II 

115TH CONGRESS 

1ST SESSION S. 222 

To repeal provisions of the Patient Protection and Affordable Care Act 

and provide private health insurance reform, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 24, 2017 

Mr. PAUL introduced the following bill; which was read twice and referred to 

the Committee on Finance 

A BILL 

To repeal provisions of the Patient Protection and Affordable 

Care Act and provide private health insurance reform, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Obamacare Replace5 ment Act’’. 

6 SEC. 2. TABLE OF CONTENTS. 

7 The table of contents for this Act is as follows: 

Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—REPEALS 

Sec. 101. Repeal of individual and employer mandates. 


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Sec. 102. Repeal of Public Health Service Act provisions. 

Sec. 103. Repeal of Patient Protection and Affordable Care Act provisions. 

Sec. 104. Conforming and technical amendments. 

TITLE II—TAXATION REFORM 

Subtitle A—Equalizing Tax Treatment of Non-Employer Provided Health 

Insurance 

Sec. 201. Tax deduction for health insurance premiums. 

Sec. 202. Refundable tax credit for payroll taxes attributable to health insurance premiums. 

Subtitle B—Health Savings Accounts 

Sec. 211. Repeal of contribution limitations. 

Sec. 212. Freedom from mandate. 

Sec. 213. Allowance of distributions for prescription and over-the-counter medicines and drugs. 

Sec. 214. Purchase of health insurance from HSA. 

Sec. 215. Special rule for certain medical expenses incurred before establishment of account. 

Sec. 216. Administrative error correction before due date of return. 

Sec. 217. Allowing HSA rollover to child or parent of account holder. 

Sec. 218. Credit for contributions to an HSA. 

Sec. 219. Equivalent bankruptcy protections for health savings accounts as retirement funds. 

Subtitle C—Medical Expenses 

Sec. 221. Certain exercise equipment and physical fitness programs treated as 

medical care. 

Sec. 222. Certain nutritional and dietary supplements to be treated as medical 

care. 

Sec. 223. Certain provider fees to be treated as medical care. 

Sec. 224. Clarification of treatment of capitated primary care payments as 

amounts paid for medical care. 

Subtitle D—Miscellaneous 

Sec. 231. Contributions of medicare beneficiaries participating in medicare advantage MSA. 

Sec. 232. Physician charity and uncompensated care deduction. 

TITLE III—INDIVIDUAL HEALTH INSURANCE REFORM 

Sec. 301. Pool reform for individual membership expansion. 

Sec. 302. Cooperative governing of individual health insurance coverage. 

TITLE IV—ASSOCIATION HEALTH PLANS 

Sec. 401. Rules governing association health plans. 

Sec. 402. Clarification of treatment of single employer arrangements. 

Sec. 403. Enforcement provisions relating to association health plans. 

Sec. 404. Cooperation between Federal and State authorities. 

Sec. 405. Effective date and transitional and other rules. 

TITLE V—MEDICAID REFORM 


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Sec. 501. Increasing State flexibility to conduct Medicaid waivers. 

TITLE VI—MISCELLANEOUS PROVISIONS 

Sec. 601. Quality health care coalition. 

Sec. 602. Certain medical stop-loss insurance obtained by certain plan sponsors 

of group health plans not included under the definition of 

health insurance coverage. 

1 TITLE I—REPEALS 

2 SEC. 101. REPEAL OF INDIVIDUAL AND EMPLOYER MAN3 DATES. 

4 (a) REPEAL OF INDIVIDUAL MANDATE.—Section 

5 5000A of the Internal Revenue Code of 1986 is amended 

6 by adding at the end the following: 

7 ‘‘(h) TERMINATION.—This section shall not apply 

8 with respect to any month beginning after the date of en9 actment of the Obamacare Replacement Act.’’. 

10 (b) REPEAL OF EMPLOYER MANDATE.—Section 

11 4980H of the Internal Revenue Code of 1986 is amended 

12 by adding at the end the following: 

13 ‘‘(e) TERMINATION.—This section shall not apply 

14 with respect to any month beginning after the date of en15 actment of the Obamacare Replacement Act.’’. 

16 SEC. 102. REPEAL OF PUBLIC HEALTH SERVICE ACT PROVI17 SIONS. 

18 (a) REPEAL.—The following provisions of title 

19 XXVII of the Public Health Service Act (42 U.S.C. 300gg 

20 et seq.) are repealed: 

21 (1) Section 2701 (42 U.S.C. 300gg). 

22 (2) Section 2702 (42 U.S.C. 300gg–1). 


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1 (3) Section 2703 (42 U.S.C. 300gg–2). 

2 (4) Section 2704 (42 U.S.C. 300gg–3). 

3 (5) Section 2705 (42 U.S.C. 300gg–4). 

4 (6) Section 2707 (42 U.S.C. 300gg–6). 

5 (7) Section 2708 (42 U.S.C. 300gg–7). 

6 (8) Section 2711 (42 U.S.C. 300gg–11). 

7 (9) Section 2712 (42 U.S.C. 300gg–12). 

8 (10) Section 2713 (42 U.S.C. 300gg–13). 

9 (11) Section 2715 (42 U.S.C. 300gg–15). 

10 (12) Section 2715A (42 U.S.C. 300gg–15a). 

11 (13) Section 2716 (42 U.S.C. 300gg–16). 

12 (14) Section 2718 (42 U.S.C. 300gg–18). 

13 (15) Section 2719 (42 U.S.C. 300gg–19). 

14 (16) Section 2719A (42 U.S.C. 300gg–19a). 

15 (17) Section 2794 (42 U.S.C. 300gg–94), relat16 ing to ensuring that consumers get value for their 

17 dollars. 

18 (b) REINSTATING PRE-PPACA LAW.—Sections 

19 2701, 2702, 2711, and 2712 of the Public Health Service 

20 Act as in effect on the day before the date of enactment 

21 of the Patient Protection and Affordable Care Act (Public 

22 Law 111–148) shall be restored or revived as if such Act 

23 had not been enacted (subject to paragraphs (1), (2), (6), 

24 and (7) of subsection (c)). 


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1 (c) REDESIGNATIONS AND TRANSFERS.—The fol2 lowing provisions of title XXVII of the Public Health Serv3 ice Act (42 U.S.C. 300gg et seq.) shall be redesignated 

4 and transferred as follows: 

5 (1) Section 2701, as restored or revived under 

6 subsection (b), shall be transferred so as to appear 

7 as the first section in subpart I of part A. 

8 (2) Section 2702, as restored or revived under 

9 subsection (b), shall be transferred so as to appear 

10 after such section 2701. 

11 (3) Section 2706 (42 U.S.C. 300gg–5) shall be 

12 redesignated as section 2703 and transferred so as 

13 to appear after such section 2702. 

14 (4) Section 2709 (42 U.S.C. 300gg–8), relating 

15 to coverage for individuals participating in approved 

16 clinical trials, shall be redesignated as section 2704 

17 and transferred so as to appear after section 2703 

18 (as so redesignated). 

19 (5) Section 2709 (42 U.S.C. 300gg–9), relating 

20 to disclosure of information, shall be redesignated as 

21 section 2705 and transferred so as to appear after 

22 section 2704 (as so redesignated). 

23 (6) Section 2711, as restored or revived under 

24 subsection (b), shall be redesignated as section 2706 


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1 and transferred so as to appear after section 2705 

2 (as so redesignated). 

3 (7) Section 2712, as restored or revived under 

4 subsection (b), shall be redesignated as section 2707 

5 and transferred so as to appear after section 2706 

6 (as so redesignated). 

7 (8) Section 2714 (42 U.S.C. 300gg–14) shall be 

8 redesignated as section 2711 and transferred so as 

9 to appear as the first section under subpart II of 

10 part A. 

11 (9) Section 2717 (42 U.S.C. 300gg–17) shall be 

12 redesignated as section 2712 and transferred so as 

13 to appear after section 2711 (as so redesignated). 

14 (d) EFFECTIVE DATES.— 

15 (1) IN GENERAL.—Except as provided in para16 graph (2), the repeals under subsection (a) shall 

17 take effect on the date of enactment of this Act and 

18 shall apply to plan years beginning after such date 

19 of enactment. 

20 (2) DELAYED EFFECTIVE DATES.—The repeals 

21 under paragraphs (2), (3), (4), and (5) of subsection 

22 (a), the provisions restored or revived under sub23 section (b), and the conforming amendment in sec24 tion 104(a)(2) shall be effective for plan years begin25 ning on January 1, 2019, and (notwithstanding subVerDate Sep 11 2014 06:25 Feb 02, 2017 Jkt 069200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S222.IS S222

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1 section (c)) the provisions of law repealed by such 

2 paragraphs of subsection (a) or amended by such 

3 conforming amendment shall continue to remain in 

4 effect until such date. 

5 SEC. 103. REPEAL OF PATIENT PROTECTION AND AFFORD6 ABLE CARE ACT PROVISIONS. 

7 (a) IN GENERAL.—Section 1312(c) of the Patient 

8 Protection and Affordable Care Act (42 U.S.C. 18032(c)) 

9 is repealed. 

10 (b) REPEAL OF 3-MONTH GRACE PERIOD FOR NON11 PAYMENT PREMIUMS.—Clause (iv) of section 

12 1412(c)(2)(B) of the Patient Protection and Affordable 

13 Care Act is amended by striking ‘‘nonpayment of pre14 miums by the insured’’ and all that follows and inserting 

15 ‘‘nonpayment of premiums by the insured, notify the Sec16 retary of such nonpayment.’’. 

17 (c) EFFECTIVE DATE.—This section, and the amend18 ments made by this section, shall take effect on the date 

19 of enactment of this Act and shall apply to plan years and 

20 taxable years beginning after such date of enactment. 

21 SEC. 104. CONFORMING AND TECHNICAL AMENDMENTS. 

22 (a) PHSA PROVISIONS.—Title XXVII of the Public 

23 Health Service Act (42 U.S.C. 300gg et seq.) is amend24 ed— 


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1 (1) in section 2724(c) (42 U.S.C. 300gg–23(c)), 

2 by striking ‘‘(other than section 2704)’’ and insert3 ing ‘‘(other than section 2725)’’; 

4 (2) in section 2741(b)(3) (42 U.S.C. 300gg– 

5 41(a)(3)), by striking ‘‘2712’’ and inserting ‘‘2707’’; 

6 (3) in section 2751(a) (42 U.S.C. 300gg– 

7 51(a)), by striking ‘‘2704’’ and inserting ‘‘2725’’; 

8 (4) in section 2752 (42 U.S.C. 300gg–52), by 

9 striking ‘‘2706’’ and inserting ‘‘2727’’; and 

10 (5) in section 2753 (42 U.S.C. 300gg–54), re11 lating to coverage of dependent students on medi12 cally necessary leave of absence, by striking ‘‘2707’’ 

13 and inserting ‘‘2728’’. 

14 (b) PPACA PROVISIONS.—The Patient Protection 

15 and Affordable Care Act (Public Law 111–148) is amend16 ed— 

17 (1) in section 1103(b)(1) (42 U.S.C. 

18 18003(b)(1))— 

19 (A) by striking ‘‘the percentage of total 

20 premium revenue expended on nonclinical costs 

21 (as reported under section 2718(a) of the Pub22 lic Health Service Act),’’; and 

23 (B) by striking ‘‘and be consistent with the 

24 standards adopted for the uniform explanation 


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1 of coverage as provided for in section 2715 of 

2 the Public Health Service Act’’; 

3 (2) in section 1251(a) (42 U.S.C. 18011(a)), by 

4 striking paragraphs (3) and (4), and inserting the 

5 following: 

6 ‘‘(3) APPLICATION OF CERTAIN PROVISIONS.— 

7 Section 2711 of the Public Health Service Act (re8 lating to extension of dependent coverage) shall 

9 apply to grandfathered health plans for plan years 

10 beginning with the first plan year to which such pro11 visions would otherwise apply.’’; 

12 (3) in section 1301(a)(4) (42 U.S.C. 

13 18021(a)(4)), by striking ‘‘section 2701(a)(2) of the 

14 Public Health Service Act’’ and inserting ‘‘section 

15 2701(a)(2) of the Public Health Service Act as in ef16 fect on the day before the date of enactment of the 

17 Obamacare Replacement Act or as determined by 

18 the Secretary’’; 

19 (4) in section 1302(e)(1)(B)(i) (42 U.S.C. 

20 18022(e)(1)(B)(i)), by striking ‘‘(except as provided 

21 for in section 2713)’’; 

22 (5) in section 1311 (42 U.S.C. 18031)— 

23 (A) in subsection (c)— 

24 (i) in paragraph (1)(B), by striking 

25 ‘‘(in a manner consistent with applicable 


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1 network adequacy provisions under section 

2 2702(c) of the Public Health Service 

3 Act)’’; and 

4 (ii) in paragraph (5), by striking ‘‘to 

5 the uniform outline of coverage the plan is 

6 required to provide under section 2716 of 

7 the Public Health Service Act and’’; 

8 (B) in subsection (d)(4)(E), by striking ‘‘, 

9 including the use of the uniform outline of cov10 erage established under section 2715 of the 

11 Public Health Service Act’’; 

12 (C) in subsection (e)(2), by striking ‘‘, and 

13 the information and the recommendations’’ and 

14 all that follows through ‘‘premium increases),’’; 

15 and 

16 (D) in subsection (f)(2)(B), by inserting 

17 before the period ‘‘as in effect on the day before 

18 the date of enactment of the Obamacare Re19 placement Act or as determined by the Sec20 retary’’; and 

21 (6) in section 1334(a)(2), by inserting before 

22 the period ‘‘as in effect on the day before the date 

23 of enactment of the Obamacare Replacement Act’’. 


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1 (c) ERISA PROVISIONS.—Section 715 of the Em2 ployee Retirement Income Security Act of 1974 (29 

3 U.S.C. 1185d) is amended— 

4 (1) in subsection (a)— 

5 (A) by striking ‘‘(a) GENERAL RULE’’ and 

6 all that follows through ‘‘the provisions of part 

7 A’’ in paragraph (1) and inserting ‘‘The provi8 sions of part A’’; and 

9 (B) by striking ‘‘as if included in this sub10 part; and’’ in paragraph (1) and all that follows 

11 through ‘‘to the extent that’’ in paragraph (2) 

12 and inserting ‘‘as if included in this subpart. To 

13 the extent that’’; and 

14 (2) by striking subsection (b). 

15 (d) IRC PROVISIONS.—The Internal Revenue Code 

16 of 1986 is amended— 

17 (1) in section 36B(b)(3)(C)— 

18 (A) in the first sentence, by striking ‘‘and 

19 the premium was adjusted only for the age of 

20 each such individual in the manner allowed 

21 under section 2701 of the Public Health Service 

22 Act’’; and 

23 (B) by striking the second sentence; 

24 (2) in section 833(c), by striking paragraph (5); 

25 and 


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1 (3) in section 9815— 

2 (A) in subsection (a)— 

3 (i) by striking ‘‘(a) GENERAL RULE’’ 

4 and all that follows through ‘‘the provi5 sions of part A’’ in paragraph (1) and in6 serting ‘‘The provisions of part A’’; and 

7 (ii) by striking ‘‘as if included in this 

8 subpart; and’’ in paragraph (1) and all 

9 that follows through ‘‘to the extent that’’ 

10 in paragraph (2) and inserting ‘‘as if in11 cluded in this subpart. To the extent 

12 that’’; and 

13 (B) by striking subsection (b). 

14 (e) SOCIAL SECURITY ACT.—Section 1937(b)(6)(A) 

15 of the Social Security Act (42 U.S.C. 1396u–7(b)(6)(A)) 

16 is amended by striking ‘‘2705(a)’’ and inserting 

17 ‘‘2726(a)’’. 

18 (f) EFFECTIVE DATE.—Except as provided in section 

19 102(d)(2), this section and the amendments made by this 

20 section shall take effect on the date of enactment of this 

21 Act and shall apply to plan years and taxable years begin22 ning after such date of enactment. 


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1 TITLE II—TAXATION REFORM 

2 Subtitle A—Equalizing Tax Treat3 ment of Non-Employer Provided 

4 Health Insurance 

5 SEC. 201. TAX DEDUCTION FOR HEALTH INSURANCE PRE6 MIUMS. 

7 (a) IN GENERAL.—Part VII of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended 

9 by redesignating section 224 as section 225 and by insert10 ing after section 222 the following new section: 

11 ‘‘SEC. 224. HEALTH INSURANCE PREMIUMS. 

12 ‘‘(a) IN GENERAL.—There shall be allowed as a de13 duction the amount of premiums paid by the taxpayer for 

14 health insurance coverage (as defined in section 9832) of 

15 the taxpayer, the taxpayer’s spouse, or any dependent (as 

16 defined in section 152, determined without regard to sub17 sections (b)(1), (b)(2), and (d)(1)(B) thereof) of the tax18 payer. 

19 ‘‘(b) COORDINATION PROVISIONS.— 

20 ‘‘(1) PREMIUM ASSISTANCE CREDIT.—Sub21 section (a) shall not apply with respect to so much 

22 of any premium for which a credit has been allowed 

23 under section 36B. 

24 ‘‘(2) ARCHER MSAS AND HSAS.—Subsection (a) 

25 shall not apply with respect to any amount which is 


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1 treated as a qualified medical expense under either 

2 section 220(d) or 223(c). 

3 ‘‘(3) DEDUCTION FOR MEDICAL EXPENSES.— 

4 For purposes of determining the amount of the de5 duction under section 213, any amount for which a 

6 deduction is allowed under subsection (a) shall not 

7 be treated as an expense paid for medical care.’’. 

8 (b) DEDUCTION AVAILABLE ABOVE THE LINE.—Sec9 tion 62(a) of the Internal Revenue Code of 1986 is amend10 ed by inserting after paragraph (21) the following new 

11 paragraph: 

12 ‘‘(22) HEALTH INSURANCE PREMIUMS.—The 

13 deduction allowed by section 224.’’. 

14 (c) CONFORMING AMENDMENTS.— 

15 (1) Section 35(g)(2) of the Internal Revenue 

16 Code of 1986 is amended by striking ‘‘or 213’’ and 

17 inserting ‘‘213, or 224’’. 

18 (2) Section 162(l)(3) of such Code is amended 

19 by inserting ‘‘or 224(a)’’ after ‘‘213(a)’’. 

20 (3) The table of sections for part VII of sub21 chapter B of chapter 1 of such Code is amended by 

22 redesignating the item relating to section 224 as re23 lating to section 225 and by inserting after the item 

24 relating to section 223 the following new item: 

‘‘Sec. 224. Health insurance premiums.’’. 


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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2016. 

4 SEC. 202. REFUNDABLE TAX CREDIT FOR PAYROLL TAXES 

5 ATTRIBUTABLE TO HEALTH INSURANCE PRE6 MIUMS. 

7 (a) IN GENERAL.—Subpart C of part IV of sub8 chapter A of chapter 1 of the Internal Revenue Code of 

9 1986 is amended by adding at the end the following new 

10 section: 

11 ‘‘SEC. 36C. REFUND OF PAYROLL TAXES ATTRIBUTABLE TO 

12 HEALTH INSURANCE PREMIUMS. 

13 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al14 lowed as a credit against the tax imposed by this subtitle 

15 for any taxable year an amount equal to the applicable 

16 percentage of the premiums paid by the taxpayer for 

17 health insurance coverage (as defined in section 9832) of 

18 the taxpayer, the taxpayer’s spouse, or any dependent (as 

19 defined in section 152, determined without regard to sub20 sections (b)(1), (b)(2), and (d)(1)(B) thereof) of the tax21 payer. 

22 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 

23 subsection (a), the term ‘applicable percentage’ means the 

24 percentage equal to the sum of the rates of in effect under 

25 subsections (a) and (b) of section 3101. 


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1 ‘‘(c) LIMITATION.—The amount of the credit allowed 

2 under subsection (a) shall not exceed the excess of— 

3 ‘‘(1) the social security taxes (as defined in sec4 tion 24(d)) of the taxpayer for the taxable year, re5 duced by 

6 ‘‘(2) the sum of the credits allowed under sec7 tion 24(d) and 32 for the taxable year.’’. 

8 (b) CONFORMING AMENDMENTS.— 

9 (1) Paragraph (2) of section 1324(b) of title 

10 31, United States Code, is amended by inserting ‘‘, 

11 36C’’ after ‘‘36B’’. 

12 (2) The table of sections for subpart C of part 

13 IV of subchapter A of chapter 1 of the Internal Rev14 enue Code of 1986 is amended by inserting after the 

15 item relating to section 36B the following new item: 

‘‘Sec. 36C. Refund of payroll taxes attributable to health insurance premiums.’’. 

16 (c) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to taxable years beginning after 

18 December 31, 2016. 

19 Subtitle B—Health Savings 

20 Accounts 

21 SEC. 211. REPEAL OF CONTRIBUTION LIMITATIONS. 

22 (a) IN GENERAL.—Subsection (b) of section 223 of 

23 the Internal Revenue Code of 1986 is amended to read 

24 as follows: 


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1 ‘‘(b) DENIAL OF DEDUCTION TO DEPENDENTS.—No 

2 deduction shall be allowed under this section to any indi3 vidual with respect to whom a deduction under section 151 

4 is allowable to another taxpayer for a taxable year begin5 ning in the calendar year in which such individual’s tax6 able year begins.’’. 

7 (b) CONFORMING AMENDMENTS.— 

8 (1) Subparagraph (A) of section 223(d)(1) of 

9 the Internal Revenue Code of 1986 is amended— 

10 (A) by striking ‘‘subsection (f)(5)’’ and in11 serting ‘‘subsection (f)(4)’’, and 

12 (B) by striking ‘‘accepted—’’ and all that 

13 follows and inserting ‘‘accepted unless it is in 

14 cash.’’. 

15 (2) Subsection (f) of section 223 of such Code 

16 is amended by striking paragraph (3) and by redes17 ignating paragraphs (4) through (8) as paragraphs 

18 (3) through (7), respectively. 

19 (3) Subsection (g) of section 223 of such Code 

20 is amended— 

21 (A) by striking ‘‘subsections (b)(2) and 

22 (c)(2)(A)’’ both places it appears and inserting 

23 ‘‘subsection (c)(2)(A)’’, and 

24 (B) by amending subparagraph (B) to read 

25 as follows: 


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1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(f)(3) for the calendar 

3 year in which such taxable year begins deter4 mined by substituting ‘calendar year 2003’ for 

5 ‘calendar year 1992’.’’. 

6 (4) Section 26(b)(2) of such Code is amended— 

7 (A) by striking ‘‘, 223(b)(8)(B)(i)(II),’’ in 

8 subparagraph (S), and 

9 (B) by striking ‘‘223(f)(4)’’ in subpara10 graph (U) and inserting ‘‘223(f)(3)’’. 

11 (5) Paragraph (1) of section 106(d) of such 

12 Code is amended by striking ‘‘under an accident or 

13 health plan’’ and all that follows and inserting 

14 ‘‘under an accident or health plan.’’. 

15 (6) Subparagraph (C) of section 106(e)(4) of 

16 such Code is amended by striking ‘‘223(f)(5)’’ and 

17 inserting ‘‘223(f)(4)’’. 

18 (7) Subparagraph (C) of section 408(d)(9) of 

19 such Code is amended— 

20 (A) by striking ‘‘LIMITATIONS.—’’ in the 

21 heading and all that follows through ‘‘(ii) ONE22 TIME TRANSFER.—’’ in clause (ii), and insert23 ing ‘‘ONE-TIME TRANSFER.—’’, 


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1 (B) by redesignating subclauses (I) and 

2 (II) as clauses (i) and (ii) and moving such 

3 clauses 2 ems to the left, and 

4 (C) by striking ‘‘subclause (II)’’ in clause 

5 (i), as so redesignated, and inserting ‘‘clause 

6 (ii)’’. 

7 (8) Section 4973 of such Code is amended by 

8 striking subsection (g) and by redesignating sub9 section (h) as subsection (g). 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to taxable years beginning after 

12 the date of the enactment of this Act. 

13 SEC. 212. FREEDOM FROM MANDATE. 

14 (a) IN GENERAL.—Section 223 of the Internal Rev15 enue Code of 1986, as amended by section 211, is further 

16 amended by striking subsections (c) and (g) and by redes17 ignating subsections (d), (e), (f), and (h) as subsections 

18 (c), (d), (e), and (f), respectively. 

19 (b) CONFORMING AMENDMENTS.— 

20 (1) Subsection (a) of section 223 of the Inter21 nal Revenue Code of 1986 is amended to read as fol22 lows: 

23 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi24 vidual, there shall be allowed as a deduction for the tax25 able year an amount equal to the aggregate amount paid 


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1 in cash during such taxable year by or on behalf of such 

2 individual to a health savings account of such individual.’’. 

3 (2) Subsection (c)(1)(A) of section 223 of such 

4 Code, as amended by section 211 and redesignated 

5 by subsection (a), is further amended by striking 

6 ‘‘subsection (f)(4)’’ and inserting ‘‘subsection 

7 (e)(4)’’. 

8 (3) Subparagraph (U) of section 26(b)(2) of 

9 such Code, as amended by section 211, is further 

10 amended by striking ‘‘section 223(f)(3)’’ and insert11 ing ‘‘section 223(e)(3)’’. 

12 (4) Sections 35(g)(3), 220(f)(5)(A), 

13 848(e)(1)(B)(v), 4973(a)(5), and 6051(a)(12) of 

14 such Code are each amended by striking ‘‘section 

15 223(d)’’ each place it appears and inserting ‘‘section 

16 223(c)’’. 

17 (5) Section 106(d)(1) of such Code is amend18 ed— 

19 (A) by striking ‘‘who is an eligible indi20 vidual (as defined in section 223(c)(1))’’, and 

21 (B) by striking ‘‘section 223(d)’’ and in22 serting ‘‘section 223(c)’’. 

23 (6) Section 106(e) of such Code is amended— 


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1 (A) by striking paragraphs (3) and (4) and 

2 by redesignating paragraph (5) as paragraph 

3 (4), 

4 (B) by inserting after paragraph (2) the 

5 following new paragraph: 

6 ‘‘(3) TREATMENT AS ROLLOVER CONTRIBU7 TION.—A qualified HSA distribution shall be treated 

8 as a rollover contribution described in section 

9 223(e)(4).’’, and 

10 (C) by striking ‘‘to any eligible individual 

11 covered under a high deductible health plan of 

12 the employer’’ in paragraph (4)(B)(ii) (as so re13 designated) and inserting ‘‘to any employee 

14 with respect to whom a health savings account 

15 has been established’’. 

16 (7) Section 408(d)(9)(A) of such Code is 

17 amended by striking ‘‘who is an eligible individual 

18 (as defined in section 223(c)) and’’. 

19 (8) Section 877A(g)(6) of such Code is amend20 ed by striking ‘‘223(f)(4)’’ and inserting 

21 ‘‘223(e)(4)’’. 

22 (9) Section 4975 of such Code is amended— 

23 (A) in subsection (c)(6)— 

24 (i) by striking ‘‘section 223(d)’’ and 

25 inserting ‘‘section 223(c)’’, and 


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1 (ii) by striking ‘‘section 223(e)(2)’’ 

2 and inserting ‘‘section 223(d)(2)’’, and 

3 (B) in subsection (e)(1)(E), by striking 

4 ‘‘section 223(d)’’ and inserting ‘‘section 

5 223(c)’’. 

6 (10) Subsection (b) of section 4980G of such 

7 Code is amended to read as follows: 

8 ‘‘(b) RULES AND REQUIREMENTS.— 

9 ‘‘(1) IN GENERAL.—An employer meets the re10 quirements of this subsection for any calendar year 

11 if the employer makes available comparable con12 tributions to the health savings accounts of all com13 parable participating employees for each coverage 

14 period during such calendar year. 

15 ‘‘(2) COMPARABLE CONTRIBUTIONS.— 

16 ‘‘(A) IN GENERAL.—For purposes of para17 graph (1), the term ‘comparable contributions’ 

18 means contributions— 

19 ‘‘(i) which are the same amount, or 

20 ‘‘(ii) if the employees are covered by a 

21 health plan, which are the same percentage 

22 of the annual deductible limit under the 

23 plan covering the employees. 

24 ‘‘(B) PART-YEAR EMPLOYEES.—In the 

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1 ployer for only a portion of the calendar year, 

2 a contribution to the health savings account of 

3 such employee shall be treated as comparable if 

4 it is an amount which bears the same ratio to 

5 the comparable amount (determined without re6 gard to this subparagraph) as such portion 

7 bears to the entire calendar year. 

8 ‘‘(3) COMPARABLE PARTICIPATING EMPLOY9 EES.—For purposes of paragraph (1), the term 

10 ‘comparable participating employees’ means all em11 ployees who are covered (if at all) under the same 

12 health plan of the employer and have the same cat13 egory of coverage. For purposes of the preceding 

14 sentence, the categories of coverage are self-only and 

15 family coverage. 

16 ‘‘(4) PART-TIME EMPLOYEES.— 

17 ‘‘(A) IN GENERAL.—Paragraph (3) shall 

18 be applied separately with respect to part-time 

19 employees and other employees. 

20 ‘‘(B) PART-TIME EMPLOYEE.—For pur21 poses of subparagraph (A), the term ‘part-time 

22 employee’ means any employee who is custom23 arily employed for fewer than 30 hours per 

24 week.’’. 


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1 (11) Section 4980G(d) of such Code is amended 

2 by striking ‘‘section 4980E’’ and inserting ‘‘this sec3 tion’’. 

4 (12) Section 6693(a)(2)(C) of such Code is 

5 amended by striking ‘‘section 223(h)’’ and inserting 

6 ‘‘section 223(f)’’. 

7 (c) EFFECTIVE DATE.—The amendments made by 

8 this section shall apply to taxable years beginning after 

9 the date of the enactment of this Act. 

10 SEC. 213. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP11 TION AND OVER-THE-COUNTER MEDICINES 

12 AND DRUGS. 

13 (a) HSAS.—Paragraph (2)(A) of section 223(c) of 

14 the Internal Revenue Code of 1986, as redesignated by 

15 section 212, is amended by striking the last sentence 

16 thereof and inserting the following: ‘‘Such term shall in17 clude an amount paid for any prescription or over-the18 counter medicine or drug.’’. 

19 (b) ARCHER MSAS.—Section 220(d)(2)(A) of the In20 ternal Revenue Code of 1986 is amended by striking the 

21 last sentence thereof and inserting the following: ‘‘Such 

22 term shall include an amount paid for any prescription 

23 or over-the-counter medicine or drug.’’. 

24 (c) HEALTH FLEXIBLE SPENDING ARRANGEMENTS

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1 section (f) of section 106 of the Internal Revenue Code 

2 of 1986 is amended to read as follows: 

3 ‘‘(f) REIMBURSEMENTS FOR ALL MEDICINES AND

4 DRUGS.—For purposes of this section and section 105, 

5 reimbursement for expenses incurred for any prescription 

6 or over-the-counter medicine or drug shall be treated as 

7 a reimbursement for medical expenses.’’. 

8 (d) EFFECTIVE DATES.— 

9 (1) DISTRIBUTIONS FROM SAVINGS AC10 COUNTS.—The amendments made by subsections (a) 

11 and (b) shall apply to amounts paid in taxable years 

12 beginning after the date of the enactment of this 

13 Act. 

14 (2) REIMBURSEMENTS.—The amendment made 

15 by subsection (c) shall apply to expenses incurred in 

16 plan years beginning after the date of the enactment 

17 of this Act. 

18 SEC. 214. PURCHASE OF HEALTH INSURANCE FROM HSA. 

19 (a) IN GENERAL.—Paragraph (2) of section 223(c) 

20 of the Internal Revenue Code of 1986, as redesignated by 

21 section 212, is amended by striking subparagraphs (B) 

22 and (C). 

23 (b) CONFORMING AMENDMENT.—Paragraph (2) of 

24 section 223(c) of the Internal Revenue Code of 1986, as 

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1 ther amended by striking ‘‘and any dependent (as defined 

2 in section 152, determined without regard to subsections 

3 (b)(1), (b)(2), and (d)(1)(B) thereof) of such individual’’ 

4 and inserting ‘‘any dependent (as defined in section 152, 

5 determined without regard to subsections (b)(1), (b)(2), 

6 and (d)(1)(B) thereof) of such individual, and any child 

7 (as defined in section 152(f)(1)) of such individual who 

8 has not attained the age of 27 before the end of such indi9 vidual’s taxable year’’. 

10 (c) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply with respect to insurance pur12 chased after the date of the enactment of this Act in tax13 able years beginning after such date. 

14 SEC. 215. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

15 INCURRED BEFORE ESTABLISHMENT OF AC16 COUNT. 

17 (a) IN GENERAL.—Paragraph (2) of section 223(c) 

18 of the Internal Revenue Code of 1986, as amended and 

19 redesignated by the preceding sections of this subtitle, is 

20 further amended by adding at the end the following new 

21 subparagraph: 

22 ‘‘(B) CERTAIN MEDICAL EXPENSES IN23 CURRED BEFORE ESTABLISHMENT OF ACCOUNT

24 TREATED AS QUALIFIED.—An expense shall not 

25 fail to be treated as a qualified medical expense 


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1 solely because such expense was incurred before 

2 the establishment of the health savings account 

3 if such expense was incurred— 

4 ‘‘(i) during either— 

5 ‘‘(I) the taxable year in which the 

6 health savings account was estab7 lished, or 

8 ‘‘(II) the preceding taxable year, 

9 in the case of a health savings ac10 count established after the taxable 

11 year in which such expense was in12 curred but before the time prescribed 

13 by law for filing the return for such 

14 taxable year (not including extensions 

15 thereof), and 

16 ‘‘(ii) for medical care which (but for 

17 the fact that it was incurred before the es18 tablishment of the account) otherwise 

19 meets the requirements of the preceding 

20 subparagraphs.’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to taxable years beginning after 

23 the date of the enactment of this Act. 


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1 SEC. 216. ADMINISTRATIVE ERROR CORRECTION BEFORE 

2 DUE DATE OF RETURN. 

3 (a) IN GENERAL.—Paragraph (3) of section 223(f) 

4 of the Internal Revenue Code of 1986, as in effect on the 

5 day before the date of the enactment of this Act, is amend6 ed by adding at the end the following new subparagraph: 

7 ‘‘(D) EXCEPTION FOR ADMINISTRATIVE

8 ERRORS CORRECTED BEFORE DUE DATE OF RE9 TURN.—Subparagraph (A) shall not apply if 

10 any payment or distribution is made to correct 

11 an administrative, clerical, or payroll contribu12 tion error and if— 

13 ‘‘(i) such distribution is received by 

14 the individual on or before the last day 

15 prescribed by law (including extensions of 

16 time) for filing such individual’s return for 

17 such taxable year, and 

18 ‘‘(ii) such distribution is accompanied 

19 by the amount of net income attributable 

20 to such contribution. 

21 Any net income described in clause (ii) shall be 

22 included in the gross income of the individual 

23 for the taxable year in which it is received.’’. 

24 (b) EFFECTIVE DATE.—The amendment made by 

25 this section shall take effect on the date of the enactment 

26 of this Act. 


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1 SEC. 217. ALLOWING HSA ROLLOVER TO CHILD OR PARENT 

2 OF ACCOUNT HOLDER. 

3 (a) IN GENERAL.—Paragraph (7)(A) of section 

4 223(e) of the Internal Revenue Code of 1986, as redesig5 nated by the preceding sections of this subtitle, is amend6 ed— 

7 (1) by inserting ‘‘, child, parent, or grand8 parent’’ after ‘‘surviving spouse’’, 

9 (2) by inserting ‘‘, child, parent, or grand10 parent, as the case may be,’’ after ‘‘the spouse’’, 

11 (3) by inserting ‘‘, CHILD, PARENT, OR GRAND12 PARENT’’ after ‘‘SPOUSE’’ in the heading thereof, 

13 and 

14 (4) by adding at the end the following: ‘‘In the 

15 case of a child who acquires such beneficiary’s inter16 est and with respect to whom a deduction under sec17 tion 151 is allowable to another taxpayer for a tax18 able year beginning in the calendar year in which 

19 such individual’s taxable year begins, such health 

20 savings account shall be treated as a health savings 

21 account of such child.’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 the date of the enactment of this Act. 


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1 SEC. 218. CREDIT FOR CONTRIBUTIONS TO AN HSA. 

2 (a) IN GENERAL.—Subpart A of part IV of sub3 chapter A of chapter 1 of the Internal Revenue Code of 

4 1986 is amended by inserting after section 25D the fol5 lowing new section: 

6 ‘‘SEC. 25E. CONTRIBUTIONS TO A HEALTH SAVINGS AC7 COUNT. 

8 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in9 dividual, there shall be allowed as a credit against the tax 

10 imposed by this subtitle for the taxable year an amount 

11 equal to so much of the qualified HSA contributions of 

12 the individual as does not exceed $5,000 ($10,000 in the 

13 case of a joint return). 

14 ‘‘(b) QUALIFIED HSA CONTRIBUTION.— 

15 ‘‘(1) IN GENERAL.—For purposes of this sec16 tion, the term ‘qualified HSA contribution’ means 

17 an amount paid in cash during the taxable year by 

18 or on behalf of an individual to a health savings ac19 count (as defined in section 223(c)) of such indi20 vidual. 

21 ‘‘(2) EXCEPTION FOR AMOUNTS NOT USED FOR

22 QUALIFIED MEDICAL EXPENSES.—The amount 

23 taken into account as qualified HSA contributions of 

24 the individual under paragraph (1) for a taxable 

25 year shall be reduced by the amount of any distribu26 tion from such health savings account during such 


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1 taxable year which is not used exclusively to pay the 

2 qualified medical expenses of the account beneficiary 

3 (within the meaning of section 223(e)(2)). 

4 ‘‘(c) COORDINATION WITH DEDUCTION.—For co5 ordination rule, see section 223(b)(1).’’. 

6 (b) CLERICAL AMENDMENT.—The table of sections 

7 for subpart A of part IV of subchapter A of chapter 1 

8 of the Internal Revenue Code of 1986 is amended by in9 serting after the item relating to section 25D the following 

10 new item: 

‘‘Sec. 25E. Contributions to a health savings account.’’. 

11 (c) CONFORMING AMENDMENT.—Subsection (b) of 

12 section 223 of the Internal Revenue Code of 1986, as 

13 amended by section 211, is further amended to read as 

14 follows: 

15 ‘‘(b) SPECIAL RULES.— 

16 ‘‘(1) COORDINATION WITH CREDIT.—The 

17 amount taken into account under subsection (a) with 

18 respect to any individual shall be reduced (but not 

19 below zero) by the amount of any credit allowed 

20 under section 25E for qualified HSA contributions 

21 with respect to the individual. 

22 ‘‘(2) DENIAL OF DEDUCTION TO DEPEND23 ENTS.—No deduction shall be allowed under this 

24 section to any individual with respect to whom a de25 duction under section 151 is allowable to another 


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1 taxpayer for a taxable year beginning in the cal2 endar year in which such individual’s taxable year 

3 begins.’’. 

4 (d) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable years beginning after 

6 the date of the enactment of this Act. 

7 SEC. 219. EQUIVALENT BANKRUPTCY PROTECTIONS FOR 

8 HEALTH SAVINGS ACCOUNTS AS RETIRE9 MENT FUNDS. 

10 (a) IN GENERAL.—Section 522 of title 11, United 

11 States Code, is amended by adding at the end the fol12 lowing new subsection: 

13 ‘‘(r) TREATMENT OF HEALTH SAVINGS AC14 COUNTS.—For purposes of this section, any health savings 

15 account (as described in section 223 of the Internal Rev16 enue Code of 1986) shall be treated in the same manner 

17 as an individual retirement account described in section 

18 408 of such Code.’’. 

19 (b) EFFECTIVE DATE.—The amendment made by 

20 this section shall apply to cases commencing under title 

21 11, United States Code, after the date of the enactment 

22 of this Act. 


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1 Subtitle C—Medical Expenses 

2 SEC. 221. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 

3 FITNESS PROGRAMS TREATED AS MEDICAL 

4 CARE. 

5 (a) IN GENERAL.—Subsection (d) of section 213 of 

6 the Internal Revenue Code of 1986 is amended by adding 

7 at the end the following new paragraph: 

8 ‘‘(12) EXERCISE EQUIPMENT AND PHYSICAL

9 FITNESS ACTIVITY.— 

10 ‘‘(A) IN GENERAL.—The term ‘medical 

11 care’ shall include amounts paid— 

12 ‘‘(i) for equipment for use in a pro13 gram (including a self-directed program) of 

14 physical exercise or physical activity, 

15 ‘‘(ii) to participate, or receive instruc16 tion, in a program of physical exercise, nu17 trition, or health coaching (including a 

18 self-directed program), and 

19 ‘‘(iii) for membership at a fitness fa20 cility. 

21 ‘‘(B) OVERALL DOLLAR LIMITATION.— 

22 ‘‘(i) IN GENERAL.—Amounts treated 

23 as medical care under subparagraph (A) 

24 shall not exceed $1,000 with respect to any 

25 individual for any taxable year. 


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1 ‘‘(ii) EXCEPTION.—Clause (i) shall 

2 not apply for purposes of determining 

3 whether expenses reimbursed through a 

4 health flexible spending arrangement sub5 ject to section 125(i)(1) are incurred for 

6 medical care. 

7 ‘‘(C) LIMITATIONS RELATED TO SPORTS

8 AND FITNESS EQUIPMENT.—Amounts paid for 

9 equipment described in subparagraph (A)(i) 

10 shall be treated as medical care only— 

11 ‘‘(i) if such equipment is utilized ex12 clusively for participation in fitness, exer13 cise, sport, or other physical activity pro14 grams, 

15 ‘‘(ii) if such equipment is not apparel 

16 or footwear, and 

17 ‘‘(iii) in the case of any item of sports 

18 equipment (other than exercise equip19 ment), to the extent the amount paid for 

20 such item does not exceed $250. 

21 ‘‘(D) FITNESS FACILITY.—For purposes of 

22 subparagraph (A)(iii), the term ‘fitness facility’ 

23 means a facility— 

24 ‘‘(i) which provides instruction in a 

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1 ties for the preservation, maintenance, en2 couragement, or development of physical 

3 fitness, or serves as the site of such a pro4 gram of a State or local government, 

5 ‘‘(ii) which is not a private club owned 

6 and operated by its members, 

7 ‘‘(iii) which does not offer golf, hunt8 ing, sailing, or riding facilities, 

9 ‘‘(iv) whose health or fitness facility is 

10 not incidental to its overall function and 

11 purpose, and 

12 ‘‘(v) which is fully compliant with the 

13 State of jurisdiction and Federal anti-dis14 crimination laws.’’. 

15 (b) LIMITATION NOT TO APPLY FOR CERTAIN PUR16 POSES.— 

17 (1) HEALTH SAVINGS ACCOUNTS.—Subpara18 graph (A) of section 223(c)(2) of the Internal Rev19 enue Code of 1986, as amended and redesignated by 

20 subtitle B, is further amended by inserting ‘‘, deter21 mined without regard to paragraph (12)(B) there22 of)’’ after ‘‘medical care (as defined in section 

23 213(d)’’. 

24 (2) ARCHER MSAS.—Subparagraph (A) of sec25 tion 220(d)(2) of the Internal Revenue Code of 


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1 1986, as amended by subtitle B, is further amended 

2 by inserting ‘‘, determined without regard to para3 graph (12)(B) thereof’’ after ‘‘medical care (as de4 fined in section 213(d)’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 the date of the enactment of this Act. 

8 SEC. 222. CERTAIN NUTRITIONAL AND DIETARY SUPPLE9 MENTS TO BE TREATED AS MEDICAL CARE. 

10 (a) IN GENERAL.—Subsection (d) of section 213 of 

11 the Internal Revenue Code of 1986, as amended by section 

12 221, is further amended by adding at the end the following 

13 new paragraph: 

14 ‘‘(13) NUTRITIONAL AND DIETARY SUPPLE15 MENTS.— 

16 ‘‘(A) IN GENERAL.—The term ‘medical 

17 care’ shall include amounts paid to purchase 

18 herbs, vitamins, minerals, homeopathic rem19 edies, meal replacement products, and other di20 etary and nutritional supplements. 

21 ‘‘(B) LIMITATION.—Amounts treated as 

22 medical care under subparagraph (A) shall not 

23 exceed $1,000 with respect to any individual for 

24 any taxable year. 


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1 ‘‘(C) MEAL REPLACEMENT PRODUCT.— 

2 For purposes of this paragraph, the term ‘meal 

3 replacement product’ means any product that— 

4 ‘‘(i) is permitted to bear labeling mak5 ing a claim described in section 403(r)(3) 

6 of the Federal Food, Drug, and Cosmetic 

7 Act, and 

8 ‘‘(ii) is permitted to claim under such 

9 section that such product is low in fat and 

10 is a good source of protein, fiber, and mul11 tiple essential vitamins and minerals. 

12 ‘‘(D) EXCEPTION.—Subparagraph (B) 

13 shall not apply for purposes of determining 

14 whether expenses reimbursed through a health 

15 flexible spending arrangement subject to section 

16 125(i)(1) are incurred for medical care.’’. 

17 (b) LIMITATION NOT TO APPLY FOR CERTAIN PUR18 POSES.— 

19 (1) HEALTH SAVINGS ACCOUNTS.—Subpara20 graph (A) of section 223(c)(2) of the Internal Rev21 enue Code of 1986, as amended and redesignated by 

22 this Act, is amended by striking ‘‘paragraph 

23 (12)(B)’’ and inserting ‘‘paragraphs (12)(B) and 

24 (13)(B)’’. 


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1 (2) ARCHER MSAS.—Subparagraph (A) of sec2 tion 220(d)(2), as amended by this Act, is amended 

3 by striking ‘‘paragraph (12)(B)’’ and inserting 

4 ‘‘paragraphs (12)(B) and (13)(B)’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 the date of the enactment of this Act. 

8 SEC. 223. CERTAIN PROVIDER FEES TO BE TREATED AS 

9 MEDICAL CARE. 

10 (a) IN GENERAL.—Subsection (d) of section 213 of 

11 the Internal Revenue Code of 1986, as amended by sec12 tions 221 and 222, is amended by adding at the end the 

13 following new paragraph: 

14 ‘‘(14) PERIODIC PROVIDER FEES.—The term 

15 ‘medical care’ shall include— 

16 ‘‘(A) periodic fees paid to a primary care 

17 physician for a defined set of medical services 

18 or the right to receive medical services on an 

19 as-needed basis, and 

20 ‘‘(B) pre-paid primary care services de21 signed to screen for, diagnose, cure, mitigate, 

22 treat, or prevent disease and promote 

23 wellness.’’. 

24 (b) EXCEPTION FOR FLEXIBLE SPENDING AC25 COUNTS.—Section 125 of the Internal Revenue Code of 


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1 1986 is amended by redesignating subsections (k) and (l) 

2 as subsections (l) and (m), respectively, and by inserting 

3 after subsection (j) the following new subsection: 

4 ‘‘(k) SPECIAL RULE WITH RESPECT TO HEALTH

5 FLEXIBLE SPENDING ARRANGEMENTS.—For purposes of 

6 applying this section with respect to any health flexible 

7 spending arrangement, amounts described in section 

8 213(d)(14) shall not be considered insurance.’’. 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to taxable years beginning after 

11 the date of the enactment of this Act. 

12 SEC. 224. CLARIFICATION OF TREATMENT OF CAPITATED 

13 PRIMARY CARE PAYMENTS AS AMOUNTS 

14 PAID FOR MEDICAL CARE. 

15 (a) IN GENERAL.—Subsection (d) of section 213 of 

16 the Internal Revenue Code of 1986, as amended by the 

17 preceding provisions of this Act, is amended by adding at 

18 the end the following new paragraph: 

19 ‘‘(15) TREATMENT OF CAPITATED PRIMARY

20 CARE PAYMENTS.—Capitated primary care payments 

21 shall be treated as amounts paid for medical care.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to taxable years beginning after 

24 the date of the enactment of this Act. 


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1 Subtitle D—Miscellaneous 

2 SEC. 231. CONTRIBUTIONS OF MEDICARE BENEFICIARIES 

3 PARTICIPATING IN MEDICARE ADVANTAGE 

4 MSA. 

5 (a) IN GENERAL.—Section 138(b) of the Internal 

6 Revenue Code of 1986 is amended by striking paragraph 

7 (2) and by redesignating paragraphs (3) and (4) as para8 graphs (2) and (3), respectively. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to taxable years beginning after 

11 the date of the enactment of this Act. 

12 SEC. 232. PHYSICIAN CHARITY AND UNCOMPENSATED 

13 CARE DEDUCTION. 

14 (a) IN GENERAL.—Part VI of subchapter B of chap15 ter 1 of the Internal Revenue Code of 1986 is amended 

16 by adding at the end the following new section: 

17 ‘‘SEC. 199A. PHYSICIAN CHARITY AND UNCOMPENSATED 

18 CARE. 

19 ‘‘(a) IN GENERAL.—In the case of a physician, there 

20 shall be allowed as a deduction for the taxable year an 

21 amount equal to the sum of— 

22 ‘‘(1) the amount such physician would have oth23 erwise charged for qualified charity care provided by 

24 such physician during such taxable year, and 


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1 ‘‘(2) the amount of any debt owed to such phy2 sician for physicians’ services which becomes worth3 less during such taxable year. 

4 ‘‘(b) DEFINITIONS.—For purposes of this section— 

5 ‘‘(1) PHYSICIAN.—The term ‘physician’ has the 

6 meaning given to such term in section 1861(r) of the 

7 Social Security Act (42 U.S.C. 1395x(r)). 

8 ‘‘(2) QUALIFIED CHARITY CARE.—The term 

9 ‘qualified charity care’ means physicians’ services 

10 provided on a volunteer or pro bono basis (not in11 cluding any services for which an amount was 

12 charged but not paid). 

13 ‘‘(3) PHYSICIANS’ SERVICES.—The term ‘physi14 cians’ services’ has the meaning given such term in 

15 section 1861(q) of the Social Security Act (42 

16 U.S.C. 1395x(q)). 

17 ‘‘(c) LIMITATIONS.— 

18 ‘‘(1) SERVICE CHARGE LIMITATION.—The 

19 amount determined under subsection (a) with re20 spect to any services or debt— 

21 ‘‘(A) shall be reduced by any reimburse22 ment received by the physician for such services 

23 or debt, and 

24 ‘‘(B) shall not exceed the economic index 

25 referred to in the fourth sentence of section 


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1 1842(b)(3) of the Social Security Act (42 

2 U.S.C. 1395u(b)(3)) applicable to the qualified 

3 charity care provided or the services provided 

4 with respect to which the debt relates. 

5 In the case of physicians’ services to which such eco6 nomic index is not applicable, the Secretary, in con7 sultation with the Secretary of Health and Human 

8 Services, shall use data on uncompensated care for 

9 purposes of the limitation under subparagraph (B), 

10 and may adjust such data so as to be an appropriate 

11 proxy, including (in the case of qualified charity 

12 care) a downward adjustment to eliminate bad debt 

13 data from uncompensated care data. 

14 ‘‘(2) OVERALL LIMITATION.—The amount al15 lowed as a deduction under subsection (a) for any 

16 taxable year shall not exceed an amount equal to 10 

17 percent of the gross income of the taxpayer for the 

18 taxable year derived from the taxpayer’s provision of 

19 physicians’ services. 

20 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 

21 shall be allowed under section 166 or any other provision 

22 of this title for the amount of any bad debt taken into 

23 account under subsection (a)(2) (as reduced, if applicable, 

24 under subsection (c)).’’. 


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1 (b) CLERICAL AMENDMENT.—The table of sections 

2 for part VI of subchapter B of chapter 1 of the Internal 

3 Revenue Code of 1986 is amended by adding at the end 

4 the following new item: 

‘‘Sec. 199A. Physician charity and uncompensated care.’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 the date of the enactment of this Act. 

8 TITLE III—INDIVIDUAL HEALTH 

9 INSURANCE REFORM 

10 SEC. 301. POOL REFORM FOR INDIVIDUAL MEMBERSHIP 

11 EXPANSION. 

12 The Public Health Service Act is amended by insert13 ing after title XXXIII the following new title: 

14 ‘‘TITLE XXXIV—POOL REFORM 

15 FOR INDIVIDUAL MEMBER16 SHIP EXPANSION 

17 ‘‘SEC. 3400. PURPOSE. 

18 ‘‘The purpose of this title is to provide, through the 

19 establishment of independent health pools (referred to in 

20 this title as ‘IHP’), for the reform of, and expansion of 

21 enrollment in, health insurance coverage for individuals 

22 and small employers. 


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1 ‘‘SEC. 3401. DEFINITION OF INDEPENDENT HEALTH POOL. 

2 ‘‘(a) IN GENERAL.—For purposes of this title, the 

3 terms ‘individual health pool’ and ‘IHP’ mean a legal non4 profit entity that meets the following requirements: 

5 ‘‘(1) ORGANIZATION.—The IHP— 

6 ‘‘(A) has been formed and maintained in 

7 good faith for a purpose that includes the for8 mation of a risk pool in order to offer health in9 surance coverage to its members; 

10 ‘‘(B) does not condition membership in the 

11 IHP on any health status-related factor relating 

12 to an individual (including an employee of an 

13 employer or a dependent of an employee); 

14 ‘‘(C) does not make health insurance cov15 erage offered through the IHP available other 

16 than in connection with a member of the IHP; 

17 ‘‘(D) is not a health insurance issuer; and 

18 ‘‘(E) does not receive any consideration di19 rectly or indirectly from any health insurance 

20 issuer in connection with the enrollment of any 

21 individuals, or employees of employers, in any 

22 health insurance coverage, except in conjunction 

23 with services offered through the IHP. 

24 ‘‘(2) OFFERING HEALTH BENEFITS COV25 ERAGE.— 


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1 ‘‘(A) DIFFERENT GROUPS.—The IHP, in 

2 conjunction with those health insurance issuers 

3 that offer health benefits coverage through the 

4 IHP, makes available health benefits coverage 

5 in the manner described in subsection (b) to all 

6 members of the IHP and the dependents of 

7 such members (and, in the case of small em8 ployers, employees and their dependents) in the 

9 manner described in subsection (c)(2) at rates 

10 that are established by the health insurance 

11 issuer on a policy or product specific basis and 

12 that may vary for individuals covered through 

13 an IHP. 

14 ‘‘(B) NONDISCRIMINATION IN COVERAGE

15 OFFERED.— 

16 ‘‘(i) IN GENERAL.—Subject to clause 

17 (ii), the IHP may not offer health benefits 

18 coverage to a member of an IHP unless 

19 the same coverage is offered to all such 

20 members of the IHP. 

21 ‘‘(ii) CONSTRUCTION.—Nothing in 

22 this title shall be construed as requiring or 

23 permitting a health insurance issuer to 

24 provide coverage outside the service area of 

25 the issuer, as approved under State law, or 


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1 preventing a health insurance issuer from 

2 underwriting or from excluding or limiting 

3 the coverage on any individual, subject to 

4 the requirement of section 2741 (relating 

5 to guaranteed availability of individual 

6 health insurance coverage to certain indi7 viduals with prior group coverage). 

8 ‘‘(C) NO ASSUMPTION OF INSURANCE RISK

9 BY IHP.—The IHP provides health benefits cov10 erage only through contracts with health insur11 ance issuers and does not assume insurance 

12 risk with respect to such coverage. 

13 ‘‘(3) GEOGRAPHIC AREAS.—Nothing in this title 

14 shall be construed as preventing the establishment 

15 and operation of more than one IHP in a geographic 

16 area or as limiting the number of IHPs that may 

17 operate in any area. 

18 ‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES

19 TO PURCHASERS.—The IHP may provide adminis20 trative services for members. Such services may in21 clude accounting, billing, and enrollment informa22 tion. 

23 ‘‘(b) HEALTH BENEFITS COVERAGE REQUIRE24 MENTS.— 


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1 ‘‘(1) COMPLIANCE WITH CONSUMER PROTEC2 TION REQUIREMENTS.—Except as provided in sec3 tion 3402, any health benefits coverage offered 

4 through an IHP— 

5 ‘‘(A) shall be issued by a health insurance 

6 issuer that meets all applicable State standards 

7 relating to consumer protection; 

8 ‘‘(B) shall be approved or otherwise per9 mitted to be offered under State law; and 

10 ‘‘(C) may not impose any exclusion of a 

11 specific disease from such coverage. 

12 ‘‘(2) WELLNESS BONUSES FOR HEALTH PRO13 MOTION.—Nothing in this title shall be construed as 

14 precluding a health insurance issuer offering health 

15 benefits coverage through an IHP from establishing 

16 premium discounts or rebates for members or from 

17 modifying otherwise applicable copayments or 

18 deductibles in return for adherence to programs of 

19 health promotion and disease prevention so long as 

20 such programs are agreed to in advance by the IHP 

21 and comply with all other provisions of this title and 

22 do not discriminate among similarly situated mem23 bers. 

24 ‘‘(c) MEMBERS; HEALTH INSURANCE ISSUERS.— 

25 ‘‘(1) MEMBERS.— 


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1 ‘‘(A) IN GENERAL.—Under rules estab2 lished to carry out this title, with respect to an 

3 individual or small employer who is a member 

4 of an IHP, the individual may enroll for health 

5 benefits coverage (including coverage for de6 pendents of such individual) or the employer 

7 may enroll employees for health benefits cov8 erage (including coverage for dependents of 

9 such employees) offered by a health insurance 

10 issuer through the IHP. 

11 ‘‘(B) RULES FOR ENROLLMENT.—Nothing 

12 in this paragraph shall preclude an IHP from 

13 establishing rules of enrollment and reenroll14 ment of members. Such rules shall be applied 

15 consistently to all members within the IHP and 

16 shall not be based in any manner on health sta17 tus-related factors. 

18 ‘‘(2) HEALTH INSURANCE ISSUERS.—The con19 tract between an IHP and a health insurance issuer 

20 shall provide, with respect to a member enrolled with 

21 health benefits coverage offered by the issuer 

22 through the IHP, for the payment to the issuer of 

23 the premiums (if any) collected by the IHP for 

24 health insurance coverage offered by the issuer. 


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1 ‘‘SEC. 3402. APPLICATION OF CERTAIN LAWS AND REQUIRE2 MENTS. 

3 ‘‘(a) PREEMPTION OF STATE LAWS RESTRICTING

4 FORMATION OF IHPS.—Any State law or regulation relat5 ing to the composition or organization of an IHP is pre6 empted to the extent the law or regulation is inconsistent 

7 with the provisions of this title. 

8 ‘‘(b) PREEMPTION OF STATE REQUIREMENTS RE9 LATING TO HEALTH BENEFIT COVERAGE.— 

10 ‘‘(1) BENEFIT REQUIREMENTS.— 

11 ‘‘(A) IN GENERAL.—Subject to subpara12 graph (B), State laws are superseded, and shall 

13 not apply to health benefits coverage made 

14 available through an IHP, insofar as such laws 

15 impose benefit requirements for such coverage, 

16 including requirements relating to coverage of 

17 specific providers, specific services or condi18 tions, or the amount, duration, or scope of ben19 efits. 

20 ‘‘(B) EXCEPTION FOR FEDERALLY IM21 POSED REQUIREMENTS AND FOR REQUIRE22 MENTS PROHIBITING DISEASE-SPECIFIC EXCLU23 SIONS.—Subparagraph (A) shall not apply to a 

24 requirement to the extent the requirement— 

25 ‘‘(i) implements title XXVII or other 

26 Federal law; or 


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1 ‘‘(ii) prohibits imposition of an exclu2 sion of a specific disease from health bene3 fits coverage. 

4 ‘‘(2) OTHER REQUIREMENTS PREVENTING OF5 FERING OF COVERAGE THROUGH AN IHP.—State 

6 laws are superseded, and shall not apply to health 

7 benefits coverage made available through an IHP, 

8 insofar as such laws impose any other requirements 

9 (including limitations on compensation arrange10 ments) that, directly or indirectly, preclude (or have 

11 the effect of precluding) the offering of such cov12 erage through an IHP, if the IHP meets the re13 quirements of this title. 

14 ‘‘(c) PREEMPTION OF STATE PREMIUM RATING RE15 QUIREMENTS.—State laws are superseded, and shall not 

16 apply to the premiums imposed for health benefits cov17 erage made available through an IHP, insofar as such 

18 laws impose restrictions on the variation of premiums 

19 among such coverage offered to members of the IHP. 

20 ‘‘SEC. 3403. DEFINITIONS. 

21 ‘‘For purposes of this title: 

22 ‘‘(1) DEPENDENT.—The term ‘dependent’, as 

23 applied to health insurance coverage offered by a 

24 health insurance issuer licensed (or otherwise regu25 lated) in a State, shall have the meaning applied to 


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1 such term with respect to such coverage under the 

2 laws of the State relating to such coverage and such 

3 an issuer. Such term may include the spouse and 

4 children of the individual involved. 

5 ‘‘(2) HEALTH BENEFITS COVERAGE.—The term 

6 ‘health benefits coverage’ has the meaning given the 

7 term ‘health insurance coverage’ in section 

8 2791(b)(1), and does not include excepted benefits 

9 (as defined in section 2791(c)). 

10 ‘‘(3) HEALTH INSURANCE ISSUER.—The term 

11 ‘health insurance issuer’ has the meaning given such 

12 term in section 2791(b)(2). 

13 ‘‘(4) HEALTH STATUS-RELATED FACTOR.—The 

14 term ‘health status-related factor’ has the meaning 

15 given such term in section 2791(d)(9). 

16 ‘‘(5) MEMBER.—The term ‘member’ means, 

17 with respect to an IHP, an individual or small em18 ployer who is a member of the legal entity described 

19 in section 3401(a)(1) to which the IHP is offering 

20 coverage. 

21 ‘‘(6) SMALL EMPLOYER.—The term ‘small em22 ployer’ has the meaning given such term in section 

23 712(c)(1)(B) of the Employee Retirement Income 

24 Security Act of 1974.’’. 


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1 SEC. 302. COOPERATIVE GOVERNING OF INDIVIDUAL 

2 HEALTH INSURANCE COVERAGE. 

3 (a) IN GENERAL.—Title XXVII of the Public Health 

4 Service Act (42 U.S.C. 300gg et seq.) is amended by add5 ing at the end the following new part: 

6 ‘‘PART D—COOPERATIVE GOVERNING OF 

7 INDIVIDUAL HEALTH INSURANCE COVERAGE 

8 ‘‘SEC. 2795. DEFINITIONS. 

9 ‘‘In this part: 

10 ‘‘(1) PRIMARY STATE.—The term ‘primary 

11 State’ means, with respect to individual health insur12 ance coverage offered by a health insurance issuer, 

13 the State designated by the issuer as the State 

14 whose covered laws shall govern the health insurance 

15 issuer in the sale of such coverage under this part. 

16 An issuer, with respect to a particular policy, may 

17 only designate one such State as its primary State 

18 with respect to all such coverage it offers. Such an 

19 issuer may not change the designated primary State 

20 with respect to individual health insurance coverage 

21 once the policy is issued, except that such a change 

22 may be made upon renewal of the policy. With re23 spect to such designated State, the issuer is deemed 

24 to be doing business in that State. 

25 ‘‘(2) SECONDARY STATE.—The term ‘secondary 

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1 ance coverage offered by a health insurance issuer, 

2 any State that is not the primary State. In the case 

3 of a health insurance issuer that is selling a policy 

4 in, or to a resident of, a secondary State, the issuer 

5 is deemed to be doing business in that secondary 

6 State. 

7 ‘‘(3) HEALTH INSURANCE ISSUER.—The term 

8 ‘health insurance issuer’ has the meaning given such 

9 term in section 2791(b)(2), except that such an 

10 issuer must be licensed in the primary State and be 

11 qualified to sell individual health insurance coverage 

12 in that State. 

13 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV14 ERAGE.—The term ‘individual health insurance cov15 erage’ means health insurance coverage offered in 

16 the individual market, as defined in section 

17 2791(e)(1). 

18 ‘‘(5) APPLICABLE STATE AUTHORITY.—The 

19 term ‘applicable State authority’ means, with respect 

20 to a health insurance issuer in a State, the State in21 surance commissioner or official or officials des22 ignated by the State to enforce the requirements of 

23 this title for the State with respect to the issuer. 

24 ‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 

25 term ‘hazardous financial condition’ means that, 


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1 based on its present or reasonably anticipated finan2 cial condition, a health insurance issuer is unlikely 

3 to be able— 

4 ‘‘(A) to meet obligations to policyholders 

5 with respect to known claims and reasonably 

6 anticipated claims; or 

7 ‘‘(B) to pay other obligations in the normal 

8 course of business. 

9 ‘‘(7) COVERED LAWS.— 

10 ‘‘(A) IN GENERAL.—The term ‘covered 

11 laws’ means the laws, rules, regulations, agree12 ments, and orders governing the insurance busi13 ness pertaining to— 

14 ‘‘(i) individual health insurance cov15 erage issued by a health insurance issuer; 

16 ‘‘(ii) the offer, sale, rating (including 

17 medical underwriting), renewal, and 

18 issuance of individual health insurance cov19 erage to an individual; 

20 ‘‘(iii) the provision to an individual in 

21 relation to individual health insurance cov22 erage of health care and insurance related 

23 services; 

24 ‘‘(iv) the provision to an individual in 

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1 erage of management, operations, and in2 vestment activities of a health insurance 

3 issuer; and 

4 ‘‘(v) the provision to an individual in 

5 relation to individual health insurance cov6 erage of loss control and claims adminis7 tration for a health insurance issuer with 

8 respect to liability for which the issuer pro9 vides insurance. 

10 ‘‘(B) EXCEPTION.—Such term does not in11 clude any law, rule, regulation, agreement, or 

12 order governing the use of care or cost manage13 ment techniques, including any requirement re14 lated to provider contracting, network access or 

15 adequacy, health care data collection, or quality 

16 assurance. 

17 ‘‘(8) STATE.—The term ‘State’ means the 50 

18 States and includes the District of Columbia, Puerto 

19 Rico, the Virgin Islands, Guam, American Samoa, 

20 and the Northern Mariana Islands. 

21 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC22 TICES.—The term ‘unfair claims settlement prac23 tices’ means only the following practices: 


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1 ‘‘(A) Knowingly misrepresenting to claim2 ants and insured individuals relevant facts or 

3 policy provisions relating to coverage at issue. 

4 ‘‘(B) Failing to acknowledge with reason5 able promptness pertinent communications with 

6 respect to claims arising under policies. 

7 ‘‘(C) Failing to adopt and implement rea8 sonable standards for the prompt investigation 

9 and settlement of claims arising under policies. 

10 ‘‘(D) Failing to effectuate prompt, fair, 

11 and equitable settlement of claims submitted in 

12 which liability has become reasonably clear. 

13 ‘‘(E) Refusing to pay claims without con14 ducting a reasonable investigation. 

15 ‘‘(F) Failing to affirm or deny coverage of 

16 claims within a reasonable period of time after 

17 having completed an investigation related to 

18 those claims. 

19 ‘‘(G) A pattern or practice of compelling 

20 insured individuals or their beneficiaries to in21 stitute suits to recover amounts due under its 

22 policies by offering substantially less than the 

23 amounts ultimately recovered in suits brought 

24 by them. 


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1 ‘‘(H) A pattern or practice of attempting 

2 to settle or settling claims for less than the 

3 amount that a reasonable person would believe 

4 the insured individual or his or her beneficiary 

5 was entitled by reference to written or printed 

6 advertising material accompanying or made 

7 part of an application. 

8 ‘‘(I) Attempting to settle or settling claims 

9 on the basis of an application that was materi10 ally altered without notice to, or knowledge or 

11 consent of, the insured. 

12 ‘‘(J) Failing to provide forms necessary to 

13 present claims within 15 calendar days of re14 quests with reasonable explanations regarding 

15 their use. 

16 ‘‘(K) Attempting to cancel a policy in less 

17 time than that prescribed in the policy or by the 

18 law of the primary State. 

19 ‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 

20 and abuse’ means an act or omission committed by 

21 a person who, knowingly and with intent to defraud, 

22 commits, or conceals any material information con23 cerning, one or more of the following: 

24 ‘‘(A) Presenting, causing to be presented, 

25 or preparing with knowledge or belief that it 


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1 will be presented to or by an insurer, a rein2 surer, or broker or its agent, false information 

3 as part of, in support of, or concerning a fact 

4 material to one or more of the following: 

5 ‘‘(i) An application for the issuance or 

6 renewal of an insurance policy or reinsur7 ance contract. 

8 ‘‘(ii) The rating of an insurance policy 

9 or reinsurance contract. 

10 ‘‘(iii) A claim for payment or benefit 

11 pursuant to an insurance policy or reinsur12 ance contract. 

13 ‘‘(iv) Premiums paid on an insurance 

14 policy or reinsurance contract. 

15 ‘‘(v) Payments made in accordance 

16 with the terms of an insurance policy or 

17 reinsurance contract. 

18 ‘‘(vi) A document filed with the com19 missioner or the chief insurance regulatory 

20 official of another jurisdiction. 

21 ‘‘(vii) The financial condition of an in22 surer or reinsurer. 

23 ‘‘(viii) The formation, acquisition, 

24 merger, reconsolidation, dissolution or 

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1 surance or reinsurance in all or part of a 

2 State by an insurer or reinsurer. 

3 ‘‘(ix) The issuance of written evidence 

4 of insurance. 

5 ‘‘(x) The reinstatement of an insur6 ance policy. 

7 ‘‘(B) Solicitation or acceptance of new or 

8 renewal insurance risks on behalf of an insurer, 

9 reinsurer, or other person engaged in the busi10 ness of insurance by a person who knows or 

11 should know that the insurer or other person 

12 responsible for the risk is insolvent at the time 

13 of the transaction. 

14 ‘‘(C) Transaction of the business of insur15 ance in violation of laws requiring a license, cer16 tificate of authority, or other legal authority for 

17 the transaction of the business of insurance. 

18 ‘‘(D) Attempt to commit, aiding or abet19 ting in the commission of, or conspiracy to com20 mit the acts or omissions specified in this para21 graph. 

22 ‘‘SEC. 2796. APPLICATION OF LAW. 

23 ‘‘(a) IN GENERAL.—The covered laws of the primary 

24 State shall apply to individual health insurance coverage 

25 offered by a health insurance issuer in the primary State 


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1 and in any secondary State, but only if the coverage and 

2 issuer comply with the conditions of this section with re3 spect to the offering of coverage in any secondary State. 

4 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC5 ONDARY STATE.—Except as provided in this section, a 

6 health insurance issuer with respect to its offer, sale, rat7 ing (including medical underwriting), renewal, and 

8 issuance of individual health insurance coverage in any 

9 secondary State is exempt from any covered laws of the 

10 secondary State (and any rules, regulations, agreements, 

11 or orders sought or issued by such State under or related 

12 to such covered laws) to the extent that such laws would— 

13 ‘‘(1) make unlawful, or regulate, directly or in14 directly, the operation of the health insurance issuer 

15 operating in the secondary State, except that any 

16 secondary State may require such an issuer— 

17 ‘‘(A) to pay, on a nondiscriminatory basis, 

18 applicable premium and other taxes (including 

19 high risk pool assessments) which are levied on 

20 insurers and surplus lines insurers, brokers, or 

21 policyholders under the laws of the State; 

22 ‘‘(B) to register with and designate the 

23 State insurance commissioner as its agent solely 

24 for the purpose of receiving service of legal doc25 uments or process; 


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1 ‘‘(C) to submit to an examination of its fi2 nancial condition by the State insurance com3 missioner in any State in which the issuer is 

4 doing business to determine the issuer’s finan5 cial condition, if— 

6 ‘‘(i) the State insurance commissioner 

7 of the primary State has not done an ex8 amination within the period recommended 

9 by the National Association of Insurance 

10 Commissioners; and 

11 ‘‘(ii) any such examination is con12 ducted in accordance with the examiners’ 

13 handbook of the National Association of 

14 Insurance Commissioners and is coordi15 nated to avoid unjustified duplication and 

16 unjustified repetition; 

17 ‘‘(D) to comply with a lawful order 

18 issued— 

19 ‘‘(i) in a delinquency proceeding com20 menced by the State insurance commis21 sioner if there has been a finding of finan22 cial impairment under subparagraph (C); 

23 or 

24 ‘‘(ii) in a voluntary dissolution pro25 ceeding; 


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1 ‘‘(E) to comply with an injunction issued 

2 by a court of competent jurisdiction, upon a pe3 tition by the State insurance commissioner al4 leging that the issuer is in hazardous financial 

5 condition; 

6 ‘‘(F) to participate, on a nondiscriminatory 

7 basis, in any insurance insolvency guaranty as8 sociation or similar association to which a 

9 health insurance issuer in the State is required 

10 to belong; 

11 ‘‘(G) to comply with any State law regard12 ing fraud and abuse (as defined in section 

13 2795(10)), except that if the State seeks an in14 junction regarding the conduct described in this 

15 subparagraph, such injunction must be obtained 

16 from a court of competent jurisdiction; 

17 ‘‘(H) to comply with any State law regard18 ing unfair claims settlement practices (as de19 fined in section 2795(9)); or 

20 ‘‘(I) to comply with the applicable require21 ments for independent review under section 

22 2798 with respect to coverage offered in the 

23 State; 

24 ‘‘(2) require any individual health insurance 

25 coverage issued by the issuer to be countersigned by 


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1 an insurance agent or broker residing in that sec2 ondary State; or 

3 ‘‘(3) otherwise discriminate against the issuer 

4 issuing insurance in both the primary State and in 

5 any secondary State. 

6 ‘‘(c) CLEAR AND CONSPICUOUS DISCLOSURE.—A 

7 health insurance issuer shall provide the following notice, 

8 in 12-point bold type, in any insurance coverage offered 

9 in a secondary State under this part by such a health in10 surance issuer and at renewal of the policy, with the 5 

11 blank spaces therein being appropriately filled with the 

12 name of the health insurance issuer, the name of the pri13 mary State, the name of the secondary State, the name 

14 of the secondary State, and the name of the secondary 

15 State, respectively, for the coverage concerned: 

16 ‘‘ ‘NOTICE

17 ‘‘ ‘This policy is issued by lllll and is gov18 erned by the laws and regulations of the lllll, and 

19 it has met all the laws of that State as determined by 

20 that State’s Department of Insurance. This policy may be 

21 less expensive than others because it is not subject to all 

22 of the insurance laws and regulations of the lllll, 

23 including coverage of some services or benefits mandated 

24 by the law of the lllll. Additionally, this policy is 

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1 strictions on rate changes of the lllll. As with all 

2 insurance products, before purchasing this policy, you 

3 should carefully review the policy and determine what 

4 health care services the policy covers and what benefits 

5 it provides, including any exclusions, limitations, or condi6 tions for such services or benefits.’. 

7 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

8 AND PREMIUM INCREASES.— 

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, a health insurance issuer that provides indi11 vidual health insurance coverage to an individual 

12 under this part in a primary or secondary State may 

13 not upon renewal— 

14 ‘‘(A) move or reclassify the individual in15 sured under the health insurance coverage from 

16 the class such individual is in at the time of 

17 issue of the contract based on the health-status 

18 related factors of the individual; or 

19 ‘‘(B) increase the premiums assessed the 

20 individual for such coverage based on a health 

21 status-related factor or change of a health sta22 tus-related factor or the past or prospective 

23 claim experience of the insured individual. 


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1 ‘‘(2) CONSTRUCTION.—Nothing in paragraph 

2 (1) shall be construed to prohibit a health insurance 

3 issuer— 

4 ‘‘(A) from terminating or discontinuing 

5 coverage or a class of coverage in accordance 

6 with subsections (b) and (c) of section 2742; 

7 ‘‘(B) from raising premium rates for all 

8 policy holders within a class based on claims ex9 perience; 

10 ‘‘(C) from changing premiums or offering 

11 discounted premiums to individuals who engage 

12 in wellness activities at intervals prescribed by 

13 the issuer, if such premium changes or incen14 tives— 

15 ‘‘(i) are disclosed to the consumer in 

16 the insurance contract; 

17 ‘‘(ii) are based on specific wellness ac18 tivities that are not applicable to all indi19 viduals; and 

20 ‘‘(iii) are not obtainable by all individ21 uals to whom coverage is offered; 

22 ‘‘(D) from reinstating lapsed coverage; or 

23 ‘‘(E) from retroactively adjusting the rates 

24 charged an insured individual if the initial rates 


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1 were set based on material misrepresentation by 

2 the individual at the time of issue. 

3 ‘‘(e) PRIOR OFFERING OF POLICY IN PRIMARY

4 STATE.—A health insurance issuer may not offer for sale 

5 individual health insurance coverage in a secondary State 

6 unless that coverage is currently offered for sale in the 

7 primary State. 

8 ‘‘(f) LICENSING OF AGENTS OR BROKERS FOR

9 HEALTH INSURANCE ISSUERS.—Any State may require 

10 that a person acting, or offering to act, as an agent or 

11 broker for a health insurance issuer with respect to the 

12 offering of individual health insurance coverage obtain a 

13 license from that State, with commissions or other com14 pensation subject to the provisions of the laws of that 

15 State, except that a State may not impose any qualifica16 tion or requirement which discriminates against a non17 resident agent or broker. 

18 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN19 SURANCE COMMISSIONER.—Each health insurance issuer 

20 issuing individual health insurance coverage in both pri21 mary and secondary States shall submit— 

22 ‘‘(1) to the insurance commissioner of each 

23 State in which it intends to offer such coverage, be24 fore it may offer individual health insurance cov25 erage in such State— 


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1 ‘‘(A) a copy of the plan of operation or fea2 sibility study or any similar statement of the 

3 policy being offered and its coverage (which 

4 shall include the name of its primary State and 

5 its principal place of business); 

6 ‘‘(B) written notice of any change in its 

7 designation of its primary State; and 

8 ‘‘(C) written notice from the issuer of the 

9 issuer’s compliance with all the laws of the pri10 mary State; and 

11 ‘‘(2) to the insurance commissioner of each sec12 ondary State in which it offers individual health in13 surance coverage, a copy of the issuer’s quarterly fi14 nancial statement submitted to the primary State, 

15 which statement shall be certified by an independent 

16 public accountant and contain a statement of opin17 ion on loss and loss adjustment expense reserves 

18 made by— 

19 ‘‘(A) a member of the American Academy 

20 of Actuaries; or 

21 ‘‘(B) a qualified loss reserve specialist. 

22 ‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.— 

23 Nothing in this section shall be construed to affect the 

24 authority of any Federal or State court to enjoin— 


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1 ‘‘(1) the solicitation or sale of individual health 

2 insurance coverage by a health insurance issuer to 

3 any person or group who is not eligible for such in4 surance; or 

5 ‘‘(2) the solicitation or sale of individual health 

6 insurance coverage that violates the requirements of 

7 the law of a secondary State which are described in 

8 subparagraphs (A) through (H) of section 

9 2796(b)(1). 

10 ‘‘(i) POWER OF SECONDARY STATES TO TAKE AD11 MINISTRATIVE ACTION.—Nothing in this section shall be 

12 construed to affect the authority of any State to enjoin 

13 conduct in violation of that State’s laws described in sec14 tion 2796(b)(1). 

15 ‘‘(j) STATE POWERS TO ENFORCE STATE LAWS.— 

16 ‘‘(1) IN GENERAL.—Subject to the provisions of 

17 subsection (b)(1)(G) (relating to injunctions) and 

18 paragraph (2), nothing in this section shall be con19 strued to affect the authority of any State to make 

20 use of any of its powers to enforce the laws of such 

21 State with respect to which a health insurance issuer 

22 is not exempt under subsection (b). 

23 ‘‘(2) COURTS OF COMPETENT JURISDICTION.— 

24 If a State seeks an injunction regarding the conduct 

25 described in paragraphs (1) and (2) of subsection 


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1 (h), such injunction must be obtained from a Fed2 eral or State court of competent jurisdiction. 

3 ‘‘(k) STATES’ AUTHORITY TO SUE.—Nothing in this 

4 section shall affect the authority of any State to bring ac5 tion in any Federal or State court. 

6 ‘‘(l) GENERALLY APPLICABLE LAWS.—Nothing in 

7 this section shall be construed to affect the applicability 

8 of State laws generally applicable to persons or corpora9 tions. 

10 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

11 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 

12 health insurance issuer is offering coverage in a primary 

13 State that does not accommodate residents of secondary 

14 States or does not provide a working mechanism for resi15 dents of a secondary State, and the issuer is offering cov16 erage under this part in such secondary State which has 

17 not adopted a qualified high risk pool as its acceptable 

18 alternative mechanism (as defined in section 2744(c)(2)), 

19 the issuer shall, with respect to any individual health in20 surance coverage offered in a secondary State under this 

21 part, comply with the guaranteed availability requirements 

22 for eligible individuals in section 2741. 


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1 ‘‘SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR 

2 BEFORE ISSUER MAY SELL INTO SECONDARY 

3 STATES. 

4 ‘‘A health insurance issuer may not offer, sell, or 

5 issue individual health insurance coverage in a secondary 

6 State if the State insurance commissioner does not use 

7 a risk-based capital formula for the determination of cap8 ital and surplus requirements for all health insurance 

9 issuers. 

10 ‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE11 DURES. 

12 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur13 ance issuer may not offer, sell, or issue individual health 

14 insurance coverage in a secondary State under the provi15 sions of this title unless— 

16 ‘‘(1) both the secondary State and the primary 

17 State have legislation or regulations in place estab18 lishing an independent review process for individuals 

19 who are covered by individual health insurance cov20 erage; or 

21 ‘‘(2) in any case in which the requirements of 

22 paragraph (1) are not met with respect to the either 

23 of such States, the issuer provides an independent 

24 review mechanism substantially identical (as deter25 mined by the applicable State authority of such 

26 State) to that prescribed in the ‘Health Carrier ExVerDate Sep 11 2014 06:25 Feb 02, 2017 Jkt 069200 PO 00000 Frm 00070 Fmt 6652 Sfmt 6201 E:\BILLS\S222.IS S222

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1 ternal Review Model Act’ of the National Association 

2 of Insurance Commissioners for all individuals who 

3 purchase insurance coverage under the terms of this 

4 part, except that, under such mechanism, the review 

5 is conducted by an independent medical reviewer, or 

6 a panel of such reviewers, with respect to whom the 

7 requirements of subsection (b) are met. 

8 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL

9 REVIEWERS.—In the case of any independent review 

10 mechanism referred to in subsection (a)(2): 

11 ‘‘(1) IN GENERAL.—In referring a denial of a 

12 claim to an independent medical reviewer, or to any 

13 panel of such reviewers, to conduct independent 

14 medical review, the issuer shall ensure that— 

15 ‘‘(A) each independent medical reviewer 

16 meets the qualifications described in paragraphs 

17 (2) and (3); 

18 ‘‘(B) with respect to each review, each re19 viewer meets the requirements of paragraph (4) 

20 and the reviewer, or at least 1 reviewer on the 

21 panel, meets the requirements described in 

22 paragraph (5); and 

23 ‘‘(C) compensation provided by the issuer 

24 to each reviewer is consistent with paragraph 

25 (6). 


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1 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde2 pendent medical reviewer shall be a physician 

3 (allopathic or osteopathic) or health care profes4 sional who— 

5 ‘‘(A) is appropriately credentialed or li6 censed in one or more States to deliver health 

7 care services; and 

8 ‘‘(B) typically treats the condition, makes 

9 the diagnosis, or provides the type of treatment 

10 under review. 

11 ‘‘(3) INDEPENDENCE.— 

12 ‘‘(A) IN GENERAL.—Subject to subpara13 graph (B), each independent medical reviewer 

14 in a case shall— 

15 ‘‘(i) not be a related party (as defined 

16 in paragraph (7)); 

17 ‘‘(ii) not have a material familial, fi18 nancial, or professional relationship with 

19 such a party; and 

20 ‘‘(iii) not otherwise have a conflict of 

21 interest with such a party (as determined 

22 under regulations). 

23 ‘‘(B) EXCEPTION.—Nothing in subpara24 graph (A) shall be construed to— 


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1 ‘‘(i) prohibit an individual, solely on 

2 the basis of affiliation with the issuer, 

3 from serving as an independent medical re4 viewer if— 

5 ‘‘(I) a non-affiliated individual is 

6 not reasonably available; 

7 ‘‘(II) the affiliated individual is 

8 not involved in the provision of items 

9 or services in the case under review; 

10 ‘‘(III) the fact of such an affili11 ation is disclosed to the issuer and the 

12 enrollee (or authorized representative) 

13 and neither party objects; and 

14 ‘‘(IV) the affiliated individual is 

15 not an employee of the issuer and 

16 does not provide services exclusively or 

17 primarily to or on behalf of the issuer; 

18 ‘‘(ii) prohibit an individual who has 

19 staff privileges at the institution where the 

20 treatment involved takes place from serv21 ing as an independent medical reviewer 

22 merely on the basis of such affiliation if 

23 the affiliation is disclosed to the issuer and 

24 the enrollee (or authorized representative), 

25 and neither party objects; or 


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1 ‘‘(iii) prohibit receipt of compensation 

2 by an independent medical reviewer from 

3 an entity if the compensation is provided 

4 consistent with paragraph (6). 

5 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

6 IN SAME FIELD.— 

7 ‘‘(A) IN GENERAL.—In a case involving 

8 treatment, or the provision of items or serv9 ices— 

10 ‘‘(i) by a physician, a reviewer shall be 

11 a practicing physician (allopathic or osteo12 pathic) of the same or similar specialty, as 

13 a physician who, acting within the appro14 priate scope of practice within the State in 

15 which the service is provided or rendered, 

16 typically treats the condition, makes the 

17 diagnosis, or provides the type of treat18 ment under review; or 

19 ‘‘(ii) by a non-physician health care 

20 professional, the reviewer, or at least 1 

21 member of the review panel, shall be a 

22 practicing non-physician health care pro23 fessional of the same or similar specialty 

24 as the non-physician health care profes25 sional who, acting within the appropriate 


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1 scope of practice within the State in which 

2 the service is provided or rendered, typi3 cally treats the condition, makes the diag4 nosis, or provides the type of treatment 

5 under review. 

6 ‘‘(B) PRACTICING DEFINED.—For pur7 poses of this paragraph, the term ‘practicing’ 

8 means, with respect to an individual who is a 

9 physician or other health care professional, that 

10 the individual provides health care services to 

11 individual patients on average at least 2 days 

12 per week. 

13 ‘‘(5) PEDIATRIC EXPERTISE.—In the case of an 

14 external review relating to a child, a reviewer shall 

15 have expertise under paragraph (2) in pediatrics. 

16 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA17 TION.—Compensation provided by the issuer to an 

18 independent medical reviewer in connection with a 

19 review under this section shall— 

20 ‘‘(A) not exceed a reasonable level; and 

21 ‘‘(B) not be contingent on the decision ren22 dered by the reviewer. 

23 ‘‘(7) RELATED PARTY DEFINED.—For purposes 

24 of this section, the term ‘related party’ means, with 


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1 respect to a denial of a claim under a coverage relat2 ing to an enrollee, any of the following: 

3 ‘‘(A) The issuer involved, or any fiduciary, 

4 officer, director, or employee of the issuer. 

5 ‘‘(B) The enrollee (or authorized represent6 ative). 

7 ‘‘(C) The health care professional that pro8 vides the items or services involved in the de9 nial. 

10 ‘‘(D) The institution at which the items or 

11 services (or treatment) involved in the denial 

12 are provided. 

13 ‘‘(E) The manufacturer of any drug or 

14 other item that is included in the items or serv15 ices involved in the denial. 

16 ‘‘(F) Any other party determined under 

17 any regulations to have a substantial interest in 

18 the denial involved. 

19 ‘‘(8) DEFINITIONS.—For purposes of this sub20 section— 

21 ‘‘(A) ENROLLEE.—The term ‘enrollee’ 

22 means, with respect to health insurance cov23 erage offered by a health insurance issuer, an 

24 individual enrolled with the issuer to receive 

25 such coverage. 


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1 ‘‘(B) HEALTH CARE PROFESSIONAL.—The 

2 term ‘health care professional’ means an indi3 vidual who is licensed, accredited, or certified 

4 under State law to provide specified health care 

5 services and who is operating within the scope 

6 of such licensure, accreditation, or certification. 

7 ‘‘SEC. 2799. ENFORCEMENT. 

8 ‘‘(a) IN GENERAL.—Subject to subsection (b), with 

9 respect to specific individual health insurance coverage the 

10 primary State for such coverage has sole jurisdiction to 

11 enforce the primary State’s covered laws in the primary 

12 State and any secondary State. 

13 ‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 

14 subsection (a) shall be construed to affect the authority 

15 of a secondary State to enforce its laws as set forth in 

16 the exception specified in section 2796(b)(1). 

17 ‘‘(c) COURT INTERPRETATION.—In reviewing action 

18 initiated by the applicable secondary State authority, the 

19 court of competent jurisdiction shall apply the covered 

20 laws of the primary State. 

21 ‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 

22 of individual health insurance coverage offered in a sec23 ondary State that fails to comply with the covered laws 

24 of the primary State, the applicable State authority of the 


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1 secondary State may notify the applicable State authority 

2 of the primary State.’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 subsection (a) shall apply to individual health insurance 

5 coverage offered, issued, or sold after the date that is one 

6 year after the date of the enactment of this Act. 

7 (c) GAO ONGOING STUDY AND REPORTS.— 

8 (1) STUDY.—The Comptroller General of the 

9 United States shall conduct an ongoing study con10 cerning the effect of the amendment made by sub11 section (a) on— 

12 (A) the number of uninsured and under13 insured; 

14 (B) the availability and cost of health in15 surance policies for individuals with pre-existing 

16 medical conditions; 

17 (C) the availability and cost of health in18 surance policies generally; 

19 (D) the elimination or reduction of dif20 ferent types of benefits under health insurance 

21 policies offered in different States; and 

22 (E) cases of fraud or abuse relating to 

23 health insurance coverage offered under such 

24 amendment and the resolution of such cases. 


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1 (2) ANNUAL REPORTS.—The Comptroller Gen2 eral shall submit to Congress an annual report, after 

3 the end of each of the 5 years following the effective 

4 date of the amendment made by subsection (a), on 

5 the ongoing study conducted under paragraph (1). 

6 TITLE IV—ASSOCIATION 

7 HEALTH PLANS 

8 SEC. 401. RULES GOVERNING ASSOCIATION HEALTH 

9 PLANS. 

10 (a) IN GENERAL.—Subtitle B of title I of the Em11 ployee Retirement Income Security Act of 1974 is amend12 ed by adding after part 7 the following new part: 

13 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

14 HEALTH PLANS 

15 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

16 ‘‘(a) IN GENERAL.—For purposes of this part, the 

17 term ‘association health plan’ means a group health plan 

18 whose sponsor is (or is deemed under this part to be) de19 scribed in subsection (b). 

20 ‘‘(b) SPONSORSHIP.—The sponsor of a group health 

21 plan is described in this subsection if such sponsor— 

22 ‘‘(1) is organized and maintained in good faith, 

23 with a constitution and bylaws specifically stating its 

24 purpose and providing for periodic meetings on at 

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1 tion, a bona fide industry association (including a 

2 rural electric cooperative association or a rural tele3 phone cooperative association), a bona fide profes4 sional association, or a bona fide chamber of com5 merce (or similar bona fide business association, in6 cluding a corporation or similar organization that 

7 operates on a cooperative basis (within the meaning 

8 of section 1381 of the Internal Revenue Code of 

9 1986)), for substantial purposes other than that of 

10 obtaining or providing medical care; 

11 ‘‘(2) is established as a permanent entity which 

12 receives the active support of its members and re13 quires for membership payment on a periodic basis 

14 of dues or payments necessary to maintain eligibility 

15 for membership in the sponsor; and 

16 ‘‘(3) does not condition membership, such dues 

17 or payments, or coverage under the plan on the 

18 basis of health status-related factors with respect to 

19 the employees of its members (or affiliated mem20 bers), or the dependents of such employees, and does 

21 not condition such dues or payments on the basis of 

22 group health plan participation. 

23 Any sponsor consisting of an association of entities which 

24 meet the requirements of paragraphs (1), (2), and (3) 


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1 shall be deemed to be a sponsor described in this sub2 section. 

3 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

4 PLANS. 

5 ‘‘(a) IN GENERAL.—The applicable authority shall 

6 prescribe by regulation a procedure under which, subject 

7 to subsection (b), the applicable authority shall certify as8 sociation health plans which apply for certification as 

9 meeting the requirements of this part. 

10 ‘‘(b) STANDARDS.—Under the procedure prescribed 

11 pursuant to subsection (a), in the case of an association 

12 health plan that provides at least one benefit option which 

13 does not consist of health insurance coverage, the applica14 ble authority shall certify such plan as meeting the re15 quirements of this part only if the applicable authority is 

16 satisfied that the applicable requirements of this part are 

17 met (or, upon the date on which the plan is to commence 

18 operations, will be met) with respect to the plan. 

19 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

20 PLANS.—An association health plan with respect to which 

21 certification under this part is in effect shall meet the ap22 plicable requirements of this part, effective on the date 

23 of certification (or, if later, on the date on which the plan 

24 is to commence operations). 


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1 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI2 CATION.—The applicable authority may provide by regula3 tion for continued certification of association health plans 

4 under this part. 

5 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

6 PLANS.—The applicable authority shall establish a class 

7 certification procedure for association health plans under 

8 which all benefits consist of health insurance coverage. 

9 Under such procedure, the applicable authority shall pro10 vide for the granting of certification under this part to 

11 the plans in each class of such association health plans 

12 upon appropriate filing under such procedure in connec13 tion with plans in such class and payment of the pre14 scribed fee under section 807(a). 

15 ‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION

16 HEALTH PLANS.—An association health plan which offers 

17 one or more benefit options which do not consist of health 

18 insurance coverage may be certified under this part only 

19 if such plan consists of— 

20 ‘‘(1) a plan which offered such coverage on the 

21 date of the enactment of the Obamacare Replace22 ment Act; 

23 ‘‘(2) a plan under which the sponsor does not 

24 restrict membership to one or more trades and busi25 nesses or industries and whose eligible participating 


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1 employers represent a broad cross-section of trades 

2 and businesses or industries; or 

3 ‘‘(3) a plan whose eligible participating employ4 ers represent one or more trades or businesses, or 

5 one or more industries, consisting of any of the fol6 lowing: agriculture; equipment and automobile deal7 erships; barbering and cosmetology; certified public 

8 accounting practices; child care; construction; dance, 

9 theatrical and orchestra productions; disinfecting 

10 and pest control; financial services; fishing; food 

11 service establishments; hospitals; labor organiza12 tions; logging; manufacturing (metals); mining; med13 ical and dental practices; medical laboratories; pro14 fessional consulting services; sanitary services; trans15 portation (local and freight); warehousing; whole16 saling/distributing; or any other trade or business or 

17 industry which has been indicated as having average 

18 or above-average risk or health claims experience by 

19 reason of State rate filings, denials of coverage, pro20 posed premium rate levels, or other means dem21 onstrated by such plan in accordance with regula22 tions. 


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1 ‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 

2 BOARDS OF TRUSTEES. 

3 ‘‘(a) SPONSOR.—The requirements of this subsection 

4 are met with respect to an association health plan if the 

5 sponsor has met (or is deemed under this part to have 

6 met) the requirements of section 801(b) for a continuous 

7 period of not less than 3 years ending with the date of 

8 the application for certification under this part. 

9 ‘‘(b) BOARD OF TRUSTEES.—The requirements of 

10 this subsection are met with respect to an association 

11 health plan if the following requirements are met: 

12 ‘‘(1) FISCAL CONTROL.—The plan is operated, 

13 pursuant to a trust agreement, by a board of trust14 ees which has complete fiscal control over the plan 

15 and which is responsible for all operations of the 

16 plan. 

17 ‘‘(2) RULES OF OPERATION AND FINANCIAL

18 CONTROLS.—The board of trustees has in effect 

19 rules of operation and financial controls, based on a 

20 3-year plan of operation, adequate to carry out the 

21 terms of the plan and to meet all requirements of 

22 this title applicable to the plan. 

23 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

24 PARTICIPATING EMPLOYERS AND TO CONTRAC25 TORS.— 

26 ‘‘(A) BOARD MEMBERSHIP.— 


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1 ‘‘(i) IN GENERAL.—Except as pro2 vided in clauses (ii) and (iii), the members 

3 of the board of trustees are individuals se4 lected from individuals who are the owners, 

5 officers, directors, or employees of the par6 ticipating employers or who are partners in 

7 the participating employers and actively 

8 participate in the business. 

9 ‘‘(ii) LIMITATION.— 

10 ‘‘(I) GENERAL RULE.—Except as 

11 provided in subclauses (II) and (III), 

12 no such member is an owner, officer, 

13 director, or employee of, or partner in, 

14 a contract administrator or other 

15 service provider to the plan. 

16 ‘‘(II) LIMITED EXCEPTION FOR

17 PROVIDERS OF SERVICES SOLELY ON

18 BEHALF OF THE SPONSOR.—Officers 

19 or employees of a sponsor which is a 

20 service provider (other than a contract 

21 administrator) to the plan may be 

22 members of the board if they con23 stitute not more than 25 percent of 

24 the membership of the board and they 


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1 do not provide services to the plan 

2 other than on behalf of the sponsor. 

3 ‘‘(III) TREATMENT OF PRO4 VIDERS OF MEDICAL CARE.—In the 

5 case of a sponsor which is an associa6 tion whose membership consists pri7 marily of providers of medical care, 

8 subclause (I) shall not apply in the 

9 case of any service provider described 

10 in subclause (I) who is a provider of 

11 medical care under the plan. 

12 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

13 Clause (i) shall not apply to an association 

14 health plan which is in existence on the 

15 date of the enactment of the Obamacare 

16 Replacement Act. 

17 ‘‘(B) SOLE AUTHORITY.—The board has 

18 sole authority under the plan to approve appli19 cations for participation in the plan and to con20 tract with a service provider to administer the 

21 day-to-day affairs of the plan. 

22 ‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 

23 the case of a group health plan which is established and 

24 maintained by a franchiser for a franchise network con25 sisting of its franchisees— 


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1 ‘‘(1) the requirements of subsection (a) and sec2 tion 801(a) shall be deemed met if such require3 ments would otherwise be met if the franchiser were 

4 deemed to be the sponsor referred to in section 

5 801(b), such network were deemed to be an associa6 tion described in section 801(b), and each franchisee 

7 were deemed to be a member (of the association and 

8 the sponsor) referred to in section 801(b); and 

9 ‘‘(2) the requirements of section 804(a)(1) shall 

10 be deemed met. 

11 The Secretary may by regulation define for purposes of 

12 this subsection the terms ‘franchiser’, ‘franchise network’, 

13 and ‘franchisee’. 

14 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE15 MENTS. 

16 ‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 

17 requirements of this subsection are met with respect to 

18 an association health plan if, under the terms of the 

19 plan— 

20 ‘‘(1) each participating employer must be— 

21 ‘‘(A) a member of the sponsor; 

22 ‘‘(B) the sponsor; or 

23 ‘‘(C) an affiliated member of the sponsor 

24 with respect to which the requirements of sub25 section (b) are met, 


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1 except that, in the case of a sponsor which is a pro2 fessional association or other individual-based asso3 ciation, if at least one of the officers, directors, or 

4 employees of an employer, or at least one of the in5 dividuals who are partners in an employer and who 

6 actively participates in the business, is a member or 

7 such an affiliated member of the sponsor, partici8 pating employers may also include such employer; 

9 and 

10 ‘‘(2) all individuals commencing coverage under 

11 the plan after certification under this part must 

12 be— 

13 ‘‘(A) active or retired owners (including 

14 self-employed individuals), officers, directors, or 

15 employees of, or partners in, participating em16 ployers; or 

17 ‘‘(B) the beneficiaries of individuals de18 scribed in subparagraph (A). 

19 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM20 PLOYEES.—In the case of an association health plan in 

21 existence on the date of the enactment of the Obamacare 

22 Replacement Act, an affiliated member of the sponsor of 

23 the plan may be offered coverage under the plan as a par24 ticipating employer only if— 


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1 ‘‘(1) the affiliated member was an affiliated 

2 member on the date of certification under this part; 

3 or 

4 ‘‘(2) during the 12-month period preceding the 

5 date of the offering of such coverage, the affiliated 

6 member has not maintained or contributed to a 

7 group health plan with respect to any of its employ8 ees who would otherwise be eligible to participate in 

9 such association health plan. 

10 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re11 quirements of this subsection are met with respect to an 

12 association health plan if, under the terms of the plan, 

13 no participating employer may provide health insurance 

14 coverage in the individual market for any employee not 

15 covered under the plan which is similar to the coverage 

16 contemporaneously provided to employees of the employer 

17 under the plan, if such exclusion of the employee from cov18 erage under the plan is based on a health status-related 

19 factor with respect to the employee and such employee 

20 would, but for such exclusion on such basis, be eligible 

21 for coverage under the plan. 

22 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

23 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI24 PATE.—The requirements of this subsection are met with 

25 respect to an association health plan if— 


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1 ‘‘(1) under the terms of the plan, all employers 

2 meeting the preceding requirements of this section 

3 are eligible to qualify as participating employers for 

4 all geographically available coverage options, unless, 

5 in the case of any such employer, participation or 

6 contribution requirements of the type referred to in 

7 section 2711 of the Public Health Service Act are 

8 not met; 

9 ‘‘(2) upon request, any employer eligible to par10 ticipate is furnished information regarding all cov11 erage options available under the plan; and 

12 ‘‘(3) the applicable requirements of sections 

13 701, 702, and 703 are met with respect to the plan. 

14 ‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 

15 DOCUMENTS, CONTRIBUTION RATES, AND 

16 BENEFIT OPTIONS. 

17 ‘‘(a) IN GENERAL.—The requirements of this section 

18 are met with respect to an association health plan if the 

19 following requirements are met: 

20 ‘‘(1) CONTENTS OF GOVERNING INSTRU21 MENTS.—The instruments governing the plan in22 clude a written instrument, meeting the require23 ments of an instrument required under section 

24 402(a)(1), which— 


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1 ‘‘(A) provides that the board of trustees 

2 serves as the named fiduciary required for plans 

3 under section 402(a)(1) and serves in the ca4 pacity of a plan administrator (referred to in 

5 section 3(16)(A)); 

6 ‘‘(B) provides that the sponsor of the plan 

7 is to serve as plan sponsor (referred to in sec8 tion 3(16)(B)); and 

9 ‘‘(C) incorporates the requirements of sec10 tion 806. 

11 ‘‘(2) CONTRIBUTION RATES MUST BE NON12 DISCRIMINATORY.— 

13 ‘‘(A) The contribution rates for any par14 ticipating small employer do not vary on the 

15 basis of any health status-related factor in rela16 tion to employees of such employer or their 

17 beneficiaries and do not vary on the basis of the 

18 type of business or industry in which such em19 ployer is engaged. 

20 ‘‘(B) Nothing in this title or any other pro21 vision of law shall be construed to preclude an 

22 association health plan, or a health insurance 

23 issuer offering health insurance coverage in 

24 connection with an association health plan, 

25 from— 


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1 ‘‘(i) setting contribution rates based 

2 on the claims experience of the plan; or 

3 ‘‘(ii) varying contribution rates for 

4 small employers in a State to the extent 

5 that such rates could vary using the same 

6 methodology employed in such State for 

7 regulating premium rates in the small 

8 group market with respect to health insur9 ance coverage offered in connection with 

10 bona fide associations (within the meaning 

11 of section 2791(d)(3) of the Public Health 

12 Service Act), 

13 subject to the requirements of section 702(b) 

14 relating to contribution rates. 

15 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI16 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If 

17 any benefit option under the plan does not consist 

18 of health insurance coverage, the plan has as of the 

19 beginning of the plan year not fewer than 1,000 par20 ticipants and beneficiaries. 

21 ‘‘(4) MARKETING REQUIREMENTS.— 

22 ‘‘(A) IN GENERAL.—If a benefit option 

23 which consists of health insurance coverage is 

24 offered under the plan, State-licensed insurance 

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1 ployers coverage which does not consist of 

2 health insurance coverage in a manner com3 parable to the manner in which such agents are 

4 used to distribute health insurance coverage. 

5 ‘‘(B) STATE-LICENSED INSURANCE

6 AGENTS.—For purposes of subparagraph (A), 

7 the term ‘State-licensed insurance agents’ 

8 means one or more agents who are licensed in 

9 a State and are subject to the laws of such 

10 State relating to licensure, qualification, test11 ing, examination, and continuing education of 

12 persons authorized to offer, sell, or solicit 

13 health insurance coverage in such State. 

14 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

15 other requirements as the applicable authority deter16 mines are necessary to carry out the purposes of this 

17 part, which shall be prescribed by the applicable au18 thority by regulation. 

19 ‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO

20 DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 

21 nothing in this part or any provision of State law (as de22 fined in section 514(c)(1)) shall be construed to preclude 

23 an association health plan, or a health insurance issuer 

24 offering health insurance coverage in connection with an 

25 association health plan, from exercising its sole discretion 


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1 in selecting the specific items and services consisting of 

2 medical care to be included as benefits under such plan 

3 or coverage, except (subject to section 514) in the case 

4 of (1) any law to the extent that it is not preempted under 

5 section 731(a)(1) with respect to matters governed by sec6 tion 711, 712, or 713, or (2) any law of the State with 

7 which filing and approval of a policy type offered by the 

8 plan was initially obtained to the extent that such law pro9 hibits an exclusion of a specific disease from such cov10 erage. 

11 ‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 

12 FOR SOLVENCY FOR PLANS PROVIDING 

13 HEALTH BENEFITS IN ADDITION TO HEALTH 

14 INSURANCE COVERAGE. 

15 ‘‘(a) IN GENERAL.—The requirements of this section 

16 are met with respect to an association health plan if— 

17 ‘‘(1) the benefits under the plan consist solely 

18 of health insurance coverage; or 

19 ‘‘(2) if the plan provides any additional benefit 

20 options which do not consist of health insurance cov21 erage, the plan— 

22 ‘‘(A) establishes and maintains reserves 

23 with respect to such additional benefit options, 

24 in amounts recommended by the qualified 

25 health actuary, consisting of— 


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1 ‘‘(i) a reserve sufficient for unearned 

2 contributions; 

3 ‘‘(ii) a reserve sufficient for benefit li4 abilities which have been incurred, which 

5 have not been satisfied, and for which risk 

6 of loss has not yet been transferred, and 

7 for expected administrative costs with re8 spect to such benefit liabilities; 

9 ‘‘(iii) a reserve sufficient for any other 

10 obligations of the plan; and 

11 ‘‘(iv) a reserve sufficient for a margin 

12 of error and other fluctuations, taking into 

13 account the specific circumstances of the 

14 plan; and 

15 ‘‘(B) establishes and maintains aggregate 

16 and specific excess/stop loss insurance and sol17 vency indemnification, with respect to such ad18 ditional benefit options for which risk of loss 

19 has not yet been transferred, as follows: 

20 ‘‘(i) The plan shall secure aggregate 

21 excess/stop loss insurance for the plan with 

22 an attachment point which is not greater 

23 than 125 percent of expected gross annual 

24 claims. The applicable authority may by 

25 regulation provide for upward adjustments 


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1 in the amount of such percentage in speci2 fied circumstances in which the plan spe3 cifically provides for and maintains re4 serves in excess of the amounts required 

5 under subparagraph (A). 

6 ‘‘(ii) The plan shall secure specific ex7 cess/stop loss insurance for the plan with 

8 an attachment point which is at least equal 

9 to an amount recommended by the plan’s 

10 qualified health actuary. The applicable 

11 authority may by regulation provide for ad12 justments in the amount of such insurance 

13 in specified circumstances in which the 

14 plan specifically provides for and maintains 

15 reserves in excess of the amounts required 

16 under subparagraph (A). 

17 ‘‘(iii) The plan shall secure indem18 nification insurance for any claims which 

19 the plan is unable to satisfy by reason of 

20 a plan termination. 

21 Any person issuing to a plan insurance described in clause 

22 (i), (ii), or (iii) of subparagraph (B) shall notify the Sec23 retary of any failure of premium payment meriting can24 cellation of the policy prior to undertaking such a cancella25 tion. Any regulations prescribed by the applicable authorVerDate Sep 11 2014 06:25 Feb 02, 2017 Jkt 069200 PO 00000 Frm 00096 Fmt 6652 Sfmt 6201 E:\BILLS\S222.IS S222

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1 ity pursuant to clause (i) or (ii) of subparagraph (B) may 

2 allow for such adjustments in the required levels of excess/ 

3 stop loss insurance as the qualified health actuary may 

4 recommend, taking into account the specific circumstances 

5 of the plan. 

6 ‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS

7 RESERVES.—In the case of any association health plan de8 scribed in subsection (a)(2), the requirements of this sub9 section are met if the plan establishes and maintains sur10 plus in an amount at least equal to— 

11 ‘‘(1) $500,000; or 

12 ‘‘(2) such greater amount (but not greater than 

13 $2,000,000) as may be set forth in regulations pre14 scribed by the applicable authority, considering the 

15 level of aggregate and specific excess/stop loss insur16 ance provided with respect to such plan and other 

17 factors related to solvency risk, such as the plan’s 

18 projected levels of participation or claims, the nature 

19 of the plan’s liabilities, and the types of assets avail20 able to assure that such liabilities are met. 

21 ‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 

22 any association health plan described in subsection (a)(2), 

23 the applicable authority may provide such additional re24 quirements relating to reserves, excess/stop loss insurance, 

25 and indemnification insurance as the applicable authority 


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1 considers appropriate. Such requirements may be provided 

2 by regulation with respect to any such plan or any class 

3 of such plans. 

4 ‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR5 ANCE.—The applicable authority may provide for adjust6 ments to the levels of reserves otherwise required under 

7 subsections (a) and (b) with respect to any plan or class 

8 of plans to take into account excess/stop loss insurance 

9 provided with respect to such plan or plans. 

10 ‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 

11 applicable authority may permit an association health plan 

12 described in subsection (a)(2) to substitute, for all or part 

13 of the requirements of this section (except subsection 

14 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar15 rangement, or other financial arrangement as the applica16 ble authority determines to be adequate to enable the plan 

17 to fully meet all its financial obligations on a timely basis 

18 and is otherwise no less protective of the interests of par19 ticipants and beneficiaries than the requirements for 

20 which it is substituted. The applicable authority may take 

21 into account, for purposes of this subsection, evidence pro22 vided by the plan or sponsor which demonstrates an as23 sumption of liability with respect to the plan. Such evi24 dence may be in the form of a contract of indemnification, 

25 lien, bonding, insurance, letter of credit, recourse under 


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1 applicable terms of the plan in the form of assessments 

2 of participating employers, security, or other financial ar3 rangement. 

4 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

5 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

6 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO7 CIATION HEALTH PLAN FUND.— 

8 ‘‘(A) IN GENERAL.—In the case of an as9 sociation health plan described in subsection 

10 (a)(2), the requirements of this subsection are 

11 met if the plan makes payments into the Asso12 ciation Health Plan Fund under this subpara13 graph when they are due. Such payments shall 

14 consist of annual payments in the amount of 

15 $5,000, and, in addition to such annual pay16 ments, such supplemental payments as the Sec17 retary may determine to be necessary under 

18 paragraph (2). Payments under this paragraph 

19 are payable to the Fund at the time determined 

20 by the Secretary. Initial payments are due in 

21 advance of certification under this part. Pay22 ments shall continue to accrue until a plan’s as23 sets are distributed pursuant to a termination 

24 procedure. 


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1 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

2 PAYMENTS.—If any payment is not made by a 

3 plan when it is due, a late payment charge of 

4 not more than 100 percent of the payment 

5 which was not timely paid shall be payable by 

6 the plan to the Fund. 

7 ‘‘(C) CONTINUED DUTY OF THE SEC8 RETARY.—The Secretary shall not cease to 

9 carry out the provisions of paragraph (2) on ac10 count of the failure of a plan to pay any pay11 ment when due. 

12 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

13 EXCESS/STOP LOSS INSURANCE COVERAGE AND IN14 DEMNIFICATION INSURANCE COVERAGE FOR CER15 TAIN PLANS.—In any case in which the applicable 

16 authority determines that there is, or that there is 

17 reason to believe that there will be: (A) a failure to 

18 take necessary corrective actions under section 

19 809(a) with respect to an association health plan de20 scribed in subsection (a)(2); or (B) a termination of 

21 such a plan under section 809(b) or 810(b)(8) (and, 

22 if the applicable authority is not the Secretary, cer23 tifies such determination to the Secretary), the Sec24 retary shall determine the amounts necessary to 

25 make payments to an insurer (designated by the 


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1 Secretary) to maintain in force excess/stop loss in2 surance coverage or indemnification insurance cov3 erage for such plan, if the Secretary determines that 

4 there is a reasonable expectation that, without such 

5 payments, claims would not be satisfied by reason of 

6 termination of such coverage. The Secretary shall, to 

7 the extent provided in advance in appropriation 

8 Acts, pay such amounts so determined to the insurer 

9 designated by the Secretary. 

10 ‘‘(3) ASSOCIATION HEALTH PLAN FUND.— 

11 ‘‘(A) IN GENERAL.—There is established in 

12 the Treasury a fund to be known as the ‘Asso13 ciation Health Plan Fund’. The Fund shall be 

14 available for making payments pursuant to 

15 paragraph (2). The Fund shall be credited with 

16 payments received pursuant to paragraph 

17 (1)(A), penalties received pursuant to para18 graph (1)(B), and earnings on investments of 

19 amounts of the Fund under subparagraph (B). 

20 ‘‘(B) INVESTMENT.—Whenever the Sec21 retary determines that the moneys of the fund 

22 are in excess of current needs, the Secretary 

23 may request the investment of such amounts as 

24 the Secretary determines advisable by the SecVerDate Sep 11 2014 06:25 Feb 02, 2017 Jkt 069200 PO 00000 Frm 00101 Fmt 6652 Sfmt 6201 E:\BILLS\S222.IS S222

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1 retary of the Treasury in obligations issued or 

2 guaranteed by the United States. 

3 ‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 

4 of this section: 

5 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR6 ANCE.—The term ‘aggregate excess/stop loss insur7 ance’ means, in connection with an association 

8 health plan, a contract— 

9 ‘‘(A) under which an insurer (meeting such 

10 minimum standards as the applicable authority 

11 may prescribe by regulation) provides for pay12 ment to the plan with respect to aggregate 

13 claims under the plan in excess of an amount 

14 or amounts specified in such contract; 

15 ‘‘(B) which is guaranteed renewable; and 

16 ‘‘(C) which allows for payment of pre17 miums by any third party on behalf of the in18 sured plan. 

19 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR20 ANCE.—The term ‘specific excess/stop loss insur21 ance’ means, in connection with an association 

22 health plan, a contract— 

23 ‘‘(A) under which an insurer (meeting such 

24 minimum standards as the applicable authority 

25 may prescribe by regulation) provides for payVerDate Sep 11 2014 06:25 Feb 02, 2017 Jkt 069200 PO 00000 Frm 00102 Fmt 6652 Sfmt 6201 E:\BILLS\S222.IS S222

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1 ment to the plan with respect to claims under 

2 the plan in connection with a covered individual 

3 in excess of an amount or amounts specified in 

4 such contract in connection with such covered 

5 individual; 

6 ‘‘(B) which is guaranteed renewable; and 

7 ‘‘(C) which allows for payment of pre8 miums by any third party on behalf of the in9 sured plan. 

10 ‘‘(h) INDEMNIFICATION INSURANCE.—For purposes 

11 of this section, the term ‘indemnification insurance’ 

12 means, in connection with an association health plan, a 

13 contract— 

14 ‘‘(1) under which an insurer (meeting such min15 imum standards as the applicable authority may pre16 scribe by regulation) provides for payment to the 

17 plan with respect to claims under the plan which the 

18 plan is unable to satisfy by reason of a termination 

19 pursuant to section 809(b) (relating to mandatory 

20 termination); 

21 ‘‘(2) which is guaranteed renewable and 

22 noncancellable for any reason (except as the applica23 ble authority may prescribe by regulation); and 

24 ‘‘(3) which allows for payment of premiums by 

25 any third party on behalf of the insured plan. 


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1 ‘‘(i) RESERVES.—For purposes of this section, the 

2 term ‘reserves’ means, in connection with an association 

3 health plan, plan assets which meet the fiduciary stand4 ards under part 4 and such additional requirements re5 garding liquidity as the applicable authority may prescribe 

6 by regulation. 

7 ‘‘(j) SOLVENCY STANDARDS WORKING GROUP.— 

8 ‘‘(1) IN GENERAL.—Within 90 days after the 

9 date of the enactment of the Obamacare Replace10 ment Act, the applicable authority shall establish a 

11 Solvency Standards Working Group. In prescribing 

12 the initial regulations under this section, the applica13 ble authority shall take into account the rec14 ommendations of such Working Group. 

15 ‘‘(2) MEMBERSHIP.—The Working Group shall 

16 consist of not more than 15 members appointed by 

17 the applicable authority. The applicable authority 

18 shall include among persons invited to membership 

19 on the Working Group at least one of each of the 

20 following: 

21 ‘‘(A) A representative of the National As22 sociation of Insurance Commissioners. 

23 ‘‘(B) A representative of the American 

24 Academy of Actuaries. 


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1 ‘‘(C) A representative of the State govern2 ments, or their interests. 

3 ‘‘(D) A representative of existing self-in4 sured arrangements, or their interests. 

5 ‘‘(E) A representative of associations of 

6 the type referred to in section 801(b)(1), or 

7 their interests. 

8 ‘‘(F) A representative of multiemployer 

9 plans that are group health plans, or their in10 terests. 

11 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE12 LATED REQUIREMENTS. 

13 ‘‘(a) FILING FEE.—Under the procedure prescribed 

14 pursuant to section 802(a), an association health plan 

15 shall pay to the applicable authority at the time of filing 

16 an application for certification under this part a filing fee 

17 in the amount of $5,000, which shall be available in the 

18 case of the Secretary, to the extent provided in appropria19 tion Acts, for the sole purpose of administering the certifi20 cation procedures applicable with respect to association 

21 health plans. 

22 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA23 TION FOR CERTIFICATION.—An application for certifi24 cation under this part meets the requirements of this sec25 tion only if it includes, in a manner and form which shall 


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1 be prescribed by the applicable authority by regulation, at 

2 least the following information: 

3 ‘‘(1) IDENTIFYING INFORMATION.—The names 

4 and addresses of— 

5 ‘‘(A) the sponsor; and 

6 ‘‘(B) the members of the board of trustees 

7 of the plan. 

8 ‘‘(2) STATES IN WHICH PLAN INTENDS TO DO

9 BUSINESS.—The States in which participants and 

10 beneficiaries under the plan are to be located and 

11 the number of them expected to be located in each 

12 such State. 

13 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro14 vided by the board of trustees that the bonding re15 quirements of section 412 will be met as of the date 

16 of the application or (if later) commencement of op17 erations. 

18 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu19 ments governing the plan (including any bylaws and 

20 trust agreements), the summary plan description, 

21 and other material describing the benefits that will 

22 be provided to participants and beneficiaries under 

23 the plan. 

24 ‘‘(5) AGREEMENTS WITH SERVICE PRO25 VIDERS.—A copy of any agreements between the 


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1 plan and contract administrators and other service 

2 providers. 

3 ‘‘(6) FUNDING REPORT.—In the case of asso4 ciation health plans providing benefits options in ad5 dition to health insurance coverage, a report setting 

6 forth information with respect to such additional 

7 benefit options determined as of a date within the 

8 120-day period ending with the date of the applica9 tion, including the following: 

10 ‘‘(A) RESERVES.—A statement, certified 

11 by the board of trustees of the plan, and a 

12 statement of actuarial opinion, signed by a 

13 qualified health actuary, that all applicable re14 quirements of section 806 are or will be met in 

15 accordance with regulations which the applica16 ble authority shall prescribe. 

17 ‘‘(B) ADEQUACY OF CONTRIBUTION

18 RATES.—A statement of actuarial opinion, 

19 signed by a qualified health actuary, which sets 

20 forth a description of the extent to which con21 tribution rates are adequate to provide for the 

22 payment of all obligations and the maintenance 

23 of required reserves under the plan for the 12- 

24 month period beginning with such date within 

25 such 120-day period, taking into account the 


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1 expected coverage and experience of the plan. If 

2 the contribution rates are not fully adequate, 

3 the statement of actuarial opinion shall indicate 

4 the extent to which the rates are inadequate 

5 and the changes needed to ensure adequacy. 

6 ‘‘(C) CURRENT AND PROJECTED VALUE OF

7 ASSETS AND LIABILITIES.—A statement of ac8 tuarial opinion signed by a qualified health ac9 tuary, which sets forth the current value of the 

10 assets and liabilities accumulated under the 

11 plan and a projection of the assets, liabilities, 

12 income, and expenses of the plan for the 12- 

13 month period referred to in subparagraph (B). 

14 The income statement shall identify separately 

15 the plan’s administrative expenses and claims. 

16 ‘‘(D) COSTS OF COVERAGE TO BE

17 CHARGED AND OTHER EXPENSES.—A state18 ment of the costs of coverage to be charged, in19 cluding an itemization of amounts for adminis20 tration, reserves, and other expenses associated 

21 with the operation of the plan. 

22 ‘‘(E) OTHER INFORMATION.—Any other 

23 information as may be determined by the appli24 cable authority, by regulation, as necessary to 

25 carry out the purposes of this part. 


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1 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

2 STATES.—A certification granted under this part to an 

3 association health plan shall not be effective unless written 

4 notice of such certification is filed with the applicable 

5 State authority of each State in which at least 25 percent 

6 of the participants and beneficiaries under the plan are 

7 located. For purposes of this subsection, an individual 

8 shall be considered to be located in the State in which a 

9 known address of such individual is located or in which 

10 such individual is employed. 

11 ‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case 

12 of any association health plan certified under this part, 

13 descriptions of material changes in any information which 

14 was required to be submitted with the application for the 

15 certification under this part shall be filed in such form 

16 and manner as shall be prescribed by the applicable au17 thority by regulation. The applicable authority may re18 quire by regulation prior notice of material changes with 

19 respect to specified matters which might serve as the basis 

20 for suspension or revocation of the certification. 

21 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS22 SOCIATION HEALTH PLANS.—An association health plan 

23 certified under this part which provides benefit options in 

24 addition to health insurance coverage for such plan year 

25 shall meet the requirements of section 103 by filing an 


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1 annual report under such section which shall include infor2 mation described in subsection (b)(6) with respect to the 

3 plan year and, notwithstanding section 104(a)(1), shall be 

4 filed with the applicable authority not later than 90 days 

5 after the close of the plan year (or on such later date as 

6 may be prescribed by the applicable authority). The appli7 cable authority may require by regulation such interim re8 ports as it considers appropriate. 

9 ‘‘(f) ENGAGEMENT OF QUALIFIED HEALTH ACTU10 ARY.—The board of trustees of each association health 

11 plan which provides benefits options in addition to health 

12 insurance coverage and which is applying for certification 

13 under this part or is certified under this part shall engage, 

14 on behalf of all participants and beneficiaries, a qualified 

15 health actuary who shall be responsible for the preparation 

16 of the materials comprising information necessary to be 

17 submitted by a qualified health actuary under this part. 

18 The qualified health actuary shall utilize such assumptions 

19 and techniques as are necessary to enable such actuary 

20 to form an opinion as to whether the contents of the mat21 ters reported under this part— 

22 ‘‘(1) are in the aggregate reasonably related to 

23 the experience of the plan and to reasonable expecta24 tions; and 


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1 ‘‘(2) represent such actuary’s best estimate of 

2 anticipated experience under the plan. 

3 The opinion by the qualified health actuary shall be made 

4 with respect to, and shall be made a part of, the annual 

5 report. 

6 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER7 MINATION. 

8 ‘‘Except as provided in section 809(b), an association 

9 health plan which is or has been certified under this part 

10 may terminate (upon or at any time after cessation of ac11 cruals in benefit liabilities) only if the board of trustees, 

12 not less than 60 days before the proposed termination 

13 date— 

14 ‘‘(1) provides to the participants and bene15 ficiaries a written notice of intent to terminate stat16 ing that such termination is intended and the pro17 posed termination date; 

18 ‘‘(2) develops a plan for winding up the affairs 

19 of the plan in connection with such termination in 

20 a manner which will result in timely payment of all 

21 benefits for which the plan is obligated; and 

22 ‘‘(3) submits such plan in writing to the appli23 cable authority. 


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1 Actions required under this section shall be taken in such 

2 form and manner as may be prescribed by the applicable 

3 authority by regulation. 

4 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI5 NATION. 

6 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE7 SERVES.—An association health plan which is certified 

8 under this part and which provides benefits other than 

9 health insurance coverage shall continue to meet the re10 quirements of section 806, irrespective of whether such 

11 certification continues in effect. The board of trustees of 

12 such plan shall determine quarterly whether the require13 ments of section 806 are met. In any case in which the 

14 board determines that there is reason to believe that there 

15 is or will be a failure to meet such requirements, or the 

16 applicable authority makes such a determination and so 

17 notifies the board, the board shall immediately notify the 

18 qualified health actuary engaged by the plan, and such 

19 actuary shall, not later than the end of the following 

20 month, make such recommendations to the board for cor21 rective action as the actuary determines necessary to en22 sure compliance with section 806. Not later than 30 days 

23 after receiving from the actuary recommendations for cor24 rective actions, the board shall notify the applicable au25 thority (in such form and manner as the applicable auVerDate Sep 11 2014 06:25 Feb 02, 2017 Jkt 069200 PO 00000 Frm 00112 Fmt 6652 Sfmt 6201 E:\BILLS\S222.IS S222

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1 thority may prescribe by regulation) of such recommenda2 tions of the actuary for corrective action, together with 

3 a description of the actions (if any) that the board has 

4 taken or plans to take in response to such recommenda5 tions. The board shall thereafter report to the applicable 

6 authority, in such form and frequency as the applicable 

7 authority may specify to the board, regarding corrective 

8 action taken by the board until the requirements of section 

9 806 are met. 

10 ‘‘(b) MANDATORY TERMINATION.—In any case in 

11 which— 

12 ‘‘(1) the applicable authority has been notified 

13 under subsection (a) (or by an issuer of excess/stop 

14 loss insurance or indemnity insurance pursuant to 

15 section 806(a)) of a failure of an association health 

16 plan which is or has been certified under this part 

17 and is described in section 806(a)(2) to meet the re18 quirements of section 806 and has not been notified 

19 by the board of trustees of the plan that corrective 

20 action has restored compliance with such require21 ments; and 

22 ‘‘(2) the applicable authority determines that 

23 there is a reasonable expectation that the plan will 

24 continue to fail to meet the requirements of section 

25 806, 


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1 the board of trustees of the plan shall, at the direction 

2 of the applicable authority, terminate the plan and, in the 

3 course of the termination, take such actions as the appli4 cable authority may require, including satisfying any 

5 claims referred to in section 806(a)(2)(B)(iii) and recov6 ering for the plan any liability under subsection 

7 (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 

8 that the affairs of the plan will be, to the maximum extent 

9 possible, wound up in a manner which will result in timely 

10 provision of all benefits for which the plan is obligated. 

11 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL12 VENT ASSOCIATION HEALTH PLANS PRO13 VIDING HEALTH BENEFITS IN ADDITION TO 

14 HEALTH INSURANCE COVERAGE. 

15 ‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR

16 INSOLVENT PLANS.—Whenever the Secretary determines 

17 that an association health plan which is or has been cer18 tified under this part and which is described in section 

19 806(a)(2) will be unable to provide benefits when due or 

20 is otherwise in a financially hazardous condition, as shall 

21 be defined by the Secretary by regulation, the Secretary 

22 shall, upon notice to the plan, apply to the appropriate 

23 United States district court for appointment of the Sec24 retary as trustee to administer the plan for the duration 

25 of the insolvency. The plan may appear as a party and 


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1 other interested persons may intervene in the proceedings 

2 at the discretion of the court. The court shall appoint such 

3 Secretary trustee if the court determines that the trustee4 ship is necessary to protect the interests of the partici5 pants and beneficiaries or providers of medical care or to 

6 avoid any unreasonable deterioration of the financial con7 dition of the plan. The trusteeship of such Secretary shall 

8 continue until the conditions described in the first sen9 tence of this subsection are remedied or the plan is termi10 nated. 

11 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon 

12 appointment as trustee under subsection (a), shall have 

13 the power— 

14 ‘‘(1) to do any act authorized by the plan, this 

15 title, or other applicable provisions of law to be done 

16 by the plan administrator or any trustee of the plan; 

17 ‘‘(2) to require the transfer of all (or any part) 

18 of the assets and records of the plan to the Sec19 retary as trustee; 

20 ‘‘(3) to invest any assets of the plan which the 

21 Secretary holds in accordance with the provisions of 

22 the plan, regulations prescribed by the Secretary, 

23 and applicable provisions of law; 

24 ‘‘(4) to require the sponsor, the plan adminis25 trator, any participating employer, and any employee 


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1 organization representing plan participants to fur2 nish any information with respect to the plan which 

3 the Secretary as trustee may reasonably need in 

4 order to administer the plan; 

5 ‘‘(5) to collect for the plan any amounts due the 

6 plan and to recover reasonable expenses of the trust7 eeship; 

8 ‘‘(6) to commence, prosecute, or defend on be9 half of the plan any suit or proceeding involving the 

10 plan; 

11 ‘‘(7) to issue, publish, or file such notices, state12 ments, and reports as may be required by the Sec13 retary by regulation or required by any order of the 

14 court; 

15 ‘‘(8) to terminate the plan (or provide for its 

16 termination in accordance with section 809(b)) and 

17 liquidate the plan assets, to restore the plan to the 

18 responsibility of the sponsor, or to continue the 

19 trusteeship; 

20 ‘‘(9) to provide for the enrollment of plan par21 ticipants and beneficiaries under appropriate cov22 erage options; and 

23 ‘‘(10) to do such other acts as may be nec24 essary to comply with this title or any order of the 

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1 pants and beneficiaries and providers of medical 

2 care. 

3 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac4 ticable after the Secretary’s appointment as trustee, the 

5 Secretary shall give notice of such appointment to— 

6 ‘‘(1) the sponsor and plan administrator; 

7 ‘‘(2) each participant; 

8 ‘‘(3) each participating employer; and 

9 ‘‘(4) if applicable, each employee organization 

10 which, for purposes of collective bargaining, rep11 resents plan participants. 

12 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in13 consistent with the provisions of this title, or as may be 

14 otherwise ordered by the court, the Secretary, upon ap15 pointment as trustee under this section, shall be subject 

16 to the same duties as those of a trustee under section 704 

17 of title 11, United States Code, and shall have the duties 

18 of a fiduciary for purposes of this title. 

19 ‘‘(e) OTHER PROCEEDINGS.—An application by the 

20 Secretary under this subsection may be filed notwith21 standing the pendency in the same or any other court of 

22 any bankruptcy, mortgage foreclosure, or equity receiver23 ship proceeding, or any proceeding to reorganize, conserve, 

24 or liquidate such plan or its property, or any proceeding 

25 to enforce a lien against property of the plan. 


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1 ‘‘(f) JURISDICTION OF COURT.— 

2 ‘‘(1) IN GENERAL.—Upon the filing of an appli3 cation for the appointment as trustee or the issuance 

4 of a decree under this section, the court to which the 

5 application is made shall have exclusive jurisdiction 

6 of the plan involved and its property wherever lo7 cated with the powers, to the extent consistent with 

8 the purposes of this section, of a court of the United 

9 States having jurisdiction over cases under chapter 

10 11 of title 11, United States Code. Pending an adju11 dication under this section such court shall stay, and 

12 upon appointment by it of the Secretary as trustee, 

13 such court shall continue the stay of, any pending 

14 mortgage foreclosure, equity receivership, or other 

15 proceeding to reorganize, conserve, or liquidate the 

16 plan, the sponsor, or property of such plan or spon17 sor, and any other suit against any receiver, conser18 vator, or trustee of the plan, the sponsor, or prop19 erty of the plan or sponsor. Pending such adjudica20 tion and upon the appointment by it of the Sec21 retary as trustee, the court may stay any proceeding 

22 to enforce a lien against property of the plan or the 

23 sponsor or any other suit against the plan or the 

24 sponsor. 


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1 ‘‘(2) VENUE.—An action under this section 

2 may be brought in the judicial district where the 

3 sponsor or the plan administrator resides or does 

4 business or where any asset of the plan is situated. 

5 A district court in which such action is brought may 

6 issue process with respect to such action in any 

7 other judicial district. 

8 ‘‘(g) PERSONNEL.—In accordance with regulations 

9 which shall be prescribed by the Secretary, the Secretary 

10 shall appoint, retain, and compensate accountants, actu11 aries, and other professional service personnel as may be 

12 necessary in connection with the Secretary’s service as 

13 trustee under this section. 

14 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

15 ‘‘(a) IN GENERAL.—Notwithstanding section 514, a 

16 State may impose by law a contribution tax on an associa17 tion health plan described in section 806(a)(2), if the plan 

18 commenced operations in such State after the date of the 

19 enactment of the Obamacare Replacement Act. 

20 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec21 tion, the term ‘contribution tax’ imposed by a State on 

22 an association health plan means any tax imposed by such 

23 State if— 

24 ‘‘(1) such tax is computed by applying a rate to 

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1 spect to individuals covered under the plan who are 

2 residents of such State, which are received by the 

3 plan from participating employers located in such 

4 State or from such individuals; 

5 ‘‘(2) the rate of such tax does not exceed the 

6 rate of any tax imposed by such State on premiums 

7 or contributions received by insurers or health main8 tenance organizations for health insurance coverage 

9 offered in such State in connection with a group 

10 health plan; 

11 ‘‘(3) such tax is otherwise nondiscriminatory; 

12 and 

13 ‘‘(4) the amount of any such tax assessed on 

14 the plan is reduced by the amount of any tax or as15 sessment otherwise imposed by the State on pre16 miums, contributions, or both received by insurers or 

17 health maintenance organizations for health insur18 ance coverage, aggregate excess/stop loss insurance 

19 (as defined in section 806(g)(1)), specific excess/stop 

20 loss insurance (as defined in section 806(g)(2)), 

21 other insurance related to the provision of medical 

22 care under the plan, or any combination thereof pro23 vided by such insurers or health maintenance organi24 zations in such State in connection with such plan. 


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1 ‘‘SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION. 

2 ‘‘(a) DEFINITIONS.—For purposes of this part— 

3 ‘‘(1) GROUP HEALTH PLAN.—The term ‘group 

4 health plan’ has the meaning provided in section 

5 733(a)(1) (after applying subsection (b) of this sec6 tion). 

7 ‘‘(2) MEDICAL CARE.—The term ‘medical care’ 

8 has the meaning provided in section 733(a)(2). 

9 ‘‘(3) HEALTH INSURANCE COVERAGE.—The 

10 term ‘health insurance coverage’ has the meaning 

11 provided in section 733(b)(1). 

12 ‘‘(4) HEALTH INSURANCE ISSUER.—The term 

13 ‘health insurance issuer’ has the meaning provided 

14 in section 733(b)(2). 

15 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap16 plicable authority’ means the Secretary, except that, 

17 in connection with any exercise of the Secretary’s 

18 authority regarding which the Secretary is required 

19 under section 506(d) to consult with a State, such 

20 term means the Secretary, in consultation with such 

21 State. 

22 ‘‘(6) HEALTH STATUS-RELATED FACTOR.—The 

23 term ‘health status-related factor’ has the meaning 

24 provided in section 733(d)(2). 

25 ‘‘(7) INDIVIDUAL MARKET.— 


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1 ‘‘(A) IN GENERAL.—The term ‘individual 

2 market’ means the market for health insurance 

3 coverage offered to individuals other than in 

4 connection with a group health plan. 

5 ‘‘(B) TREATMENT OF VERY SMALL

6 GROUPS.— 

7 ‘‘(i) IN GENERAL.—Subject to clause 

8 (ii), such term includes coverage offered in 

9 connection with a group health plan that 

10 has fewer than 2 participants as current 

11 employees or participants described in sec12 tion 732(d)(3) on the first day of the plan 

13 year. 

14 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

15 shall not apply in the case of health insur16 ance coverage offered in a State if such 

17 State regulates the coverage described in 

18 such clause in the same manner and to the 

19 same extent as coverage in the small group 

20 market (as defined in section 2791(e)(5) of 

21 the Public Health Service Act) is regulated 

22 by such State. 

23 ‘‘(8) PARTICIPATING EMPLOYER.—The term 

24 ‘participating employer’ means, in connection with 

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1 vidual who is an employee of such employer, a part2 ner in such employer, or a self-employed individual 

3 who is such employer (or any dependent, as defined 

4 under the terms of the plan, of such individual) is 

5 or was covered under such plan in connection with 

6 the status of such individual as such an employee, 

7 partner, or self-employed individual in relation to the 

8 plan. 

9 ‘‘(9) APPLICABLE STATE AUTHORITY.—The 

10 term ‘applicable State authority’ means, with respect 

11 to a health insurance issuer in a State, the State in12 surance commissioner or official or officials des13 ignated by the State to enforce the requirements of 

14 title XXVII of the Public Health Service Act for the 

15 State involved with respect to such issuer. 

16 ‘‘(10) QUALIFIED HEALTH ACTUARY.—The 

17 term ‘qualified health actuary’ means an individual 

18 who is a member of the American Academy of Actu19 aries with expertise in health care. 

20 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili21 ated member’ means, in connection with a sponsor— 

22 ‘‘(A) a person who is otherwise eligible to 

23 be a member of the sponsor but who elects an 

24 affiliated status with the sponsor, 


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1 ‘‘(B) in the case of a sponsor with mem2 bers which consist of associations, a person who 

3 is a member of any such association and elects 

4 an affiliated status with the sponsor, or 

5 ‘‘(C) in the case of an association health 

6 plan in existence on the date of the enactment 

7 of the Obamacare Replacement Act, a person 

8 eligible to be a member of the sponsor or one 

9 of its member associations. 

10 ‘‘(12) LARGE EMPLOYER.—The term ‘large em11 ployer’ means, in connection with a group health 

12 plan with respect to a plan year, an employer who 

13 employed an average of at least 51 employees on 

14 business days during the preceding calendar year 

15 and who employs at least 2 employees on the first 

16 day of the plan year. 

17 ‘‘(13) SMALL EMPLOYER.—The term ‘small em18 ployer’ means, in connection with a group health 

19 plan with respect to a plan year, an employer who 

20 is not a large employer. 

21 ‘‘(b) RULES OF CONSTRUCTION.— 

22 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur23 poses of determining whether a plan, fund, or pro24 gram is an employee welfare benefit plan which is an 

25 association health plan, and for purposes of applying 


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1 this title in connection with such plan, fund, or pro2 gram so determined to be such an employee welfare 

3 benefit plan— 

4 ‘‘(A) in the case of a partnership, the term 

5 ‘employer’ (as defined in section 3(5)) includes 

6 the partnership in relation to the partners, and 

7 the term ‘employee’ (as defined in section 3(6)) 

8 includes any partner in relation to the partner9 ship; and 

10 ‘‘(B) in the case of a self-employed indi11 vidual, the term ‘employer’ (as defined in sec12 tion 3(5)) and the term ‘employee’ (as defined 

13 in section 3(6)) shall include such individual. 

14 ‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED

15 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

16 case of any plan, fund, or program which was estab17 lished or is maintained for the purpose of providing 

18 medical care (through the purchase of insurance or 

19 otherwise) for employees (or their dependents) cov20 ered thereunder and which demonstrates to the Sec21 retary that all requirements for certification under 

22 this part would be met with respect to such plan, 

23 fund, or program if such plan, fund, or program 

24 were a group health plan, such plan, fund, or pro25 gram shall be treated for purposes of this title as an 


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1 employee welfare benefit plan on and after the date 

2 of such demonstration. 

3 ‘‘(3) EXCEPTION FOR CERTAIN BENEFITS.— 

4 The requirements of this part shall not apply to a 

5 group health plan in relation to its provision of ex6 cepted benefits, as defined in section 733(c).’’. 

7 (b) CONFORMING AMENDMENTS TO PREEMPTION

8 RULES.— 

9 (1) Section 514(b)(6) of such Act (29 U.S.C. 

10 1144(b)(6)) is amended by adding at the end the 

11 following new subparagraph: 

12 ‘‘(E) The preceding subparagraphs of this paragraph 

13 do not apply with respect to any State law in the case 

14 of an association health plan which is certified under part 

15 8.’’. 

16 (2) Section 514 of such Act (29 U.S.C. 1144) 

17 is amended— 

18 (A) in subsection (b)(4), by striking ‘‘Sub19 section (a)’’ and inserting ‘‘Subsections (a) and 

20 (d)’’; 

21 (B) in subsection (b)(5), by striking ‘‘sub22 section (a)’’ in subparagraph (A) and inserting 

23 ‘‘subsection (a) of this section and subsections 

24 (a)(2)(B) and (b) of section 805’’, and by strik25 ing ‘‘subsection (a)’’ in subparagraph (B) and 


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1 inserting ‘‘subsection (a) of this section or sub2 section (a)(2)(B) or (b) of section 805’’; 

3 (C) by redesignating subsection (d) as sub4 section (e); and 

5 (D) by inserting after subsection (c) the 

6 following new subsection: 

7 ‘‘(d)(1) Except as provided in subsection (b)(4), the 

8 provisions of this title shall supersede any and all State 

9 laws insofar as they may now or hereafter preclude, or 

10 have the effect of precluding, a health insurance issuer 

11 from offering health insurance coverage in connection with 

12 an association health plan which is certified under part 

13 8. 

14 ‘‘(2) Except as provided in paragraphs (4) and (5) 

15 of subsection (b) of this section— 

16 ‘‘(A) In any case in which health insurance cov17 erage of any policy type is offered under an associa18 tion health plan certified under part 8 to a partici19 pating employer operating in such State, the provi20 sions of this title shall supersede any and all laws 

21 of such State insofar as they may preclude a health 

22 insurance issuer from offering health insurance cov23 erage of the same policy type to other employers op24 erating in the State which are eligible for coverage 

25 under such association health plan, whether or not 


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1 such other employers are participating employers in 

2 such plan. 

3 ‘‘(B) In any case in which health insurance cov4 erage of any policy type is offered in a State under 

5 an association health plan certified under part 8 and 

6 the filing, with the applicable State authority (as de7 fined in section 812(a)(9)), of the policy form in 

8 connection with such policy type is approved by such 

9 State authority, the provisions of this title shall su10 persede any and all laws of any other State in which 

11 health insurance coverage of such type is offered, in12 sofar as they may preclude, upon the filing in the 

13 same form and manner of such policy form with the 

14 applicable State authority in such other State, the 

15 approval of the filing in such other State. 

16 ‘‘(3) Nothing in subsection (b)(6)(E) or the preceding 

17 provisions of this subsection shall be construed, with re18 spect to health insurance issuers or health insurance cov19 erage, to supersede or impair the law of any State— 

20 ‘‘(A) providing solvency standards or similar 

21 standards regarding the adequacy of insurer capital, 

22 surplus, reserves, or contributions, or 

23 ‘‘(B) relating to prompt payment of claims. 


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1 ‘‘(4) For additional provisions relating to association 

2 health plans, see subsections (a)(2)(B) and (b) of section 

3 805. 

4 ‘‘(5) For purposes of this subsection, the term ‘asso5 ciation health plan’ has the meaning provided in section 

6 801(a), and the terms ‘health insurance coverage’, ‘par7 ticipating employer’, and ‘health insurance issuer’ have 

8 the meanings provided such terms in section 812, respec9 tively.’’. 

10 (3) Section 514(b)(6)(A) of such Act (29 

11 U.S.C. 1144(b)(6)(A)) is amended— 

12 (A) in clause (i)(II), by striking ‘‘and’’ at 

13 the end; 

14 (B) in clause (ii)— 

15 (i) by inserting ‘‘and which does not 

16 provide medical care (within the meaning 

17 of section 733(a)(2)),’’ after ‘‘arrange18 ment,’’; and 

19 (ii) by striking ‘‘title.’’ and inserting 

20 ‘‘title, and’’; and 

21 (C) by adding at the end the following new 

22 clause: 

23 ‘‘(iii) subject to subparagraph (E), in the case 

24 of any other employee welfare benefit plan which is 

25 a multiple employer welfare arrangement and which 


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1 provides medical care (within the meaning of section 

2 733(a)(2)), any law of any State which regulates in3 surance may apply.’’. 

4 (4) Section 514(e) of such Act (as redesignated 

5 by paragraph (2)(C)) is amended— 

6 (A) by striking ‘‘Nothing’’ and inserting 

7 ‘‘(1) Except as provided in paragraph (2), noth8 ing’’; and 

9 (B) by adding at the end the following new 

10 paragraph: 

11 ‘‘(2) Nothing in any other provision of law enacted 

12 on or after the date of the enactment of the Obamacare 

13 Replacement Act shall be construed to alter, amend, mod14 ify, invalidate, impair, or supersede any provision of this 

15 title, except by specific cross-reference to the affected sec16 tion.’’. 

17 (c) PLAN SPONSOR.—Section 3(16)(B) of such Act 

18 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

19 the following new sentence: ‘‘Such term also includes a 

20 person serving as the sponsor of an association health plan 

21 under part 8 of subtitle B.’’. 

22 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE23 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

24 UNDER ASSOCIATION HEALTH PLANS.—Section 102(b) 

25 of such Act (29 U.S.C. 1022(b)) is amended by adding 


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1 at the end the following: ‘‘An association health plan shall 

2 include in its summary plan description, in connection 

3 with each benefit option, a description of the form of sol4 vency or guarantee fund protection secured pursuant to 

5 this Act or applicable State law, if any.’’. 

6 (e) SAVINGS CLAUSE.—Section 731(c) of such Act is 

7 amended by inserting ‘‘or part 8’’ after ‘‘this part’’. 

8 (f) REPORT TO THE CONGRESS REGARDING CERTIFI9 CATION OF SELF-INSURED ASSOCIATION HEALTH

10 PLANS.—Not later than January 1, 2018, the Secretary 

11 of Labor shall report to the Committee on Education and 

12 the Workforce of the House of Representatives and the 

13 Committee on Health, Education, Labor, and Pensions of 

14 the Senate the effect association health plans have had, 

15 if any, on reducing the number of uninsured individuals. 

16 (g) CLERICAL AMENDMENT.—The table of contents 

17 in section 1 of the Employee Retirement Income Security 

18 Act of 1974 is amended by inserting after the item relat19 ing to section 734 the following new items: 

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘801. Association health plans. 

‘‘802. Certification of association health plans. 

‘‘803. Requirements relating to sponsors and boards of trustees. 

‘‘804. Participation and coverage requirements. 

‘‘805. Other requirements relating to plan documents, contribution rates, and 

benefit options. 

‘‘806. Maintenance of reserves and provisions for solvency for plans providing 

health benefits in addition to health insurance coverage. 

‘‘807. Requirements for application and related requirements. 

‘‘808. Notice requirements for voluntary termination. 

‘‘809. Corrective actions and mandatory termination. 


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‘‘810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. 

‘‘811. State assessment authority. 

‘‘812. Definitions and rules of construction.’’. 

1 SEC. 402. CLARIFICATION OF TREATMENT OF SINGLE EM2 PLOYER ARRANGEMENTS. 

3 Section 3(40)(B) of the Employee Retirement Income 

4 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend5 ed— 

6 (1) in clause (i), by inserting after ‘‘control 

7 group,’’ the following: ‘‘except that, in any case in 

8 which the benefit referred to in subparagraph (A) 

9 consists of medical care (as defined in section 

10 812(a)(2)), two or more trades or businesses, wheth11 er or not incorporated, shall be deemed a single em12 ployer for any plan year of such plan, or any fiscal 

13 year of such other arrangement, if such trades or 

14 businesses are within the same control group during 

15 such year or at any time during the preceding 1-year 

16 period,’’; 

17 (2) in clause (iii), by striking ‘‘(iii) the deter18 mination’’ and inserting the following: 

19 ‘‘(iii)(I) in any case in which the benefit re20 ferred to in subparagraph (A) consists of medical 

21 care (as defined in section 812(a)(2)), the deter22 mination of whether a trade or business is under 

23 ‘common control’ with another trade or business 


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1 shall be determined under regulations of the Sec2 retary applying principles consistent and coextensive 

3 with the principles applied in determining whether 

4 employees of two or more trades or businesses are 

5 treated as employed by a single employer under sec6 tion 4001(b), except that, for purposes of this para7 graph, an interest of greater than 25 percent may 

8 not be required as the minimum interest necessary 

9 for common control, or 

10 ‘‘(II) in any other case, the determination’’; 

11 (3) by redesignating clauses (iv) and (v) as 

12 clauses (v) and (vi), respectively; and 

13 (4) by inserting after clause (iii) the following 

14 new clause: 

15 ‘‘(iv) in any case in which the benefit referred 

16 to in subparagraph (A) consists of medical care (as 

17 defined in section 812(a)(2)), in determining, after 

18 the application of clause (i), whether benefits are 

19 provided to employees of two or more employers, the 

20 arrangement shall be treated as having only one par21 ticipating employer if, after the application of clause 

22 (i), the number of individuals who are employees and 

23 former employees of any one participating employer 

24 and who are covered under the arrangement is 

25 greater than 75 percent of the aggregate number of 


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1 all individuals who are employees or former employ2 ees of participating employers and who are covered 

3 under the arrangement,’’. 

4 SEC. 403. ENFORCEMENT PROVISIONS RELATING TO ASSO5 CIATION HEALTH PLANS. 

6 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

7 MISREPRESENTATIONS.—Section 501 of the Employee 

8 Retirement Income Security Act of 1974 (29 U.S.C. 1131) 

9 is amended by adding at the end the following new sub10 section: 

11 ‘‘(c) Any person who willfully falsely represents, to 

12 any employee, any employee’s beneficiary, any employer, 

13 the Secretary, or any State, a plan or other arrangement 

14 established or maintained for the purpose of offering or 

15 providing any benefit described in section 3(1) to employ16 ees or their beneficiaries as— 

17 ‘‘(1) being an association health plan which has 

18 been certified under part 8; 

19 ‘‘(2) having been established or maintained 

20 under or pursuant to one or more collective bar21 gaining agreements which are reached pursuant to 

22 collective bargaining described in section 8(d) of the 

23 National Labor Relations Act (29 U.S.C. 158(d)) or 

24 paragraph Fourth of section 2 of the Railway Labor 

25 Act (45 U.S.C. 152, paragraph Fourth) or which are 


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1 reached pursuant to labor-management negotiations 

2 under similar provisions of State public employee re3 lations laws; or 

4 ‘‘(3) being a plan or arrangement described in 

5 section 3(40)(A)(i), 

6 shall, upon conviction, be imprisoned not more than 5 

7 years, be fined under title 18, United States Code, or 

8 both.’’. 

9 (b) CEASE ACTIVITIES ORDERS.—Section 502 of 

10 such Act (29 U.S.C. 1132) is amended by adding at the 

11 end the following new subsection: 

12 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE13 SIST ORDERS.— 

14 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

15 upon application by the Secretary showing the oper16 ation, promotion, or marketing of an association 

17 health plan (or similar arrangement providing bene18 fits consisting of medical care (as defined in section 

19 733(a)(2))) that— 

20 ‘‘(A) is not certified under part 8, is sub21 ject under section 514(b)(6) to the insurance 

22 laws of any State in which the plan or arrange23 ment offers or provides benefits, and is not li24 censed, registered, or otherwise approved under 

25 the insurance laws of such State; or 


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1 ‘‘(B) is an association health plan certified 

2 under part 8 and is not operating in accordance 

3 with the requirements under part 8 for such 

4 certification, 

5 a district court of the United States shall enter an 

6 order requiring that the plan or arrangement cease 

7 activities. 

8 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

9 apply in the case of an association health plan or 

10 other arrangement if the plan or arrangement shows 

11 that— 

12 ‘‘(A) all benefits under it referred to in 

13 paragraph (1) consist of health insurance cov14 erage; and 

15 ‘‘(B) with respect to each State in which 

16 the plan or arrangement offers or provides ben17 efits, the plan or arrangement is operating in 

18 accordance with applicable State laws that are 

19 not superseded under section 514. 

20 ‘‘(3) ADDITIONAL EQUITABLE RELIEF.—The 

21 court may grant such additional equitable relief, in22 cluding any relief available under this title, as it 

23 deems necessary to protect the interests of the pub24 lic and of persons having claims for benefits against 

25 the plan.’’. 


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1 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.— 

2 Section 503 of such Act (29 U.S.C. 1133) is amended— 

3 (1) by inserting ‘‘(a) IN GENERAL.—’’ before 

4 ‘‘In accordance’’; and 

5 (2) by adding at the end the following new sub6 section: 

7 ‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of 

8 each association health plan which is or has been certified 

9 under part 8 shall require the board of trustees or the 

10 named fiduciary (as applicable) to ensure that the require11 ments of this section are met in connection with claims 

12 filed under the plan.’’. 

13 SEC. 404. COOPERATION BETWEEN FEDERAL AND STATE 

14 AUTHORITIES. 

15 Section 506 of the Employee Retirement Income Se16 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

17 at the end the following new subsection: 

18 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

19 TO ASSOCIATION HEALTH PLANS.— 

20 ‘‘(1) AGREEMENTS WITH STATES.—The Sec21 retary shall consult with the State recognized under 

22 paragraph (2) with respect to an association health 

23 plan regarding the exercise of— 


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1 ‘‘(A) the Secretary’s authority under sec2 tions 502 and 504 to enforce the requirements 

3 for certification under part 8; and 

4 ‘‘(B) the Secretary’s authority to certify 

5 association health plans under part 8 in accord6 ance with regulations of the Secretary applica7 ble to certification under part 8. 

8 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

9 STATE.—In carrying out paragraph (1), the Sec10 retary shall ensure that only one State will be recog11 nized, with respect to any particular association 

12 health plan, as the State with which consultation is 

13 required. In carrying out this paragraph— 

14 ‘‘(A) in the case of a plan which provides 

15 health insurance coverage (as defined in section 

16 812(a)(3)), such State shall be the State with 

17 which filing and approval of a policy type of18 fered by the plan was initially obtained; and 

19 ‘‘(B) in any other case, the Secretary shall 

20 take into account the places of residence of the 

21 participants and beneficiaries under the plan 

22 and the State in which the trust is main23 tained.’’. 


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1 SEC. 405. EFFECTIVE DATE AND TRANSITIONAL AND 

2 OTHER RULES. 

3 (a) EFFECTIVE DATE.—The amendments made by 

4 this subtitle shall take effect 1 year after the date of the 

5 enactment of this Act. The Secretary of Labor shall first 

6 issue all regulations necessary to carry out the amend7 ments made by this subtitle within 1 year after the date 

8 of the enactment of this Act. 

9 (b) TREATMENT OF CERTAIN EXISTING HEALTH

10 BENEFITS PROGRAMS.— 

11 (1) IN GENERAL.—In any case in which, as of 

12 the date of the enactment of this Act, an arrange13 ment is maintained in a State for the purpose of 

14 providing benefits consisting of medical care for the 

15 employees and beneficiaries of its participating em16 ployers, at least 200 participating employers make 

17 contributions to such arrangement, such arrange18 ment has been in existence for at least 10 years, and 

19 such arrangement is licensed under the laws of one 

20 or more States to provide such benefits to its par21 ticipating employers, upon the filing with the appli22 cable authority (as defined in section 812(a)(5) of 

23 the Employee Retirement Income Security Act of 

24 1974 (as amended by this subtitle)) by the arrange25 ment of an application for certification of the arVerDate Sep 11 2014 06:25 Feb 02, 2017 Jkt 069200 PO 00000 Frm 00139 Fmt 6652 Sfmt 6201 E:\BILLS\S222.IS S222

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1 rangement under part 8 of subtitle B of title I of 

2 such Act— 

3 (A) such arrangement shall be deemed to 

4 be a group health plan for purposes of title I 

5 of such Act; 

6 (B) the requirements of sections 801(a) 

7 and 803(a) of the Employee Retirement Income 

8 Security Act of 1974 shall be deemed met with 

9 respect to such arrangement; 

10 (C) the requirements of section 803(b) of 

11 such Act shall be deemed met, if the arrange12 ment is operated by a board of directors 

13 which— 

14 (i) is elected by the participating em15 ployers, with each employer having one 

16 vote; and 

17 (ii) has complete fiscal control over 

18 the arrangement and which is responsible 

19 for all operations of the arrangement; 

20 (D) the requirements of section 804(a) of 

21 such Act shall be deemed met with respect to 

22 such arrangement; and 

23 (E) the arrangement may be certified by 

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1 erations in any State only if it operates in such 

2 State on the date of certification. 

3 The provisions of this subsection shall cease to apply 

4 with respect to any such arrangement at such time 

5 after the date of the enactment of this Act as the 

6 applicable requirements of this subsection are not 

7 met with respect to such arrangement. 

8 (2) DEFINITIONS.—For purposes of this sub9 section, the terms ‘‘group health plan’’, ‘‘medical 

10 care’’, and ‘‘participating employer’’ shall have the 

11 meanings provided in section 812 of the Employee 

12 Retirement Income Security Act of 1974, except 

13 that the reference in subsection (a)(8) of such sec14 tion to an ‘‘association health plan’’ shall be deemed 

15 a reference to an arrangement referred to in this 

16 subsection. 

17 TITLE V—MEDICAID REFORM 

18 SEC. 501. INCREASING STATE FLEXIBILITY TO CONDUCT 

19 MEDICAID WAIVERS. 

20 Section 1115(a)(1) of the Social Security Act (42 

21 U.S.C. 1315(a)(1)) is amended— 

22 (1) by striking ‘‘1602, or 1902’’ and inserting 

23 ‘‘or 1602’’; and 

24 (2) by inserting ‘‘and shall waive compliance 

25 with section 1902,’’ after ‘‘as the case may be,’’. 


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1 TITLE VI—MISCELLANEOUS 

2 PROVISIONS 

3 SEC. 601. QUALITY HEALTH CARE COALITION. 

4 (a) APPLICATION OF THE FEDERAL ANTITRUST

5 LAWS TO HEALTH CARE PROFESSIONALS NEGOTIATING

6 WITH HEALTH PLANS.— 

7 (1) IN GENERAL.—Any health care profes8 sionals who are engaged in negotiations with a 

9 health plan regarding the terms of any contract 

10 under which the professionals provide health care 

11 items or services for which benefits are provided 

12 under such plan shall, in connection with such nego13 tiations, be exempt from the Federal antitrust laws. 

14 (2) LIMITATION.— 

15 (A) NO NEW RIGHT FOR COLLECTIVE CES16 SATION OF SERVICE.—The exemption provided 

17 in paragraph (1) shall not confer any new right 

18 to participate in any collective cessation of serv19 ice to patients not already permitted by existing 

20 law. 

21 (B) NO CHANGE IN NATIONAL LABOR RE22 LATIONS ACT.—This section applies only to 

23 health care professionals excluded from the Na24 tional Labor Relations Act (29 U.S.C. 151 et 

25 seq.). Nothing in this section shall be construed 


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1 as changing or amending any provision of the 

2 National Labor Relations Act, or as affecting 

3 the status of any group of persons under that 

4 Act. 

5 (3) NO APPLICATION TO FEDERAL PRO6 GRAMS.—Nothing in this section shall apply to nego7 tiations between health care professionals and health 

8 plans pertaining to benefits provided under any of 

9 the following: 

10 (A) The Medicare program under title 

11 XVIII of the Social Security Act (42 U.S.C. 

12 1395 et seq.). 

13 (B) The Medicaid program under title XIX 

14 of the Social Security Act (42 U.S.C. 1396 et 

15 seq.). 

16 (C) The State Children’s Health Insurance 

17 Program under title XXI of the Social Security 

18 Act (42 U.S.C. 1397aa et seq.). 

19 (D) Chapter 55 of title 10, United States 

20 Code (relating to medical and dental care for 

21 members of the uniformed services). 

22 (E) Chapter 17 of title 38, United States 

23 Code (relating to Veterans’ medical care). 


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1 (F) Chapter 89 of title 5, United States 

2 Code (relating to the Federal Employees Health 

3 Benefits program). 

4 (G) The Indian Health Care Improvement 

5 Act (25 U.S.C. 1601 et seq.). 

6 (b) DEFINITIONS.—In this section, the following defi7 nitions shall apply: 

8 (1) ANTITRUST LAWS.—The term ‘‘antitrust 

9 laws’’— 

10 (A) has the meaning given it in subsection 

11 (a) of the first section of the Clayton Act (15 

12 U.S.C. 12(a)), except that such term includes 

13 section 5 of the Federal Trade Commission Act 

14 (15 U.S.C. 45) to the extent such section ap15 plies to unfair methods of competition; and 

16 (B) includes any State law similar to the 

17 laws referred to in subparagraph (A). 

18 (2) GROUP HEALTH PLAN.—The term ‘‘group 

19 health plan’’ means an employee welfare benefit plan 

20 to the extent that the plan provides medical care (in21 cluding items and services paid for as medical care) 

22 to employees or their dependents (as defined under 

23 the terms of the plan) directly or through insurance, 

24 reimbursement, or otherwise. 


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1 (3) GROUP HEALTH PLAN, HEALTH INSURANCE

2 ISSUER.—The terms ‘‘group health plan’’ and 

3 ‘‘health insurance issuer’’ include a third-party ad4 ministrator or other person acting for or on behalf 

5 of such plan or issuer. 

6 (4) HEALTH CARE SERVICES.—The term 

7 ‘‘health care services’’ means any services for which 

8 payment may be made under a health plan, includ9 ing services related to the delivery or administration 

10 of such services. 

11 (5) HEALTH CARE PROFESSIONAL.—The term 

12 ‘‘health care professional’’ means any individual or 

13 entity that provides health care items or services, 

14 treatment, assistance with activities of daily living, 

15 or medications to patients and who, to the extent re16 quired by State or Federal law, possesses specialized 

17 training that confers expertise in the provision of 

18 such items or services, treatment, assistance, or 

19 medications. 

20 (6) HEALTH INSURANCE COVERAGE.—The term 

21 ‘‘health insurance coverage’’ means benefits con22 sisting of medical care (provided directly, through 

23 insurance or reimbursement, or otherwise and in24 cluding items and services paid for as medical care) 

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1 tificate, hospital or medical service plan contract, or 

2 health maintenance organization contract offered by 

3 a health insurance issuer. 

4 (7) HEALTH INSURANCE ISSUER.—The term 

5 ‘‘health insurance issuer’’ means an insurance com6 pany, insurance service, or insurance organization 

7 (including a health maintenance organization) that 

8 is licensed to engage in the business of insurance in 

9 a State and that is subject to State law regulating 

10 insurance. Such term does not include a group 

11 health plan. 

12 (8) HEALTH MAINTENANCE ORGANIZATION.— 

13 The term ‘‘health maintenance organization’’ 

14 means— 

15 (A) a federally qualified health mainte16 nance organization (as defined in section 

17 1301(a) of the Public Health Service Act (42 

18 U.S.C. 300e(a))); 

19 (B) an organization recognized under State 

20 law as a health maintenance organization; or 

21 (C) a similar organization regulated under 

22 State law for solvency in the same manner and 

23 to the same extent as such a health mainte24 nance organization. 


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1 (9) HEALTH PLAN.—The term ‘‘health plan’’ 

2 means a group health plan or a health insurance 

3 issuer that is offering health insurance coverage. 

4 (10) MEDICAL CARE.—The term ‘‘medical 

5 care’’ means amounts paid for— 

6 (A) the diagnosis, cure, mitigation, treat7 ment, or prevention of disease, or amounts paid 

8 for the purpose of affecting any structure or 

9 function of the body; and 

10 (B) transportation primarily for and essen11 tial to receiving items and services referred to 

12 in subparagraph (A). 

13 (11) PERSON.—The term ‘‘person’’ includes a 

14 State or unit of local government. 

15 (12) STATE.—The term ‘‘State’’ includes the 

16 several States, the District of Columbia, Puerto 

17 Rico, the Virgin Islands of the United States, Guam, 

18 American Samoa, and the Commonwealth of the 

19 Northern Mariana Islands. 

20 (c) EFFECTIVE DATE.—This section shall take effect 

21 on the date of the enactment of this Act and shall not 

22 apply with respect to conduct occurring before such date. 


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1 SEC. 602. CERTAIN MEDICAL STOP-LOSS INSURANCE OB2 TAINED BY CERTAIN PLAN SPONSORS OF 

3 GROUP HEALTH PLANS NOT INCLUDED 

4 UNDER THE DEFINITION OF HEALTH INSUR5 ANCE COVERAGE. 

6 (a) PHSA.—Section 2791(b)(1) of the Public Health 

7 Service Act (42 U.S.C. 300gg–91(b)(1)) is amended by 

8 adding at the end the following new sentence: ‘‘Such term 

9 shall not include a stop loss policy obtained by a self-in10 sured health plan or a plan sponsor of a group health plan 

11 that self-insures the health risks of its plan participants 

12 to reimburse the plan or sponsor for losses that the plan 

13 or sponsor incurs in providing health or medical benefits 

14 to such plan participants in excess of a predetermined level 

15 set forth in the stop loss policy obtained by such plan or 

16 sponsor.’’. 

17 (b) ERISA.—Section 733(b)(1) of the Employee Re18 tirement Income Security Act of 1974 (29 U.S.C. 

19 1191b(b)(1)) is amended by adding at the end the fol20 lowing new sentence: ‘‘Such term shall not include a stop 

21 loss policy obtained by a self-insured health plan or a plan 

22 sponsor of a group health plan that self-insures the health 

23 risks of its plan participants to reimburse the plan or 

24 sponsor for losses that the plan or sponsor incurs in pro25 viding health or medical benefits to such plan participants 


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1 in excess of a predetermined level set forth in the stop 

2 loss policy obtained by such plan or sponsor.’’. 

3 (c) IRC.—Section 9832(b)(1)(A) of the Internal Rev4 enue Code of 1986 is amended by adding at the end the 

5 following new sentence: ‘‘Such term shall not include a 

6 stop loss policy obtained by a self-insured health plan or 

7 a plan sponsor of a group health plan that self-insures 

8 the health risks of its plan participants to reimburse the 

9 plan or sponsor for losses that the plan or sponsor incurs 

10 in providing health or medical benefits to such plan par11 ticipants in excess of a predetermined level set forth in 

12 the stop loss policy obtained by such plan or sponsor.’’. 

Æ 


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