I 

115TH CONGRESS 

1ST SESSION H. R. 1072 

To repeal provisions of the Patient Protection and Affordable Care Act 

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

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 15, 2017 

Mr. SANFORD (for himself, Mr. DUNCAN of South Carolina, Mr. MEADOWS, 

Mr. GOSAR, Mr. GARRETT, and Mr. MOONEY of West Virginia) introduced the following bill; which was referred to the Committee on Energy 

and Commerce, and in addition to the Committees on Ways and Means, 

Education and the Workforce, and the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of 

such provisions as fall within the jurisdiction of the committee concerned 

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: 


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Sec. 1. Short title. 

Sec. 2. Table of contents. 

TITLE I—REPEALS 

Sec. 101. Repeal of individual and employer mandates. 

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. 

Sec. 220. Distributions for abortion expenses from health savings accounts included in gross income. 

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 


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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 

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

TITLE VI—MISCELLANEOUS PROVISIONS 

Sec. 601. Certain medical stop-loss insurance obtained by certain plan sponsors 

of group health plans not included under the definition of 

health insurance coverage. 

Sec. 602. Restoring the application of antitrust laws to health sector insurers. 

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.’’. 


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1 SEC. 102. REPEAL OF PUBLIC HEALTH SERVICE ACT PROVI2 SIONS. 

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

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

5 et seq.) are repealed: 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

22 (17) Section 2794 (42 U.S.C. 300gg–94), relat23 ing to ensuring that consumers get value for their 

24 dollars. 

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

26 2701, 2702, 2711, and 2712 of the Public Health Service 


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

2 of the Patient Protection and Affordable Care Act (Public 

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

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

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

6 (c) REDESIGNATIONS AND TRANSFERS.—The fol7 lowing provisions of title XXVII of the Public Health Serv8 ice Act (42 U.S.C. 300gg et seq.) shall be redesignated 

9 and transferred as follows: 

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

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

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

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

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

15 after such section 2701. 

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

17 redesignated as section 2703 and transferred so as 

18 to appear after such section 2702. 

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

20 to coverage for individuals participating in approved 

21 clinical trials, shall be redesignated as section 2704 

22 and transferred so as to appear after section 2703 

23 (as so redesignated). 

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

25 to disclosure of information, shall be redesignated as 


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1 section 2705 and transferred so as to appear after 

2 section 2704 (as so redesignated). 

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

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

5 and transferred so as to appear after section 2705 

6 (as so redesignated). 

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

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

9 and transferred so as to appear after section 2706 

10 (as so redesignated). 

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

12 redesignated as section 2711 and transferred so as 

13 to appear as the first section under subpart II of 

14 part A. 

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

16 redesignated as section 2712 and transferred so as 

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

18 (d) EFFECTIVE DATES.— 

19 (1) IN GENERAL.—Except as provided in para20 graph (2), the repeals under subsection (a) shall 

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

22 shall apply to plan years beginning after such date 

23 of enactment. 

24 (2) DELAYED EFFECTIVE DATES.—The repeals 

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


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1 (a), the provisions restored or revived under sub2 section (b), and the conforming amendment in sec3 tion 104(a)(2) shall be effective for plan years begin4 ning on January 1, 2019, and (notwithstanding sub5 section (c)) the provisions of law repealed by such 

6 paragraphs of subsection (a) or amended by such 

7 conforming amendment shall continue to remain in 

8 effect until such date. 

9 SEC. 103. REPEAL OF PATIENT PROTECTION AND AFFORD10 ABLE CARE ACT PROVISIONS. 

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

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

13 is repealed. 

14 (b) REPEAL OF 3-MONTH GRACE PERIOD FOR NON15 PAYMENT PREMIUMS.—Clause (iv) of section 

16 1412(c)(2)(B) of the Patient Protection and Affordable 

17 Care Act is amended by striking ‘‘nonpayment of pre18 miums by the insured’’ and all that follows and inserting 

19 ‘‘nonpayment of premiums by the insured, notify the Sec20 retary of such nonpayment.’’. 

21 (c) EFFECTIVE DATE.—This section, and the amend22 ments made by this section, shall take effect on the date 

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

24 taxable years beginning after such date of enactment. 


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1 SEC. 104. CONFORMING AND TECHNICAL AMENDMENTS. 

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

3 Health Service Act (42 U.S.C. 300gg et seq.) is amend4 ed— 

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

6 by striking ‘‘(other than section 2704)’’ and insert7 ing ‘‘(other than section 2725)’’; 

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

9 41(a)(3)), by striking ‘‘2712’’ and inserting ‘‘2707’’; 

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

11 51(a)), by striking ‘‘2704’’ and inserting ‘‘2725’’; 

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

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

14 (5) in section 2753 (42 U.S.C. 300gg–54), re15 lating to coverage of dependent students on medi16 cally necessary leave of absence, by striking ‘‘2707’’ 

17 and inserting ‘‘2728’’. 

18 (b) PPACA PROVISIONS.—The Patient Protection 

19 and Affordable Care Act (Public Law 111–148) is amend20 ed— 

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

22 18003(b)(1))— 

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

24 premium revenue expended on nonclinical costs 

25 (as reported under section 2718(a) of the Pub26 lic Health Service Act),’’; and 


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

2 standards adopted for the uniform explanation 

3 of coverage as provided for in section 2715 of 

4 the Public Health Service Act’’; 

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

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

7 following: 

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

9 Section 2711 of the Public Health Service Act (re10 lating to extension of dependent coverage) shall 

11 apply to grandfathered health plans for plan years 

12 beginning with the first plan year to which such pro13 visions would otherwise apply.’’; 

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

15 18021(a)(4)), by striking ‘‘section 2701(a)(2) of the 

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

17 2701(a)(2) of the Public Health Service Act as in ef18 fect on the day before the date of enactment of the 

19 Obamacare Replacement Act or as determined by 

20 the Secretary’’; 

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

22 18022(e)(1)(B)(i)), by striking ‘‘(except as provided 

23 for in section 2713)’’; 

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

25 (A) in subsection (c)— 


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

2 ‘‘(in a manner consistent with applicable 

3 network adequacy provisions under section 

4 2702(c) of the Public Health Service 

5 Act)’’; and 

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

7 the uniform outline of coverage the plan is 

8 required to provide under section 2716 of 

9 the Public Health Service Act and’’; 

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

11 including the use of the uniform outline of cov12 erage established under section 2715 of the 

13 Public Health Service Act’’; 

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

15 the information and the recommendations’’ and 

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

17 and 

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

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

20 the date of enactment of the Obamacare Re21 placement Act or as determined by the Sec22 retary’’; and 

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

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

25 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) section 36B(b)(3)(C) is amended— 

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, 2017. 

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, 2017. 

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 SEC. 220. DISTRIBUTIONS FOR ABORTION EXPENSES FROM 

2 HEALTH SAVINGS ACCOUNTS INCLUDED IN 

3 GROSS INCOME. 

4 (a) IN GENERAL.—Subsection (e) of section 223 of 

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

6 preceding provisions of this subtitle, is amended by adding 

7 at the end the following new paragraph: 

8 ‘‘(8) EXCEPTION FOR CERTAIN ABORTION EX9 PENSES.— 

10 ‘‘(A) IN GENERAL.—Notwithstanding para11 graph (1), any amount used to pay for an abor12 tion (other than an abortion described in sub13 paragraph (B)) or health insurance that covers 

14 abortions (other than abortions so described) 

15 shall be included in the gross income of such 

16 beneficiary. 

17 ‘‘(B) EXCEPTIONS.—Subparagraph (A) 

18 shall not apply to— 

19 ‘‘(i) an abortion— 

20 ‘‘(I) in the case of a pregnancy 

21 that is the result of an act of rape or 

22 incest, or 

23 ‘‘(II) in the case where a woman 

24 suffers from a physical disorder, phys25 ical injury, or physical illness that 

26 would, as certified by a physician, 


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1 place the woman in danger of death 

2 unless an abortion is performed, in3 cluding a life-endangering physical 

4 condition caused by or arising from 

5 the pregnancy, and 

6 ‘‘(ii) the treatment of any infection, 

7 injury, disease, or disorder that has been 

8 caused by or exacerbated by the perform9 ance of an abortion.’’. 

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

11 this section shall apply to taxable years beginning after 

12 the date of the enactment of this Act. 

13 Subtitle C—Medical Expenses 

14 SEC. 221. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 

15 FITNESS PROGRAMS TREATED AS MEDICAL 

16 CARE. 

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

18 the Internal Revenue Code of 1986 is amended by adding 

19 at the end the following new paragraph: 

20 ‘‘(12) EXERCISE EQUIPMENT AND PHYSICAL

21 FITNESS ACTIVITY.— 

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

23 care’ shall include amounts paid— 


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1 ‘‘(i) for equipment for use in a pro2 gram (including a self-directed program) of 

3 physical exercise or physical activity, 

4 ‘‘(ii) to participate, or receive instruc5 tion, in a program of physical exercise, nu6 trition, or health coaching (including a 

7 self-directed program), and 

8 ‘‘(iii) for membership at a fitness fa9 cility. 

10 ‘‘(B) OVERALL DOLLAR LIMITATION.— 

11 ‘‘(i) IN GENERAL.—Amounts treated 

12 as medical care under subparagraph (A) 

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

14 individual for any taxable year. 

15 ‘‘(ii) EXCEPTION.—Clause (i) shall 

16 not apply for purposes of determining 

17 whether expenses reimbursed through a 

18 health flexible spending arrangement sub19 ject to section 125(i)(1) are incurred for 

20 medical care. 

21 ‘‘(C) LIMITATIONS RELATED TO SPORTS

22 AND FITNESS EQUIPMENT.—Amounts paid for 

23 equipment described in subparagraph (A)(i) 

24 shall be treated as medical care only— 


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1 ‘‘(i) if such equipment is utilized ex2 clusively for participation in fitness, exer3 cise, sport, or other physical activity pro4 grams, 

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

6 or footwear, and 

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

8 equipment (other than exercise equip9 ment), to the extent the amount paid for 

10 such item does not exceed $250. 

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

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

13 means a facility— 

14 ‘‘(i) which provides instruction in a 

15 program of physical exercise, offers facili16 ties for the preservation, maintenance, en17 couragement, or development of physical 

18 fitness, or serves as the site of such a pro19 gram of a State or local government, 

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

21 and operated by its members, 

22 ‘‘(iii) which does not offer golf, hunt23 ing, sailing, or riding facilities, 


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

2 not incidental to its overall function and 

3 purpose, and 

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

5 State of jurisdiction and Federal anti-dis6 crimination laws.’’. 

7 (b) LIMITATION NOT TO APPLY FOR CERTAIN PUR8 POSES.— 

9 (1) HEALTH SAVINGS ACCOUNTS.—Subpara10 graph (A) of section 223(c)(2) of the Internal Rev11 enue Code of 1986, as amended and redesignated by 

12 subtitle B, is further amended by inserting ‘‘, deter13 mined without regard to paragraph (12)(B) there14 of)’’ after ‘‘medical care (as defined in section 

15 213(d)’’. 

16 (2) ARCHER MSAS.—Subparagraph (A) of sec17 tion 220(d)(2) of the Internal Revenue Code of 

18 1986, as amended by subtitle B, is further amended 

19 by inserting ‘‘, determined without regard to para20 graph (12)(B) thereof’’ after ‘‘medical care (as de21 fined in section 213(d)’’. 

22 (c) 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. 222. CERTAIN NUTRITIONAL AND DIETARY SUPPLE2 MENTS TO BE TREATED AS MEDICAL CARE. 

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

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

5 221, is further amended by adding at the end the following 

6 new paragraph: 

7 ‘‘(13) NUTRITIONAL AND DIETARY SUPPLE8 MENTS.— 

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

10 care’ shall include amounts paid to purchase 

11 herbs, vitamins, minerals, homeopathic rem12 edies, meal replacement products, and other di13 etary and nutritional supplements. 

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

15 medical care under subparagraph (A) shall not 

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

17 any taxable year. 

18 ‘‘(C) MEAL REPLACEMENT PRODUCT.— 

19 For purposes of this paragraph, the term ‘meal 

20 replacement product’ means any product that— 

21 ‘‘(i) is permitted to bear labeling mak22 ing a claim described in section 403(r)(3) 

23 of the Federal Food, Drug, and Cosmetic 

24 Act, and 

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

26 section that such product is low in fat and 


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1 is a good source of protein, fiber, and mul2 tiple essential vitamins and minerals. 

3 ‘‘(D) EXCEPTION.—Subparagraph (B) 

4 shall not apply for purposes of determining 

5 whether expenses reimbursed through a health 

6 flexible spending arrangement subject to section 

7 125(i)(1) are incurred for medical care.’’. 

8 (b) LIMITATION NOT TO APPLY FOR CERTAIN PUR9 POSES.— 

10 (1) HEALTH SAVINGS ACCOUNTS.—Subpara11 graph (A) of section 223(c)(2) of the Internal Rev12 enue Code of 1986, as amended and redesignated by 

13 this Act, is amended by striking ‘‘paragraph 

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

15 (13)(B)’’. 

16 (2) ARCHER MSAS.—Subparagraph (A) of sec17 tion 220(d)(2), as amended by this Act, is amended 

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

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

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

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 


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

2 MEDICAL CARE. 

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

4 the Internal Revenue Code of 1986, as amended by sec5 tions 221 and 222, is amended by adding at the end the 

6 following new paragraph: 

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

8 ‘medical care’ shall include— 

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

10 physician for a defined set of medical services 

11 or the right to receive medical services on an 

12 as-needed basis, and 

13 ‘‘(B) pre-paid primary care services de14 signed to screen for, diagnose, cure, mitigate, 

15 treat, or prevent disease and promote 

16 wellness.’’. 

17 (b) EXCEPTION FOR FLEXIBLE SPENDING AC18 COUNTS.—Section 125 of the Internal Revenue Code of 

19 1986 is amended by redesignating subsections (k) and (l) 

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

21 after subsection (j) the following new subsection: 

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

23 FLEXIBLE SPENDING ARRANGEMENTS.—For purposes of 

24 applying this section with respect to any health flexible 

25 spending arrangement, amounts described in section 

26 213(d)(14) shall not be considered insurance.’’. 


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

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

4 SEC. 224. CLARIFICATION OF TREATMENT OF CAPITATED 

5 PRIMARY CARE PAYMENTS AS AMOUNTS 

6 PAID FOR MEDICAL CARE. 

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

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

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

10 the end the following new paragraph: 

11 ‘‘(15) TREATMENT OF CAPITATED PRIMARY

12 CARE PAYMENTS.—Capitated primary care payments 

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

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

15 this section shall apply to taxable years beginning after 

16 the date of the enactment of this Act. 

17 Subtitle D—Miscellaneous 

18 SEC. 231. CONTRIBUTIONS OF MEDICARE BENEFICIARIES 

19 PARTICIPATING IN MEDICARE ADVANTAGE 

20 MSA. 

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

22 Revenue Code of 1986 is amended by striking paragraph 

23 (2) and by redesignating paragraphs (3) and (4) as para24 graphs (2) and (3), respectively. 


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

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

4 SEC. 232. PHYSICIAN CHARITY AND UNCOMPENSATED 

5 CARE DEDUCTION. 

6 (a) IN GENERAL.—Part VI of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 is amended 

8 by adding at the end the following new section: 

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

10 CARE. 

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

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

13 amount equal to the sum of— 

14 ‘‘(1) the amount such physician would have oth15 erwise charged for qualified charity care provided by 

16 such physician during such taxable year, and 

17 ‘‘(2) the amount of any debt owed to such phy18 sician for physicians’ services which becomes worth19 less during such taxable year. 

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

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

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

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

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

25 ‘qualified charity care’ means physicians’ services 


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1 provided on a volunteer or pro bono basis (not in2 cluding any services for which an amount was 

3 charged but not paid). 

4 ‘‘(3) PHYSICIANS’ SERVICES.—The term ‘physi5 cians’ services’ has the meaning given such term in 

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

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

8 ‘‘(c) LIMITATIONS.— 

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

10 amount determined under subsection (a) with re11 spect to any services or debt— 

12 ‘‘(A) shall be reduced by any reimburse13 ment received by the physician for such services 

14 or debt, and 

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

16 referred to in the fourth sentence of section 

17 1842(b)(3) of the Social Security Act (42 

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

19 charity care provided or the services provided 

20 with respect to which the debt relates. 

21 In the case of physicians’ services to which such eco22 nomic index is not applicable, the Secretary, in con23 sultation with the Secretary of Health and Human 

24 Services, shall use data on uncompensated care for 

25 purposes of the limitation under subparagraph (B), 


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

2 proxy, including (in the case of qualified charity 

3 care) a downward adjustment to eliminate bad debt 

4 data from uncompensated care data. 

5 ‘‘(2) OVERALL LIMITATION.—The amount al6 lowed as a deduction under subsection (a) for any 

7 taxable year shall not exceed an amount equal to 10 

8 percent of the gross income of the taxpayer for the 

9 taxable year derived from the taxpayer’s provision of 

10 physicians’ services. 

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

12 shall be allowed under section 166 or any other provision 

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

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

15 under subsection (c)).’’. 

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

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

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

19 the following new item: 

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

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

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 


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1 TITLE III—INDIVIDUAL HEALTH 

2 INSURANCE REFORM 

3 SEC. 301. POOL REFORM FOR INDIVIDUAL MEMBERSHIP 

4 EXPANSION. 

5 The Public Health Service Act is amended by insert6 ing after title XXXIII the following new title: 

7 ‘‘TITLE XXXIV—POOL REFORM 

8 FOR INDIVIDUAL MEMBER9 SHIP EXPANSION 

10 ‘‘SEC. 3400. PURPOSE. 

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

12 establishment of independent health pools (referred to in 

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

14 enrollment in, health insurance coverage for individuals 

15 and small employers. 

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

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

18 terms ‘individual health pool’ and ‘IHP’ mean a legal non19 profit entity that meets the following requirements: 

20 ‘‘(1) ORGANIZATION.—The IHP— 

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

22 good faith for a purpose that includes the for23 mation of a risk pool in order to offer health in24 surance coverage to its members; 


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

2 IHP on any health status-related factor relating 

3 to an individual (including an employee of an 

4 employer or a dependent of an employee); 

5 ‘‘(C) does not make health insurance cov6 erage offered through the IHP available other 

7 than in connection with a member of the IHP; 

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

9 ‘‘(E) does not receive any consideration di10 rectly or indirectly from any health insurance 

11 issuer in connection with the enrollment of any 

12 individuals, or employees of employers, in any 

13 health insurance coverage, except in conjunction 

14 with services offered through the IHP. 

15 ‘‘(2) OFFERING HEALTH BENEFITS COV16 ERAGE.— 

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

18 conjunction with those health insurance issuers 

19 that offer health benefits coverage through the 

20 IHP, makes available health benefits coverage 

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

22 members of the IHP and the dependents of 

23 such members (and, in the case of small em24 ployers, employees and their dependents) in the 

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


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1 that are established by the health insurance 

2 issuer on a policy or product specific basis and 

3 that may vary for individuals covered through 

4 an IHP. 

5 ‘‘(B) NONDISCRIMINATION IN COVERAGE

6 OFFERED.— 

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

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

9 coverage to a member of an IHP unless 

10 the same coverage is offered to all such 

11 members of the IHP. 

12 ‘‘(ii) CONSTRUCTION.—Nothing in 

13 this title shall be construed as requiring or 

14 permitting a health insurance issuer to 

15 provide coverage outside the service area of 

16 the issuer, as approved under State law, or 

17 preventing a health insurance issuer from 

18 underwriting or from excluding or limiting 

19 the coverage on any individual, subject to 

20 the requirement of section 2741 (relating 

21 to guaranteed availability of individual 

22 health insurance coverage to certain indi23 viduals with prior group coverage). 

24 ‘‘(C) NO ASSUMPTION OF INSURANCE RISK

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1 erage only through contracts with health insur2 ance issuers and does not assume insurance 

3 risk with respect to such coverage. 

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

5 shall be construed as preventing the establishment 

6 and operation of more than one IHP in a geographic 

7 area or as limiting the number of IHPs that may 

8 operate in any area. 

9 ‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES

10 TO PURCHASERS.—The IHP may provide adminis11 trative services for members. Such services may in12 clude accounting, billing, and enrollment informa13 tion. 

14 ‘‘(b) HEALTH BENEFITS COVERAGE REQUIRE15 MENTS.— 

16 ‘‘(1) COMPLIANCE WITH CONSUMER PROTEC17 TION REQUIREMENTS.—Except as provided in sec18 tion 3402, any health benefits coverage offered 

19 through an IHP— 

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

21 issuer that meets all applicable State standards 

22 relating to consumer protection; 

23 ‘‘(B) shall be approved or otherwise per24 mitted to be offered under State law; and 


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

2 specific disease from such coverage. 

3 ‘‘(2) WELLNESS BONUSES FOR HEALTH PRO4 MOTION.—Nothing in this title shall be construed as 

5 precluding a health insurance issuer offering health 

6 benefits coverage through an IHP from establishing 

7 premium discounts or rebates for members or from 

8 modifying otherwise applicable copayments or 

9 deductibles in return for adherence to programs of 

10 health promotion and disease prevention so long as 

11 such programs are agreed to in advance by the IHP 

12 and comply with all other provisions of this title and 

13 do not discriminate among similarly situated mem14 bers. 

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

16 ‘‘(1) MEMBERS.— 

17 ‘‘(A) IN GENERAL.—Under rules estab18 lished to carry out this title, with respect to an 

19 individual or small employer who is a member 

20 of an IHP, the individual may enroll for health 

21 benefits coverage (including coverage for de22 pendents of such individual) or the employer 

23 may enroll employees for health benefits cov24 erage (including coverage for dependents of 


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1 such employees) offered by a health insurance 

2 issuer through the IHP. 

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

4 in this paragraph shall preclude an IHP from 

5 establishing rules of enrollment and reenroll6 ment of members. Such rules shall be applied 

7 consistently to all members within the IHP and 

8 shall not be based in any manner on health sta9 tus-related factors. 

10 ‘‘(2) HEALTH INSURANCE ISSUERS.—The con11 tract between an IHP and a health insurance issuer 

12 shall provide, with respect to a member enrolled with 

13 health benefits coverage offered by the issuer 

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

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

16 health insurance coverage offered by the issuer. 

17 ‘‘SEC. 3402. APPLICATION OF CERTAIN LAWS AND REQUIRE18 MENTS. 

19 ‘‘(a) PREEMPTION OF STATE LAWS RESTRICTING

20 FORMATION OF IHPS.—Any State law or regulation relat21 ing to the composition or organization of an IHP is pre22 empted to the extent the law or regulation is inconsistent 

23 with the provisions of this title. 

24 ‘‘(b) PREEMPTION OF STATE REQUIREMENTS RE25 LATING TO HEALTH BENEFIT COVERAGE.— 


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1 ‘‘(1) BENEFIT REQUIREMENTS.— 

2 ‘‘(A) IN GENERAL.—Subject to subpara3 graph (B), State laws are superseded, and shall 

4 not apply to health benefits coverage made 

5 available through an IHP, insofar as such laws 

6 impose benefit requirements for such coverage, 

7 including requirements relating to coverage of 

8 specific providers, specific services or condi9 tions, or the amount, duration, or scope of ben10 efits. 

11 ‘‘(B) EXCEPTION FOR FEDERALLY IM12 POSED REQUIREMENTS AND FOR REQUIRE13 MENTS PROHIBITING DISEASE-SPECIFIC EXCLU14 SIONS.—Subparagraph (A) shall not apply to a 

15 requirement to the extent the requirement— 

16 ‘‘(i) implements title XXVII or other 

17 Federal law; or 

18 ‘‘(ii) prohibits imposition of an exclu19 sion of a specific disease from health bene20 fits coverage. 

21 ‘‘(2) OTHER REQUIREMENTS PREVENTING OF22 FERING OF COVERAGE THROUGH AN IHP.—State 

23 laws are superseded, and shall not apply to health 

24 benefits coverage made available through an IHP, 

25 insofar as such laws impose any other requirements 


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1 (including limitations on compensation arrange2 ments) that, directly or indirectly, preclude (or have 

3 the effect of precluding) the offering of such cov4 erage through an IHP, if the IHP meets the re5 quirements of this title. 

6 ‘‘(c) PREEMPTION OF STATE PREMIUM RATING RE7 QUIREMENTS.—State laws are superseded, and shall not 

8 apply to the premiums imposed for health benefits cov9 erage made available through an IHP, insofar as such 

10 laws impose restrictions on the variation of premiums 

11 among such coverage offered to members of the IHP. 

12 ‘‘SEC. 3403. DEFINITIONS. 

13 ‘‘For purposes of this title: 

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

15 applied to health insurance coverage offered by a 

16 health insurance issuer licensed (or otherwise regu17 lated) in a State, shall have the meaning applied to 

18 such term with respect to such coverage under the 

19 laws of the State relating to such coverage and such 

20 an issuer. Such term may include the spouse and 

21 children of the individual involved. 

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

23 ‘health benefits coverage’ has the meaning given the 

24 term ‘health insurance coverage’ in section 


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

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

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

4 ‘health insurance issuer’ has the meaning given such 

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

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

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

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

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

10 with respect to an IHP, an individual or small em11 ployer who is a member of the legal entity described 

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

13 coverage. 

14 ‘‘(6) SMALL EMPLOYER.—The term ‘small em15 ployer’ has the meaning given such term in section 

16 712(c)(1)(B) of the Employee Retirement and In17 come Security Act of 1974.’’. 

18 SEC. 302. COOPERATIVE GOVERNING OF INDIVIDUAL 

19 HEALTH INSURANCE COVERAGE. 

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

21 Service Act (42 U.S.C. 300gg et seq.) is amended by add22 ing at the end the following new part: 


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1 ‘‘PART D—COOPERATIVE GOVERNING OF 

2 INDIVIDUAL HEALTH INSURANCE COVERAGE 

3 ‘‘SEC. 2795. DEFINITIONS. 

4 ‘‘In this part: 

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

6 State’ means, with respect to individual health insur7 ance coverage offered by a health insurance issuer, 

8 the State designated by the issuer as the State 

9 whose covered laws shall govern the health insurance 

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

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

12 only designate one such State as its primary State 

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

14 issuer may not change the designated primary State 

15 with respect to individual health insurance coverage 

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

17 may be made upon renewal of the policy. With re18 spect to such designated State, the issuer is deemed 

19 to be doing business in that State. 

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

21 State’ means, with respect to individual health insur22 ance coverage offered by a health insurance issuer, 

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

24 of a health insurance issuer that is selling a policy 

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


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1 is deemed to be doing business in that secondary 

2 State. 

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

4 ‘health insurance issuer’ has the meaning given such 

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

6 issuer must be licensed in the primary State and be 

7 qualified to sell individual health insurance coverage 

8 in that State. 

9 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV10 ERAGE.—The term ‘individual health insurance cov11 erage’ means health insurance coverage offered in 

12 the individual market, as defined in section 

13 2791(e)(1). 

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

15 term ‘applicable State authority’ means, with respect 

16 to a health insurance issuer in a State, the State in17 surance commissioner or official or officials des18 ignated by the State to enforce the requirements of 

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

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

21 term ‘hazardous financial condition’ means that, 

22 based on its present or reasonably anticipated finan23 cial condition, a health insurance issuer is unlikely 

24 to be able— 


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1 ‘‘(A) to meet obligations to policyholders 

2 with respect to known claims and reasonably 

3 anticipated claims; or 

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

5 course of business. 

6 ‘‘(7) COVERED LAWS.— 

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

8 laws’ means the laws, rules, regulations, agree9 ments, and orders governing the insurance busi10 ness pertaining to— 

11 ‘‘(i) individual health insurance cov12 erage issued by a health insurance issuer; 

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

14 medical underwriting), renewal, and 

15 issuance of individual health insurance cov16 erage to an individual; 

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

18 relation to individual health insurance cov19 erage of health care and insurance related 

20 services; 

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

22 relation to individual health insurance cov23 erage of management, operations, and in24 vestment activities of a health insurance 

25 issuer; and 


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

2 relation to individual health insurance cov3 erage of loss control and claims adminis4 tration for a health insurance issuer with 

5 respect to liability for which the issuer pro6 vides insurance. 

7 ‘‘(B) EXCEPTION.—Such term does not in8 clude any law, rule, regulation, agreement, or 

9 order governing the use of care or cost manage10 ment techniques, including any requirement re11 lated to provider contracting, network access or 

12 adequacy, health care data collection, or quality 

13 assurance. 

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

15 States and includes the District of Columbia, Puerto 

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

17 and the Northern Mariana Islands. 

18 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC19 TICES.—The term ‘unfair claims settlement prac20 tices’ means only the following practices: 

21 ‘‘(A) Knowingly misrepresenting to claim22 ants and insured individuals relevant facts or 

23 policy provisions relating to coverage at issue. 


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1 ‘‘(B) Failing to acknowledge with reason2 able promptness pertinent communications with 

3 respect to claims arising under policies. 

4 ‘‘(C) Failing to adopt and implement rea5 sonable standards for the prompt investigation 

6 and settlement of claims arising under policies. 

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

8 and equitable settlement of claims submitted in 

9 which liability has become reasonably clear. 

10 ‘‘(E) Refusing to pay claims without con11 ducting a reasonable investigation. 

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

13 claims within a reasonable period of time after 

14 having completed an investigation related to 

15 those claims. 

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

17 insured individuals or their beneficiaries to in18 stitute suits to recover amounts due under its 

19 policies by offering substantially less than the 

20 amounts ultimately recovered in suits brought 

21 by them. 

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

23 to settle or settling claims for less than the 

24 amount that a reasonable person would believe 

25 the insured individual or his or her beneficiary 


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1 was entitled by reference to written or printed 

2 advertising material accompanying or made 

3 part of an application. 

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

5 on the basis of an application that was materi6 ally altered without notice to, or knowledge or 

7 consent of, the insured. 

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

9 present claims within 15 calendar days of re10 quests with reasonable explanations regarding 

11 their use. 

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

13 time than that prescribed in the policy or by the 

14 law of the primary State. 

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

16 and abuse’ means an act or omission committed by 

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

18 commits, or conceals any material information con19 cerning, one or more of the following: 

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

21 or preparing with knowledge or belief that it 

22 will be presented to or by an insurer, a rein23 surer, or broker or its agent, false information 

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

25 material to one or more of the following: 


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

2 renewal of an insurance policy or reinsur3 ance contract. 

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

5 or reinsurance contract. 

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

7 pursuant to an insurance policy or reinsur8 ance contract. 

9 ‘‘(iv) Premiums paid on an insurance 

10 policy or reinsurance contract. 

11 ‘‘(v) Payments made in accordance 

12 with the terms of an insurance policy or 

13 reinsurance contract. 

14 ‘‘(vi) A document filed with the com15 missioner or the chief insurance regulatory 

16 official of another jurisdiction. 

17 ‘‘(vii) The financial condition of an in18 surer or reinsurer. 

19 ‘‘(viii) The formation, acquisition, 

20 merger, reconsolidation, dissolution or 

21 withdrawal from one or more lines of in22 surance or reinsurance in all or part of a 

23 State by an insurer or reinsurer. 

24 ‘‘(ix) The issuance of written evidence 

25 of insurance. 


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1 ‘‘(x) The reinstatement of an insur2 ance policy. 

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

4 renewal insurance risks on behalf of an insurer, 

5 reinsurer, or other person engaged in the busi6 ness of insurance by a person who knows or 

7 should know that the insurer or other person 

8 responsible for the risk is insolvent at the time 

9 of the transaction. 

10 ‘‘(C) Transaction of the business of insur11 ance in violation of laws requiring a license, cer12 tificate of authority, or other legal authority for 

13 the transaction of the business of insurance. 

14 ‘‘(D) Attempt to commit, aiding or abet15 ting in the commission of, or conspiracy to com16 mit the acts or omissions specified in this para17 graph. 

18 ‘‘SEC. 2796. APPLICATION OF LAW. 

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

20 State shall apply to individual health insurance coverage 

21 offered by a health insurance issuer in the primary State 

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

23 issuer comply with the conditions of this section with re24 spect to the offering of coverage in any secondary State. 


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1 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC2 ONDARY STATE.—Except as provided in this section, a 

3 health insurance issuer with respect to its offer, sale, rat4 ing (including medical underwriting), renewal, and 

5 issuance of individual health insurance coverage in any 

6 secondary State is exempt from any covered laws of the 

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

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

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

10 ‘‘(1) make unlawful, or regulate, directly or in11 directly, the operation of the health insurance issuer 

12 operating in the secondary State, except that any 

13 secondary State may require such an issuer— 

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

15 applicable premium and other taxes (including 

16 high risk pool assessments) which are levied on 

17 insurers and surplus lines insurers, brokers, or 

18 policyholders under the laws of the State; 

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

20 State insurance commissioner as its agent solely 

21 for the purpose of receiving service of legal doc22 uments or process; 

23 ‘‘(C) to submit to an examination of its fi24 nancial condition by the State insurance com25 missioner in any State in which the issuer is 


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1 doing business to determine the issuer’s finan2 cial condition, if— 

3 ‘‘(i) the State insurance commissioner 

4 of the primary State has not done an ex5 amination within the period recommended 

6 by the National Association of Insurance 

7 Commissioners; and 

8 ‘‘(ii) any such examination is con9 ducted in accordance with the examiners’ 

10 handbook of the National Association of 

11 Insurance Commissioners and is coordi12 nated to avoid unjustified duplication and 

13 unjustified repetition; 

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

15 issued— 

16 ‘‘(i) in a delinquency proceeding com17 menced by the State insurance commis18 sioner if there has been a finding of finan19 cial impairment under subparagraph (C); 

20 or 

21 ‘‘(ii) in a voluntary dissolution pro22 ceeding; 

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

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1 leging that the issuer is in hazardous financial 

2 condition; 

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

4 basis, in any insurance insolvency guaranty as5 sociation or similar association to which a 

6 health insurance issuer in the State is required 

7 to belong; 

8 ‘‘(G) to comply with any State law regard9 ing fraud and abuse (as defined in section 

10 2795(10)), except that if the State seeks an in11 junction regarding the conduct described in this 

12 subparagraph, such injunction must be obtained 

13 from a court of competent jurisdiction; 

14 ‘‘(H) to comply with any State law regard15 ing unfair claims settlement practices (as de16 fined in section 2795(9)); or 

17 ‘‘(I) to comply with the applicable require18 ments for independent review under section 

19 2798 with respect to coverage offered in the 

20 State; 

21 ‘‘(2) require any individual health insurance 

22 coverage issued by the issuer to be countersigned by 

23 an insurance agent or broker residing in that sec24 ondary State; or 


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1 ‘‘(3) otherwise discriminate against the issuer 

2 issuing insurance in both the primary State and in 

3 any secondary State. 

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

5 health insurance issuer shall provide the following notice, 

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

7 in a secondary State under this part by such a health in8 surance issuer and at renewal of the policy, with the 5 

9 blank spaces therein being appropriately filled with the 

10 name of the health insurance issuer, the name of the pri11 mary State, the name of the secondary State, the name 

12 of the secondary State, and the name of the secondary 

13 State, respectively, for the coverage concerned: 

14 ‘‘ ‘NOTICE

15 ‘‘ ‘This policy is issued by lllll and is gov16 erned by the laws and regulations of the lllll, and 

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

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

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

20 of the insurance laws and regulations of the lllll, 

21 including coverage of some services or benefits mandated 

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

23 not subject to all of the consumer protection laws or re24 strictions on rate changes of the lllll. As with all 

25 insurance products, before purchasing this policy, you 


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1 should carefully review the policy and determine what 

2 health care services the policy covers and what benefits 

3 it provides, including any exclusions, limitations, or condi4 tions for such services or benefits.’. 

5 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

6 AND PREMIUM INCREASES.— 

7 ‘‘(1) IN GENERAL.—For purposes of this sec8 tion, a health insurance issuer that provides indi9 vidual health insurance coverage to an individual 

10 under this part in a primary or secondary State may 

11 not upon renewal— 

12 ‘‘(A) move or reclassify the individual in13 sured under the health insurance coverage from 

14 the class such individual is in at the time of 

15 issue of the contract based on the health-status 

16 related factors of the individual; or 

17 ‘‘(B) increase the premiums assessed the 

18 individual for such coverage based on a health 

19 status-related factor or change of a health sta20 tus-related factor or the past or prospective 

21 claim experience of the insured individual. 

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

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

24 issuer— 


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1 ‘‘(A) from terminating or discontinuing 

2 coverage or a class of coverage in accordance 

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

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

5 policy holders within a class based on claims ex6 perience; 

7 ‘‘(C) from changing premiums or offering 

8 discounted premiums to individuals who engage 

9 in wellness activities at intervals prescribed by 

10 the issuer, if such premium changes or incen11 tives— 

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

13 the insurance contract; 

14 ‘‘(ii) are based on specific wellness ac15 tivities that are not applicable to all indi16 viduals; and 

17 ‘‘(iii) are not obtainable by all individ18 uals to whom coverage is offered; 

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

20 ‘‘(E) from retroactively adjusting the rates 

21 charged an insured individual if the initial rates 

22 were set based on material misrepresentation by 

23 the individual at the time of issue. 

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

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


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1 individual health insurance coverage in a secondary State 

2 unless that coverage is currently offered for sale in the 

3 primary State. 

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

5 HEALTH INSURANCE ISSUERS.—Any State may require 

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

7 broker for a health insurance issuer with respect to the 

8 offering of individual health insurance coverage obtain a 

9 license from that State, with commissions or other com10 pensation subject to the provisions of the laws of that 

11 State, except that a State may not impose any qualifica12 tion or requirement which discriminates against a non13 resident agent or broker. 

14 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN15 SURANCE COMMISSIONER.—Each health insurance issuer 

16 issuing individual health insurance coverage in both pri17 mary and secondary States shall submit— 

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

19 State in which it intends to offer such coverage, be20 fore it may offer individual health insurance cov21 erage in such State— 

22 ‘‘(A) a copy of the plan of operation or fea23 sibility study or any similar statement of the 

24 policy being offered and its coverage (which 


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1 shall include the name of its primary State and 

2 its principal place of business); 

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

4 designation of its primary State; and 

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

6 issuer’s compliance with all the laws of the pri7 mary State; and 

8 ‘‘(2) to the insurance commissioner of each sec9 ondary State in which it offers individual health in10 surance coverage, a copy of the issuer’s quarterly fi11 nancial statement submitted to the primary State, 

12 which statement shall be certified by an independent 

13 public accountant and contain a statement of opin14 ion on loss and loss adjustment expense reserves 

15 made by— 

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

17 of Actuaries; or 

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

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

20 Nothing in this section shall be construed to affect the 

21 authority of any Federal or State court to enjoin— 

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

23 insurance coverage by a health insurance issuer to 

24 any person or group who is not eligible for such in25 surance; or 


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

2 insurance coverage that violates the requirements of 

3 the law of a secondary State which are described in 

4 subparagraphs (A) through (H) of section 

5 2796(b)(1). 

6 ‘‘(i) POWER OF SECONDARY STATES TO TAKE AD7 MINISTRATIVE ACTION.—Nothing in this section shall be 

8 construed to affect the authority of any State to enjoin 

9 conduct in violation of that State’s laws described in sec10 tion 2796(b)(1). 

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

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

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

14 paragraph (2), nothing in this section shall be con15 strued to affect the authority of any State to make 

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

17 State with respect to which a health insurance issuer 

18 is not exempt under subsection (b). 

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

20 If a State seeks an injunction regarding the conduct 

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

22 (h), such injunction must be obtained from a Fed23 eral or State court of competent jurisdiction. 


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

2 section shall affect the authority of any State to bring ac3 tion in any Federal or State court. 

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

5 this section shall be construed to affect the applicability 

6 of State laws generally applicable to persons or corpora7 tions. 

8 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

9 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 

10 health insurance issuer is offering coverage in a primary 

11 State that does not accommodate residents of secondary 

12 States or does not provide a working mechanism for resi13 dents of a secondary State, and the issuer is offering cov14 erage under this part in such secondary State which has 

15 not adopted a qualified high risk pool as its acceptable 

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

17 the issuer shall, with respect to any individual health in18 surance coverage offered in a secondary State under this 

19 part, comply with the guaranteed availability requirements 

20 for eligible individuals in section 2741. 

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

22 BEFORE ISSUER MAY SELL INTO SECONDARY 

23 STATES. 

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

25 issue individual health insurance coverage in a secondary 


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1 State if the State insurance commissioner does not use 

2 a risk-based capital formula for the determination of cap3 ital and surplus requirements for all health insurance 

4 issuers. 

5 ‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE6 DURES. 

7 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur8 ance issuer may not offer, sell, or issue individual health 

9 insurance coverage in a secondary State under the provi10 sions of this title unless— 

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

12 State have legislation or regulations in place estab13 lishing an independent review process for individuals 

14 who are covered by individual health insurance cov15 erage; or 

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

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

18 of such States, the issuer provides an independent 

19 review mechanism substantially identical (as deter20 mined by the applicable State authority of such 

21 State) to that prescribed in the ‘Health Carrier Ex22 ternal Review Model Act’ of the National Association 

23 of Insurance Commissioners for all individuals who 

24 purchase insurance coverage under the terms of this 

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


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1 is conducted by an independent medical reviewer, or 

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

3 requirements of subsection (b) are met. 

4 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL

5 REVIEWERS.—In the case of any independent review 

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

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

8 claim to an independent medical reviewer, or to any 

9 panel of such reviewers, to conduct independent 

10 medical review, the issuer shall ensure that— 

11 ‘‘(A) each independent medical reviewer 

12 meets the qualifications described in paragraphs 

13 (2) and (3); 

14 ‘‘(B) with respect to each review, each re15 viewer meets the requirements of paragraph (4) 

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

17 panel, meets the requirements described in 

18 paragraph (5); and 

19 ‘‘(C) compensation provided by the issuer 

20 to each reviewer is consistent with paragraph 

21 (6). 

22 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde23 pendent medical reviewer shall be a physician 

24 (allopathic or osteopathic) or health care profes25 sional who— 


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1 ‘‘(A) is appropriately credentialed or li2 censed in one or more States to deliver health 

3 care services; and 

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

5 the diagnosis, or provides the type of treatment 

6 under review. 

7 ‘‘(3) INDEPENDENCE.— 

8 ‘‘(A) IN GENERAL.—Subject to subpara9 graph (B), each independent medical reviewer 

10 in a case shall— 

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

12 in paragraph (7)); 

13 ‘‘(ii) not have a material familial, fi14 nancial, or professional relationship with 

15 such a party; and 

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

17 interest with such a party (as determined 

18 under regulations). 

19 ‘‘(B) EXCEPTION.—Nothing in subpara20 graph (A) shall be construed to— 

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

22 the basis of affiliation with the issuer, 

23 from serving as an independent medical re24 viewer if— 


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

2 not reasonably available; 

3 ‘‘(II) the affiliated individual is 

4 not involved in the provision of items 

5 or services in the case under review; 

6 ‘‘(III) the fact of such an affili7 ation is disclosed to the issuer and the 

8 enrollee (or authorized representative) 

9 and neither party objects; and 

10 ‘‘(IV) the affiliated individual is 

11 not an employee of the issuer and 

12 does not provide services exclusively or 

13 primarily to or on behalf of the issuer; 

14 ‘‘(ii) prohibit an individual who has 

15 staff privileges at the institution where the 

16 treatment involved takes place from serv17 ing as an independent medical reviewer 

18 merely on the basis of such affiliation if 

19 the affiliation is disclosed to the issuer and 

20 the enrollee (or authorized representative), 

21 and neither party objects; or 

22 ‘‘(iii) prohibit receipt of compensation 

23 by an independent medical reviewer from 

24 an entity if the compensation is provided 

25 consistent with paragraph (6). 


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1 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

2 IN SAME FIELD.— 

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

4 treatment, or the provision of items or serv5 ices— 

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

7 a practicing physician (allopathic or osteo8 pathic) of the same or similar specialty, as 

9 a physician who, acting within the appro10 priate scope of practice within the State in 

11 which the service is provided or rendered, 

12 typically treats the condition, makes the 

13 diagnosis, or provides the type of treat14 ment under review; or 

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

16 professional, the reviewer, or at least one 

17 member of the review panel, shall be a 

18 practicing non-physician health care pro19 fessional of the same or similar specialty 

20 as the non-physician health care profes21 sional who, acting within the appropriate 

22 scope of practice within the State in which 

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1 nosis, or provides the type of treatment 

2 under review. 

3 ‘‘(B) PRACTICING DEFINED.—For pur4 poses of this paragraph, the term ‘practicing’ 

5 means, with respect to an individual who is a 

6 physician or other health care professional, that 

7 the individual provides health care services to 

8 individual patients on average at least 2 days 

9 per week. 

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

11 external review relating to a child, a reviewer shall 

12 have expertise under paragraph (2) in pediatrics. 

13 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA14 TION.—Compensation provided by the issuer to an 

15 independent medical reviewer in connection with a 

16 review under this section shall— 

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

18 ‘‘(B) not be contingent on the decision ren19 dered by the reviewer. 

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

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

22 respect to a denial of a claim under a coverage relat23 ing to an enrollee, any of the following: 

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

25 officer, director, or employee of the issuer. 


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1 ‘‘(B) The enrollee (or authorized represent2 ative). 

3 ‘‘(C) The health care professional that pro4 vides the items or services involved in the de5 nial. 

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

7 services (or treatment) involved in the denial 

8 are provided. 

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

10 other item that is included in the items or serv11 ices involved in the denial. 

12 ‘‘(F) Any other party determined under 

13 any regulations to have a substantial interest in 

14 the denial involved. 

15 ‘‘(8) DEFINITIONS.—For purposes of this sub16 section— 

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

18 means, with respect to health insurance cov19 erage offered by a health insurance issuer, an 

20 individual enrolled with the issuer to receive 

21 such coverage. 

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

23 term ‘health care professional’ means an indi24 vidual who is licensed, accredited, or certified 

25 under State law to provide specified health care 


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1 services and who is operating within the scope 

2 of such licensure, accreditation, or certification. 

3 ‘‘SEC. 2799. ENFORCEMENT. 

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

5 respect to specific individual health insurance coverage the 

6 primary State for such coverage has sole jurisdiction to 

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

8 State and any secondary State. 

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

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

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

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

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

14 initiated by the applicable secondary State authority, the 

15 court of competent jurisdiction shall apply the covered 

16 laws of the primary State. 

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

18 of individual health insurance coverage offered in a sec19 ondary State that fails to comply with the covered laws 

20 of the primary State, the applicable State authority of the 

21 secondary State may notify the applicable State authority 

22 of the primary State.’’. 

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

24 subsection (a) shall apply to individual health insurance 


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

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

3 (c) GAO ONGOING STUDY AND REPORTS.— 

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

5 United States shall conduct an ongoing study con6 cerning the effect of the amendment made by sub7 section (a) on— 

8 (A) the number of uninsured and under9 insured; 

10 (B) the availability and cost of health in11 surance policies for individuals with pre-existing 

12 medical conditions; 

13 (C) the availability and cost of health in14 surance policies generally; 

15 (D) the elimination or reduction of dif16 ferent types of benefits under health insurance 

17 policies offered in different States; and 

18 (E) cases of fraud or abuse relating to 

19 health insurance coverage offered under such 

20 amendment and the resolution of such cases. 

21 (2) ANNUAL REPORTS.—The Comptroller Gen22 eral shall submit to Congress an annual report, after 

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

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

25 the ongoing study conducted under paragraph (1). 


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1 TITLE IV—ASSOCIATION 

2 HEALTH PLANS 

3 SEC. 401. RULES GOVERNING ASSOCIATION HEALTH 

4 PLANS. 

5 (a) IN GENERAL.—Subtitle B of title I of the Em6 ployee Retirement Income Security Act of 1974 is amend7 ed by adding after part 7 the following new part: 

8 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

9 HEALTH PLANS 

10 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

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

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

13 whose sponsor is (or is deemed under this part to be) de14 scribed in subsection (b). 

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

16 plan is described in this subsection if such sponsor— 

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

18 with a constitution and bylaws specifically stating its 

19 purpose and providing for periodic meetings on at 

20 least an annual basis, as a bona fide trade associa21 tion, a bona fide industry association (including a 

22 rural electric cooperative association or a rural tele23 phone cooperative association), a bona fide profes24 sional association, or a bona fide chamber of com25 merce (or similar bona fide business association, inVerDate Sep 11 2014 04:43 Feb 22, 2017 Jkt 069200 PO 00000 Frm 00081 Fmt 6652 Sfmt 6201 E:\BILLS\H1072.IH H1072

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1 cluding a corporation or similar organization that 

2 operates on a cooperative basis (within the meaning 

3 of section 1381 of the Internal Revenue Code of 

4 1986)), for substantial purposes other than that of 

5 obtaining or providing medical care; 

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

7 receives the active support of its members and re8 quires for membership payment on a periodic basis 

9 of dues or payments necessary to maintain eligibility 

10 for membership in the sponsor; and 

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

12 or payments, or coverage under the plan on the 

13 basis of health status-related factors with respect to 

14 the employees of its members (or affiliated mem15 bers), or the dependents of such employees, and does 

16 not condition such dues or payments on the basis of 

17 group health plan participation. 

18 Any sponsor consisting of an association of entities which 

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

20 shall be deemed to be a sponsor described in this sub21 section. 

22 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

23 PLANS. 

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

25 prescribe by regulation a procedure under which, subject 


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1 to subsection (b), the applicable authority shall certify as2 sociation health plans which apply for certification as 

3 meeting the requirements of this part. 

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

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

6 health plan that provides at least one benefit option which 

7 does not consist of health insurance coverage, the applica8 ble authority shall certify such plan as meeting the re9 quirements of this part only if the applicable authority is 

10 satisfied that the applicable requirements of this part are 

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

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

13 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

15 certification under this part is in effect shall meet the ap16 plicable requirements of this part, effective on the date 

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

18 is to commence operations). 

19 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI20 CATION.—The applicable authority may provide by regula21 tion for continued certification of association health plans 

22 under this part. 

23 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

24 PLANS.—The applicable authority shall establish a class 

25 certification procedure for association health plans under 


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1 which all benefits consist of health insurance coverage. 

2 Under such procedure, the applicable authority shall pro3 vide for the granting of certification under this part to 

4 the plans in each class of such association health plans 

5 upon appropriate filing under such procedure in connec6 tion with plans in such class and payment of the pre7 scribed fee under section 807(a). 

8 ‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION

9 HEALTH PLANS.—An association health plan which offers 

10 one or more benefit options which do not consist of health 

11 insurance coverage may be certified under this part only 

12 if such plan consists of— 

13 ‘‘(1) a plan which offered such coverage on the 

14 date of the enactment of the Obamacare Replace15 ment Act; 

16 ‘‘(2) a plan under which the sponsor does not 

17 restrict membership to one or more trades and busi18 nesses or industries and whose eligible participating 

19 employers represent a broad cross-section of trades 

20 and businesses or industries; or 

21 ‘‘(3) a plan whose eligible participating employ22 ers represent one or more trades or businesses, or 

23 one or more industries, consisting of any of the fol24 lowing: agriculture; equipment and automobile deal25 erships; barbering and cosmetology; certified public 


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1 accounting practices; child care; construction; dance, 

2 theatrical and orchestra productions; disinfecting 

3 and pest control; financial services; fishing; food 

4 service establishments; hospitals; labor organiza5 tions; logging; manufacturing (metals); mining; med6 ical and dental practices; medical laboratories; pro7 fessional consulting services; sanitary services; trans8 portation (local and freight); warehousing; whole9 saling/distributing; or any other trade or business or 

10 industry which has been indicated as having average 

11 or above-average risk or health claims experience by 

12 reason of State rate filings, denials of coverage, pro13 posed premium rate levels, or other means dem14 onstrated by such plan in accordance with regula15 tions. 

16 ‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 

17 BOARDS OF TRUSTEES. 

18 ‘‘(a) SPONSOR.—The requirements of this subsection 

19 are met with respect to an association health plan if the 

20 sponsor has met (or is deemed under this part to have 

21 met) the requirements of section 801(b) for a continuous 

22 period of not less than 3 years ending with the date of 

23 the application for certification under this part. 


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1 ‘‘(b) BOARD OF TRUSTEES.—The requirements of 

2 this subsection are met with respect to an association 

3 health plan if the following requirements are met: 

4 ‘‘(1) FISCAL CONTROL.—The plan is operated, 

5 pursuant to a trust agreement, by a board of trust6 ees which has complete fiscal control over the plan 

7 and which is responsible for all operations of the 

8 plan. 

9 ‘‘(2) RULES OF OPERATION AND FINANCIAL

10 CONTROLS.—The board of trustees has in effect 

11 rules of operation and financial controls, based on a 

12 3-year plan of operation, adequate to carry out the 

13 terms of the plan and to meet all requirements of 

14 this title applicable to the plan. 

15 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

16 PARTICIPATING EMPLOYERS AND TO CONTRAC17 TORS.— 

18 ‘‘(A) BOARD MEMBERSHIP.— 

19 ‘‘(i) IN GENERAL.—Except as pro20 vided in clauses (ii) and (iii), the members 

21 of the board of trustees are individuals se22 lected from individuals who are the owners, 

23 officers, directors, or employees of the par24 ticipating employers or who are partners in 


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1 the participating employers and actively 

2 participate in the business. 

3 ‘‘(ii) LIMITATION.— 

4 ‘‘(I) GENERAL RULE.—Except as 

5 provided in subclauses (II) and (III), 

6 no such member is an owner, officer, 

7 director, or employee of, or partner in, 

8 a contract administrator or other 

9 service provider to the plan. 

10 ‘‘(II) LIMITED EXCEPTION FOR

11 PROVIDERS OF SERVICES SOLELY ON

12 BEHALF OF THE SPONSOR.—Officers 

13 or employees of a sponsor which is a 

14 service provider (other than a contract 

15 administrator) to the plan may be 

16 members of the board if they con17 stitute not more than 25 percent of 

18 the membership of the board and they 

19 do not provide services to the plan 

20 other than on behalf of the sponsor. 

21 ‘‘(III) TREATMENT OF PRO22 VIDERS OF MEDICAL CARE.—In the 

23 case of a sponsor which is an associa24 tion whose membership consists pri25 marily of providers of medical care, 


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1 subclause (I) shall not apply in the 

2 case of any service provider described 

3 in subclause (I) who is a provider of 

4 medical care under the plan. 

5 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

6 Clause (i) shall not apply to an association 

7 health plan which is in existence on the 

8 date of the enactment of the Obamacare 

9 Replacement Act. 

10 ‘‘(B) SOLE AUTHORITY.—The board has 

11 sole authority under the plan to approve appli12 cations for participation in the plan and to con13 tract with a service provider to administer the 

14 day-to-day affairs of the plan. 

15 ‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 

16 the case of a group health plan which is established and 

17 maintained by a franchiser for a franchise network con18 sisting of its franchisees— 

19 ‘‘(1) the requirements of subsection (a) and sec20 tion 801(a) shall be deemed met if such require21 ments would otherwise be met if the franchiser were 

22 deemed to be the sponsor referred to in section 

23 801(b), such network were deemed to be an associa24 tion described in section 801(b), and each franchisee 


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1 were deemed to be a member (of the association and 

2 the sponsor) referred to in section 801(b); and 

3 ‘‘(2) the requirements of section 804(a)(1) shall 

4 be deemed met. 

5 The Secretary may by regulation define for purposes of 

6 this subsection the terms ‘franchiser’, ‘franchise network’, 

7 and ‘franchisee’. 

8 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE9 MENTS. 

10 ‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 

11 requirements of this subsection are met with respect to 

12 an association health plan if, under the terms of the 

13 plan— 

14 ‘‘(1) each participating employer must be— 

15 ‘‘(A) a member of the sponsor; 

16 ‘‘(B) the sponsor; or 

17 ‘‘(C) an affiliated member of the sponsor 

18 with respect to which the requirements of sub19 section (b) are met, 

20 except that, in the case of a sponsor which is a pro21 fessional association or other individual-based asso22 ciation, if at least one of the officers, directors, or 

23 employees of an employer, or at least one of the in24 dividuals who are partners in an employer and who 

25 actively participates in the business, is a member or 


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1 such an affiliated member of the sponsor, partici2 pating employers may also include such employer; 

3 and 

4 ‘‘(2) all individuals commencing coverage under 

5 the plan after certification under this part must 

6 be— 

7 ‘‘(A) active or retired owners (including 

8 self-employed individuals), officers, directors, or 

9 employees of, or partners in, participating em10 ployers; or 

11 ‘‘(B) the beneficiaries of individuals de12 scribed in subparagraph (A). 

13 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM14 PLOYEES.—In the case of an association health plan in 

15 existence on the date of the enactment of the Obamacare 

16 Replacement Act, an affiliated member of the sponsor of 

17 the plan may be offered coverage under the plan as a par18 ticipating employer only if— 

19 ‘‘(1) the affiliated member was an affiliated 

20 member on the date of certification under this part; 

21 or 

22 ‘‘(2) during the 12-month period preceding the 

23 date of the offering of such coverage, the affiliated 

24 member has not maintained or contributed to a 

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1 ees who would otherwise be eligible to participate in 

2 such association health plan. 

3 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re4 quirements of this subsection are met with respect to an 

5 association health plan if, under the terms of the plan, 

6 no participating employer may provide health insurance 

7 coverage in the individual market for any employee not 

8 covered under the plan which is similar to the coverage 

9 contemporaneously provided to employees of the employer 

10 under the plan, if such exclusion of the employee from cov11 erage under the plan is based on a health status-related 

12 factor with respect to the employee and such employee 

13 would, but for such exclusion on such basis, be eligible 

14 for coverage under the plan. 

15 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

16 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI17 PATE.—The requirements of this subsection are met with 

18 respect to an association health plan if— 

19 ‘‘(1) under the terms of the plan, all employers 

20 meeting the preceding requirements of this section 

21 are eligible to qualify as participating employers for 

22 all geographically available coverage options, unless, 

23 in the case of any such employer, participation or 

24 contribution requirements of the type referred to in 


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1 section 2711 of the Public Health Service Act are 

2 not met; 

3 ‘‘(2) upon request, any employer eligible to par4 ticipate is furnished information regarding all cov5 erage options available under the plan; and 

6 ‘‘(3) the applicable requirements of sections 

7 701, 702, and 703 are met with respect to the plan. 

8 ‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 

9 DOCUMENTS, CONTRIBUTION RATES, AND 

10 BENEFIT OPTIONS. 

11 ‘‘(a) IN GENERAL.—The requirements of this section 

12 are met with respect to an association health plan if the 

13 following requirements are met: 

14 ‘‘(1) CONTENTS OF GOVERNING INSTRU15 MENTS.—The instruments governing the plan in16 clude a written instrument, meeting the require17 ments of an instrument required under section 

18 402(a)(1), which— 

19 ‘‘(A) provides that the board of trustees 

20 serves as the named fiduciary required for plans 

21 under section 402(a)(1) and serves in the ca22 pacity of a plan administrator (referred to in 

23 section 3(16)(A)); 


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1 ‘‘(B) provides that the sponsor of the plan 

2 is to serve as plan sponsor (referred to in sec3 tion 3(16)(B)); and 

4 ‘‘(C) incorporates the requirements of sec5 tion 806. 

6 ‘‘(2) CONTRIBUTION RATES MUST BE NON7 DISCRIMINATORY.— 

8 ‘‘(A) The contribution rates for any par9 ticipating small employer do not vary on the 

10 basis of any health status-related factor in rela11 tion to employees of such employer or their 

12 beneficiaries and do not vary on the basis of the 

13 type of business or industry in which such em14 ployer is engaged. 

15 ‘‘(B) Nothing in this title or any other pro16 vision of law shall be construed to preclude an 

17 association health plan, or a health insurance 

18 issuer offering health insurance coverage in 

19 connection with an association health plan, 

20 from— 

21 ‘‘(i) setting contribution rates based 

22 on the claims experience of the plan; or 

23 ‘‘(ii) varying contribution rates for 

24 small employers in a State to the extent 

25 that such rates could vary using the same 


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1 methodology employed in such State for 

2 regulating premium rates in the small 

3 group market with respect to health insur4 ance coverage offered in connection with 

5 bona fide associations (within the meaning 

6 of section 2791(d)(3) of the Public Health 

7 Service Act), 

8 subject to the requirements of section 702(b) 

9 relating to contribution rates. 

10 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI11 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If 

12 any benefit option under the plan does not consist 

13 of health insurance coverage, the plan has as of the 

14 beginning of the plan year not fewer than 1,000 par15 ticipants and beneficiaries. 

16 ‘‘(4) MARKETING REQUIREMENTS.— 

17 ‘‘(A) IN GENERAL.—If a benefit option 

18 which consists of health insurance coverage is 

19 offered under the plan, State-licensed insurance 

20 agents shall be used to distribute to small em21 ployers coverage which does not consist of 

22 health insurance coverage in a manner com23 parable to the manner in which such agents are 

24 used to distribute health insurance coverage. 


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1 ‘‘(B) STATE-LICENSED INSURANCE

2 AGENTS.—For purposes of subparagraph (A), 

3 the term ‘State-licensed insurance agents’ 

4 means one or more agents who are licensed in 

5 a State and are subject to the laws of such 

6 State relating to licensure, qualification, test7 ing, examination, and continuing education of 

8 persons authorized to offer, sell, or solicit 

9 health insurance coverage in such State. 

10 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

11 other requirements as the applicable authority deter12 mines are necessary to carry out the purposes of this 

13 part, which shall be prescribed by the applicable au14 thority by regulation. 

15 ‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO

16 DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 

17 nothing in this part or any provision of State law (as de18 fined in section 514(c)(1)) shall be construed to preclude 

19 an association health plan, or a health insurance issuer 

20 offering health insurance coverage in connection with an 

21 association health plan, from exercising its sole discretion 

22 in selecting the specific items and services consisting of 

23 medical care to be included as benefits under such plan 

24 or coverage, except (subject to section 514) in the case 

25 of (1) any law to the extent that it is not preempted under 


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1 section 731(a)(1) with respect to matters governed by sec2 tion 711, 712, or 713, or (2) any law of the State with 

3 which filing and approval of a policy type offered by the 

4 plan was initially obtained to the extent that such law pro5 hibits an exclusion of a specific disease from such cov6 erage. 

7 ‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 

8 FOR SOLVENCY FOR PLANS PROVIDING 

9 HEALTH BENEFITS IN ADDITION TO HEALTH 

10 INSURANCE COVERAGE. 

11 ‘‘(a) IN GENERAL.—The requirements of this section 

12 are met with respect to an association health plan if— 

13 ‘‘(1) the benefits under the plan consist solely 

14 of health insurance coverage; or 

15 ‘‘(2) if the plan provides any additional benefit 

16 options which do not consist of health insurance cov17 erage, the plan— 

18 ‘‘(A) establishes and maintains reserves 

19 with respect to such additional benefit options, 

20 in amounts recommended by the qualified 

21 health actuary, consisting of— 

22 ‘‘(i) a reserve sufficient for unearned 

23 contributions; 

24 ‘‘(ii) a reserve sufficient for benefit li25 abilities which have been incurred, which 


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1 have not been satisfied, and for which risk 

2 of loss has not yet been transferred, and 

3 for expected administrative costs with re4 spect to such benefit liabilities; 

5 ‘‘(iii) a reserve sufficient for any other 

6 obligations of the plan; and 

7 ‘‘(iv) a reserve sufficient for a margin 

8 of error and other fluctuations, taking into 

9 account the specific circumstances of the 

10 plan; and 

11 ‘‘(B) establishes and maintains aggregate 

12 and specific excess/stop loss insurance and sol13 vency indemnification, with respect to such ad14 ditional benefit options for which risk of loss 

15 has not yet been transferred, as follows: 

16 ‘‘(i) The plan shall secure aggregate 

17 excess/stop loss insurance for the plan with 

18 an attachment point which is not greater 

19 than 125 percent of expected gross annual 

20 claims. The applicable authority may by 

21 regulation provide for upward adjustments 

22 in the amount of such percentage in speci23 fied circumstances in which the plan spe24 cifically provides for and maintains reVerDate Sep 11 2014 04:43 Feb 22, 2017 Jkt 069200 PO 00000 Frm 00097 Fmt 6652 Sfmt 6201 E:\BILLS\H1072.IH H1072

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1 serves in excess of the amounts required 

2 under subparagraph (A). 

3 ‘‘(ii) The plan shall secure specific ex4 cess/stop loss insurance for the plan with 

5 an attachment point which is at least equal 

6 to an amount recommended by the plan’s 

7 qualified health actuary. The applicable 

8 authority may by regulation provide for ad9 justments in the amount of such insurance 

10 in specified circumstances in which the 

11 plan specifically provides for and maintains 

12 reserves in excess of the amounts required 

13 under subparagraph (A). 

14 ‘‘(iii) The plan shall secure indem15 nification insurance for any claims which 

16 the plan is unable to satisfy by reason of 

17 a plan termination. 

18 Any person issuing to a plan insurance described in clause 

19 (i), (ii), or (iii) of subparagraph (B) shall notify the Sec20 retary of any failure of premium payment meriting can21 cellation of the policy prior to undertaking such a cancella22 tion. Any regulations prescribed by the applicable author23 ity pursuant to clause (i) or (ii) of subparagraph (B) may 

24 allow for such adjustments in the required levels of excess/ 

25 stop loss insurance as the qualified health actuary may 


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1 recommend, taking into account the specific circumstances 

2 of the plan. 

3 ‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS

4 RESERVES.—In the case of any association health plan de5 scribed in subsection (a)(2), the requirements of this sub6 section are met if the plan establishes and maintains sur7 plus in an amount at least equal to— 

8 ‘‘(1) $500,000; or 

9 ‘‘(2) such greater amount (but not greater than 

10 $2,000,000) as may be set forth in regulations pre11 scribed by the applicable authority, considering the 

12 level of aggregate and specific excess/stop loss insur13 ance provided with respect to such plan and other 

14 factors related to solvency risk, such as the plan’s 

15 projected levels of participation or claims, the nature 

16 of the plan’s liabilities, and the types of assets avail17 able to assure that such liabilities are met. 

18 ‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 

19 any association health plan described in subsection (a)(2), 

20 the applicable authority may provide such additional re21 quirements relating to reserves, excess/stop loss insurance, 

22 and indemnification insurance as the applicable authority 

23 considers appropriate. Such requirements may be provided 

24 by regulation with respect to any such plan or any class 

25 of such plans. 


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1 ‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR2 ANCE.—The applicable authority may provide for adjust3 ments to the levels of reserves otherwise required under 

4 subsections (a) and (b) with respect to any plan or class 

5 of plans to take into account excess/stop loss insurance 

6 provided with respect to such plan or plans. 

7 ‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 

8 applicable authority may permit an association health plan 

9 described in subsection (a)(2) to substitute, for all or part 

10 of the requirements of this section (except subsection 

11 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar12 rangement, or other financial arrangement as the applica13 ble authority determines to be adequate to enable the plan 

14 to fully meet all its financial obligations on a timely basis 

15 and is otherwise no less protective of the interests of par16 ticipants and beneficiaries than the requirements for 

17 which it is substituted. The applicable authority may take 

18 into account, for purposes of this subsection, evidence pro19 vided by the plan or sponsor which demonstrates an as20 sumption of liability with respect to the plan. Such evi21 dence may be in the form of a contract of indemnification, 

22 lien, bonding, insurance, letter of credit, recourse under 

23 applicable terms of the plan in the form of assessments 

24 of participating employers, security, or other financial ar25 rangement. 


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1 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

2 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

3 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO4 CIATION HEALTH PLAN FUND.— 

5 ‘‘(A) IN GENERAL.—In the case of an as6 sociation health plan described in subsection 

7 (a)(2), the requirements of this subsection are 

8 met if the plan makes payments into the Asso9 ciation Health Plan Fund under this subpara10 graph when they are due. Such payments shall 

11 consist of annual payments in the amount of 

12 $5,000, and, in addition to such annual pay13 ments, such supplemental payments as the Sec14 retary may determine to be necessary under 

15 paragraph (2). Payments under this paragraph 

16 are payable to the Fund at the time determined 

17 by the Secretary. Initial payments are due in 

18 advance of certification under this part. Pay19 ments shall continue to accrue until a plan’s as20 sets are distributed pursuant to a termination 

21 procedure. 

22 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

23 PAYMENTS.—If any payment is not made by a 

24 plan when it is due, a late payment charge of 

25 not more than 100 percent of the payment 


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1 which was not timely paid shall be payable by 

2 the plan to the Fund. 

3 ‘‘(C) CONTINUED DUTY OF THE SEC4 RETARY.—The Secretary shall not cease to 

5 carry out the provisions of paragraph (2) on ac6 count of the failure of a plan to pay any pay7 ment when due. 

8 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

9 EXCESS/STOP LOSS INSURANCE COVERAGE AND IN10 DEMNIFICATION INSURANCE COVERAGE FOR CER11 TAIN PLANS.—In any case in which the applicable 

12 authority determines that there is, or that there is 

13 reason to believe that there will be: (A) a failure to 

14 take necessary corrective actions under section 

15 809(a) with respect to an association health plan de16 scribed in subsection (a)(2); or (B) a termination of 

17 such a plan under section 809(b) or 810(b)(8) (and, 

18 if the applicable authority is not the Secretary, cer19 tifies such determination to the Secretary), the Sec20 retary shall determine the amounts necessary to 

21 make payments to an insurer (designated by the 

22 Secretary) to maintain in force excess/stop loss in23 surance coverage or indemnification insurance cov24 erage for such plan, if the Secretary determines that 

25 there is a reasonable expectation that, without such 


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1 payments, claims would not be satisfied by reason of 

2 termination of such coverage. The Secretary shall, to 

3 the extent provided in advance in appropriation 

4 Acts, pay such amounts so determined to the insurer 

5 designated by the Secretary. 

6 ‘‘(3) ASSOCIATION HEALTH PLAN FUND.— 

7 ‘‘(A) IN GENERAL.—There is established in 

8 the Treasury a fund to be known as the ‘Asso9 ciation Health Plan Fund’. The Fund shall be 

10 available for making payments pursuant to 

11 paragraph (2). The Fund shall be credited with 

12 payments received pursuant to paragraph 

13 (1)(A), penalties received pursuant to para14 graph (1)(B), and earnings on investments of 

15 amounts of the Fund under subparagraph (B). 

16 ‘‘(B) INVESTMENT.—Whenever the Sec17 retary determines that the moneys of the fund 

18 are in excess of current needs, the Secretary 

19 may request the investment of such amounts as 

20 the Secretary determines advisable by the Sec21 retary of the Treasury in obligations issued or 

22 guaranteed by the United States. 

23 ‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 

24 of this section: 


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1 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR2 ANCE.—The term ‘aggregate excess/stop loss insur3 ance’ means, in connection with an association 

4 health plan, a contract— 

5 ‘‘(A) under which an insurer (meeting such 

6 minimum standards as the applicable authority 

7 may prescribe by regulation) provides for pay8 ment to the plan with respect to aggregate 

9 claims under the plan in excess of an amount 

10 or amounts specified in such contract; 

11 ‘‘(B) which is guaranteed renewable; and 

12 ‘‘(C) which allows for payment of pre13 miums by any third party on behalf of the in14 sured plan. 

15 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR16 ANCE.—The term ‘specific excess/stop loss insur17 ance’ means, in connection with an association 

18 health plan, a contract— 

19 ‘‘(A) under which an insurer (meeting such 

20 minimum standards as the applicable authority 

21 may prescribe by regulation) provides for pay22 ment to the plan with respect to claims under 

23 the plan in connection with a covered individual 

24 in excess of an amount or amounts specified in 


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1 such contract in connection with such covered 

2 individual; 

3 ‘‘(B) which is guaranteed renewable; and 

4 ‘‘(C) which allows for payment of pre5 miums by any third party on behalf of the in6 sured plan. 

7 ‘‘(h) INDEMNIFICATION INSURANCE.—For purposes 

8 of this section, the term ‘indemnification insurance’ 

9 means, in connection with an association health plan, a 

10 contract— 

11 ‘‘(1) under which an insurer (meeting such min12 imum standards as the applicable authority may pre13 scribe by regulation) provides for payment to the 

14 plan with respect to claims under the plan which the 

15 plan is unable to satisfy by reason of a termination 

16 pursuant to section 809(b) (relating to mandatory 

17 termination); 

18 ‘‘(2) which is guaranteed renewable and 

19 noncancellable for any reason (except as the applica20 ble authority may prescribe by regulation); and 

21 ‘‘(3) which allows for payment of premiums by 

22 any third party on behalf of the insured plan. 

23 ‘‘(i) RESERVES.—For purposes of this section, the 

24 term ‘reserves’ means, in connection with an association 

25 health plan, plan assets which meet the fiduciary standVerDate Sep 11 2014 04:43 Feb 22, 2017 Jkt 069200 PO 00000 Frm 00105 Fmt 6652 Sfmt 6201 E:\BILLS\H1072.IH H1072

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1 ards under part 4 and such additional requirements re2 garding liquidity as the applicable authority may prescribe 

3 by regulation. 

4 ‘‘(j) SOLVENCY STANDARDS WORKING GROUP.— 

5 ‘‘(1) IN GENERAL.—Within 90 days after the 

6 date of the enactment of the Obamacare Replace7 ment Act, the applicable authority shall establish a 

8 Solvency Standards Working Group. In prescribing 

9 the initial regulations under this section, the applica10 ble authority shall take into account the rec11 ommendations of such Working Group. 

12 ‘‘(2) MEMBERSHIP.—The Working Group shall 

13 consist of not more than 15 members appointed by 

14 the applicable authority. The applicable authority 

15 shall include among persons invited to membership 

16 on the Working Group at least one of each of the 

17 following: 

18 ‘‘(A) A representative of the National As19 sociation of Insurance Commissioners. 

20 ‘‘(B) A representative of the American 

21 Academy of Actuaries. 

22 ‘‘(C) A representative of the State govern23 ments, or their interests. 

24 ‘‘(D) A representative of existing self-in25 sured arrangements, or their interests. 


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1 ‘‘(E) A representative of associations of 

2 the type referred to in section 801(b)(1), or 

3 their interests. 

4 ‘‘(F) A representative of multiemployer 

5 plans that are group health plans, or their in6 terests. 

7 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE8 LATED REQUIREMENTS. 

9 ‘‘(a) FILING FEE.—Under the procedure prescribed 

10 pursuant to section 802(a), an association health plan 

11 shall pay to the applicable authority at the time of filing 

12 an application for certification under this part a filing fee 

13 in the amount of $5,000, which shall be available in the 

14 case of the Secretary, to the extent provided in appropria15 tion Acts, for the sole purpose of administering the certifi16 cation procedures applicable with respect to association 

17 health plans. 

18 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA19 TION FOR CERTIFICATION.—An application for certifi20 cation under this part meets the requirements of this sec21 tion only if it includes, in a manner and form which shall 

22 be prescribed by the applicable authority by regulation, at 

23 least the following information: 

24 ‘‘(1) IDENTIFYING INFORMATION.—The names 

25 and addresses of— 


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1 ‘‘(A) the sponsor; and 

2 ‘‘(B) the members of the board of trustees 

3 of the plan. 

4 ‘‘(2) STATES IN WHICH PLAN INTENDS TO DO

5 BUSINESS.—The States in which participants and 

6 beneficiaries under the plan are to be located and 

7 the number of them expected to be located in each 

8 such State. 

9 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro10 vided by the board of trustees that the bonding re11 quirements of section 412 will be met as of the date 

12 of the application or (if later) commencement of op13 erations. 

14 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu15 ments governing the plan (including any bylaws and 

16 trust agreements), the summary plan description, 

17 and other material describing the benefits that will 

18 be provided to participants and beneficiaries under 

19 the plan. 

20 ‘‘(5) AGREEMENTS WITH SERVICE PRO21 VIDERS.—A copy of any agreements between the 

22 plan and contract administrators and other service 

23 providers. 

24 ‘‘(6) FUNDING REPORT.—In the case of asso25 ciation health plans providing benefits options in adVerDate Sep 11 2014 04:43 Feb 22, 2017 Jkt 069200 PO 00000 Frm 00108 Fmt 6652 Sfmt 6201 E:\BILLS\H1072.IH H1072

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1 dition to health insurance coverage, a report setting 

2 forth information with respect to such additional 

3 benefit options determined as of a date within the 

4 120-day period ending with the date of the applica5 tion, including the following: 

6 ‘‘(A) RESERVES.—A statement, certified 

7 by the board of trustees of the plan, and a 

8 statement of actuarial opinion, signed by a 

9 qualified health actuary, that all applicable re10 quirements of section 806 are or will be met in 

11 accordance with regulations which the applica12 ble authority shall prescribe. 

13 ‘‘(B) ADEQUACY OF CONTRIBUTION

14 RATES.—A statement of actuarial opinion, 

15 signed by a qualified health actuary, which sets 

16 forth a description of the extent to which con17 tribution rates are adequate to provide for the 

18 payment of all obligations and the maintenance 

19 of required reserves under the plan for the 12- 

20 month period beginning with such date within 

21 such 120-day period, taking into account the 

22 expected coverage and experience of the plan. If 

23 the contribution rates are not fully adequate, 

24 the statement of actuarial opinion shall indicate 


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1 the extent to which the rates are inadequate 

2 and the changes needed to ensure adequacy. 

3 ‘‘(C) CURRENT AND PROJECTED VALUE OF

4 ASSETS AND LIABILITIES.—A statement of ac5 tuarial opinion signed by a qualified health ac6 tuary, which sets forth the current value of the 

7 assets and liabilities accumulated under the 

8 plan and a projection of the assets, liabilities, 

9 income, and expenses of the plan for the 12- 

10 month period referred to in subparagraph (B). 

11 The income statement shall identify separately 

12 the plan’s administrative expenses and claims. 

13 ‘‘(D) COSTS OF COVERAGE TO BE

14 CHARGED AND OTHER EXPENSES.—A state15 ment of the costs of coverage to be charged, in16 cluding an itemization of amounts for adminis17 tration, reserves, and other expenses associated 

18 with the operation of the plan. 

19 ‘‘(E) OTHER INFORMATION.—Any other 

20 information as may be determined by the appli21 cable authority, by regulation, as necessary to 

22 carry out the purposes of this part. 

23 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

24 STATES.—A certification granted under this part to an 

25 association health plan shall not be effective unless written 


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1 notice of such certification is filed with the applicable 

2 State authority of each State in which at least 25 percent 

3 of the participants and beneficiaries under the plan are 

4 located. For purposes of this subsection, an individual 

5 shall be considered to be located in the State in which a 

6 known address of such individual is located or in which 

7 such individual is employed. 

8 ‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case 

9 of any association health plan certified under this part, 

10 descriptions of material changes in any information which 

11 was required to be submitted with the application for the 

12 certification under this part shall be filed in such form 

13 and manner as shall be prescribed by the applicable au14 thority by regulation. The applicable authority may re15 quire by regulation prior notice of material changes with 

16 respect to specified matters which might serve as the basis 

17 for suspension or revocation of the certification. 

18 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS19 SOCIATION HEALTH PLANS.—An association health plan 

20 certified under this part which provides benefit options in 

21 addition to health insurance coverage for such plan year 

22 shall meet the requirements of section 103 by filing an 

23 annual report under such section which shall include infor24 mation described in subsection (b)(6) with respect to the 

25 plan year and, notwithstanding section 104(a)(1), shall be 


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1 filed with the applicable authority not later than 90 days 

2 after the close of the plan year (or on such later date as 

3 may be prescribed by the applicable authority). The appli4 cable authority may require by regulation such interim re5 ports as it considers appropriate. 

6 ‘‘(f) ENGAGEMENT OF QUALIFIED HEALTH ACTU7 ARY.—The board of trustees of each association health 

8 plan which provides benefits options in addition to health 

9 insurance coverage and which is applying for certification 

10 under this part or is certified under this part shall engage, 

11 on behalf of all participants and beneficiaries, a qualified 

12 health actuary who shall be responsible for the preparation 

13 of the materials comprising information necessary to be 

14 submitted by a qualified health actuary under this part. 

15 The qualified health actuary shall utilize such assumptions 

16 and techniques as are necessary to enable such actuary 

17 to form an opinion as to whether the contents of the mat18 ters reported under this part— 

19 ‘‘(1) are in the aggregate reasonably related to 

20 the experience of the plan and to reasonable expecta21 tions; and 

22 ‘‘(2) represent such actuary’s best estimate of 

23 anticipated experience under the plan. 


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1 The opinion by the qualified health actuary shall be made 

2 with respect to, and shall be made a part of, the annual 

3 report. 

4 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER5 MINATION. 

6 ‘‘Except as provided in section 809(b), an association 

7 health plan which is or has been certified under this part 

8 may terminate (upon or at any time after cessation of ac9 cruals in benefit liabilities) only if the board of trustees, 

10 not less than 60 days before the proposed termination 

11 date— 

12 ‘‘(1) provides to the participants and bene13 ficiaries a written notice of intent to terminate stat14 ing that such termination is intended and the pro15 posed termination date; 

16 ‘‘(2) develops a plan for winding up the affairs 

17 of the plan in connection with such termination in 

18 a manner which will result in timely payment of all 

19 benefits for which the plan is obligated; and 

20 ‘‘(3) submits such plan in writing to the appli21 cable authority. 

22 Actions required under this section shall be taken in such 

23 form and manner as may be prescribed by the applicable 

24 authority by regulation. 


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1 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI2 NATION. 

3 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE4 SERVES.—An association health plan which is certified 

5 under this part and which provides benefits other than 

6 health insurance coverage shall continue to meet the re7 quirements of section 806, irrespective of whether such 

8 certification continues in effect. The board of trustees of 

9 such plan shall determine quarterly whether the require10 ments of section 806 are met. In any case in which the 

11 board determines that there is reason to believe that there 

12 is or will be a failure to meet such requirements, or the 

13 applicable authority makes such a determination and so 

14 notifies the board, the board shall immediately notify the 

15 qualified health actuary engaged by the plan, and such 

16 actuary shall, not later than the end of the following 

17 month, make such recommendations to the board for cor18 rective action as the actuary determines necessary to en19 sure compliance with section 806. Not later than 30 days 

20 after receiving from the actuary recommendations for cor21 rective actions, the board shall notify the applicable au22 thority (in such form and manner as the applicable au23 thority may prescribe by regulation) of such recommenda24 tions of the actuary for corrective action, together with 

25 a description of the actions (if any) that the board has 

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1 tions. The board shall thereafter report to the applicable 

2 authority, in such form and frequency as the applicable 

3 authority may specify to the board, regarding corrective 

4 action taken by the board until the requirements of section 

5 806 are met. 

6 ‘‘(b) MANDATORY TERMINATION.—In any case in 

7 which— 

8 ‘‘(1) the applicable authority has been notified 

9 under subsection (a) (or by an issuer of excess/stop 

10 loss insurance or indemnity insurance pursuant to 

11 section 806(a)) of a failure of an association health 

12 plan which is or has been certified under this part 

13 and is described in section 806(a)(2) to meet the re14 quirements of section 806 and has not been notified 

15 by the board of trustees of the plan that corrective 

16 action has restored compliance with such require17 ments; and 

18 ‘‘(2) the applicable authority determines that 

19 there is a reasonable expectation that the plan will 

20 continue to fail to meet the requirements of section 

21 806, 

22 the board of trustees of the plan shall, at the direction 

23 of the applicable authority, terminate the plan and, in the 

24 course of the termination, take such actions as the appli25 cable authority may require, including satisfying any 


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1 claims referred to in section 806(a)(2)(B)(iii) and recov2 ering for the plan any liability under subsection 

3 (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 

4 that the affairs of the plan will be, to the maximum extent 

5 possible, wound up in a manner which will result in timely 

6 provision of all benefits for which the plan is obligated. 

7 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL8 VENT ASSOCIATION HEALTH PLANS PRO9 VIDING HEALTH BENEFITS IN ADDITION TO 

10 HEALTH INSURANCE COVERAGE. 

11 ‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR

12 INSOLVENT PLANS.—Whenever the Secretary determines 

13 that an association health plan which is or has been cer14 tified under this part and which is described in section 

15 806(a)(2) will be unable to provide benefits when due or 

16 is otherwise in a financially hazardous condition, as shall 

17 be defined by the Secretary by regulation, the Secretary 

18 shall, upon notice to the plan, apply to the appropriate 

19 United States district court for appointment of the Sec20 retary as trustee to administer the plan for the duration 

21 of the insolvency. The plan may appear as a party and 

22 other interested persons may intervene in the proceedings 

23 at the discretion of the court. The court shall appoint such 

24 Secretary trustee if the court determines that the trustee25 ship is necessary to protect the interests of the particiVerDate Sep 11 2014 04:43 Feb 22, 2017 Jkt 069200 PO 00000 Frm 00116 Fmt 6652 Sfmt 6201 E:\BILLS\H1072.IH H1072

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1 pants and beneficiaries or providers of medical care or to 

2 avoid any unreasonable deterioration of the financial con3 dition of the plan. The trusteeship of such Secretary shall 

4 continue until the conditions described in the first sen5 tence of this subsection are remedied or the plan is termi6 nated. 

7 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon 

8 appointment as trustee under subsection (a), shall have 

9 the power— 

10 ‘‘(1) to do any act authorized by the plan, this 

11 title, or other applicable provisions of law to be done 

12 by the plan administrator or any trustee of the plan; 

13 ‘‘(2) to require the transfer of all (or any part) 

14 of the assets and records of the plan to the Sec15 retary as trustee; 

16 ‘‘(3) to invest any assets of the plan which the 

17 Secretary holds in accordance with the provisions of 

18 the plan, regulations prescribed by the Secretary, 

19 and applicable provisions of law; 

20 ‘‘(4) to require the sponsor, the plan adminis21 trator, any participating employer, and any employee 

22 organization representing plan participants to fur23 nish any information with respect to the plan which 

24 the Secretary as trustee may reasonably need in 

25 order to administer the plan; 


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1 ‘‘(5) to collect for the plan any amounts due the 

2 plan and to recover reasonable expenses of the trust3 eeship; 

4 ‘‘(6) to commence, prosecute, or defend on be5 half of the plan any suit or proceeding involving the 

6 plan; 

7 ‘‘(7) to issue, publish, or file such notices, state8 ments, and reports as may be required by the Sec9 retary by regulation or required by any order of the 

10 court; 

11 ‘‘(8) to terminate the plan (or provide for its 

12 termination in accordance with section 809(b)) and 

13 liquidate the plan assets, to restore the plan to the 

14 responsibility of the sponsor, or to continue the 

15 trusteeship; 

16 ‘‘(9) to provide for the enrollment of plan par17 ticipants and beneficiaries under appropriate cov18 erage options; and 

19 ‘‘(10) to do such other acts as may be nec20 essary to comply with this title or any order of the 

21 court and to protect the interests of plan partici22 pants and beneficiaries and providers of medical 

23 care. 


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1 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac2 ticable after the Secretary’s appointment as trustee, the 

3 Secretary shall give notice of such appointment to— 

4 ‘‘(1) the sponsor and plan administrator; 

5 ‘‘(2) each participant; 

6 ‘‘(3) each participating employer; and 

7 ‘‘(4) if applicable, each employee organization 

8 which, for purposes of collective bargaining, rep9 resents plan participants. 

10 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in11 consistent with the provisions of this title, or as may be 

12 otherwise ordered by the court, the Secretary, upon ap13 pointment as trustee under this section, shall be subject 

14 to the same duties as those of a trustee under section 704 

15 of title 11, United States Code, and shall have the duties 

16 of a fiduciary for purposes of this title. 

17 ‘‘(e) OTHER PROCEEDINGS.—An application by the 

18 Secretary under this subsection may be filed notwith19 standing the pendency in the same or any other court of 

20 any bankruptcy, mortgage foreclosure, or equity receiver21 ship proceeding, or any proceeding to reorganize, conserve, 

22 or liquidate such plan or its property, or any proceeding 

23 to enforce a lien against property of the plan. 

24 ‘‘(f) JURISDICTION OF COURT.— 


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1 ‘‘(1) IN GENERAL.—Upon the filing of an appli2 cation for the appointment as trustee or the issuance 

3 of a decree under this section, the court to which the 

4 application is made shall have exclusive jurisdiction 

5 of the plan involved and its property wherever lo6 cated with the powers, to the extent consistent with 

7 the purposes of this section, of a court of the United 

8 States having jurisdiction over cases under chapter 

9 11 of title 11, United States Code. Pending an adju10 dication under this section such court shall stay, and 

11 upon appointment by it of the Secretary as trustee, 

12 such court shall continue the stay of, any pending 

13 mortgage foreclosure, equity receivership, or other 

14 proceeding to reorganize, conserve, or liquidate the 

15 plan, the sponsor, or property of such plan or spon16 sor, and any other suit against any receiver, conser17 vator, or trustee of the plan, the sponsor, or prop18 erty of the plan or sponsor. Pending such adjudica19 tion and upon the appointment by it of the Sec20 retary as trustee, the court may stay any proceeding 

21 to enforce a lien against property of the plan or the 

22 sponsor or any other suit against the plan or the 

23 sponsor. 

24 ‘‘(2) VENUE.—An action under this section 

25 may be brought in the judicial district where the 


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1 sponsor or the plan administrator resides or does 

2 business or where any asset of the plan is situated. 

3 A district court in which such action is brought may 

4 issue process with respect to such action in any 

5 other judicial district. 

6 ‘‘(g) PERSONNEL.—In accordance with regulations 

7 which shall be prescribed by the Secretary, the Secretary 

8 shall appoint, retain, and compensate accountants, actu9 aries, and other professional service personnel as may be 

10 necessary in connection with the Secretary’s service as 

11 trustee under this section. 

12 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

13 ‘‘(a) IN GENERAL.—Notwithstanding section 514, a 

14 State may impose by law a contribution tax on an associa15 tion health plan described in section 806(a)(2), if the plan 

16 commenced operations in such State after the date of the 

17 enactment of the Obamacare Replacement Act. 

18 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec19 tion, the term ‘contribution tax’ imposed by a State on 

20 an association health plan means any tax imposed by such 

21 State if— 

22 ‘‘(1) such tax is computed by applying a rate to 

23 the amount of premiums or contributions, with re24 spect to individuals covered under the plan who are 

25 residents of such State, which are received by the 


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1 plan from participating employers located in such 

2 State or from such individuals; 

3 ‘‘(2) the rate of such tax does not exceed the 

4 rate of any tax imposed by such State on premiums 

5 or contributions received by insurers or health main6 tenance organizations for health insurance coverage 

7 offered in such State in connection with a group 

8 health plan; 

9 ‘‘(3) such tax is otherwise nondiscriminatory; 

10 and 

11 ‘‘(4) the amount of any such tax assessed on 

12 the plan is reduced by the amount of any tax or as13 sessment otherwise imposed by the State on pre14 miums, contributions, or both received by insurers or 

15 health maintenance organizations for health insur16 ance coverage, aggregate excess/stop loss insurance 

17 (as defined in section 806(g)(1)), specific excess/stop 

18 loss insurance (as defined in section 806(g)(2)), 

19 other insurance related to the provision of medical 

20 care under the plan, or any combination thereof pro21 vided by such insurers or health maintenance organi22 zations in such State in connection with such plan. 

23 ‘‘SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION. 

24 ‘‘(a) DEFINITIONS.—For purposes of this part— 


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1 ‘‘(1) GROUP HEALTH PLAN.—The term ‘group 

2 health plan’ has the meaning provided in section 

3 733(a)(1) (after applying subsection (b) of this sec4 tion). 

5 ‘‘(2) MEDICAL CARE.—The term ‘medical care’ 

6 has the meaning provided in section 733(a)(2). 

7 ‘‘(3) HEALTH INSURANCE COVERAGE.—The 

8 term ‘health insurance coverage’ has the meaning 

9 provided in section 733(b)(1). 

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

11 ‘health insurance issuer’ has the meaning provided 

12 in section 733(b)(2). 

13 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap14 plicable authority’ means the Secretary, except that, 

15 in connection with any exercise of the Secretary’s 

16 authority regarding which the Secretary is required 

17 under section 506(d) to consult with a State, such 

18 term means the Secretary, in consultation with such 

19 State. 

20 ‘‘(6) HEALTH STATUS-RELATED FACTOR.—The 

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

22 provided in section 733(d)(2). 

23 ‘‘(7) INDIVIDUAL MARKET.— 

24 ‘‘(A) IN GENERAL.—The term ‘individual 

25 market’ means the market for health insurance 


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1 coverage offered to individuals other than in 

2 connection with a group health plan. 

3 ‘‘(B) TREATMENT OF VERY SMALL

4 GROUPS.— 

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

6 (ii), such term includes coverage offered in 

7 connection with a group health plan that 

8 has fewer than 2 participants as current 

9 employees or participants described in sec10 tion 732(d)(3) on the first day of the plan 

11 year. 

12 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

13 shall not apply in the case of health insur14 ance coverage offered in a State if such 

15 State regulates the coverage described in 

16 such clause in the same manner and to the 

17 same extent as coverage in the small group 

18 market (as defined in section 2791(e)(5) of 

19 the Public Health Service Act) is regulated 

20 by such State. 

21 ‘‘(8) PARTICIPATING EMPLOYER.—The term 

22 ‘participating employer’ means, in connection with 

23 an association health plan, any employer, if any indi24 vidual who is an employee of such employer, a part25 ner in such employer, or a self-employed individual 


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1 who is such employer (or any dependent, as defined 

2 under the terms of the plan, of such individual) is 

3 or was covered under such plan in connection with 

4 the status of such individual as such an employee, 

5 partner, or self-employed individual in relation to the 

6 plan. 

7 ‘‘(9) APPLICABLE STATE AUTHORITY.—The 

8 term ‘applicable State authority’ means, with respect 

9 to a health insurance issuer in a State, the State in10 surance commissioner or official or officials des11 ignated by the State to enforce the requirements of 

12 title XXVII of the Public Health Service Act for the 

13 State involved with respect to such issuer. 

14 ‘‘(10) QUALIFIED HEALTH ACTUARY.—The 

15 term ‘qualified health actuary’ means an individual 

16 who is a member of the American Academy of Actu17 aries with expertise in health care. 

18 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili19 ated member’ means, in connection with a sponsor— 

20 ‘‘(A) a person who is otherwise eligible to 

21 be a member of the sponsor but who elects an 

22 affiliated status with the sponsor, 

23 ‘‘(B) in the case of a sponsor with mem24 bers which consist of associations, a person who 


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1 is a member of any such association and elects 

2 an affiliated status with the sponsor, or 

3 ‘‘(C) in the case of an association health 

4 plan in existence on the date of the enactment 

5 of the Obamacare Replacement Act, a person 

6 eligible to be a member of the sponsor or one 

7 of its member associations. 

8 ‘‘(12) LARGE EMPLOYER.—The term ‘large em9 ployer’ means, in connection with a group health 

10 plan with respect to a plan year, an employer who 

11 employed an average of at least 51 employees on 

12 business days during the preceding calendar year 

13 and who employs at least 2 employees on the first 

14 day of the plan year. 

15 ‘‘(13) SMALL EMPLOYER.—The term ‘small em16 ployer’ means, in connection with a group health 

17 plan with respect to a plan year, an employer who 

18 is not a large employer. 

19 ‘‘(b) RULES OF CONSTRUCTION.— 

20 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur21 poses of determining whether a plan, fund, or pro22 gram is an employee welfare benefit plan which is an 

23 association health plan, and for purposes of applying 

24 this title in connection with such plan, fund, or proVerDate Sep 11 2014 04:43 Feb 22, 2017 Jkt 069200 PO 00000 Frm 00126 Fmt 6652 Sfmt 6201 E:\BILLS\H1072.IH H1072

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1 gram so determined to be such an employee welfare 

2 benefit plan— 

3 ‘‘(A) in the case of a partnership, the term 

4 ‘employer’ (as defined in section 3(5)) includes 

5 the partnership in relation to the partners, and 

6 the term ‘employee’ (as defined in section 3(6)) 

7 includes any partner in relation to the partner8 ship; and 

9 ‘‘(B) in the case of a self-employed indi10 vidual, the term ‘employer’ (as defined in sec11 tion 3(5)) and the term ‘employee’ (as defined 

12 in section 3(6)) shall include such individual. 

13 ‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED

14 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

15 case of any plan, fund, or program which was estab16 lished or is maintained for the purpose of providing 

17 medical care (through the purchase of insurance or 

18 otherwise) for employees (or their dependents) cov19 ered thereunder and which demonstrates to the Sec20 retary that all requirements for certification under 

21 this part would be met with respect to such plan, 

22 fund, or program if such plan, fund, or program 

23 were a group health plan, such plan, fund, or pro24 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 04:43 Feb 22, 2017 Jkt 069200 PO 00000 Frm 00141 Fmt 6652 Sfmt 6201 E:\BILLS\H1072.IH H1072

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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 

24 any applicable authority with respect to its opVerDate Sep 11 2014 04:43 Feb 22, 2017 Jkt 069200 PO 00000 Frm 00142 Fmt 6652 Sfmt 6201 E:\BILLS\H1072.IH H1072

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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. CERTAIN MEDICAL STOP-LOSS INSURANCE OB4 TAINED BY CERTAIN PLAN SPONSORS OF 

5 GROUP HEALTH PLANS NOT INCLUDED 

6 UNDER THE DEFINITION OF HEALTH INSUR7 ANCE COVERAGE. 

8 (a) PHSA.—Section 2791(b)(1) of the Public Health 

9 Service Act (42 U.S.C. 300gg–91(b)(1)) is amended by 

10 adding at the end the following new sentence: ‘‘Such term 

11 shall not include a stop loss policy obtained by a self-in12 sured health plan or a plan sponsor of a group health plan 

13 that self-insures the health risks of its plan participants 

14 to reimburse the plan or sponsor for losses that the plan 

15 or sponsor incurs in providing health or medical benefits 

16 to such plan participants in excess of a predetermined level 

17 set forth in the stop loss policy obtained by such plan or 

18 sponsor.’’. 

19 (b) ERISA.—Section 733(b)(1) of the Employee Re20 tirement Income Security Act of 1974 (29 U.S.C. 

21 1191b(b)(1)) is amended by adding at the end the fol22 lowing new sentence: ‘‘Such term shall not include a stop 

23 loss policy obtained by a self-insured health plan or a plan 

24 sponsor of a group health plan that self-insures the health 

25 risks of its plan participants to reimburse the plan or 


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1 sponsor for losses that the plan or sponsor incurs in pro2 viding health or medical benefits to such plan participants 

3 in excess of a predetermined level set forth in the stop 

4 loss policy obtained by such plan or sponsor.’’. 

5 (c) IRC.—Section 9832(b)(1)(A) of the Internal Rev6 enue Code of 1986 is amended by adding at the end the 

7 following new sentence: ‘‘Such term shall not include a 

8 stop loss policy obtained by a self-insured health plan or 

9 a plan sponsor of a group health plan that self-insures 

10 the health risks of its plan participants to reimburse the 

11 plan or sponsor for losses that the plan or sponsor incurs 

12 in providing health or medical benefits to such plan par13 ticipants in excess of a predetermined level set forth in 

14 the stop loss policy obtained by such plan or sponsor.’’. 

15 SEC. 602. RESTORING THE APPLICATION OF ANTITRUST 

16 LAWS TO HEALTH SECTOR INSURERS. 

17 (a) AMENDMENT TO MCCARRAN-FERGUSON ACT.— 

18 Section 3 of the Act of March 9, 1945 (15 U.S.C. 1013), 

19 commonly known as the McCarran-Ferguson Act, is 

20 amended by adding at the end the following: 

21 ‘‘(c)(1) Nothing contained in this Act shall modify, 

22 impair, or supersede the operation of any of the antitrust 

23 laws with respect to the business of health insurance (in24 cluding the business of dental insurance). For purposes 

25 of the preceding sentence, the term ‘antitrust laws’ has 


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1 the meaning given it in subsection (a) of the first section 

2 of the Clayton Act, except that such term includes section 

3 5 of the Federal Trade Commission Act to the extent that 

4 such section 5 applies to unfair methods of competition. 

5 ‘‘(2) For purposes of paragraph (1), the term 

6 ‘business of health insurance (including the business 

7 of dental insurance)’ does not include— 

8 ‘‘(A) the business of life insurance (includ9 ing annuities); or 

10 ‘‘(B) the business of property or casualty 

11 insurance, including but not limited to, any in12 surance or benefits defined as ‘excepted bene13 fits’ under paragraph (1), subparagraph (B) or 

14 (C) of paragraph (2), or paragraph (3) of sec15 tion 9832(c) of the Internal Revenue Code of 

16 1986 (26 U.S.C. 9832(c)) whether offered sepa17 rately or in combination with insurance or bene18 fits described in paragraph (2)(A) of such sec19 tion.’’. 

20 (b) RELATED PROVISION.—For purposes of section 

21 5 of the Federal Trade Commission Act (15 U.S.C. 45) 

22 to the extent such section applies to unfair methods of 

23 competition, section 3(c) of the McCarran-Ferguson Act 

24 shall apply with respect to the business of health insurance 

25 without regard to whether such business is carried on for 


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1 profit, notwithstanding the definition of ‘‘Corporation’’ 

2 contained in section 4 of the Federal Trade Commission 

3 Act. 

Æ 


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