I 

111TH CONGRESS 

1ST SESSION H. R. 3713 

To provide bipartisan solutions to lower health costs, increase access to 

affordable coverage, and give patients more choices and control. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 1, 2009 

Mr. ROGERS of Michigan (for himself, Mrs. BLACKBURN, Mr. SHIMKUS, Mr. 

PITTS, Mrs. MYRICK, Mrs. BONO MACK, Mr. BUYER, Mr. UPTON, and 

Mr. HALL of Texas) 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 Labor, Appropriations, 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 provide bipartisan solutions to lower health costs, increase 

access to affordable coverage, and give patients more 

choices and control. 

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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘American Health Care Solutions Act of 2009’’. 

6 (b) TABLE OF CONTENTS.—The table of contents of 

7 this Act is as follows: 


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Sec. 1. Short title; table of contents. 

Sec. 2. Rule of construction regarding prohibition on authority to ration health 

care. 

TITLE I—EXPANDING ACCESS TO COVERAGE 

Subtitle A—Protecting Affordability Through Reinsurance or High Risk 

Pooling 

Sec. 101. Ensuring affordability for all through special pooling of cost for those 

with pre-existing conditions and many health care needs. 

Subtitle B—Individual Membership Associations 

Sec. 111. Expansion of access and choice of health insurance coverage through 

individual membership associations (IMAs). 

Subtitle C—Association Health Plans 

Sec. 121. Rules governing association health plans. 

Sec. 122. Clarification of treatment of single employer arrangements. 

Sec. 123. Enforcement provisions relating to association health plans. 

Sec. 124. Cooperation between Federal and State authorities. 

Sec. 125. Effective date and transitional and other rules. 

Subtitle D—Purchasing Insurance Across State Lines 

Sec. 131. Cooperative governing of individual health insurance coverage. 

Sec. 132. Severability. 

Subtitle E—Protecting Patients From Rescissions 

Sec. 141. Opportunity for independent, external third party reviews of certain 

nonrenewals and discontinuations, including rescissions, of individual health insurance coverage. 

TITLE II—PROMOTING PATIENT CHOICE 

Subtitle A—Credit for Small Employers Adopting Auto-Enrollment and 

Defined Contribution Options 

Sec. 201. Credit for small employers adopting auto-enrollment and defined contribution options. 

Subtitle B—Tax Incentives for Long-Term Care Insurance 

Sec. 211. Treatment of premiums on qualified long-term care insurance contracts. 

Sec. 212. Credit for taxpayers with long-term care needs. 

Sec. 213. Additional consumer protections for long-term care insurance. 

Subtitle C—Comparative Effectiveness Research 

Sec. 221. Prohibition on Certain Uses of Data Obtained from Comparative Effectiveness Research; Accounting for Personalized Medicine 

and Differences in Patient Treatment Response. 

Subtitle D—Programs of Health Promotion or Disease Prevention 

Sec. 231. Programs of health promotion or disease prevention. 


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TITLE III—STRENGTHENING SAFETY NET PROGRAMS 

Subtitle A—Beneficiary Choice Under Medicaid and SCHIP 

Sec. 301. Easing administrative barriers to State cooperation with employersponsored insurance coverage. 

Sec. 302. Improving beneficiary choice in SCHIP. 

Sec. 303. Application to Medicaid. 

Sec. 304. Expansion of health opportunity account program. 

Sec. 305. Verification requirements to prevent illegal aliens from receiving Medicaid benefits. 

Subtitle B—Community Health Centers 

Sec. 311. Increased funding. 

TITLE IV—EXPANDING HEALTH SAVINGS ACCOUNTS 

Sec. 401. Allow both spouses to make catch-up contributions to the same HSA 

account. 

Sec. 402. Provisions relating to Medicare. 

Sec. 403. Individuals eligible for veterans benefits for a service-connected disability. 

Sec. 404. Individuals eligible for Indian Health Service assistance. 

Sec. 405. FSA and HRA termination to fund HSAS. 

Sec. 406. Purchase of health insurance from HSA account. 

Sec. 407. Special rule for certain medical expenses incurred before establishment of account. 

Sec. 408. Preventive care prescription drug clarification. 

Sec. 409. Qualified medical expenses. 

TITLE V—MEDICAL LIABILITY REFORM 

Subtitle A—Medical Liability 

Sec. 501. Encouraging speedy resolution of claims. 

Sec. 502. Compensating patient injury. 

Sec. 503. Maximizing patient recovery. 

Sec. 504. Additional health benefits. 

Sec. 505. Punitive damages. 

Sec. 506. Authorization of payment of future damages to claimants in 

HEALTH care lawsuits. 

Sec. 507. Definitions. 

Sec. 508. Effect on other laws. 

Sec. 509. State flexibility and protection of states’ rights. 

Sec. 510. Applicability; effective date. 

Sec. 511. Sense of Congress. 

Subtitle B—Liability Protection for Community Health Center Volunteers 

Sec. 521. Health centers under Public Health Service Act; liability protections 

for volunteer practitioners. 

TITLE VI—MISCELLANEOUS 

Subtitle A—Fighting Fraud and Abuse 

Sec. 601. Provide adequate funding to HHS OIG and HCFAC. 


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Sec. 602. Increased civil money penalties and criminal fines for Medicare fraud 

and abuse. 

Sec. 603. Increased sentences for felonies involving Medicare fraud and abuse. 

Sec. 604. Illegal distribution of a Medicare or Medicaid beneficiary identification or provider number. 

Sec. 605. Use of technology for real-time data review. 

Subtitle B—State Transparency Plan Portal 

Sec. 611. Providing information on health coverage options and health care 

providers. 

Sec. 612. Establishment of performance-based quality measures. 

Subtitle C—Medicare Accountable Care Organization Demonstration Program 

Sec. 621. Medicare Accountable Care Organization demonstration program. 

Subtitle D—Repeal of Unused Stimulus Funds 

Sec. 631. Rescission and repeal in ARRA. 

1 SEC. 2. RULE OF CONSTRUCTION REGARDING PROHIBI2 TION ON AUTHORITY TO RATION HEALTH 

3 CARE. 

4 Nothing in this Act may be construed to authorize 

5 the Federal Government to ration health care for the 

6 American people. 

7 TITLE I—EXPANDING ACCESS TO 

8 COVERAGE 

9 Subtitle A—Protecting Afford10 ability Through Reinsurance or 

11 High Risk Pooling 

12 SEC. 101. ENSURING AFFORDABILITY FOR ALL THROUGH 

13 SPECIAL POOLING OF COST FOR THOSE WITH 

14 PRE-EXISTING CONDITIONS AND MANY 

15 HEALTH CARE NEEDS. 

16 (a) STATE REQUIREMENT.— 


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1 (1) IN GENERAL.—Not later than 2 years after 

2 the date of the enactment of this Act, each State 

3 shall ensure an adequate financial backstop to miti4 gate the cost of high risk individuals in the State 

5 through— 

6 (A) a qualified State reinsurance program 

7 described in subsection (b); or 

8 (B) a qualifying State high risk pool de9 scribed in subsection (c)(1); and 

10 (C) subject to paragraph (4), contribute to 

11 the ongoing stability of the arrangement 

12 through State assessments or allocation of 

13 other State funds that are not otherwise used 

14 on State health care programs. 

15 (2) PREFERENCE.—Beginning 3 years after the 

16 date of the enactment of this Act, the Secretary, in 

17 awarding any competitive grant and for which only 

18 States are eligible to apply, shall give preference to 

19 a State with a program that meets the requirements 

20 of paragraph (1). 

21 (3) RELATION TO CURRENT QUALIFIED HIGH

22 RISK POOL PROGRAM OPERATING A QUALIFIED HIGH

23 RISK POOL.—In the case of a State that is operating 

24 a current section 2745 qualified high risk pool as of 

25 the date of the enactment of this Act— 


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1 (A) as of the date that is 2 years after the 

2 date of the enactment of this Act, such a pool 

3 shall not be treated as a qualified high risk pool 

4 under section 2745 of the Public Health Service 

5 Act (42 U.S.C. 300gg–45) unless the pool is a 

6 qualifying State high risk pool described in sub7 section (c)(1); and 

8 (B) current funding sources may be used 

9 to transition from operation of such a pool to 

10 operation of a qualified State reinsurance pro11 gram described in subsection (b). 

12 (4) APPLICATION OF FUNDS.—If the program 

13 or pool operated under paragraph (1)(A) is in sound 

14 financial condition as demonstrated by audited fi15 nancial statements and actuarial certification and is 

16 approved as an appropriate financial backstop by the 

17 State Insurance Commissioner involved, the require18 ment of paragraph (1)(C) shall be waived. 

19 (b) QUALIFIED STATE REINSURANCE PROGRAM.— 

20 (1) FORM OF PROGRAM.—A qualified State re21 insurance program may provide reinsurance— 

22 (A) on a prospective or retrospective basis; 

23 and 

24 (B) on a basis that protects health insur25 ance issuers against the annual aggregate 


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1 spending of their enrollees as well as purchase 

2 protection against individual catastrophic costs. 

3 (2) SATISFACTION OF HIPAA REQUIREMENT.— 

4 A qualified State reinsurance program shall be 

5 deemed, for purposes of section 2745 of the Public 

6 Health Service Act (42 U.S.C. 300gg–45), to be a 

7 qualified high-risk pool under such section. 

8 (c) QUALIFYING STATE HIGH RISK POOL.— 

9 (1) IN GENERAL.—A qualifying State high risk 

10 pool described in this subsection means a current 

11 section 2745 qualified high risk pool that meets the 

12 following requirements: 

13 (A) The pool offers assistance to low-in14 come individuals as applicable and may incor15 porate applicable Federal and State programs 

16 for eligible individuals to meet this purpose. 

17 (B) The pool provides a variety of coverage 

18 options, one of which must be a high deductible 

19 health plan that may be coupled with a health 

20 savings account. 

21 (C) The pool is funded with a stable fund22 ing source that is not solely dependent on an 

23 appropriation from a State legislature. 

24 (D) The pool eliminates waiting lists and 

25 pre-existing conditions exclusionary periods so 


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1 that all eligible residents who are seeking cov2 erage through the pool can receive coverage 

3 through the pool. 

4 (E) The pool allows for coverage of individ5 uals who, but for the 24-month disability wait6 ing period under section 226(b) of the Social 

7 Security Act, would be eligible for Medicare 

8 during the period of such waiting period. 

9 (F) The pool does not charge participants 

10 more than 150 percent of the average premium 

11 for individual market coverage in that State. 

12 (G) The pool conducts education and out13 reach initiatives so that residents and brokers 

14 understand that the pool is available to eligible 

15 residents. 

16 (H) The pool does not impose lifetime or 

17 annual limits on benefits. 

18 (2) RELATION TO SECTION 2745.—As of the 

19 date that is 2 years after the date of the enactment 

20 of this Act, a pool shall not qualify as a qualified 

21 high risk pool under section 2745 of the Public 

22 Health Service Act (42 U.S.C. 300gg–45) unless the 

23 pool is a qualifying State high risk pool described in 

24 paragraph (1). 


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1 (d) WAIVERS.—In order to accommodate new and in2 novative programs, the Secretary may waive such require3 ments of this section for qualified State reinsurance pro4 grams and for qualifying State high risk pools as the Sec5 retary deems appropriate. 

6 (e) FUNDING.—In addition to any other amounts ap7 propriated, there are authorized to be appropriated to 

8 carry out section 2745 of the Public Health Service Act 

9 (42 U.S.C. 300gg–45) (including through a program or 

10 pool described in subsection (a)(1)), $20,000,000,000 for 

11 Fiscal Years 2010 through 2019 to carry out this section. 

12 (f) DEFINITIONS.—In this section: 

13 (1) CURRENT SECTION 2745 QUALIFIED HIGH

14 RISK POOL.—The term ‘‘current section 2745 quali15 fied high risk pool’’ has the meaning given the term 

16 ‘‘qualified high risk pool’’ under section 2745(g) of 

17 the Public Health Service Act (42 U.S.C. 300gg– 

18 45(g)) as in effect as of the date of the enactment 

19 of this Act. 

20 (2) HEALTH INSURANCE COVERAGE.—The term 

21 ‘‘health insurance coverage’’ has the meaning given 

22 such term in section 2791 of the Public Health 

23 Service Act (42 U.S.C. 300gg–91). 

24 (3) HEALTH INSURANCE ISSUER.—The term 

25 ‘‘health insurance issuer’’ has the meaning given 


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1 such term in section 2791 of the Public Health 

2 Service Act (42 U.S.C. 300gg–91). 

3 (4) QUALIFIED STATE REINSURANCE PRO4 GRAM.—The term ‘‘qualified State reinsurance pro5 gram’’ means a program operated by a State or a 

6 State authorized program that provides reinsurance 

7 for health insurance coverage offered in the indi8 vidual or the small group market in accordance with 

9 the model for such a program established (as of the 

10 date of the enactment of this Act). 

11 (5) SECRETARY.—The term ‘‘Secretary’’ means 

12 the Secretary of Health and Human Services. 

13 (6) STATE.—The term ‘‘State’’ has the mean14 ing given such term for purposes of title XIX of the 

15 Social Security Act. 

16 Subtitle B—Individual Membership 

17 Associations 

18 SEC. 111. EXPANSION OF ACCESS AND CHOICE OF HEALTH 

19 INSURANCE COVERAGE THROUGH INDI20 VIDUAL MEMBERSHIP ASSOCIATIONS (IMAS). 

21 The Public Health Service Act (42 U.S.C. 201 et 

22 seq.) is amended by adding at the end the following new 

23 title: 


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1 ‘‘TITLE XXXI—INDIVIDUAL 

2 MEMBERSHIP ASSOCIATIONS 

3 ‘‘SEC. 3101. DEFINITION OF INDIVIDUAL MEMBERSHIP AS4 SOCIATION (IMA). 

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

6 terms ‘individual membership association’ and ‘IMA’ 

7 mean a legal entity that meets the following requirements: 

8 ‘‘(1) ORGANIZATION.—The IMA is an organiza9 tion operated under the direction of an association 

10 (as defined in section 3104(1)). 

11 ‘‘(2) OFFERING HEALTH BENEFITS COV12 ERAGE.— 

13 ‘‘(A) DIFFERENT GROUPS.—The IMA, in 

14 conjunction with those health insurance issuers 

15 that offer health benefits coverage through the 

16 IMA, makes available health benefits coverage 

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

18 members of the IMA and the dependents of 

19 such members in the manner described in sub20 section (c)(2) at rates that are established by 

21 the health insurance issuer on a policy or prod22 uct specific basis and that may vary only as 

23 permissible under State law. 

24 ‘‘(B) NONDISCRIMINATION IN COVERAGE

25 OFFERED.— 


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

2 (ii), the IMA may not offer health benefits 

3 coverage to a member of an IMA unless 

4 the same coverage is offered to all such 

5 members of the IMA. 

6 ‘‘(ii) CONSTRUCTION.—Nothing in 

7 this title shall be construed as requiring or 

8 permitting a health insurance issuer to 

9 provide coverage outside the service area of 

10 the issuer, as approved under State law, or 

11 requiring a health insurance issuer from 

12 excluding or limiting the coverage on any 

13 individual, subject to the requirement of 

14 section 2741. 

15 ‘‘(C) NO FINANCIAL UNDERWRITING.—The 

16 IMA provides health benefits coverage only 

17 through contracts with health insurance issuers 

18 and does not assume insurance risk with re19 spect to such coverage. 

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

21 shall be construed as preventing the establishment 

22 and operation of more than one IMA in a geographic 

23 area or as limiting the number of IMAs that may 

24 operate in any area. 


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1 ‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES

2 TO PURCHASERS.— 

3 ‘‘(A) IN GENERAL.—The IMA may provide 

4 administrative services for members. Such serv5 ices may include accounting, billing, and enroll6 ment information. 

7 ‘‘(B) CONSTRUCTION.—Nothing in this 

8 subsection shall be construed as preventing an 

9 IMA from serving as an administrative service 

10 organization to any entity. 

11 ‘‘(5) FILING INFORMATION.—The IMA files 

12 with the Secretary information that demonstrates 

13 the IMA’s compliance with the applicable require14 ments of this title. 

15 ‘‘(b) HEALTH BENEFITS COVERAGE REQUIRE16 MENTS.— 

17 ‘‘(1) COMPLIANCE WITH CONSUMER PROTEC18 TION REQUIREMENTS.—Any health benefits coverage 

19 offered through an IMA shall— 

20 ‘‘(A) be underwritten by a health insurance 

21 issuer that— 

22 ‘‘(i) is licensed (or otherwise regu23 lated) under State law, and 


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1 ‘‘(ii) meets all applicable State stand2 ards relating to consumer protection, sub3 ject to section 3002(b), and 

4 ‘‘(B) subject to paragraph (2), be approved 

5 or otherwise permitted to be offered under 

6 State law. 

7 ‘‘(2) EXAMPLES OF TYPES OF COVERAGE.—The 

8 benefits coverage made available through an IMA 

9 may include, but is not limited to, any of the fol10 lowing if it meets the other applicable requirements 

11 of this title: 

12 ‘‘(A) Coverage through a health mainte13 nance organization. 

14 ‘‘(B) Coverage in connection with a pre15 ferred provider organization. 

16 ‘‘(C) Coverage in connection with a li17 censed provider-sponsored organization. 

18 ‘‘(D) Indemnity coverage through an insur19 ance company. 

20 ‘‘(E) Coverage offered in connection with a 

21 contribution into a medical savings account, 

22 health savings account, or flexible spending ac23 count. 

24 ‘‘(F) Coverage that includes a point-of25 service option. 


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1 ‘‘(G) Any combination of such types of 

2 coverage. 

3 ‘‘(3) 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 IMA 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 IMA 

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 who is a member of an IMA, the in20 dividual may enroll for health benefits coverage 

21 (including coverage for dependents of such indi22 vidual) offered by a health insurance issuer 

23 through the IMA. 

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

25 in this paragraph shall preclude an IMA from 


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1 establishing rules of enrollment and reenroll2 ment of members. Such rules shall be applied 

3 consistently to all members within the IMA and 

4 shall not be based in any manner on health sta5 tus-related factors. 

6 ‘‘(2) HEALTH INSURANCE ISSUERS.—The con7 tract between an IMA and a health insurance issuer 

8 shall provide, with respect to a member enrolled with 

9 health benefits coverage offered by the issuer 

10 through the IMA, for the payment of the premiums 

11 collected by the issuer. 

12 ‘‘SEC. 3102. APPLICATION OF CERTAIN LAWS AND REQUIRE13 MENTS. 

14 ‘‘State laws insofar as they relate to any of the fol15 lowing are superseded and shall not apply to health bene16 fits coverage made available through an IMA: 

17 ‘‘(1) Benefit requirements for health benefits 

18 coverage offered through an IMA, including (but not 

19 limited to) requirements relating to coverage of spe20 cific providers, specific services or conditions, or the 

21 amount, duration, or scope of benefits, but not in22 cluding requirements to the extent required to imple23 ment title XXVII or other Federal law and to the 

24 extent the requirement prohibits an exclusion of a 

25 specific disease from such coverage. 


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1 ‘‘(2) Any other requirements (including limita2 tions on compensation arrangements) that, directly 

3 or indirectly, preclude (or have the effect of pre4 cluding) the offering of such coverage through an 

5 IMA, if the IMA meets the requirements of this 

6 title. 

7 Any State law or regulation relating to the composition 

8 or organization of an IMA is preempted to the extent the 

9 law or regulation is inconsistent with the provisions of this 

10 title. 

11 ‘‘SEC. 3103. ADMINISTRATION. 

12 ‘‘(a) IN GENERAL.—The Secretary shall administer 

13 this title and is authorized to issue such regulations as 

14 may be required to carry out this title. Such regulations 

15 shall be subject to Congressional review under the provi16 sions of chapter 8 of title 5, United States Code. The Sec17 retary shall incorporate the process of ‘deemed file and 

18 use’ with respect to the information filed under section 

19 3001(a)(5)(A) and shall determine whether information 

20 filed by an IMA demonstrates compliance with the applica21 ble requirements of this title. The Secretary shall exercise 

22 authority under this title in a manner that fosters and 

23 promotes the development of IMAs in order to improve 

24 access to health care coverage and services. 


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1 ‘‘(b) PERIODIC REPORTS.—The Secretary shall sub2 mit to Congress a report every 30 months, during the 10- 

3 year period beginning on the effective date of the rules 

4 promulgated by the Secretary to carry out this title, on 

5 the effectiveness of this title in promoting coverage of un6 insured individuals. The Secretary may provide for the 

7 production of such reports through one or more contracts 

8 with appropriate private entities. 

9 ‘‘SEC. 3104. DEFINITIONS. 

10 ‘‘For purposes of this title: 

11 ‘‘(1) ASSOCIATION.—The term ‘association’ 

12 means, with respect to health insurance coverage of13 fered in a State, an association which— 

14 ‘‘(A) has been actively in existence for at 

15 least 5 years; 

16 ‘‘(B) has been formed and maintained in 

17 good faith for purposes other than obtaining in18 surance; 

19 ‘‘(C) does not condition membership in the 

20 association on any health status-related factor 

21 relating to an individual (including an employee 

22 of an employer or a dependent of an employee); 

23 and 

24 ‘‘(D) does not make health insurance cov25 erage offered through the association available 


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1 other than in connection with a member of the 

2 association. 

3 ‘‘(2) DEPENDENT.—The term ‘dependent’, as 

4 applied to health insurance coverage offered by a 

5 health insurance issuer licensed (or otherwise regu6 lated) in a State, shall have the meaning applied to 

7 such term with respect to such coverage under the 

8 laws of the State relating to such coverage and such 

9 an issuer. Such term may include the spouse and 

10 children of the individual involved. 

11 ‘‘(3) HEALTH BENEFITS COVERAGE.—The term 

12 ‘health benefits coverage’ has the meaning given the 

13 term health insurance coverage in section 

14 2791(b)(1). 

15 ‘‘(4) HEALTH INSURANCE ISSUER.—The term 

16 ‘health insurance issuer’ has the meaning given such 

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

18 ‘‘(5) HEALTH STATUS-RELATED FACTOR.—The 

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

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

21 ‘‘(6) IMA; INDIVIDUAL MEMBERSHIP ASSOCIA22 TION.—The terms ‘IMA’ and ‘individual membership 

23 association’ are defined in section 3101(a). 

24 ‘‘(7) MEMBER.—The term ‘member’ means, 

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1 ber of the association to which the IMA is offering 

2 coverage.’’. 

3 Subtitle C—Association Health 

4 Plans 

5 SEC. 121. RULES GOVERNING ASSOCIATION HEALTH 

6 PLANS. 

7 (a) IN GENERAL.—Subtitle B of title I of the Em8 ployee Retirement Income Security Act of 1974 is amend9 ed by adding after part 7 the following new part: 

10 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

11 HEALTH PLANS 

12 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

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

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

15 whose sponsor is (or is deemed under this part to be) de16 scribed in subsection (b). 

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

18 plan is described in this subsection if such sponsor— 

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

20 with a constitution and bylaws specifically stating its 

21 purpose and providing for periodic meetings on at 

22 least an annual basis, as a bona fide trade associa23 tion, a bona fide industry association (including a 

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1 sional association, or a bona fide chamber of com2 merce (or similar bona fide business association, in3 cluding a corporation or similar organization that 

4 operates on a cooperative basis (within the meaning 

5 of section 1381 of the Internal Revenue Code of 

6 1986)), for substantial purposes other than that of 

7 obtaining or providing medical care; 

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

9 receives the active support of its members and re10 quires for membership payment on a periodic basis 

11 of dues or payments necessary to maintain eligibility 

12 for membership in the sponsor; and 

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

14 or payments, or coverage under the plan on the 

15 basis of health status-related factors with respect to 

16 the employees of its members (or affiliated mem17 bers), or the dependents of such employees, and does 

18 not condition such dues or payments on the basis of 

19 group health plan participation. 

20 Any sponsor consisting of an association of entities which 

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

22 shall be deemed to be a sponsor described in this sub23 section. 


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1 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

2 PLANS. 

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

4 prescribe by regulation a procedure under which, subject 

5 to subsection (b), the applicable authority shall certify as6 sociation health plans which apply for certification as 

7 meeting the requirements of this part. 

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

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

10 health plan that provides at least one benefit option which 

11 does not consist of health insurance coverage, the applica12 ble authority shall certify such plan as meeting the re13 quirements of this part only if the applicable authority is 

14 satisfied that the applicable requirements of this part are 

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

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

17 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

19 certification under this part is in effect shall meet the ap20 plicable requirements of this part, effective on the date 

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

22 is to commence operations). 

23 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI24 CATION.—The applicable authority may provide by regula25 tion for continued certification of association health plans 

26 under this part. 


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1 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

2 PLANS.—The applicable authority shall establish a class 

3 certification procedure for association health plans under 

4 which all benefits consist of health insurance coverage. 

5 Under such procedure, the applicable authority shall pro6 vide for the granting of certification under this part to 

7 the plans in each class of such association health plans 

8 upon appropriate filing under such procedure in connec9 tion with plans in such class and payment of the pre10 scribed fee under section 807(a). 

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

12 HEALTH PLANS.—An association health plan which offers 

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

14 insurance coverage may be certified under this part only 

15 if such plan consists of any of the following: 

16 ‘‘(1) A plan which offered such coverage on the 

17 date of the enactment of the Small Business Health 

18 Fairness Act of 2009. 

19 ‘‘(2) A plan under which the sponsor does not 

20 restrict membership to one or more trades and busi21 nesses or industries and whose eligible participating 

22 employers represent a broad cross-section of trades 

23 and businesses or industries. 

24 ‘‘(3) A plan whose eligible participating employ25 ers represent one or more trades or businesses, or 


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1 one or more industries, consisting of any of the fol2 lowing: agriculture; equipment and automobile deal3 erships; barbering and cosmetology; certified public 

4 accounting practices; child care; construction; dance, 

5 theatrical and orchestra productions; disinfecting 

6 and pest control; financial services; fishing; food 

7 service establishments; hospitals; labor organiza8 tions; logging; manufacturing (metals); mining; med9 ical and dental practices; medical laboratories; pro10 fessional consulting services; sanitary services; trans11 portation (local and freight); warehousing; whole12 saling/distributing; or any other trade or business or 

13 industry which has been indicated as having average 

14 or above-average risk or health claims experience by 

15 reason of State rate filings, denials of coverage, pro16 posed premium rate levels, or other means dem17 onstrated by such plan in accordance with regula18 tions. 

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

20 BOARDS OF TRUSTEES. 

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

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

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

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


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

2 the application for certification under this part. 

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

4 this subsection are met with respect to an association 

5 health plan if the following requirements are met: 

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

7 pursuant to a trust agreement, by a board of trust8 ees which has complete fiscal control over the plan 

9 and which is responsible for all operations of the 

10 plan. 

11 ‘‘(2) RULES OF OPERATION AND FINANCIAL

12 CONTROLS.—The board of trustees has in effect 

13 rules of operation and financial controls, based on a 

14 3-year plan of operation, adequate to carry out the 

15 terms of the plan and to meet all requirements of 

16 this title applicable to the plan. 

17 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

18 PARTICIPATING EMPLOYERS AND TO CONTRAC19 TORS.— 

20 ‘‘(A) BOARD MEMBERSHIP.— 

21 ‘‘(i) IN GENERAL.—Except as pro22 vided in clauses (ii) and (iii), the members 

23 of the board of trustees are individuals se24 lected from individuals who are the owners, 

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1 ticipating employers or who are partners in 

2 the participating employers and actively 

3 participate in the business. 

4 ‘‘(ii) LIMITATION.— 

5 ‘‘(I) GENERAL RULE.—Except as 

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

7 no such member is an owner, officer, 

8 director, or employee of, or partner in, 

9 a contract administrator or other 

10 service provider to the plan. 

11 ‘‘(II) LIMITED EXCEPTION FOR

12 PROVIDERS OF SERVICES SOLELY ON

13 BEHALF OF THE SPONSOR.—Officers 

14 or employees of a sponsor which is a 

15 service provider (other than a contract 

16 administrator) to the plan may be 

17 members of the board if they con18 stitute not more than 25 percent of 

19 the membership of the board and they 

20 do not provide services to the plan 

21 other than on behalf of the sponsor. 

22 ‘‘(III) TREATMENT OF PRO23 VIDERS OF MEDICAL CARE.—In the 

24 case of a sponsor which is an associa25 tion whose membership consists priVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 marily of providers of medical care, 

2 subclause (I) shall not apply in the 

3 case of any service provider described 

4 in subclause (I) who is a provider of 

5 medical care under the plan. 

6 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

7 Clause (i) shall not apply to an association 

8 health plan which is in existence on the 

9 date of the enactment of the Small Busi10 ness Health Fairness Act of 2009. 

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

12 sole authority under the plan to approve appli13 cations for participation in the plan and to con14 tract with a service provider to administer the 

15 day-to-day affairs of the plan. 

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

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

18 maintained by a franchiser for a franchise network con19 sisting of its franchisees— 

20 ‘‘(1) the requirements of subsection (a) and sec21 tion 801(a) shall be deemed met if such require22 ments would otherwise be met if the franchiser were 

23 deemed to be the sponsor referred to in section 

24 801(b), such network were deemed to be an associa25 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 Small Busi16 ness Health Fairness Act of 2009, an affiliated member 

17 of the sponsor of the plan may be offered coverage under 

18 the plan as a participating 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 (42 

2 U.S.C. 300gg–11) are 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 (42 U.S.C. 300gg–91(d)(3))), 

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 actu21 ary, 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 Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00036 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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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 actuary. The applicable authority 

8 may by regulation provide for adjustments 

9 in the amount of such insurance in speci10 fied circumstances in which the plan spe11 cifically provides for and maintains re12 serves 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/ 

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1 ommend, 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 

8 on the books of the Treasury a fund to be 

9 known as the ‘Association Health Plan Fund’. 

10 The Fund shall be available for making pay11 ments pursuant to paragraph (2). The Fund 

12 shall be credited with payments received pursu13 ant to paragraph (1)(A), penalties received pur14 suant to paragraph (1)(B); and earnings on in15 vestments of amounts of the Fund under sub16 paragraph (B). 

17 ‘‘(B) INVESTMENT.—Whenever the Sec18 retary determines that the moneys of the fund 

19 are in excess of current needs, the Secretary 

20 may request the investment of such amounts as 

21 the Secretary determines advisable by the Sec22 retary of the Treasury in obligations issued or 

23 guaranteed by the United States. 

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

25 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 

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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 Small Business Health 

7 Fairness Act of 2009, the applicable authority shall 

8 establish a Solvency Standards Working Group. In 

9 prescribing the initial regulations under this section, 

10 the applicable authority shall take into account the 

11 recommendations 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 Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00047 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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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 actuary, that all applicable require10 ments of section 806 are or will be met in ac11 cordance with regulations which the applicable 

12 authority shall prescribe. 

13 ‘‘(B) ADEQUACY OF CONTRIBUTION

14 RATES.—A statement of actuarial opinion, 

15 signed by a qualified actuary, which sets forth 

16 a description of the extent to which contribution 

17 rates are adequate to provide for the payment 

18 of all obligations and the maintenance of re19 quired 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 actuary, 

6 which sets forth the current value of the assets 

7 and liabilities accumulated under the plan and 

8 a projection of the assets, liabilities, income, 

9 and expenses of the plan for the 12-month pe10 riod referred to in subparagraph (B). The in11 come statement shall identify separately the 

12 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)(A), shall 


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1 be filed with the applicable authority not later than 90 

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

3 as may be prescribed by the applicable authority). The ap4 plicable authority may require by regulation such interim 

5 reports as it considers appropriate. 

6 ‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The 

7 board of trustees of each association health plan which 

8 provides benefits options in addition to health insurance 

9 coverage and which is applying for certification under this 

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

11 of all participants and beneficiaries, a qualified actuary 

12 who shall be responsible for the preparation of the mate13 rials comprising information necessary to be submitted by 

14 a qualified actuary under this part. The qualified actuary 

15 shall utilize such assumptions and techniques as are nec16 essary to enable such actuary to form an opinion as to 

17 whether the contents of the matters reported under this 

18 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. 

24 The opinion by the qualified actuary shall be made with 

25 respect to, and shall be made a part of, the annual report. 


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1 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER2 MINATION. 

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

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

5 may terminate (upon or at any time after cessation of ac6 cruals in benefit liabilities) only if the board of trustees, 

7 not less than 60 days before the proposed termination 

8 date— 

9 ‘‘(1) provides to the participants and bene10 ficiaries a written notice of intent to terminate stat11 ing that such termination is intended and the pro12 posed termination date; 

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

14 of the plan in connection with such termination in 

15 a manner which will result in timely payment of all 

16 benefits for which the plan is obligated; and 

17 ‘‘(3) submits such plan in writing to the appli18 cable authority. 

19 Actions required under this section shall be taken in such 

20 form and manner as may be prescribed by the applicable 

21 authority by regulation. 

22 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI23 NATION. 

24 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE25 SERVES.—An association health plan which is certified 

26 under this part and which provides benefits other than 


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1 health insurance coverage shall continue to meet the re2 quirements of section 806, irrespective of whether such 

3 certification continues in effect. The board of trustees of 

4 such plan shall determine quarterly whether the require5 ments of section 806 are met. In any case in which the 

6 board determines that there is reason to believe that there 

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

8 applicable authority makes such a determination and so 

9 notifies the board, the board shall immediately notify the 

10 qualified actuary engaged by the plan, and such actuary 

11 shall, not later than the end of the next following month, 

12 make such recommendations to the board for corrective 

13 action as the actuary determines necessary to ensure com14 pliance with section 806. Not later than 30 days after re15 ceiving from the actuary recommendations for corrective 

16 actions, the board shall notify the applicable authority (in 

17 such form and manner as the applicable authority may 

18 prescribe by regulation) of such recommendations of the 

19 actuary for corrective action, together with a description 

20 of the actions (if any) that the board has taken or plans 

21 to take in response to such recommendations. The board 

22 shall thereafter report to the applicable authority, in such 

23 form and frequency as the applicable authority may speci24 fy to the board, regarding corrective action taken by the 

25 board until the requirements of section 806 are met. 


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1 ‘‘(b) MANDATORY TERMINATION.—In any case in 

2 which— 

3 ‘‘(1) the applicable authority has been notified 

4 under subsection (a) (or by an issuer of excess/stop 

5 loss insurance or indemnity insurance pursuant to 

6 section 806(a)) of a failure of an association health 

7 plan which is or has been certified under this part 

8 and is described in section 806(a)(2) to meet the re9 quirements of section 806 and has not been notified 

10 by the board of trustees of the plan that corrective 

11 action has restored compliance with such require12 ments; and 

13 ‘‘(2) the applicable authority determines that 

14 there is a reasonable expectation that the plan will 

15 continue to fail to meet the requirements of section 

16 806, 

17 the board of trustees of the plan shall, at the direction 

18 of the applicable authority, terminate the plan and, in the 

19 course of the termination, take such actions as the appli20 cable authority may require, including satisfying any 

21 claims referred to in section 806(a)(2)(B)(iii) and recov22 ering for the plan any liability under subsection 

23 (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 

24 that the affairs of the plan will be, to the maximum extent 


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1 possible, wound up in a manner which will result in timely 

2 provision of all benefits for which the plan is obligated. 

3 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL4 VENT ASSOCIATION HEALTH PLANS PRO5 VIDING HEALTH BENEFITS IN ADDITION TO 

6 HEALTH INSURANCE COVERAGE. 

7 ‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR

8 INSOLVENT PLANS.—Whenever the Secretary determines 

9 that an association health plan which is or has been cer10 tified under this part and which is described in section 

11 806(a)(2) will be unable to provide benefits when due or 

12 is otherwise in a financially hazardous condition, as shall 

13 be defined by the Secretary by regulation, the Secretary 

14 shall, upon notice to the plan, apply to the appropriate 

15 United States district court for appointment of the Sec16 retary as trustee to administer the plan for the duration 

17 of the insolvency. The plan may appear as a party and 

18 other interested persons may intervene in the proceedings 

19 at the discretion of the court. The court shall appoint such 

20 Secretary trustee if the court determines that the trustee21 ship is necessary to protect the interests of the partici22 pants and beneficiaries or providers of medical care or to 

23 avoid any unreasonable deterioration of the financial con24 dition of the plan. The trusteeship of such Secretary shall 

25 continue until the conditions described in the first senVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00055 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 tence of this subsection are remedied or the plan is termi2 nated. 

3 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon 

4 appointment as trustee under subsection (a), shall have 

5 the power— 

6 ‘‘(1) to do any act authorized by the plan, this 

7 title, or other applicable provisions of law to be done 

8 by the plan administrator or any trustee of the plan; 

9 ‘‘(2) to require the transfer of all (or any part) 

10 of the assets and records of the plan to the Sec11 retary as trustee; 

12 ‘‘(3) to invest any assets of the plan which the 

13 Secretary holds in accordance with the provisions of 

14 the plan, regulations prescribed by the Secretary, 

15 and applicable provisions of law; 

16 ‘‘(4) to require the sponsor, the plan adminis17 trator, any participating employer, and any employee 

18 organization representing plan participants to fur19 nish any information with respect to the plan which 

20 the Secretary as trustee may reasonably need in 

21 order to administer the plan; 

22 ‘‘(5) to collect for the plan any amounts due the 

23 plan and to recover reasonable expenses of the trust24 eeship; 


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1 ‘‘(6) to commence, prosecute, or defend on be2 half of the plan any suit or proceeding involving the 

3 plan; 

4 ‘‘(7) to issue, publish, or file such notices, state5 ments, and reports as may be required by the Sec6 retary by regulation or required by any order of the 

7 court; 

8 ‘‘(8) to terminate the plan (or provide for its 

9 termination in accordance with section 809(b)) and 

10 liquidate the plan assets, to restore the plan to the 

11 responsibility of the sponsor, or to continue the 

12 trusteeship; 

13 ‘‘(9) to provide for the enrollment of plan par14 ticipants and beneficiaries under appropriate cov15 erage options; and 

16 ‘‘(10) to do such other acts as may be nec17 essary to comply with this title or any order of the 

18 court and to protect the interests of plan partici19 pants and beneficiaries and providers of medical 

20 care. 

21 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac22 ticable after the Secretary’s appointment as trustee, the 

23 Secretary shall give notice of such appointment to— 

24 ‘‘(1) the sponsor and plan administrator; 

25 ‘‘(2) each participant; 


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1 ‘‘(3) each participating employer; and 

2 ‘‘(4) if applicable, each employee organization 

3 which, for purposes of collective bargaining, rep4 resents plan participants. 

5 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in6 consistent with the provisions of this title, or as may be 

7 otherwise ordered by the court, the Secretary, upon ap8 pointment as trustee under this section, shall be subject 

9 to the same duties as those of a trustee under section 704 

10 of title 11, United States Code, and shall have the duties 

11 of a fiduciary for purposes of this title. 

12 ‘‘(e) OTHER PROCEEDINGS.—An application by the 

13 Secretary under this subsection may be filed notwith14 standing the pendency in the same or any other court of 

15 any bankruptcy, mortgage foreclosure, or equity receiver16 ship proceeding, or any proceeding to reorganize, conserve, 

17 or liquidate such plan or its property, or any proceeding 

18 to enforce a lien against property of the plan. 

19 ‘‘(f) JURISDICTION OF COURT.— 

20 ‘‘(1) IN GENERAL.—Upon the filing of an appli21 cation for the appointment as trustee or the issuance 

22 of a decree under this section, the court to which the 

23 application is made shall have exclusive jurisdiction 

24 of the plan involved and its property wherever lo25 cated with the powers, to the extent consistent with 


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1 the purposes of this section, of a court of the United 

2 States having jurisdiction over cases under chapter 

3 11 of title 11, United States Code. Pending an adju4 dication under this section such court shall stay, and 

5 upon appointment by it of the Secretary as trustee, 

6 such court shall continue the stay of, any pending 

7 mortgage foreclosure, equity receivership, or other 

8 proceeding to reorganize, conserve, or liquidate the 

9 plan, the sponsor, or property of such plan or spon10 sor, and any other suit against any receiver, conser11 vator, or trustee of the plan, the sponsor, or prop12 erty of the plan or sponsor. Pending such adjudica13 tion and upon the appointment by it of the Sec14 retary as trustee, the court may stay any proceeding 

15 to enforce a lien against property of the plan or the 

16 sponsor or any other suit against the plan or the 

17 sponsor. 

18 ‘‘(2) VENUE.—An action under this section 

19 may be brought in the judicial district where the 

20 sponsor or the plan administrator resides or does 

21 business or where any asset of the plan is situated. 

22 A district court in which such action is brought may 

23 issue process with respect to such action in any 

24 other judicial district. 


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1 ‘‘(g) PERSONNEL.—In accordance with regulations 

2 which shall be prescribed by the Secretary, the Secretary 

3 shall appoint, retain, and compensate accountants, actu4 aries, and other professional service personnel as may be 

5 necessary in connection with the Secretary’s service as 

6 trustee under this section. 

7 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

8 ‘‘(a) IN GENERAL.—Notwithstanding section 514, a 

9 State may impose by law a contribution tax on an associa10 tion health plan described in section 806(a)(2), if the plan 

11 commenced operations in such State after the date of the 

12 enactment of the Small Business Health Fairness Act of 

13 2009. 

14 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec15 tion, the term ‘contribution tax’ imposed by a State on 

16 an association health plan means any tax imposed by such 

17 State if— 

18 ‘‘(1) such tax is computed by applying a rate to 

19 the amount of premiums or contributions, with re20 spect to individuals covered under the plan who are 

21 residents of such State, which are received by the 

22 plan from participating employers located in such 

23 State or from such individuals; 

24 ‘‘(2) the rate of such tax does not exceed the 

25 rate of any tax imposed by such State on premiums 


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1 or contributions received by insurers or health main2 tenance organizations for health insurance coverage 

3 offered in such State in connection with a group 

4 health plan; 

5 ‘‘(3) such tax is otherwise nondiscriminatory; 

6 and 

7 ‘‘(4) the amount of any such tax assessed on 

8 the plan is reduced by the amount of any tax or as9 sessment otherwise imposed by the State on pre10 miums, contributions, or both received by insurers or 

11 health maintenance organizations for health insur12 ance coverage, aggregate excess/stop loss insurance 

13 (as defined in section 806(g)(1)), specific excess/stop 

14 loss insurance (as defined in section 806(g)(2)), 

15 other insurance related to the provision of medical 

16 care under the plan, or any combination thereof pro17 vided by such insurers or health maintenance organi18 zations in such State in connection with such plan. 

19 ‘‘SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION. 

20 ‘‘(a) DEFINITIONS.—For purposes of this part: 

21 ‘‘(1) GROUP HEALTH PLAN.—The term ‘group 

22 health plan’ has the meaning provided in section 

23 733(a)(1) (after applying subsection (b) of this sec24 tion). 


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1 ‘‘(2) MEDICAL CARE.—The term ‘medical care’ 

2 has the meaning provided in section 733(a)(2). 

3 ‘‘(3) HEALTH INSURANCE COVERAGE.—The 

4 term ‘health insurance coverage’ has the meaning 

5 provided in section 733(b)(1). 

6 ‘‘(4) HEALTH INSURANCE ISSUER.—The term 

7 ‘health insurance issuer’ has the meaning provided 

8 in section 733(b)(2). 

9 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap10 plicable authority’ means the Secretary, except that, 

11 in connection with any exercise of the Secretary’s 

12 authority regarding which the Secretary is required 

13 under section 506(d) to consult with a State, such 

14 term means the Secretary, in consultation with such 

15 State. 

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

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

18 provided in section 733(d)(2). 

19 ‘‘(7) INDIVIDUAL MARKET.— 

20 ‘‘(A) IN GENERAL.—The term ‘individual 

21 market’ means the market for health insurance 

22 coverage offered to individuals other than in 

23 connection with a group health plan. 

24 ‘‘(B) TREATMENT OF VERY SMALL

25 GROUPS.— 


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

2 (ii), such term includes coverage offered in 

3 connection with a group health plan that 

4 has fewer than 2 participants as current 

5 employees or participants described in sec6 tion 732(d)(3) on the first day of the plan 

7 year. 

8 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

9 shall not apply in the case of health insur10 ance coverage offered in a State if such 

11 State regulates the coverage described in 

12 such clause in the same manner and to the 

13 same extent as coverage in the small group 

14 market (as defined in section 2791(e)(5) of 

15 the Public Health Service Act (42 U.S.C. 

16 300gg–91(e)(5)) is regulated by such 

17 State. 

18 ‘‘(8) PARTICIPATING EMPLOYER.—The term 

19 ‘participating employer’ means, in connection with 

20 an association health plan, any employer, if any indi21 vidual who is an employee of such employer, a part22 ner in such employer, or a self-employed individual 

23 who is such employer (or any dependent, as defined 

24 under the terms of the plan, of such individual) is 

25 or was covered under such plan in connection with 


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1 the status of such individual as such an employee, 

2 partner, or self-employed individual in relation to the 

3 plan. 

4 ‘‘(9) APPLICABLE STATE AUTHORITY.—The 

5 term ‘applicable State authority’ means, with respect 

6 to a health insurance issuer in a State, the State in7 surance commissioner or official or officials des8 ignated by the State to enforce the requirements of 

9 title XXVII of the Public Health Service Act (42 

10 U.S.C. 300hh et seq.) for the State involved with re11 spect to such issuer. 

12 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali13 fied actuary’ means an individual who is a member 

14 of the American Academy of Actuaries. 

15 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili16 ated member’ means, in connection with a sponsor— 

17 ‘‘(A) a person who is otherwise eligible to 

18 be a member of the sponsor but who elects an 

19 affiliated status with the sponsor, 

20 ‘‘(B) in the case of a sponsor with mem21 bers which consist of associations, a person who 

22 is a member of any such association and elects 

23 an affiliated status with the sponsor, or 

24 ‘‘(C) in the case of an association health 

25 plan in existence on the date of the enactment 


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1 of the Small Business Health Fairness Act of 

2 2009, a person eligible to be a member of the 

3 sponsor or one of its member associations. 

4 ‘‘(12) LARGE EMPLOYER.—The term ‘large em5 ployer’ means, in connection with a group health 

6 plan with respect to a plan year, an employer who 

7 employed an average of at least 51 employees on 

8 business days during the preceding calendar year 

9 and who employs at least 2 employees on the first 

10 day of the plan year. 

11 ‘‘(13) SMALL EMPLOYER.—The term ‘small em12 ployer’ means, in connection with a group health 

13 plan with respect to a plan year, an employer who 

14 is not a large employer. 

15 ‘‘(b) RULES OF CONSTRUCTION.— 

16 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur17 poses of determining whether a plan, fund, or pro18 gram is an employee welfare benefit plan which is an 

19 association health plan, and for purposes of applying 

20 this title in connection with such plan, fund, or pro21 gram so determined to be such an employee welfare 

22 benefit plan— 

23 ‘‘(A) in the case of a partnership, the term 

24 ‘employer’ (as defined in section 3(5)) includes 

25 the partnership in relation to the partners, and 


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1 the term ‘employee’ (as defined in section 3(6)) 

2 includes any partner in relation to the partner3 ship; and 

4 ‘‘(B) in the case of a self-employed indi5 vidual, the term ‘employer’ (as defined in sec6 tion 3(5)) and the term ‘employee’ (as defined 

7 in section 3(6)) shall include such individual. 

8 ‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED

9 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

10 case of any plan, fund, or program which was estab11 lished or is maintained for the purpose of providing 

12 medical care (through the purchase of insurance or 

13 otherwise) for employees (or their dependents) cov14 ered thereunder and which demonstrates to the Sec15 retary that all requirements for certification under 

16 this part would be met with respect to such plan, 

17 fund, or program if such plan, fund, or program 

18 were a group health plan, such plan, fund, or pro19 gram shall be treated for purposes of this title as an 

20 employee welfare benefit plan on and after the date 

21 of such demonstration.’’. 

22 (b) CONFORMING AMENDMENTS TO PREEMPTION

23 RULES.— 


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1 (1) Section 514(b)(6) of such Act (29 U.S.C. 

2 1144(b)(6)) is amended by adding at the end the 

3 following new subparagraph: 

4 ‘‘(E) The preceding subparagraphs of this paragraph 

5 do not apply with respect to any State law in the case 

6 of an association health plan which is certified under part 

7 8.’’. 

8 (2) Section 514 of such Act (29 U.S.C. 1144) 

9 is amended— 

10 (A) in subsection (b)(4), by striking ‘‘Sub11 section (a)’’ and inserting ‘‘Subsections (a) and 

12 (d)’’; 

13 (B) in subsection (b)(5), by striking ‘‘sub14 section (a)’’ in subparagraph (A) and inserting 

15 ‘‘subsection (a) of this section and subsections 

16 (a)(2)(B) and (b) of section 805’’, and by strik17 ing ‘‘subsection (a)’’ in subparagraph (B) and 

18 inserting ‘‘subsection (a) of this section or sub19 section (a)(2)(B) or (b) of section 805’’; 

20 (C) by redesignating subsection (d) as sub21 section (e); and 

22 (D) by inserting after subsection (c) the 

23 following new subsection: 

24 ‘‘(d)(1) Except as provided in subsection (b)(4), the 

25 provisions of this title shall supersede any and all State 


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1 laws insofar as they may now or hereafter preclude, or 

2 have the effect of precluding, a health insurance issuer 

3 from offering health insurance coverage in connection with 

4 an association health plan which is certified under part 

5 8. 

6 ‘‘(2) Except as provided in paragraphs (4) and (5) 

7 of subsection (b) of this section— 

8 ‘‘(A) In any case in which health insurance cov9 erage of any policy type is offered under an associa10 tion health plan certified under part 8 to a partici11 pating employer operating in such State, the provi12 sions of this title shall supersede any and all laws 

13 of such State insofar as they may preclude a health 

14 insurance issuer from offering health insurance cov15 erage of the same policy type to other employers op16 erating in the State which are eligible for coverage 

17 under such association health plan, whether or not 

18 such other employers are participating employers in 

19 such plan. 

20 ‘‘(B) In any case in which health insurance cov21 erage of any policy type is offered in a State under 

22 an association health plan certified under part 8 and 

23 the filing, with the applicable State authority (as de24 fined in section 812(a)(9)), of the policy form in 

25 connection with such policy type is approved by such 


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1 State authority, the provisions of this title shall su2 persede any and all laws of any other State in which 

3 health insurance coverage of such type is offered, in4 sofar as they may preclude, upon the filing in the 

5 same form and manner of such policy form with the 

6 applicable State authority in such other State, the 

7 approval of the filing in such other State. 

8 ‘‘(3) Nothing in subsection (b)(6)(E) or the preceding 

9 provisions of this subsection shall be construed, with re10 spect to health insurance issuers or health insurance cov11 erage, to supersede or impair the law of any State— 

12 ‘‘(A) providing solvency standards or similar 

13 standards regarding the adequacy of insurer capital, 

14 surplus, reserves, or contributions, or 

15 ‘‘(B) relating to prompt payment of claims. 

16 ‘‘(4) For additional provisions relating to association 

17 health plans, see subsections (a)(2)(B) and (b) of section 

18 805. 

19 ‘‘(5) For purposes of this subsection, the term ‘asso20 ciation health plan’ has the meaning provided in section 

21 801(a), and the terms ‘health insurance coverage’, ‘par22 ticipating employer’, and ‘health insurance issuer’ have 

23 the meanings provided such terms in section 812, respec24 tively.’’. 


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1 (3) Section 514(b)(6)(A) of such Act (29 

2 U.S.C. 1144(b)(6)(A)) is amended— 

3 (A) in clause (i)(II), by striking ‘‘and’’ at 

4 the end; 

5 (B) in clause (ii), by inserting ‘‘and which 

6 does not provide medical care (within the mean7 ing of section 733(a)(2)),’’ after ‘‘arrange8 ment,’’, and by striking ‘‘title.’’ and inserting 

9 ‘‘title, and’’; and 

10 (C) by adding at the end the following new 

11 clause: 

12 ‘‘(iii) subject to subparagraph (E), in the case 

13 of any other employee welfare benefit plan which is 

14 a multiple employer welfare arrangement and which 

15 provides medical care (within the meaning of section 

16 733(a)(2)), any law of any State which regulates in17 surance may apply.’’. 

18 (4) Section 514(e) of such Act (as redesignated 

19 by paragraph (2)(C)) is amended— 

20 (A) by striking ‘‘Nothing’’ and inserting 

21 ‘‘(1) Except as provided in paragraph (2), noth22 ing’’; and 

23 (B) by adding at the end the following new 

24 paragraph: 


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1 ‘‘(2) Nothing in any other provision of law enacted 

2 on or after the date of the enactment of the Small Busi3 ness Health Fairness Act of 2009 shall be construed to 

4 alter, amend, modify, invalidate, impair, or supersede any 

5 provision of this title, except by specific cross-reference to 

6 the affected section.’’. 

7 (c) PLAN SPONSOR.—Section 3(16)(B) of such Act 

8 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

9 the following new sentence: ‘‘Such term also includes a 

10 person serving as the sponsor of an association health plan 

11 under part 8.’’. 

12 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE13 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

14 UNDER ASSOCIATION HEALTH PLANS.—Section 102(b) 

15 of such Act (29 U.S.C. 102(b)) is amended by adding at 

16 the end the following: ‘‘An association health plan shall 

17 include in its summary plan description, in connection 

18 with each benefit option, a description of the form of sol19 vency or guarantee fund protection secured pursuant to 

20 this Act or applicable State law, if any.’’. 

21 (e) SAVINGS CLAUSE.—Section 731(c) of such Act is 

22 amended by inserting ‘‘or part 8’’ after ‘‘this part’’. 

23 (f) REPORT TO THE CONGRESS REGARDING CERTIFI24 CATION OF SELF-INSURED ASSOCIATION HEALTH

25 PLANS.—Not later than January 1, 2012, the Secretary 


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1 of Labor shall report to the Committee on Education and 

2 the Workforce of the House of Representatives and the 

3 Committee on Health, Education, Labor, and Pensions of 

4 the Senate the effect association health plans have had, 

5 if any, on reducing the number of uninsured individuals. 

6 (g) CLERICAL AMENDMENT.—The table of contents 

7 in section 1 of the Employee Retirement Income Security 

8 Act of 1974 is amended by inserting after the item relat9 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. 

‘‘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.’’. 

10 SEC. 122. CLARIFICATION OF TREATMENT OF SINGLE EM11 PLOYER ARRANGEMENTS. 

12 Section 3(40)(B) of the Employee Retirement Income 

13 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend14 ed— 

15 (1) in clause (i), by inserting after ‘‘control 

16 group,’’ the following: ‘‘except that, in any case in 

17 which the benefit referred to in subparagraph (A) 


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1 consists of medical care (as defined in section 

2 812(a)(2)), two or more trades or businesses, wheth3 er or not incorporated, shall be deemed a single em4 ployer for any plan year of such plan, or any fiscal 

5 year of such other arrangement, if such trades or 

6 businesses are within the same control group during 

7 such year or at any time during the preceding 1-year 

8 period,’’; 

9 (2) in clause (iii), by striking ‘‘(iii) the deter10 mination’’ and inserting the following: 

11 ‘‘(iii)(I) in any case in which the benefit re12 ferred to in subparagraph (A) consists of medical 

13 care (as defined in section 812(a)(2)), the deter14 mination of whether a trade or business is under 

15 ‘common control’ with another trade or business 

16 shall be determined under regulations of the Sec17 retary applying principles consistent and coextensive 

18 with the principles applied in determining whether 

19 employees of two or more trades or businesses are 

20 treated as employed by a single employer under sec21 tion 4001(b), except that, for purposes of this para22 graph, an interest of greater than 25 percent may 

23 not be required as the minimum interest necessary 

24 for common control, or 

25 ‘‘(II) in any other case, the determination’’; 


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1 (3) by redesignating clauses (iv) and (v) as 

2 clauses (v) and (vi), respectively; and 

3 (4) by inserting after clause (iii) the following 

4 new clause: 

5 ‘‘(iv) in any case in which the benefit referred 

6 to in subparagraph (A) consists of medical care (as 

7 defined in section 812(a)(2)), in determining, after 

8 the application of clause (i), whether benefits are 

9 provided to employees of two or more employers, the 

10 arrangement shall be treated as having only one par11 ticipating employer if, after the application of clause 

12 (i), the number of individuals who are employees and 

13 former employees of any one participating employer 

14 and who are covered under the arrangement is 

15 greater than 75 percent of the aggregate number of 

16 all individuals who are employees or former employ17 ees of participating employers and who are covered 

18 under the arrangement,’’. 

19 SEC. 123. ENFORCEMENT PROVISIONS RELATING TO ASSO20 CIATION HEALTH PLANS. 

21 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

22 MISREPRESENTATIONS.—Section 501 of the Employee 

23 Retirement Income Security Act of 1974 (29 U.S.C. 1131) 

24 is amended— 

25 (1) by inserting ‘‘(a)’’ after ‘‘Sec. 501.’’; and 


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1 (2) by adding at the end the following new sub2 section: 

3 ‘‘(b) Any person who willfully falsely represents, to 

4 any employee, any employee’s beneficiary, any employer, 

5 the Secretary, or any State, a plan or other arrangement 

6 established or maintained for the purpose of offering or 

7 providing any benefit described in section 3(1) to employ8 ees or their beneficiaries as— 

9 ‘‘(1) being an association health plan which has 

10 been certified under part 8; 

11 ‘‘(2) having been established or maintained 

12 under or pursuant to one or more collective bar13 gaining agreements which are reached pursuant to 

14 collective bargaining described in section 8(d) of the 

15 National Labor Relations Act (29 U.S.C. 158(d)) or 

16 paragraph Fourth of section 2 of the Railway Labor 

17 Act (45 U.S.C. 152, paragraph Fourth) or which are 

18 reached pursuant to labor-management negotiations 

19 under similar provisions of State public employee re20 lations laws; or 

21 ‘‘(3) being a plan or arrangement described in 

22 section 3(40)(A)(i), 

23 shall, upon conviction, be imprisoned not more than 5 

24 years, be fined under title 18, United States Code, or 

25 both.’’. 


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1 (b) CEASE ACTIVITIES ORDERS.—Section 502 of 

2 such Act (29 U.S.C. 1132) is amended by adding at the 

3 end the following new subsection: 

4 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE5 SIST ORDERS.— 

6 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

7 upon application by the Secretary showing the oper8 ation, promotion, or marketing of an association 

9 health plan (or similar arrangement providing bene10 fits consisting of medical care (as defined in section 

11 733(a)(2))) that— 

12 ‘‘(A) is not certified under part 8, is sub13 ject under section 514(b)(6) to the insurance 

14 laws of any State in which the plan or arrange15 ment offers or provides benefits, and is not li16 censed, registered, or otherwise approved under 

17 the insurance laws of such State; or 

18 ‘‘(B) is an association health plan certified 

19 under part 8 and is not operating in accordance 

20 with the requirements under part 8 for such 

21 certification, 

22 a district court of the United States shall enter an 

23 order requiring that the plan or arrangement cease 

24 activities. 


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1 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

2 apply in the case of an association health plan or 

3 other arrangement if the plan or arrangement shows 

4 that— 

5 ‘‘(A) all benefits under it referred to in 

6 paragraph (1) consist of health insurance cov7 erage; and 

8 ‘‘(B) with respect to each State in which 

9 the plan or arrangement offers or provides ben10 efits, the plan or arrangement is operating in 

11 accordance with applicable State laws that are 

12 not superseded under section 514. 

13 ‘‘(3) ADDITIONAL EQUITABLE RELIEF.—The 

14 court may grant such additional equitable relief, in15 cluding any relief available under this title, as it 

16 deems necessary to protect the interests of the pub17 lic and of persons having claims for benefits against 

18 the plan.’’. 

19 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.— 

20 Section 503 of such Act (29 U.S.C. 1133) is amended by 

21 inserting ‘‘(a) IN GENERAL.—’’ before ‘‘In accordance’’, 

22 and by adding at the end the following new subsection: 

23 ‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of 

24 each association health plan which is or has been certified 

25 under part 8 shall require the board of trustees or the 


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1 named fiduciary (as applicable) to ensure that the require2 ments of this section are met in connection with claims 

3 filed under the plan.’’. 

4 SEC. 124. COOPERATION BETWEEN FEDERAL AND STATE 

5 AUTHORITIES. 

6 Section 506 of the Employee Retirement Income Se7 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

8 at the end the following new subsection: 

9 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

10 TO ASSOCIATION HEALTH PLANS.— 

11 ‘‘(1) AGREEMENTS WITH STATES.—The Sec12 retary shall consult with the State recognized under 

13 paragraph (2) with respect to an association health 

14 plan regarding the exercise of— 

15 ‘‘(A) the Secretary’s authority under sec16 tions 502 and 504 to enforce the requirements 

17 for certification under part 8; and 

18 ‘‘(B) the Secretary’s authority to certify 

19 association health plans under part 8 in accord20 ance with regulations of the Secretary applica21 ble to certification under part 8. 

22 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

23 STATE.—In carrying out paragraph (1), the Sec24 retary shall ensure that only one State will be recog25 nized, with respect to any particular association 


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1 health plan, as the State with which consultation is 

2 required. In carrying out this paragraph— 

3 ‘‘(A) in the case of a plan which provides 

4 health insurance coverage (as defined in section 

5 812(a)(3)), such State shall be the State with 

6 which filing and approval of a policy type of7 fered by the plan was initially obtained, and 

8 ‘‘(B) in any other case, the Secretary shall 

9 take into account the places of residence of the 

10 participants and beneficiaries under the plan 

11 and the State in which the trust is main12 tained.’’. 

13 SEC. 125. EFFECTIVE DATE AND TRANSITIONAL AND 

14 OTHER RULES. 

15 (a) EFFECTIVE DATE.—The amendments made by 

16 this subtitle shall take effect 1 year after the date of the 

17 enactment of this Act. The Secretary of Labor shall first 

18 issue all regulations necessary to carry out the amend19 ments made by this subtitle within 1 year after the date 

20 of the enactment of this Act. 

21 (b) TREATMENT OF CERTAIN EXISTING HEALTH

22 BENEFITS PROGRAMS.— 

23 (1) IN GENERAL.—In any case in which, as of 

24 the date of the enactment of this Act, an arrange25 ment is maintained in a State for the purpose of 


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1 providing benefits consisting of medical care for the 

2 employees and beneficiaries of its participating em3 ployers, at least 200 participating employers make 

4 contributions to such arrangement, such arrange5 ment has been in existence for at least 10 years, and 

6 such arrangement is licensed under the laws of one 

7 or more States to provide such benefits to its par8 ticipating employers, upon the filing with the appli9 cable authority (as defined in section 812(a)(5) of 

10 the Employee Retirement Income Security Act of 

11 1974 (as amended by this subtitle)) by the arrange12 ment of an application for certification of the ar13 rangement under part 8 of subtitle B of title I of 

14 such Act— 

15 (A) such arrangement shall be deemed to 

16 be a group health plan for purposes of title I 

17 of such Act; 

18 (B) the requirements of sections 801(a) 

19 and 803(a) of the Employee Retirement Income 

20 Security Act of 1974 shall be deemed met with 

21 respect to such arrangement; 

22 (C) the requirements of section 803(b) of 

23 such Act shall be deemed met, if the arrange24 ment is operated by a board of directors 

25 which— 


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1 (i) is elected by the participating em2 ployers, with each employer having one 

3 vote; and 

4 (ii) has complete fiscal control over 

5 the arrangement and which is responsible 

6 for all operations of the arrangement; 

7 (D) the requirements of section 804(a) of 

8 such Act shall be deemed met with respect to 

9 such arrangement; and 

10 (E) the arrangement may be certified by 

11 any applicable authority with respect to its op12 erations in any State only if it operates in such 

13 State on the date of certification. 

14 The provisions of this subsection shall cease to apply 

15 with respect to any such arrangement at such time 

16 after the date of the enactment of this Act as the 

17 applicable requirements of this subsection are not 

18 met with respect to such arrangement. 

19 (2) DEFINITIONS.—For purposes of this sub20 section, the terms ‘‘group health plan’’, ‘‘medical 

21 care’’, and ‘‘participating employer’’ shall have the 

22 meanings provided in section 812 of the Employee 

23 Retirement Income Security Act of 1974, except 

24 that the reference in paragraph (7) of such section 

25 to an ‘‘association health plan’’ shall be deemed a 


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1 reference to an arrangement referred to in this sub2 section. 

3 Subtitle D—Purchasing Insurance 

4 Across State Lines 

5 SEC. 131. COOPERATIVE GOVERNING OF INDIVIDUAL 

6 HEALTH INSURANCE COVERAGE. 

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

8 Service Act (42 U.S.C. 300gg et seq.) is amended by add9 ing at the end the following new part: 

10 ‘‘PART D—COOPERATIVE GOVERNING OF 

11 INDIVIDUAL HEALTH INSURANCE COVERAGE 

12 ‘‘SEC. 2795. DEFINITIONS. 

13 ‘‘In this part: 

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

15 State’ means, with respect to individual health insur16 ance coverage offered by a health insurance issuer, 

17 the State designated by the issuer as the State 

18 whose covered laws shall govern the health insurance 

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

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

21 only designate one such State as its primary State 

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

23 issuer may not change the designated primary State 

24 with respect to individual health insurance coverage 

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


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1 may be made upon renewal of the policy. With re2 spect to such designated State, the issuer is deemed 

3 to be doing business in that State. 

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

5 State’ means, with respect to individual health insur6 ance coverage offered by a health insurance issuer, 

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

8 of a health insurance issuer that is selling a policy 

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

10 is deemed to be doing business in that secondary 

11 State. 

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

13 ‘health insurance issuer’ has the meaning given such 

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

15 issuer must be licensed in the primary State and be 

16 qualified to sell individual health insurance coverage 

17 in that State. 

18 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV19 ERAGE.—The term ‘individual health insurance cov20 erage’ means health insurance coverage offered in 

21 the individual market, as defined in section 

22 2791(e)(1). 

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

24 term ‘applicable State authority’ means, with respect 

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1 surance commissioner or official or officials des2 ignated by the State to enforce the requirements of 

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

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

5 term ‘hazardous financial condition’ means that, 

6 based on its present or reasonably anticipated finan7 cial condition, a health insurance issuer is unlikely 

8 to be able— 

9 ‘‘(A) to meet obligations to policyholders 

10 with respect to known claims and reasonably 

11 anticipated claims; or 

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

13 course of business. 

14 ‘‘(7) COVERED LAWS.— 

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

16 laws’ means the laws, rules, regulations, agree17 ments, and orders governing the insurance busi18 ness pertaining to— 

19 ‘‘(i) individual health insurance cov20 erage issued by a health insurance issuer; 

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

22 medical underwriting), renewal, and 

23 issuance of individual health insurance cov24 erage to an individual; 


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

2 relation to individual health insurance cov3 erage of health care and insurance related 

4 services; 

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

6 relation to individual health insurance cov7 erage of management, operations, and in8 vestment activities of a health insurance 

9 issuer; and 

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

11 relation to individual health insurance cov12 erage of loss control and claims adminis13 tration for a health insurance issuer with 

14 respect to liability for which the issuer pro15 vides insurance. 

16 ‘‘(B) EXCEPTION.—Such term does not in17 clude any law, rule, regulation, agreement, or 

18 order governing the use of care or cost manage19 ment techniques, including any requirement re20 lated to provider contracting, network access or 

21 adequacy, health care data collection, or quality 

22 assurance. 

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

24 States and includes the District of Columbia, Puerto 


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

2 and the Northern Mariana Islands. 

3 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC4 TICES.—The term ‘unfair claims settlement prac5 tices’ means only the following practices: 

6 ‘‘(A) Knowingly misrepresenting to claim7 ants and insured individuals relevant facts or 

8 policy provisions relating to coverage at issue. 

9 ‘‘(B) Failing to acknowledge with reason10 able promptness pertinent communications with 

11 respect to claims arising under policies. 

12 ‘‘(C) Failing to adopt and implement rea13 sonable standards for the prompt investigation 

14 and settlement of claims arising under policies. 

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

16 and equitable settlement of claims submitted in 

17 which liability has become reasonably clear. 

18 ‘‘(E) Refusing to pay claims without con19 ducting a reasonable investigation. 

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

21 claims within a reasonable period of time after 

22 having completed an investigation related to 

23 those claims. 

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

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1 stitute suits to recover amounts due under its 

2 policies by offering substantially less than the 

3 amounts ultimately recovered in suits brought 

4 by them. 

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

6 to settle or settling claims for less than the 

7 amount that a reasonable person would believe 

8 the insured individual or his or her beneficiary 

9 was entitled by reference to written or printed 

10 advertising material accompanying or made 

11 part of an application. 

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

13 on the basis of an application that was materi14 ally altered without notice to, or knowledge or 

15 consent of, the insured. 

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

17 present claims within 15 calendar days of a re18 quests with reasonable explanations regarding 

19 their use. 

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

21 time than that prescribed in the policy or by the 

22 law of the primary State. 

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

24 and abuse’ means an act or omission committed by 

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


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1 commits, or conceals any material information con2 cerning, one or more of the following: 

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

4 or preparing with knowledge or belief that it 

5 will be presented to or by an insurer, a rein6 surer, broker or its agent, false information as 

7 part of, in support of or concerning a fact ma8 terial to one or more of the following: 

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

10 renewal of an insurance policy or reinsur11 ance contract. 

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

13 or reinsurance contract. 

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

15 pursuant to an insurance policy or reinsur16 ance contract. 

17 ‘‘(iv) Premiums paid on an insurance 

18 policy or reinsurance contract. 

19 ‘‘(v) Payments made in accordance 

20 with the terms of an insurance policy or 

21 reinsurance contract. 

22 ‘‘(vi) A document filed with the com23 missioner or the chief insurance regulatory 

24 official of another jurisdiction. 


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1 ‘‘(vii) The financial condition of an in2 surer or reinsurer. 

3 ‘‘(viii) The formation, acquisition, 

4 merger, reconsolidation, dissolution or 

5 withdrawal from one or more lines of in6 surance or reinsurance in all or part of a 

7 State by an insurer or reinsurer. 

8 ‘‘(ix) The issuance of written evidence 

9 of insurance. 

10 ‘‘(x) The reinstatement of an insur11 ance policy. 

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

13 renewal insurance risks on behalf of an insurer 

14 reinsurer or other person engaged in the busi15 ness of insurance by a person who knows or 

16 should know that the insurer or other person 

17 responsible for the risk is insolvent at the time 

18 of the transaction. 

19 ‘‘(C) Transaction of the business of insur20 ance in violation of laws requiring a license, cer21 tificate of authority or other legal authority for 

22 the transaction of the business of insurance. 

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1 mit the acts or omissions specified in this para2 graph. 

3 ‘‘SEC. 2796. APPLICATION OF LAW. 

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

5 State shall apply to individual health insurance coverage 

6 offered by a health insurance issuer in the primary State 

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

8 issuer comply with the conditions of this section with re9 spect to the offering of coverage in any secondary State. 

10 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC11 ONDARY STATE.—Except as provided in this section, a 

12 health insurance issuer with respect to its offer, sale, rat13 ing (including medical underwriting), renewal, and 

14 issuance of individual health insurance coverage in any 

15 secondary State is exempt from any covered laws of the 

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

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

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

19 ‘‘(1) make unlawful, or regulate, directly or in20 directly, the operation of the health insurance issuer 

21 operating in the secondary State, except that any 

22 secondary State may require such an issuer— 

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

24 applicable premium and other taxes (including 

25 high risk pool assessments) which are levied on 


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1 insurers and surplus lines insurers, brokers, or 

2 policyholders under the laws of the State; 

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

4 State insurance commissioner as its agent solely 

5 for the purpose of receiving service of legal doc6 uments or process; 

7 ‘‘(C) to submit to an examination of its fi8 nancial condition by the State insurance com9 missioner in any State in which the issuer is 

10 doing business to determine the issuer’s finan11 cial condition, if— 

12 ‘‘(i) the State insurance commissioner 

13 of the primary State has not done an ex14 amination within the period recommended 

15 by the National Association of Insurance 

16 Commissioners; and 

17 ‘‘(ii) any such examination is con18 ducted in accordance with the examiners’ 

19 handbook of the National Association of 

20 Insurance Commissioners and is coordi21 nated to avoid unjustified duplication and 

22 unjustified repetition; 

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

24 issued— 


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1 ‘‘(i) in a delinquency proceeding com2 menced by the State insurance commis3 sioner if there has been a finding of finan4 cial impairment under subparagraph (C); 

5 or 

6 ‘‘(ii) in a voluntary dissolution pro7 ceeding; 

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

9 by a court of competent jurisdiction, upon a pe10 tition by the State insurance commissioner al11 leging that the issuer is in hazardous financial 

12 condition; 

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

14 basis, in any insurance insolvency guaranty as15 sociation or similar association to which a 

16 health insurance issuer in the State is required 

17 to belong; 

18 ‘‘(G) to comply with any State law regard19 ing fraud and abuse (as defined in section 

20 2795(10)), except that if the State seeks an in21 junction regarding the conduct described in this 

22 subparagraph, such injunction must be obtained 

23 from a court of competent jurisdiction; 


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1 ‘‘(H) to comply with any State law regard2 ing unfair claims settlement practices (as de3 fined in section 2795(9)); or 

4 ‘‘(I) to comply with the applicable require5 ments for independent review under section 

6 2798 with respect to coverage offered in the 

7 State; 

8 ‘‘(2) require any individual health insurance 

9 coverage issued by the issuer to be countersigned by 

10 an insurance agent or broker residing in that Sec11 ondary State; or 

12 ‘‘(3) otherwise discriminate against the issuer 

13 issuing insurance in both the primary State and in 

14 any secondary State. 

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

16 health insurance issuer shall provide the following notice, 

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

18 in a secondary State under this part by such a health in19 surance issuer and at renewal of the policy, with the 5 

20 blank spaces therein being appropriately filled with the 

21 name of the health insurance issuer, the name of primary 

22 State, the name of the secondary State, the name of the 

23 secondary State, and the name of the secondary State, re24 spectively, for the coverage concerned: 


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1 ‘Notice This policy is issued by lll and is 

2 governed by the laws and regulations of the 

3 State of lll, and it has met all the laws of 

4 that State as determined by that State’s De5 partment of Insurance. This policy may be 

6 less expensive than others because it is not 

7 subject to all of the insurance laws and regu8 lations of the State of lll, including cov9 erage of some services or benefits mandated 

10 by the law of the State of lll. Additionally, 

11 this policy is not subject to all of the con12 sumer protection laws or restrictions on rate 

13 changes of the State of lll. As with all in14 surance products, before purchasing this pol15 icy, you should carefully review the policy 

16 and determine what health care services the 

17 policy covers and what benefits it provides, 

18 including any exclusions, limitations, or con19 ditions for such services or benefits.’ ’’. 

20 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

21 AND PREMIUM INCREASES.— 

22 ‘‘(1) IN GENERAL.—For purposes of this sec23 tion, a health insurance issuer that provides indi24 vidual health insurance coverage to an individual 


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1 under this part in a primary or secondary State may 

2 not upon renewal— 

3 ‘‘(A) move or reclassify the individual in4 sured under the health insurance coverage from 

5 the class such individual is in at the time of 

6 issue of the contract based on the health-status 

7 related factors of the individual; or 

8 ‘‘(B) increase the premiums assessed the 

9 individual for such coverage based on a health 

10 status-related factor or change of a health sta11 tus-related factor or the past or prospective 

12 claim experience of the insured individual. 

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

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

15 issuer— 

16 ‘‘(A) from terminating or discontinuing 

17 coverage or a class of coverage in accordance 

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

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

20 policy holders within a class based on claims ex21 perience; 

22 ‘‘(C) from changing premiums or offering 

23 discounted premiums to individuals who engage 

24 in wellness activities at intervals prescribed by 


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1 the issuer, if such premium changes or incen2 tives— 

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

4 the insurance contract; 

5 ‘‘(ii) are based on specific wellness ac6 tivities that are not applicable to all indi7 viduals; and 

8 ‘‘(iii) are not obtainable by all individ9 uals to whom coverage is offered; 

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

11 ‘‘(E) from retroactively adjusting the rates 

12 charged an insured individual if the initial rates 

13 were set based on material misrepresentation by 

14 the individual at the time of issue. 

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

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

17 individual health insurance coverage in a secondary State 

18 unless that coverage is currently offered for sale in the 

19 primary State. 

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

21 HEALTH INSURANCE ISSUERS.—Any State may require 

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

23 broker for a health insurance issuer with respect to the 

24 offering of individual health insurance coverage obtain a 

25 license from that State, with commissions or other comVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00096 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 pensation subject to the provisions of the laws of that 

2 State, except that a State may not impose any qualifica3 tion or requirement which discriminates against a non4 resident agent or broker. 

5 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN6 SURANCE COMMISSIONER.—Each health insurance issuer 

7 issuing individual health insurance coverage in both pri8 mary and secondary States shall submit— 

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

10 State in which it intends to offer such coverage, be11 fore it may offer individual health insurance cov12 erage in such State— 

13 ‘‘(A) a copy of the plan of operation or fea14 sibility study or any similar statement of the 

15 policy being offered and its coverage (which 

16 shall include the name of its primary State and 

17 its principal place of business); 

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

19 designation of its primary State; and 

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

21 issuer’s compliance with all the laws of the pri22 mary State; and 

23 ‘‘(2) to the insurance commissioner of each sec24 ondary State in which it offers individual health in25 surance coverage, a copy of the issuer’s quarterly fiVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00097 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 nancial statement submitted to the primary State, 

2 which statement shall be certified by an independent 

3 public accountant and contain a statement of opin4 ion on loss and loss adjustment expense reserves 

5 made by— 

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

7 of Actuaries; or 

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

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

10 Nothing in this section shall be construed to affect the 

11 authority of any Federal or State court to enjoin— 

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

13 insurance coverage by a health insurance issuer to 

14 any person or group who is not eligible for such in15 surance; or 

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

17 insurance coverage that violates the requirements of 

18 the law of a secondary State which are described in 

19 subparagraphs (A) through (H) of section 

20 2796(b)(1). 

21 ‘‘(i) POWER OF SECONDARY STATES TO TAKE AD22 MINISTRATIVE ACTION.—Nothing in this section shall be 

23 construed to affect the authority of any State to enjoin 

24 conduct in violation of that State’s laws described in sec25 tion 2796(b)(1). 


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

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

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

4 paragraph (2), nothing in this section shall be con5 strued to affect the authority of any State to make 

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

7 State with respect to which a health insurance issuer 

8 is not exempt under subsection (b). 

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

10 If a State seeks an injunction regarding the conduct 

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

12 (h), such injunction must be obtained from a Fed13 eral or State court of competent jurisdiction. 

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

15 section shall affect the authority of any State to bring ac16 tion in any Federal or State court. 

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

18 this section shall be construed to affect the applicability 

19 of State laws generally applicable to persons or corpora20 tions. 

21 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

22 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 

23 health insurance issuer is offering coverage in a primary 

24 State that does not accommodate residents of secondary 

25 States or does not provide a working mechanism for resiVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00099 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 dents of a secondary State, and the issuer is offering cov2 erage under this part in such secondary State which has 

3 not adopted a qualified high risk pool as its acceptable 

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

5 the issuer shall, with respect to any individual health in6 surance coverage offered in a secondary State under this 

7 part, comply with the guaranteed availability requirements 

8 for eligible individuals in section 2741. 

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

10 BEFORE ISSUER MAY SELL INTO SECONDARY 

11 STATES. 

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

13 issue individual health insurance coverage in a secondary 

14 State if the State insurance commissioner does not use 

15 a risk-based capital formula for the determination of cap16 ital and surplus requirements for all health insurance 

17 issuers. 

18 ‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE19 DURES. 

20 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur21 ance issuer may not offer, sell, or issue individual health 

22 insurance coverage in a secondary State under the provi23 sions of this title unless— 

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

25 State have legislation or regulations in place estabVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00100 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 lishing an independent review process for individuals 

2 who are covered by individual health insurance cov3 erage, or 

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

5 subparagraph (A) are not met with respect to the ei6 ther of such States, the issuer provides an inde7 pendent review mechanism substantially identical (as 

8 determined by the applicable State authority of such 

9 State) to that prescribed in the ‘Health Carrier Ex10 ternal Review Model Act’ of the National Association 

11 of Insurance Commissioners for all individuals who 

12 purchase insurance coverage under the terms of this 

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

14 is conducted by an independent medical reviewer, or 

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

16 requirements of subsection (b) are met. 

17 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL

18 REVIEWERS.—In the case of any independent review 

19 mechanism referred to in subsection (a)(2)— 

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

21 claim to an independent medical reviewer, or to any 

22 panel of such reviewers, to conduct independent 

23 medical review, the issuer shall ensure that— 


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1 ‘‘(A) each independent medical reviewer 

2 meets the qualifications described in paragraphs 

3 (2) and (3); 

4 ‘‘(B) with respect to each review, each re5 viewer meets the requirements of paragraph (4) 

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

7 panel, meets the requirements described in 

8 paragraph (5); and 

9 ‘‘(C) compensation provided by the issuer 

10 to each reviewer is consistent with paragraph 

11 (6). 

12 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde13 pendent medical reviewer shall be a physician 

14 (allopathic or osteopathic) or health care profes15 sional who— 

16 ‘‘(A) is appropriately credentialed or li17 censed in 1 or more States to deliver health 

18 care services; and 

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

20 the diagnosis, or provides the type of treatment 

21 under review. 

22 ‘‘(3) INDEPENDENCE.— 

23 ‘‘(A) IN GENERAL.—Subject to subpara24 graph (B), each independent medical reviewer 

25 in a case shall— 


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

2 in paragraph (7)); 

3 ‘‘(ii) not have a material familial, fi4 nancial, or professional relationship with 

5 such a party; and 

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

7 interest with such a party (as determined 

8 under regulations). 

9 ‘‘(B) EXCEPTION.—Nothing in subpara10 graph (A) shall be construed to— 

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

12 the basis of affiliation with the issuer, 

13 from serving as an independent medical re14 viewer if— 

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

16 not reasonably available; 

17 ‘‘(II) the affiliated individual is 

18 not involved in the provision of items 

19 or services in the case under review; 

20 ‘‘(III) the fact of such an affili21 ation is disclosed to the issuer and the 

22 enrollee (or authorized representative) 

23 and neither party objects; and 

24 ‘‘(IV) the affiliated individual is 

25 not an employee of the issuer and 


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1 does not provide services exclusively or 

2 primarily to or on behalf of the issuer; 

3 ‘‘(ii) prohibit an individual who has 

4 staff privileges at the institution where the 

5 treatment involved takes place from serv6 ing as an independent medical reviewer 

7 merely on the basis of such affiliation if 

8 the affiliation is disclosed to the issuer and 

9 the enrollee (or authorized representative), 

10 and neither party objects; or 

11 ‘‘(iii) prohibit receipt of compensation 

12 by an independent medical reviewer from 

13 an entity if the compensation is provided 

14 consistent with paragraph (6). 

15 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

16 IN SAME FIELD.— 

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

18 treatment, or the provision of items or serv19 ices— 

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

21 a practicing physician (allopathic or osteo22 pathic) of the same or similar specialty, as 

23 a physician who, acting within the appro24 priate scope of practice within the State in 

25 which the service is provided or rendered, 


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1 typically treats the condition, makes the 

2 diagnosis, or provides the type of treat3 ment under review; or 

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

5 professional, the reviewer, or at least 1 

6 member of the review panel, shall be a 

7 practicing non-physician health care pro8 fessional of the same or similar specialty 

9 as the non-physician health care profes10 sional who, acting within the appropriate 

11 scope of practice within the State in which 

12 the service is provided or rendered, typi13 cally treats the condition, makes the diag14 nosis, or provides the type of treatment 

15 under review. 

16 ‘‘(B) PRACTICING DEFINED.—For pur17 poses of this paragraph, the term ‘practicing’ 

18 means, with respect to an individual who is a 

19 physician or other health care professional, that 

20 the individual provides health care services to 

21 individual patients on average at least 2 days 

22 per week. 

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

24 external review relating to a child, a reviewer shall 

25 have expertise under paragraph (2) in pediatrics. 


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1 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA2 TION.—Compensation provided by the issuer to an 

3 independent medical reviewer in connection with a 

4 review under this section shall— 

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

6 ‘‘(B) not be contingent on the decision ren7 dered by the reviewer. 

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

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

10 respect to a denial of a claim under a coverage relat11 ing to an enrollee, any of the following: 

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

13 officer, director, or employee of the issuer. 

14 ‘‘(B) The enrollee (or authorized represent15 ative). 

16 ‘‘(C) The health care professional that pro17 vides the items or services involved in the de18 nial. 

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

20 services (or treatment) involved in the denial 

21 are provided. 

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

23 other item that is included in the items or serv24 ices involved in the denial. 


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1 ‘‘(F) Any other party determined under 

2 any regulations to have a substantial interest in 

3 the denial involved. 

4 ‘‘(8) DEFINITIONS.—For purposes of this sub5 section: 

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

7 means, with respect to health insurance cov8 erage offered by a health insurance issuer, an 

9 individual enrolled with the issuer to receive 

10 such coverage. 

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

12 term ‘health care professional’ means an indi13 vidual who is licensed, accredited, or certified 

14 under State law to provide specified health care 

15 services and who is operating within the scope 

16 of such licensure, accreditation, or certification. 

17 ‘‘SEC. 2799. ENFORCEMENT. 

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

19 respect to specific individual health insurance coverage the 

20 primary State for such coverage has sole jurisdiction to 

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

22 State and any secondary State. 

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

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


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

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

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

4 initiated by the applicable secondary State authority, the 

5 court of competent jurisdiction shall apply the covered 

6 laws of the primary State. 

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

8 of individual health insurance coverage offered in a sec9 ondary State that fails to comply with the covered laws 

10 of the primary State, the applicable State authority of the 

11 secondary State may notify the applicable State authority 

12 of the primary State.’’. 

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

14 subsection (a) shall apply to individual health insurance 

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

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

17 (c) GAO ONGOING STUDY AND REPORTS.— 

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

19 United States shall conduct an ongoing study con20 cerning the effect of the amendment made by sub21 section (a) on— 

22 (A) the number of uninsured and under-in23 sured; 


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1 (B) the availability and cost of health in2 surance policies for individuals with pre-existing 

3 medical conditions; 

4 (C) the availability and cost of health in5 surance policies generally; 

6 (D) the elimination or reduction of dif7 ferent types of benefits under health insurance 

8 policies offered in different States; and 

9 (E) cases of fraud or abuse relating to 

10 health insurance coverage offered under such 

11 amendment and the resolution of such cases. 

12 (2) ANNUAL REPORTS.—The Comptroller Gen13 eral shall submit to Congress an annual report, after 

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

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

16 the ongoing study conducted under paragraph (1). 

17 SEC. 132. SEVERABILITY. 

18 If any provision of this subtitle or the application of 

19 such provision to any person or circumstance is held to 

20 be unconstitutional, the remainder of this subtitle and the 

21 application of the provisions of such to any other person 

22 or circumstance shall not be affected. 


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1 Subtitle E—Protecting Patients 

2 From Rescissions 

3 SEC. 141. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 

4 THIRD PARTY REVIEWS OF CERTAIN NON5 RENEWALS AND DISCONTINUATIONS, IN6 CLUDING RESCISSIONS, OF INDIVIDUAL 

7 HEALTH INSURANCE COVERAGE. 

8 (a) CLARIFICATION REGARDING APPLICATION OF

9 GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH

10 INSURANCE COVERAGE.—Section 2742 of the Public 

11 Health Service Act (42 U.S.C. 300gg–42) is amended— 

12 (1) in its heading, by inserting ‘‘, continuation 

13 in force, including prohibition of rescission,’’ after 

14 ‘‘guaranteed renewability’’; 

15 (2) in subsection (a), by inserting ‘‘, including 

16 without rescission,’’ after ‘‘continue in force’’; and 

17 (3) in subsection (b)(2), by inserting before the 

18 period at the end the following: ‘‘, including inten19 tional concealment of material facts regarding a 

20 health condition related to the condition for which 

21 coverage is being claimed’’. 

22 (b) OPPORTUNITY FOR INDEPENDENT, EXTERNAL

23 THIRD PARTY REVIEW IN CERTAIN CASES.—Subpart 1 

24 of part B of title XXVII of the Public Health Service Act 

25 is amended by adding at the end the following new section: 


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1 ‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 

2 THIRD PARTY REVIEW IN CERTAIN CASES. 

3 ‘‘(a) NOTICE AND REVIEW RIGHT.—If a health in4 surance issuer determines to nonrenew or not continue in 

5 force, including rescind, health insurance coverage for an 

6 individual in the individual market on the basis described 

7 in section 2742(b)(2) before such nonrenewal, discontinu8 ation, or rescission, may take effect the issuer shall pro9 vide the individual with notice of such proposed non10 renewal, discontinuation, or rescission and an opportunity 

11 for a review of such determination by an independent, ex12 ternal third party under procedures specified by the Sec13 retary. 

14 ‘‘(b) INDEPENDENT DETERMINATION.—If the indi15 vidual requests such review by an independent, external 

16 third party of a nonrenewal, discontinuation, or rescission 

17 of health insurance coverage, the coverage shall remain in 

18 effect until such third party determines that the coverage 

19 may be nonrenewed, discontinued, or rescinded under sec20 tion 2742(b)(2).’’. 

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

22 this section shall apply after the date of the enactment 

23 of this Act with respect to health insurance coverage 

24 issued before, on, or after such date. 


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1 TITLE II—PROMOTING PATIENT 

2 CHOICE 

3 Subtitle A—Credit for Small Em4 ployers Adopting Auto-Enroll5 ment and Defined Contribution 

6 Options 

7 SEC. 201. CREDIT FOR SMALL EMPLOYERS ADOPTING 

8 AUTO-ENROLLMENT AND DEFINED CON9 TRIBUTION OPTIONS. 

10 (a) IN GENERAL.—Subpart D of part IV of sub11 chapter A of chapter 1 of the Internal Revenue Code of 

12 1986 (relating to business-related credits) is amended by 

13 adding at the end the following new section: 

14 ‘‘SEC. 45R. AUTO-ENROLLMENT AND DEFINED CONTRIBU15 TION OPTION FOR HEALTH BENEFITS PLANS 

16 OF SMALL EMPLOYERS. 

17 ‘‘(a) IN GENERAL.—For purposes of section 38, in 

18 the case of a small employer, the health benefits plan im19 plementation credit determined under this section for the 

20 taxable year is an amount equal to 100 percent of the 

21 amount paid or incurred by the taxpayer during the tax22 able year for qualified health benefits expenses. 

23 ‘‘(b) LIMITATION.—The credit determined under sub24 section (a) with respect to any taxpayer for any taxable 

25 year shall not exceed the excess of— 


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1 ‘‘(1) $1,500, over 

2 ‘‘(2) sum of the credits determined under sub3 section (a) with respect to such taxpayer for all pre4 ceding taxable years. 

5 ‘‘(c) QUALIFIED HEALTH BENEFITS EXPENSES.— 

6 For purposes of this section, the term ‘qualified health 

7 benefits auto-enrollment expenses’ means, with respect to 

8 any taxable year, amounts paid or incurred by the tax9 payer during such taxable year for— 

10 ‘‘(1) establishing auto-enrollment which meets 

11 the requirements of section 107 of the for coverage 

12 of a participant or beneficiary under a group health 

13 plan, or health insurance coverage offered in connec14 tion with such a plan, and 

15 ‘‘(2) implementing the employer contribution 

16 option for health insurance coverage pursuant to 

17 section 5000(e)(2). 

18 ‘‘(d) QUALIFIED SMALL EMPLOYER.—For purposes 

19 of this section, the term ‘qualified small employer’ means 

20 any employer for any taxable year if the number of em21 ployees employed by such employer during such taxable 

22 year does not exceed 50. All employers treated as a single 

23 employer under subsection (a) or (b) of section 52 shall 

24 be treated as a single employer for purposes of this sec25 tion. 


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1 ‘‘(e) NO DOUBLE BENEFIT.—No deduction or credit 

2 shall be allowed under any other provision of this chapter 

3 with respect to the amount of the credit determined under 

4 this section. 

5 ‘‘(f) TERMINATION.—Subsection (a) shall not apply 

6 to any taxable year beginning after the date which is 2 

7 years after the date of the enactment of this section.’’. 

8 (b) CREDIT TO BE PART OF GENERAL BUSINESS

9 CREDIT.—Subsection (b) of section 38 of such Code (re10 lating to general business credit) is amended by striking 

11 ‘‘plus’’ at the end of paragraph (34), by striking the period 

12 at the end of paragraph (35) and inserting ‘‘, plus’’ , and 

13 by adding at the end the following new paragraph: 

14 ‘‘(36) in the case of a small employer (as de15 fined in section 45R(d)), the health benefits plan im16 plementation credit determined under section 

17 45R(a).’’. 

18 (c) CLERICAL AMENDMENT.—The table of sections 

19 for subpart D of part IV of subchapter A of chapter 1 

20 of such Code is amended by inserting after the item relat21 ing to section 45Q the following new item: 

‘‘Sec. 45R. Auto-enrollment and defined contribution option for health benefits 

plans of small employers.’’. 

22 (d) 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 Subtitle B—Tax Incentives for 

2 Long-Term Care Insurance 

3 SEC. 211. TREATMENT OF PREMIUMS ON QUALIFIED LONG4 TERM CARE INSURANCE CONTRACTS. 

5 (a) IN GENERAL.—Part VII of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 (relating to 

7 additional itemized deductions) is amended by redesig8 nating section 224 as section 225 and by inserting after 

9 section 223 the following new section: 

10 ‘‘SEC. 224. PREMIUMS ON QUALIFIED LONG-TERM CARE IN11 SURANCE CONTRACTS. 

12 ‘‘(a) IN GENERAL.—In the case of an individual, 

13 there shall be allowed as a deduction an amount equal to 

14 the applicable percentage of eligible long-term care pre15 miums (as defined in section 213(d)(10)) paid during the 

16 taxable year for coverage for the taxpayer and the tax17 payer’s spouse and dependents under a qualified long-term 

18 care insurance contract (as defined in section 7702B(b)). 

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

20 subsection (a), the applicable percentage shall be deter21 mined in accordance with the following table: 

‘‘For taxable years beginning The applicable 

in calendar year— percentage is— 

2010 or 2011 ............................................................................... 25

2012 ............................................................................................. 35

2013 ............................................................................................. 65

2014 or thereafter ....................................................................... 100. 


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1 ‘‘(c) COORDINATION WITH OTHER DEDUCTIONS.— 

2 Any amount paid by a taxpayer for any qualified long3 term care insurance contract to which subsection (a) ap4 plies shall not be taken into account in computing the 

5 amount allowable to the taxpayer as a deduction under 

6 section 162(l) or 213(a).’’. 

7 (b) LONG-TERM CARE INSURANCE PERMITTED TO

8 BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE

9 SPENDING ARRANGEMENTS.— 

10 (1) CAFETERIA PLANS.—The last sentence of 

11 section 125(f) of such Code (defining qualified bene12 fits) is amended by inserting before the period at the 

13 end ‘‘; except that such term shall include the pay14 ment of premiums for any qualified long-term care 

15 insurance contract (as defined in section 7702B) to 

16 the extent the amount of such payment does not ex17 ceed the eligible long-term care premiums (as de18 fined in section 213(d)(10)) for such contract’’. 

19 (2) FLEXIBLE SPENDING ARRANGEMENTS.— 

20 Section 106 of such Code (relating to contributions 

21 by an employer to accident and health plans) is 

22 amended by striking subsection (c) and redesig23 nating subsections (d) and (e) as subsections (c) and 

24 (d), respectively. 

25 (c) CONFORMING AMENDMENTS.— 


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1 (1) Section 62(a) of such Code is amended by 

2 inserting before the last sentence at the end the fol3 lowing new paragraph: 

4 ‘‘(22) PREMIUMS ON QUALIFIED LONG-TERM

5 CARE INSURANCE CONTRACTS.—The deduction al6 lowed by section 224.’’. 

7 (2) Sections 223(b)(4)(B), 223(d)(4)(C), 

8 223(f)(3)(B), 3231(e)(11), 3306(b)(18), 

9 3401(a)(22), 4973(g)(1), and 4973(g)(2)(B)(i) of 

10 such Code are each amended by striking ‘‘section 

11 106(d)’’ and inserting ‘‘section 106(c)’’. 

12 (3) Section 223(c)(1)(B)(iii)(II) of such Code is 

13 amended by striking ‘‘106(e)’’ and inserting 

14 ‘‘106(d)’’. 

15 (4) Section 6041 of such Code is amended— 

16 (A) in subsection (f)(1) by striking ‘‘(as 

17 defined in section 106(c)(2))’’, and 

18 (B) by adding at the end the following new 

19 subsection: 

20 ‘‘(h) FLEXIBLE SPENDING ARRANGEMENT DE21 FINED.—For purposes of this section, a flexible spending 

22 arrangement is a benefit program which provides employ23 ees with coverage under which— 


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1 ‘‘(1) specified incurred expenses may be reim2 bursed (subject to reimbursement maximums and 

3 other reasonable conditions), and 

4 ‘‘(2) the maximum amount of reimbursement 

5 which is reasonably available to a participant for 

6 such coverage is less than 500 percent of the value 

7 of such coverage. 

8 In the case of an insured plan, the maximum amount rea9 sonably available shall be determined on the basis of the 

10 underlying coverage.’’. 

11 (5) The table of sections for part VII of sub12 chapter B of chapter 1 of such Code is amended by 

13 striking the last item and inserting the following 

14 new items: 

‘‘Sec. 224. Premiums on qualified long-term care insurance contracts. 

‘‘Sec. 225. Cross reference.’’. 

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

16 this section shall apply to taxable years beginning after 

17 December 31, 2009. 

18 SEC. 212. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE 

19 NEEDS. 

20 (a) IN GENERAL.—Subpart A of part IV of sub21 chapter A of chapter 1 of the Internal Revenue Code of 

22 1986 (relating to nonrefundable personal credits) is 

23 amended by inserting after section 25D the following new 

24 section: 


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1 ‘‘SEC. 25E. CREDIT FOR TAXPAYERS WITH LONG-TERM 

2 CARE NEEDS. 

3 ‘‘(a) ALLOWANCE OF CREDIT.— 

4 ‘‘(1) IN GENERAL.—There shall be allowed as a 

5 credit against the tax imposed by this chapter for 

6 the taxable year an amount equal to the applicable 

7 credit amount multiplied by the number of applica8 ble individuals with respect to whom the taxpayer is 

9 an eligible caregiver for the taxable year. 

10 ‘‘(2) APPLICABLE CREDIT AMOUNT.—For pur11 poses of paragraph (1), the applicable credit amount 

12 shall be determined in accordance with the following 

13 table: 

‘‘For taxable years beginning The applicable 

in calendar year— credit amount is— 

2010 ............................................................................................. 1,500

2011 ............................................................................................. 2,000

2012 ............................................................................................. 2,500

2013 or thereafter ....................................................................... 3,000. 

14 ‘‘(b) LIMITATION BASED ON ADJUSTED GROSS IN15 COME.— 

16 ‘‘(1) IN GENERAL.—The amount of the credit 

17 allowable under subsection (a) shall be reduced (but 

18 not below zero) by $100 for each $1,000 (or fraction 

19 thereof) by which the taxpayer’s modified adjusted 

20 gross income exceeds the threshold amount. For 

21 purposes of the preceding sentence, the term ‘modi22 fied adjusted gross income’ means adjusted gross inVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00119 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 come increased by any amount excluded from gross 

2 income under section 911, 931, or 933. 

3 ‘‘(2) THRESHOLD AMOUNT.—For purposes of 

4 paragraph (1), the term ‘threshold amount’ means— 

5 ‘‘(A) $150,000 in the case of a joint re6 turn, and 

7 ‘‘(B) $75,000 in any other case. 

8 ‘‘(3) INDEXING.—In the case of any taxable 

9 year beginning in a calendar year after 2010, each 

10 dollar amount contained in paragraph (2) shall be 

11 increased by an amount equal to the product of— 

12 ‘‘(A) such dollar amount, and 

13 ‘‘(B) the medical care cost adjustment de14 termined under section 213(d)(10)(B)(ii) for 

15 the calendar year in which the taxable year be16 gins, determined by substituting ‘August 2009’ 

17 for ‘August 1996’ in subclause (II) thereof. 

18 If any increase determined under the preceding sen19 tence is not a multiple of $50, such increase shall 

20 be rounded to the next lowest multiple of $50. 

21 ‘‘(c) DEFINITIONS.—For purposes of this section: 

22 ‘‘(1) APPLICABLE INDIVIDUAL.— 

23 ‘‘(A) IN GENERAL.—The term ‘applicable 

24 individual’ means, with respect to any taxable 

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1 fore the due date for filing the return of tax for 

2 the taxable year (without extensions), by a phy3 sician (as defined in section 1861(r)(1) of the 

4 Social Security Act) as being an individual with 

5 long-term care needs described in subparagraph 

6 (B) for a period— 

7 ‘‘(i) which is at least 180 consecutive 

8 days, and 

9 ‘‘(ii) a portion of which occurs within 

10 the taxable year. 

11 Notwithstanding the preceding sentence, a cer12 tification shall not be treated as valid unless it 

is made within the 391 13 ⁄2 month period ending 

14 on such due date (or such other period as the 

15 Secretary prescribes). 

16 ‘‘(B) INDIVIDUALS WITH LONG-TERM CARE

17 NEEDS.—An individual is described in this sub18 paragraph if the individual meets any of the fol19 lowing requirements: 

20 ‘‘(i) The individual is at least 6 years 

21 of age and— 

22 ‘‘(I) is unable to perform (with23 out substantial assistance from an24 other individual) at least 3 activities 

25 of daily living (as defined in section 


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1 7702B(c)(2)(B)) due to a loss of 

2 functional capacity, or 

3 ‘‘(II) requires substantial super4 vision to protect such individual from 

5 threats to health and safety due to se6 vere cognitive impairment and is un7 able to perform, without reminding or 

8 cuing assistance, at least 1 activity of 

9 daily living (as so defined) or to the 

10 extent provided in regulations pre11 scribed by the Secretary (in consulta12 tion with the Secretary of Health and 

13 Human Services), is unable to engage 

14 in age appropriate activities. 

15 ‘‘(ii) The individual is at least 2 but 

16 not 6 years of age and is unable due to a 

17 loss of functional capacity to perform 

18 (without substantial assistance from an19 other individual) at least 2 of the following 

20 activities: eating, transferring, or mobility. 

21 ‘‘(iii) The individual is under 2 years 

22 of age and requires specific durable med23 ical equipment by reason of a severe health 

24 condition or requires a skilled practitioner 

25 trained to address the individual’s condiVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00122 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 tion to be available if the individual’s par2 ents or guardians are absent. 

3 ‘‘(2) ELIGIBLE CAREGIVER.— 

4 ‘‘(A) IN GENERAL.—A taxpayer shall be 

5 treated as an eligible caregiver for any taxable 

6 year with respect to the following individuals: 

7 ‘‘(i) The taxpayer. 

8 ‘‘(ii) The taxpayer’s spouse. 

9 ‘‘(iii) An individual with respect to 

10 whom the taxpayer is allowed a deduction 

11 under section 151(c) for the taxable year. 

12 ‘‘(iv) An individual who would be de13 scribed in clause (iii) for the taxable year 

14 if section 151(c) were applied by sub15 stituting for the exemption amount an 

16 amount equal to the sum of the exemption 

17 amount, the standard deduction under sec18 tion 63(c)(2)(C), and any additional stand19 ard deduction under section 63(c)(3) which 

20 would be applicable to the individual if 

21 clause (iii) applied. 

22 ‘‘(v) An individual who would be de23 scribed in clause (iii) for the taxable year 

24 if— 


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1 ‘‘(I) the requirements of clause 

2 (iv) are met with respect to the indi3 vidual, and 

4 ‘‘(II) the requirements of sub5 paragraph (B) are met with respect to 

6 the individual in lieu of the support 

7 test under subsection (c)(1)(D) or 

8 (d)(1)(C) of section 152. 

9 ‘‘(B) RESIDENCY TEST.—The require10 ments of this subparagraph are met if an indi11 vidual has as his principal place of abode the 

12 home of the taxpayer and— 

13 ‘‘(i) in the case of an individual who 

14 is an ancestor or descendant of the tax15 payer or the taxpayer’s spouse, is a mem16 ber of the taxpayer’s household for over 

17 half the taxable year, or 

18 ‘‘(ii) in the case of any other indi19 vidual, is a member of the taxpayer’s 

20 household for the entire taxable year. 

21 ‘‘(C) SPECIAL RULES WHERE MORE THAN

22 1 ELIGIBLE CAREGIVER.— 

23 ‘‘(i) IN GENERAL.—If more than 1 in24 dividual is an eligible caregiver with re25 spect to the same applicable individual for 


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1 taxable years ending with or within the 

2 same calendar year, a taxpayer shall be 

3 treated as the eligible caregiver if each 

4 such individual (other than the taxpayer) 

5 files a written declaration (in such form 

6 and manner as the Secretary may pre7 scribe) that such individual will not claim 

8 such applicable individual for the credit 

9 under this section. 

10 ‘‘(ii) NO AGREEMENT.—If each indi11 vidual required under clause (i) to file a 

12 written declaration under clause (i) does 

13 not do so, the individual with the highest 

14 adjusted gross income shall be treated as 

15 the eligible caregiver. 

16 ‘‘(iii) MARRIED INDIVIDUALS FILING

17 SEPARATELY.—In the case of married indi18 viduals filing separately, the determination 

19 under this subparagraph as to whether the 

20 husband or wife is the eligible caregiver 

21 shall be made under the rules of clause (ii) 

22 (whether or not one of them has filed a 

23 written declaration under clause (i)). 

24 ‘‘(d) IDENTIFICATION REQUIREMENT.—No credit 

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1 spect to any applicable individual unless the taxpayer in2 cludes the name and taxpayer identification number of 

3 such individual, and the identification number of the phy4 sician certifying such individual, on the return of tax for 

5 the taxable year. 

6 ‘‘(e) TAXABLE YEAR MUST BE FULL TAXABLE

7 YEAR.—Except in the case of a taxable year closed by rea8 son of the death of the taxpayer, no credit shall be allow9 able under this section in the case of a taxable year cov10 ering a period of less than 12 months.’’. 

11 (b) CONFORMING AMENDMENTS.— 

12 (1) Section 6213(g)(2) of such Code is amend13 ed by striking ‘‘and’’ at the end of subparagraph 

14 (L), by striking the period at the end of subpara15 graph (M) and inserting ‘‘, and’’, and by inserting 

16 after subparagraph (M) the following new subpara17 graph: 

18 ‘‘(N) an omission of a correct TIN or phy19 sician identification required under section 

20 25E(d) (relating to credit for taxpayers with 

21 long-term care needs) to be included on a re22 turn.’’. 

23 (2) The table of sections for subpart A of part 

24 IV of subchapter A of chapter 1 of such Code is 


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1 amended by inserting after the item relating to sec2 tion 25D the following new item: 

‘‘Sec. 25E. Credit for taxpayers with long-term care needs.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2009. 

6 SEC. 213. ADDITIONAL CONSUMER PROTECTIONS FOR 

7 LONG-TERM CARE INSURANCE. 

8 (a) ADDITIONAL PROTECTIONS APPLICABLE TO

9 LONG-TERM CARE INSURANCE.—Subparagraphs (A) and 

10 (B) of section 7702B(g)(2) of the Internal Revenue Code 

11 of 1986 (relating to requirements of model regulation and 

12 Act) are amended to read as follows: 

13 ‘‘(A) IN GENERAL.—The requirements of 

14 this paragraph are met with respect to any con15 tract if such contract meets— 

16 ‘‘(i) MODEL REGULATION.—The fol17 lowing requirements of the model regula18 tion: 

19 ‘‘(I) Section 6A (relating to guar20 anteed renewal or noncancellability), 

21 other than paragraph (5) thereof, and 

22 the requirements of section 6B of the 

23 model Act relating to such section 6A. 

24 ‘‘(II) Section 6B (relating to pro25 hibitions on limitations and excluVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00127 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 sions) other than paragraph (7) there2 of. 

3 ‘‘(III) Section 6C (relating to ex4 tension of benefits). 

5 ‘‘(IV) Section 6D (relating to 

6 continuation or conversion of cov7 erage). 

8 ‘‘(V) Section 6E (relating to dis9 continuance and replacement of poli10 cies). 

11 ‘‘(VI) Section 7 (relating to unin12 tentional lapse). 

13 ‘‘(VII) Section 8 (relating to dis14 closure), other than sections 8F, 8G, 

15 8H, and 8I thereof. 

16 ‘‘(VIII) Section 11 (relating to 

17 prohibitions against post-claims un18 derwriting). 

19 ‘‘(IX) Section 12 (relating to 

20 minimum standards). 

21 ‘‘(X) Section 13 (relating to re22 quirement to offer inflation protec23 tion). 

24 ‘‘(XI) Section 25 (relating to pro25 hibition against preexisting conditions 


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1 and probationary periods in replace2 ment policies or certificates). 

3 ‘‘(XII) The provisions of section 

4 26 relating to contingent nonforfeiture 

5 benefits, if the policyholder declines 

6 the offer of a nonforfeiture provision 

7 described in paragraph (4). 

8 ‘‘(ii) MODEL ACT.—The following re9 quirements of the model Act: 

10 ‘‘(I) Section 6C (relating to pre11 existing conditions). 

12 ‘‘(II) Section 6D (relating to 

13 prior hospitalization). 

14 ‘‘(III) The provisions of section 8 

15 relating to contingent nonforfeiture 

16 benefits, if the policyholder declines 

17 the offer of a nonforfeiture provision 

18 described in paragraph (4). 

19 ‘‘(B) DEFINITIONS.—For purposes of this 

20 paragraph: 

21 ‘‘(i) MODEL PROVISIONS.—The terms 

22 ‘model regulation’ and ‘model Act’ mean 

23 the long-term care insurance model regula24 tion, and the long-term care insurance 

25 model Act, respectively, promulgated by 


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1 the National Association of Insurance 

2 Commissioners (as adopted as of December 

3 31, 2008). 

4 ‘‘(ii) COORDINATION.—Any provision 

5 of the model regulation or model Act listed 

6 under clause (i) or (ii) of subparagraph 

7 (A) shall be treated as including any other 

8 provision of such regulation or Act nec9 essary to implement the provision. 

10 ‘‘(iii) DETERMINATION.—For pur11 poses of this section and section 4980C, 

12 the determination of whether any require13 ment of a model regulation or the model 

14 Act has been met shall be made by the 

15 Secretary.’’. 

16 (b) EXCISE TAX.—Paragraph (1) of section 

17 4980C(c) of the Internal Revenue Code of 1986 (relating 

18 to requirements of model provisions) is amended to read 

19 as follows: 

20 ‘‘(1) REQUIREMENTS OF MODEL PROVISIONS.— 

21 ‘‘(A) MODEL REGULATION.—The following 

22 requirements of the model regulation must be 

23 met: 

24 ‘‘(i) Section 9 (relating to required 

25 disclosure of rating practices to consumer). 


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1 ‘‘(ii) Section 14 (relating to applica2 tion forms and replacement coverage). 

3 ‘‘(iii) Section 15 (relating to reporting 

4 requirements). 

5 ‘‘(iv) Section 22 (relating to filing re6 quirements for marketing). 

7 ‘‘(v) Section 23 (relating to standards 

8 for marketing), including inaccurate com9 pletion of medical histories, other than 

10 paragraphs (1), (6), and (9) of section 

11 23C. 

12 ‘‘(vi) Section 24 (relating to suit13 ability). 

14 ‘‘(vii) Section 29 (relating to standard 

15 format outline of coverage). 

16 ‘‘(viii) Section 30 (relating to require17 ment to deliver shopper’s guide). 

18 The requirements referred to in clause (vi) shall 

19 not include those portions of the personal work20 sheet described in Appendix B relating to con21 sumer protection requirements not imposed by 

22 section 4980C or 7702B. 

23 ‘‘(B) MODEL ACT.—The following require24 ments of the model Act must be met: 


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1 ‘‘(i) Section 6F (relating to right to 

2 return). 

3 ‘‘(ii) Section 6G (relating to outline of 

4 coverage). 

5 ‘‘(iii) Section 6H (relating to require6 ments for certificates under group plans). 

7 ‘‘(iv) Section 6J (relating to policy 

8 summary). 

9 ‘‘(v) Section 6K (relating to monthly 

10 reports on accelerated death benefits). 

11 ‘‘(vi) Section 7 (relating to incontest12 ability period). 

13 ‘‘(C) DEFINITIONS.—For purposes of this 

14 paragraph, the terms ‘model regulation’ and 

15 ‘model Act’ have the meanings given such terms 

16 by section 7702B(g)(2)(B).’’. 

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

18 this section shall apply to policies issued after December 

19 31, 2009. 


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1 Subtitle C—Comparative 

2 Effectiveness Research 

3 SEC. 221. PROHIBITION ON CERTAIN USES OF DATA OB4 TAINED FROM COMPARATIVE EFFECTIVE5 NESS RESEARCH; ACCOUNTING FOR PERSON6 ALIZED MEDICINE AND DIFFERENCES IN PA7 TIENT TREATMENT RESPONSE. 

8 (a) IN GENERAL.—Notwithstanding any other provi9 sion of law, the Secretary of Health and Human Serv10 ices— 

11 (1) shall not use data obtained from the con12 duct of comparative effectiveness research, including 

13 such research that is conducted or supported using 

14 funds appropriated under the American Recovery 

15 and Reinvestment Act of 2009 (Public Law 111–5), 

16 to deny coverage of an item or service under a Fed17 eral health care program (as defined in section 

18 1128B(f) of the Social Security Act (42 U.S.C. 

19 1320a–7b(f))); and 

20 (2) shall ensure that comparative effectiveness 

21 research conducted or supported by the Federal 

22 Government accounts for factors contributing to dif23 ferences in the treatment response and treatment 

24 preferences of patients, including patient-reported 

25 outcomes, genomics and personalized medicine, the 


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1 unique needs of health disparity populations, and in2 direct patient benefits. 

3 (b) RULE OF CONSTRUCTION.—Nothing in this sec4 tion shall be construed as affecting the authority of the 

5 Commissioner of Food and Drugs under the Federal 

6 Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) 

7 or the Public Health Service Act (42 U.S.C. 201 et seq.). 

8 Subtitle D—Programs of Health 

9 Promotion or Disease Prevention 

10 SEC. 231. PROGRAMS OF HEALTH PROMOTION OR DISEASE 

11 PREVENTION. 

12 (a) IN GENERAL.—Nothing in the Public Health 

13 Service Act, Employee Retirement Income Security Act of 

14 1974, or the Internal Revenue Code of 1986 (or any 

15 amendment made by this Act) shall be applied, adminis16 tered, or interpreted to prevent an employer from estab17 lishing premium discounts or rebates, or modifying copay18 ments or deductibles, in the case of employees who adhere 

19 to, or participate in, a program of health promotion or 

20 disease prevention which meets the requirements of sub21 section (b). 

22 (b) PROGRAMS OF HEALTH PROMOTION OR DISEASE

23 PREVENTION TO WHICH SECTION APPLIES.— 

24 (1) GENERAL PROVISIONS.— 


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1 (A) GENERAL RULE.—For purposes of 

2 paragraph (2)(B), a program of health pro3 motion or disease prevention (referred to in this 

4 subsection as a ‘‘wellness program’’) shall be a 

5 program that is designed to promote health or 

6 prevent disease that meets the applicable re7 quirements of this subsection. 

8 (B) NO CONDITIONS BASED ON HEALTH

9 STATUS FACTOR.—If none of the conditions for 

10 obtaining a premium discount or rebate or 

11 other reward for participation in a wellness pro12 gram is based on an individual satisfying a 

13 standard that is related to a health status fac14 tor, such wellness program shall not violate this 

15 section if participation in the program is made 

16 available to all similarly situated individuals 

17 and the requirements of paragraph (2) are com18 plied with. 

19 (C) CONDITIONS BASED ON HEALTH STA20 TUS FACTOR.—If any of the conditions for ob21 taining a premium discount or rebate or other 

22 reward for participation in a wellness program 

23 is based on an individual satisfying a standard 

24 that is related to a health status factor, such 

25 wellness program shall not violate this section if 


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1 the requirements of paragraph (3) are complied 

2 with. 

3 (2) WELLNESS PROGRAMS NOT SUBJECT TO

4 REQUIREMENTS.—If none of the conditions for ob5 taining a premium discount or rebate or other re6 ward under a wellness program as described in para7 graph (1)(B) are based on an individual satisfying 

8 a standard that is related to a health status factor 

9 (or if such a wellness program does not provide such 

10 a reward), the wellness program shall not violate 

11 this section if participation in the program is made 

12 available to all similarly situated individuals. The 

13 following programs shall not have to comply with the 

14 requirements of paragraph (3) if participation in the 

15 program is made available to all similarly situated 

16 individuals: 

17 (A) A program that reimburses all or part 

18 of the cost for memberships in a fitness center. 

19 (B) A diagnostic testing program that pro20 vides a reward for participation and does not 

21 base any part of the reward on outcomes. 

22 (C) A program that encourages preventive 

23 care related to a health condition through the 

24 waiver of the copayment or deductible require25 ment under an individual or group health plan 


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1 for the costs of certain items or services related 

2 to a health condition (such as prenatal care or 

3 well-baby visits). 

4 (D) A program that reimburses individuals 

5 for the costs of smoking cessation programs 

6 without regard to whether the individual quits 

7 smoking. 

8 (E) A program that provides a reward to 

9 individuals for attending a periodic health edu10 cation seminar. 

11 (3) WELLNESS PROGRAMS SUBJECT TO RE12 QUIREMENTS.—If any of the conditions for obtaining 

13 a premium discount, rebate, or reward under a 

14 wellness program as described in paragraph (1)(C) 

15 is based on an individual satisfying a standard that 

16 is related to a health status factor, the wellness pro17 gram shall not violate this section if the following re18 quirements are complied with: 

19 (A) The reward for the wellness program, 

20 together with the reward for other wellness pro21 grams with respect to the plan that requires 

22 satisfaction of a standard related to a health 

23 status factor, shall not exceed 50 percent of the 

24 cost of employee-only coverage under the plan. 

25 If, in addition to employees or individuals, any 


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1 class of dependents (such as spouses or spouses 

2 and dependent children) may participate fully 

3 in the wellness program, such reward shall not 

4 exceed 50 percent of the cost of the coverage in 

5 which an employee or individual and any de6 pendents are enrolled. For purposes of this 

7 paragraph, the cost of coverage shall be deter8 mined based on the total amount of employer 

9 and employee contributions for the benefit 

10 package under which the employee is (or the 

11 employee and any dependents are) receiving 

12 coverage. A reward may be in the form of a dis13 count or rebate of a premium or contribution, 

14 a waiver of all or part of a cost-sharing mecha15 nism (such as deductibles, copayments, or coin16 surance), the absence of a surcharge, or the 

17 value of a benefit that would otherwise not be 

18 provided under the plan. 

19 (B) The wellness program shall be reason20 ably designed to promote health or prevent dis21 ease. A program complies with the preceding 

22 sentence if the program has a reasonable 

23 chance of improving the health of, or preventing 

24 disease in, participating individuals and it is 

25 not overly burdensome, is not a subterfuge for 


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1 discriminating based on a health status factor, 

2 and is not highly suspect in the method chosen 

3 to promote health or prevent disease. The plan 

4 or issuer shall evaluate the program’s reason5 ableness at least once per year. 

6 (C) The plan shall give individuals eligible 

7 for the program the opportunity to qualify for 

8 the reward under the program at least once 

9 each year. 

10 (D) The full reward under the wellness 

11 program shall be made available to all similarly 

12 situated individuals. For such purpose, the fol13 lowing applies: 

14 (i) The reward is not available to all 

15 similarly situated individuals for a period 

16 unless the wellness program allows— 

17 (I) for a reasonable alternative 

18 standard (or waiver of the otherwise 

19 applicable standard) for obtaining the 

20 reward for any individual for whom, 

21 for that period, it is unreasonably dif22 ficult due to a medical condition to 

23 satisfy the otherwise applicable stand24 ard; and 


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1 (II) for a reasonable alternative 

2 standard (or waiver of the otherwise 

3 applicable standard) for obtaining the 

4 reward for any individual for whom, 

5 for that period, it is medically inadvis6 able to attempt to satisfy the other7 wise applicable standard. 

8 (ii) If reasonable under the cir9 cumstances, the plan or issuer may seek 

10 verification, such as a statement from an 

11 individual’s physician, that a health status 

12 factor makes it unreasonably difficult or 

13 medically inadvisable for the individual to 

14 satisfy or attempt to satisfy the otherwise 

15 applicable standard. 

16 (E) The plan or issuer involved shall dis17 close in all plan materials describing the terms 

18 of the wellness program the availability of a 

19 reasonable alternative standard (or the possi20 bility of waiver of the otherwise applicable 

21 standard) required under subparagraph (D). If 

22 plan materials disclose that such a program is 

23 available, without describing its terms, the dis24 closure under this subparagraph shall not be re25 quired. 


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1 (c) EXISTING PROGRAMS.—Nothing in this section 

2 shall prohibit a program of health promotion or disease 

3 prevention that was established prior to the date of enact4 ment of this section and applied with all applicable regula5 tions, and that is operating on such date, from continuing 

6 to be carried out for as long as such regulations remain 

7 in effect. 

8 (d) REGULATIONS.—Nothing in this section shall be 

9 construed as prohibiting the Secretaries of Labor, Health 

10 and Human Services, or the Treasury from promulgating 

11 regulations in connection with this section. 

12 TITLE III—STRENGTHENING 

13 SAFETY NET PROGRAMS 

14 Subtitle A—Beneficiary Choice 

15 Under Medicaid and SCHIP 

16 SEC. 301. EASING ADMINISTRATIVE BARRIERS TO STATE 

17 COOPERATION WITH EMPLOYER-SPONSORED 

18 INSURANCE COVERAGE. 

19 (a) REQUIRING SOME COVERAGE FOR EMPLOYER20 SPONSORED INSURANCE.— 

21 (1) IN GENERAL.—Section 2102(a) of the So22 cial Security Act (42 U.S.C. 1397b(a)) is amend23 ed— 

24 (A) in paragraph (6), by striking ‘‘and’’ at 

25 the end; 


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1 (B) in paragraph (7), by striking the pe2 riod at the end and inserting ‘‘; and’’; and 

3 (C) by adding at the end the following new 

4 paragraph: 

5 ‘‘(8) effective for plan years beginning on or 

6 after October 1, 2010, how the plan will provide for 

7 child health assistance with respect to targeted low8 income children who have access to coverage under 

9 a group health plan.’’. 

10 (2) EFFECTIVE DATE.—The amendments made 

11 by paragraph (1) shall apply beginning with fiscal 

12 year 2011. 

13 (b) FEDERAL FINANCIAL PARTICIPATION FOR EM14 PLOYER-SPONSORED INSURANCE.—Section 2105 of such 

15 Act (42 U.S.C. 1397d) is amended— 

16 (1) in subsection (a)(1)(C), by inserting before 

17 the semicolon at the end the following: ‘‘and, subject 

18 to paragraph (3)(C) of subsection (c), in the form of 

19 payment of the premiums for coverage under a 

20 group health plan that includes coverage of targeted 

21 low-income children and benefits supplemental to 

22 such coverage’’; and 

23 (2) by amending paragraph (3) of subsection 

24 (c) to read as follows: 


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1 ‘‘(3) PURCHASE OF EMPLOYER-SPONSORED IN2 SURANCE.— 

3 ‘‘(A) IN GENERAL.—Payment may be 

4 made to a State under subsection (a)(1)(C), 

5 subject to the provisions of this paragraph, for 

6 the purchase of family coverage under a group 

7 health plan that includes coverage of targeted 

8 low-income children unless such coverage would 

9 otherwise substitute for coverage that would be 

10 provided to such children but for the purchase 

11 of family coverage. 

12 ‘‘(B) WAIVER OF CERTAIN PROVISIONS.— 

13 With respect to coverage described in subpara14 graph (A)— 

15 ‘‘(i) notwithstanding section 2102, no 

16 minimum benefits requirement (other than 

17 those otherwise applicable with respect to 

18 services within the categories of basic serv19 ices described in section 2103(c)(1) and 

20 emergency services) under this title shall 

21 apply; and 

22 ‘‘(ii) no limitation on beneficiary cost23 sharing otherwise applicable under this 

24 title or title XIX shall apply. 


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1 ‘‘(C) REQUIRED PROVISION OF SUPPLE2 MENTAL BENEFITS.—If the coverage described 

3 in subparagraph (A) does not provide coverage 

4 for the services in each of the categories of 

5 basic services described in section 2103(c)(1) 

6 and for emergency services, the State child 

7 health plan shall provide coverage of such serv8 ices as supplemental benefits. 

9 ‘‘(D) LIMITATION ON FFP.—The amount 

10 of the payment under subsection (a)(1)(C) for 

11 coverage described in subparagraph (A) (and 

12 supplemental benefits under subparagraph (C) 

13 for individuals so covered) during a fiscal year 

14 may not exceed the product of— 

15 ‘‘(i) the national per capita expendi16 ture under this title (taking into account 

17 both Federal and State expenditures) for 

18 the previous fiscal year (as determined by 

19 the Secretary using the best available 

20 data); 

21 ‘‘(ii) the enhanced FMAP for the 

22 State and fiscal year involved; and 

23 ‘‘(iii) the number of targeted low-in24 come children for whom such coverage is 

25 provided. 


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1 ‘‘(E) VOLUNTARY ENROLLMENT.—A State 

2 child health plan— 

3 ‘‘(i) may not require a targeted low4 income child to enroll in family coverage 

5 described in subparagraph (A) in order to 

6 obtain child health assistance under this 

7 title; 

8 ‘‘(ii) before providing such child 

9 health assistance for such coverage of a 

10 child, shall make available (which may be 

11 through an Internet website or other 

12 means) to the parent or guardian of the 

13 child information on the coverage available 

14 under this title, including benefits and 

15 cost-sharing; and 

16 ‘‘(iii) shall provide at least one oppor17 tunity per fiscal year for beneficiaries to 

18 switch coverage under this title from cov19 erage described in subparagraph (A) to the 

20 coverage that is otherwise made available 

21 under this title. 

22 ‘‘(F) INFORMATION ON COVERAGE OP23 TIONS.—A State child health plan shall— 


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1 ‘‘(i) describe how the State will notify 

2 potential beneficiaries of coverage de3 scribed in subparagraph (A); 

4 ‘‘(ii) provide such notification in writ5 ing at least during the initial application 

6 for enrollment under this title and during 

7 redeterminations of eligibility if the indi8 vidual was enrolled before October 1, 2009; 

9 and 

10 ‘‘(iii) post a description of these cov11 erage options on any official Internet 

12 website that may be established by the 

13 State in connection with the plan. 

14 ‘‘(G) SEMIANNUAL VERIFICATION OF COV15 ERAGE.—If coverage described in subparagraph 

16 (A) is provided under a group health plan with 

17 respect to a targeted low-income child, the 

18 State child health plan shall provide for the col19 lection, at least once every six months, of proof 

20 from the plan that the child is enrolled in such 

21 coverage. 

22 ‘‘(H) RULE OF CONSTRUCTION.—Nothing 

23 in this section is to be construed to prohibit a 

24 State from— 


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1 ‘‘(i) offering wrap around benefits in 

2 order for a group health plan to meet any 

3 State-established minimum benefit require4 ments; 

5 ‘‘(ii) establishing a cost-effectiveness 

6 test to qualify for coverage under such a 

7 plan; 

8 ‘‘(iii) establishing limits on beneficiary 

9 cost-sharing under such a plan; 

10 ‘‘(iv) paying all or part of a bene11 ficiary’s cost-sharing requirements under 

12 such a plan; 

13 ‘‘(v) paying less than the full cost of 

14 the employee’s share of the premium under 

15 such a plan, including prorating the cost of 

16 the premium to pay for only what the 

17 State determines is the portion of the pre18 mium that covers targeted low-income chil19 dren; 

20 ‘‘(vi) using State funds to pay for 

21 benefits above the Federal upper limit es22 tablished under subparagraph (D); 

23 ‘‘(vii) allowing beneficiaries enrolled in 

24 group health plans from changing plans to 


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1 another coverage option available under 

2 this title at any time; or 

3 ‘‘(viii) providing any guidance or in4 formation it deems appropriate in order to 

5 help beneficiaries make an informed deci6 sion regarding the option to enroll in cov7 erage described in subparagraph (A). 

8 ‘‘(I) GROUP HEALTH PLAN DEFINED.—In 

9 this paragraph, the term ‘group health plan’ 

10 has the meaning given such term in section 

11 2791(a)(1) of the Public Health Service Act (42 

12 U.S.C. 300gg–91(a)(1)). 

13 ‘‘(J) ATTESTATION REQUIREMENT FOR

14 CERTAIN HIGHER INCOME CHILDREN.—Effec15 tive October 1, 2011, any State that provides 

16 for child health assistance under this title for 

17 children in families with gross income (as deter18 mined without regard to any income disregards 

19 or expense exclusions) that exceeds 200 percent 

20 of the poverty line shall require, as a condition 

21 of eligibility for child health assistance under 

22 this title (other than in the form of premium 

23 assistance under this paragraph) that there 

24 must be executed an attestation (under penalty 


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1 of perjury) that the child is not eligible for cov2 erage under any group health plan.’’. 

3 SEC. 302. IMPROVING BENEFICIARY CHOICE IN SCHIP. 

4 (a) REQUIRING OFFERING OF ALTERNATIVE COV5 ERAGE OPTIONS.—Section 2102 of the Social Security Act 

6 (42 U.S.C. 1397b), as amended by section 1781, is 

7 amended— 

8 (1) in subsection (a)— 

9 (A) in paragraph (7), by striking ‘‘and’’ at 

10 the end; 

11 (B) in paragraph (8), by striking the pe12 riod at the end and inserting ‘‘; and’’; and 

13 (C) by adding at the end the following new 

14 paragraph: 

15 ‘‘(9) effective for plan years beginning on or 

16 after October 1, 2010, how the plan will provide for 

17 child health assistance with respect to targeted low18 income children through alternative coverage options 

19 in accordance with subsection (d).’’; and 

20 (2) by adding at the end the following new sub21 section: 

22 ‘‘(d) ALTERNATIVE COVERAGE OPTIONS.— 

23 ‘‘(1) IN GENERAL.—Effective October 1, 2010, 

24 a State child health plan shall provide for the offer25 ing of any qualified alternative coverage that a 


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1 qualified entity seeks to offer to targeted low-income 

2 children through the plan in the State. 

3 ‘‘(2) APPLICATION OF UNIFORM FINANCIAL

4 LIMITATION FOR ALL ALTERNATIVE COVERAGE OP5 TIONS.—With respect to all qualified alternative cov6 erage offered in a State, the State child health plan 

7 shall establish a uniform dollar limitation on the per 

8 capita monthly amount that will be paid by the 

9 State to the qualified entity with respect to such 

10 coverage provided to a targeted low-income child. 

11 Such limitation may not be less than 90 percent of 

12 the per capita monthly payment made for coverage 

13 offered under the State child health plan that is not 

14 in the form of an alternative coverage option. Noth15 ing in this paragraph shall be construed— 

16 ‘‘(A) as requiring a State to provide for 

17 the full payment of premiums for qualified al18 ternative coverage; 

19 ‘‘(B) as preventing a State from charging 

20 additional premiums to cover the difference be21 tween the cost of qualified alternative coverage 

22 and the amount of such payment limitation; 

23 and 

24 ‘‘(C) as preventing a State from using its 

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1 ceeds the Federal financial participation as lim2 ited under section 2105(c)(8). 

3 ‘‘(3) QUALIFIED ALTERNATIVE COVERAGE DE4 FINED.—In this section, the term ‘qualified alter5 native coverage’ means health insurance coverage 

6 that— 

7 ‘‘(A) meets the coverage requirements of 

8 section 2103 (other than cost-sharing require9 ments of such section); and 

10 ‘‘(B) is offered by a qualified insurer, and 

11 not directly by the State. 

12 ‘‘(4) QUALIFIED INSURER DEFINED.—In this 

13 section, the term ‘qualified insurer’ means, with re14 spect to a State, an entity that is licensed to offer 

15 health insurance coverage in the State.’’. 

16 (b) FEDERAL FINANCIAL PARTICIPATION FOR

17 QUALIFIED ALTERNATIVE COVERAGE.—Section 2105 of 

18 such Act (42 U.S.C. 1397d), as amended by sections 

19 301(a) and 601(a) of the Children’s Health Insurance 

20 Program Reauthorization Act of 2009 (Public Law 111– 

21 5), is amended— 

22 (1) in subsection (a)(1)(C), as amended by sec23 tion 1781(b)(1), by inserting before the semicolon at 

24 the end the following: ‘‘and, subject to subsection 


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1 (c)(12)(C), in the form of payment of the premiums 

2 for coverage for qualified alternative coverage’’; and 

3 (2) by adding at the end of subsection (c) the 

4 following new paragraph: 

5 ‘‘(12) PURCHASE OF QUALIFIED ALTERNATIVE

6 COVERAGE.— 

7 ‘‘(A) IN GENERAL.—Payment may be 

8 made to a State under subsection (a)(1)(C), 

9 subject to the provisions of this paragraph, for 

10 the purchase of qualified alternative coverage. 

11 ‘‘(B) WAIVER OF CERTAIN PROVISIONS.— 

12 With respect to coverage described in subpara13 graph (A), no limitation on beneficiary cost14 sharing otherwise applicable under this title or 

15 title XIX shall apply. 

16 ‘‘(C) LIMITATION ON FFP.—The amount of 

17 the payment under paragraph (1)(C) for cov18 erage described in subparagraph (A) during a 

19 fiscal year in the aggregate for all such cov20 erage in the State may not exceed the product 

21 of— 

22 ‘‘(i) the national per capita expendi23 ture under this title (taking into account 

24 both Federal and State expenditures) for 

25 the previous fiscal year (as determined by 


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1 the Secretary using the best available 

2 data); 

3 ‘‘(ii) the enhanced FMAP for the 

4 State and fiscal year involved; and 

5 ‘‘(iii) the number of targeted low-in6 come children for whom such coverage is 

7 provided. 

8 ‘‘(D) VOLUNTARY ENROLLMENT.—A State 

9 child health plan— 

10 ‘‘(i) may not require a targeted low11 income child to enroll in coverage described 

12 in subparagraph (A) in order to obtain 

13 child health assistance under this title; 

14 ‘‘(ii) before providing such child 

15 health assistance for such coverage of a 

16 child, shall make available (which may be 

17 through an Internet website or other 

18 means) to the parent or guardian of the 

19 child information on the coverage available 

20 under this title, including benefits and 

21 cost-sharing; and 

22 ‘‘(iii) shall provide at least one oppor23 tunity per fiscal year for beneficiaries to 

24 switch coverage under this title from cov25 erage described in subparagraph (A) to the 


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1 coverage that is otherwise made available 

2 under this title. 

3 ‘‘(E) INFORMATION ON COVERAGE OP4 TIONS.—A State child health plan shall— 

5 ‘‘(i) describe how the State will notify 

6 potential beneficiaries of coverage de7 scribed in subparagraph (A); 

8 ‘‘(ii) provide such notification in writ9 ing at least during the initial application 

10 for enrollment under this title and during 

11 redeterminations of eligibility if the indi12 vidual was enrolled before October 1, 2009; 

13 and 

14 ‘‘(iii) post a description of these cov15 erage options on any official website that 

16 may be established by the State in connec17 tion with the plan. 

18 ‘‘(F) RULE OF CONSTRUCTION.—Nothing 

19 in this section is to be construed to prohibit a 

20 State from— 

21 ‘‘(i) establishing limits on beneficiary 

22 cost-sharing under such alternative cov23 erage; 


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1 ‘‘(ii) paying all or part of a bene2 ficiary’s cost-sharing requirements under 

3 such coverage; 

4 ‘‘(iii) paying less than the full cost of 

5 a child’s share of the premium under such 

6 coverage, insofar as the premium for such 

7 coverage exceeds the limitation established 

8 by the State under subparagraph (C); 

9 ‘‘(iv) using State funds to pay for 

10 benefits above the Federal upper limit es11 tablished under subparagraph (C); or 

12 ‘‘(v) providing any guidance or infor13 mation it deems appropriate in order to 

14 help beneficiaries make an informed deci15 sion regarding the option to enroll in cov16 erage described in subparagraph (A).’’. 

17 SEC. 303. APPLICATION TO MEDICAID. 

18 In accordance with rules established by the Secretary 

19 of Health and Human Services, the requirements imposed 

20 under a State child health plan under title XXI of the 

21 Social Security Act under the amendments made by the 

22 preceding sections of this subtitle shall apply in the same 

23 manner to a State plan under title XIX of such Act, except 

24 that— 


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1 (1) such requirements shall not apply to indi2 viduals whose eligibility for medical assistance under 

3 such title is based on being aged, blind, or disabled 

4 or to individuals with a category of individuals de5 scribed in section 1937(a)(2)(B) of such Act; and 

6 (2) the national per capita expenditures shall be 

7 determined based on a benchmark coverage de8 scribed in section 1937(b)(1) of such Act but with9 out regard to expenditures for individuals described 

10 in paragraph (1) or for nursing facility services and 

11 other long-term care services (as determined by the 

12 Secretary). 

13 SEC. 304. EXPANSION OF HEALTH OPPORTUNITY ACCOUNT 

14 PROGRAM. 

15 (a) IN GENERAL.—Section 613 of the Children’s 

16 Health Insurance Program Reauthorization Act of 2009 

17 (Public Law 111–3) is repealed. 

18 (b) EXPANSION.—Section 1938(a)(2) of the Social 

19 Security Act (42 U.S.C. 1396u–8(a)(2)) is amended— 

20 (1) in subparagraph (A) by striking everything 

21 following the first sentence; and 

22 (2) by striking subparagraph (B). 


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1 SEC. 305. VERIFICATION REQUIREMENTS TO PREVENT IL2 LEGAL ALIENS FROM RECEIVING MEDICAID 

3 BENEFITS. 

4 Section 1904 of the Social Security Act (42 U.S.C. 

5 1396c) is amended— 

6 (1) by striking ‘‘If the Secretary’’ and inserting 

7 the following: 

8 ‘‘(a) OVERSIGHT.—If the Secretary’’; and 

9 (2) by adding at the end the following new sub10 section: 

11 ‘‘(b) PREVENTING ILLEGAL ALIENS FROM RECEIV12 ING MEDICAID BENEFITS.— 

13 ‘‘(1) VERIFICATION AS CONDITION ON FUND14 ING.—Notwithstanding any other provision of law, 

15 subject to paragraphs (3) and (4), the Secretary 

16 shall not provide funding under 1903(a) for medical 

17 assistance provided to an individual (other than 

18 emergency services unless such individual has been 

19 determined to be eligible for medical assistance 

20 under this title on the basis of— 

21 ‘‘(A) United States citizenship or nation22 ality through the verification process described 

23 in section 1903(x); or 

24 ‘‘(B) qualified alien status through the im25 migration status verification system described 

26 in section 1137(d). 


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1 ‘‘(2) RULE OF CONSTRUCTION.—Nothing in the 

2 America’s Affordable Health Choices Act of 2009 or 

3 the amendments made by that Act shall be con4 strued as exempting any individual from the eligi5 bility verification requirements specified in para6 graph (1). 

7 ‘‘(3) NO APPLICATION TO DSH.—Paragraph (1) 

8 shall not apply to or affect the payments described 

9 in section 1923(f) (relating to disproportionate share 

10 hospital payments). 

11 ‘‘(4) NO APPLICATION TO EMERGENCY MEDICAL

12 SERVICES.—Paragraph (1) shall not apply to emer13 gency medical services described in section 1903(f), 

14 regardless of the status of the individual for whom 

15 such services are provided. 

16 ‘‘(5) NO IMPACT ON EMTALA.—Nothing in this 

17 subsection shall be construed as affecting the appli18 cation of the requirements of section 1867.’’. 

19 Subtitle B—Community Health 

20 Centers 

21 SEC. 311. INCREASED FUNDING. 

22 Section 330 of the Public Health Service Act (42 

23 U.S.C. 254b) is amended— 

24 (1) in subsection (r)(1)— 


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1 (A) in subparagraph (D), by striking 

2 ‘‘and’’ at the end; 

3 (B) in subparagraph (E), by striking the 

4 period at the end and inserting ‘‘; and’’; and 

5 (C) by inserting at the end the following: 

6 ‘‘(F) Such sums as may be necessary for 

7 each of fiscal years 2013 and 2019.’’; and 

8 (2) by inserting after subsection (r) the fol9 lowing: 

10 ‘‘(s) ADDITIONAL FUNDING.—For the purpose of 

11 carrying out this section, in addition to any other amounts 

12 authorized to be appropriated for such purpose, there are 

13 authorized to be appropriated, out of any monies in the 

14 Public Health Investment Fund, the following: 

15 ‘‘(1) For fiscal year 2010, $1,000,000,000. 

16 ‘‘(2) For fiscal year 2011, $1,500,000,000. 

17 ‘‘(3) For fiscal year 2012, $2,500,000,000. 

18 ‘‘(4) For fiscal year 2013, $3,000,000,000. 

19 ‘‘(5) For fiscal year 2014, $4,000,000,000. 

20 ‘‘(6) For fiscal year 2015, $4,400,000,000. 

21 ‘‘(7) For fiscal year 2016, $4,800,000,000. 

22 ‘‘(8) For fiscal year 2017, $5,300,000,000. 

23 ‘‘(9) For fiscal year 2018, $5,900,000,000. 

24 ‘‘(10) For fiscal year 2019, $6,400,000,000.’’. 


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1 TITLE IV—EXPANDING HEALTH 

2 SAVINGS ACCOUNTS 

3 SEC. 401. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CON4 TRIBUTIONS TO THE SAME HSA ACCOUNT. 

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

6 of the Internal Revenue Code of 1986 is amended by add7 ing at the end the following new subparagraph: 

8 ‘‘(C) SPECIAL RULE WHERE BOTH

9 SPOUSES ARE ELIGIBLE INDIVIDUALS WITH 1

10 ACCOUNT.—If— 

11 ‘‘(i) an individual and the individual’s 

12 spouse have both attained age 55 before 

13 the close of the taxable year, and 

14 ‘‘(ii) the spouse is not an account ben15 eficiary of a health savings account as of 

16 the close of such year, 

17 the additional contribution amount shall be 200 

18 percent of the amount otherwise determined 

19 under subparagraph (B).’’. 

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

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 

23 SEC. 402. PROVISIONS RELATING TO MEDICARE. 

24 (a) INDIVIDUALS OVER AGE 65 ONLY ENROLLED IN

25 MEDICARE PART A.—Section 223(b)(7) of the Internal 


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1 Revenue Code of 1986 (relating to contribution limitation 

2 on Medicare eligible individuals) is amended by adding at 

3 the end the following new sentence: ‘‘This paragraph shall 

4 not apply to any individual during any period the individ5 ual’s only entitlement to such benefits is an entitlement 

6 to hospital insurance benefits under part A of title XVIII 

7 of such Act pursuant to an enrollment for such hospital 

8 insurance benefits under section 226(a)(1) of such Act.’’. 

9 (b) MEDICARE BENEFICIARIES PARTICIPATING IN

10 MEDICARE ADVANTAGE MSA MAY CONTRIBUTE THEIR

11 OWN MONEY TO THEIR MSA.—Subsection (b) of section 

12 138 of such Code is amended by striking paragraph (2) 

13 and by redesignating paragraphs (3) and (4) as para14 graphs (2) and (3), respectively. 

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

16 this section shall apply to taxable years beginning after 

17 the date of the enactment of this Act. 

18 SEC. 403. INDIVIDUALS ELIGIBLE FOR VETERANS BENE19 FITS FOR A SERVICE-CONNECTED DIS20 ABILITY. 

21 (a) IN GENERAL.—Section 223(c)(1) of the Internal 

22 Revenue Code of 1986 (defining eligible individual) is 

23 amended by adding at the end the following new subpara24 graph: 


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1 ‘‘(C) SPECIAL RULE FOR INDIVIDUALS ELI2 GIBLE FOR CERTAIN VETERANS BENEFITS.— 

3 For purposes of subparagraph (A)(ii), an indi4 vidual shall not be treated as covered under a 

5 health plan described in such subparagraph 

6 merely because the individual receives periodic 

7 hospital care or medical services for a service8 connected disability under any law administered 

9 by the Secretary of Veterans Affairs but only if 

10 the individual is not eligible to receive such care 

11 or services for any condition other than a serv12 ice-connected disability.’’. 

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

14 this section shall apply to taxable years beginning after 

15 the date of the enactment of this Act. 

16 SEC. 404. INDIVIDUALS ELIGIBLE FOR INDIAN HEALTH 

17 SERVICE ASSISTANCE. 

18 (a) IN GENERAL.—Section 223(c)(1) of the Internal 

19 Revenue Code of 1986, as amended by this title, is amend20 ed by adding at the end the following new subparagraph: 

21 ‘‘(D) SPECIAL RULE FOR INDIVIDUALS EL22 IGIBLE FOR ASSISTANCE UNDER INDIAN

23 HEALTH SERVICE PROGRAMS.—For purposes of 

24 subparagraph (A)(ii), an individual shall not be 

25 treated as covered under a health plan deVerDate Nov 24 2008 04:40 Oct 03, 2009 Jkt 089200 PO 00000 Frm 00162 Fmt 6652 Sfmt 6201 E:\BILLS\H3713.IH H3713

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1 scribed in such subparagraph merely because 

2 the individual receives hospital care or medical 

3 services under a medical care program of the 

4 Indian Health Service or of a tribal organiza5 tion.’’. 

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

7 this section shall apply to taxable years beginning after 

8 the date of the enactment of this Act. 

9 SEC. 405. FSA AND HRA TERMINATION TO FUND HSAS. 

10 (a) ELIGIBLE INDIVIDUALS INCLUDE FSA AND HRA 

11 PARTICIPANTS.—Section 223(c)(1)(B) of the Internal 

12 Revenue Code of 1986 is amended— 

13 (1) by striking ‘‘and’’ at the end of clause (ii), 

14 (2) by striking the period at the end of clause 

15 (iii) and inserting ‘‘, and’’, and 

16 (3) by inserting after clause (iii) the following 

17 new clause: 

18 ‘‘(iv) coverage under a health flexible 

19 spending arrangement or a health reim20 bursement arrangement in the plan year a 

21 qualified HSA distribution as described in 

22 section 106(e) is made on behalf of the in23 dividual if after the qualified HSA dis24 tribution is made and for the remaining 

25 duration of the plan year, the coverage 


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1 provided under the health flexible spending 

2 arrangement or health reimbursement ar3 rangement is converted to— 

4 ‘‘(I) coverage that does not pay 

5 or reimburse any medical expense in6 curred before the minimum annual de7 ductible under section 223(c)(2)(A)(i) 

8 (prorated for the period occurring 

9 after the qualified HSA distribution is 

10 made) is satisfied, 

11 ‘‘(II) coverage that, after the 

12 qualified HSA distribution is made, 

13 does not pay or reimburse any med14 ical expense incurred after the quali15 fied HSA distribution is made other 

16 than preventive care as defined in sec17 tion 223(c)(2)(3), 

18 ‘‘(III) coverage that, after the 

19 qualified HSA distribution is made, 

20 pays or reimburses benefits for cov21 erage described in section 

22 223(c)(1)(B)(ii) (but not through in23 surance or for long-term care serv24 ices), 


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1 ‘‘(IV) coverage that, after the 

2 qualified HSA distribution is made, 

3 pays or reimburses benefits for per4 mitted insurance as defined in section 

5 223(c)(1)(B)(i) or coverage described 

6 in section 223(c)(1)(B)(ii) (but not 

7 for long-term care services), 

8 ‘‘(V) coverage that, after the 

9 qualified HSA distribution is made, 

10 pays or reimburses only those medical 

11 expenses incurred after an individual’s 

12 retirement (and no expenses incurred 

13 before retirement), or 

14 ‘‘(VI) coverage that, after the 

15 qualified HSA distribution is made, is 

16 suspended, pursuant to an election 

17 made on or before the date the indi18 vidual elects a qualified HSA distribu19 tion or, if later, on the date of the in20 dividual enrolls in a high deductible 

21 health plan (as defined in section 

22 223(c)(2)), that does not pay or reim23 burse, at any time, any medical ex24 pense incurred during the suspension 


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1 period except as defined in subclauses 

2 (I) through (V) above.’’. 

3 (b) QUALIFIED HSA DISTRIBUTION SHALL NOT AF4 FECT FLEXIBLE SPENDING ARRANGEMENT.—Section 

5 106(e)(1) of such Code is amended to read as follows: 

6 ‘‘(1) IN GENERAL.—A plan shall not fail to be 

7 treated as a health flexible spending arrangement 

8 under this section, section 105, or section 125, or as 

9 a health reimbursement arrangement under this sec10 tion or section 105, merely because such plan pro11 vides for a qualified HSA distribution.’’. 

12 (c) FSA BALANCES AT YEAR END SHALL NOT FOR13 FEIT.—Section 125(d)(2) of such Code is amended by 

14 adding at the end the following new subparagraph: 

15 ‘‘(E) EXCEPTION FOR QUALIFIED HSA DIS16 TRIBUTIONS.—Subparagraph (A) shall not 

17 apply to the extent that there is an amount re18 maining in a health flexible spending account at 

19 the end of a plan year that an individual elects 

20 to contribute to a health savings account pursu21 ant to a qualified HSA distribution (as defined 

22 in section 106(e)(2)).’’. 

23 (d) SIMPLIFICATION OF LIMITATIONS ON FSA AND

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1 lating to qualified HSA distribution) is amended to read 

2 as follows: 

3 ‘‘(2) QUALIFIED HSA DISTRIBUTION.— 

4 ‘‘(A) IN GENERAL.—The term ‘qualified 

5 HSA distribution’ means a distribution from a 

6 health flexible spending arrangement or health 

7 reimbursement arrangement to the extent that 

8 such distribution does not exceed the lesser 

9 of— 

10 ‘‘(i) the balance in such arrangement 

11 as of the date of such distribution, or 

12 ‘‘(ii) the amount determined under 

13 subparagraph (B). 

14 Such term shall not include more than 1 dis15 tribution with respect to any arrangement. 

16 ‘‘(B) DOLLAR LIMITATIONS.— 

17 ‘‘(i) DISTRIBUTIONS FROM A HEALTH

18 FLEXIBLE SPENDING ARRANGEMENT.—A 

19 qualified HSA distribution from a health 

20 flexible spending arrangement shall not ex21 ceed the applicable amount. 

22 ‘‘(ii) DISTRIBUTIONS FROM A HEALTH

23 REIMBURSEMENT ARRANGEMENT.—A 

24 qualified HSA distribution from a health 


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1 reimbursement arrangement shall not ex2 ceed— 

3 ‘‘(I) the applicable amount di4 vided by 12, multiplied by 

5 ‘‘(II) the number of months dur6 ing which the individual is a partici7 pant in the health reimbursement ar8 rangement. 

9 ‘‘(iii) APPLICABLE AMOUNT.—For 

10 purposes of this subparagraph, the applica11 ble amount is— 

12 ‘‘(I) $2,250 in the case of an eli13 gible individual who has self-only cov14 erage under a high deductible health 

15 plan at the time of such distribution, 

16 and 

17 ‘‘(II) $4,500 in the case of an eli18 gible individual who has family cov19 erage under a high deductible health 

20 plan at the time of such distribu21 tion.’’. 

22 (e) ELIMINATION OF ADDITIONAL TAX FOR FAILURE

23 TO MAINTAIN HIGH DEDUCTIBLE HEALTH PLAN COV24 ERAGE.—Section 106(e) of such Code is amended— 


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1 (1) by striking paragraph (3) and redesignating 

2 paragraphs (4) and (5) as paragraphs (3) and (4), 

3 respectively, and 

4 (2) by striking subparagraph (A) of paragraph 

5 (3), as so redesignated, and redesignating subpara6 graphs (B) and (C) of such paragraph as subpara7 graphs (A) and (B) thereof, respectively. 

8 (f) LIMITED PURPOSE FSAS AND HRAS.—Section 

9 106(e) of such Code, as amended by this section, is 

10 amended by adding at the end the following new para11 graph: 

12 ‘‘(5) LIMITED PURPOSE FSAS AND HRAS.—A 

13 plan shall not fail to be a health flexible spending 

14 arrangement or health reimbursement arrangement 

15 under this section or section 105 merely because the 

16 plan converts coverage for individuals who enroll in 

17 a high deductible health plan described in section 

18 223(c)(2) to coverage described in section 

19 223(c)(1)(B)(iv). Coverage for such individuals may 

20 be converted as of the date of enrollment in the high 

21 deductible health plan, without regard to the period 

22 of coverage under the health flexible spending ar23 rangement or health reimbursement arrangement, 

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1 dividuals who do not enroll in a high deductible 

2 health plan.’’. 

3 (g) DISTRIBUTION AMOUNTS ADJUSTED FOR COST4 OF-LIVING.—Section 106(e) of such Code, as amended by 

5 this section, is amended by adding at the end the following 

6 new paragraph: 

7 ‘‘(6) COST-OF-LIVING ADJUSTMENT.— 

8 ‘‘(A) IN GENERAL.—In the case of any 

9 taxable year beginning after December 31, 

10 2010, each of the dollar amounts in paragraph 

11 (2)(B)(iii) shall be increased by an amount 

12 equal to such dollar amount, multiplied by the 

13 cost-of-living adjustment determined under sec14 tion 1(f)(3) for the calendar year in which such 

15 taxable year begins by substituting ‘calendar 

16 year 2009’ for ‘calendar year 1992’ in subpara17 graph (B) thereof. 

18 ‘‘(B) ROUNDING.—If any increase under 

19 paragraph (1) is not a multiple of $50, such in20 crease shall be rounded to the nearest multiple 

21 of $50.’’. 

22 (h) DISCLAIMER OF DISQUALIFYING COVERAGE.— 

23 Section 223(c)(1)(B) of such Code, as amended by this 

24 section, is amended— 

25 (1) by striking ‘‘and’’ at the end of clause (iii), 


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1 (2) by striking the period at the end of clause 

2 (iv) and inserting ‘‘, and’’, and 

3 (3) by inserting after clause (iv) the following 

4 new clause: 

5 ‘‘(v) any coverage (including prospec6 tive coverage) under a health plan that is 

7 not a high deductible health plan which is 

8 disclaimed in writing, at the time of the 

9 creation or organization of the health sav10 ings account, including by execution of a 

11 trust described in subsection (d)(1) 

12 through a governing instrument that in13 cludes such a disclaimer, or by acceptance 

14 of an amendment to such a trust that in15 cludes such a disclaimer.’’. 

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

17 this section shall apply to taxable years beginning after 

18 the date of the enactment of this Act. 

19 SEC. 406. PURCHASE OF HEALTH INSURANCE FROM HSA 

20 ACCOUNT. 

21 (a) IN GENERAL.—Paragraph (2) of section 223(d) 

22 of the Internal Revenue Code of 1986 (defining qualified 

23 medical expenses) is amended— 

24 (1) by striking subparagraphs (B) and (C), and 


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1 (2) by inserting ‘‘ and including payment for in2 surance)’’ after ‘‘section 213(d)’’. 

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

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

6 SEC. 407. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

7 INCURRED BEFORE ESTABLISHMENT OF AC8 COUNT. 

9 (a) IN GENERAL.—Paragraph (2) of section 223(d) 

10 of the Internal Revenue Code of 1986, as amended by this 

11 title, is amended by adding at the end the following new 

12 subparagraph: 

13 ‘‘(B) CERTAIN MEDICAL EXPENSES IN14 CURRED BEFORE ESTABLISHMENT OF ACCOUNT

15 TREATED AS QUALIFIED.—An expense shall not 

16 fail to be treated as a qualified medical expense 

17 solely because such expense was incurred before 

18 the establishment of the health savings account 

19 if such expense was incurred— 

20 ‘‘(i) during either— 

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

22 health savings account was estab23 lished, or 

24 ‘‘(II) the preceding taxable year 

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1 count established after the taxable 

2 year in which such expense was in3 curred but before the time prescribed 

4 by law for filing the return for such 

5 taxable year (not including extensions 

6 thereof), and 

7 ‘‘(ii) for medical care of an individual 

8 during a period that such individual was 

9 covered by a high deductible health plan 

10 and met the requirements of subsection 

11 (c)(1)(A)(ii) (after application of sub12 section (c)(1)(B)).’’. 

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

14 this section shall apply to health savings accounts estab15 lished during taxable years beginning after the date of the 

16 enactment of this Act. 

17 SEC. 408. PREVENTIVE CARE PRESCRIPTION DRUG CLARI18 FICATION. 

19 (a) CLARIFY USE OF DRUGS IN PREVENTIVE

20 CARE.—Subparagraph (C) of section 223(c)(2) of the In21 ternal Revenue Code of 1986 is amended by adding at the 

22 end the following: ‘‘Preventive care shall include prescrip23 tion and over-the-counter drugs and medicines which have 

24 the primary purpose of preventing the onset of, further 


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1 deterioration from, or complications associated with 

2 chronic conditions, illnesses, or diseases.’’. 

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

4 this section shall apply to taxable years beginning after 

5 the date of the enactment of this Act. 

6 SEC. 409. QUALIFIED MEDICAL EXPENSES. 

7 (a) CERTAIN EXERCISE EQUIPMENT AND PHYSICAL

8 FITNESS PROGRAMS TREATED AS MEDICAL CARE.— 

9 (1) IN GENERAL.—Subsection (d) of section 

10 213 of the Internal Revenue Code of 1986 is amend11 ed by adding at the end the following new para12 graph: 

13 ‘‘(12) EXERCISE EQUIPMENT AND PHYSICAL

14 FITNESS PROGRAMS.— 

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

16 care’ shall include amounts paid— 

17 ‘‘(i) to purchase or use equipment 

18 used in a program (including a self-di19 rected program) of physical exercise, 

20 ‘‘(ii) to participate, or receive instruc21 tion, in a program of physical exercise, and 

22 ‘‘(iii) for membership dues in a fitness 

23 club the primary purpose of which is to 

24 provide access to equipment and facilities 

25 for physical exercise. 


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

2 medical care under subparagraph (A) shall not 

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

4 any taxable year.’’. 

5 (2) EFFECTIVE DATE.—The amendment made 

6 by this subsection shall apply to taxable years begin7 ning after the date of the enactment of this Act. 

8 (b) CERTAIN NUTRITIONAL AND DIETARY SUPPLE9 MENTS TO BE TREATED AS MEDICAL CARE.— 

10 (1) IN GENERAL.—Subsection (d) of section 

11 213 of such Code, as amended by subsection (a), is 

12 amended by adding at the end the following new 

13 paragraph: 

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

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

17 care’ shall include amounts paid to purchase 

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

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

22 medical care under subparagraph (A) shall not 

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

24 any taxable year. 


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1 ‘‘(C) MEAL REPLACEMENT PRODUCT.— 

2 For purposes of this paragraph, the term ‘meal 

3 replacement product’ means any product that— 

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

6 of the Federal Food, Drug, and Cosmetic 

7 Act, and 

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

9 section that such product is low in fat and 

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

12 (2) EFFECTIVE DATE.—The amendment made 

13 by this subsection shall apply to taxable years begin14 ning after the date of the enactment of this Act. 

15 TITLE V—MEDICAL LIABILITY 

16 REFORM 

17 Subtitle A—Medical Liability 

18 SEC. 501. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS. 

19 The time for the commencement of a health care law20 suit shall be 3 years after the date of manifestation of 

21 injury or 1 year after the claimant discovers, or through 

22 the use of reasonable diligence should have discovered, the 

23 injury, whichever occurs first. In no event shall the time 

24 for commencement of a health care lawsuit exceed 3 years 


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1 after the date of manifestation of injury unless tolled for 

2 any of the following— 

3 (1) upon proof of fraud; 

4 (2) intentional concealment; or 

5 (3) the presence of a foreign body, which has no 

6 therapeutic or diagnostic purpose or effect, in the 

7 person of the injured person 

8

9 Actions by a minor shall be commenced within 3 years 

10 from the date of the alleged manifestation of injury except 

11 that actions by a minor under the full age of 6 years shall 

12 be commenced within 3 years of manifestation of injury 

13 or prior to the minor’s 8th birthday, whichever provides 

14 a longer period. Such time limitation shall be tolled for 

15 minors for any period during which a parent or guardian 

16 and a health care provider or health care organization 

17 have committed fraud or collusion in the failure to bring 

18 an action on behalf of the injured minor 

19 SEC. 502. COMPENSATING PATIENT INJURY. 

20 (a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL

21 ECONOMIC LOSSES IN HEALTH CARE LAWSUITS.—In any 

22 health care lawsuit, nothing in this subtitle shall limit a 

23 claimant’s recovery of the full amount of the available eco24 nomic damages, notwithstanding the limitation in sub25 section (b). 


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1 (b) ADDITIONAL NONECONOMIC DAMAGES.—In any 

2 health care lawsuit, the amount of noneconomic damages, 

3 if available, may be as much as $250,000, regardless of 

4 the number of parties against whom the action is brought 

5 or the number of separate claims or actions brought with 

6 respect to the same injury. 

7 (c) NO DISCOUNT OF AWARD FOR NONECONOMIC

8 DAMAGES.—For purposes of applying the limitation in 

9 subsection (b), future noneconomic damages shall not be 

10 discounted to present value. The jury shall not be in11 formed about the maximum award for noneconomic dam12 ages. An award for noneconomic damages in excess of 

13 $250,000 shall be reduced either before the entry of judg14 ment, or by amendment of the judgment after entry of 

15 judgment, and such reduction shall be made before ac16 counting for any other reduction in damages required by 

17 law. If separate awards are rendered for past and future 

18 noneconomic damages and the combined awards exceed 

19 $250,000, the future noneconomic damages shall be re20 duced first. 

21 (d) FAIR SHARE RULE.—In any health care lawsuit, 

22 each party shall be liable for that party’s several share 

23 of any damages only and not for the share of any other 

24 person. Each party shall be liable only for the amount of 

25 damages allocated to such party in direct proportion to 


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1 such party’s percentage of responsibility. Whenever a 

2 judgment of liability is rendered as to any party, a sepa3 rate judgment shall be rendered against each such party 

4 for the amount allocated to such party. For purposes of 

5 this section, the trier of fact shall determine the propor6 tion of responsibility of each party for the claimant’s 

7 harm. 

8 SEC. 503. MAXIMIZING PATIENT RECOVERY. 

9 (a) COURT SUPERVISION OF SHARE OF DAMAGES

10 ACTUALLY PAID TO CLAIMANTS.—In any health care law11 suit, the court shall supervise the arrangements for pay12 ment of damages to protect against conflicts of interest 

13 that may have the effect of reducing the amount of dam14 ages awarded that are actually paid to claimants. In par15 ticular, in any health care lawsuit in which the attorney 

16 for a party claims a financial stake in the outcome by vir17 tue of a contingent fee, the court shall have the power 

18 to restrict the payment of a claimant’s damage recovery 

19 to such attorney, and to redirect such damages to the 

20 claimant based upon the interests of justice and principles 

21 of equity. In no event shall the total of all contingent fees 

22 for representing all claimants in a health care lawsuit ex23 ceed the following limits: 

24 (1) 40 percent of the first $50,000 recovered by 

25 the claimant(s). 


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(2) 331 1 ⁄3 percent of the next $50,000 recovered 

2 by the claimant(s). 

3 (3) 25 percent of the next $500,000 recovered 

4 by the claimant(s). 

5 (4) 15 percent of any amount by which the re6 covery by the claimant(s) is in excess of $600,000. 

7 (b) APPLICABILITY.—The limitations in this section 

8 shall apply whether the recovery is by judgment, settle9 ment, mediation, arbitration, or any other form of alter10 native dispute resolution. In a health care lawsuit involv11 ing a minor or incompetent person, a court retains the 

12 authority to authorize or approve a fee that is less than 

13 the maximum permitted under this section. The require14 ment for court supervision in the first two sentences of 

15 subsection (a) applies only in civil actions. 

16 SEC. 504. ADDITIONAL HEALTH BENEFITS. 

17 In any health care lawsuit involving injury or wrong18 ful death, any party may introduce evidence of collateral 

19 source benefits. If a party elects to introduce such evi20 dence, any opposing party may introduce evidence of any 

21 amount paid or contributed or reasonably likely to be paid 

22 or contributed in the future by or on behalf of the oppos23 ing party to secure the right to such collateral source bene24 fits. No provider of collateral source benefits shall recover 

25 any amount against the claimant or receive any lien or 


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1 credit against the claimant’s recovery or be equitably or 

2 legally subrogated to the right of the claimant in a health 

3 care lawsuit involving injury or wrongful death. This sec4 tion shall apply to any health care lawsuit that is settled 

5 as well as a health care lawsuit that is resolved by a fact 

6 finder. This section shall not apply to section 1862(b) (42 

7 U.S.C. 1395y(b)) or section 1902(a)(25) (42 U.S.C. 

8 1396a(a)(25)) of the Social Security Act. 

9 SEC. 505. PUNITIVE DAMAGES. 

10 (a) IN GENERAL.—Punitive damages may, if other11 wise permitted by applicable State or Federal law, be 

12 awarded against any person in a health care lawsuit only 

13 if it is proven by clear and convincing evidence that such 

14 person acted with malicious intent to injure the claimant, 

15 or that such person deliberately failed to avoid unneces16 sary injury that such person knew the claimant was sub17 stantially certain to suffer. In any health care lawsuit 

18 where no judgment for compensatory damages is rendered 

19 against such person, no punitive damages may be awarded 

20 with respect to the claim in such lawsuit. No demand for 

21 punitive damages shall be included in a health care lawsuit 

22 as initially filed. A court may allow a claimant to file an 

23 amended pleading for punitive damages only upon a mo24 tion by the claimant and after a finding by the court, upon 

25 review of supporting and opposing affidavits or after a 


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1 hearing, after weighing the evidence, that the claimant has 

2 established by a substantial probability that the claimant 

3 will prevail on the claim for punitive damages. At the re4 quest of any party in a health care lawsuit, the trier of 

5 fact shall consider in a separate proceeding— 

6 (1) whether punitive damages are to be award7 ed and the amount of such award; and 

8 (2) the amount of punitive damages following a 

9 determination of punitive liability. 

10 If a separate proceeding is requested, evidence relevant 

11 only to the claim for punitive damages, as determined by 

12 applicable State law, shall be inadmissible in any pro13 ceeding to determine whether compensatory damages are 

14 to be awarded. 

15 (b) DETERMINING AMOUNT OF PUNITIVE DAM16 AGES.— 

17 (1) FACTORS CONSIDERED.—In determining 

18 the amount of punitive damages, if awarded, in a 

19 health care lawsuit, the trier of fact shall consider 

20 only the following— 

21 (A) the severity of the harm caused by the 

22 conduct of such party; 

23 (B) the duration of the conduct or any 

24 concealment of it by such party; 


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1 (C) the profitability of the conduct to such 

2 party; 

3 (D) the number of products sold or med4 ical procedures rendered for compensation, as 

5 the case may be, by such party, of the kind 

6 causing the harm complained of by the claim7 ant; 

8 (E) any criminal penalties imposed on such 

9 party, as a result of the conduct complained of 

10 by the claimant; and 

11 (F) the amount of any civil fines assessed 

12 against such party as a result of the conduct 

13 complained of by the claimant. 

14 (2) MAXIMUM AWARD.—The amount of punitive 

15 damages, if awarded, in a health care lawsuit may 

16 be as much as $250,000 or as much as two times 

17 the amount of economic damages awarded, which18 ever is greater. The jury shall not be informed of 

19 this limitation. 

20 (c) NO PUNITIVE DAMAGES FOR PRODUCTS THAT

21 COMPLY WITH FDA STANDARDS.— 

22 (1) IN GENERAL.— 

23 (A) No punitive damages may be awarded 

24 against the manufacturer or distributor of a 

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1 nent or raw material of such medical product, 

2 based on a claim that such product caused the 

3 claimant’s harm where— 

4 (i)(I) such medical product was sub5 ject to premarket approval, clearance, or li6 censure by the Food and Drug Administra7 tion with respect to the safety of the for8 mulation or performance of the aspect of 

9 such medical product which caused the 

10 claimant’s harm or the adequacy of the 

11 packaging or labeling of such medical 

12 product; and 

13 (II) such medical product was so ap14 proved, cleared, or licensed; or 

15 (ii) such medical product is generally 

16 recognized among qualified experts as safe 

17 and effective pursuant to conditions estab18 lished by the Food and Drug Administra19 tion and applicable Food and Drug Admin20 istration regulations, including without 

21 limitation those related to packaging and 

22 labeling, unless the Food and Drug Admin23 istration has determined that such medical 

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1 cable Food and Drug Administration stat2 utes and regulations. 

3 (B) RULE OF CONSTRUCTION.—Subpara4 graph (A) may not be construed as establishing 

5 the obligation of the Food and Drug Adminis6 tration to demonstrate affirmatively that a 

7 manufacturer, distributor, or supplier referred 

8 to in such subparagraph meets any of the con9 ditions described in such subparagraph. 

10 (2) LIABILITY OF HEALTH CARE PROVIDERS.— 

11 A health care provider who prescribes, or who dis12 penses pursuant to a prescription, a medical product 

13 approved, licensed, or cleared by the Food and Drug 

14 Administration shall not be named as a party to a 

15 product liability lawsuit involving such product and 

16 shall not be liable to a claimant in a class action 

17 lawsuit against the manufacturer, distributor, or 

18 seller of such product. Nothing in this paragraph 

19 prevents a court from consolidating cases involving 

20 health care providers and cases involving products li21 ability claims against the manufacturer, distributor, 

22 or product seller of such medical product. 

23 (3) PACKAGING.—In a health care lawsuit for 

24 harm which is alleged to relate to the adequacy of 

25 the packaging or labeling of a drug which is required 


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1 to have tamper-resistant packaging under regula2 tions of the Secretary of Health and Human Serv3 ices (including labeling regulations related to such 

4 packaging), the manufacturer or product seller of 

5 the drug shall not be held liable for punitive dam6 ages unless such packaging or labeling is found by 

7 the trier of fact by clear and convincing evidence to 

8 be substantially out of compliance with such regula9 tions. 

10 (4) EXCEPTION.—Paragraph (1) shall not 

11 apply in any health care lawsuit in which— 

12 (A) a person, before or after premarket ap13 proval, clearance, or licensure of such medical 

14 product, knowingly misrepresented to or with15 held from the Food and Drug Administration 

16 information that is required to be submitted 

17 under the Federal Food, Drug, and Cosmetic 

18 Act (21 U.S.C. 301 et seq.) or section 351 of 

19 the Public Health Service Act (42 U.S.C. 262) 

20 that is material and is causally related to the 

21 harm which the claimant allegedly suffered; or 

22 (B) a person made an illegal payment to 

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1 taining approval, clearance, or licensure of such 

2 medical product. 

3 SEC. 506. AUTHORIZATION OF PAYMENT OF FUTURE DAM4 AGES TO CLAIMANTS IN HEALTH CARE LAW5 SUITS. 

6 (a) IN GENERAL.—In any health care lawsuit, if an 

7 award of future damages, without reduction to present 

8 value, equaling or exceeding $50,000 is made against a 

9 party with sufficient insurance or other assets to fund a 

10 periodic payment of such a judgment, the court shall, at 

11 the request of any party, enter a judgment ordering that 

12 the future damages be paid by periodic payments. In any 

13 health care lawsuit, the court may be guided by the Uni14 form Periodic Payment of Judgments Act promulgated by 

15 the National Conference of Commissioners on Uniform 

16 State Laws. 

17 (b) APPLICABILITY.—This section applies to all ac18 tions which have not been first set for trial or retrial be19 fore the effective date of this subtitle. 

20 SEC. 507. DEFINITIONS. 

21 In this subtitle: 

22 (1) ALTERNATIVE DISPUTE RESOLUTION SYS23 TEM; ADR.—The term ‘‘alternative dispute resolution 

24 system’’ or ‘‘ADR’’ means a system that provides 

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1 ner other than through a civil action brought in a 

2 State or Federal court. 

3 (2) CLAIMANT.—The term ‘‘claimant’’ means 

4 any person who brings a health care lawsuit, includ5 ing a person who asserts or claims a right to legal 

6 or equitable contribution, indemnity, or subrogation, 

7 arising out of a health care liability claim or action, 

8 and any person on whose behalf such a claim is as9 serted or such an action is brought, whether de10 ceased, incompetent, or a minor. 

11 (3) COLLATERAL SOURCE BENEFITS.—The 

12 term ‘‘collateral source benefits’’ means any amount 

13 paid or reasonably likely to be paid in the future to 

14 or on behalf of the claimant, or any service, product, 

15 or other benefit provided or reasonably likely to be 

16 provided in the future to or on behalf of the claim17 ant, as a result of the injury or wrongful death, pur18 suant to— 

19 (A) any State or Federal health, sickness, 

20 income-disability, accident, or workers’ com21 pensation law; 

22 (B) any health, sickness, income-disability, 

23 or accident insurance that provides health bene24 fits or income-disability coverage; 


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1 (C) any contract or agreement of any 

2 group, organization, partnership, or corporation 

3 to provide, pay for, or reimburse the cost of 

4 medical, hospital, dental, or income-disability 

5 benefits; and 

6 (D) any other publicly or privately funded 

7 program. 

8 (4) COMPENSATORY DAMAGES.—The term 

9 ‘‘compensatory damages’’ means objectively 

10 verifiable monetary losses incurred as a result of the 

11 provision of, use of, or payment for (or failure to 

12 provide, use, or pay for) health care services or med13 ical products, such as past and future medical ex14 penses, loss of past and future earnings, cost of ob15 taining domestic services, loss of employment, and 

16 loss of business or employment opportunities, dam17 ages for physical and emotional pain, suffering, in18 convenience, physical impairment, mental anguish, 

19 disfigurement, loss of enjoyment of life, loss of soci20 ety and companionship, loss of consortium (other 

21 than loss of domestic service), hedonic damages, in22 jury to reputation, and all other nonpecuniary losses 

23 of any kind or nature. The term ‘‘compensatory 

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1 economic damages, as such terms are defined in this 

2 section. 

3 (5) CONTINGENT FEE.—The term ‘‘contingent 

4 fee’’ includes all compensation to any person or per5 sons which is payable only if a recovery is effected 

6 on behalf of one or more claimants. 

7 (6) ECONOMIC DAMAGES.—The term ‘‘economic 

8 damages’’ means objectively verifiable monetary 

9 losses incurred as a result of the provision of, use 

10 of, or payment for (or failure to provide, use, or pay 

11 for) health care services or medical products, such as 

12 past and future medical expenses, loss of past and 

13 future earnings, cost of obtaining domestic services, 

14 loss of employment, and loss of business or employ15 ment opportunities. 

16 (7) HEALTH CARE LAWSUIT.—The term 

17 ‘‘health care lawsuit’’ means any health care liability 

18 claim concerning the provision of health care goods 

19 or services or any medical product affecting inter20 state commerce, or any health care liability action 

21 concerning the provision of health care goods or 

22 services or any medical product affecting interstate 

23 commerce, brought in a State or Federal court or 

24 pursuant to an alternative dispute resolution system, 

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1 zation, or the manufacturer, distributor, supplier, 

2 marketer, promoter, or seller of a medical product, 

3 regardless of the theory of liability on which the 

4 claim is based, or the number of claimants, plain5 tiffs, defendants, or other parties, or the number of 

6 claims or causes of action, in which the claimant al7 leges a health care liability claim. Such term does 

8 not include a claim or action which is based on 

9 criminal liability; which seeks civil fines or penalties 

10 paid to Federal, State, or local government; or which 

11 is grounded in antitrust. 

12 (8) HEALTH CARE LIABILITY ACTION.—The 

13 term ‘‘health care liability action’’ means a civil ac14 tion brought in a State or Federal court or pursuant 

15 to an alternative dispute resolution system, against 

16 a health care provider, a health care organization, or 

17 the manufacturer, distributor, supplier, marketer, 

18 promoter, or seller of a medical product, regardless 

19 of the theory of liability on which the claim is based, 

20 or the number of plaintiffs, defendants, or other par21 ties, or the number of causes of action, in which the 

22 claimant alleges a health care liability claim. 

23 (9) HEALTH CARE LIABILITY CLAIM.—The 

24 term ‘‘health care liability claim’’ means a demand 

25 by any person, whether or not pursuant to ADR, 


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1 against a health care provider, health care organiza2 tion, or the manufacturer, distributor, supplier, mar3 keter, promoter, or seller of a medical product, in4 cluding, but not limited to, third-party claims, cross5 claims, counter-claims, or contribution claims, which 

6 are based upon the provision of, use of, or payment 

7 for (or the failure to provide, use, or pay for) health 

8 care services or medical products, regardless of the 

9 theory of liability on which the claim is based, or the 

10 number of plaintiffs, defendants, or other parties, or 

11 the number of causes of action. 

12 (10) HEALTH CARE ORGANIZATION.—The term 

13 ‘‘health care organization’’ means any person or en14 tity which is obligated to provide or pay for health 

15 benefits under any health plan, including any person 

16 or entity acting under a contract or arrangement 

17 with a health care organization to provide or admin18 ister any health benefit. 

19 (11) HEALTH CARE PROVIDER.—The term 

20 ‘‘health care provider’’ means any person or entity 

21 required by State or Federal laws or regulations to 

22 be licensed, registered, or certified to provide health 

23 care services, and being either so licensed, reg24 istered, or certified, or exempted from such require25 ment by other statute or regulation. 


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1 (12) HEALTH CARE GOODS OR SERVICES.—The 

2 term ‘‘health care goods or services’’ means any 

3 goods or services provided by a health care organiza4 tion, provider, or by any individual working under 

5 the supervision of a health care provider, that relates 

6 to the diagnosis, prevention, or treatment of any 

7 human disease or impairment, or the assessment or 

8 care of the health of human beings. 

9 (13) MALICIOUS INTENT TO INJURE.—The 

10 term ‘‘malicious intent to injure’’ means inten11 tionally causing or attempting to cause physical in12 jury other than providing health care goods or serv13 ices. 

14 (14) MEDICAL PRODUCT.—The term ‘‘medical 

15 product’’ means a drug, device, or biological product 

16 intended for humans, and the terms ‘‘drug’’, ‘‘de17 vice’’, and ‘‘biological product’’ have the meanings 

18 given such terms in sections 201(g)(1) and 201(h) 

19 of the Federal Food, Drug and Cosmetic Act (21 

20 U.S.C. 321(g)(1) and (h)) and section 351(a) of the 

21 Public Health Service Act (42 U.S.C. 262(a)), re22 spectively, including any component or raw material 

23 used therein, but excluding health care services. 

24 (15) NONECONOMIC DAMAGES.—The term 

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1 ical and emotional pain, suffering, inconvenience, 

2 physical impairment, mental anguish, disfigurement, 

3 loss of enjoyment of life, loss of society and compan4 ionship, loss of consortium (other than loss of do5 mestic service), hedonic damages, injury to reputa6 tion, and all other nonpecuniary losses of any kind 

7 or nature. 

8 (16) PUNITIVE DAMAGES.—The term ‘‘punitive 

9 damages’’ means damages awarded, for the purpose 

10 of punishment or deterrence, and not solely for com11 pensatory purposes, against a health care provider, 

12 health care organization, or a manufacturer, dis13 tributor, or supplier of a medical product. Punitive 

14 damages are neither economic nor noneconomic 

15 damages. 

16 (17) RECOVERY.—The term ‘‘recovery’’ means 

17 the net sum recovered after deducting any disburse18 ments or costs incurred in connection with prosecu19 tion or settlement of the claim, including all costs 

20 paid or advanced by any person. Costs of health care 

21 incurred by the plaintiff and the attorneys’ office 

22 overhead costs or charges for legal services are not 

23 deductible disbursements or costs for such purpose. 

24 (18) STATE.—The term ‘‘State’’ means each of 

25 the several States, the District of Columbia, the 


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1 Commonwealth of Puerto Rico, the Virgin Islands, 

2 Guam, American Samoa, the Northern Mariana Is3 lands, the Trust Territory of the Pacific Islands, and 

4 any other territory or possession of the United 

5 States, or any political subdivision thereof. 

6 SEC. 508. EFFECT ON OTHER LAWS. 

7 (a) VACCINE INJURY.— 

8 (1) To the extent that title XXI of the Public 

9 Health Service Act (42 U.S.C. 300aa–1 et seq.) es10 tablishes a Federal rule of law applicable to a civil 

11 action brought for a vaccine-related injury or 

12 death— 

13 (A) this subtitle does not affect the appli14 cation of the rule of law to such an action; and 

15 (B) any rule of law prescribed by this sub16 title in conflict with a rule of law of such title 

17 XXI shall not apply to such action. 

18 (2) If there is an aspect of a civil action 

19 brought for a vaccine-related injury or death to 

20 which a Federal rule of law under title XXI of the 

21 Public Health Service Act (42 U.S.C. 300aa–1 et 

22 seq.) does not apply, then this subtitle or otherwise 

23 applicable law (as determined under this subtitle) 

24 will apply to such aspect of such action. 


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1 (b) OTHER FEDERAL LAW.—Except as provided in 

2 this section, nothing in this subtitle shall be deemed to 

3 affect any defense available to a defendant in a health care 

4 lawsuit or action under any other provision of Federal law. 

5 SEC. 509. STATE FLEXIBILITY AND PROTECTION OF 

6 STATES’ RIGHTS. 

7 (a) HEALTH CARE LAWSUITS.—The provisions gov8 erning health care lawsuits set forth in this subtitle pre9 empt, subject to subsections (b) and (c), State law to the 

10 extent that State law prevents the application of any pro11 visions of law established by or under this subtitle. The 

12 provisions governing health care lawsuits set forth in this 

13 subtitle supersede chapter 171 of title 28, United States 

14 Code, to the extent that such chapter— 

15 (1) provides for a greater amount of damages 

16 or contingent fees, a longer period in which a health 

17 care lawsuit may be commenced, or a reduced appli18 cability or scope of periodic payment of future dam19 ages, than provided in this subtitle; or 

20 (2) prohibits the introduction of evidence re21 garding collateral source benefits, or mandates or 

22 permits subrogation or a lien on collateral source 

23 benefits. 

24 (b) PROTECTION OF STATES’ RIGHTS AND OTHER

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1 sion of law established by or under this subtitle (including 

2 State standards of negligence) shall be governed by other3 wise applicable State or Federal law. 

4 (2) This subtitle shall not preempt or supersede any 

5 State or Federal law that imposes greater procedural or 

6 substantive protections for health care providers and 

7 health care organizations from liability, loss, or damages 

8 than those provided by this subtitle or create a cause of 

9 action. 

10 (c) STATE FLEXIBILITY.—No provision of this sub11 title shall be construed to preempt— 

12 (1) any State law (whether effective before, on, 

13 or after the date of the enactment of this Act) that 

14 specifies a particular monetary amount of compen15 satory or punitive damages (or the total amount of 

16 damages) that may be awarded in a health care law17 suit, regardless of whether such monetary amount is 

18 greater or lesser than is provided for under this sub19 title, notwithstanding section 502(a); or 

20 (2) any defense available to a party in a health 

21 care lawsuit under any other provision of State or 

22 Federal law. 

23 SEC. 510. APPLICABILITY; EFFECTIVE DATE. 

24 This subtitle shall apply to any health care lawsuit 

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1 native dispute resolution system, that is initiated on or 

2 after the date of the enactment of this Act, except that 

3 any health care lawsuit arising from an injury occurring 

4 prior to the date of the enactment of this Act shall be 

5 governed by the applicable statute of limitations provisions 

6 in effect at the time the injury occurred. 

7 SEC. 511. SENSE OF CONGRESS. 

8 It is the sense of Congress that a health insurer 

9 should be liable for damages for harm caused when it 

10 makes a decision as to what care is medically necessary 

11 and appropriate. 

12 Subtitle B—Liability Protection for 

13 Community Health Center Vol14 unteers 

15 SEC. 521. HEALTH CENTERS UNDER PUBLIC HEALTH SERV16 ICE ACT; LIABILITY PROTECTIONS FOR VOL17 UNTEER PRACTITIONERS. 

18 (a) IN GENERAL.—Section 224 of the Public Health 

19 Service Act (42 U.S.C. 233) is amended— 

20 (1) in subsection (g)(1)(A)— 

21 (A) in the first sentence, by striking ‘‘or 

22 employee’’ and inserting ‘‘employee, or (subject 

23 to subsection (k)(4)) volunteer practitioner’’; 

24 and 


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1 (B) in the second sentence, by inserting 

2 ‘‘and subsection (k)(4)’’ after ‘‘subject to para3 graph (5)’’; and 

4 (2) in each of subsections (g), (i), (j), (k), (l), 

5 and (m)— 

6 (A) by striking the term ‘‘employee, or 

7 contractor’’ each place such term appears and 

8 inserting ‘‘employee, volunteer practitioner, or 

9 contractor’’; 

10 (B) by striking the term ‘‘employee, and 

11 contractor’’ each place such term appears and 

12 inserting ‘‘employee, volunteer practitioner, and 

13 contractor’’; 

14 (C) by striking the term ‘‘employee, or any 

15 contractor’’ each place such term appears and 

16 inserting ‘‘employee, volunteer practitioner, or 

17 contractor’’; and 

18 (D) by striking the term ‘‘employees, or 

19 contractors’’ each place such term appears and 

20 inserting ‘‘employees, volunteer practitioners, or 

21 contractors’’. 

22 (b) APPLICABILITY; DEFINITION.—Section 224(k) of 

23 the Public Health Service Act (42 U.S.C. 233(k)) is 

24 amended by adding at the end the following paragraph: 


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1 ‘‘(4)(A) Subsections (g) through (m) apply with re2 spect to volunteer practitioners beginning with the first 

3 fiscal year for which an appropriations Act provides that 

4 amounts in the fund under paragraph (2) are available 

5 with respect to such practitioners. 

6 ‘‘(B) For purposes of subsections (g) through (m), 

7 the term ‘volunteer practitioner’ means a practitioner who, 

8 with respect to an entity described in subsection (g)(4), 

9 meets the following conditions: 

10 ‘‘(i) The practitioner is a licensed physician or 

11 a licensed clinical psychologist. 

12 ‘‘(ii) At the request of such entity, the practi13 tioner provides services to patients of the entity, at 

14 a site at which the entity operates or at a site des15 ignated by the entity. The weekly number of hours 

16 of services provided to the patients by the practi17 tioner is not a factor with respect to meeting condi18 tions under this subparagraph. 

19 ‘‘(iii) The practitioner does not for the provision 

20 of such services receive any compensation from such 

21 patients, from the entity, or from third-party payors 

22 (including reimbursement under any insurance pol23 icy or health plan, or under any Federal or State 

24 health benefits program).’’. 


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1 TITLE VI—MISCELLANEOUS 

2 Subtitle A—Fighting Fraud and 

3 Abuse 

4 SEC. 601. PROVIDE ADEQUATE FUNDING TO HHS OIG AND 

5 HCFAC. 

6 (a) HCFAC FUNDING.—Section 1817(k)(3)(A) of 

7 the Social Security Act (42 U.S.C. 1395i(k)(3)(A)) is 

8 amended— 

9 (1) in clause (i)— 

10 (A) in subclause (IV), by striking ‘‘2009, 

11 and 2010’’ and inserting ‘‘and 2009’’; and 

12 (B) by amending subclause (V) to read as 

13 follows: 

14 ‘‘(V) for each fiscal year after fis15 cal year 2009, $300,000,000.’’; and 

16 (2) in clause (ii)— 

17 (A) in subclause (IX), by striking ‘‘2009, 

18 and 2010’’ and inserting ‘‘and 2009’’; and 

19 (B) in subclause (X), by striking ‘‘2010’’ 

20 and inserting ‘‘2009’’ and by inserting before 

21 the period at the end the following: ‘‘, plus the 

22 amount by which the amount made available 

23 under clause (i)(V) for fiscal year 2010 exceeds 

24 the amount made available under clause (i)(IV) 

25 for 2009’’. 


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1 (b) OIG FUNDING.—There are authorized to be ap2 propriated for each of fiscal years 2010 through 2019 

3 $100,000,000 for the Office of the Inspector General of 

4 the Department of Health and Human Services for fraud 

5 prevention activities under the Medicare and Medicaid 

6 programs. 

7 SEC. 602. INCREASED CIVIL MONEY PENALTIES AND CRIMI8 NAL FINES FOR MEDICARE FRAUD AND 

9 ABUSE. 

10 (a) INCREASED CIVIL MONEY PENALTIES.—Section 

11 1128A of the Social Security Act (42 U.S.C. 1320a–7a) 

12 is amended— 

13 (1) in subsection (a), in the flush matter fol14 lowing paragraph (7)— 

15 (A) by striking ‘‘$10,000’’ each place it 

16 appears and inserting ‘‘$20,000’’; 

17 (B) by striking ‘‘$15,000’’ and inserting 

18 ‘‘$30,000’’; and 

19 (C) by striking ‘‘$50,000’’ and inserting 

20 ‘‘$100,000’’; and 

21 (2) in subsection (b)— 

22 (A) in paragraph (1), in the flush matter 

23 following subparagraph (B), by striking 

24 ‘‘$2,000’’ and inserting ‘‘$4,000’’; 


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1 (B) in paragraph (2), by striking ‘‘$2,000’’ 

2 and inserting ‘‘$4,000’’; and 

3 (C) in paragraph (3)(A)(i), by striking 

4 ‘‘$5,000’’ and inserting ‘‘$10,000’’. 

5 (b) INCREASED CRIMINAL FINES.—Section 1128B of 

6 the Social Security Act (42 U.S.C. 1320a–7b) is amend7 ed— 

8 (1) in subsection (a), in the flush matter fol9 lowing paragraph (6)— 

10 (A) by striking ‘‘$25,000’’ and inserting 

11 ‘‘$100,000’’; and 

12 (B) by striking ‘‘$10,000’’ and inserting 

13 ‘‘$20,000’’; 

14 (2) in subsection (b)— 

15 (A) in paragraph (1), in the flush matter 

16 following subparagraph (B), by striking 

17 ‘‘$25,000’’ and inserting ‘‘$100,000’’; and 

18 (B) in paragraph (2), in the flush matter 

19 following subparagraph (B), by striking 

20 ‘‘$25,000’’ and inserting ‘‘$100,000’’; 

21 (3) in subsection (c), by striking ‘‘$25,000’’ and 

22 inserting ‘‘$100,000’’; 

23 (4) in subsection (d), in the second flush matter 

24 following subparagraph (B), by striking ‘‘$25,000’’ 

25 and inserting ‘‘$100,000’’; and 


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1 (5) in subsection (e), by striking ‘‘$2,000’’ and 

2 inserting ‘‘$4,000’’. 

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

4 this section shall apply to civil money penalties and fines 

5 imposed for actions taken on or after the date of enact6 ment of this Act. 

7 SEC. 603. INCREASED SENTENCES FOR FELONIES INVOLV8 ING MEDICARE FRAUD AND ABUSE. 

9 (a) FALSE STATEMENTS AND REPRESENTATIONS.— 

10 Section 1128B(a) of the Social Security Act (42 U.S.C. 

11 1320a–7b(a)) is amended, in clause (i) of the flush matter 

12 following paragraph (6), by striking ‘‘not more than 5 

13 years’’ and inserting ‘‘not more than 10 years’’. 

14 (b) ANTI-KICKBACK.—Section 1128B(b) of the So15 cial Security Act (42 U.S.C. 1320a–7b(b)) is amended— 

16 (1) in paragraph (1), in the flush matter fol17 lowing subparagraph (B), by striking ‘‘not more 

18 than 5 years’’ and inserting ‘‘not more than 10 

19 years’’; and 

20 (2) in paragraph (2), in the flush matter fol21 lowing subparagraph (B), by striking ‘‘not more 

22 than 5 years’’ and inserting ‘‘not more than 10 

23 years’’. 

24 (c) FALSE STATEMENT OR REPRESENTATION WITH

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1 TIES.—Section 1128B(c) of the Social Security Act (42 

2 U.S.C. 1320a–7b(c)) is amended by striking ‘‘not more 

3 than 5 years’’ and inserting ‘‘not more than 10 years’’. 

4 (d) EXCESS CHARGES.—Section 1128B(d) of the So5 cial Security Act (42 U.S.C. 1320a–7b(d)) is amended, in 

6 the second flush matter following subparagraph (B), by 

7 striking ‘‘not more than 5 years’’ and inserting ‘‘not more 

8 than 10 years’’. 

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

10 this section shall apply to criminal penalties imposed for 

11 actions taken on or after the date of enactment of this 

12 Act. 

13 SEC. 604. ILLEGAL DISTRIBUTION OF A MEDICARE OR MED14 ICAID BENEFICIARY IDENTIFICATION OR 

15 PROVIDER NUMBER. 

16 Section 1128B(b) of the Social Security Act (42 

17 U.S.C. 1320a–7b(b)), as amended by section 4(b), is 

18 amended by adding at the end the following: 

19 ‘‘(5) Whoever knowingly, intentionally, and with the 

20 intent to defraud purchases, sells or distributes, or ar21 ranges for the purchase, sale, or distribution of two or 

22 more Medicare or Medicaid beneficiary identification num23 bers or provider numbers shall be imprisoned for not more 

24 than three years or fined under title 18, United States 

25 Code (or, if greater, an amount equal to the monetary loss 


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1 to the Federal and any State government as a result of 

2 such acts), or both.’’. 

3 SEC. 605. USE OF TECHNOLOGY FOR REAL-TIME DATA RE4 VIEW. 

5 Title XVIII of the Social Security Act is amended by 

6 adding at the end the following new section: 

7 ‘‘USE OF TECHNOLOGY FOR REAL-TIME DATA REVIEW

8 ‘‘SEC. 1899. (a) IN GENERAL.—The Secretary shall 

9 establish procedures for the use of technology (including 

10 front-end, pre-payment technology similar to that used by 

11 hedge funds, investment funds, and banks) to provide real12 time data analysis of claims for payment under this title 

13 to identify and investigate unusual billing or order prac14 tices under this title that could indicate fraud or abuse. 

15 ‘‘(b) COMPETITIVE BIDDING.—The procedures estab16 lished under subsection (a) shall ensure that the imple17 mentation of such technology is conducted through a com18 petitive bidding process.’’. 

19 Subtitle B—State Transparency 

20 Plan Portal 

21 SEC. 611. PROVIDING INFORMATION ON HEALTH COV22 ERAGE OPTIONS AND HEALTH CARE PRO23 VIDERS. 

24 (a) STATE-BASED PORTAL.—A State (by itself or 

25 jointly with other States) may contract with a private enti26 ty to establish a Health Plan and Provider Portal website 


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1 (referred to in this section as a ‘‘plan portal’’) for the pur2 poses of providing standardized information— 

3 (1) on health insurance plans that have been 

4 certified to be available for purchase in that State; 

5 and 

6 (2) on price and quality information on health 

7 care providers (including physicians, hospitals, and 

8 other health care institutions). 

9 (b) PILOT PROGRAM.— 

10 (1) IN GENERAL.—Not later than 90 days after 

11 the date of the enactment of this Act the Secretary 

12 of Health and Human Services shall work with 

13 States to establish no later than 2011, consistent 

14 with this title, a website that will serve as a pilot 

15 program for a national portal for information struc16 tured in a manner so individuals may directly link 

17 to the State plan portal for the State in which they 

18 reside. 

19 (2) CONTRACTS WITH STATE.—The Secretary 

20 shall enter into contracts with States, in a number 

21 and distribution determined by the Secretary, to de22 velop State plan portals that follow the applicable 

23 standards and regulations under this section. 

24 (3) COMMON STANDARDS FOR PLAN POR25 TALS.— 


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1 (A) IN GENERAL.—In connection with such 

2 website, the Secretary shall establish standards 

3 for interoperability and consistency for State 

4 plan portals so that individuals can access and 

5 view information in a similar manner on plan 

6 portals of different States. Such standards shall 

7 include standard definitions for health insur8 ance plan benefits so that individuals can accu9 rately compare health insurance plans within 

10 such portals and standards for the inclusion of 

11 information described in subsection (c). 

12 (B) CONSULTATION.—The Secretary shall 

13 consult with a group consisting of a balanced 

14 representation of the critical stakeholders (in15 cluding States, health insurance issuers, the 

16 National Association of Insurance Commis17 sioners, qualified health care provider-based en18 tities (including physicians, hospitals, and other 

19 health care institutions), and a standards devel20 opment organization) to develop such stand21 ards. 

22 (C) ISSUANCE.— 

23 (i) IN GENERAL.—Not later than 6 

24 months after the date of the enactment of 

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1 lation, after notice and opportunity for 

2 public comment, standards that are con3 sistent with the recommendations made by 

4 the group under subparagraph (B). 

5 (ii) DISSEMINATION.—The Secretary 

6 shall broadly disseminate the standards so 

7 issued. 

8 (D) REVIEW.—One year after the date of 

9 establishment of the pilot program under this 

10 subsection, the Secretary, in consultation with 

11 stakeholder group described in subparagraph 

12 (B), shall review the standards established and 

13 make such changes in such standards as may 

14 be appropriate. 

15 (4) AUTHORIZATION OF APPROPRIATIONS.— 

16 There are authorized to be appropriated to the Sec17 retary such amounts as may be necessary for— 

18 (A) the development and operation of the 

19 national website under this subsection; and 

20 (B) contracts with States under paragraph 

21 (2) to assist in the development and initial op22 eration of plan portals in accordance with 

23 standards established under paragraph (3) and 

24 other applicable provisions of this section. 


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1 (c) INFORMATION IN PLAN PORTALS.—The stand2 ards for plan portals under subsection (b)(3) shall include 

3 the following: 

4 (1) HEALTH INSURANCE INFORMATION.—Each 

5 plan portal shall meet the following requirements 

6 with respect to information on health insurance 

7 plans: 

8 (A) The plan portal shall present complete 

9 information on the costs and benefits of health 

10 insurance plans (including information on 

11 monthly premium, copayments, deductibles, and 

12 covered benefits) in a uniform manner that— 

13 (i) uses the standard definitions devel14 oped under subsection (b)(3); and 

15 (ii) is designed to allow consumers to 

16 easily compare such plans. 

17 (B) The plan portal shall be available on 

18 the Internet and accessible to all individuals in 

19 the United States. 

20 (C) The plan portal shall allow consumers 

21 to search and sort data on the health insurance 

22 plans in the plan portal on criteria such as cov23 erage of specific benefits (such as coverage of 

24 disease management services or pediatric care 


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1 services), as well as data available respecting 

2 quality of plans. 

3 (D) The plan portal shall meet all relevant 

4 State laws and regulations, including laws and 

5 regulations related to the marketing of insur6 ance products. 

7 (E) Notwithstanding subsection (d)(1), the 

8 plan portal shall provide information to individ9 uals who are eligible for the Medicaid program 

10 under title XIX of the Social Security Act or 

11 State Children’s Health Insurance Program 

12 under title XXI of such Act by including infor13 mation on options, eligibility, and how to enroll 

14 through providing a link to a website main15 tained with respect to such State programs. 

16 (F) The plan portal shall provide support 

17 to individuals who are eligible for tax credits 

18 and deductions under the amendments made by 

19 this Act to enhance such individual’s ability to 

20 access such credits and deductions. 

21 (G) The plan portal shall allow consumers 

22 to access quality data on providers as made 

23 available through a website once that data is 

24 available. 


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1 (2) PROVIDER INFORMATION.—Each plan por2 tal shall meet the following requirements with re3 spect to information on health care providers: 

4 (A) Identifying and licensure information. 

5 (B) Self-pay prices charged, including vari6 ation in such prices. 

7 For purposes of subparagraph (B), the term ‘‘self8 pay price’’ means the price charged by a provider to 

9 individuals for items or services where the price is 

10 not established or negotiated through a health care 

11 program or third party. 

12 (3) TAX CREDIT AND DEDUCTION INFORMA13 TION.—Each plan portal shall also include informa14 tion on tax credits and deductions that may be avail15 able for purpose of qualified health plans. 

16 (4) INCLUSION OF QUALITY INFORMATION.— 

17 The Secretary, after collaboration with States and 

18 health care providers (including practicing physi19 cians, hospitals, and other health care institutions), 

20 shall submit to Congress recommendations on how 

21 to include on plan portals information on perform22 ance-based quality measures obtained under section 

23 612. 

24 (d) PROHIBITIONS.— 


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1 (1) DIRECT ENROLLMENT.—A plan portal may 

2 not directly enroll individuals in health insurance 

3 plans or under a State Medicaid plan or a State 

4 children’s health insurance plan. 

5 (2) CONFLICTS OF INTEREST.— 

6 (A) COMPANIES.—A health insurance 

7 issuer offering a health insurance plan through 

8 a plan portal may not— 

9 (i) be the private entity developing 

10 and maintaining a plan portal under this 

11 section; or 

12 (ii) have an ownership interest in such 

13 private entity or in the plan portal. 

14 (B) INDIVIDUALS.—An individual em15 ployed by a health insurance issuer offering a 

16 health insurance plan through a plan portal 

17 may not serve as a director or officer for— 

18 (i) the private entity developing and 

19 maintaining a plan portal under this sec20 tion; or 

21 (ii) the plan portal. 

22 (e) CONSTRUCTION.—Nothing in this section shall be 

23 construed to prohibit health insurance brokers and agents 

24 from— 

25 (1) utilizing the plan portal for any purpose; or 


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1 (2) marketing or offering health insurance 

2 products. 

3 (f) STATE DEFINED.—In this section, the term 

4 ‘‘State’’ has the meaning given such term for purposes of 

5 title XIX of the Social Security Act. 

6 SEC. 612. ESTABLISHMENT OF PERFORMANCE-BASED 

7 QUALITY MEASURES. 

8 Not later than January 1, 2010, the Secretary of 

9 Health and Human Services shall submit to Congress a 

10 proposal for a formalized process for the development of 

11 performance-based quality measures that could be applied 

12 to physicians’ services under the Medicare program. Such 

13 proposal shall be in concert and agreement with the Physi14 cian Consortium for Performance Improvement and shall 

15 only utilize measures agreed upon by each physician spe16 cialty organization. 

17 Subtitle C—Medicare Accountable 

18 Care Organization Demonstra19 tion Program 

20 SEC. 621. MEDICARE ACCOUNTABLE CARE ORGANIZATION 

21 DEMONSTRATION PROGRAM. 

22 (a) ESTABLISHMENT.— 

23 (1) IN GENERAL.—In order to promote innova24 tive care coordination and delivery that is cost-effec25 tive, the Secretary of Health and Human Services 


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1 (in this section referred to as the ‘‘Secretary’’) shall 

2 conduct a demonstration program under the Medi3 care program under which— 

4 (A) groups of providers meeting certain 

5 criteria may work together to manage and co6 ordinate care for Medicare fee-for-service bene7 ficiaries through an Accountable Care Organi8 zation (in this section referred to as an 

9 ‘‘ACO’’); and 

10 (B) providers in participating ACOs are el11 igible for bonuses based on performance. 

12 (2) MEDICARE FEE-FOR-SERVICE BENEFICIARY

13 DEFINED.—In this section, the term ‘‘Medicare fee14 for-service beneficiary’’ means an individual who is 

15 enrolled in the original Medicare fee-for-service pro16 gram under parts A and B of title XVIII of the So17 cial Security Act and not enrolled in an MA plan 

18 under part C of such title. 

19 (b) ELIGIBLE ACOS.— 

20 (1) IN GENERAL.—Subject to paragraph (2), 

21 the following provider groups are eligible to partici22 pate as ACOs under the demonstration program 

23 under this section: 

24 (A) Physicians in group practice arrange25 ments. 


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1 (B) Networks of individual physician prac2 tices. 

3 (C) Partnerships or joint venture arrange4 ments between hospitals and physicians. 

5 (D) Partnerships or joint ventures, which 

6 may include pharmacists providing medication 

7 therapy management. 

8 (E) Hospitals employing physicians. 

9 (F) Integrated delivery systems. 

10 (G) Community-based coalitions of pro11 viders. 

12 (2) REQUIREMENTS.—An ACO shall meet the 

13 following requirements: 

14 (A) The ACO shall have a formal legal 

15 structure that would allow the organization to 

16 receive and distribute bonuses to participating 

17 providers. 

18 (B) The ACO shall include the primary 

19 care providers of at least 5,000 Medicare fee20 for-service beneficiaries. 

21 (C) The ACO shall be willing to become 

22 accountable for the overall care of the Medicare 

23 fee-for-service beneficiaries. 

24 (D) The ACO shall provide the Secretary 

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1 cians participating in the ACO to support the 

2 beneficiary assignment, implementation of per3 formance measures, and the determination of 

4 bonus payments under the demonstration pro5 gram. 

6 (E) The ACO shall have in place contracts 

7 with a core group of key specialist physicians, 

8 a leadership and management structure, and 

9 processes to promote evidence-based medicine 

10 and to coordinate care. 

11 (c) ASSIGNMENT OF MEDICARE FEE-FOR-SERVICE

12 BENEFICIARIES.— 

13 (1) IN GENERAL.—Under the demonstration 

14 program under this section, each Medicare fee-for15 service Medicare beneficiary shall be automatically 

16 assigned to a primary care provider. Such assign17 ment shall be based on the physician from whom the 

18 beneficiary received the most primary care in the 

19 preceding year. 

20 (2) BENEFICIARIES MAY CONTINUE TO SEE

21 PROVIDERS OUTSIDE OF THE ACO.—Under the dem22 onstration program under this section, a Medicare 

23 fee-for-service Medicare beneficiary may continue to 

24 see providers in and outside of the ACO to which 

25 they have been assigned. 


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1 (d) BONUS PAYMENTS.— 

2 (1) IN GENERAL.—Under the demonstration 

3 program, Medicare payments shall continue to be 

4 made to providers under the original Medicare fee5 for-service program in the same manner as they 

6 would otherwise be made except that a participating 

7 ACO is eligible for bonuses if— 

8 (A) it meets certain quality performance 

9 measures; and 

10 (B) spending for their Medicare fee-for11 service beneficiaries meets the requirement 

12 under paragraph (3). 

13 (2) QUALITY.—Under the demonstration pro14 gram under this section, providers meet the require15 ment under paragraph (1)(A) if they generally follow 

16 consensus-based guidelines established by non-gov17 ernment professional medical societies. Patient satis18 faction and risk-adjusted outcomes shall be deter19 mined through an independent entity with medical 

20 expertise. 

21 (3) REQUIREMENT RELATING TO SPENDING.— 

22 (A) IN GENERAL.—An ACO shall only be 

23 eligible to receive a bonus payment if the aver24 age Medicare expenditures under the ACO for 

25 Medicare fee-for-service beneficiaries over a 


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1 two-year period is at least 2 percent below the 

2 average benchmark for the corresponding two3 year period. The benchmark for each ACO shall 

4 be set using the most recent three years of total 

5 per-beneficiary spending for Medicare fee-for6 service beneficiaries assigned to the ACO. Such 

7 benchmark shall be updated by the projected 

8 rate of growth in national per capita spending 

9 for the original Medicare fee-for-service pro10 gram, as projected (using the most recent three 

11 years of data) by the Chief Actuary of the Cen12 ters for Medicare & Medicaid Services. 

13 (4) AMOUNT OF BONUS PAYMENTS.—The 

14 amount of the bonus payment to a participating 

15 ACO shall be one-half of the percentage point dif16 ference between the two-year average of their pa17 tients’ Medicare expenditures and 98 percent of the 

18 two-year average benchmark. The bonus amount, in 

19 dollars, shall be equal to the bonus share multiplied 

20 by the benchmark for the most recent year. 

21 (5) LIMITATION.—Bonus payments may only be 

22 made to an ACO if the primary care provider to 

23 which the Medicare fee-for-service beneficiary has 

24 been assigned under subsection (c) elects to partici25 pate in such ACO. 


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1 (e) WAIVER AUTHORITY.—The Secretary may waive 

2 such requirements of titles XI and XVIII of the Social 

3 Security Act (42 U.S.C. 1301 et seq.; 1395 et seq.) as 

4 may be appropriate for the purpose of carrying out the 

5 demonstration program under this section. 

6 (f) REPORT.—Upon completion of the demonstration 

7 program under this section, the Secretary shall submit to 

8 Congress a report on the program together with such rec9 ommendations as the Secretary determines appropriate. 

10 Subtitle D—Repeal of Unused 

11 Stimulus Funds 

12 SEC. 631. RESCISSION AND REPEAL IN ARRA. 

13 (a) RESCISSION.—Of the discretionary appropria14 tions made available in division A of the American Recov15 ery and Reinvestment Act of 2009 (Public Law 111–5), 

16 all unobligated balances are rescinded. 

17 (b) REPEAL.—Subtitles B and C of title II and titles 

18 III through VII of division B of the American Recovery 

19 and Reinvestment Act of 2009 (Public Law 111–5) are 

20 repealed. 

Æ 


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