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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3713 Introduced in House (IH)]

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.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``American Health 
Care Solutions Act of 2009''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

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.
              TITLE III--STRENGTHENING SAFETY NET PROGRAMS

        Subtitle A--Beneficiary Choice Under Medicaid and SCHIP

Sec. 301. Easing administrative barriers to State cooperation with 
                            employer-sponsored 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.
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.

SEC. 2. RULE OF CONSTRUCTION REGARDING PROHIBITION ON AUTHORITY TO 
              RATION HEALTH CARE.

    Nothing in this Act may be construed to authorize the Federal 
Government to ration health care for the American people.

                 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.

    (a) State Requirement.--
            (1) In general.--Not later than 2 years after the date of 
        the enactment of this Act, each State shall ensure an adequate 
        financial backstop to mitigate the cost of high risk 
        individuals in the State through--
                    (A) a qualified State reinsurance program described 
                in subsection (b); or
                    (B) a qualifying State high risk pool described in 
                subsection (c)(1); and
                    (C) subject to paragraph (4), contribute to the 
                ongoing stability of the arrangement through State 
                assessments or allocation of other State funds that are 
                not otherwise used on State health care programs.
            (2) Preference.--Beginning 3 years after the date of the 
        enactment of this Act, the Secretary, in awarding any 
        competitive grant and for which only States are eligible to 
        apply, shall give preference to a State with a program that 
        meets the requirements of paragraph (1).
            (3) Relation to current qualified high risk pool program 
        operating a qualified high risk pool.--In the case of a State 
        that is operating a current section 2745 qualified high risk 
        pool as of the date of the enactment of this Act--
                    (A) as of the date that is 2 years after the date 
                of the enactment of this Act, such a pool shall not be 
                treated as a qualified high risk pool under section 
                2745 of the Public Health Service Act (42 U.S.C. 300gg-
                45) unless the pool is a qualifying State high risk 
                pool described in subsection (c)(1); and
                    (B) current funding sources may be used to 
                transition from operation of such a pool to operation 
                of a qualified State reinsurance program described in 
                subsection (b).
            (4) Application of funds.--If the program or pool operated 
        under paragraph (1)(A) is in sound financial condition as 
        demonstrated by audited financial statements and actuarial 
        certification and is approved as an appropriate financial 
        backstop by the State Insurance Commissioner involved, the 
        requirement of paragraph (1)(C) shall be waived.
    (b) Qualified State Reinsurance Program.--
            (1) Form of program.--A qualified State reinsurance program 
        may provide reinsurance--
                    (A) on a prospective or retrospective basis; and
                    (B) on a basis that protects health insurance 
                issuers against the annual aggregate spending of their 
                enrollees as well as purchase protection against 
                individual catastrophic costs.
            (2) Satisfaction of hipaa requirement.--A qualified State 
        reinsurance program shall be deemed, for purposes of section 
        2745 of the Public Health Service Act (42 U.S.C. 300gg-45), to 
        be a qualified high-risk pool under such section.
    (c) Qualifying State High Risk Pool.--
            (1) In general.--A qualifying State high risk pool 
        described in this subsection means a current section 2745 
        qualified high risk pool that meets the following requirements:
                    (A) The pool offers assistance to low-income 
                individuals as applicable and may incorporate 
                applicable Federal and State programs for eligible 
                individuals to meet this purpose.
                    (B) The pool provides a variety of coverage 
                options, one of which must be a high deductible health 
                plan that may be coupled with a health savings account.
                    (C) The pool is funded with a stable funding source 
                that is not solely dependent on an appropriation from a 
                State legislature.
                    (D) The pool eliminates waiting lists and pre-
                existing conditions exclusionary periods so that all 
                eligible residents who are seeking coverage through the 
                pool can receive coverage through the pool.
                    (E) The pool allows for coverage of individuals 
                who, but for the 24-month disability waiting period 
                under section 226(b) of the Social Security Act, would 
                be eligible for Medicare during the period of such 
                waiting period.
                    (F) The pool does not charge participants more than 
                150 percent of the average premium for individual 
                market coverage in that State.
                    (G) The pool conducts education and outreach 
                initiatives so that residents and brokers understand 
                that the pool is available to eligible residents.
                    (H) The pool does not impose lifetime or annual 
                limits on benefits.
            (2) Relation to section 2745.--As of the date that is 2 
        years after the date of the enactment of this Act, a pool shall 
        not qualify as a qualified high risk pool under section 2745 of 
        the Public Health Service Act (42 U.S.C. 300gg-45) unless the 
        pool is a qualifying State high risk pool described in 
        paragraph (1).
    (d) Waivers.--In order to accommodate new and innovative programs, 
the Secretary may waive such requirements of this section for qualified 
State reinsurance programs and for qualifying State high risk pools as 
the Secretary deems appropriate.
    (e) Funding.--In addition to any other amounts appropriated, there 
are authorized to be appropriated to carry out section 2745 of the 
Public Health Service Act (42 U.S.C. 300gg-45) (including through a 
program or pool described in subsection (a)(1)), $20,000,000,000 for 
Fiscal Years 2010 through 2019 to carry out this section.
    (f) Definitions.--In this section:
            (1) Current section 2745 qualified high risk pool.--The 
        term ``current section 2745 qualified high risk pool'' has the 
        meaning given the term ``qualified high risk pool'' under 
        section 2745(g) of the Public Health Service Act (42 U.S.C. 
        300gg-45(g)) as in effect as of the date of the enactment of 
        this Act.
            (2) Health insurance coverage.--The term ``health insurance 
        coverage'' has the meaning given such term in section 2791 of 
        the Public Health Service Act (42 U.S.C. 300gg-91).
            (3) Health insurance issuer.--The term ``health insurance 
        issuer'' has the meaning given such term in section 2791 of the 
        Public Health Service Act (42 U.S.C. 300gg-91).
            (4) Qualified state reinsurance program.--The term 
        ``qualified State reinsurance program'' means a program 
        operated by a State or a State authorized program that provides 
        reinsurance for health insurance coverage offered in the 
        individual or the small group market in accordance with the 
        model for such a program established (as of the date of the 
        enactment of this Act).
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (6) State.--The term ``State'' has the meaning given such 
        term for purposes of title XIX of the Social Security Act.

             Subtitle B--Individual Membership Associations

SEC. 111. EXPANSION OF ACCESS AND CHOICE OF HEALTH INSURANCE COVERAGE 
              THROUGH INDIVIDUAL MEMBERSHIP ASSOCIATIONS (IMAS).

    The Public Health Service Act (42 U.S.C. 201 et seq.) is amended by 
adding at the end the following new title:

            ``TITLE XXXI--INDIVIDUAL MEMBERSHIP ASSOCIATIONS

``SEC. 3101. DEFINITION OF INDIVIDUAL MEMBERSHIP ASSOCIATION (IMA).

    ``(a) In General.--For purposes of this title, the terms 
`individual membership association' and `IMA' mean a legal entity that 
meets the following requirements:
            ``(1) Organization.--The IMA is an organization operated 
        under the direction of an association (as defined in section 
        3104(1)).
            ``(2) Offering health benefits coverage.--
                    ``(A) Different groups.--The IMA, in conjunction 
                with those health insurance issuers that offer health 
                benefits coverage through the IMA, makes available 
                health benefits coverage in the manner described in 
                subsection (b) to all members of the IMA and the 
                dependents of such members in the manner described in 
                subsection (c)(2) at rates that are established by the 
                health insurance issuer on a policy or product specific 
                basis and that may vary only as permissible under State 
                law.
                    ``(B) Nondiscrimination in coverage offered.--
                            ``(i) In general.--Subject to clause (ii), 
                        the IMA may not offer health benefits coverage 
                        to a member of an IMA unless the same coverage 
                        is offered to all such members of the IMA.
                            ``(ii) Construction.--Nothing in this title 
                        shall be construed as requiring or permitting a 
                        health insurance issuer to provide coverage 
                        outside the service area of the issuer, as 
                        approved under State law, or requiring a health 
                        insurance issuer from excluding or limiting the 
                        coverage on any individual, subject to the 
                        requirement of section 2741.
                    ``(C) No financial underwriting.--The IMA provides 
                health benefits coverage only through contracts with 
                health insurance issuers and does not assume insurance 
                risk with respect to such coverage.
            ``(3) Geographic areas.--Nothing in this title shall be 
        construed as preventing the establishment and operation of more 
        than one IMA in a geographic area or as limiting the number of 
        IMAs that may operate in any area.
            ``(4) Provision of administrative services to purchasers.--
                    ``(A) In general.--The IMA may provide 
                administrative services for members. Such services may 
                include accounting, billing, and enrollment 
                information.
                    ``(B) Construction.--Nothing in this subsection 
                shall be construed as preventing an IMA from serving as 
                an administrative service organization to any entity.
            ``(5) Filing information.--The IMA files with the Secretary 
        information that demonstrates the IMA's compliance with the 
        applicable requirements of this title.
    ``(b) Health Benefits Coverage Requirements.--
            ``(1) Compliance with consumer protection requirements.--
        Any health benefits coverage offered through an IMA shall--
                    ``(A) be underwritten by a health insurance issuer 
                that--
                            ``(i) is licensed (or otherwise regulated) 
                        under State law, and
                            ``(ii) meets all applicable State standards 
                        relating to consumer protection, subject to 
                        section 3002(b), and
                    ``(B) subject to paragraph (2), be approved or 
                otherwise permitted to be offered under State law.
            ``(2) Examples of types of coverage.--The benefits coverage 
        made available through an IMA may include, but is not limited 
        to, any of the following if it meets the other applicable 
        requirements of this title:
                    ``(A) Coverage through a health maintenance 
                organization.
                    ``(B) Coverage in connection with a preferred 
                provider organization.
                    ``(C) Coverage in connection with a licensed 
                provider-sponsored organization.
                    ``(D) Indemnity coverage through an insurance 
                company.
                    ``(E) Coverage offered in connection with a 
                contribution into a medical savings account, health 
                savings account, or flexible spending account.
                    ``(F) Coverage that includes a point-of-service 
                option.
                    ``(G) Any combination of such types of coverage.
            ``(3) Wellness bonuses for health promotion.--Nothing in 
        this title shall be construed as precluding a health insurance 
        issuer offering health benefits coverage through an IMA from 
        establishing premium discounts or rebates for members or from 
        modifying otherwise applicable copayments or deductibles in 
        return for adherence to programs of health promotion and 
        disease prevention so long as such programs are agreed to in 
        advance by the IMA and comply with all other provisions of this 
        title and do not discriminate among similarly situated members.
    ``(c) Members; Health Insurance Issuers.--
            ``(1) Members.--
                    ``(A) In general.--Under rules established to carry 
                out this title, with respect to an individual who is a 
                member of an IMA, the individual may enroll for health 
                benefits coverage (including coverage for dependents of 
                such individual) offered by a health insurance issuer 
                through the IMA.
                    ``(B) Rules for enrollment.--Nothing in this 
                paragraph shall preclude an IMA from establishing rules 
                of enrollment and reenrollment of members. Such rules 
                shall be applied consistently to all members within the 
                IMA and shall not be based in any manner on health 
                status-related factors.
            ``(2) Health insurance issuers.--The contract between an 
        IMA and a health insurance issuer shall provide, with respect 
        to a member enrolled with health benefits coverage offered by 
        the issuer through the IMA, for the payment of the premiums 
        collected by the issuer.

``SEC. 3102. APPLICATION OF CERTAIN LAWS AND REQUIREMENTS.

    ``State laws insofar as they relate to any of the following are 
superseded and shall not apply to health benefits coverage made 
available through an IMA:
            ``(1) Benefit requirements for health benefits coverage 
        offered through an IMA, including (but not limited to) 
        requirements relating to coverage of specific providers, 
        specific services or conditions, or the amount, duration, or 
        scope of benefits, but not including requirements to the extent 
        required to implement title XXVII or other Federal law and to 
        the extent the requirement prohibits an exclusion of a specific 
        disease from such coverage.
            ``(2) Any other requirements (including limitations on 
        compensation arrangements) that, directly or indirectly, 
        preclude (or have the effect of precluding) the offering of 
        such coverage through an IMA, if the IMA meets the requirements 
        of this title.
Any State law or regulation relating to the composition or organization 
of an IMA is preempted to the extent the law or regulation is 
inconsistent with the provisions of this title.

``SEC. 3103. ADMINISTRATION.

    ``(a) In General.--The Secretary shall administer this title and is 
authorized to issue such regulations as may be required to carry out 
this title. Such regulations shall be subject to Congressional review 
under the provisions of chapter 8 of title 5, United States Code. The 
Secretary shall incorporate the process of `deemed file and use' with 
respect to the information filed under section 3001(a)(5)(A) and shall 
determine whether information filed by an IMA demonstrates compliance 
with the applicable requirements of this title. The Secretary shall 
exercise authority under this title in a manner that fosters and 
promotes the development of IMAs in order to improve access to health 
care coverage and services.
    ``(b) Periodic Reports.--The Secretary shall submit to Congress a 
report every 30 months, during the 10-year period beginning on the 
effective date of the rules promulgated by the Secretary to carry out 
this title, on the effectiveness of this title in promoting coverage of 
uninsured individuals. The Secretary may provide for the production of 
such reports through one or more contracts with appropriate private 
entities.

``SEC. 3104. DEFINITIONS.

    ``For purposes of this title:
            ``(1) Association.--The term `association' means, with 
        respect to health insurance coverage offered in a State, an 
        association which--
                    ``(A) has been actively in existence for at least 5 
                years;
                    ``(B) has been formed and maintained in good faith 
                for purposes other than obtaining insurance;
                    ``(C) does not condition membership in the 
                association on any health status-related factor 
                relating to an individual (including an employee of an 
                employer or a dependent of an employee); and
                    ``(D) does not make health insurance coverage 
                offered through the association available other than in 
                connection with a member of the association.
            ``(2) Dependent.--The term `dependent', as applied to 
        health insurance coverage offered by a health insurance issuer 
        licensed (or otherwise regulated) in a State, shall have the 
        meaning applied to such term with respect to such coverage 
        under the laws of the State relating to such coverage and such 
        an issuer. Such term may include the spouse and children of the 
        individual involved.
            ``(3) Health benefits coverage.--The term `health benefits 
        coverage' has the meaning given the term health insurance 
        coverage in section 2791(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2).
            ``(5) Health status-related factor.--The term `health 
        status-related factor' has the meaning given such term in 
        section 2791(d)(9).
            ``(6) IMA; individual membership association.--The terms 
        `IMA' and `individual membership association' are defined in 
        section 3101(a).
            ``(7) Member.--The term `member' means, with respect to an 
        IMA, an individual who is a member of the association to which 
        the IMA is offering coverage.''.

                  Subtitle C--Association Health Plans

SEC. 121. RULES GOVERNING ASSOCIATION HEALTH PLANS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding after part 7 the 
following new part:

           ``PART 8--RULES GOVERNING ASSOCIATION HEALTH PLANS

``SEC. 801. ASSOCIATION HEALTH PLANS.

    ``(a) In General.--For purposes of this part, the term `association 
health plan' means a group health plan whose sponsor is (or is deemed 
under this part to be) described in subsection (b).
    ``(b) Sponsorship.--The sponsor of a group health plan is described 
in this subsection if such sponsor--
            ``(1) is organized and maintained in good faith, with a 
        constitution and bylaws specifically stating its purpose and 
        providing for periodic meetings on at least an annual basis, as 
        a bona fide trade association, a bona fide industry association 
        (including a rural electric cooperative association or a rural 
        telephone cooperative association), a bona fide professional 
        association, or a bona fide chamber of commerce (or similar 
        bona fide business association, including a corporation or 
        similar organization that operates on a cooperative basis 
        (within the meaning of section 1381 of the Internal Revenue 
        Code of 1986)), for substantial purposes other than that of 
        obtaining or providing medical care;
            ``(2) is established as a permanent entity which receives 
        the active support of its members and requires for membership 
        payment on a periodic basis of dues or payments necessary to 
        maintain eligibility for membership in the sponsor; and
            ``(3) does not condition membership, such dues or payments, 
        or coverage under the plan on the basis of health status-
        related factors with respect to the employees of its members 
        (or affiliated members), or the dependents of such employees, 
        and does not condition such dues or payments on the basis of 
        group health plan participation.
Any sponsor consisting of an association of entities which meet the 
requirements of paragraphs (1), (2), and (3) shall be deemed to be a 
sponsor described in this subsection.

``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.

    ``(a) In General.--The applicable authority shall prescribe by 
regulation a procedure under which, subject to subsection (b), the 
applicable authority shall certify association health plans which apply 
for certification as meeting the requirements of this part.
    ``(b) Standards.--Under the procedure prescribed pursuant to 
subsection (a), in the case of an association health plan that provides 
at least one benefit option which does not consist of health insurance 
coverage, the applicable authority shall certify such plan as meeting 
the requirements of this part only if the applicable authority is 
satisfied that the applicable requirements of this part are met (or, 
upon the date on which the plan is to commence operations, will be met) 
with respect to the plan.
    ``(c) Requirements Applicable to Certified Plans.--An association 
health plan with respect to which certification under this part is in 
effect shall meet the applicable requirements of this part, effective 
on the date of certification (or, if later, on the date on which the 
plan is to commence operations).
    ``(d) Requirements for Continued Certification.--The applicable 
authority may provide by regulation for continued certification of 
association health plans under this part.
    ``(e) Class Certification for Fully Insured Plans.--The applicable 
authority shall establish a class certification procedure for 
association health plans under which all benefits consist of health 
insurance coverage. Under such procedure, the applicable authority 
shall provide for the granting of certification under this part to the 
plans in each class of such association health plans upon appropriate 
filing under such procedure in connection with plans in such class and 
payment of the prescribed fee under section 807(a).
    ``(f) Certification of Self-Insured Association Health Plans.--An 
association health plan which offers one or more benefit options which 
do not consist of health insurance coverage may be certified under this 
part only if such plan consists of any of the following:
            ``(1) A plan which offered such coverage on the date of the 
        enactment of the Small Business Health Fairness Act of 2009.
            ``(2) A plan under which the sponsor does not restrict 
        membership to one or more trades and businesses or industries 
        and whose eligible participating employers represent a broad 
        cross-section of trades and businesses or industries.
            ``(3) A plan whose eligible participating employers 
        represent one or more trades or businesses, or one or more 
        industries, consisting of any of the following: agriculture; 
        equipment and automobile dealerships; barbering and 
        cosmetology; certified public accounting practices; child care; 
        construction; dance, theatrical and orchestra productions; 
        disinfecting and pest control; financial services; fishing; 
        food service establishments; hospitals; labor organizations; 
        logging; manufacturing (metals); mining; medical and dental 
        practices; medical laboratories; professional consulting 
        services; sanitary services; transportation (local and 
        freight); warehousing; wholesaling/distributing; or any other 
        trade or business or industry which has been indicated as 
        having average or above-average risk or health claims 
        experience by reason of State rate filings, denials of 
        coverage, proposed premium rate levels, or other means 
        demonstrated by such plan in accordance with regulations.

``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES.

    ``(a) Sponsor.--The requirements of this subsection are met with 
respect to an association health plan if the sponsor has met (or is 
deemed under this part to have met) the requirements of section 801(b) 
for a continuous period of not less than 3 years ending with the date 
of the application for certification under this part.
    ``(b) Board of Trustees.--The requirements of this subsection are 
met with respect to an association health plan if the following 
requirements are met:
            ``(1) Fiscal control.--The plan is operated, pursuant to a 
        trust agreement, by a board of trustees which has complete 
        fiscal control over the plan and which is responsible for all 
        operations of the plan.
            ``(2) Rules of operation and financial controls.--The board 
        of trustees has in effect rules of operation and financial 
        controls, based on a 3-year plan of operation, adequate to 
        carry out the terms of the plan and to meet all requirements of 
        this title applicable to the plan.
            ``(3) Rules governing relationship to participating 
        employers and to contractors.--
                    ``(A) Board membership.--
                            ``(i) In general.--Except as provided in 
                        clauses (ii) and (iii), the members of the 
                        board of trustees are individuals selected from 
                        individuals who are the owners, officers, 
                        directors, or employees of the participating 
                        employers or who are partners in the 
                        participating employers and actively 
                        participate in the business.
                            ``(ii) Limitation.--
                                    ``(I) General rule.--Except as 
                                provided in subclauses (II) and (III), 
                                no such member is an owner, officer, 
                                director, or employee of, or partner 
                                in, a contract administrator or other 
                                service provider to the plan.
                                    ``(II) Limited exception for 
                                providers of services solely on behalf 
                                of the sponsor.--Officers or employees 
                                of a sponsor which is a service 
                                provider (other than a contract 
                                administrator) to the plan may be 
                                members of the board if they constitute 
                                not more than 25 percent of the 
                                membership of the board and they do not 
                                provide services to the plan other than 
                                on behalf of the sponsor.
                                    ``(III) Treatment of providers of 
                                medical care.--In the case of a sponsor 
                                which is an association whose 
                                membership consists primarily of 
                                providers of medical care, subclause 
                                (I) shall not apply in the case of any 
                                service provider described in subclause 
                                (I) who is a provider of medical care 
                                under the plan.
                            ``(iii) Certain plans excluded.--Clause (i) 
                        shall not apply to an association health plan 
                        which is in existence on the date of the 
                        enactment of the Small Business Health Fairness 
                        Act of 2009.
                    ``(B) Sole authority.--The board has sole authority 
                under the plan to approve applications for 
                participation in the plan and to contract with a 
                service provider to administer the day-to-day affairs 
                of the plan.
    ``(c) Treatment of Franchise Networks.--In the case of a group 
health plan which is established and maintained by a franchiser for a 
franchise network consisting of its franchisees--
            ``(1) the requirements of subsection (a) and section 801(a) 
        shall be deemed met if such requirements would otherwise be met 
        if the franchiser were deemed to be the sponsor referred to in 
        section 801(b), such network were deemed to be an association 
        described in section 801(b), and each franchisee were deemed to 
        be a member (of the association and the sponsor) referred to in 
        section 801(b); and
            ``(2) the requirements of section 804(a)(1) shall be deemed 
        met.
The Secretary may by regulation define for purposes of this subsection 
the terms `franchiser', `franchise network', and `franchisee'.

``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

    ``(a) Covered Employers and Individuals.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan--
            ``(1) each participating employer must be--
                    ``(A) a member of the sponsor,
                    ``(B) the sponsor, or
                    ``(C) an affiliated member of the sponsor with 
                respect to which the requirements of subsection (b) are 
                met,
        except that, in the case of a sponsor which is a professional 
        association or other individual-based association, if at least 
        one of the officers, directors, or employees of an employer, or 
        at least one of the individuals who are partners in an employer 
        and who actively participates in the business, is a member or 
        such an affiliated member of the sponsor, participating 
        employers may also include such employer; and
            ``(2) all individuals commencing coverage under the plan 
        after certification under this part must be--
                    ``(A) active or retired owners (including self-
                employed individuals), officers, directors, or 
                employees of, or partners in, participating employers; 
                or
                    ``(B) the beneficiaries of individuals described in 
                subparagraph (A).
    ``(b) Coverage of Previously Uninsured Employees.--In the case of 
an association health plan in existence on the date of the enactment of 
the Small Business Health Fairness Act of 2009, an affiliated member of 
the sponsor of the plan may be offered coverage under the plan as a 
participating employer only if--
            ``(1) the affiliated member was an affiliated member on the 
        date of certification under this part; or
            ``(2) during the 12-month period preceding the date of the 
        offering of such coverage, the affiliated member has not 
        maintained or contributed to a group health plan with respect 
        to any of its employees who would otherwise be eligible to 
        participate in such association health plan.
    ``(c) Individual Market Unaffected.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan, no participating employer may provide health 
insurance coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer under the plan, 
if such exclusion of the employee from coverage under the plan is based 
on a health status-related factor with respect to the employee and such 
employee would, but for such exclusion on such basis, be eligible for 
coverage under the plan.
    ``(d) Prohibition of Discrimination Against Employers and Employees 
Eligible To Participate.--The requirements of this subsection are met 
with respect to an association health plan if--
            ``(1) under the terms of the plan, all employers meeting 
        the preceding requirements of this section are eligible to 
        qualify as participating employers for all geographically 
        available coverage options, unless, in the case of any such 
        employer, participation or contribution requirements of the 
        type referred to in section 2711 of the Public Health Service 
        Act (42 U.S.C. 300gg-11) are not met;
            ``(2) upon request, any employer eligible to participate is 
        furnished information regarding all coverage options available 
        under the plan; and
            ``(3) the applicable requirements of sections 701, 702, and 
        703 are met with respect to the plan.

``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION 
              RATES, AND BENEFIT OPTIONS.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if the following requirements are 
met:
            ``(1) Contents of governing instruments.--The instruments 
        governing the plan include a written instrument, meeting the 
        requirements of an instrument required under section 402(a)(1), 
        which--
                    ``(A) provides that the board of trustees serves as 
                the named fiduciary required for plans under section 
                402(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A));
                    ``(B) provides that the sponsor of the plan is to 
                serve as plan sponsor (referred to in section 
                3(16)(B)); and
                    ``(C) incorporates the requirements of section 806.
            ``(2) Contribution rates must be nondiscriminatory.--
                    ``(A) The contribution rates for any participating 
                small employer do not vary on the basis of any health 
                status-related factor in relation to employees of such 
                employer or their beneficiaries and do not vary on the 
                basis of the type of business or industry in which such 
                employer is engaged.
                    ``(B) Nothing in this title or any other provision 
                of law shall be construed to preclude an association 
                health plan, or a health insurance issuer offering 
                health insurance coverage in connection with an 
                association health plan, from--
                            ``(i) setting contribution rates based on 
                        the claims experience of the plan; or
                            ``(ii) varying contribution rates for small 
                        employers in a State to the extent that such 
                        rates could vary using the same methodology 
                        employed in such State for regulating premium 
                        rates in the small group market with respect to 
                        health insurance coverage offered in connection 
                        with bona fide associations (within the meaning 
                        of section 2791(d)(3) of the Public Health 
                        Service Act (42 U.S.C. 300gg-91(d)(3))),
                subject to the requirements of section 702(b) relating 
                to contribution rates.
            ``(3) Floor for number of covered individuals with respect 
        to certain plans.--If any benefit option under the plan does 
        not consist of health insurance coverage, the plan has as of 
        the beginning of the plan year not fewer than 1,000 
        participants and beneficiaries.
            ``(4) Marketing requirements.--
                    ``(A) In general.--If a benefit option which 
                consists of health insurance coverage is offered under 
                the plan, State-licensed insurance agents shall be used 
                to distribute to small employers coverage which does 
                not consist of health insurance coverage in a manner 
                comparable to the manner in which such agents are used 
                to distribute health insurance coverage.
                    ``(B) State-licensed insurance agents.--For 
                purposes of subparagraph (A), the term `State-licensed 
                insurance agents' means one or more agents who are 
                licensed in a State and are subject to the laws of such 
                State relating to licensure, qualification, testing, 
                examination, and continuing education of persons 
                authorized to offer, sell, or solicit health insurance 
                coverage in such State.
            ``(5) Regulatory requirements.--Such other requirements as 
        the applicable authority determines are necessary to carry out 
        the purposes of this part, which shall be prescribed by the 
        applicable authority by regulation.
    ``(b) Ability of Association Health Plans To Design Benefit 
Options.--Subject to section 514(d), nothing in this part or any 
provision of State law (as defined in section 514(c)(1)) shall be 
construed to preclude an association health plan, or a health insurance 
issuer offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion in 
selecting the specific items and services consisting of medical care to 
be included as benefits under such plan or coverage, except (subject to 
section 514) in the case of (1) any law to the extent that it is not 
preempted under section 731(a)(1) with respect to matters governed by 
section 711, 712, or 713, or (2) any law of the State with which filing 
and approval of a policy type offered by the plan was initially 
obtained to the extent that such law prohibits an exclusion of a 
specific disease from such coverage.

``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR 
              PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH 
              INSURANCE COVERAGE.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if--
            ``(1) the benefits under the plan consist solely of health 
        insurance coverage; or
            ``(2) if the plan provides any additional benefit options 
        which do not consist of health insurance coverage, the plan--
                    ``(A) establishes and maintains reserves with 
                respect to such additional benefit options, in amounts 
                recommended by the qualified actuary, consisting of--
                            ``(i) a reserve sufficient for unearned 
                        contributions;
                            ``(ii) a reserve sufficient for benefit 
                        liabilities which have been incurred, which 
                        have not been satisfied, and for which risk of 
                        loss has not yet been transferred, and for 
                        expected administrative costs with respect to 
                        such benefit liabilities;
                            ``(iii) a reserve sufficient for any other 
                        obligations of the plan; and
                            ``(iv) a reserve sufficient for a margin of 
                        error and other fluctuations, taking into 
                        account the specific circumstances of the plan; 
                        and
                    ``(B) establishes and maintains aggregate and 
                specific excess/stop loss insurance and solvency 
                indemnification, with respect to such additional 
                benefit options for which risk of loss has not yet been 
                transferred, as follows:
                            ``(i) The plan shall secure aggregate 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is not greater than 125 
                        percent of expected gross annual claims. The 
                        applicable authority may by regulation provide 
                        for upward adjustments in the amount of such 
                        percentage in specified circumstances in which 
                        the plan specifically provides for and 
                        maintains reserves in excess of the amounts 
                        required under subparagraph (A).
                            ``(ii) The plan shall secure specific 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is at least equal to an 
                        amount recommended by the plan's qualified 
                        actuary. The applicable authority may by 
                        regulation provide for adjustments in the 
                        amount of such insurance in specified 
                        circumstances in which the plan specifically 
                        provides for and maintains reserves in excess 
                        of the amounts required under subparagraph (A).
                            ``(iii) The plan shall secure 
                        indemnification insurance for any claims which 
                        the plan is unable to satisfy by reason of a 
                        plan termination.
Any person issuing to a plan insurance described in clause (i), (ii), 
or (iii) of subparagraph (B) shall notify the Secretary of any failure 
of premium payment meriting cancellation of the policy prior to 
undertaking such a cancellation. Any regulations prescribed by the 
applicable authority pursuant to clause (i) or (ii) of subparagraph (B) 
may allow for such adjustments in the required levels of excess/stop 
loss insurance as the qualified actuary may recommend, taking into 
account the specific circumstances of the plan.
    ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case 
of any association health plan described in subsection (a)(2), the 
requirements of this subsection are met if the plan establishes and 
maintains surplus in an amount at least equal to--
            ``(1) $500,000, or
            ``(2) such greater amount (but not greater than $2,000,000) 
        as may be set forth in regulations prescribed by the applicable 
        authority, considering the level of aggregate and specific 
        excess/stop loss insurance provided with respect to such plan 
        and other factors related to solvency risk, such as the plan's 
        projected levels of participation or claims, the nature of the 
        plan's liabilities, and the types of assets available to assure 
        that such liabilities are met.
    ``(c) Additional Requirements.--In the case of any association 
health plan described in subsection (a)(2), the applicable authority 
may provide such additional requirements relating to reserves, excess/
stop loss insurance, and indemnification insurance as the applicable 
authority considers appropriate. Such requirements may be provided by 
regulation with respect to any such plan or any class of such plans.
    ``(d) Adjustments for Excess/Stop Loss Insurance.--The applicable 
authority may provide for adjustments to the levels of reserves 
otherwise required under subsections (a) and (b) with respect to any 
plan or class of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans.
    ``(e) Alternative Means of Compliance.--The applicable authority 
may permit an association health plan described in subsection (a)(2) to 
substitute, for all or part of the requirements of this section (except 
subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless 
arrangement, or other financial arrangement as the applicable authority 
determines to be adequate to enable the plan to fully meet all its 
financial obligations on a timely basis and is otherwise no less 
protective of the interests of participants and beneficiaries than the 
requirements for which it is substituted. The applicable authority may 
take into account, for purposes of this subsection, evidence provided 
by the plan or sponsor which demonstrates an assumption of liability 
with respect to the plan. Such evidence may be in the form of a 
contract of indemnification, lien, bonding, insurance, letter of 
credit, recourse under applicable terms of the plan in the form of 
assessments of participating employers, security, or other financial 
arrangement.
    ``(f) Measures To Ensure Continued Payment of Benefits by Certain 
Plans in Distress.--
            ``(1) Payments by certain plans to association health plan 
        fund.--
                    ``(A) In general.--In the case of an association 
                health plan described in subsection (a)(2), the 
                requirements of this subsection are met if the plan 
                makes payments into the Association Health Plan Fund 
                under this subparagraph when they are due. Such 
                payments shall consist of annual payments in the amount 
                of $5,000, and, in addition to such annual payments, 
                such supplemental payments as the Secretary may 
                determine to be necessary under paragraph (2). Payments 
                under this paragraph are payable to the Fund at the 
                time determined by the Secretary. Initial payments are 
                due in advance of certification under this part. 
                Payments shall continue to accrue until a plan's assets 
                are distributed pursuant to a termination procedure.
                    ``(B) Penalties for failure to make payments.--If 
                any payment is not made by a plan when it is due, a 
                late payment charge of not more than 100 percent of the 
                payment which was not timely paid shall be payable by 
                the plan to the Fund.
                    ``(C) Continued duty of the secretary.--The 
                Secretary shall not cease to carry out the provisions 
                of paragraph (2) on account of the failure of a plan to 
                pay any payment when due.
            ``(2) Payments by secretary to continue excess/stop loss 
        insurance coverage and indemnification insurance coverage for 
        certain plans.--In any case in which the applicable authority 
        determines that there is, or that there is reason to believe 
        that there will be: (A) a failure to take necessary corrective 
        actions under section 809(a) with respect to an association 
        health plan described in subsection (a)(2); or (B) a 
        termination of such a plan under section 809(b) or 810(b)(8) 
        (and, if the applicable authority is not the Secretary, 
        certifies such determination to the Secretary), the Secretary 
        shall determine the amounts necessary to make payments to an 
        insurer (designated by the Secretary) to maintain in force 
        excess/stop loss insurance coverage or indemnification 
        insurance coverage for such plan, if the Secretary determines 
        that there is a reasonable expectation that, without such 
        payments, claims would not be satisfied by reason of 
        termination of such coverage. The Secretary shall, to the 
        extent provided in advance in appropriation Acts, pay such 
        amounts so determined to the insurer designated by the 
        Secretary.
            ``(3) Association health plan fund.--
                    ``(A) In general.--There is established on the 
                books of the Treasury a fund to be known as the 
                `Association Health Plan Fund'. The Fund shall be 
                available for making payments pursuant to paragraph 
                (2). The Fund shall be credited with payments received 
                pursuant to paragraph (1)(A), penalties received 
                pursuant to paragraph (1)(B); and earnings on 
                investments of amounts of the Fund under subparagraph 
                (B).
                    ``(B) Investment.--Whenever the Secretary 
                determines that the moneys of the fund are in excess of 
                current needs, the Secretary may request the investment 
                of such amounts as the Secretary determines advisable 
                by the Secretary of the Treasury in obligations issued 
                or guaranteed by the United States.
    ``(g) Excess/Stop Loss Insurance.--For purposes of this section--
            ``(1) Aggregate excess/stop loss insurance.--The term 
        `aggregate excess/stop loss insurance' means, in connection 
        with an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to aggregate claims under the plan in excess of 
                an amount or amounts specified in such contract;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
            ``(2) Specific excess/stop loss insurance.--The term 
        `specific excess/stop loss insurance' means, in connection with 
        an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to claims under the plan in connection with a 
                covered individual in excess of an amount or amounts 
                specified in such contract in connection with such 
                covered individual;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
    ``(h) Indemnification Insurance.--For purposes of this section, the 
term `indemnification insurance' means, in connection with an 
association health plan, a contract--
            ``(1) under which an insurer (meeting such minimum 
        standards as the applicable authority may prescribe by 
        regulation) provides for payment to the plan with respect to 
        claims under the plan which the plan is unable to satisfy by 
        reason of a termination pursuant to section 809(b) (relating to 
        mandatory termination);
            ``(2) which is guaranteed renewable and noncancellable for 
        any reason (except as the applicable authority may prescribe by 
        regulation); and
            ``(3) which allows for payment of premiums by any third 
        party on behalf of the insured plan.
    ``(i) Reserves.--For purposes of this section, the term `reserves' 
means, in connection with an association health plan, plan assets which 
meet the fiduciary standards under part 4 and such additional 
requirements regarding liquidity as the applicable authority may 
prescribe by regulation.
    ``(j) Solvency Standards Working Group.--
            ``(1) In general.--Within 90 days after the date of the 
        enactment of the Small Business Health Fairness Act of 2009, 
        the applicable authority shall establish a Solvency Standards 
        Working Group. In prescribing the initial regulations under 
        this section, the applicable authority shall take into account 
        the recommendations of such Working Group.
            ``(2) Membership.--The Working Group shall consist of not 
        more than 15 members appointed by the applicable authority. The 
        applicable authority shall include among persons invited to 
        membership on the Working Group at least one of each of the 
        following:
                    ``(A) A representative of the National Association 
                of Insurance Commissioners.
                    ``(B) A representative of the American Academy of 
                Actuaries.
                    ``(C) A representative of the State governments, or 
                their interests.
                    ``(D) A representative of existing self-insured 
                arrangements, or their interests.
                    ``(E) A representative of associations of the type 
                referred to in section 801(b)(1), or their interests.
                    ``(F) A representative of multiemployer plans that 
                are group health plans, or their interests.

``SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS.

    ``(a) Filing Fee.--Under the procedure prescribed pursuant to 
section 802(a), an association health plan shall pay to the applicable 
authority at the time of filing an application for certification under 
this part a filing fee in the amount of $5,000, which shall be 
available in the case of the Secretary, to the extent provided in 
appropriation Acts, for the sole purpose of administering the 
certification procedures applicable with respect to association health 
plans.
    ``(b) Information To Be Included in Application for 
Certification.--An application for certification under this part meets 
the requirements of this section only if it includes, in a manner and 
form which shall be prescribed by the applicable authority by 
regulation, at least the following information:
            ``(1) Identifying information.--The names and addresses 
        of--
                    ``(A) the sponsor; and
                    ``(B) the members of the board of trustees of the 
                plan.
            ``(2) States in which plan intends to do business.--The 
        States in which participants and beneficiaries under the plan 
        are to be located and the number of them expected to be located 
        in each such State.
            ``(3) Bonding requirements.--Evidence provided by the board 
        of trustees that the bonding requirements of section 412 will 
        be met as of the date of the application or (if later) 
        commencement of operations.
            ``(4) Plan documents.--A copy of the documents governing 
        the plan (including any bylaws and trust agreements), the 
        summary plan description, and other material describing the 
        benefits that will be provided to participants and 
        beneficiaries under the plan.
            ``(5) Agreements with service providers.--A copy of any 
        agreements between the plan and contract administrators and 
        other service providers.
            ``(6) Funding report.--In the case of association health 
        plans providing benefits options in addition to health 
        insurance coverage, a report setting forth information with 
        respect to such additional benefit options determined as of a 
        date within the 120-day period ending with the date of the 
        application, including the following:
                    ``(A) Reserves.--A statement, certified by the 
                board of trustees of the plan, and a statement of 
                actuarial opinion, signed by a qualified actuary, that 
                all applicable requirements of section 806 are or will 
                be met in accordance with regulations which the 
                applicable authority shall prescribe.
                    ``(B) Adequacy of contribution rates.--A statement 
                of actuarial opinion, signed by a qualified actuary, 
                which sets forth a description of the extent to which 
                contribution rates are adequate to provide for the 
                payment of all obligations and the maintenance of 
                required reserves under the plan for the 12-month 
                period beginning with such date within such 120-day 
                period, taking into account the expected coverage and 
                experience of the plan. If the contribution rates are 
                not fully adequate, the statement of actuarial opinion 
                shall indicate the extent to which the rates are 
                inadequate and the changes needed to ensure adequacy.
                    ``(C) Current and projected value of assets and 
                liabilities.--A statement of actuarial opinion signed 
                by a qualified actuary, which sets forth the current 
                value of the assets and liabilities accumulated under 
                the plan and a projection of the assets, liabilities, 
                income, and expenses of the plan for the 12-month 
                period referred to in subparagraph (B). The income 
                statement shall identify separately the plan's 
                administrative expenses and claims.
                    ``(D) Costs of coverage to be charged and other 
                expenses.--A statement of the costs of coverage to be 
                charged, including an itemization of amounts for 
                administration, reserves, and other expenses associated 
                with the operation of the plan.
                    ``(E) Other information.--Any other information as 
                may be determined by the applicable authority, by 
                regulation, as necessary to carry out the purposes of 
                this part.
    ``(c) Filing Notice of Certification With States.--A certification 
granted under this part to an association health plan shall not be 
effective unless written notice of such certification is filed with the 
applicable State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are located. For 
purposes of this subsection, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed.
    ``(d) Notice of Material Changes.--In the case of any association 
health plan certified under this part, descriptions of material changes 
in any information which was required to be submitted with the 
application for the certification under this part shall be filed in 
such form and manner as shall be prescribed by the applicable authority 
by regulation. The applicable authority may require by regulation prior 
notice of material changes with respect to specified matters which 
might serve as the basis for suspension or revocation of the 
certification.
    ``(e) Reporting Requirements for Certain Association Health 
Plans.--An association health plan certified under this part which 
provides benefit options in addition to health insurance coverage for 
such plan year shall meet the requirements of section 103 by filing an 
annual report under such section which shall include information 
described in subsection (b)(6) with respect to the plan year and, 
notwithstanding section 104(a)(1)(A), shall be filed with the 
applicable authority not later than 90 days after the close of the plan 
year (or on such later date as may be prescribed by the applicable 
authority). The applicable authority may require by regulation such 
interim reports as it considers appropriate.
    ``(f) Engagement of Qualified Actuary.--The board of trustees of 
each association health plan which provides benefits options in 
addition to health insurance coverage and which is applying for 
certification under this part or is certified under this part shall 
engage, on behalf of all participants and beneficiaries, a qualified 
actuary who shall be responsible for the preparation of the materials 
comprising information necessary to be submitted by a qualified actuary 
under this part. The qualified actuary shall utilize such assumptions 
and techniques as are necessary to enable such actuary to form an 
opinion as to whether the contents of the matters reported under this 
part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the plan and to reasonable expectations; and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the plan.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.

``SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

    ``Except as provided in section 809(b), an association health plan 
which is or has been certified under this part may terminate (upon or 
at any time after cessation of accruals in benefit liabilities) only if 
the board of trustees, not less than 60 days before the proposed 
termination date--
            ``(1) provides to the participants and beneficiaries a 
        written notice of intent to terminate stating that such 
        termination is intended and the proposed termination date;
            ``(2) develops a plan for winding up the affairs of the 
        plan in connection with such termination in a manner which will 
        result in timely payment of all benefits for which the plan is 
        obligated; and
            ``(3) submits such plan in writing to the applicable 
        authority.
Actions required under this section shall be taken in such form and 
manner as may be prescribed by the applicable authority by regulation.

``SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

    ``(a) Actions To Avoid Depletion of Reserves.--An association 
health plan which is certified under this part and which provides 
benefits other than health insurance coverage shall continue to meet 
the requirements of section 806, irrespective of whether such 
certification continues in effect. The board of trustees of such plan 
shall determine quarterly whether the requirements of section 806 are 
met. In any case in which the board determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the applicable authority makes such a determination and so notifies 
the board, the board shall immediately notify the qualified actuary 
engaged by the plan, and such actuary shall, not later than the end of 
the next following month, make such recommendations to the board for 
corrective action as the actuary determines necessary to ensure 
compliance with section 806. Not later than 30 days after receiving 
from the actuary recommendations for corrective actions, the board 
shall notify the applicable authority (in such form and manner as the 
applicable authority may prescribe by regulation) of such 
recommendations of the actuary for corrective action, together with a 
description of the actions (if any) that the board has taken or plans 
to take in response to such recommendations. The board shall thereafter 
report to the applicable authority, in such form and frequency as the 
applicable authority may specify to the board, regarding corrective 
action taken by the board until the requirements of section 806 are 
met.
    ``(b) Mandatory Termination.--In any case in which--
            ``(1) the applicable authority has been notified under 
        subsection (a) (or by an issuer of excess/stop loss insurance 
        or indemnity insurance pursuant to section 806(a)) of a failure 
        of an association health plan which is or has been certified 
        under this part and is described in section 806(a)(2) to meet 
        the requirements of section 806 and has not been notified by 
        the board of trustees of the plan that corrective action has 
        restored compliance with such requirements; and
            ``(2) the applicable authority determines that there is a 
        reasonable expectation that the plan will continue to fail to 
        meet the requirements of section 806,
the board of trustees of the plan shall, at the direction of the 
applicable authority, terminate the plan and, in the course of the 
termination, take such actions as the applicable authority may require, 
including satisfying any claims referred to in section 
806(a)(2)(B)(iii) and recovering for the plan any liability under 
subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 
that the affairs of the plan will be, to the maximum extent possible, 
wound up in a manner which will result in timely provision of all 
benefits for which the plan is obligated.

``SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION 
              HEALTH PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO 
              HEALTH INSURANCE COVERAGE.

    ``(a) Appointment of Secretary as Trustee for Insolvent Plans.--
Whenever the Secretary determines that an association health plan which 
is or has been certified under this part and which is described in 
section 806(a)(2) will be unable to provide benefits when due or is 
otherwise in a financially hazardous condition, as shall be defined by 
the Secretary by regulation, the Secretary shall, upon notice to the 
plan, apply to the appropriate United States district court for 
appointment of the Secretary as trustee to administer the plan for the 
duration of the insolvency. The plan may appear as a party and other 
interested persons may intervene in the proceedings at the discretion 
of the court. The court shall appoint such Secretary trustee if the 
court determines that the trusteeship is necessary to protect the 
interests of the participants and beneficiaries or providers of medical 
care or to avoid any unreasonable deterioration of the financial 
condition of the plan. The trusteeship of such Secretary shall continue 
until the conditions described in the first sentence of this subsection 
are remedied or the plan is terminated.
    ``(b) Powers as Trustee.--The Secretary, upon appointment as 
trustee under subsection (a), shall have the power--
            ``(1) to do any act authorized by the plan, this title, or 
        other applicable provisions of law to be done by the plan 
        administrator or any trustee of the plan;
            ``(2) to require the transfer of all (or any part) of the 
        assets and records of the plan to the Secretary as trustee;
            ``(3) to invest any assets of the plan which the Secretary 
        holds in accordance with the provisions of the plan, 
        regulations prescribed by the Secretary, and applicable 
        provisions of law;
            ``(4) to require the sponsor, the plan administrator, any 
        participating employer, and any employee organization 
        representing plan participants to furnish any information with 
        respect to the plan which the Secretary as trustee may 
        reasonably need in order to administer the plan;
            ``(5) to collect for the plan any amounts due the plan and 
        to recover reasonable expenses of the trusteeship;
            ``(6) to commence, prosecute, or defend on behalf of the 
        plan any suit or proceeding involving the plan;
            ``(7) to issue, publish, or file such notices, statements, 
        and reports as may be required by the Secretary by regulation 
        or required by any order of the court;
            ``(8) to terminate the plan (or provide for its termination 
        in accordance with section 809(b)) and liquidate the plan 
        assets, to restore the plan to the responsibility of the 
        sponsor, or to continue the trusteeship;
            ``(9) to provide for the enrollment of plan participants 
        and beneficiaries under appropriate coverage options; and
            ``(10) to do such other acts as may be necessary to comply 
        with this title or any order of the court and to protect the 
        interests of plan participants and beneficiaries and providers 
        of medical care.
    ``(c) Notice of Appointment.--As soon as practicable after the 
Secretary's appointment as trustee, the Secretary shall give notice of 
such appointment to--
            ``(1) the sponsor and plan administrator;
            ``(2) each participant;
            ``(3) each participating employer; and
            ``(4) if applicable, each employee organization which, for 
        purposes of collective bargaining, represents plan 
        participants.
    ``(d) Additional Duties.--Except to the extent inconsistent with 
the provisions of this title, or as may be otherwise ordered by the 
court, the Secretary, upon appointment as trustee under this section, 
shall be subject to the same duties as those of a trustee under section 
704 of title 11, United States Code, and shall have the duties of a 
fiduciary for purposes of this title.
    ``(e) Other Proceedings.--An application by the Secretary under 
this subsection may be filed notwithstanding the pendency in the same 
or any other court of any bankruptcy, mortgage foreclosure, or equity 
receivership proceeding, or any proceeding to reorganize, conserve, or 
liquidate such plan or its property, or any proceeding to enforce a 
lien against property of the plan.
    ``(f) Jurisdiction of Court.--
            ``(1) In general.--Upon the filing of an application for 
        the appointment as trustee or the issuance of a decree under 
        this section, the court to which the application is made shall 
        have exclusive jurisdiction of the plan involved and its 
        property wherever located with the powers, to the extent 
        consistent with the purposes of this section, of a court of the 
        United States having jurisdiction over cases under chapter 11 
        of title 11, United States Code. Pending an adjudication under 
        this section such court shall stay, and upon appointment by it 
        of the Secretary as trustee, such court shall continue the stay 
        of, any pending mortgage foreclosure, equity receivership, or 
        other proceeding to reorganize, conserve, or liquidate the 
        plan, the sponsor, or property of such plan or sponsor, and any 
        other suit against any receiver, conservator, or trustee of the 
        plan, the sponsor, or property of the plan or sponsor. Pending 
        such adjudication and upon the appointment by it of the 
        Secretary as trustee, the court may stay any proceeding to 
        enforce a lien against property of the plan or the sponsor or 
        any other suit against the plan or the sponsor.
            ``(2) Venue.--An action under this section may be brought 
        in the judicial district where the sponsor or the plan 
        administrator resides or does business or where any asset of 
        the plan is situated. A district court in which such action is 
        brought may issue process with respect to such action in any 
        other judicial district.
    ``(g) Personnel.--In accordance with regulations which shall be 
prescribed by the Secretary, the Secretary shall appoint, retain, and 
compensate accountants, actuaries, and other professional service 
personnel as may be necessary in connection with the Secretary's 
service as trustee under this section.

``SEC. 811. STATE ASSESSMENT AUTHORITY.

    ``(a) In General.--Notwithstanding section 514, a State may impose 
by law a contribution tax on an association health plan described in 
section 806(a)(2), if the plan commenced operations in such State after 
the date of the enactment of the Small Business Health Fairness Act of 
2009.
    ``(b) Contribution Tax.--For purposes of this section, the term 
`contribution tax' imposed by a State on an association health plan 
means any tax imposed by such State if--
            ``(1) such tax is computed by applying a rate to the amount 
        of premiums or contributions, with respect to individuals 
        covered under the plan who are residents of such State, which 
        are received by the plan from participating employers located 
        in such State or from such individuals;
            ``(2) the rate of such tax does not exceed the rate of any 
        tax imposed by such State on premiums or contributions received 
        by insurers or health maintenance organizations for health 
        insurance coverage offered in such State in connection with a 
        group health plan;
            ``(3) such tax is otherwise nondiscriminatory; and
            ``(4) the amount of any such tax assessed on the plan is 
        reduced by the amount of any tax or assessment otherwise 
        imposed by the State on premiums, contributions, or both 
        received by insurers or health maintenance organizations for 
        health insurance coverage, aggregate excess/stop loss insurance 
        (as defined in section 806(g)(1)), specific excess/stop loss 
        insurance (as defined in section 806(g)(2)), other insurance 
        related to the provision of medical care under the plan, or any 
        combination thereof provided by such insurers or health 
        maintenance organizations in such State in connection with such 
        plan.

``SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION.

    ``(a) Definitions.--For purposes of this part:
            ``(1) Group health plan.--The term `group health plan' has 
        the meaning provided in section 733(a)(1) (after applying 
        subsection (b) of this section).
            ``(2) Medical care.--The term `medical care' has the 
        meaning provided in section 733(a)(2).
            ``(3) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning provided in section 
        733(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning provided in section 733(b)(2).
            ``(5) Applicable authority.--The term `applicable 
        authority' means the Secretary, except that, in connection with 
        any exercise of the Secretary's authority regarding which the 
        Secretary is required under section 506(d) to consult with a 
        State, such term means the Secretary, in consultation with such 
        State.
            ``(6) Health status-related factor.--The term `health 
        status-related factor' has the meaning provided in section 
        733(d)(2).
            ``(7) Individual market.--
                    ``(A) In general.--The term `individual market' 
                means the market for health insurance coverage offered 
                to individuals other than in connection with a group 
                health plan.
                    ``(B) Treatment of very small groups.--
                            ``(i) In general.--Subject to clause (ii), 
                        such term includes coverage offered in 
                        connection with a group health plan that has 
                        fewer than 2 participants as current employees 
                        or participants described in section 732(d)(3) 
                        on the first day of the plan year.
                            ``(ii) State exception.--Clause (i) shall 
                        not apply in the case of health insurance 
                        coverage offered in a State if such State 
                        regulates the coverage described in such clause 
                        in the same manner and to the same extent as 
                        coverage in the small group market (as defined 
                        in section 2791(e)(5) of the Public Health 
                        Service Act (42 U.S.C. 300gg-91(e)(5)) is 
                        regulated by such State.
            ``(8) Participating employer.--The term `participating 
        employer' means, in connection with an association health plan, 
        any employer, if any individual who is an employee of such 
        employer, a partner in such employer, or a self-employed 
        individual who is such employer (or any dependent, as defined 
        under the terms of the plan, of such individual) is or was 
        covered under such plan in connection with the status of such 
        individual as such an employee, partner, or self-employed 
        individual in relation to the plan.
            ``(9) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of title XXVII of the Public Health Service Act 
        (42 U.S.C. 300hh et seq.) for the State involved with respect 
        to such issuer.
            ``(10) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries.
            ``(11) Affiliated member.--The term `affiliated member' 
        means, in connection with a sponsor--
                    ``(A) a person who is otherwise eligible to be a 
                member of the sponsor but who elects an affiliated 
                status with the sponsor,
                    ``(B) in the case of a sponsor with members which 
                consist of associations, a person who is a member of 
                any such association and elects an affiliated status 
                with the sponsor, or
                    ``(C) in the case of an association health plan in 
                existence on the date of the enactment of the Small 
                Business Health Fairness Act of 2009, a person eligible 
                to be a member of the sponsor or one of its member 
                associations.
            ``(12) Large employer.--The term `large employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who employed an average of at least 51 
        employees on business days during the preceding calendar year 
        and who employs at least 2 employees on the first day of the 
        plan year.
            ``(13) Small employer.--The term `small employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who is not a large employer.
    ``(b) Rules of Construction.--
            ``(1) Employers and employees.--For purposes of determining 
        whether a plan, fund, or program is an employee welfare benefit 
        plan which is an association health plan, and for purposes of 
        applying this title in connection with such plan, fund, or 
        program so determined to be such an employee welfare benefit 
        plan--
                    ``(A) in the case of a partnership, the term 
                `employer' (as defined in section 3(5)) includes the 
                partnership in relation to the partners, and the term 
                `employee' (as defined in section 3(6)) includes any 
                partner in relation to the partnership; and
                    ``(B) in the case of a self-employed individual, 
                the term `employer' (as defined in section 3(5)) and 
                the term `employee' (as defined in section 3(6)) shall 
                include such individual.
            ``(2) Plans, funds, and programs treated as employee 
        welfare benefit plans.--In the case of any plan, fund, or 
        program which was established or is maintained for the purpose 
        of providing medical care (through the purchase of insurance or 
        otherwise) for employees (or their dependents) covered 
        thereunder and which demonstrates to the Secretary that all 
        requirements for certification under this part would be met 
        with respect to such plan, fund, or program if such plan, fund, 
        or program were a group health plan, such plan, fund, or 
        program shall be treated for purposes of this title as an 
        employee welfare benefit plan on and after the date of such 
        demonstration.''.
    (b) Conforming Amendments to Preemption Rules.--
            (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is 
        amended by adding at the end the following new subparagraph:
    ``(E) The preceding subparagraphs of this paragraph do not apply 
with respect to any State law in the case of an association health plan 
which is certified under part 8.''.
            (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
                    (A) in subsection (b)(4), by striking ``Subsection 
                (a)'' and inserting ``Subsections (a) and (d)'';
                    (B) in subsection (b)(5), by striking ``subsection 
                (a)'' in subparagraph (A) and inserting ``subsection 
                (a) of this section and subsections (a)(2)(B) and (b) 
                of section 805'', and by striking ``subsection (a)'' in 
                subparagraph (B) and inserting ``subsection (a) of this 
                section or subsection (a)(2)(B) or (b) of section 
                805'';
                    (C) by redesignating subsection (d) as subsection 
                (e); and
                    (D) by inserting after subsection (c) the following 
                new subsection:
    ``(d)(1) Except as provided in subsection (b)(4), the provisions of 
this title shall supersede any and all State laws insofar as they may 
now or hereafter preclude, or have the effect of precluding, a health 
insurance issuer from offering health insurance coverage in connection 
with an association health plan which is certified under part 8.
    ``(2) Except as provided in paragraphs (4) and (5) of subsection 
(b) of this section--
            ``(A) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan 
        certified under part 8 to a participating employer operating in 
        such State, the provisions of this title shall supersede any 
        and all laws of such State insofar as they may preclude a 
        health insurance issuer from offering health insurance coverage 
        of the same policy type to other employers operating in the 
        State which are eligible for coverage under such association 
        health plan, whether or not such other employers are 
        participating employers in such plan.
            ``(B) In any case in which health insurance coverage of any 
        policy type is offered in a State under an association health 
        plan certified under part 8 and the filing, with the applicable 
        State authority (as defined in section 812(a)(9)), of the 
        policy form in connection with such policy type is approved by 
        such State authority, the provisions of this title shall 
        supersede any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as they may 
        preclude, upon the filing in the same form and manner of such 
        policy form with the applicable State authority in such other 
        State, the approval of the filing in such other State.
    ``(3) Nothing in subsection (b)(6)(E) or the preceding provisions 
of this subsection shall be construed, with respect to health insurance 
issuers or health insurance coverage, to supersede or impair the law of 
any State--
            ``(A) providing solvency standards or similar standards 
        regarding the adequacy of insurer capital, surplus, reserves, 
        or contributions, or
            ``(B) relating to prompt payment of claims.
    ``(4) For additional provisions relating to association health 
plans, see subsections (a)(2)(B) and (b) of section 805.
    ``(5) For purposes of this subsection, the term `association health 
plan' has the meaning provided in section 801(a), and the terms `health 
insurance coverage', `participating employer', and `health insurance 
issuer' have the meanings provided such terms in section 812, 
respectively.''.
            (3) Section 514(b)(6)(A) of such Act (29 U.S.C. 
        1144(b)(6)(A)) is amended--
                    (A) in clause (i)(II), by striking ``and'' at the 
                end;
                    (B) in clause (ii), by inserting ``and which does 
                not provide medical care (within the meaning of section 
                733(a)(2)),'' after ``arrangement,'', and by striking 
                ``title.'' and inserting ``title, and''; and
                    (C) by adding at the end the following new clause:
            ``(iii) subject to subparagraph (E), in the case of any 
        other employee welfare benefit plan which is a multiple 
        employer welfare arrangement and which provides medical care 
        (within the meaning of section 733(a)(2)), any law of any State 
        which regulates insurance may apply.''.
            (4) Section 514(e) of such Act (as redesignated by 
        paragraph (2)(C)) is amended--
                    (A) by striking ``Nothing'' and inserting ``(1) 
                Except as provided in paragraph (2), nothing''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(2) Nothing in any other provision of law enacted on or after the 
date of the enactment of the Small Business Health Fairness Act of 2009 
shall be construed to alter, amend, modify, invalidate, impair, or 
supersede any provision of this title, except by specific cross-
reference to the affected section.''.
    (c) Plan Sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
102(16)(B)) is amended by adding at the end the following new sentence: 
``Such term also includes a person serving as the sponsor of an 
association health plan under part 8.''.
    (d) Disclosure of Solvency Protections Related to Self-Insured and 
Fully Insured Options Under Association Health Plans.--Section 102(b) 
of such Act (29 U.S.C. 102(b)) is amended by adding at the end the 
following: ``An association health plan shall include in its summary 
plan description, in connection with each benefit option, a description 
of the form of solvency or guarantee fund protection secured pursuant 
to this Act or applicable State law, if any.''.
    (e) Savings Clause.--Section 731(c) of such Act is amended by 
inserting ``or part 8'' after ``this part''.
    (f) Report to the Congress Regarding Certification of Self-Insured 
Association Health Plans.--Not later than January 1, 2012, the 
Secretary of Labor shall report to the Committee on Education and the 
Workforce of the House of Representatives and the Committee on Health, 
Education, Labor, and Pensions of the Senate the effect association 
health plans have had, if any, on reducing the number of uninsured 
individuals.
    (g) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating 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.''.

SEC. 122. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting after ``control group,'' 
        the following: ``except that, in any case in which the benefit 
        referred to in subparagraph (A) consists of medical care (as 
        defined in section 812(a)(2)), two or more trades or 
        businesses, whether or not incorporated, shall be deemed a 
        single employer for any plan year of such plan, or any fiscal 
        year of such other arrangement, if such trades or businesses 
        are within the same control group during such year or at any 
        time during the preceding 1-year period,'';
            (2) in clause (iii), by striking ``(iii) the 
        determination'' and inserting the following:
            ``(iii)(I) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), the determination of whether a trade or 
        business is under `common control' with another trade or 
        business shall be determined under regulations of the Secretary 
        applying principles consistent and coextensive with the 
        principles applied in determining whether employees of two or 
        more trades or businesses are treated as employed by a single 
        employer under section 4001(b), except that, for purposes of 
        this paragraph, an interest of greater than 25 percent may not 
        be required as the minimum interest necessary for common 
        control, or
            ``(II) in any other case, the determination'';
            (3) by redesignating clauses (iv) and (v) as clauses (v) 
        and (vi), respectively; and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), in determining, after the application of 
        clause (i), whether benefits are provided to employees of two 
        or more employers, the arrangement shall be treated as having 
        only one participating employer if, after the application of 
        clause (i), the number of individuals who are employees and 
        former employees of any one participating employer and who are 
        covered under the arrangement is greater than 75 percent of the 
        aggregate number of all individuals who are employees or former 
        employees of participating employers and who are covered under 
        the arrangement,''.

SEC. 123. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION HEALTH PLANS.

    (a) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1131) is amended--
            (1) by inserting ``(a)'' after ``Sec. 501.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Any person who willfully falsely represents, to any employee, 
any employee's beneficiary, any employer, the Secretary, or any State, 
a plan or other arrangement established or maintained for the purpose 
of offering or providing any benefit described in section 3(1) to 
employees or their beneficiaries as--
            ``(1) being an association health plan which has been 
        certified under part 8;
            ``(2) having been established or maintained under or 
        pursuant to one or more collective bargaining agreements which 
        are reached pursuant to collective bargaining described in 
        section 8(d) of the National Labor Relations Act (29 U.S.C. 
        158(d)) or paragraph Fourth of section 2 of the Railway Labor 
        Act (45 U.S.C. 152, paragraph Fourth) or which are reached 
        pursuant to labor-management negotiations under similar 
        provisions of State public employee relations laws; or
            ``(3) being a plan or arrangement described in section 
        3(40)(A)(i),
shall, upon conviction, be imprisoned not more than 5 years, be fined 
under title 18, United States Code, or both.''.
    (b) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(n) Association Health Plan Cease and Desist Orders.--
            ``(1) In general.--Subject to paragraph (2), upon 
        application by the Secretary showing the operation, promotion, 
        or marketing of an association health plan (or similar 
        arrangement providing benefits consisting of medical care (as 
        defined in section 733(a)(2))) that--
                    ``(A) is not certified under part 8, is subject 
                under section 514(b)(6) to the insurance laws of any 
                State in which the plan or arrangement offers or 
                provides benefits, and is not licensed, registered, or 
                otherwise approved under the insurance laws of such 
                State; or
                    ``(B) is an association health plan certified under 
                part 8 and is not operating in accordance with the 
                requirements under part 8 for such certification,
        a district court of the United States shall enter an order 
        requiring that the plan or arrangement cease activities.
            ``(2) Exception.--Paragraph (1) shall not apply in the case 
        of an association health plan or other arrangement if the plan 
        or arrangement shows that--
                    ``(A) all benefits under it referred to in 
                paragraph (1) consist of health insurance coverage; and
                    ``(B) with respect to each State in which the plan 
                or arrangement offers or provides benefits, the plan or 
                arrangement is operating in accordance with applicable 
                State laws that are not superseded under section 514.
            ``(3) Additional equitable relief.--The court may grant 
        such additional equitable relief, including any relief 
        available under this title, as it deems necessary to protect 
        the interests of the public and of persons having claims for 
        benefits against the plan.''.
    (c) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended by inserting ``(a) In General.--'' before 
``In accordance'', and by adding at the end the following new 
subsection:
    ``(b) Association Health Plans.--The terms of each association 
health plan which is or has been certified under part 8 shall require 
the board of trustees or the named fiduciary (as applicable) to ensure 
that the requirements of this section are met in connection with claims 
filed under the plan.''.

SEC. 124. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(d) Consultation With States With Respect to Association Health 
Plans.--
            ``(1) Agreements with states.--The Secretary shall consult 
        with the State recognized under paragraph (2) with respect to 
        an association health plan regarding the exercise of--
                    ``(A) the Secretary's authority under sections 502 
                and 504 to enforce the requirements for certification 
                under part 8; and
                    ``(B) the Secretary's authority to certify 
                association health plans under part 8 in accordance 
                with regulations of the Secretary applicable to 
                certification under part 8.
            ``(2) Recognition of primary domicile state.--In carrying 
        out paragraph (1), the Secretary shall ensure that only one 
        State will be recognized, with respect to any particular 
        association health plan, as the State with which consultation 
        is required. In carrying out this paragraph--
                    ``(A) in the case of a plan which provides health 
                insurance coverage (as defined in section 812(a)(3)), 
                such State shall be the State with which filing and 
                approval of a policy type offered by the plan was 
                initially obtained, and
                    ``(B) in any other case, the Secretary shall take 
                into account the places of residence of the 
                participants and beneficiaries under the plan and the 
                State in which the trust is maintained.''.

SEC. 125. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES.

    (a) Effective Date.--The amendments made by this subtitle shall 
take effect 1 year after the date of the enactment of this Act. The 
Secretary of Labor shall first issue all regulations necessary to carry 
out the amendments made by this subtitle within 1 year after the date 
of the enactment of this Act.
    (b) Treatment of Certain Existing Health Benefits Programs.--
            (1) In general.--In any case in which, as of the date of 
        the enactment of this Act, an arrangement is maintained in a 
        State for the purpose of providing benefits consisting of 
        medical care for the employees and beneficiaries of its 
        participating employers, at least 200 participating employers 
        make contributions to such arrangement, such arrangement has 
        been in existence for at least 10 years, and such arrangement 
        is licensed under the laws of one or more States to provide 
        such benefits to its participating employers, upon the filing 
        with the applicable authority (as defined in section 812(a)(5) 
        of the Employee Retirement Income Security Act of 1974 (as 
        amended by this subtitle)) by the arrangement of an application 
        for certification of the arrangement under part 8 of subtitle B 
        of title I of such Act--
                    (A) such arrangement shall be deemed to be a group 
                health plan for purposes of title I of such Act;
                    (B) the requirements of sections 801(a) and 803(a) 
                of the Employee Retirement Income Security Act of 1974 
                shall be deemed met with respect to such arrangement;
                    (C) the requirements of section 803(b) of such Act 
                shall be deemed met, if the arrangement is operated by 
                a board of directors which--
                            (i) is elected by the participating 
                        employers, with each employer having one vote; 
                        and
                            (ii) has complete fiscal control over the 
                        arrangement and which is responsible for all 
                        operations of the arrangement;
                    (D) the requirements of section 804(a) of such Act 
                shall be deemed met with respect to such arrangement; 
                and
                    (E) the arrangement may be certified by any 
                applicable authority with respect to its operations in 
                any State only if it operates in such State on the date 
                of certification.
        The provisions of this subsection shall cease to apply with 
        respect to any such arrangement at such time after the date of 
        the enactment of this Act as the applicable requirements of 
        this subsection are not met with respect to such arrangement.
            (2) Definitions.--For purposes of this subsection, the 
        terms ``group health plan'', ``medical care'', and 
        ``participating employer'' shall have the meanings provided in 
        section 812 of the Employee Retirement Income Security Act of 
        1974, except that the reference in paragraph (7) of such 
        section to an ``association health plan'' shall be deemed a 
        reference to an arrangement referred to in this subsection.

          Subtitle D--Purchasing Insurance Across State Lines

SEC. 131. COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE 
              COVERAGE.

    (a) In General.--Title XXVII of the Public Health Service Act (42 
U.S.C. 300gg et seq.) is amended by adding at the end the following new 
part:

``PART D--COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE

``SEC. 2795. DEFINITIONS.

    ``In this part:
            ``(1) Primary state.--The term `primary State' means, with 
        respect to individual health insurance coverage offered by a 
        health insurance issuer, the State designated by the issuer as 
        the State whose covered laws shall govern the health insurance 
        issuer in the sale of such coverage under this part. An issuer, 
        with respect to a particular policy, may only designate one 
        such State as its primary State with respect to all such 
        coverage it offers. Such an issuer may not change the 
        designated primary State with respect to individual health 
        insurance coverage once the policy is issued, except that such 
        a change may be made upon renewal of the policy. With respect 
        to such designated State, the issuer is deemed to be doing 
        business in that State.
            ``(2) Secondary state.--The term `secondary State' means, 
        with respect to individual health insurance coverage offered by 
        a health insurance issuer, any State that is not the primary 
        State. In the case of a health insurance issuer that is selling 
        a policy in, or to a resident of, a secondary State, the issuer 
        is deemed to be doing business in that secondary State.
            ``(3) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2), 
        except that such an issuer must be licensed in the primary 
        State and be qualified to sell individual health insurance 
        coverage in that State.
            ``(4) Individual health insurance coverage.--The term 
        `individual health insurance coverage' means health insurance 
        coverage offered in the individual market, as defined in 
        section 2791(e)(1).
            ``(5) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of this title for the State with respect to the 
        issuer.
            ``(6) Hazardous financial condition.--The term `hazardous 
        financial condition' means that, based on its present or 
        reasonably anticipated financial condition, a health insurance 
        issuer is unlikely to be able--
                    ``(A) to meet obligations to policyholders with 
                respect to known claims and reasonably anticipated 
                claims; or
                    ``(B) to pay other obligations in the normal course 
                of business.
            ``(7) Covered laws.--
                    ``(A) In general.--The term `covered laws' means 
                the laws, rules, regulations, agreements, and orders 
                governing the insurance business pertaining to--
                            ``(i) individual health insurance coverage 
                        issued by a health insurance issuer;
                            ``(ii) the offer, sale, rating (including 
                        medical underwriting), renewal, and issuance of 
                        individual health insurance coverage to an 
                        individual;
                            ``(iii) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of health care and insurance related 
                        services;
                            ``(iv) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of management, operations, and 
                        investment activities of a health insurance 
                        issuer; and
                            ``(v) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of loss control and claims 
                        administration for a health insurance issuer 
                        with respect to liability for which the issuer 
                        provides insurance.
                    ``(B) Exception.--Such term does not include any 
                law, rule, regulation, agreement, or order governing 
                the use of care or cost management techniques, 
                including any requirement related to provider 
                contracting, network access or adequacy, health care 
                data collection, or quality assurance.
            ``(8) State.--The term `State' means the 50 States and 
        includes the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and the Northern Mariana 
        Islands.
            ``(9) Unfair claims settlement practices.--The term `unfair 
        claims settlement practices' means only the following 
        practices:
                    ``(A) Knowingly misrepresenting to claimants and 
                insured individuals relevant facts or policy provisions 
                relating to coverage at issue.
                    ``(B) Failing to acknowledge with reasonable 
                promptness pertinent communications with respect to 
                claims arising under policies.
                    ``(C) Failing to adopt and implement reasonable 
                standards for the prompt investigation and settlement 
                of claims arising under policies.
                    ``(D) Failing to effectuate prompt, fair, and 
                equitable settlement of claims submitted in which 
                liability has become reasonably clear.
                    ``(E) Refusing to pay claims without conducting a 
                reasonable investigation.
                    ``(F) Failing to affirm or deny coverage of claims 
                within a reasonable period of time after having 
                completed an investigation related to those claims.
                    ``(G) A pattern or practice of compelling insured 
                individuals or their beneficiaries to institute suits 
                to recover amounts due under its policies by offering 
                substantially less than the amounts ultimately 
                recovered in suits brought by them.
                    ``(H) A pattern or practice of attempting to settle 
                or settling claims for less than the amount that a 
                reasonable person would believe the insured individual 
                or his or her beneficiary was entitled by reference to 
                written or printed advertising material accompanying or 
                made part of an application.
                    ``(I) Attempting to settle or settling claims on 
                the basis of an application that was materially altered 
                without notice to, or knowledge or consent of, the 
                insured.
                    ``(J) Failing to provide forms necessary to present 
                claims within 15 calendar days of a requests with 
                reasonable explanations regarding their use.
                    ``(K) Attempting to cancel a policy in less time 
                than that prescribed in the policy or by the law of the 
                primary State.
            ``(10) Fraud and abuse.--The term `fraud and abuse' means 
        an act or omission committed by a person who, knowingly and 
        with intent to defraud, commits, or conceals any material 
        information concerning, one or more of the following:
                    ``(A) Presenting, causing to be presented or 
                preparing with knowledge or belief that it will be 
                presented to or by an insurer, a reinsurer, broker or 
                its agent, false information as part of, in support of 
                or concerning a fact material to one or more of the 
                following:
                            ``(i) An application for the issuance or 
                        renewal of an insurance policy or reinsurance 
                        contract.
                            ``(ii) The rating of an insurance policy or 
                        reinsurance contract.
                            ``(iii) A claim for payment or benefit 
                        pursuant to an insurance policy or reinsurance 
                        contract.
                            ``(iv) Premiums paid on an insurance policy 
                        or reinsurance contract.
                            ``(v) Payments made in accordance with the 
                        terms of an insurance policy or reinsurance 
                        contract.
                            ``(vi) A document filed with the 
                        commissioner or the chief insurance regulatory 
                        official of another jurisdiction.
                            ``(vii) The financial condition of an 
                        insurer or reinsurer.
                            ``(viii) The formation, acquisition, 
                        merger, reconsolidation, dissolution or 
                        withdrawal from one or more lines of insurance 
                        or reinsurance in all or part of a State by an 
                        insurer or reinsurer.
                            ``(ix) The issuance of written evidence of 
                        insurance.
                            ``(x) The reinstatement of an insurance 
                        policy.
                    ``(B) Solicitation or acceptance of new or renewal 
                insurance risks on behalf of an insurer reinsurer or 
                other person engaged in the business of insurance by a 
                person who knows or should know that the insurer or 
                other person responsible for the risk is insolvent at 
                the time of the transaction.
                    ``(C) Transaction of the business of insurance in 
                violation of laws requiring a license, certificate of 
                authority or other legal authority for the transaction 
                of the business of insurance.
                    ``(D) Attempt to commit, aiding or abetting in the 
                commission of, or conspiracy to commit the acts or 
                omissions specified in this paragraph.

``SEC. 2796. APPLICATION OF LAW.

    ``(a) In General.--The covered laws of the primary State shall 
apply to individual health insurance coverage offered by a health 
insurance issuer in the primary State and in any secondary State, but 
only if the coverage and issuer comply with the conditions of this 
section with respect to the offering of coverage in any secondary 
State.
    ``(b) Exemptions From Covered Laws in a Secondary State.--Except as 
provided in this section, a health insurance issuer with respect to its 
offer, sale, rating (including medical underwriting), renewal, and 
issuance of individual health insurance coverage in any secondary State 
is exempt from any covered laws of the secondary State (and any rules, 
regulations, agreements, or orders sought or issued by such State under 
or related to such covered laws) to the extent that such laws would--
            ``(1) make unlawful, or regulate, directly or indirectly, 
        the operation of the health insurance issuer operating in the 
        secondary State, except that any secondary State may require 
        such an issuer--
                    ``(A) to pay, on a nondiscriminatory basis, 
                applicable premium and other taxes (including high risk 
                pool assessments) which are levied on insurers and 
                surplus lines insurers, brokers, or policyholders under 
                the laws of the State;
                    ``(B) to register with and designate the State 
                insurance commissioner as its agent solely for the 
                purpose of receiving service of legal documents or 
                process;
                    ``(C) to submit to an examination of its financial 
                condition by the State insurance commissioner in any 
                State in which the issuer is doing business to 
                determine the issuer's financial condition, if--
                            ``(i) the State insurance commissioner of 
                        the primary State has not done an examination 
                        within the period recommended by the National 
                        Association of Insurance Commissioners; and
                            ``(ii) any such examination is conducted in 
                        accordance with the examiners' handbook of the 
                        National Association of Insurance Commissioners 
                        and is coordinated to avoid unjustified 
                        duplication and unjustified repetition;
                    ``(D) to comply with a lawful order issued--
                            ``(i) in a delinquency proceeding commenced 
                        by the State insurance commissioner if there 
                        has been a finding of financial impairment 
                        under subparagraph (C); or
                            ``(ii) in a voluntary dissolution 
                        proceeding;
                    ``(E) to comply with an injunction issued by a 
                court of competent jurisdiction, upon a petition by the 
                State insurance commissioner alleging that the issuer 
                is in hazardous financial condition;
                    ``(F) to participate, on a nondiscriminatory basis, 
                in any insurance insolvency guaranty association or 
                similar association to which a health insurance issuer 
                in the State is required to belong;
                    ``(G) to comply with any State law regarding fraud 
                and abuse (as defined in section 2795(10)), except that 
                if the State seeks an injunction regarding the conduct 
                described in this subparagraph, such injunction must be 
                obtained from a court of competent jurisdiction;
                    ``(H) to comply with any State law regarding unfair 
                claims settlement practices (as defined in section 
                2795(9)); or
                    ``(I) to comply with the applicable requirements 
                for independent review under section 2798 with respect 
                to coverage offered in the State;
            ``(2) require any individual health insurance coverage 
        issued by the issuer to be countersigned by an insurance agent 
        or broker residing in that Secondary State; or
            ``(3) otherwise discriminate against the issuer issuing 
        insurance in both the primary State and in any secondary State.
    ``(c) Clear and Conspicuous Disclosure.--A health insurance issuer 
shall provide the following notice, in 12-point bold type, in any 
insurance coverage offered in a secondary State under this part by such 
a health insurance issuer and at renewal of the policy, with the 5 
blank spaces therein being appropriately filled with the name of the 
health insurance issuer, the name of primary State, the name of the 
secondary State, the name of the secondary State, and the name of the 
secondary State, respectively, for the coverage concerned:
`Notice This policy is issued by ___ and is governed by the laws and 
regulations of the State of ___, and it has met all the laws of that 
State as determined by that State's Department of Insurance. This 
policy may be less expensive than others because it is not subject to 
all of the insurance laws and regulations of the State of ___, 
including coverage of some services or benefits mandated by the law of 
the State of ___. Additionally, this policy is not subject to all of 
the consumer protection laws or restrictions on rate changes of the 
State of ___. As with all insurance products, before purchasing this 
policy, you should carefully review the policy and determine what 
health care services the policy covers and what benefits it provides, 
including any exclusions, limitations, or conditions for such services 
or benefits.'''.
    ``(d) Prohibition on Certain Reclassifications and Premium 
Increases.--
            ``(1) In general.--For purposes of this section, a health 
        insurance issuer that provides individual health insurance 
        coverage to an individual under this part in a primary or 
        secondary State may not upon renewal--
                    ``(A) move or reclassify the individual insured 
                under the health insurance coverage from the class such 
                individual is in at the time of issue of the contract 
                based on the health-status related factors of the 
                individual; or
                    ``(B) increase the premiums assessed the individual 
                for such coverage based on a health status-related 
                factor or change of a health status-related factor or 
                the past or prospective claim experience of the insured 
                individual.
            ``(2) Construction.--Nothing in paragraph (1) shall be 
        construed to prohibit a health insurance issuer--
                    ``(A) from terminating or discontinuing coverage or 
                a class of coverage in accordance with subsections (b) 
                and (c) of section 2742;
                    ``(B) from raising premium rates for all policy 
                holders within a class based on claims experience;
                    ``(C) from changing premiums or offering discounted 
                premiums to individuals who engage in wellness 
                activities at intervals prescribed by the issuer, if 
                such premium changes or incentives--
                            ``(i) are disclosed to the consumer in the 
                        insurance contract;
                            ``(ii) are based on specific wellness 
                        activities that are not applicable to all 
                        individuals; and
                            ``(iii) are not obtainable by all 
                        individuals to whom coverage is offered;
                    ``(D) from reinstating lapsed coverage; or
                    ``(E) from retroactively adjusting the rates 
                charged an insured individual if the initial rates were 
                set based on material misrepresentation by the 
                individual at the time of issue.
    ``(e) Prior Offering of Policy in Primary State.--A health 
insurance issuer may not offer for sale individual health insurance 
coverage in a secondary State unless that coverage is currently offered 
for sale in the primary State.
    ``(f) Licensing of Agents or Brokers for Health Insurance 
Issuers.--Any State may require that a person acting, or offering to 
act, as an agent or broker for a health insurance issuer with respect 
to the offering of individual health insurance coverage obtain a 
license from that State, with commissions or other compensation subject 
to the provisions of the laws of that State, except that a State may 
not impose any qualification or requirement which discriminates against 
a nonresident agent or broker.
    ``(g) Documents for Submission to State Insurance Commissioner.--
Each health insurance issuer issuing individual health insurance 
coverage in both primary and secondary States shall submit--
            ``(1) to the insurance commissioner of each State in which 
        it intends to offer such coverage, before it may offer 
        individual health insurance coverage in such State--
                    ``(A) a copy of the plan of operation or 
                feasibility study or any similar statement of the 
                policy being offered and its coverage (which shall 
                include the name of its primary State and its principal 
                place of business);
                    ``(B) written notice of any change in its 
                designation of its primary State; and
                    ``(C) written notice from the issuer of the 
                issuer's compliance with all the laws of the primary 
                State; and
            ``(2) to the insurance commissioner of each secondary State 
        in which it offers individual health insurance coverage, a copy 
        of the issuer's quarterly financial statement submitted to the 
        primary State, which statement shall be certified by an 
        independent public accountant and contain a statement of 
        opinion on loss and loss adjustment expense reserves made by--
                    ``(A) a member of the American Academy of 
                Actuaries; or
                    ``(B) a qualified loss reserve specialist.
    ``(h) Power of Courts To Enjoin Conduct.--Nothing in this section 
shall be construed to affect the authority of any Federal or State 
court to enjoin--
            ``(1) the solicitation or sale of individual health 
        insurance coverage by a health insurance issuer to any person 
        or group who is not eligible for such insurance; or
            ``(2) the solicitation or sale of individual health 
        insurance coverage that violates the requirements of the law of 
        a secondary State which are described in subparagraphs (A) 
        through (H) of section 2796(b)(1).
    ``(i) Power of Secondary States To Take Administrative Action.--
Nothing in this section shall be construed to affect the authority of 
any State to enjoin conduct in violation of that State's laws described 
in section 2796(b)(1).
    ``(j) State Powers To Enforce State Laws.--
            ``(1) In general.--Subject to the provisions of subsection 
        (b)(1)(G) (relating to injunctions) and paragraph (2), nothing 
        in this section shall be construed to affect the authority of 
        any State to make use of any of its powers to enforce the laws 
        of such State with respect to which a health insurance issuer 
        is not exempt under subsection (b).
            ``(2) Courts of competent jurisdiction.--If a State seeks 
        an injunction regarding the conduct described in paragraphs (1) 
        and (2) of subsection (h), such injunction must be obtained 
        from a Federal or State court of competent jurisdiction.
    ``(k) States' Authority To Sue.--Nothing in this section shall 
affect the authority of any State to bring action in any Federal or 
State court.
    ``(l) Generally Applicable Laws.--Nothing in this section shall be 
construed to affect the applicability of State laws generally 
applicable to persons or corporations.
    ``(m) Guaranteed Availability of Coverage to HIPAA Eligible 
Individuals.--To the extent that a health insurance issuer is offering 
coverage in a primary State that does not accommodate residents of 
secondary States or does not provide a working mechanism for residents 
of a secondary State, and the issuer is offering coverage under this 
part in such secondary State which has not adopted a qualified high 
risk pool as its acceptable alternative mechanism (as defined in 
section 2744(c)(2)), the issuer shall, with respect to any individual 
health insurance coverage offered in a secondary State under this part, 
comply with the guaranteed availability requirements for eligible 
individuals in section 2741.

``SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE ISSUER MAY 
              SELL INTO SECONDARY STATES.

    ``A health insurance issuer may not offer, sell, or issue 
individual health insurance coverage in a secondary State if the State 
insurance commissioner does not use a risk-based capital formula for 
the determination of capital and surplus requirements for all health 
insurance issuers.

``SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCEDURES.

    ``(a) Right to External Appeal.--A health insurance issuer may not 
offer, sell, or issue individual health insurance coverage in a 
secondary State under the provisions of this title unless--
            ``(1) both the secondary State and the primary State have 
        legislation or regulations in place establishing an independent 
        review process for individuals who are covered by individual 
        health insurance coverage, or
            ``(2) in any case in which the requirements of subparagraph 
        (A) are not met with respect to the either of such States, the 
        issuer provides an independent review mechanism substantially 
        identical (as determined by the applicable State authority of 
        such State) to that prescribed in the `Health Carrier External 
        Review Model Act' of the National Association of Insurance 
        Commissioners for all individuals who purchase insurance 
        coverage under the terms of this part, except that, under such 
        mechanism, the review is conducted by an independent medical 
        reviewer, or a panel of such reviewers, with respect to whom 
        the requirements of subsection (b) are met.
    ``(b) Qualifications of Independent Medical Reviewers.--In the case 
of any independent review mechanism referred to in subsection (a)(2)--
            ``(1) In general.--In referring a denial of a claim to an 
        independent medical reviewer, or to any panel of such 
        reviewers, to conduct independent medical review, the issuer 
        shall ensure that--
                    ``(A) each independent medical reviewer meets the 
                qualifications described in paragraphs (2) and (3);
                    ``(B) with respect to each review, each reviewer 
                meets the requirements of paragraph (4) and the 
                reviewer, or at least 1 reviewer on the panel, meets 
                the requirements described in paragraph (5); and
                    ``(C) compensation provided by the issuer to each 
                reviewer is consistent with paragraph (6).
            ``(2) Licensure and expertise.--Each independent medical 
        reviewer shall be a physician (allopathic or osteopathic) or 
        health care professional who--
                    ``(A) is appropriately credentialed or licensed in 
                1 or more States to deliver health care services; and
                    ``(B) typically treats the condition, makes the 
                diagnosis, or provides the type of treatment under 
                review.
            ``(3) Independence.--
                    ``(A) In general.--Subject to subparagraph (B), 
                each independent medical reviewer in a case shall--
                            ``(i) not be a related party (as defined in 
                        paragraph (7));
                            ``(ii) not have a material familial, 
                        financial, or professional relationship with 
                        such a party; and
                            ``(iii) not otherwise have a conflict of 
                        interest with such a party (as determined under 
                        regulations).
                    ``(B) Exception.--Nothing in subparagraph (A) shall 
                be construed to--
                            ``(i) prohibit an individual, solely on the 
                        basis of affiliation with the issuer, from 
                        serving as an independent medical reviewer if--
                                    ``(I) a non-affiliated individual 
                                is not reasonably available;
                                    ``(II) the affiliated individual is 
                                not involved in the provision of items 
                                or services in the case under review;
                                    ``(III) the fact of such an 
                                affiliation is disclosed to the issuer 
                                and the enrollee (or authorized 
                                representative) and neither party 
                                objects; and
                                    ``(IV) the affiliated individual is 
                                not an employee of the issuer and does 
                                not provide services exclusively or 
                                primarily to or on behalf of the 
                                issuer;
                            ``(ii) prohibit an individual who has staff 
                        privileges at the institution where the 
                        treatment involved takes place from serving as 
                        an independent medical reviewer merely on the 
                        basis of such affiliation if the affiliation is 
                        disclosed to the issuer and the enrollee (or 
                        authorized representative), and neither party 
                        objects; or
                            ``(iii) prohibit receipt of compensation by 
                        an independent medical reviewer from an entity 
                        if the compensation is provided consistent with 
                        paragraph (6).
            ``(4) Practicing health care professional in same field.--
                    ``(A) In general.--In a case involving treatment, 
                or the provision of items or services--
                            ``(i) by a physician, a reviewer shall be a 
                        practicing physician (allopathic or 
                        osteopathic) of the same or similar specialty, 
                        as a physician who, acting within the 
                        appropriate scope of practice within the State 
                        in which the service is provided or rendered, 
                        typically treats the condition, makes the 
                        diagnosis, or provides the type of treatment 
                        under review; or
                            ``(ii) by a non-physician health care 
                        professional, the reviewer, or at least 1 
                        member of the review panel, shall be a 
                        practicing non-physician health care 
                        professional of the same or similar specialty 
                        as the non-physician health care professional 
                        who, acting within the appropriate scope of 
                        practice within the State in which the service 
                        is provided or rendered, typically treats the 
                        condition, makes the diagnosis, or provides the 
                        type of treatment under review.
                    ``(B) Practicing defined.--For purposes of this 
                paragraph, the term `practicing' means, with respect to 
                an individual who is a physician or other health care 
                professional, that the individual provides health care 
                services to individual patients on average at least 2 
                days per week.
            ``(5) Pediatric expertise.--In the case of an external 
        review relating to a child, a reviewer shall have expertise 
        under paragraph (2) in pediatrics.
            ``(6) Limitations on reviewer compensation.--Compensation 
        provided by the issuer to an independent medical reviewer in 
        connection with a review under this section shall--
                    ``(A) not exceed a reasonable level; and
                    ``(B) not be contingent on the decision rendered by 
                the reviewer.
            ``(7) Related party defined.--For purposes of this section, 
        the term `related party' means, with respect to a denial of a 
        claim under a coverage relating to an enrollee, any of the 
        following:
                    ``(A) The issuer involved, or any fiduciary, 
                officer, director, or employee of the issuer.
                    ``(B) The enrollee (or authorized representative).
                    ``(C) The health care professional that provides 
                the items or services involved in the denial.
                    ``(D) The institution at which the items or 
                services (or treatment) involved in the denial are 
                provided.
                    ``(E) The manufacturer of any drug or other item 
                that is included in the items or services involved in 
                the denial.
                    ``(F) Any other party determined under any 
                regulations to have a substantial interest in the 
                denial involved.
            ``(8) Definitions.--For purposes of this subsection:
                    ``(A) Enrollee.--The term `enrollee' means, with 
                respect to health insurance coverage offered by a 
                health insurance issuer, an individual enrolled with 
                the issuer to receive such coverage.
                    ``(B) Health care professional.--The term `health 
                care professional' means an individual who is licensed, 
                accredited, or certified under State law to provide 
                specified health care services and who is operating 
                within the scope of such licensure, accreditation, or 
                certification.

``SEC. 2799. ENFORCEMENT.

    ``(a) In General.--Subject to subsection (b), with respect to 
specific individual health insurance coverage the primary State for 
such coverage has sole jurisdiction to enforce the primary State's 
covered laws in the primary State and any secondary State.
    ``(b) Secondary State's Authority.--Nothing in subsection (a) shall 
be construed to affect the authority of a secondary State to enforce 
its laws as set forth in the exception specified in section 2796(b)(1).
    ``(c) Court Interpretation.--In reviewing action initiated by the 
applicable secondary State authority, the court of competent 
jurisdiction shall apply the covered laws of the primary State.
    ``(d) Notice of Compliance Failure.--In the case of individual 
health insurance coverage offered in a secondary State that fails to 
comply with the covered laws of the primary State, the applicable State 
authority of the secondary State may notify the applicable State 
authority of the primary State.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to individual health insurance coverage offered, issued, or sold 
after the date that is one year after the date of the enactment of this 
Act.
    (c) GAO Ongoing Study and Reports.--
            (1) Study.--The Comptroller General of the United States 
        shall conduct an ongoing study concerning the effect of the 
        amendment made by subsection (a) on--
                    (A) the number of uninsured and under-insured;
                    (B) the availability and cost of health insurance 
                policies for individuals with pre-existing medical 
                conditions;
                    (C) the availability and cost of health insurance 
                policies generally;
                    (D) the elimination or reduction of different types 
                of benefits under health insurance policies offered in 
                different States; and
                    (E) cases of fraud or abuse relating to health 
                insurance coverage offered under such amendment and the 
                resolution of such cases.
            (2) Annual reports.--The Comptroller General shall submit 
        to Congress an annual report, after the end of each of the 5 
        years following the effective date of the amendment made by 
        subsection (a), on the ongoing study conducted under paragraph 
        (1).

SEC. 132. SEVERABILITY.

    If any provision of this subtitle or the application of such 
provision to any person or circumstance is held to be unconstitutional, 
the remainder of this subtitle and the application of the provisions of 
such to any other person or circumstance shall not be affected.

            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.

    (a) Clarification Regarding Application of Guaranteed Renewability 
of Individual Health Insurance Coverage.--Section 2742 of the Public 
Health Service Act (42 U.S.C. 300gg-42) is amended--
            (1) in its heading, by inserting ``, continuation in force, 
        including prohibition of rescission,'' after ``guaranteed 
        renewability'';
            (2) in subsection (a), by inserting ``, including without 
        rescission,'' after ``continue in force''; and
            (3) in subsection (b)(2), by inserting before the period at 
        the end the following: ``, including intentional concealment of 
        material facts regarding a health condition related to the 
        condition for which coverage is being claimed''.
    (b) Opportunity for Independent, External Third Party Review in 
Certain Cases.--Subpart 1 of part B of title XXVII of the Public Health 
Service Act is amended by adding at the end the following new section:

``SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL THIRD PARTY REVIEW 
              IN CERTAIN CASES.

    ``(a) Notice and Review Right.--If a health insurance issuer 
determines to nonrenew or not continue in force, including rescind, 
health insurance coverage for an individual in the individual market on 
the basis described in section 2742(b)(2) before such nonrenewal, 
discontinuation, or rescission, may take effect the issuer shall 
provide the individual with notice of such proposed nonrenewal, 
discontinuation, or rescission and an opportunity for a review of such 
determination by an independent, external third party under procedures 
specified by the Secretary.
    ``(b) Independent Determination.--If the individual requests such 
review by an independent, external third party of a nonrenewal, 
discontinuation, or rescission of health insurance coverage, the 
coverage shall remain in effect until such third party determines that 
the coverage may be nonrenewed, discontinued, or rescinded under 
section 2742(b)(2).''.
    (c) Effective Date.--The amendments made by this section shall 
apply after the date of the enactment of this Act with respect to 
health insurance coverage issued before, on, or after such date.

                   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.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following new section:

``SEC. 45R. AUTO-ENROLLMENT AND DEFINED CONTRIBUTION OPTION FOR HEALTH 
              BENEFITS PLANS OF SMALL EMPLOYERS.

    ``(a) In General.--For purposes of section 38, in the case of a 
small employer, the health benefits plan implementation credit 
determined under this section for the taxable year is an amount equal 
to 100 percent of the amount paid or incurred by the taxpayer during 
the taxable year for qualified health benefits expenses.
    ``(b) Limitation.--The credit determined under subsection (a) with 
respect to any taxpayer for any taxable year shall not exceed the 
excess of--
            ``(1) $1,500, over
            ``(2) sum of the credits determined under subsection (a) 
        with respect to such taxpayer for all preceding taxable years.
    ``(c) Qualified Health Benefits Expenses.--For purposes of this 
section, the term `qualified health benefits auto-enrollment expenses' 
means, with respect to any taxable year, amounts paid or incurred by 
the taxpayer during such taxable year for--
            ``(1) establishing auto-enrollment which meets the 
        requirements of section 107 of the for coverage of a 
        participant or beneficiary under a group health plan, or health 
        insurance coverage offered in connection with such a plan, and
            ``(2) implementing the employer contribution option for 
        health insurance coverage pursuant to section 5000(e)(2).
    ``(d) Qualified Small Employer.--For purposes of this section, the 
term `qualified small employer' means any employer for any taxable year 
if the number of employees employed by such employer during such 
taxable year does not exceed 50. All employers treated as a single 
employer under subsection (a) or (b) of section 52 shall be treated as 
a single employer for purposes of this section.
    ``(e) No Double Benefit.--No deduction or credit shall be allowed 
under any other provision of this chapter with respect to the amount of 
the credit determined under this section.
    ``(f) Termination.--Subsection (a) shall not apply to any taxable 
year beginning after the date which is 2 years after the date of the 
enactment of this section.''.
    (b) Credit To Be Part of General Business Credit.--Subsection (b) 
of section 38 of such Code (relating to general business credit) is 
amended by striking ``plus'' at the end of paragraph (34), by striking 
the period at the end of paragraph (35) and inserting ``, plus'' , and 
by adding at the end the following new paragraph:
            ``(36) in the case of a small employer (as defined in 
        section 45R(d)), the health benefits plan implementation credit 
        determined under section 45R(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 45Q the following new 
item:

``Sec. 45R. Auto-enrollment and defined contribution option for health 
                            benefits plans of small employers.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

        Subtitle B--Tax Incentives for Long-Term Care Insurance

SEC. 211. TREATMENT OF PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE 
              CONTRACTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions) is amended by redesignating section 224 as section 225 and 
by inserting after section 223 the following new section:

``SEC. 224. PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a deduction an amount equal to the applicable percentage of 
eligible long-term care premiums (as defined in section 213(d)(10)) 
paid during the taxable year for coverage for the taxpayer and the 
taxpayer's spouse and dependents under a qualified long-term care 
insurance contract (as defined in section 7702B(b)).
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage shall be determined 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.
    ``(c) Coordination With Other Deductions.--Any amount paid by a 
taxpayer for any qualified long-term care insurance contract to which 
subsection (a) applies shall not be taken into account in computing the 
amount allowable to the taxpayer as a deduction under section 162(l) or 
213(a).''.
    (b) Long-Term Care Insurance Permitted To Be Offered Under 
Cafeteria Plans and Flexible Spending Arrangements.--
            (1) Cafeteria plans.--The last sentence of section 125(f) 
        of such Code (defining qualified benefits) is amended by 
        inserting before the period at the end ``; except that such 
        term shall include the payment of premiums for any qualified 
        long-term care insurance contract (as defined in section 7702B) 
        to the extent the amount of such payment does not exceed the 
        eligible long-term care premiums (as defined in section 
        213(d)(10)) for such contract''.
            (2) Flexible spending arrangements.--Section 106 of such 
        Code (relating to contributions by an employer to accident and 
        health plans) is amended by striking subsection (c) and 
        redesignating subsections (d) and (e) as subsections (c) and 
        (d), respectively.
    (c) Conforming Amendments.--
            (1) Section 62(a) of such Code is amended by inserting 
        before the last sentence at the end the following new 
        paragraph:
            ``(22) Premiums on qualified long-term care insurance 
        contracts.--The deduction allowed by section 224.''.
            (2) Sections 223(b)(4)(B), 223(d)(4)(C), 223(f)(3)(B), 
        3231(e)(11), 3306(b)(18), 3401(a)(22), 4973(g)(1), and 
        4973(g)(2)(B)(i) of such Code are each amended by striking 
        ``section 106(d)'' and inserting ``section 106(c)''.
            (3) Section 223(c)(1)(B)(iii)(II) of such Code is amended 
        by striking ``106(e)'' and inserting ``106(d)''.
            (4) Section 6041 of such Code is amended--
                    (A) in subsection (f)(1) by striking ``(as defined 
                in section 106(c)(2))'', and
                    (B) by adding at the end the following new 
                subsection:
    ``(h) Flexible Spending Arrangement Defined.--For purposes of this 
section, a flexible spending arrangement is a benefit program which 
provides employees with coverage under which--
            ``(1) specified incurred expenses may be reimbursed 
        (subject to reimbursement maximums and other reasonable 
        conditions), and
            ``(2) the maximum amount of reimbursement which is 
        reasonably available to a participant for such coverage is less 
        than 500 percent of the value of such coverage.
In the case of an insured plan, the maximum amount reasonably available 
shall be determined on the basis of the underlying coverage.''.
            (5) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by striking the last item and 
        inserting the following new items:

``Sec. 224. Premiums on qualified long-term care insurance contracts.
``Sec. 225. Cross reference.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 212. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25D the 
following new section:

``SEC. 25E. CREDIT FOR TAXPAYERS WITH LONG-TERM CARE NEEDS.

    ``(a) Allowance of Credit.--
            ``(1) In general.--There shall be allowed as a credit 
        against the tax imposed by this chapter for the taxable year an 
        amount equal to the applicable credit amount multiplied by the 
        number of applicable individuals with respect to whom the 
        taxpayer is an eligible caregiver for the taxable year.
            ``(2) Applicable credit amount.--For purposes of paragraph 
        (1), the applicable credit amount shall be determined in 
        accordance with the following 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.
    ``(b) Limitation Based on Adjusted Gross Income.--
            ``(1) In general.--The amount of the credit allowable under 
        subsection (a) shall be reduced (but not below zero) by $100 
        for each $1,000 (or fraction thereof) by which the taxpayer's 
        modified adjusted gross income exceeds the threshold amount. 
        For purposes of the preceding sentence, the term `modified 
        adjusted gross income' means adjusted gross income increased by 
        any amount excluded from gross income under section 911, 931, 
        or 933.
            ``(2) Threshold amount.--For purposes of paragraph (1), the 
        term `threshold amount' means--
                    ``(A) $150,000 in the case of a joint return, and
                    ``(B) $75,000 in any other case.
            ``(3) Indexing.--In the case of any taxable year beginning 
        in a calendar year after 2010, each dollar amount contained in 
        paragraph (2) shall be increased by an amount equal to the 
        product of--
                    ``(A) such dollar amount, and
                    ``(B) the medical care cost adjustment determined 
                under section 213(d)(10)(B)(ii) for the calendar year 
                in which the taxable year begins, determined by 
                substituting `August 2009' for `August 1996' in 
                subclause (II) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $50, such increase shall be rounded to the next 
        lowest multiple of $50.
    ``(c) Definitions.--For purposes of this section:
            ``(1) Applicable individual.--
                    ``(A) In general.--The term `applicable individual' 
                means, with respect to any taxable year, any individual 
                who has been certified, before the due date for filing 
                the return of tax for the taxable year (without 
                extensions), by a physician (as defined in section 
                1861(r)(1) of the Social Security Act) as being an 
                individual with long-term care needs described in 
                subparagraph (B) for a period--
                            ``(i) which is at least 180 consecutive 
                        days, and
                            ``(ii) a portion of which occurs within the 
                        taxable year.
                Notwithstanding the preceding sentence, a certification 
                shall not be treated as valid unless it is made within 
                the 39\1/2\ month period ending on such due date (or 
                such other period as the Secretary prescribes).
                    ``(B) Individuals with long-term care needs.--An 
                individual is described in this subparagraph if the 
                individual meets any of the following requirements:
                            ``(i) The individual is at least 6 years of 
                        age and--
                                    ``(I) is unable to perform (without 
                                substantial assistance from another 
                                individual) at least 3 activities of 
                                daily living (as defined in section 
                                7702B(c)(2)(B)) due to a loss of 
                                functional capacity, or
                                    ``(II) requires substantial 
                                supervision to protect such individual 
                                from threats to health and safety due 
                                to severe cognitive impairment and is 
                                unable to perform, without reminding or 
                                cuing assistance, at least 1 activity 
                                of daily living (as so defined) or to 
                                the extent provided in regulations 
                                prescribed by the Secretary (in 
                                consultation with the Secretary of 
                                Health and Human Services), is unable 
                                to engage in age appropriate 
                                activities.
                            ``(ii) The individual is at least 2 but not 
                        6 years of age and is unable due to a loss of 
                        functional capacity to perform (without 
                        substantial assistance from another individual) 
                        at least 2 of the following activities: eating, 
                        transferring, or mobility.
                            ``(iii) The individual is under 2 years of 
                        age and requires specific durable medical 
                        equipment by reason of a severe health 
                        condition or requires a skilled practitioner 
                        trained to address the individual's condition 
                        to be available if the individual's parents or 
                        guardians are absent.
            ``(2) Eligible caregiver.--
                    ``(A) In general.--A taxpayer shall be treated as 
                an eligible caregiver for any taxable year with respect 
                to the following individuals:
                            ``(i) The taxpayer.
                            ``(ii) The taxpayer's spouse.
                            ``(iii) An individual with respect to whom 
                        the taxpayer is allowed a deduction under 
                        section 151(c) for the taxable year.
                            ``(iv) An individual who would be described 
                        in clause (iii) for the taxable year if section 
                        151(c) were applied by substituting for the 
                        exemption amount an amount equal to the sum of 
                        the exemption amount, the standard deduction 
                        under section 63(c)(2)(C), and any additional 
                        standard deduction under section 63(c)(3) which 
                        would be applicable to the individual if clause 
                        (iii) applied.
                            ``(v) An individual who would be described 
                        in clause (iii) for the taxable year if--
                                    ``(I) the requirements of clause 
                                (iv) are met with respect to the 
                                individual, and
                                    ``(II) the requirements of 
                                subparagraph (B) are met with respect 
                                to the individual in lieu of the 
                                support test under subsection (c)(1)(D) 
                                or (d)(1)(C) of section 152.
                    ``(B) Residency test.--The requirements of this 
                subparagraph are met if an individual has as his 
                principal place of abode the home of the taxpayer and--
                            ``(i) in the case of an individual who is 
                        an ancestor or descendant of the taxpayer or 
                        the taxpayer's spouse, is a member of the 
                        taxpayer's household for over half the taxable 
                        year, or
                            ``(ii) in the case of any other individual, 
                        is a member of the taxpayer's household for the 
                        entire taxable year.
                    ``(C) Special rules where more than 1 eligible 
                caregiver.--
                            ``(i) In general.--If more than 1 
                        individual is an eligible caregiver with 
                        respect to the same applicable individual for 
                        taxable years ending with or within the same 
                        calendar year, a taxpayer shall be treated as 
                        the eligible caregiver if each such individual 
                        (other than the taxpayer) files a written 
                        declaration (in such form and manner as the 
                        Secretary may prescribe) that such individual 
                        will not claim such applicable individual for 
                        the credit under this section.
                            ``(ii) No agreement.--If each individual 
                        required under clause (i) to file a written 
                        declaration under clause (i) does not do so, 
                        the individual with the highest adjusted gross 
                        income shall be treated as the eligible 
                        caregiver.
                            ``(iii) Married individuals filing 
                        separately.--In the case of married individuals 
                        filing separately, the determination under this 
                        subparagraph as to whether the husband or wife 
                        is the eligible caregiver shall be made under 
                        the rules of clause (ii) (whether or not one of 
                        them has filed a written declaration under 
                        clause (i)).
    ``(d) Identification Requirement.--No credit shall be allowed under 
this section to a taxpayer with respect to any applicable individual 
unless the taxpayer includes the name and taxpayer identification 
number of such individual, and the identification number of the 
physician certifying such individual, on the return of tax for the 
taxable year.
    ``(e) Taxable Year Must Be Full Taxable Year.--Except in the case 
of a taxable year closed by reason of the death of the taxpayer, no 
credit shall be allowable under this section in the case of a taxable 
year covering a period of less than 12 months.''.
    (b) Conforming Amendments.--
            (1) Section 6213(g)(2) of such Code is amended by striking 
        ``and'' at the end of subparagraph (L), by striking the period 
        at the end of subparagraph (M) and inserting ``, and'', and by 
        inserting after subparagraph (M) the following new 
        subparagraph:
                    ``(N) an omission of a correct TIN or physician 
                identification required under section 25E(d) (relating 
                to credit for taxpayers with long-term care needs) to 
                be included on a return.''.
            (2) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 of such Code is amended by inserting 
        after the item relating to section 25D the following new item:

``Sec. 25E. Credit for taxpayers with long-term care needs.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2009.

SEC. 213. ADDITIONAL CONSUMER PROTECTIONS FOR LONG-TERM CARE INSURANCE.

    (a) Additional Protections Applicable to Long-Term Care 
Insurance.--Subparagraphs (A) and (B) of section 7702B(g)(2) of the 
Internal Revenue Code of 1986 (relating to requirements of model 
regulation and Act) are amended to read as follows:
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to any contract if such 
                contract meets--
                            ``(i) Model regulation.--The following 
                        requirements of the model regulation:
                                    ``(I) Section 6A (relating to 
                                guaranteed renewal or 
                                noncancellability), other than 
                                paragraph (5) thereof, and the 
                                requirements of section 6B of the model 
                                Act relating to such section 6A.
                                    ``(II) Section 6B (relating to 
                                prohibitions on limitations and 
                                exclusions) other than paragraph (7) 
                                thereof.
                                    ``(III) Section 6C (relating to 
                                extension of benefits).
                                    ``(IV) Section 6D (relating to 
                                continuation or conversion of 
                                coverage).
                                    ``(V) Section 6E (relating to 
                                discontinuance and replacement of 
                                policies).
                                    ``(VI) Section 7 (relating to 
                                unintentional lapse).
                                    ``(VII) Section 8 (relating to 
                                disclosure), other than sections 8F, 
                                8G, 8H, and 8I thereof.
                                    ``(VIII) Section 11 (relating to 
                                prohibitions against post-claims 
                                underwriting).
                                    ``(IX) Section 12 (relating to 
                                minimum standards).
                                    ``(X) Section 13 (relating to 
                                requirement to offer inflation 
                                protection).
                                    ``(XI) Section 25 (relating to 
                                prohibition against preexisting 
                                conditions and probationary periods in 
                                replacement policies or certificates).
                                    ``(XII) The provisions of section 
                                26 relating to contingent nonforfeiture 
                                benefits, if the policyholder declines 
                                the offer of a nonforfeiture provision 
                                described in paragraph (4).
                            ``(ii) Model act.--The following 
                        requirements of the model Act:
                                    ``(I) Section 6C (relating to 
                                preexisting conditions).
                                    ``(II) Section 6D (relating to 
                                prior hospitalization).
                                    ``(III) The provisions of section 8 
                                relating to contingent nonforfeiture 
                                benefits, if the policyholder declines 
                                the offer of a nonforfeiture provision 
                                described in paragraph (4).
                    ``(B) Definitions.--For purposes of this paragraph:
                            ``(i) Model provisions.--The terms `model 
                        regulation' and `model Act' mean the long-term 
                        care insurance model regulation, and the long-
                        term care insurance model Act, respectively, 
                        promulgated by the National Association of 
                        Insurance Commissioners (as adopted as of 
                        December 31, 2008).
                            ``(ii) Coordination.--Any provision of the 
                        model regulation or model Act listed under 
                        clause (i) or (ii) of subparagraph (A) shall be 
                        treated as including any other provision of 
                        such regulation or Act necessary to implement 
                        the provision.
                            ``(iii) Determination.--For purposes of 
                        this section and section 4980C, the 
                        determination of whether any requirement of a 
                        model regulation or the model Act has been met 
                        shall be made by the Secretary.''.
    (b) Excise Tax.--Paragraph (1) of section 4980C(c) of the Internal 
Revenue Code of 1986 (relating to requirements of model provisions) is 
amended to read as follows:
            ``(1) Requirements of model provisions.--
                    ``(A) Model regulation.--The following requirements 
                of the model regulation must be met:
                            ``(i) Section 9 (relating to required 
                        disclosure of rating practices to consumer).
                            ``(ii) Section 14 (relating to application 
                        forms and replacement coverage).
                            ``(iii) Section 15 (relating to reporting 
                        requirements).
                            ``(iv) Section 22 (relating to filing 
                        requirements for marketing).
                            ``(v) Section 23 (relating to standards for 
                        marketing), including inaccurate completion of 
                        medical histories, other than paragraphs (1), 
                        (6), and (9) of section 23C.
                            ``(vi) Section 24 (relating to 
                        suitability).
                            ``(vii) Section 29 (relating to standard 
                        format outline of coverage).
                            ``(viii) Section 30 (relating to 
                        requirement to deliver shopper's guide).
                The requirements referred to in clause (vi) shall not 
                include those portions of the personal worksheet 
                described in Appendix B relating to consumer protection 
                requirements not imposed by section 4980C or 7702B.
                    ``(B) Model act.--The following requirements of the 
                model Act must be met:
                            ``(i) Section 6F (relating to right to 
                        return).
                            ``(ii) Section 6G (relating to outline of 
                        coverage).
                            ``(iii) Section 6H (relating to 
                        requirements for certificates under group 
                        plans).
                            ``(iv) Section 6J (relating to policy 
                        summary).
                            ``(v) Section 6K (relating to monthly 
                        reports on accelerated death benefits).
                            ``(vi) Section 7 (relating to 
                        incontestability period).
                    ``(C) Definitions.--For purposes of this paragraph, 
                the terms `model regulation' and `model Act' have the 
                meanings given such terms by section 7702B(g)(2)(B).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to policies issued after December 31, 2009.

             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.

    (a) In General.--Notwithstanding any other provision of law, the 
Secretary of Health and Human Services--
            (1) shall not use data obtained from the conduct of 
        comparative effectiveness research, including such research 
        that is conducted or supported using funds appropriated under 
        the American Recovery and Reinvestment Act of 2009 (Public Law 
        111-5), to deny coverage of an item or service under a Federal 
        health care program (as defined in section 1128B(f) of the 
        Social Security Act (42 U.S.C. 1320a-7b(f))); and
            (2) shall ensure that comparative effectiveness research 
        conducted or supported by the Federal Government accounts for 
        factors contributing to differences in the treatment response 
        and treatment preferences of patients, including patient-
        reported outcomes, genomics and personalized medicine, the 
        unique needs of health disparity populations, and indirect 
        patient benefits.
    (b) Rule of Construction.--Nothing in this section shall be 
construed as affecting the authority of the Commissioner of Food and 
Drugs under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et 
seq.) or the Public Health Service Act (42 U.S.C. 201 et seq.).

     Subtitle D--Programs of Health Promotion or Disease Prevention

SEC. 231. PROGRAMS OF HEALTH PROMOTION OR DISEASE PREVENTION.

    (a) In General.--Nothing in the Public Health Service Act, Employee 
Retirement Income Security Act of 1974, or the Internal Revenue Code of 
1986 (or any amendment made by this Act) shall be applied, 
administered, or interpreted to prevent an employer from establishing 
premium discounts or rebates, or modifying copayments or deductibles, 
in the case of employees who adhere to, or participate in, a program of 
health promotion or disease prevention which meets the requirements of 
subsection (b).
    (b) Programs of Health Promotion or Disease Prevention to Which 
Section Applies.--
            (1) General provisions.--
                    (A) General rule.--For purposes of paragraph 
                (2)(B), a program of health promotion or disease 
                prevention (referred to in this subsection as a 
                ``wellness program'') shall be a program that is 
                designed to promote health or prevent disease that 
                meets the applicable requirements of this subsection.
                    (B) No conditions based on health status factor.--
                If none of the conditions for obtaining a premium 
                discount or rebate or other reward for participation in 
                a wellness program is based on an individual satisfying 
                a standard that is related to a health status factor, 
                such wellness program shall not violate this section if 
                participation in the program is made available to all 
                similarly situated individuals and the requirements of 
                paragraph (2) are complied with.
                    (C) Conditions based on health status factor.--If 
                any of the conditions for obtaining a premium discount 
                or rebate or other reward for participation in a 
                wellness program is based on an individual satisfying a 
                standard that is related to a health status factor, 
                such wellness program shall not violate this section if 
                the requirements of paragraph (3) are complied with.
            (2) Wellness programs not subject to requirements.--If none 
        of the conditions for obtaining a premium discount or rebate or 
        other reward under a wellness program as described in paragraph 
        (1)(B) are based on an individual satisfying a standard that is 
        related to a health status factor (or if such a wellness 
        program does not provide such a reward), the wellness program 
        shall not violate this section if participation in the program 
        is made available to all similarly situated individuals. The 
        following programs shall not have to comply with the 
        requirements of paragraph (3) if participation in the program 
        is made available to all similarly situated individuals:
                    (A) A program that reimburses all or part of the 
                cost for memberships in a fitness center.
                    (B) A diagnostic testing program that provides a 
                reward for participation and does not base any part of 
                the reward on outcomes.
                    (C) A program that encourages preventive care 
                related to a health condition through the waiver of the 
                copayment or deductible requirement under an individual 
                or group health plan for the costs of certain items or 
                services related to a health condition (such as 
                prenatal care or well-baby visits).
                    (D) A program that reimburses individuals for the 
                costs of smoking cessation programs without regard to 
                whether the individual quits smoking.
                    (E) A program that provides a reward to individuals 
                for attending a periodic health education seminar.
            (3) Wellness programs subject to requirements.--If any of 
        the conditions for obtaining a premium discount, rebate, or 
        reward under a wellness program as described in paragraph 
        (1)(C) is based on an individual satisfying a standard that is 
        related to a health status factor, the wellness program shall 
        not violate this section if the following requirements are 
        complied with:
                    (A) The reward for the wellness program, together 
                with the reward for other wellness programs with 
                respect to the plan that requires satisfaction of a 
                standard related to a health status factor, shall not 
                exceed 50 percent of the cost of employee-only coverage 
                under the plan. If, in addition to employees or 
                individuals, any class of dependents (such as spouses 
                or spouses and dependent children) may participate 
                fully in the wellness program, such reward shall not 
                exceed 50 percent of the cost of the coverage in which 
                an employee or individual and any dependents are 
                enrolled. For purposes of this paragraph, the cost of 
                coverage shall be determined based on the total amount 
                of employer and employee contributions for the benefit 
                package under which the employee is (or the employee 
                and any dependents are) receiving coverage. A reward 
                may be in the form of a discount or rebate of a premium 
                or contribution, a waiver of all or part of a cost-
                sharing mechanism (such as deductibles, copayments, or 
                coinsurance), the absence of a surcharge, or the value 
                of a benefit that would otherwise not be provided under 
                the plan.
                    (B) The wellness program shall be reasonably 
                designed to promote health or prevent disease. A 
                program complies with the preceding sentence if the 
                program has a reasonable chance of improving the health 
                of, or preventing disease in, participating individuals 
                and it is not overly burdensome, is not a subterfuge 
                for discriminating based on a health status factor, and 
                is not highly suspect in the method chosen to promote 
                health or prevent disease. The plan or issuer shall 
                evaluate the program's reasonableness at least once per 
                year.
                    (C) The plan shall give individuals eligible for 
                the program the opportunity to qualify for the reward 
                under the program at least once each year.
                    (D) The full reward under the wellness program 
                shall be made available to all similarly situated 
                individuals. For such purpose, the following applies:
                            (i) The reward is not available to all 
                        similarly situated individuals for a period 
                        unless the wellness program allows--
                                    (I) for a reasonable alternative 
                                standard (or waiver of the otherwise 
                                applicable standard) for obtaining the 
                                reward for any individual for whom, for 
                                that period, it is unreasonably 
                                difficult due to a medical condition to 
                                satisfy the otherwise applicable 
                                standard; and
                                    (II) for a reasonable alternative 
                                standard (or waiver of the otherwise 
                                applicable standard) for obtaining the 
                                reward for any individual for whom, for 
                                that period, it is medically 
                                inadvisable to attempt to satisfy the 
                                otherwise applicable standard.
                            (ii) If reasonable under the circumstances, 
                        the plan or issuer may seek verification, such 
                        as a statement from an individual's physician, 
                        that a health status factor makes it 
                        unreasonably difficult or medically inadvisable 
                        for the individual to satisfy or attempt to 
                        satisfy the otherwise applicable standard.
                    (E) The plan or issuer involved shall disclose in 
                all plan materials describing the terms of the wellness 
                program the availability of a reasonable alternative 
                standard (or the possibility of waiver of the otherwise 
                applicable standard) required under subparagraph (D). 
                If plan materials disclose that such a program is 
                available, without describing its terms, the disclosure 
                under this subparagraph shall not be required.
    (c) Existing Programs.--Nothing in this section shall prohibit a 
program of health promotion or disease prevention that was established 
prior to the date of enactment of this section and applied with all 
applicable regulations, and that is operating on such date, from 
continuing to be carried out for as long as such regulations remain in 
effect.
    (d) Regulations.--Nothing in this section shall be construed as 
prohibiting the Secretaries of Labor, Health and Human Services, or the 
Treasury from promulgating regulations in connection with this section.

              TITLE III--STRENGTHENING SAFETY NET PROGRAMS

        Subtitle A--Beneficiary Choice Under Medicaid and SCHIP

SEC. 301. EASING ADMINISTRATIVE BARRIERS TO STATE COOPERATION WITH 
              EMPLOYER-SPONSORED INSURANCE COVERAGE.

    (a) Requiring Some Coverage for Employer-Sponsored Insurance.--
            (1) In general.--Section 2102(a) of the Social Security Act 
        (42 U.S.C. 1397b(a)) is amended--
                    (A) in paragraph (6), by striking ``and'' at the 
                end;
                    (B) in paragraph (7), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(8) effective for plan years beginning on or after 
        October 1, 2010, how the plan will provide for child health 
        assistance with respect to targeted low-income children who 
        have access to coverage under a group health plan.''.
            (2) Effective date.--The amendments made by paragraph (1) 
        shall apply beginning with fiscal year 2011.
    (b) Federal Financial Participation for Employer-Sponsored 
Insurance.--Section 2105 of such Act (42 U.S.C. 1397d) is amended--
            (1) in subsection (a)(1)(C), by inserting before the 
        semicolon at the end the following: ``and, subject to paragraph 
        (3)(C) of subsection (c), in the form of payment of the 
        premiums for coverage under a group health plan that includes 
        coverage of targeted low-income children and benefits 
        supplemental to such coverage''; and
            (2) by amending paragraph (3) of subsection (c) to read as 
        follows:
            ``(3) Purchase of employer-sponsored insurance.--
                    ``(A) In general.--Payment may be made to a State 
                under subsection (a)(1)(C), subject to the provisions 
                of this paragraph, for the purchase of family coverage 
                under a group health plan that includes coverage of 
                targeted low-income children unless such coverage would 
                otherwise substitute for coverage that would be 
                provided to such children but for the purchase of 
                family coverage.
                    ``(B) Waiver of certain provisions.--With respect 
                to coverage described in subparagraph (A)--
                            ``(i) notwithstanding section 2102, no 
                        minimum benefits requirement (other than those 
                        otherwise applicable with respect to services 
                        within the categories of basic services 
                        described in section 2103(c)(1) and emergency 
                        services) under this title shall apply; and
                            ``(ii) no limitation on beneficiary cost-
                        sharing otherwise applicable under this title 
                        or title XIX shall apply.
                    ``(C) Required provision of supplemental 
                benefits.--If the coverage described in subparagraph 
                (A) does not provide coverage for the services in each 
                of the categories of basic services described in 
                section 2103(c)(1) and for emergency services, the 
                State child health plan shall provide coverage of such 
                services as supplemental benefits.
                    ``(D) Limitation on ffp.--The amount of the payment 
                under subsection (a)(1)(C) for coverage described in 
                subparagraph (A) (and supplemental benefits under 
                subparagraph (C) for individuals so covered) during a 
                fiscal year may not exceed the product of--
                            ``(i) the national per capita expenditure 
                        under this title (taking into account both 
                        Federal and State expenditures) for the 
                        previous fiscal year (as determined by the 
                        Secretary using the best available data);
                            ``(ii) the enhanced FMAP for the State and 
                        fiscal year involved; and
                            ``(iii) the number of targeted low-income 
                        children for whom such coverage is provided.
                    ``(E) Voluntary enrollment.--A State child health 
                plan--
                            ``(i) may not require a targeted low-income 
                        child to enroll in family coverage described in 
                        subparagraph (A) in order to obtain child 
                        health assistance under this title;
                            ``(ii) before providing such child health 
                        assistance for such coverage of a child, shall 
                        make available (which may be through an 
                        Internet website or other means) to the parent 
                        or guardian of the child information on the 
                        coverage available under this title, including 
                        benefits and cost-sharing; and
                            ``(iii) shall provide at least one 
                        opportunity per fiscal year for beneficiaries 
                        to switch coverage under this title from 
                        coverage described in subparagraph (A) to the 
                        coverage that is otherwise made available under 
                        this title.
                    ``(F) Information on coverage options.--A State 
                child health plan shall--
                            ``(i) describe how the State will notify 
                        potential beneficiaries of coverage described 
                        in subparagraph (A);
                            ``(ii) provide such notification in writing 
                        at least during the initial application for 
                        enrollment under this title and during 
                        redeterminations of eligibility if the 
                        individual was enrolled before October 1, 2009; 
                        and
                            ``(iii) post a description of these 
                        coverage options on any official Internet 
                        website that may be established by the State in 
                        connection with the plan.
                    ``(G) Semiannual verification of coverage.--If 
                coverage described in subparagraph (A) is provided 
                under a group health plan with respect to a targeted 
                low-income child, the State child health plan shall 
                provide for the collection, at least once every six 
                months, of proof from the plan that the child is 
                enrolled in such coverage.
                    ``(H) Rule of construction.--Nothing in this 
                section is to be construed to prohibit a State from--
                            ``(i) offering wrap around benefits in 
                        order for a group health plan to meet any 
                        State-established minimum benefit requirements;
                            ``(ii) establishing a cost-effectiveness 
                        test to qualify for coverage under such a plan;
                            ``(iii) establishing limits on beneficiary 
                        cost-sharing under such a plan;
                            ``(iv) paying all or part of a 
                        beneficiary's cost-sharing requirements under 
                        such a plan;
                            ``(v) paying less than the full cost of the 
                        employee's share of the premium under such a 
                        plan, including prorating the cost of the 
                        premium to pay for only what the State 
                        determines is the portion of the premium that 
                        covers targeted low-income children;
                            ``(vi) using State funds to pay for 
                        benefits above the Federal upper limit 
                        established under subparagraph (D);
                            ``(vii) allowing beneficiaries enrolled in 
                        group health plans from changing plans to 
                        another coverage option available under this 
                        title at any time; or
                            ``(viii) providing any guidance or 
                        information it deems appropriate in order to 
                        help beneficiaries make an informed decision 
                        regarding the option to enroll in coverage 
                        described in subparagraph (A).
                    ``(I) Group health plan defined.--In this 
                paragraph, the term `group health plan' has the meaning 
                given such term in section 2791(a)(1) of the Public 
                Health Service Act (42 U.S.C. 300gg-91(a)(1)).
                    ``(J) Attestation requirement for certain higher 
                income children.--Effective October 1, 2011, any State 
                that provides for child health assistance under this 
                title for children in families with gross income (as 
                determined without regard to any income disregards or 
                expense exclusions) that exceeds 200 percent of the 
                poverty line shall require, as a condition of 
                eligibility for child health assistance under this 
                title (other than in the form of premium assistance 
                under this paragraph) that there must be executed an 
                attestation (under penalty of perjury) that the child 
                is not eligible for coverage under any group health 
                plan.''.

SEC. 302. IMPROVING BENEFICIARY CHOICE IN SCHIP.

    (a) Requiring Offering of Alternative Coverage Options.--Section 
2102 of the Social Security Act (42 U.S.C. 1397b), as amended by 
section 1781, is amended--
            (1) in subsection (a)--
                    (A) in paragraph (7), by striking ``and'' at the 
                end;
                    (B) in paragraph (8), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(9) effective for plan years beginning on or after 
        October 1, 2010, how the plan will provide for child health 
        assistance with respect to targeted low-income children through 
        alternative coverage options in accordance with subsection 
        (d).''; and
            (2) by adding at the end the following new subsection:
    ``(d) Alternative Coverage Options.--
            ``(1) In general.--Effective October 1, 2010, a State child 
        health plan shall provide for the offering of any qualified 
        alternative coverage that a qualified entity seeks to offer to 
        targeted low-income children through the plan in the State.
            ``(2) Application of uniform financial limitation for all 
        alternative coverage options.--With respect to all qualified 
        alternative coverage offered in a State, the State child health 
        plan shall establish a uniform dollar limitation on the per 
        capita monthly amount that will be paid by the State to the 
        qualified entity with respect to such coverage provided to a 
        targeted low-income child. Such limitation may not be less than 
        90 percent of the per capita monthly payment made for coverage 
        offered under the State child health plan that is not in the 
        form of an alternative coverage option. Nothing in this 
        paragraph shall be construed--
                    ``(A) as requiring a State to provide for the full 
                payment of premiums for qualified alternative coverage;
                    ``(B) as preventing a State from charging 
                additional premiums to cover the difference between the 
                cost of qualified alternative coverage and the amount 
                of such payment limitation; and
                    ``(C) as preventing a State from using its own 
                funds to provide a dollar limitation that exceeds the 
                Federal financial participation as limited under 
                section 2105(c)(8).
            ``(3) Qualified alternative coverage defined.--In this 
        section, the term `qualified alternative coverage' means health 
        insurance coverage that--
                    ``(A) meets the coverage requirements of section 
                2103 (other than cost-sharing requirements of such 
                section); and
                    ``(B) is offered by a qualified insurer, and not 
                directly by the State.
            ``(4) Qualified insurer defined.--In this section, the term 
        `qualified insurer' means, with respect to a State, an entity 
        that is licensed to offer health insurance coverage in the 
        State.''.
    (b) Federal Financial Participation for Qualified Alternative 
Coverage.--Section 2105 of such Act (42 U.S.C. 1397d), as amended by 
sections 301(a) and 601(a) of the Children's Health Insurance Program 
Reauthorization Act of 2009 (Public Law 111-5), is amended--
            (1) in subsection (a)(1)(C), as amended by section 
        1781(b)(1), by inserting before the semicolon at the end the 
        following: ``and, subject to subsection (c)(12)(C), in the form 
        of payment of the premiums for coverage for qualified 
        alternative coverage''; and
            (2) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(12) Purchase of qualified alternative coverage.--
                    ``(A) In general.--Payment may be made to a State 
                under subsection (a)(1)(C), subject to the provisions 
                of this paragraph, for the purchase of qualified 
                alternative coverage.
                    ``(B) Waiver of certain provisions.--With respect 
                to coverage described in subparagraph (A), no 
                limitation on beneficiary cost-sharing otherwise 
                applicable under this title or title XIX shall apply.
                    ``(C) Limitation on ffp.--The amount of the payment 
                under paragraph (1)(C) for coverage described in 
                subparagraph (A) during a fiscal year in the aggregate 
                for all such coverage in the State may not exceed the 
                product of--
                            ``(i) the national per capita expenditure 
                        under this title (taking into account both 
                        Federal and State expenditures) for the 
                        previous fiscal year (as determined by the 
                        Secretary using the best available data);
                            ``(ii) the enhanced FMAP for the State and 
                        fiscal year involved; and
                            ``(iii) the number of targeted low-income 
                        children for whom such coverage is provided.
                    ``(D) Voluntary enrollment.--A State child health 
                plan--
                            ``(i) may not require a targeted low-income 
                        child to enroll in coverage described in 
                        subparagraph (A) in order to obtain child 
                        health assistance under this title;
                            ``(ii) before providing such child health 
                        assistance for such coverage of a child, shall 
                        make available (which may be through an 
                        Internet website or other means) to the parent 
                        or guardian of the child information on the 
                        coverage available under this title, including 
                        benefits and cost-sharing; and
                            ``(iii) shall provide at least one 
                        opportunity per fiscal year for beneficiaries 
                        to switch coverage under this title from 
                        coverage described in subparagraph (A) to the 
                        coverage that is otherwise made available under 
                        this title.
                    ``(E) Information on coverage options.--A State 
                child health plan shall--
                            ``(i) describe how the State will notify 
                        potential beneficiaries of coverage described 
                        in subparagraph (A);
                            ``(ii) provide such notification in writing 
                        at least during the initial application for 
                        enrollment under this title and during 
                        redeterminations of eligibility if the 
                        individual was enrolled before October 1, 2009; 
                        and
                            ``(iii) post a description of these 
                        coverage options on any official website that 
                        may be established by the State in connection 
                        with the plan.
                    ``(F) Rule of construction.--Nothing in this 
                section is to be construed to prohibit a State from--
                            ``(i) establishing limits on beneficiary 
                        cost-sharing under such alternative coverage;
                            ``(ii) paying all or part of a 
                        beneficiary's cost-sharing requirements under 
                        such coverage;
                            ``(iii) paying less than the full cost of a 
                        child's share of the premium under such 
                        coverage, insofar as the premium for such 
                        coverage exceeds the limitation established by 
                        the State under subparagraph (C);
                            ``(iv) using State funds to pay for 
                        benefits above the Federal upper limit 
                        established under subparagraph (C); or
                            ``(v) providing any guidance or information 
                        it deems appropriate in order to help 
                        beneficiaries make an informed decision 
                        regarding the option to enroll in coverage 
                        described in subparagraph (A).''.

SEC. 303. APPLICATION TO MEDICAID.

    In accordance with rules established by the Secretary of Health and 
Human Services, the requirements imposed under a State child health 
plan under title XXI of the Social Security Act under the amendments 
made by the preceding sections of this subtitle shall apply in the same 
manner to a State plan under title XIX of such Act, except that--
            (1) such requirements shall not apply to individuals whose 
        eligibility for medical assistance under such title is based on 
        being aged, blind, or disabled or to individuals with a 
        category of individuals described in section 1937(a)(2)(B) of 
        such Act; and
            (2) the national per capita expenditures shall be 
        determined based on a benchmark coverage described in section 
        1937(b)(1) of such Act but without regard to expenditures for 
        individuals described in paragraph (1) or for nursing facility 
        services and other long-term care services (as determined by 
        the Secretary).

SEC. 304. EXPANSION OF HEALTH OPPORTUNITY ACCOUNT PROGRAM.

    (a) In General.--Section 613 of the Children's Health Insurance 
Program Reauthorization Act of 2009 (Public Law 111-3) is repealed.
    (b) Expansion.--Section 1938(a)(2) of the Social Security Act (42 
U.S.C. 1396u-8(a)(2)) is amended--
            (1) in subparagraph (A) by striking everything following 
        the first sentence; and
            (2) by striking subparagraph (B).

SEC. 305. VERIFICATION REQUIREMENTS TO PREVENT ILLEGAL ALIENS FROM 
              RECEIVING MEDICAID BENEFITS.

    Section 1904 of the Social Security Act (42 U.S.C. 1396c) is 
amended--
            (1) by striking ``If the Secretary'' and inserting the 
        following:
    ``(a) Oversight.--If the Secretary''; and
            (2) by adding at the end the following new subsection:
    ``(b) Preventing Illegal Aliens From Receiving Medicaid Benefits.--
            ``(1) Verification as condition on funding.--
        Notwithstanding any other provision of law, subject to 
        paragraphs (3) and (4), the Secretary shall not provide funding 
        under 1903(a) for medical assistance provided to an individual 
        (other than emergency services unless such individual has been 
        determined to be eligible for medical assistance under this 
        title on the basis of--
                    ``(A) United States citizenship or nationality 
                through the verification process described in section 
                1903(x); or
                    ``(B) qualified alien status through the 
                immigration status verification system described in 
                section 1137(d).
            ``(2) Rule of construction.--Nothing in the America's 
        Affordable Health Choices Act of 2009 or the amendments made by 
        that Act shall be construed as exempting any individual from 
        the eligibility verification requirements specified in 
        paragraph (1).
            ``(3) No application to dsh.--Paragraph (1) shall not apply 
        to or affect the payments described in section 1923(f) 
        (relating to disproportionate share hospital payments).
            ``(4) No application to emergency medical services.--
        Paragraph (1) shall not apply to emergency medical services 
        described in section 1903(f), regardless of the status of the 
        individual for whom such services are provided.
            ``(5) No impact on emtala.--Nothing in this subsection 
        shall be construed as affecting the application of the 
        requirements of section 1867.''.

                  Subtitle B--Community Health Centers

SEC. 311. INCREASED FUNDING.

    Section 330 of the Public Health Service Act (42 U.S.C. 254b) is 
amended--
            (1) in subsection (r)(1)--
                    (A) in subparagraph (D), by striking ``and'' at the 
                end;
                    (B) in subparagraph (E), by striking the period at 
                the end and inserting ``; and''; and
                    (C) by inserting at the end the following:
                    ``(F) Such sums as may be necessary for each of 
                fiscal years 2013 and 2019.''; and
            (2) by inserting after subsection (r) the following:
    ``(s) Additional Funding.--For the purpose of carrying out this 
section, in addition to any other amounts authorized to be appropriated 
for such purpose, there are authorized to be appropriated, out of any 
monies in the Public Health Investment Fund, the following:
            ``(1) For fiscal year 2010, $1,000,000,000.
            ``(2) For fiscal year 2011, $1,500,000,000.
            ``(3) For fiscal year 2012, $2,500,000,000.
            ``(4) For fiscal year 2013, $3,000,000,000.
            ``(5) For fiscal year 2014, $4,000,000,000.
            ``(6) For fiscal year 2015, $4,400,000,000.
            ``(7) For fiscal year 2016, $4,800,000,000.
            ``(8) For fiscal year 2017, $5,300,000,000.
            ``(9) For fiscal year 2018, $5,900,000,000.
            ``(10) For fiscal year 2019, $6,400,000,000.''.

              TITLE IV--EXPANDING HEALTH SAVINGS ACCOUNTS

SEC. 401. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE SAME 
              HSA ACCOUNT.

    (a) In General.--Paragraph (3) of section 223(b) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(C) Special rule where both spouses are eligible 
                individuals with 1 account.--If--
                            ``(i) an individual and the individual's 
                        spouse have both attained age 55 before the 
                        close of the taxable year, and
                            ``(ii) the spouse is not an account 
                        beneficiary of a health savings account as of 
                        the close of such year,
                the additional contribution amount shall be 200 percent 
                of the amount otherwise determined under subparagraph 
                (B).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 402. PROVISIONS RELATING TO MEDICARE.

    (a) Individuals Over Age 65 Only Enrolled in Medicare Part A.--
Section 223(b)(7) of the Internal Revenue Code of 1986 (relating to 
contribution limitation on Medicare eligible individuals) is amended by 
adding at the end the following new sentence: ``This paragraph shall 
not apply to any individual during any period the individual's only 
entitlement to such benefits is an entitlement to hospital insurance 
benefits under part A of title XVIII of such Act pursuant to an 
enrollment for such hospital insurance benefits under section 226(a)(1) 
of such Act.''.
    (b) Medicare Beneficiaries Participating in Medicare Advantage MSA 
May Contribute Their Own Money to Their MSA.--Subsection (b) of section 
138 of such Code is amended by striking paragraph (2) and by 
redesignating paragraphs (3) and (4) as paragraphs (2) and (3), 
respectively.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 403. INDIVIDUALS ELIGIBLE FOR VETERANS BENEFITS FOR A SERVICE-
              CONNECTED DISABILITY.

    (a) In General.--Section 223(c)(1) of the Internal Revenue Code of 
1986 (defining eligible individual) is amended by adding at the end the 
following new subparagraph:
                    ``(C) Special rule for individuals eligible for 
                certain veterans benefits.--For purposes of 
                subparagraph (A)(ii), an individual shall not be 
                treated as covered under a health plan described in 
                such subparagraph merely because the individual 
                receives periodic hospital care or medical services for 
                a service-connected disability under any law 
                administered by the Secretary of Veterans Affairs but 
                only if the individual is not eligible to receive such 
                care or services for any condition other than a 
                service-connected disability.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 404. INDIVIDUALS ELIGIBLE FOR INDIAN HEALTH SERVICE ASSISTANCE.

    (a) In General.--Section 223(c)(1) of the Internal Revenue Code of 
1986, as amended by this title, is amended by adding at the end the 
following new subparagraph:
                    ``(D) Special rule for individuals eligible for 
                assistance under indian health service programs.--For 
                purposes of subparagraph (A)(ii), an individual shall 
                not be treated as covered under a health plan described 
                in such subparagraph merely because the individual 
                receives hospital care or medical services under a 
                medical care program of the Indian Health Service or of 
                a tribal organization.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 405. FSA AND HRA TERMINATION TO FUND HSAS.

    (a) Eligible Individuals Include FSA and HRA Participants.--Section 
223(c)(1)(B) of the Internal Revenue Code of 1986 is amended--
            (1) by striking ``and'' at the end of clause (ii),
            (2) by striking the period at the end of clause (iii) and 
        inserting ``, and'', and
            (3) by inserting after clause (iii) the following new 
        clause:
                            ``(iv) coverage under a health flexible 
                        spending arrangement or a health reimbursement 
                        arrangement in the plan year a qualified HSA 
                        distribution as described in section 106(e) is 
                        made on behalf of the individual if after the 
                        qualified HSA distribution is made and for the 
                        remaining duration of the plan year, the 
                        coverage provided under the health flexible 
                        spending arrangement or health reimbursement 
                        arrangement is converted to--
                                    ``(I) coverage that does not pay or 
                                reimburse any medical expense incurred 
                                before the minimum annual deductible 
                                under section 223(c)(2)(A)(i) (prorated 
                                for the period occurring after the 
                                qualified HSA distribution is made) is 
                                satisfied,
                                    ``(II) coverage that, after the 
                                qualified HSA distribution is made, 
                                does not pay or reimburse any medical 
                                expense incurred after the qualified 
                                HSA distribution is made other than 
                                preventive care as defined in section 
                                223(c)(2)(3),
                                    ``(III) coverage that, after the 
                                qualified HSA distribution is made, 
                                pays or reimburses benefits for 
                                coverage described in section 
                                223(c)(1)(B)(ii) (but not through 
                                insurance or for long-term care 
                                services),
                                    ``(IV) coverage that, after the 
                                qualified HSA distribution is made, 
                                pays or reimburses benefits for 
                                permitted insurance as defined in 
                                section 223(c)(1)(B)(i) or coverage 
                                described in section 223(c)(1)(B)(ii) 
                                (but not for long-term care services),
                                    ``(V) coverage that, after the 
                                qualified HSA distribution is made, 
                                pays or reimburses only those medical 
                                expenses incurred after an individual's 
                                retirement (and no expenses incurred 
                                before retirement), or
                                    ``(VI) coverage that, after the 
                                qualified HSA distribution is made, is 
                                suspended, pursuant to an election made 
                                on or before the date the individual 
                                elects a qualified HSA distribution or, 
                                if later, on the date of the individual 
                                enrolls in a high deductible health 
                                plan (as defined in section 223(c)(2)), 
                                that does not pay or reimburse, at any 
                                time, any medical expense incurred 
                                during the suspension period except as 
                                defined in subclauses (I) through (V) 
                                above.''.
    (b) Qualified HSA Distribution Shall Not Affect Flexible Spending 
Arrangement.--Section 106(e)(1) of such Code is amended to read as 
follows:
            ``(1) In general.--A plan shall not fail to be treated as a 
        health flexible spending arrangement under this section, 
        section 105, or section 125, or as a health reimbursement 
        arrangement under this section or section 105, merely because 
        such plan provides for a qualified HSA distribution.''.
    (c) FSA Balances at Year End Shall Not Forfeit.--Section 125(d)(2) 
of such Code is amended by adding at the end the following new 
subparagraph:
                    ``(E) Exception for qualified hsa distributions.--
                Subparagraph (A) shall not apply to the extent that 
                there is an amount remaining in a health flexible 
                spending account at the end of a plan year that an 
                individual elects to contribute to a health savings 
                account pursuant to a qualified HSA distribution (as 
                defined in section 106(e)(2)).''.
    (d) Simplification of Limitations on FSA and HRA Rollovers.--
Section 106(e)(2) of such Code (relating to qualified HSA distribution) 
is amended to read as follows:
            ``(2) Qualified hsa distribution.--
                    ``(A) In general.--The term `qualified HSA 
                distribution' means a distribution from a health 
                flexible spending arrangement or health reimbursement 
                arrangement to the extent that such distribution does 
                not exceed the lesser of--
                            ``(i) the balance in such arrangement as of 
                        the date of such distribution, or
                            ``(ii) the amount determined under 
                        subparagraph (B).
                Such term shall not include more than 1 distribution 
                with respect to any arrangement.
                    ``(B) Dollar limitations.--
                            ``(i) Distributions from a health flexible 
                        spending arrangement.--A qualified HSA 
                        distribution from a health flexible spending 
                        arrangement shall not exceed the applicable 
                        amount.
                            ``(ii) Distributions from a health 
                        reimbursement arrangement.--A qualified HSA 
                        distribution from a health reimbursement 
                        arrangement shall not exceed--
                                    ``(I) the applicable amount divided 
                                by 12, multiplied by
                                    ``(II) the number of months during 
                                which the individual is a participant 
                                in the health reimbursement 
                                arrangement.
                            ``(iii) Applicable amount.--For purposes of 
                        this subparagraph, the applicable amount is--
                                    ``(I) $2,250 in the case of an 
                                eligible individual who has self-only 
                                coverage under a high deductible health 
                                plan at the time of such distribution, 
                                and
                                    ``(II) $4,500 in the case of an 
                                eligible individual who has family 
                                coverage under a high deductible health 
                                plan at the time of such 
                                distribution.''.
    (e) Elimination of Additional Tax for Failure To Maintain High 
Deductible Health Plan Coverage.--Section 106(e) of such Code is 
amended--
            (1) by striking paragraph (3) and redesignating paragraphs 
        (4) and (5) as paragraphs (3) and (4), respectively, and
            (2) by striking subparagraph (A) of paragraph (3), as so 
        redesignated, and redesignating subparagraphs (B) and (C) of 
        such paragraph as subparagraphs (A) and (B) thereof, 
        respectively.
    (f) Limited Purpose FSAs and HRAs.--Section 106(e) of such Code, as 
amended by this section, is amended by adding at the end the following 
new paragraph:
            ``(5) Limited purpose fsas and hras.--A plan shall not fail 
        to be a health flexible spending arrangement or health 
        reimbursement arrangement under this section or section 105 
        merely because the plan converts coverage for individuals who 
        enroll in a high deductible health plan described in section 
        223(c)(2) to coverage described in section 223(c)(1)(B)(iv). 
        Coverage for such individuals may be converted as of the date 
        of enrollment in the high deductible health plan, without 
        regard to the period of coverage under the health flexible 
        spending arrangement or health reimbursement arrangement, and 
        without requiring any change in coverage to individuals who do 
        not enroll in a high deductible health plan.''.
    (g) Distribution Amounts Adjusted for Cost-of-Living.--Section 
106(e) of such Code, as amended by this section, is amended by adding 
at the end the following new paragraph:
            ``(6) Cost-of-living adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning after December 31, 2010, each of the dollar 
                amounts in paragraph (2)(B)(iii) shall be increased by 
                an amount equal to such dollar amount, multiplied by 
                the cost-of-living adjustment determined under section 
                1(f)(3) for the calendar year in which such taxable 
                year begins by substituting `calendar year 2009' for 
                `calendar year 1992' in subparagraph (B) thereof.
                    ``(B) Rounding.--If any increase under paragraph 
                (1) is not a multiple of $50, such increase shall be 
                rounded to the nearest multiple of $50.''.
    (h) Disclaimer of Disqualifying Coverage.--Section 223(c)(1)(B) of 
such Code, as amended by this section, is amended--
            (1) by striking ``and'' at the end of clause (iii),
            (2) by striking the period at the end of clause (iv) and 
        inserting ``, and'', and
            (3) by inserting after clause (iv) the following new 
        clause:
                            ``(v) any coverage (including prospective 
                        coverage) under a health plan that is not a 
                        high deductible health plan which is disclaimed 
                        in writing, at the time of the creation or 
                        organization of the health savings account, 
                        including by execution of a trust described in 
                        subsection (d)(1) through a governing 
                        instrument that includes such a disclaimer, or 
                        by acceptance of an amendment to such a trust 
                        that includes such a disclaimer.''.
    (i) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 406. PURCHASE OF HEALTH INSURANCE FROM HSA ACCOUNT.

    (a) In General.--Paragraph (2) of section 223(d) of the Internal 
Revenue Code of 1986 (defining qualified medical expenses) is amended--
            (1) by striking subparagraphs (B) and (C), and
            (2) by inserting `` and including payment for insurance)'' 
        after ``section 213(d)''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 407. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE 
              ESTABLISHMENT OF ACCOUNT.

    (a) In General.--Paragraph (2) of section 223(d) of the Internal 
Revenue Code of 1986, as amended by this title, is amended by adding at 
the end the following new subparagraph:
                    ``(B) Certain medical expenses incurred before 
                establishment of account treated as qualified.--An 
                expense shall not fail to be treated as a qualified 
                medical expense solely because such expense was 
                incurred before the establishment of the health savings 
                account if such expense was incurred--
                            ``(i) during either--
                                    ``(I) the taxable year in which the 
                                health savings account was established, 
                                or
                                    ``(II) the preceding taxable year 
                                in the case of a health savings account 
                                established after the taxable year in 
                                which such expense was incurred but 
                                before the time prescribed by law for 
                                filing the return for such taxable year 
                                (not including extensions thereof), and
                            ``(ii) for medical care of an individual 
                        during a period that such individual was 
                        covered by a high deductible health plan and 
                        met the requirements of subsection 
                        (c)(1)(A)(ii) (after application of subsection 
                        (c)(1)(B)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to health savings accounts established during taxable years beginning 
after the date of the enactment of this Act.

SEC. 408. PREVENTIVE CARE PRESCRIPTION DRUG CLARIFICATION.

    (a) Clarify Use of Drugs in Preventive Care.--Subparagraph (C) of 
section 223(c)(2) of the Internal Revenue Code of 1986 is amended by 
adding at the end the following: ``Preventive care shall include 
prescription and over-the-counter drugs and medicines which have the 
primary purpose of preventing the onset of, further deterioration from, 
or complications associated with chronic conditions, illnesses, or 
diseases.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 409. QUALIFIED MEDICAL EXPENSES.

    (a) Certain Exercise Equipment and Physical Fitness Programs 
Treated as Medical Care.--
            (1) In general.--Subsection (d) of section 213 of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following new paragraph:
            ``(12) Exercise equipment and physical fitness programs.--
                    ``(A) In general.--The term `medical care' shall 
                include amounts paid--
                            ``(i) to purchase or use equipment used in 
                        a program (including a self-directed program) 
                        of physical exercise,
                            ``(ii) to participate, or receive 
                        instruction, in a program of physical exercise, 
                        and
                            ``(iii) for membership dues in a fitness 
                        club the primary purpose of which is to provide 
                        access to equipment and facilities for physical 
                        exercise.
                    ``(B) Limitation.--Amounts treated as medical care 
                under subparagraph (A) shall not exceed $1,000 with 
                respect to any individual for any taxable year.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.
    (b) Certain Nutritional and Dietary Supplements To Be Treated as 
Medical Care.--
            (1) In general.--Subsection (d) of section 213 of such 
        Code, as amended by subsection (a), is amended by adding at the 
        end the following new paragraph:
            ``(13) Nutritional and dietary supplements.--
                    ``(A) In general.--The term `medical care' shall 
                include amounts paid to purchase herbs, vitamins, 
                minerals, homeopathic remedies, meal replacement 
                products, and other dietary and nutritional 
                supplements.
                    ``(B) Limitation.--Amounts treated as medical care 
                under subparagraph (A) shall not exceed $1,000 with 
                respect to any individual for any taxable year.
                    ``(C) Meal replacement product.--For purposes of 
                this paragraph, the term `meal replacement product' 
                means any product that--
                            ``(i) is permitted to bear labeling making 
                        a claim described in section 403(r)(3) of the 
                        Federal Food, Drug, and Cosmetic Act, and
                            ``(ii) is permitted to claim under such 
                        section that such product is low in fat and is 
                        a good source of protein, fiber, and multiple 
                        essential vitamins and minerals.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to taxable years beginning after the date of the 
        enactment of this Act.

                   TITLE V--MEDICAL LIABILITY REFORM

                     Subtitle A--Medical Liability

SEC. 501. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

    The time for the commencement of a health care lawsuit shall be 3 
years after the date of manifestation of injury or 1 year after the 
claimant discovers, or through the use of reasonable diligence should 
have discovered, the injury, whichever occurs first. In no event shall 
the time for commencement of a health care lawsuit exceed 3 years after 
the date of manifestation of injury unless tolled for any of the 
following--
            (1) upon proof of fraud;
            (2) intentional concealment; or
            (3) the presence of a foreign body, which has no 
        therapeutic or diagnostic purpose or effect, in the person of 
        the injured person
    
Actions by a minor shall be commenced within 3 years from the date of 
the alleged manifestation of injury except that actions by a minor 
under the full age of 6 years shall be commenced within 3 years of 
manifestation of injury or prior to the minor's 8th birthday, whichever 
provides a longer period. Such time limitation shall be tolled for 
minors for any period during which a parent or guardian and a health 
care provider or health care organization have committed fraud or 
collusion in the failure to bring an action on behalf of the injured 
minor

SEC. 502. COMPENSATING PATIENT INJURY.

    (a) Unlimited Amount of Damages for Actual Economic Losses in 
Health Care Lawsuits.--In any health care lawsuit, nothing in this 
subtitle shall limit a claimant's recovery of the full amount of the 
available economic damages, notwithstanding the limitation in 
subsection (b).
    (b) Additional Noneconomic Damages.--In any health care lawsuit, 
the amount of noneconomic damages, if available, may be as much as 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of separate claims or actions brought with 
respect to the same injury.
    (c) No Discount of Award for Noneconomic Damages.--For purposes of 
applying the limitation in subsection (b), future noneconomic damages 
shall not be discounted to present value. The jury shall not be 
informed about the maximum award for noneconomic damages. An award for 
noneconomic damages in excess of $250,000 shall be reduced either 
before the entry of judgment, or by amendment of the judgment after 
entry of judgment, and such reduction shall be made before accounting 
for any other reduction in damages required by law. If separate awards 
are rendered for past and future noneconomic damages and the combined 
awards exceed $250,000, the future noneconomic damages shall be reduced 
first.
    (d) Fair Share Rule.--In any health care lawsuit, each party shall 
be liable for that party's several share of any damages only and not 
for the share of any other person. Each party shall be liable only for 
the amount of damages allocated to such party in direct proportion to 
such party's percentage of responsibility. Whenever a judgment of 
liability is rendered as to any party, a separate judgment shall be 
rendered against each such party for the amount allocated to such 
party. For purposes of this section, the trier of fact shall determine 
the proportion of responsibility of each party for the claimant's harm.

SEC. 503. MAXIMIZING PATIENT RECOVERY.

    (a) Court Supervision of Share of Damages Actually Paid to 
Claimants.--In any health care lawsuit, the court shall supervise the 
arrangements for payment of damages to protect against conflicts of 
interest that may have the effect of reducing the amount of damages 
awarded that are actually paid to claimants. In particular, in any 
health care lawsuit in which the attorney for a party claims a 
financial stake in the outcome by virtue of a contingent fee, the court 
shall have the power to restrict the payment of a claimant's damage 
recovery to such attorney, and to redirect such damages to the claimant 
based upon the interests of justice and principles of equity. In no 
event shall the total of all contingent fees for representing all 
claimants in a health care lawsuit exceed the following limits:
            (1) 40 percent of the first $50,000 recovered by the 
        claimant(s).
            (2) 33\1/3\ percent of the next $50,000 recovered by the 
        claimant(s).
            (3) 25 percent of the next $500,000 recovered by the 
        claimant(s).
            (4) 15 percent of any amount by which the recovery by the 
        claimant(s) is in excess of $600,000.
    (b) Applicability.--The limitations in this section shall apply 
whether the recovery is by judgment, settlement, mediation, 
arbitration, or any other form of alternative dispute resolution. In a 
health care lawsuit involving a minor or incompetent person, a court 
retains the authority to authorize or approve a fee that is less than 
the maximum permitted under this section. The requirement for court 
supervision in the first two sentences of subsection (a) applies only 
in civil actions.

SEC. 504. ADDITIONAL HEALTH BENEFITS.

    In any health care lawsuit involving injury or wrongful death, any 
party may introduce evidence of collateral source benefits. If a party 
elects to introduce such evidence, any opposing party may introduce 
evidence of any amount paid or contributed or reasonably likely to be 
paid or contributed in the future by or on behalf of the opposing party 
to secure the right to such collateral source benefits. No provider of 
collateral source benefits shall recover any amount against the 
claimant or receive any lien or credit against the claimant's recovery 
or be equitably or legally subrogated to the right of the claimant in a 
health care lawsuit involving injury or wrongful death. This section 
shall apply to any health care lawsuit that is settled as well as a 
health care lawsuit that is resolved by a fact finder. This section 
shall not apply to section 1862(b) (42 U.S.C. 1395y(b)) or section 
1902(a)(25) (42 U.S.C. 1396a(a)(25)) of the Social Security Act.

SEC. 505. PUNITIVE DAMAGES.

    (a) In General.--Punitive damages may, if otherwise permitted by 
applicable State or Federal law, be awarded against any person in a 
health care lawsuit only if it is proven by clear and convincing 
evidence that such person acted with malicious intent to injure the 
claimant, or that such person deliberately failed to avoid unnecessary 
injury that such person knew the claimant was substantially certain to 
suffer. In any health care lawsuit where no judgment for compensatory 
damages is rendered against such person, no punitive damages may be 
awarded with respect to the claim in such lawsuit. No demand for 
punitive damages shall be included in a health care lawsuit as 
initially filed. A court may allow a claimant to file an amended 
pleading for punitive damages only upon a motion by the claimant and 
after a finding by the court, upon review of supporting and opposing 
affidavits or after a hearing, after weighing the evidence, that the 
claimant has established by a substantial probability that the claimant 
will prevail on the claim for punitive damages. At the request of any 
party in a health care lawsuit, the trier of fact shall consider in a 
separate proceeding--
            (1) whether punitive damages are to be awarded and the 
        amount of such award; and
            (2) the amount of punitive damages following a 
        determination of punitive liability.
If a separate proceeding is requested, evidence relevant only to the 
claim for punitive damages, as determined by applicable State law, 
shall be inadmissible in any proceeding to determine whether 
compensatory damages are to be awarded.
    (b) Determining Amount of Punitive Damages.--
            (1) Factors considered.--In determining the amount of 
        punitive damages, if awarded, in a health care lawsuit, the 
        trier of fact shall consider only the following--
                    (A) the severity of the harm caused by the conduct 
                of such party;
                    (B) the duration of the conduct or any concealment 
                of it by such party;
                    (C) the profitability of the conduct to such party;
                    (D) the number of products sold or medical 
                procedures rendered for compensation, as the case may 
                be, by such party, of the kind causing the harm 
                complained of by the claimant;
                    (E) any criminal penalties imposed on such party, 
                as a result of the conduct complained of by the 
                claimant; and
                    (F) the amount of any civil fines assessed against 
                such party as a result of the conduct complained of by 
                the claimant.
            (2) Maximum award.--The amount of punitive damages, if 
        awarded, in a health care lawsuit may be as much as $250,000 or 
        as much as two times the amount of economic damages awarded, 
        whichever is greater. The jury shall not be informed of this 
        limitation.
    (c) No Punitive Damages for Products That Comply With FDA 
Standards.--
            (1) In general.--
                    (A) No punitive damages may be awarded against the 
                manufacturer or distributor of a medical product, or a 
                supplier of any component or raw material of such 
                medical product, based on a claim that such product 
                caused the claimant's harm where--
                            (i)(I) such medical product was subject to 
                        premarket approval, clearance, or licensure by 
                        the Food and Drug Administration with respect 
                        to the safety of the formulation or performance 
                        of the aspect of such medical product which 
                        caused the claimant's harm or the adequacy of 
                        the packaging or labeling of such medical 
                        product; and
                            (II) such medical product was so approved, 
                        cleared, or licensed; or
                            (ii) such medical product is generally 
                        recognized among qualified experts as safe and 
                        effective pursuant to conditions established by 
                        the Food and Drug Administration and applicable 
                        Food and Drug Administration regulations, 
                        including without limitation those related to 
                        packaging and labeling, unless the Food and 
                        Drug Administration has determined that such 
                        medical product was not manufactured or 
                        distributed in substantial compliance with 
                        applicable Food and Drug Administration 
                        statutes and regulations.
                    (B) Rule of construction.--Subparagraph (A) may not 
                be construed as establishing the obligation of the Food 
                and Drug Administration to demonstrate affirmatively 
                that a manufacturer, distributor, or supplier referred 
                to in such subparagraph meets any of the conditions 
                described in such subparagraph.
            (2) Liability of health care providers.--A health care 
        provider who prescribes, or who dispenses pursuant to a 
        prescription, a medical product approved, licensed, or cleared 
        by the Food and Drug Administration shall not be named as a 
        party to a product liability lawsuit involving such product and 
        shall not be liable to a claimant in a class action lawsuit 
        against the manufacturer, distributor, or seller of such 
        product. Nothing in this paragraph prevents a court from 
        consolidating cases involving health care providers and cases 
        involving products liability claims against the manufacturer, 
        distributor, or product seller of such medical product.
            (3) Packaging.--In a health care lawsuit for harm which is 
        alleged to relate to the adequacy of the packaging or labeling 
        of a drug which is required to have tamper-resistant packaging 
        under regulations of the Secretary of Health and Human Services 
        (including labeling regulations related to such packaging), the 
        manufacturer or product seller of the drug shall not be held 
        liable for punitive damages unless such packaging or labeling 
        is found by the trier of fact by clear and convincing evidence 
        to be substantially out of compliance with such regulations.
            (4) Exception.--Paragraph (1) shall not apply in any health 
        care lawsuit in which--
                    (A) a person, before or after premarket approval, 
                clearance, or licensure of such medical product, 
                knowingly misrepresented to or withheld from the Food 
                and Drug Administration information that is required to 
                be submitted under the Federal Food, Drug, and Cosmetic 
                Act (21 U.S.C. 301 et seq.) or section 351 of the 
                Public Health Service Act (42 U.S.C. 262) that is 
                material and is causally related to the harm which the 
                claimant allegedly suffered; or
                    (B) a person made an illegal payment to an official 
                of the Food and Drug Administration for the purpose of 
                either securing or maintaining approval, clearance, or 
                licensure of such medical product.

SEC. 506. AUTHORIZATION OF PAYMENT OF FUTURE DAMAGES TO CLAIMANTS IN 
              HEALTH CARE LAWSUITS.

    (a) In General.--In any health care lawsuit, if an award of future 
damages, without reduction to present value, equaling or exceeding 
$50,000 is made against a party with sufficient insurance or other 
assets to fund a periodic payment of such a judgment, the court shall, 
at the request of any party, enter a judgment ordering that the future 
damages be paid by periodic payments. In any health care lawsuit, the 
court may be guided by the Uniform Periodic Payment of Judgments Act 
promulgated by the National Conference of Commissioners on Uniform 
State Laws.
    (b) Applicability.--This section applies to all actions which have 
not been first set for trial or retrial before the effective date of 
this subtitle.

SEC. 507. DEFINITIONS.

    In this subtitle:
            (1) Alternative dispute resolution system; adr.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of health care lawsuits 
        in a manner other than through a civil action brought in a 
        State or Federal court.
            (2) Claimant.--The term ``claimant'' means any person who 
        brings a health care lawsuit, including a person who asserts or 
        claims a right to legal or equitable contribution, indemnity, 
        or subrogation, arising out of a health care liability claim or 
        action, and any person on whose behalf such a claim is asserted 
        or such an action is brought, whether deceased, incompetent, or 
        a minor.
            (3) Collateral source benefits.--The term ``collateral 
        source benefits'' means any amount paid or reasonably likely to 
        be paid in the future to or on behalf of the claimant, or any 
        service, product, or other benefit provided or reasonably 
        likely to be provided in the future to or on behalf of the 
        claimant, as a result of the injury or wrongful death, pursuant 
        to--
                    (A) any State or Federal health, sickness, income-
                disability, accident, or workers' compensation law;
                    (B) any health, sickness, income-disability, or 
                accident insurance that provides health benefits or 
                income-disability coverage;
                    (C) any contract or agreement of any group, 
                organization, partnership, or corporation to provide, 
                pay for, or reimburse the cost of medical, hospital, 
                dental, or income-disability benefits; and
                    (D) any other publicly or privately funded program.
            (4) Compensatory damages.--The term ``compensatory 
        damages'' means objectively verifiable monetary losses incurred 
        as a result of the provision of, use of, or payment for (or 
        failure to provide, use, or pay for) health care services or 
        medical products, such as past and future medical expenses, 
        loss of past and future earnings, cost of obtaining domestic 
        services, loss of employment, and loss of business or 
        employment opportunities, damages for physical and emotional 
        pain, suffering, inconvenience, physical impairment, mental 
        anguish, disfigurement, loss of enjoyment of life, loss of 
        society and companionship, loss of consortium (other than loss 
        of domestic service), hedonic damages, injury to reputation, 
        and all other nonpecuniary losses of any kind or nature. The 
        term ``compensatory damages'' includes economic damages and 
        noneconomic damages, as such terms are defined in this section.
            (5) Contingent fee.--The term ``contingent fee'' includes 
        all compensation to any person or persons which is payable only 
        if a recovery is effected on behalf of one or more claimants.
            (6) Economic damages.--The term ``economic damages'' means 
        objectively verifiable monetary losses incurred as a result of 
        the provision of, use of, or payment for (or failure to 
        provide, use, or pay for) health care services or medical 
        products, such as past and future medical expenses, loss of 
        past and future earnings, cost of obtaining domestic services, 
        loss of employment, and loss of business or employment 
        opportunities.
            (7) Health care lawsuit.--The term ``health care lawsuit'' 
        means any health care liability claim concerning the provision 
        of health care goods or services or any medical product 
        affecting interstate commerce, or any health care liability 
        action concerning the provision of health care goods or 
        services or any medical product affecting interstate commerce, 
        brought in a State or Federal court or pursuant to an 
        alternative dispute resolution system, against a health care 
        provider, a health care organization, or the manufacturer, 
        distributor, supplier, marketer, promoter, or seller of a 
        medical product, regardless of the theory of liability on which 
        the claim is based, or the number of claimants, plaintiffs, 
        defendants, or other parties, or the number of claims or causes 
        of action, in which the claimant alleges a health care 
        liability claim. Such term does not include a claim or action 
        which is based on criminal liability; which seeks civil fines 
        or penalties paid to Federal, State, or local government; or 
        which is grounded in antitrust.
            (8) Health care liability action.--The term ``health care 
        liability action'' means a civil action brought in a State or 
        Federal court or pursuant to an alternative dispute resolution 
        system, against a health care provider, a health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, regardless 
        of the theory of liability on which the claim is based, or the 
        number of plaintiffs, defendants, or other parties, or the 
        number of causes of action, in which the claimant alleges a 
        health care liability claim.
            (9) Health care liability claim.--The term ``health care 
        liability claim'' means a demand by any person, whether or not 
        pursuant to ADR, against a health care provider, health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, including, 
        but not limited to, third-party claims, cross-claims, counter-
        claims, or contribution claims, which are based upon the 
        provision of, use of, or payment for (or the failure to 
        provide, use, or pay for) health care services or medical 
        products, regardless of the theory of liability on which the 
        claim is based, or the number of plaintiffs, defendants, or 
        other parties, or the number of causes of action.
            (10) Health care organization.--The term ``health care 
        organization'' means any person or entity which is obligated to 
        provide or pay for health benefits under any health plan, 
        including any person or entity acting under a contract or 
        arrangement with a health care organization to provide or 
        administer any health benefit.
            (11) Health care provider.--The term ``health care 
        provider'' means any person or entity required by State or 
        Federal laws or regulations to be licensed, registered, or 
        certified to provide health care services, and being either so 
        licensed, registered, or certified, or exempted from such 
        requirement by other statute or regulation.
            (12) Health care goods or services.--The term ``health care 
        goods or services'' means any goods or services provided by a 
        health care organization, provider, or by any individual 
        working under the supervision of a health care provider, that 
        relates to the diagnosis, prevention, or treatment of any human 
        disease or impairment, or the assessment or care of the health 
        of human beings.
            (13) Malicious intent to injure.--The term ``malicious 
        intent to injure'' means intentionally causing or attempting to 
        cause physical injury other than providing health care goods or 
        services.
            (14) Medical product.--The term ``medical product'' means a 
        drug, device, or biological product intended for humans, and 
        the terms ``drug'', ``device'', and ``biological product'' have 
        the meanings given such terms in sections 201(g)(1) and 201(h) 
        of the Federal Food, Drug and Cosmetic Act (21 U.S.C. 321(g)(1) 
        and (h)) and section 351(a) of the Public Health Service Act 
        (42 U.S.C. 262(a)), respectively, including any component or 
        raw material used therein, but excluding health care services.
            (15) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages for physical and emotional pain, suffering, 
        inconvenience, physical impairment, mental anguish, 
        disfigurement, loss of enjoyment of life, loss of society and 
        companionship, loss of consortium (other than loss of domestic 
        service), hedonic damages, injury to reputation, and all other 
        nonpecuniary losses of any kind or nature.
            (16) Punitive damages.--The term ``punitive damages'' means 
        damages awarded, for the purpose of punishment or deterrence, 
        and not solely for compensatory purposes, against a health care 
        provider, health care organization, or a manufacturer, 
        distributor, or supplier of a medical product. Punitive damages 
        are neither economic nor noneconomic damages.
            (17) Recovery.--The term ``recovery'' means the net sum 
        recovered after deducting any disbursements or costs incurred 
        in connection with prosecution or settlement of the claim, 
        including all costs paid or advanced by any person. Costs of 
        health care incurred by the plaintiff and the attorneys' office 
        overhead costs or charges for legal services are not deductible 
        disbursements or costs for such purpose.
            (18) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, the Northern 
        Mariana Islands, the Trust Territory of the Pacific Islands, 
        and any other territory or possession of the United States, or 
        any political subdivision thereof.

SEC. 508. EFFECT ON OTHER LAWS.

    (a) Vaccine Injury.--
            (1) To the extent that title XXI of the Public Health 
        Service Act (42 U.S.C. 300aa-1 et seq.) establishes a Federal 
        rule of law applicable to a civil action brought for a vaccine-
        related injury or death--
                    (A) this subtitle does not affect the application 
                of the rule of law to such an action; and
                    (B) any rule of law prescribed by this subtitle in 
                conflict with a rule of law of such title XXI shall not 
                apply to such action.
            (2) If there is an aspect of a civil action brought for a 
        vaccine-related injury or death to which a Federal rule of law 
        under title XXI of the Public Health Service Act (42 U.S.C. 
        300aa-1 et seq.) does not apply, then this subtitle or 
        otherwise applicable law (as determined under this subtitle) 
        will apply to such aspect of such action.
    (b) Other Federal Law.--Except as provided in this section, nothing 
in this subtitle shall be deemed to affect any defense available to a 
defendant in a health care lawsuit or action under any other provision 
of Federal law.

SEC. 509. STATE FLEXIBILITY AND PROTECTION OF STATES' RIGHTS.

    (a) Health Care Lawsuits.--The provisions governing health care 
lawsuits set forth in this subtitle preempt, subject to subsections (b) 
and (c), State law to the extent that State law prevents the 
application of any provisions of law established by or under this 
subtitle. The provisions governing health care lawsuits set forth in 
this subtitle supersede chapter 171 of title 28, United States Code, to 
the extent that such chapter--
            (1) provides for a greater amount of damages or contingent 
        fees, a longer period in which a health care lawsuit may be 
        commenced, or a reduced applicability or scope of periodic 
        payment of future damages, than provided in this subtitle; or
            (2) prohibits the introduction of evidence regarding 
        collateral source benefits, or mandates or permits subrogation 
        or a lien on collateral source benefits.
    (b) Protection of States' Rights and Other Laws.--(1) Any issue 
that is not governed by any provision of law established by or under 
this subtitle (including State standards of negligence) shall be 
governed by otherwise applicable State or Federal law.
    (2) This subtitle shall not preempt or supersede any State or 
Federal law that imposes greater procedural or substantive protections 
for health care providers and health care organizations from liability, 
loss, or damages than those provided by this subtitle or create a cause 
of action.
    (c) State Flexibility.--No provision of this subtitle shall be 
construed to preempt--
            (1) any State law (whether effective before, on, or after 
        the date of the enactment of this Act) that specifies a 
        particular monetary amount of compensatory or punitive damages 
        (or the total amount of damages) that may be awarded in a 
        health care lawsuit, regardless of whether such monetary amount 
        is greater or lesser than is provided for under this subtitle, 
        notwithstanding section 502(a); or
            (2) any defense available to a party in a health care 
        lawsuit under any other provision of State or Federal law.

SEC. 510. APPLICABILITY; EFFECTIVE DATE.

    This subtitle shall apply to any health care lawsuit brought in a 
Federal or State court, or subject to an alternative dispute resolution 
system, that is initiated on or after the date of the enactment of this 
Act, except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of this Act shall be 
governed by the applicable statute of limitations provisions in effect 
at the time the injury occurred.

SEC. 511. SENSE OF CONGRESS.

    It is the sense of Congress that a health insurer should be liable 
for damages for harm caused when it makes a decision as to what care is 
medically necessary and appropriate.

Subtitle B--Liability Protection for Community Health Center Volunteers

SEC. 521. HEALTH CENTERS UNDER PUBLIC HEALTH SERVICE ACT; LIABILITY 
              PROTECTIONS FOR VOLUNTEER PRACTITIONERS.

    (a) In General.--Section 224 of the Public Health Service Act (42 
U.S.C. 233) is amended--
            (1) in subsection (g)(1)(A)--
                    (A) in the first sentence, by striking ``or 
                employee'' and inserting ``employee, or (subject to 
                subsection (k)(4)) volunteer practitioner''; and
                    (B) in the second sentence, by inserting ``and 
                subsection (k)(4)'' after ``subject to paragraph (5)''; 
                and
            (2) in each of subsections (g), (i), (j), (k), (l), and 
        (m)--
                    (A) by striking the term ``employee, or 
                contractor'' each place such term appears and inserting 
                ``employee, volunteer practitioner, or contractor'';
                    (B) by striking the term ``employee, and 
                contractor'' each place such term appears and inserting 
                ``employee, volunteer practitioner, and contractor'';
                    (C) by striking the term ``employee, or any 
                contractor'' each place such term appears and inserting 
                ``employee, volunteer practitioner, or contractor''; 
                and
                    (D) by striking the term ``employees, or 
                contractors'' each place such term appears and 
                inserting ``employees, volunteer practitioners, or 
                contractors''.
    (b) Applicability; Definition.--Section 224(k) of the Public Health 
Service Act (42 U.S.C. 233(k)) is amended by adding at the end the 
following paragraph:
    ``(4)(A) Subsections (g) through (m) apply with respect to 
volunteer practitioners beginning with the first fiscal year for which 
an appropriations Act provides that amounts in the fund under paragraph 
(2) are available with respect to such practitioners.
    ``(B) For purposes of subsections (g) through (m), the term 
`volunteer practitioner' means a practitioner who, with respect to an 
entity described in subsection (g)(4), meets the following conditions:
            ``(i) The practitioner is a licensed physician or a 
        licensed clinical psychologist.
            ``(ii) At the request of such entity, the practitioner 
        provides services to patients of the entity, at a site at which 
        the entity operates or at a site designated by the entity. The 
        weekly number of hours of services provided to the patients by 
        the practitioner is not a factor with respect to meeting 
        conditions under this subparagraph.
            ``(iii) The practitioner does not for the provision of such 
        services receive any compensation from such patients, from the 
        entity, or from third-party payors (including reimbursement 
        under any insurance policy or health plan, or under any Federal 
        or State health benefits program).''.

                        TITLE VI--MISCELLANEOUS

                  Subtitle A--Fighting Fraud and Abuse

SEC. 601. PROVIDE ADEQUATE FUNDING TO HHS OIG AND HCFAC.

    (a) HCFAC Funding.--Section 1817(k)(3)(A) of the Social Security 
Act (42 U.S.C. 1395i(k)(3)(A)) is amended--
            (1) in clause (i)--
                    (A) in subclause (IV), by striking ``2009, and 
                2010'' and inserting ``and 2009''; and
                    (B) by amending subclause (V) to read as follows:
                                    ``(V) for each fiscal year after 
                                fiscal year 2009, $300,000,000.''; and
            (2) in clause (ii)--
                    (A) in subclause (IX), by striking ``2009, and 
                2010'' and inserting ``and 2009''; and
                    (B) in subclause (X), by striking ``2010'' and 
                inserting ``2009'' and by inserting before the period 
                at the end the following: ``, plus the amount by which 
                the amount made available under clause (i)(V) for 
                fiscal year 2010 exceeds the amount made available 
                under clause (i)(IV) for 2009''.
    (b) OIG Funding.--There are authorized to be appropriated for each 
of fiscal years 2010 through 2019 $100,000,000 for the Office of the 
Inspector General of the Department of Health and Human Services for 
fraud prevention activities under the Medicare and Medicaid programs.

SEC. 602. INCREASED CIVIL MONEY PENALTIES AND CRIMINAL FINES FOR 
              MEDICARE FRAUD AND ABUSE.

    (a) Increased Civil Money Penalties.--Section 1128A of the Social 
Security Act (42 U.S.C. 1320a-7a) is amended--
            (1) in subsection (a), in the flush matter following 
        paragraph (7)--
                    (A) by striking ``$10,000'' each place it appears 
                and inserting ``$20,000'';
                    (B) by striking ``$15,000'' and inserting 
                ``$30,000''; and
                    (C) by striking ``$50,000'' and inserting 
                ``$100,000''; and
            (2) in subsection (b)--
                    (A) in paragraph (1), in the flush matter following 
                subparagraph (B), by striking ``$2,000'' and inserting 
                ``$4,000'';
                    (B) in paragraph (2), by striking ``$2,000'' and 
                inserting ``$4,000''; and
                    (C) in paragraph (3)(A)(i), by striking ``$5,000'' 
                and inserting ``$10,000''.
    (b) Increased Criminal Fines.--Section 1128B of the Social Security 
Act (42 U.S.C. 1320a-7b) is amended--
            (1) in subsection (a), in the flush matter following 
        paragraph (6)--
                    (A) by striking ``$25,000'' and inserting 
                ``$100,000''; and
                    (B) by striking ``$10,000'' and inserting 
                ``$20,000'';
            (2) in subsection (b)--
                    (A) in paragraph (1), in the flush matter following 
                subparagraph (B), by striking ``$25,000'' and inserting 
                ``$100,000''; and
                    (B) in paragraph (2), in the flush matter following 
                subparagraph (B), by striking ``$25,000'' and inserting 
                ``$100,000'';
            (3) in subsection (c), by striking ``$25,000'' and 
        inserting ``$100,000'';
            (4) in subsection (d), in the second flush matter following 
        subparagraph (B), by striking ``$25,000'' and inserting 
        ``$100,000''; and
            (5) in subsection (e), by striking ``$2,000'' and inserting 
        ``$4,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to civil money penalties and fines imposed for actions taken on 
or after the date of enactment of this Act.

SEC. 603. INCREASED SENTENCES FOR FELONIES INVOLVING MEDICARE FRAUD AND 
              ABUSE.

    (a) False Statements and Representations.--Section 1128B(a) of the 
Social Security Act (42 U.S.C. 1320a-7b(a)) is amended, in clause (i) 
of the flush matter following paragraph (6), by striking ``not more 
than 5 years'' and inserting ``not more than 10 years''.
    (b) Anti-Kickback.--Section 1128B(b) of the Social Security Act (42 
U.S.C. 1320a-7b(b)) is amended--
            (1) in paragraph (1), in the flush matter following 
        subparagraph (B), by striking ``not more than 5 years'' and 
        inserting ``not more than 10 years''; and
            (2) in paragraph (2), in the flush matter following 
        subparagraph (B), by striking ``not more than 5 years'' and 
        inserting ``not more than 10 years''.
    (c) False Statement or Representation With Respect to Conditions or 
Operations of Facilities.--Section 1128B(c) of the Social Security Act 
(42 U.S.C. 1320a-7b(c)) is amended by striking ``not more than 5 
years'' and inserting ``not more than 10 years''.
    (d) Excess Charges.--Section 1128B(d) of the Social Security Act 
(42 U.S.C. 1320a-7b(d)) is amended, in the second flush matter 
following subparagraph (B), by striking ``not more than 5 years'' and 
inserting ``not more than 10 years''.
    (e) Effective Date.--The amendments made by this section shall 
apply to criminal penalties imposed for actions taken on or after the 
date of enactment of this Act.

SEC. 604. ILLEGAL DISTRIBUTION OF A MEDICARE OR MEDICAID BENEFICIARY 
              IDENTIFICATION OR PROVIDER NUMBER.

    Section 1128B(b) of the Social Security Act (42 U.S.C. 1320a-
7b(b)), as amended by section 4(b), is amended by adding at the end the 
following:
    ``(5) Whoever knowingly, intentionally, and with the intent to 
defraud purchases, sells or distributes, or arranges for the purchase, 
sale, or distribution of two or more Medicare or Medicaid beneficiary 
identification numbers or provider numbers shall be imprisoned for not 
more than three years or fined under title 18, United States Code (or, 
if greater, an amount equal to the monetary loss to the Federal and any 
State government as a result of such acts), or both.''.

SEC. 605. USE OF TECHNOLOGY FOR REAL-TIME DATA REVIEW.

    Title XVIII of the Social Security Act is amended by adding at the 
end the following new section:

             ``use of technology for real-time data review

    ``Sec. 1899.  (a) In General.--The Secretary shall establish 
procedures for the use of technology (including front-end, pre-payment 
technology similar to that used by hedge funds, investment funds, and 
banks) to provide real-time data analysis of claims for payment under 
this title to identify and investigate unusual billing or order 
practices under this title that could indicate fraud or abuse.
    ``(b) Competitive Bidding.--The procedures established under 
subsection (a) shall ensure that the implementation of such technology 
is conducted through a competitive bidding process.''.

               Subtitle B--State Transparency Plan Portal

SEC. 611. PROVIDING INFORMATION ON HEALTH COVERAGE OPTIONS AND HEALTH 
              CARE PROVIDERS.

    (a) State-Based Portal.--A State (by itself or jointly with other 
States) may contract with a private entity to establish a Health Plan 
and Provider Portal website (referred to in this section as a ``plan 
portal'') for the purposes of providing standardized information--
            (1) on health insurance plans that have been certified to 
        be available for purchase in that State; and
            (2) on price and quality information on health care 
        providers (including physicians, hospitals, and other health 
        care institutions).
    (b) Pilot Program.--
            (1) In general.--Not later than 90 days after the date of 
        the enactment of this Act the Secretary of Health and Human 
        Services shall work with States to establish no later than 
        2011, consistent with this title, a website that will serve as 
        a pilot program for a national portal for information 
        structured in a manner so individuals may directly link to the 
        State plan portal for the State in which they reside.
            (2) Contracts with state.--The Secretary shall enter into 
        contracts with States, in a number and distribution determined 
        by the Secretary, to develop State plan portals that follow the 
        applicable standards and regulations under this section.
            (3) Common standards for plan portals.--
                    (A) In general.--In connection with such website, 
                the Secretary shall establish standards for 
                interoperability and consistency for State plan portals 
                so that individuals can access and view information in 
                a similar manner on plan portals of different States. 
                Such standards shall include standard definitions for 
                health insurance plan benefits so that individuals can 
                accurately compare health insurance plans within such 
                portals and standards for the inclusion of information 
                described in subsection (c).
                    (B) Consultation.--The Secretary shall consult with 
                a group consisting of a balanced representation of the 
                critical stakeholders (including States, health 
                insurance issuers, the National Association of 
                Insurance Commissioners, qualified health care 
                provider-based entities (including physicians, 
                hospitals, and other health care institutions), and a 
                standards development organization) to develop such 
                standards.
                    (C) Issuance.--
                            (i) In general.--Not later than 6 months 
                        after the date of the enactment of this Act, 
                        the Secretary shall issue, by regulation, after 
                        notice and opportunity for public comment, 
                        standards that are consistent with the 
                        recommendations made by the group under 
                        subparagraph (B).
                            (ii) Dissemination.--The Secretary shall 
                        broadly disseminate the standards so issued.
                    (D) Review.--One year after the date of 
                establishment of the pilot program under this 
                subsection, the Secretary, in consultation with 
                stakeholder group described in subparagraph (B), shall 
                review the standards established and make such changes 
                in such standards as may be appropriate.
            (4) Authorization of appropriations.--There are authorized 
        to be appropriated to the Secretary such amounts as may be 
        necessary for--
                    (A) the development and operation of the national 
                website under this subsection; and
                    (B) contracts with States under paragraph (2) to 
                assist in the development and initial operation of plan 
                portals in accordance with standards established under 
                paragraph (3) and other applicable provisions of this 
                section.
    (c) Information in Plan Portals.--The standards for plan portals 
under subsection (b)(3) shall include the following:
            (1) Health insurance information.--Each plan portal shall 
        meet the following requirements with respect to information on 
        health insurance plans:
                    (A) The plan portal shall present complete 
                information on the costs and benefits of health 
                insurance plans (including information on monthly 
                premium, copayments, deductibles, and covered benefits) 
                in a uniform manner that--
                            (i) uses the standard definitions developed 
                        under subsection (b)(3); and
                            (ii) is designed to allow consumers to 
                        easily compare such plans.
                    (B) The plan portal shall be available on the 
                Internet and accessible to all individuals in the 
                United States.
                    (C) The plan portal shall allow consumers to search 
                and sort data on the health insurance plans in the plan 
                portal on criteria such as coverage of specific 
                benefits (such as coverage of disease management 
                services or pediatric care services), as well as data 
                available respecting quality of plans.
                    (D) The plan portal shall meet all relevant State 
                laws and regulations, including laws and regulations 
                related to the marketing of insurance products.
                    (E) Notwithstanding subsection (d)(1), the plan 
                portal shall provide information to individuals who are 
                eligible for the Medicaid program under title XIX of 
                the Social Security Act or State Children's Health 
                Insurance Program under title XXI of such Act by 
                including information on options, eligibility, and how 
                to enroll through providing a link to a website 
                maintained with respect to such State programs.
                    (F) The plan portal shall provide support to 
                individuals who are eligible for tax credits and 
                deductions under the amendments made by this Act to 
                enhance such individual's ability to access such 
                credits and deductions.
                    (G) The plan portal shall allow consumers to access 
                quality data on providers as made available through a 
                website once that data is available.
            (2) Provider information.--Each plan portal shall meet the 
        following requirements with respect to information on health 
        care providers:
                    (A) Identifying and licensure information.
                    (B) Self-pay prices charged, including variation in 
                such prices.
        For purposes of subparagraph (B), the term ``self-pay price'' 
        means the price charged by a provider to individuals for items 
        or services where the price is not established or negotiated 
        through a health care program or third party.
            (3) Tax credit and deduction information.--Each plan portal 
        shall also include information on tax credits and deductions 
        that may be available for purpose of qualified health plans.
            (4) Inclusion of quality information.--The Secretary, after 
        collaboration with States and health care providers (including 
        practicing physicians, hospitals, and other health care 
        institutions), shall submit to Congress recommendations on how 
        to include on plan portals information on performance-based 
        quality measures obtained under section 612.
    (d) Prohibitions.--
            (1) Direct enrollment.--A plan portal may not directly 
        enroll individuals in health insurance plans or under a State 
        Medicaid plan or a State children's health insurance plan.
            (2) Conflicts of interest.--
                    (A) Companies.--A health insurance issuer offering 
                a health insurance plan through a plan portal may not--
                            (i) be the private entity developing and 
                        maintaining a plan portal under this section; 
                        or
                            (ii) have an ownership interest in such 
                        private entity or in the plan portal.
                    (B) Individuals.--An individual employed by a 
                health insurance issuer offering a health insurance 
                plan through a plan portal may not serve as a director 
                or officer for--
                            (i) the private entity developing and 
                        maintaining a plan portal under this section; 
                        or
                            (ii) the plan portal.
    (e) Construction.--Nothing in this section shall be construed to 
prohibit health insurance brokers and agents from--
            (1) utilizing the plan portal for any purpose; or
            (2) marketing or offering health insurance products.
    (f) State Defined.--In this section, the term ``State'' has the 
meaning given such term for purposes of title XIX of the Social 
Security Act.

SEC. 612. ESTABLISHMENT OF PERFORMANCE-BASED QUALITY MEASURES.

    Not later than January 1, 2010, the Secretary of Health and Human 
Services shall submit to Congress a proposal for a formalized process 
for the development of performance-based quality measures that could be 
applied to physicians' services under the Medicare program. Such 
proposal shall be in concert and agreement with the Physician 
Consortium for Performance Improvement and shall only utilize measures 
agreed upon by each physician specialty organization.

   Subtitle C--Medicare Accountable Care Organization Demonstration 
                                Program

SEC. 621. MEDICARE ACCOUNTABLE CARE ORGANIZATION DEMONSTRATION PROGRAM.

    (a) Establishment.--
            (1) In general.--In order to promote innovative care 
        coordination and delivery that is cost-effective, the Secretary 
        of Health and Human Services (in this section referred to as 
        the ``Secretary'') shall conduct a demonstration program under 
        the Medicare program under which--
                    (A) groups of providers meeting certain criteria 
                may work together to manage and coordinate care for 
                Medicare fee-for-service beneficiaries through an 
                Accountable Care Organization (in this section referred 
                to as an ``ACO''); and
                    (B) providers in participating ACOs are eligible 
                for bonuses based on performance.
            (2) Medicare fee-for-service beneficiary defined.--In this 
        section, the term ``Medicare fee-for-service beneficiary'' 
        means an individual who is enrolled in the original Medicare 
        fee-for-service program under parts A and B of title XVIII of 
        the Social Security Act and not enrolled in an MA plan under 
        part C of such title.
    (b) Eligible ACOs.--
            (1) In general.--Subject to paragraph (2), the following 
        provider groups are eligible to participate as ACOs under the 
        demonstration program under this section:
                    (A) Physicians in group practice arrangements.
                    (B) Networks of individual physician practices.
                    (C) Partnerships or joint venture arrangements 
                between hospitals and physicians.
                    (D) Partnerships or joint ventures, which may 
                include pharmacists providing medication therapy 
                management.
                    (E) Hospitals employing physicians.
                    (F) Integrated delivery systems.
                    (G) Community-based coalitions of providers.
            (2) Requirements.--An ACO shall meet the following 
        requirements:
                    (A) The ACO shall have a formal legal structure 
                that would allow the organization to receive and 
                distribute bonuses to participating providers.
                    (B) The ACO shall include the primary care 
                providers of at least 5,000 Medicare fee-for-service 
                beneficiaries.
                    (C) The ACO shall be willing to become accountable 
                for the overall care of the Medicare fee-for-service 
                beneficiaries.
                    (D) The ACO shall provide the Secretary with a list 
                of primary care and specialist physicians participating 
                in the ACO to support the beneficiary assignment, 
                implementation of performance measures, and the 
                determination of bonus payments under the demonstration 
                program.
                    (E) The ACO shall have in place contracts with a 
                core group of key specialist physicians, a leadership 
                and management structure, and processes to promote 
                evidence-based medicine and to coordinate care.
    (c) Assignment of Medicare Fee-for-service Beneficiaries.--
            (1) In general.--Under the demonstration program under this 
        section, each Medicare fee-for-service Medicare beneficiary 
        shall be automatically assigned to a primary care provider. 
        Such assignment shall be based on the physician from whom the 
        beneficiary received the most primary care in the preceding 
        year.
            (2) Beneficiaries may continue to see providers outside of 
        the aco.--Under the demonstration program under this section, a 
        Medicare fee-for-service Medicare beneficiary may continue to 
        see providers in and outside of the ACO to which they have been 
        assigned.
    (d) Bonus Payments.--
            (1) In general.--Under the demonstration program, Medicare 
        payments shall continue to be made to providers under the 
        original Medicare fee-for-service program in the same manner as 
        they would otherwise be made except that a participating ACO is 
        eligible for bonuses if--
                    (A) it meets certain quality performance measures; 
                and
                    (B) spending for their Medicare fee-for-service 
                beneficiaries meets the requirement under paragraph 
                (3).
            (2) Quality.--Under the demonstration program under this 
        section, providers meet the requirement under paragraph (1)(A) 
        if they generally follow consensus-based guidelines established 
        by non-government professional medical societies. Patient 
        satisfaction and risk-adjusted outcomes shall be determined 
        through an independent entity with medical expertise.
            (3) Requirement relating to spending.--
                    (A) In general.--An ACO shall only be eligible to 
                receive a bonus payment if the average Medicare 
                expenditures under the ACO for Medicare fee-for-service 
                beneficiaries over a two-year period is at least 2 
                percent below the average benchmark for the 
                corresponding two-year period. The benchmark for each 
                ACO shall be set using the most recent three years of 
                total per-beneficiary spending for Medicare fee-for-
                service beneficiaries assigned to the ACO. Such 
                benchmark shall be updated by the projected rate of 
                growth in national per capita spending for the original 
                Medicare fee-for-service program, as projected (using 
                the most recent three years of data) by the Chief 
                Actuary of the Centers for Medicare & Medicaid 
                Services.
            (4) Amount of bonus payments.--The amount of the bonus 
        payment to a participating ACO shall be one-half of the 
        percentage point difference between the two-year average of 
        their patients' Medicare expenditures and 98 percent of the 
        two-year average benchmark. The bonus amount, in dollars, shall 
        be equal to the bonus share multiplied by the benchmark for the 
        most recent year.
            (5) Limitation.--Bonus payments may only be made to an ACO 
        if the primary care provider to which the Medicare fee-for-
        service beneficiary has been assigned under subsection (c) 
        elects to participate in such ACO.
    (e) Waiver Authority.--The Secretary may waive such requirements of 
titles XI and XVIII of the Social Security Act (42 U.S.C. 1301 et seq.; 
1395 et seq.) as may be appropriate for the purpose of carrying out the 
demonstration program under this section.
    (f) Report.--Upon completion of the demonstration program under 
this section, the Secretary shall submit to Congress a report on the 
program together with such recommendations as the Secretary determines 
appropriate.

              Subtitle D--Repeal of Unused Stimulus Funds

SEC. 631. RESCISSION AND REPEAL IN ARRA.

    (a) Rescission.--Of the discretionary appropriations made available 
in division A of the American Recovery and Reinvestment Act of 2009 
(Public Law 111-5), all unobligated balances are rescinded.
    (b) Repeal.--Subtitles B and C of title II and titles III through 
VII of division B of the American Recovery and Reinvestment Act of 2009 
(Public Law 111-5) are repealed.
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