I 

111TH CONGRESS 

1ST SESSION H. R. 3889 

To amend the Internal Revenue Code of 1986 to repeal the percentage 

floor on medical expense deductions, expand the use of tax-preferred 

health care accounts, and establish a charity care credit, to amend 

the Social Security Act to create a Medicare voucher program and 

reform EMTALA requirements, and to amend Public Health Service 

Act to provide for cooperative governing of individual health insurance 

coverage offered in interstate commerce. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 21, 2009 

Mr. BROUN of Georgia introduced the following bill; which was referred to the 

Committee on Energy and Commerce, and in addition to the Committees 

on Education and Labor and Ways and Means, 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 amend the Internal Revenue Code of 1986 to repeal 

the percentage floor on medical expense deductions, expand the use of tax-preferred health care accounts, and 

establish a charity care credit, to amend the Social Security Act to create a Medicare voucher program and reform EMTALA requirements, and to amend Public 

Health Service Act to provide for cooperative governing 

of individual health insurance coverage offered in interstate commerce. 


smartinez on DSKB9S0YB1PROD with BILLS
2 

•HR 3889 IH

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS; CON4 STRUCTION. 

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

6 ‘‘Offering Patients True Individualized Options Act of 

7 2009’’ or the ‘‘OPTION Act of 2009’’. 

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

9 this Act is as follows: 

Sec. 1. Short title; table of contents; construction. 

TITLE I—HEALTH CARE TAX REFORM 

Sec. 101. Elimination of 7.5-percent floor on medical expense deductions. 

Sec. 102. Repeal of prescribed drug limitation on deduction for medical care. 

Sec. 103. Repeal of 2-percent miscellaneous itemized deduction floor for medical expense deductions. 

Sec. 104. Healthcare savings account reform. 

Sec. 105. Charity care credit. 

Sec. 106. COBRA continuation coverage extended. 

Sec. 107. HSA charitable contributions. 

TITLE II—MEDICARE VOUCHER PROGRAM 

Sec. 201. Replacement of Medicare part A entitlement with Medicare Reform 

Voucher Program. 

TITLE III—EMTALA REFORMS 

Sec. 301. EMTALA reforms. 

TITLE IV—COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH 

INSURANCE COVERAGE 

Sec. 401. Cooperative governing of individual health insurance coverage. 

TITLE V—ASSOCIATION HEALTH PLANS 

Sec. 501. Short title. 

Sec. 502. Rules governing association health plans. 

Sec. 503. Clarification of treatment of single employer arrangements. 

Sec. 504. Enforcement provisions relating to association health plans. 

Sec. 505. Cooperation between Federal and State authorities. 

Sec. 506. Effective date and transitional and other rules. 


smartinez on DSKB9S0YB1PROD with BILLS
3 

•HR 3889 IH

1 (c) CONSTRUCTION.—Nothing in this Act shall be 

2 construed to preclude or prohibit a health care provider 

3 or health insurance issuer from publicly disclosing any 

4 pricing of services provided or covered. 

5 TITLE I—HEALTH CARE TAX 

6 REFORM 

7 SEC. 101. ELIMINATION OF 7.5-PERCENT FLOOR ON MED8 ICAL EXPENSE DEDUCTIONS. 

9 (a) IN GENERAL.—Subsection (a) of section 213 of 

10 the Internal Revenue Code of 1986 is amended by striking 

11 ‘‘, to the extent that such expenses exceed 7.5 percent of 

12 adjusted gross income’’. 

13 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

14 section 56(b) of such Code is amended by striking sub15 paragraph (B). 

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

17 this section shall apply to taxable years beginning after 

18 December 31, 2009. 

19 SEC. 102. REPEAL OF PRESCRIBED DRUG LIMITATION ON 

20 DEDUCTION FOR MEDICAL CARE. 

21 (a) IN GENERAL.—Section 213 of the Internal Rev22 enue Code of 1986 is amended by striking subsection (b). 

23 (b) CONFORMING AMENDMENT.—Subsection (d) of 

24 section 213 of such Code is amended by striking para25 graph (3). 


smartinez on DSKB9S0YB1PROD with BILLS
4 

•HR 3889 IH

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

2 this section shall apply to taxable years beginning after 

3 December 31, 2009. 

4 SEC. 103. REPEAL OF 2-PERCENT MISCELLANEOUS 

5 ITEMIZED DEDUCTION FLOOR FOR MEDICAL 

6 EXPENSE DEDUCTIONS. 

7 (a) IN GENERAL.—Subsection (b) of section 67 of the 

8 Internal Revenue Code of 1986 is amended by striking 

9 paragraph (5). 

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

11 this section shall apply to taxable years beginning after 

12 the December 31, 2009. 

13 SEC. 104. HEALTHCARE SAVINGS ACCOUNT REFORM. 

14 (a) INCREASE IN DEDUCTIBLE CONTRIBUTION LIMI15 TATIONS.— 

16 (1) IN GENERAL.—Paragraph (2) of section 

17 223(b) of the Internal Revenue Code of 1986 is 

18 amended— 

19 (A) in subparagraph (A) by striking 

20 ‘‘$2,250’’ and inserting ‘‘the amount in effect 

21 for such month under subsection 

22 (c)(2)(A)(ii)(I)’’, and 

23 (B) in subparagraph (B) by striking 

24 ‘‘$4,500’’ and inserting ‘‘the amount in effect 


smartinez on DSKB9S0YB1PROD with BILLS
5 

•HR 3889 IH

1 for such month under subsection 

2 (c)(2)(A)(ii)(II)’’. 

3 (2) CONFORMING AMENDMENT.—Paragraph (1) 

4 of section 223(g) is amended by striking ‘‘sub5 sections (b)(2) and’’ and inserting ‘‘subsection’’. 

6 (b) MEDICARE ELIGIBLE INDIVIDUALS ELIGIBLE TO

7 CONTRIBUTE TO HSA.— 

8 (1) Subsection (b) of section 223 of such Code 

9 is amended by striking paragraph (7). 

10 (2) Paragraph (1) of section 223(c) of such 

11 Code is amended by adding at the end the following 

12 new subparagraph: 

13 ‘‘(C) SPECIAL RULE FOR INDIVIDUALS EN14 TITLED TO BENEFITS UNDER MEDICARE.—In 

15 the case of an individual— 

16 ‘‘(i) who is entitled to benefits under 

17 title XVIII of the Social Security Act, and 

18 ‘‘(ii) with respect to whom a health 

19 savings account is established in a month 

20 before the first month such individual is 

21 entitled to such benefits, 

22 such individual shall be deemed to be an eligible 

23 individual.’’. 

24 (c) ROLLOVER TO MEDICARE ADVANTAGE MSA.— 


smartinez on DSKB9S0YB1PROD with BILLS
6 

•HR 3889 IH

1 (1) IN GENERAL.—Paragraph (2) of section 

2 138(b) of such Code is amended by striking ‘‘or’’ at 

3 the end of subparagraph (A), by adding ‘‘or’’ at the 

4 end of subparagraph (C), and by adding at the end 

5 the following new subparagraph: 

6 ‘‘(C) a HSA rollover contribution described 

7 in subsection (d)(5),’’. 

8 (2) HSA ROLLOVER CONTRIBUTION.—Sub9 section (c) of section 138 of such Code is amended 

10 by adding at the end the following new paragraph: 

11 ‘‘(5) ROLLOVER CONTRIBUTION.—An amount is 

12 described in this paragraph as a rollover contribu13 tion if it meets the requirement of subparagraphs 

14 (A) and (B). 

15 ‘‘(A) IN GENERAL.—The requirements of 

16 this subparagraph are met in the case of an 

17 amount paid or distributed from a health sav18 ings to the account beneficiary to the extent the 

19 amount is received is paid into a Medicare Ad20 vantage MSA of such beneficiary not later than 

21 the 60th day after the day on which the bene22 ficiary receives the payment or distribution. 

23 ‘‘(B) LIMITATION.—This paragraph shall 

24 not apply to any amount described in subpara25 graph (A) received by an individual from a 


smartinez on DSKB9S0YB1PROD with BILLS
7 

•HR 3889 IH

1 health savings account if, at any time during 

2 the 1-year period ending on the day of such re3 ceipt, such individual received any other amount 

4 described in subparagraph (A) from a health 

5 savings account which was not includible in the 

6 individual’s gross income because of the appli7 cation of section 223(f)(5)(A).’’. 

8 (3) CONFORMING AMENDMENT.—Subparagraph 

9 (A) of section 223(f)(5) of such Code is amended by 

10 inserting ‘‘or Medicare Advantage MSA’’ after ‘‘into 

11 a health savings account’’. 

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

13 this section shall apply to taxable years beginning after 

14 December 31, 2009. 

15 SEC. 105. CHARITY CARE CREDIT. 

16 (a) IN GENERAL.—Subpart A of part IV of sub17 chapter A of chapter 1 of the Internal Revenue Code of 

18 1986 (relating to nonrefundable personal credits) is 

19 amended by inserting after section 25D the following new 

20 section: 

21 ‘‘SEC. 25E. CHARITY CARE CREDIT. 

22 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of a phy23 sician, there shall be allowed as a credit against the tax 

24 imposed by this chapter for a taxable year the amount 

25 determined in accordance with the following table: 


smartinez on DSKB9S0YB1PROD with BILLS
8 

•HR 3889 IH

‘‘If the physician has provided during such 

taxable year:.

The amount of 

the credit is: 

At least 25 but less than 30 qualified hours of 

charity care.

$2,000. 

At least 30 but less than 35 qualified hours of 

charity care.

$2,400. 

At least 35 but less than 40 qualified hours of 

charity care.

$2,800. 

At least 40 but less than 45 qualified hours of 

charity care.

$3,200. 

At least 45 but less than 50 qualified hours of 

charity care.

$3,600. 

At least 50 but less than 55 qualified hours of 

charity care.

$4,000. 

At least 55 but less than 60 qualified hours of 

charity care.

$4,400. 

At least 60 but less than 65 qualified hours of 

charity care.

$4,800. 

At least 65 but less than 70 qualified hours of 

charity care.

$5,200. 

At least 70 but less than 75 qualified hours of 

charity care.

$5,600. 

At least 75 but less than 80 qualified hours of 

charity care.

$6,000. 

At least 80 but less than 85 qualified hours of 

charity care.

$6,400. 

At least 85 but less than 90 qualified hours of 

charity care.

$6,800. 

At least 90 but less than 95 qualified hours of 

charity care.

$7,200. 

At least 95 but less than 100 qualified hours of 

charity care.

$7,600. 

At least 100 hours of charity care ......................... $8,000. 

1 ‘‘(b) QUALIFIED HOURS OF CHARITY CARE.—For 

2 purposes of this section— 

3 ‘‘(1) QUALIFIED HOURS OF CHARITY CARE.— 

4 The term ‘qualified hours of charity care’ means the 

5 hours that a physician provides medical care (as de6 fined in section 213(d)(1)(A)) on a volunteer or pro 

7 bono basis. 

8 ‘‘(2) PHYSICIAN.—The term ‘physician’ has the 

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

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


smartinez on DSKB9S0YB1PROD with BILLS
9 

•HR 3889 IH

1 (b) CONFORMING AMENDMENT.—The table of sec2 tions for subpart A of part IV of subchapter A of chapter 

3 1 of such Code is amended by inserting after the item 

4 relating to section 25D the following new item: 

‘‘Sec. 25E. Charity care credit.’’. 

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

6 this section shall apply to taxable years beginning after 

7 December 31, 2009. 

8 SEC. 106. COBRA CONTINUATION COVERAGE EXTENDED. 

9 (a) UNDER IRC.—Subparagraph (B) of section 

10 4980B(f)(2) of the Internal Revenue Code of 1986 is 

11 amended by striking clauses (i) and (v) and by redesig12 nating clauses (ii), (iii), and (iv) as clauses (i), (ii), and 

13 (iii), respectively. 

14 (b) UNDER ERISA.—Paragraph (2) of section 602 

15 of the Employee Retirement Income Security Act of 2009 

16 (29 U.S.C. 1162) is amended by striking subparagraphs 

17 (A) and (E) and by redesignating subparagraphs (B), (C), 

18 and (D) as subparagraphs (A), (B), and (C), respectively. 

19 (c) UNDER PHSA.—Paragraph (2) of section 

20 2202(2) of the Public Health Service Act (42 U.S.C. 

21 300bb–2(2)) is amended by striking subparagraphs (A) 

22 and (E) and by redesignating subparagraphs (B), (C), and 

23 (D) as subparagraphs (A), (B), and (C), respectively. 

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

25 this section shall apply with respect to group health plans, 


smartinez on DSKB9S0YB1PROD with BILLS
10 

•HR 3889 IH

1 and health insurance coverage offered in connection with 

2 group health plans, for plan years beginning after the date 

3 of the enactment of this Act. 

4 SEC. 107. HSA CHARITABLE CONTRIBUTIONS. 

5 (a) IN GENERAL.—Subsection (f) of section 223 of 

6 the Internal Revenue Code of 1986 is amended by adding 

7 at the end the following new paragraph: 

8 ‘‘(9) DISTRIBUTIONS FOR CHARITABLE PUR9 POSES.—For purposes of this subsection— 

10 ‘‘(A) IN GENERAL.—Paragraph (2) shall 

11 not apply to any qualified charitable distribu12 tions with respect to a taxpayer made during 

13 any taxable year. 

14 ‘‘(B) QUALIFIED CHARITABLE DISTRIBU15 TION.—For purposes of this paragraph, the 

16 term ‘qualified charitable distribution’ means 

17 any distribution from a health savings account 

18 which is made directly by the trustee to an or19 ganization described in section 170(b)(1)(A) 

20 (other than any organization described in sec21 tion 509(a)(3) or any fund or account described 

22 in section 4966(d)(2)). A distribution shall be 

23 treated as a qualified charitable distribution 

24 only to the extent that the distribution would be 


smartinez on DSKB9S0YB1PROD with BILLS
11 

•HR 3889 IH

1 includible in gross income without regard to 

2 subparagraph (A). 

3 ‘‘(C) CONTRIBUTIONS MUST BE OTHER4 WISE DEDUCTIBLE.—For purposes of this para5 graph, a distribution to an organization de6 scribed in subparagraph (B) shall be treated as 

7 a qualified charitable distribution only if a de8 duction for the entire distribution would be al9 lowable under section 170 (determined without 

10 regard to subsection (b) thereof and this para11 graph). 

12 ‘‘(D) DENIAL OF DEDUCTION.—Qualified 

13 charitable distributions which are not includible 

14 in gross income pursuant to subparagraph (A) 

15 shall not be taken into account in determining 

16 the deduction under section 170.’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2009. 


smartinez on DSKB9S0YB1PROD with BILLS
12 

•HR 3889 IH

1 TITLE II—MEDICARE VOUCHER 

2 PROGRAM 

3 SEC. 201. REPLACEMENT OF MEDICARE PART A ENTITLE4 MENT WITH MEDICARE REFORM VOUCHER 

5 PROGRAM. 

6 (a) IN GENERAL.—Section 226 of the Social Security 

7 Act (42 U.S.C. 426) is amended by adding at the end the 

8 following new subsections: 

9 ‘‘(k) REPLACEMENT OF ENTITLEMENT WITH

10 VOUCHER PROGRAM.— 

11 ‘‘(1) IN GENERAL.—Notwithstanding the pre12 vious provisions of this section, beginning the first 

13 January 1 after the date of the enactment of the Of14 fering Patients True Individualized Options Act of 

15 2009, the Secretary shall establish a procedure 

16 under which an individual otherwise entitled under 

17 subsection (a) to benefits under part A of title 

18 XVIII shall in lieu of such entitlement be automati19 cally enrolled in the Medicare Reform Voucher Pro20 gram established under subsection (l). 

21 ‘‘(2) TREATMENT UNDER THE INTERNAL REV22 ENUE CODE OF 1986.—An individual who is enrolled 

23 under the Medicare Reform Voucher Program under 

24 paragraph (1) shall not be treated as entitled to benVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
13 

•HR 3889 IH

1 efits under title XVIII for purposes of section 

2 223(b)(7) of the Internal Revenue Code of 1986. 

3 ‘‘(3) INELIGIBILITY FOR PART B OR D BENE4 FITS.—An individual shall not be eligible for benefits 

5 under part B or D of title XVIII once the individual 

6 is enrolled in the Medicare Reform Voucher Pro7 gram under paragraph (1). 

8 ‘‘(l) MEDICARE REFORM VOUCHER PROGRAM.— 

9 ‘‘(1) ESTABLISHMENT OF PROGRAM.—The Sec10 retary shall establish a program to be known as the 

11 Medicare Reform Voucher Program (in this sub12 section referred to as the ‘voucher program’) con13 sistent with this subsection. 

14 ‘‘(2) AUTOMATIC ENROLLMENT.—An individual 

15 otherwise entitled under subsection (a) to benefits 

16 under part A of title XVIII shall be enrolled in the 

17 voucher program for the period during which such 

18 individual would otherwise be so entitled to benefits. 

19 ‘‘(3) AMOUNT OF VOUCHER.— 

20 ‘‘(A) IN GENERAL.—Subject to clause (ii), 

21 for each year that an individual is enrolled in 

22 the voucher program, the Secretary shall pro23 vide a voucher to such individual in an amount 

24 determined by the Secretary that is based on 

25 the geographic location of the individual and 


smartinez on DSKB9S0YB1PROD with BILLS
14 

•HR 3889 IH

1 the cost of applicable health insurance coverage 

2 and benefits in such area. 

3 ‘‘(B) COMPUTATION OF VOUCHER

4 AMOUNTS.—The amount of a voucher provided 

5 to an individual located in a geographic area for 

6 a year shall be computed at 120 percent of the 

7 sum of the median premium and median de8 ductible payment for such year for all health in9 surance coverage offered by health insurance 

10 issuers in the individual market serving such 

11 area. 

12 ‘‘(4) PERMISSIBLE USE OF VOUCHER.—A 

13 voucher under paragraph (3) may be used only for 

14 the following purposes: 

15 ‘‘(A) For payment of premiums, 

16 deductibles, copayments, or other cost-sharing 

17 for enrollment of such individual for health in18 surance coverage offered by health insurance 

19 issuers in the individual market. 

20 ‘‘(B) As a contribution into a MSA plan 

21 established by such individual, as defined in 

22 section 138(b)(2) of the Internal Revenue Code 

23 of 1986. 

24 ‘‘(5) MSA DEPOSITS.—Each voucher amount 

25 received by an individual under this subsection shall 


smartinez on DSKB9S0YB1PROD with BILLS
15 

•HR 3889 IH

1 be deposited, on behalf of such individual, into the 

2 MSA plan of such individual.’’. 

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

4 this section shall take effect on the first January 1 after 

5 the date of the enactment of this Act and shall apply to 

6 an individual who becomes entitled to benefits under part 

7 A of title XVIII of the Social Security Act on or after 

8 such January 1. 

9 TITLE III—EMTALA REFORMS 

10 SEC. 301. EMTALA REFORMS. 

11 (a) USE OF QUALIFIED EMERGENCY DEPARTMENT

12 PERSONNEL IN PERFORMING INITIAL SCREENING.—Sub13 section (a) of section 1867 of the Social Security Act (42 

14 U.S.C. 1395dd) is amended— 

15 (1) by designating the sentence beginning with 

16 ‘‘In the case of’’ as paragraph (1), with the heading 

17 ‘‘IN GENERAL.—’’ and appropriate indentation; and 

18 (2) by adding at the end the following new 

19 paragraph: 

20 ‘‘(2) PERMITTING APPLICATION OF ER

21 TRIAGE.— 

22 ‘‘(A) IN GENERAL.—The requirement of 

23 paragraph (1) that a hospital conduct an appro24 priate medical screening examination of an indi25 vidual is deemed to be satisfied if a qualified 


smartinez on DSKB9S0YB1PROD with BILLS
16 

•HR 3889 IH

1 emergency screener (as defined in subparagraph 

2 (B)) performs a preliminary triage-type screen3 ing in which the personnel— 

4 ‘‘(i) assesses the nature and extent of 

5 the individual’s illness or injury; and 

6 ‘‘(ii) determines, based on such as7 sessment, that an emergency medical con8 dition does not exist. 

9 ‘‘(B) QUALIFIED EMERGENCY SCREENER

10 DEFINED.—In this paragraph, the term ‘quali11 fied emergency screener’ means a physician, li12 censed practical nurse or registered nurse, 

13 qualified emergency medical technician, or other 

14 individual with basic, health care education that 

15 meets standards specified by the Secretary as 

16 being sufficient to perform the screening de17 scribed in subparagraph (A).’’. 

18 (b) REVISION OF EMERGENCY MEDICAL CONDITION

19 DEFINITION.—Subsection (e)(1)(A) of such section is 

20 amended to read as follows: 

21 ‘‘(A) a medical condition manifesting itself 

22 by symptoms of sufficient severity (including se23 vere pain) and with an onset or of a course 

24 such that the absence of immediate medical at25 tention could reasonably be expected to pose an 


smartinez on DSKB9S0YB1PROD with BILLS
17 

•HR 3889 IH

1 immediate risk to life or long-term health of the 

2 individual (or, with respect to a pregnant 

3 woman, the life or long-term health of the 

4 woman or her unborn child); or’’. 

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

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

7 of this Act and shall apply to individuals who come to an 

8 emergency room on or after the date that is 30 days after 

9 the date of the enactment of this Act. 

10 TITLE IV—COOPERATIVE GOV11 ERNING OF INDIVIDUAL 

12 HEALTH INSURANCE COV13 ERAGE 

14 SEC. 401. COOPERATIVE GOVERNING OF INDIVIDUAL 

15 HEALTH INSURANCE COVERAGE. 

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

17 Service Act (42 U.S.C. 300gg et seq.) is amended by add18 ing at the end the following new part: 

19 ‘‘PART D—COOPERATIVE GOVERNING OF 

20 INDIVIDUAL HEALTH INSURANCE COVERAGE 

21 ‘‘SEC. 2795. DEFINITIONS. 

22 ‘‘In this part: 

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

24 State’ means, with respect to individual health insur25 ance coverage offered by a health insurance issuer, 


smartinez on DSKB9S0YB1PROD with BILLS
18 

•HR 3889 IH

1 the State designated by the issuer as the State 

2 whose covered laws shall govern the health insurance 

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

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

5 only designate one such State as its primary State 

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

7 issuer may not change the designated primary State 

8 with respect to individual health insurance coverage 

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

10 may be made upon renewal of the policy. With re11 spect to such designated State, the issuer is deemed 

12 to be doing business in that State. 

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

14 State’ means, with respect to individual health insur15 ance coverage offered by a health insurance issuer, 

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

17 of a health insurance issuer that is selling a policy 

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

19 is deemed to be doing business in that secondary 

20 State. 

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

22 ‘health insurance issuer’ has the meaning given such 

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

24 issuer must be licensed in the primary State and be 


smartinez on DSKB9S0YB1PROD with BILLS
19 

•HR 3889 IH

1 qualified to sell individual health insurance coverage 

2 in that State. 

3 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV4 ERAGE.—The term ‘individual health insurance cov5 erage’ means health insurance coverage offered in 

6 the individual market, as defined in section 

7 2791(e)(1). 

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

9 term ‘applicable State authority’ means, with respect 

10 to a health insurance issuer in a State, the State in11 surance commissioner or official or officials des12 ignated by the State to enforce the requirements of 

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

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

15 term ‘hazardous financial condition’ means that, 

16 based on its present or reasonably anticipated finan17 cial condition, a health insurance issuer is unlikely 

18 to be able— 

19 ‘‘(A) to meet obligations to policyholders 

20 with respect to known claims and reasonably 

21 anticipated claims; or 

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

23 course of business. 

24 ‘‘(7) COVERED LAWS.— 


smartinez on DSKB9S0YB1PROD with BILLS
20 

•HR 3889 IH

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

2 laws’ means the laws, rules, regulations, agree3 ments, and orders governing the insurance busi4 ness pertaining to— 

5 ‘‘(i) individual health insurance cov6 erage issued by a health insurance issuer; 

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

8 medical underwriting), renewal, and 

9 issuance of individual health insurance cov10 erage to an individual; 

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

12 relation to individual health insurance cov13 erage of health care and insurance related 

14 services; 

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

16 relation to individual health insurance cov17 erage of management, operations, and in18 vestment activities of a health insurance 

19 issuer; and 

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

21 relation to individual health insurance cov22 erage of loss control and claims adminis23 tration for a health insurance issuer with 

24 respect to liability for which the issuer pro25 vides insurance. 


smartinez on DSKB9S0YB1PROD with BILLS
21 

•HR 3889 IH

1 ‘‘(B) EXCEPTION.—Such term does not in2 clude any law, rule, regulation, agreement, or 

3 order governing the use of care or cost manage4 ment techniques, including any requirement re5 lated to provider contracting, network access or 

6 adequacy, health care data collection, or quality 

7 assurance. 

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

9 States and includes the District of Columbia, Puerto 

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

11 and the Northern Mariana Islands. 

12 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC13 TICES.—The term ‘unfair claims settlement prac14 tices’ means only the following practices: 

15 ‘‘(A) Knowingly misrepresenting to claim16 ants and insured individuals relevant facts or 

17 policy provisions relating to coverage at issue. 

18 ‘‘(B) Failing to acknowledge with reason19 able promptness pertinent communications with 

20 respect to claims arising under policies. 

21 ‘‘(C) Failing to adopt and implement rea22 sonable standards for the prompt investigation 

23 and settlement of claims arising under policies. 


smartinez on DSKB9S0YB1PROD with BILLS
22 

•HR 3889 IH

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

2 and equitable settlement of claims submitted in 

3 which liability has become reasonably clear. 

4 ‘‘(E) Refusing to pay claims without con5 ducting a reasonable investigation. 

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

7 claims within a reasonable period of time after 

8 having completed an investigation related to 

9 those claims. 

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

11 insured individuals or their beneficiaries to in12 stitute suits to recover amounts due under its 

13 policies by offering substantially less than the 

14 amounts ultimately recovered in suits brought 

15 by them. 

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

17 to settle or settling claims for less than the 

18 amount that a reasonable person would believe 

19 the insured individual or his or her beneficiary 

20 was entitled by reference to written or printed 

21 advertising material accompanying or made 

22 part of an application. 

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

24 on the basis of an application that was materiVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
23 

•HR 3889 IH

1 ally altered without notice to, or knowledge or 

2 consent of, the insured. 

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

4 present claims within 15 calendar days of a re5 quests with reasonable explanations regarding 

6 their use. 

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

8 time than that prescribed in the policy or by the 

9 law of the primary State. 

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

11 and abuse’ means an act or omission committed by 

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

13 commits, or conceals any material information con14 cerning, one or more of the following: 

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

16 or preparing with knowledge or belief that it 

17 will be presented to or by an insurer, a rein18 surer, broker or its agent, false information as 

19 part of, in support of or concerning a fact ma20 terial to one or more of the following: 

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

22 renewal of an insurance policy or reinsur23 ance contract. 

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

25 or reinsurance contract. 


smartinez on DSKB9S0YB1PROD with BILLS
24 

•HR 3889 IH

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

2 pursuant to an insurance policy or reinsur3 ance contract. 

4 ‘‘(iv) Premiums paid on an insurance 

5 policy or reinsurance contract. 

6 ‘‘(v) Payments made in accordance 

7 with the terms of an insurance policy or 

8 reinsurance contract. 

9 ‘‘(vi) A document filed with the com10 missioner or the chief insurance regulatory 

11 official of another jurisdiction. 

12 ‘‘(vii) The financial condition of an in13 surer or reinsurer. 

14 ‘‘(viii) The formation, acquisition, 

15 merger, reconsolidation, dissolution or 

16 withdrawal from one or more lines of in17 surance or reinsurance in all or part of a 

18 State by an insurer or reinsurer. 

19 ‘‘(ix) The issuance of written evidence 

20 of insurance. 

21 ‘‘(x) The reinstatement of an insur22 ance policy. 

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

24 renewal insurance risks on behalf of an insurer 

25 reinsurer or other person engaged in the busiVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
25 

•HR 3889 IH

1 ness of insurance by a person who knows or 

2 should know that the insurer or other person 

3 responsible for the risk is insolvent at the time 

4 of the transaction. 

5 ‘‘(C) Transaction of the business of insur6 ance in violation of laws requiring a license, cer7 tificate of authority or other legal authority for 

8 the transaction of the business of insurance. 

9 ‘‘(D) Attempt to commit, aiding or abet10 ting in the commission of, or conspiracy to com11 mit the acts or omissions specified in this para12 graph. 

13 ‘‘SEC. 2796. APPLICATION OF LAW. 

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

15 State shall apply to individual health insurance coverage 

16 offered by a health insurance issuer in the primary State 

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

18 issuer comply with the conditions of this section with re19 spect to the offering of coverage in any secondary State. 

20 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC21 ONDARY STATE.—Except as provided in this section, a 

22 health insurance issuer with respect to its offer, sale, rat23 ing (including medical underwriting), renewal, and 

24 issuance of individual health insurance coverage in any 

25 secondary State is exempt from any covered laws of the 


smartinez on DSKB9S0YB1PROD with BILLS
26 

•HR 3889 IH

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

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

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

4 ‘‘(1) make unlawful, or regulate, directly or in5 directly, the operation of the health insurance issuer 

6 operating in the secondary State, except that any 

7 secondary State may require such an issuer— 

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

9 applicable premium and other taxes (including 

10 high risk pool assessments) which are levied on 

11 insurers and surplus lines insurers, brokers, or 

12 policyholders under the laws of the State; 

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

14 State insurance commissioner as its agent solely 

15 for the purpose of receiving service of legal doc16 uments or process; 

17 ‘‘(C) to submit to an examination of its fi18 nancial condition by the State insurance com19 missioner in any State in which the issuer is 

20 doing business to determine the issuer’s finan21 cial condition, if— 

22 ‘‘(i) the State insurance commissioner 

23 of the primary State has not done an ex24 amination within the period recommended 


smartinez on DSKB9S0YB1PROD with BILLS
27 

•HR 3889 IH

1 by the National Association of Insurance 

2 Commissioners; and 

3 ‘‘(ii) any such examination is con4 ducted in accordance with the examiners’ 

5 handbook of the National Association of 

6 Insurance Commissioners and is coordi7 nated to avoid unjustified duplication and 

8 unjustified repetition; 

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

10 issued— 

11 ‘‘(i) in a delinquency proceeding com12 menced by the State insurance commis13 sioner if there has been a finding of finan14 cial impairment under subparagraph (C); 

15 or 

16 ‘‘(ii) in a voluntary dissolution pro17 ceeding; 

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

19 by a court of competent jurisdiction, upon a pe20 tition by the State insurance commissioner al21 leging that the issuer is in hazardous financial 

22 condition; 

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

24 basis, in any insurance insolvency guaranty as25 sociation or similar association to which a 


smartinez on DSKB9S0YB1PROD with BILLS
28 

•HR 3889 IH

1 health insurance issuer in the State is required 

2 to belong; 

3 ‘‘(G) to comply with any State law regard4 ing fraud and abuse (as defined in section 

5 2795(10)), except that if the State seeks an in6 junction regarding the conduct described in this 

7 subparagraph, such injunction must be obtained 

8 from a court of competent jurisdiction; 

9 ‘‘(H) to comply with any State law regard10 ing unfair claims settlement practices (as de11 fined in section 2795(9)); or 

12 ‘‘(I) to comply with the applicable require13 ments for independent review under section 

14 2798 with respect to coverage offered in the 

15 State; 

16 ‘‘(2) require any individual health insurance 

17 coverage issued by the issuer to be countersigned by 

18 an insurance agent or broker residing in that Sec19 ondary State; or 

20 ‘‘(3) otherwise discriminate against the issuer 

21 issuing insurance in both the primary State and in 

22 any secondary State. 

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

24 health insurance issuer shall provide the following notice, 

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


smartinez on DSKB9S0YB1PROD with BILLS
29 

•HR 3889 IH

1 in a secondary State under this part by such a health in2 surance issuer and at renewal of the policy, with the 5 

3 blank spaces therein being appropriately filled with the 

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

5 State, the name of the secondary State, the name of the 

6 secondary State, and the name of the secondary State, re7 spectively, for the coverage concerned: ‘Notice: This policy 

8 is issued by llll and is governed by the laws and 

9 regulations of the State of llll, and it has met all 

10 the laws of that State as determined by that State’s De11 partment of Insurance. This policy may be less expensive 

12 than others because it is not subject to all of the insurance 

13 laws and regulations of the State of lllll, includ14 ing coverage of some services or benefits mandated by the 

15 law of the State of lllll. Additionally, this policy 

16 is not subject to all of the consumer protection laws or 

17 restrictions on rate changes of the State of lllll. 

18 As with all insurance products, before purchasing this pol19 icy, you should carefully review the policy and determine 

20 what health care services the policy covers and what bene21 fits it provides, including any exclusions, limitations, or 

22 conditions for such services or benefits.’ 

23 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

24 AND PREMIUM INCREASES.— 


smartinez on DSKB9S0YB1PROD with BILLS
30 

•HR 3889 IH

1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, a health insurance issuer that provides indi3 vidual health insurance coverage to an individual 

4 under this part in a primary or secondary State may 

5 not upon renewal— 

6 ‘‘(A) move or reclassify the individual in7 sured under the health insurance coverage from 

8 the class such individual is in at the time of 

9 issue of the contract based on the health status10 related factors of the individual; or 

11 ‘‘(B) increase the premiums assessed the 

12 individual for such coverage based on a health 

13 status-related factor or change of a health sta14 tus-related factor or the past or prospective 

15 claim experience of the insured individual. 

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

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

18 issuer— 

19 ‘‘(A) from terminating or discontinuing 

20 coverage or a class of coverage in accordance 

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

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

23 policy holders within a class based on claims ex24 perience; 


smartinez on DSKB9S0YB1PROD with BILLS
31 

•HR 3889 IH

1 ‘‘(C) from changing premiums or offering 

2 discounted premiums to individuals who engage 

3 in wellness activities at intervals prescribed by 

4 the issuer, if such premium changes or incen5 tives— 

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

7 the insurance contract; 

8 ‘‘(ii) are based on specific wellness ac9 tivities that are not applicable to all indi10 viduals; and 

11 ‘‘(iii) are not obtainable by all individ12 uals to whom coverage is offered; 

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

14 ‘‘(E) from retroactively adjusting the rates 

15 charged an insured individual if the initial rates 

16 were set based on material misrepresentation by 

17 the individual at the time of issue. 

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

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

20 individual health insurance coverage in a secondary State 

21 unless that coverage is currently offered for sale in the 

22 primary State. 

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

24 HEALTH INSURANCE ISSUERS.—Any State may require 

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


smartinez on DSKB9S0YB1PROD with BILLS
32 

•HR 3889 IH

1 broker for a health insurance issuer with respect to the 

2 offering of individual health insurance coverage obtain a 

3 license from that State, with commissions or other com4 pensation subject to the provisions of the laws of that 

5 State, except that a State may not impose any qualifica6 tion or requirement which discriminates against a non7 resident agent or broker. 

8 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN9 SURANCE COMMISSIONER.—Each health insurance issuer 

10 issuing individual health insurance coverage in both pri11 mary and secondary States shall submit— 

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

13 State in which it intends to offer such coverage, be14 fore it may offer individual health insurance cov15 erage in such State— 

16 ‘‘(A) a copy of the plan of operation or fea17 sibility study or any similar statement of the 

18 policy being offered and its coverage (which 

19 shall include the name of its primary State and 

20 its principal place of business); 

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

22 designation of its primary State; and 

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

24 issuer’s compliance with all the laws of the pri25 mary State; and 


smartinez on DSKB9S0YB1PROD with BILLS
33 

•HR 3889 IH

1 ‘‘(2) to the insurance commissioner of each sec2 ondary State in which it offers individual health in3 surance coverage, a copy of the issuer’s quarterly fi4 nancial statement submitted to the primary State, 

5 which statement shall be certified by an independent 

6 public accountant and contain a statement of opin7 ion on loss and loss adjustment expense reserves 

8 made by— 

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

10 of Actuaries; or 

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

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

13 Nothing in this section shall be construed to affect the 

14 authority of any Federal or State court to enjoin— 

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

16 insurance coverage by a health insurance issuer to 

17 any person or group who is not eligible for such in18 surance; or 

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

20 insurance coverage that violates the requirements of 

21 the law of a secondary State which are described in 

22 subparagraphs (A) through (H) of section 

23 2796(b)(1). 

24 ‘‘(i) POWER OF SECONDARY STATES TO TAKE AD25 MINISTRATIVE ACTION.—Nothing in this section shall be 


smartinez on DSKB9S0YB1PROD with BILLS
34 

•HR 3889 IH

1 construed to affect the authority of any State to enjoin 

2 conduct in violation of that State’s laws described in sec3 tion 2796(b)(1). 

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

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

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

7 paragraph (2), nothing in this section shall be con8 strued to affect the authority of any State to make 

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

10 State with respect to which a health insurance issuer 

11 is not exempt under subsection (b). 

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

13 If a State seeks an injunction regarding the conduct 

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

15 (h), such injunction must be obtained from a Fed16 eral or State court of competent jurisdiction. 

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

18 section shall affect the authority of any State to bring ac19 tion in any Federal or State court. 

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

21 this section shall be construed to affect the applicability 

22 of State laws generally applicable to persons or corpora23 tions. 

24 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

25 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 


smartinez on DSKB9S0YB1PROD with BILLS
35 

•HR 3889 IH

1 health insurance issuer is offering coverage in a primary 

2 State that does not accommodate residents of secondary 

3 States or does not provide a working mechanism for resi4 dents of a secondary State, and the issuer is offering cov5 erage under this part in such secondary State which has 

6 not adopted a qualified high risk pool as its acceptable 

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

8 the issuer shall, with respect to any individual health in9 surance coverage offered in a secondary State under this 

10 part, comply with the guaranteed availability requirements 

11 for eligible individuals in section 2741. 

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

13 BEFORE ISSUER MAY SELL INTO SECONDARY 

14 STATES. 

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

16 issue individual health insurance coverage in a secondary 

17 State if the State insurance commissioner does not use 

18 a risk-based capital formula for the determination of cap19 ital and surplus requirements for all health insurance 

20 issuers. 

21 ‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE22 DURES. 

23 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur24 ance issuer may not offer, sell, or issue individual health 


smartinez on DSKB9S0YB1PROD with BILLS
36 

•HR 3889 IH

1 insurance coverage in a secondary State under the provi2 sions of this title unless— 

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

4 State have legislation or regulations in place estab5 lishing an independent review process for individuals 

6 who are covered by individual health insurance cov7 erage, or 

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

9 subparagraph (A) are not met with respect to the ei10 ther of such States, the issuer provides an inde11 pendent review mechanism substantially identical (as 

12 determined by the applicable State authority of such 

13 State) to that prescribed in the ‘Health Carrier Ex14 ternal Review Model Act’ of the National Association 

15 of Insurance Commissioners for all individuals who 

16 purchase insurance coverage under the terms of this 

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

18 is conducted by an independent medical reviewer, or 

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

20 requirements of subsection (b) are met. 

21 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL

22 REVIEWERS.—In the case of any independent review 

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

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

25 claim to an independent medical reviewer, or to any 


smartinez on DSKB9S0YB1PROD with BILLS
37 

•HR 3889 IH

1 panel of such reviewers, to conduct independent 

2 medical review, the issuer shall ensure that— 

3 ‘‘(A) each independent medical reviewer 

4 meets the qualifications described in paragraphs 

5 (2) and (3); 

6 ‘‘(B) with respect to each review, each re7 viewer meets the requirements of paragraph (4) 

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

9 panel, meets the requirements described in 

10 paragraph (5); and 

11 ‘‘(C) compensation provided by the issuer 

12 to each reviewer is consistent with paragraph 

13 (6). 

14 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde15 pendent medical reviewer shall be a physician 

16 (allopathic or osteopathic) or health care profes17 sional who— 

18 ‘‘(A) is appropriately credentialed or li19 censed in 1 or more States to deliver health 

20 care services; and 

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

22 the diagnosis, or provides the type of treatment 

23 under review. 

24 ‘‘(3) INDEPENDENCE.— 


smartinez on DSKB9S0YB1PROD with BILLS
38 

•HR 3889 IH

1 ‘‘(A) IN GENERAL.—Subject to subpara2 graph (B), each independent medical reviewer 

3 in a case shall— 

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

5 in paragraph (7)); 

6 ‘‘(ii) not have a material familial, fi7 nancial, or professional relationship with 

8 such a party; and 

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

10 interest with such a party (as determined 

11 under regulations). 

12 ‘‘(B) EXCEPTION.—Nothing in subpara13 graph (A) shall be construed to— 

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

15 the basis of affiliation with the issuer, 

16 from serving as an independent medical re17 viewer if— 

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

19 not reasonably available; 

20 ‘‘(II) the affiliated individual is 

21 not involved in the provision of items 

22 or services in the case under review; 

23 ‘‘(III) the fact of such an affili24 ation is disclosed to the issuer and the 


smartinez on DSKB9S0YB1PROD with BILLS
39 

•HR 3889 IH

1 enrollee (or authorized representative) 

2 and neither party objects; and 

3 ‘‘(IV) the affiliated individual is 

4 not an employee of the issuer and 

5 does not provide services exclusively or 

6 primarily to or on behalf of the issuer; 

7 ‘‘(ii) prohibit an individual who has 

8 staff privileges at the institution where the 

9 treatment involved takes place from serv10 ing as an independent medical reviewer 

11 merely on the basis of such affiliation if 

12 the affiliation is disclosed to the issuer and 

13 the enrollee (or authorized representative), 

14 and neither party objects; or 

15 ‘‘(iii) prohibit receipt of compensation 

16 by an independent medical reviewer from 

17 an entity if the compensation is provided 

18 consistent with paragraph (6). 

19 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

20 IN SAME FIELD.— 

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

22 treatment, or the provision of items or serv23 ices— 

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

25 a practicing physician (allopathic or osteoVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00039 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
40 

•HR 3889 IH

1 pathic) of the same or similar specialty, as 

2 a physician who, acting within the appro3 priate scope of practice within the State in 

4 which the service is provided or rendered, 

5 typically treats the condition, makes the 

6 diagnosis, or provides the type of treat7 ment under review; or 

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

9 professional, the reviewer, or at least 1 

10 member of the review panel, shall be a 

11 practicing non-physician health care pro12 fessional of the same or similar specialty 

13 as the non-physician health care profes14 sional who, acting within the appropriate 

15 scope of practice within the State in which 

16 the service is provided or rendered, typi17 cally treats the condition, makes the diag18 nosis, or provides the type of treatment 

19 under review. 

20 ‘‘(B) PRACTICING DEFINED.—For pur21 poses of this paragraph, the term ‘practicing’ 

22 means, with respect to an individual who is a 

23 physician or other health care professional, that 

24 the individual provides health care services to 


smartinez on DSKB9S0YB1PROD with BILLS
41 

•HR 3889 IH

1 individual patients on average at least 2 days 

2 per week. 

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

4 external review relating to a child, a reviewer shall 

5 have expertise under paragraph (2) in pediatrics. 

6 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA7 TION.—Compensation provided by the issuer to an 

8 independent medical reviewer in connection with a 

9 review under this section shall— 

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

11 ‘‘(B) not be contingent on the decision ren12 dered by the reviewer. 

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

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

15 respect to a denial of a claim under a coverage relat16 ing to an enrollee, any of the following: 

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

18 officer, director, or employee of the issuer. 

19 ‘‘(B) The enrollee (or authorized represent20 ative). 

21 ‘‘(C) The health care professional that pro22 vides the items or services involved in the de23 nial. 


smartinez on DSKB9S0YB1PROD with BILLS
42 

•HR 3889 IH

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

2 services (or treatment) involved in the denial 

3 are provided. 

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

5 other item that is included in the items or serv6 ices involved in the denial. 

7 ‘‘(F) Any other party determined under 

8 any regulations to have a substantial interest in 

9 the denial involved. 

10 ‘‘(8) DEFINITIONS.—For purposes of this sub11 section: 

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

13 means, with respect to health insurance cov14 erage offered by a health insurance issuer, an 

15 individual enrolled with the issuer to receive 

16 such coverage. 

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

18 term ‘health care professional’ means an indi19 vidual who is licensed, accredited, or certified 

20 under State law to provide specified health care 

21 services and who is operating within the scope 

22 of such licensure, accreditation, or certification. 

23 ‘‘SEC. 2799. ENFORCEMENT. 

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

25 respect to specific individual health insurance coverage the 


smartinez on DSKB9S0YB1PROD with BILLS
43 

•HR 3889 IH

1 primary State for such coverage has sole jurisdiction to 

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

3 State and any secondary State. 

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

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

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

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

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

9 initiated by the applicable secondary State authority, the 

10 court of competent jurisdiction shall apply the covered 

11 laws of the primary State. 

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

13 of individual health insurance coverage offered in a sec14 ondary State that fails to comply with the covered laws 

15 of the primary State, the applicable State authority of the 

16 secondary State may notify the applicable State authority 

17 of the primary State.’’. 

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

19 subsection (a) shall apply to individual health insurance 

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

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

22 (c) GAO ONGOING STUDY AND REPORTS.— 

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

24 United States shall conduct an ongoing study conVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00043 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
44 

•HR 3889 IH

1 cerning the effect of the amendment made by sub2 section (a) on— 

3 (A) the number of uninsured and under-in4 sured; 

5 (B) the availability and cost of health in6 surance policies for individuals with pre-existing 

7 medical conditions; 

8 (C) the availability and cost of health in9 surance policies generally; 

10 (D) the elimination or reduction of dif11 ferent types of benefits under health insurance 

12 policies offered in different States; and 

13 (E) cases of fraud or abuse relating to 

14 health insurance coverage offered under such 

15 amendment and the resolution of such cases. 

16 (2) ANNUAL REPORTS.—The Comptroller Gen17 eral shall submit to Congress an annual report, after 

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

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

20 the ongoing study conducted under paragraph (1). 

21 TITLE V—ASSOCIATION HEALTH 

22 PLANS 

23 SEC. 501. SHORT TITLE. 

24 This title may be cited as the ‘‘Small Business Health 

25 Fairness Act of 2009’’. 


smartinez on DSKB9S0YB1PROD with BILLS
45 

•HR 3889 IH

1 SEC. 502. RULES GOVERNING ASSOCIATION HEALTH 

2 PLANS. 

3 (a) IN GENERAL.—Subtitle B of title I of the Em4 ployee Retirement Income Security Act of 1974 is amend5 ed by adding after part 7 the following new part: 

6 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

7 HEALTH PLANS 

8 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

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

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

11 whose sponsor is (or is deemed under this part to be) de12 scribed in subsection (b). 

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

14 plan is described in this subsection if such sponsor— 

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

16 with a constitution and bylaws specifically stating its 

17 purpose and providing for periodic meetings on at 

18 least an annual basis, for substantial purposes other 

19 than that of obtaining or providing medical care; 

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

21 receives the active support of its members and re22 quires for membership payment on a periodic basis 

23 of dues or payments necessary to maintain eligibility 

24 for membership in the sponsor; and 

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

26 or payments, or coverage under the plan on the 


smartinez on DSKB9S0YB1PROD with BILLS
46 

•HR 3889 IH

1 basis of health status-related factors with respect to 

2 the employees of its members (or affiliated mem3 bers), or the dependents of such employees, and does 

4 not condition such dues or payments on the basis of 

5 group health plan participation. 

6 Any sponsor consisting of an association of entities which 

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

8 shall be deemed to be a sponsor described in this sub9 section. 

10 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

11 PLANS. 

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

13 prescribe by regulation a procedure under which, subject 

14 to subsection (b), the applicable authority shall certify as15 sociation health plans which apply for certification as 

16 meeting the requirements of this part. 

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

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

19 health plan that provides at least one benefit option which 

20 does not consist of health insurance coverage, the applica21 ble authority shall certify such plan as meeting the re22 quirements of this part only if the applicable authority is 

23 satisfied that the applicable requirements of this part are 

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

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


smartinez on DSKB9S0YB1PROD with BILLS
47 

•HR 3889 IH

1 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

3 certification under this part is in effect shall meet the ap4 plicable requirements of this part, effective on the date 

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

6 is to commence operations). 

7 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI8 CATION.—The applicable authority may provide by regula9 tion for continued certification of association health plans 

10 under this part. 

11 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

12 PLANS.—The applicable authority shall establish a class 

13 certification procedure for association health plans under 

14 which all benefits consist of health insurance coverage. 

15 Under such procedure, the applicable authority shall pro16 vide for the granting of certification under this part to 

17 the plans in each class of such association health plans 

18 upon appropriate filing under such procedure in connec19 tion with plans in such class and payment of the pre20 scribed fee under section 807(a). 

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

22 HEALTH PLANS.—An association health plan which offers 

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

24 insurance coverage may be certified under this part only 

25 if such plan consists of any of the following: 


smartinez on DSKB9S0YB1PROD with BILLS
48 

•HR 3889 IH

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

2 date of the enactment of the Small Business Health 

3 Fairness Act of 2009, 

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

5 restrict membership to one or more trades and busi6 nesses or industries and whose eligible participating 

7 employers represent a broad cross-section of trades 

8 and businesses or industries, or 

9 ‘‘(3) a plan whose eligible participating employ10 ers represent one or more trades or businesses, or 

11 one or more industries, consisting of any of the fol12 lowing: agriculture; equipment and automobile deal13 erships; barbering and cosmetology; certified public 

14 accounting practices; child care; construction; dance, 

15 theatrical and orchestra productions; disinfecting 

16 and pest control; financial services; fishing; food 

17 service establishments; hospitals; labor organiza18 tions; logging; manufacturing (metals); mining; med19 ical and dental practices; medical laboratories; pro20 fessional consulting services; sanitary services; trans21 portation (local and freight); warehousing; whole22 saling/distributing; or any other trade or business or 

23 industry which has been indicated as having average 

24 or above-average risk or health claims experience by 

25 reason of State rate filings, denials of coverage, proVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00048 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
49 

•HR 3889 IH

1 posed premium rate levels, or other means dem2 onstrated by such plan in accordance with regula3 tions. 

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

5 BOARDS OF TRUSTEES. 

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

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

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

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

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

11 the application for certification under this part. 

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

13 this subsection are met with respect to an association 

14 health plan if the following requirements are met: 

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

16 pursuant to a trust agreement, by a board of trust17 ees which has complete fiscal control over the plan 

18 and which is responsible for all operations of the 

19 plan. 

20 ‘‘(2) RULES OF OPERATION AND FINANCIAL

21 CONTROLS.—The board of trustees has in effect 

22 rules of operation and financial controls, based on a 

23 3-year plan of operation, adequate to carry out the 

24 terms of the plan and to meet all requirements of 

25 this title applicable to the plan. 


smartinez on DSKB9S0YB1PROD with BILLS
50 

•HR 3889 IH

1 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

2 PARTICIPATING EMPLOYERS AND TO CONTRAC3 TORS.— 

4 ‘‘(A) BOARD MEMBERSHIP.— 

5 ‘‘(i) IN GENERAL.—Except as pro6 vided in clauses (ii) and (iii), the members 

7 of the board of trustees are individuals se8 lected from individuals who are the owners, 

9 officers, directors, or employees of the par10 ticipating employers or who are partners in 

11 the participating employers and actively 

12 participate in the business. 

13 ‘‘(ii) LIMITATION.— 

14 ‘‘(I) GENERAL RULE.—Except as 

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

16 no such member is an owner, officer, 

17 director, or employee of, or partner in, 

18 a contract administrator or other 

19 service provider to the plan. 

20 ‘‘(II) LIMITED EXCEPTION FOR

21 PROVIDERS OF SERVICES SOLELY ON

22 BEHALF OF THE SPONSOR.—Officers 

23 or employees of a sponsor which is a 

24 service provider (other than a contract 

25 administrator) to the plan may be 


smartinez on DSKB9S0YB1PROD with BILLS
51 

•HR 3889 IH

1 members of the board if they con2 stitute not more than 25 percent of 

3 the membership of the board and they 

4 do not provide services to the plan 

5 other than on behalf of the sponsor. 

6 ‘‘(III) TREATMENT OF PRO7 VIDERS OF MEDICAL CARE.—In the 

8 case of a sponsor which is an associa9 tion whose membership consists pri10 marily of providers of medical care, 

11 subclause (I) shall not apply in the 

12 case of any service provider described 

13 in subclause (I) who is a provider of 

14 medical care under the plan. 

15 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

16 Clause (i) shall not apply to an association 

17 health plan which is in existence on the 

18 date of the enactment of the Small Busi19 ness Health Fairness Act of 2009. 

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

21 sole authority under the plan to approve appli22 cations for participation in the plan and to con23 tract with a service provider to administer the 

24 day-to-day affairs of the plan. 


smartinez on DSKB9S0YB1PROD with BILLS
52 

•HR 3889 IH

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

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

3 maintained by a franchiser for a franchise network con4 sisting of its franchisees— 

5 ‘‘(1) the requirements of subsection (a) and sec6 tion 801(a) shall be deemed met if such require7 ments would otherwise be met if the franchiser were 

8 deemed to be the sponsor referred to in section 

9 801(b), such network were deemed to be an associa10 tion described in section 801(b), and each franchisee 

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

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

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

14 be deemed met. 

15 The Secretary may by regulation define for purposes of 

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

17 and ‘franchisee’. 

18 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE19 MENTS. 

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

21 requirements of this subsection are met with respect to 

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

23 plan— 

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

25 ‘‘(A) a member of the sponsor, 


smartinez on DSKB9S0YB1PROD with BILLS
53 

•HR 3889 IH

1 ‘‘(B) the sponsor, or 

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

3 with respect to which the requirements of sub4 section (b) are met, 

5 except that, in the case of a sponsor which is a pro6 fessional association or other individual-based asso7 ciation, if at least one of the officers, directors, or 

8 employees of an employer, or at least one of the in9 dividuals who are partners in an employer and who 

10 actively participates in the business, is a member or 

11 such an affiliated member of the sponsor, partici12 pating employers may also include such employer; 

13 and 

14 ‘‘(2) all individuals commencing coverage under 

15 the plan after certification under this part must 

16 be— 

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

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

19 employees of, or partners in, participating em20 ployers; or 

21 ‘‘(B) the beneficiaries of individuals de22 scribed in subparagraph (A). 

23 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM24 PLOYEES.—In the case of an association health plan in 

25 existence on the date of the enactment of the Small BusiVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00053 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
54 

•HR 3889 IH

1 ness Health Fairness Act of 2009, an affiliated member 

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

3 the plan as a participating employer only if— 

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

5 member on the date of certification under this part; 

6 or 

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

8 date of the offering of such coverage, the affiliated 

9 member has not maintained or contributed to a 

10 group health plan with respect to any of its employ11 ees who would otherwise be eligible to participate in 

12 such association health plan. 

13 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re14 quirements of this subsection are met with respect to an 

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

16 no participating employer may provide health insurance 

17 coverage in the individual market for any employee not 

18 covered under the plan which is similar to the coverage 

19 contemporaneously provided to employees of the employer 

20 under the plan, if such exclusion of the employee from cov21 erage under the plan is based on a health status-related 

22 factor with respect to the employee and such employee 

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

24 for coverage under the plan. 


smartinez on DSKB9S0YB1PROD with BILLS
55 

•HR 3889 IH

1 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

2 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI3 PATE.—The requirements of this subsection are met with 

4 respect to an association health plan if— 

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

6 meeting the preceding requirements of this section 

7 are eligible to qualify as participating employers for 

8 all geographically available coverage options, unless, 

9 in the case of any such employer, participation or 

10 contribution requirements of the type referred to in 

11 section 2711 of the Public Health Service Act are 

12 not met; 

13 ‘‘(2) upon request, any employer eligible to par14 ticipate is furnished information regarding all cov15 erage options available under the plan; and 

16 ‘‘(3) the applicable requirements of sections 

17 701, 702, and 703 are met with respect to the plan. 

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

19 DOCUMENTS, CONTRIBUTION RATES, AND 

20 BENEFIT OPTIONS. 

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

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

23 following requirements are met: 

24 ‘‘(1) CONTENTS OF GOVERNING INSTRU25 MENTS.—The instruments governing the plan inVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00055 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
56 

•HR 3889 IH

1 clude a written instrument, meeting the require2 ments of an instrument required under section 

3 402(a)(1), which— 

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

5 serves as the named fiduciary required for plans 

6 under section 402(a)(1) and serves in the ca7 pacity of a plan administrator (referred to in 

8 section 3(16)(A)); 

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

10 is to serve as plan sponsor (referred to in sec11 tion 3(16)(B)); and 

12 ‘‘(C) incorporates the requirements of sec13 tion 806. 

14 ‘‘(2) CONTRIBUTION RATES MUST BE NON15 DISCRIMINATORY.— 

16 ‘‘(A) The contribution rates for any par17 ticipating small employer do not vary on the 

18 basis of any health status-related factor in rela19 tion to employees of such employer or their 

20 beneficiaries and do not vary on the basis of the 

21 type of business or industry in which such em22 ployer is engaged. 

23 ‘‘(B) Nothing in this title or any other pro24 vision of law shall be construed to preclude an 

25 association health plan, or a health insurance 


smartinez on DSKB9S0YB1PROD with BILLS
57 

•HR 3889 IH

1 issuer offering health insurance coverage in 

2 connection with an association health plan, 

3 from— 

4 ‘‘(i) setting contribution rates based 

5 on the claims experience of the plan; or 

6 ‘‘(ii) varying contribution rates for 

7 small employers in a State to the extent 

8 that such rates could vary using the same 

9 methodology employed in such State for 

10 regulating premium rates in the small 

11 group market with respect to health insur12 ance coverage offered in connection with 

13 bona fide associations (within the meaning 

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

15 Service Act), 

16 subject to the requirements of section 702(b) 

17 relating to contribution rates. 

18 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI19 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If 

20 any benefit option under the plan does not consist 

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

22 beginning of the plan year not fewer than 1,000 par23 ticipants and beneficiaries. 

24 ‘‘(4) MARKETING REQUIREMENTS.— 


smartinez on DSKB9S0YB1PROD with BILLS
58 

•HR 3889 IH

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

2 which consists of health insurance coverage is 

3 offered under the plan, State-licensed insurance 

4 agents shall be used to distribute to small em5 ployers coverage which does not consist of 

6 health insurance coverage in a manner com7 parable to the manner in which such agents are 

8 used to distribute health insurance coverage. 

9 ‘‘(B) STATE-LICENSED INSURANCE

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

11 the term ‘State-licensed insurance agents’ 

12 means one or more agents who are licensed in 

13 a State and are subject to the laws of such 

14 State relating to licensure, qualification, test15 ing, examination, and continuing education of 

16 persons authorized to offer, sell, or solicit 

17 health insurance coverage in such State. 

18 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

19 other requirements as the applicable authority deter20 mines are necessary to carry out the purposes of this 

21 part, which shall be prescribed by the applicable au22 thority by regulation. 

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

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

25 nothing in this part or any provision of State law (as deVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00058 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
59 

•HR 3889 IH

1 fined in section 514(c)(1)) shall be construed to preclude 

2 an association health plan, or a health insurance issuer 

3 offering health insurance coverage in connection with an 

4 association health plan, from exercising its sole discretion 

5 in selecting the specific items and services consisting of 

6 medical care to be included as benefits under such plan 

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

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

9 section 731(a)(1) with respect to matters governed by sec10 tion 711, 712, or 713, or (2) any law of the State with 

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

12 plan was initially obtained to the extent that such law pro13 hibits an exclusion of a specific disease from such cov14 erage. 

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

16 FOR SOLVENCY FOR PLANS PROVIDING 

17 HEALTH BENEFITS IN ADDITION TO HEALTH 

18 INSURANCE COVERAGE. 

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

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

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

22 of health insurance coverage; or 

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

24 options which do not consist of health insurance cov25 erage, the plan— 


smartinez on DSKB9S0YB1PROD with BILLS
60 

•HR 3889 IH

1 ‘‘(A) establishes and maintains reserves 

2 with respect to such additional benefit options, 

3 in amounts recommended by the qualified actu4 ary, consisting of— 

5 ‘‘(i) a reserve sufficient for unearned 

6 contributions; 

7 ‘‘(ii) a reserve sufficient for benefit li8 abilities which have been incurred, which 

9 have not been satisfied, and for which risk 

10 of loss has not yet been transferred, and 

11 for expected administrative costs with re12 spect to such benefit liabilities; 

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

14 obligations of the plan; and 

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

16 of error and other fluctuations, taking into 

17 account the specific circumstances of the 

18 plan; and 

19 ‘‘(B) establishes and maintains aggregate 

20 and specific excess/stop loss insurance and sol21 vency indemnification, with respect to such ad22 ditional benefit options for which risk of loss 

23 has not yet been transferred, as follows: 

24 ‘‘(i) The plan shall secure aggregate 

25 excess/stop loss insurance for the plan with 


smartinez on DSKB9S0YB1PROD with BILLS
61 

•HR 3889 IH

1 an attachment point which is not greater 

2 than 125 percent of expected gross annual 

3 claims. The applicable authority may by 

4 regulation provide for upward adjustments 

5 in the amount of such percentage in speci6 fied circumstances in which the plan spe7 cifically provides for and maintains re8 serves in excess of the amounts required 

9 under subparagraph (A). 

10 ‘‘(ii) The plan shall secure specific ex11 cess/stop loss insurance for the plan with 

12 an attachment point which is at least equal 

13 to an amount recommended by the plan’s 

14 qualified actuary. The applicable authority 

15 may by regulation provide for adjustments 

16 in the amount of such insurance in speci17 fied circumstances in which the plan spe18 cifically provides for and maintains re19 serves in excess of the amounts required 

20 under subparagraph (A). 

21 ‘‘(iii) The plan shall secure indem22 nification insurance for any claims which 

23 the plan is unable to satisfy by reason of 

24 a plan termination. 


smartinez on DSKB9S0YB1PROD with BILLS
62 

•HR 3889 IH

1 Any person issuing to a plan insurance described in clause 

2 (i), (ii), or (iii) of subparagraph (B) shall notify the Sec3 retary of any failure of premium payment meriting can4 cellation of the policy prior to undertaking such a cancella5 tion. Any regulations prescribed by the applicable author6 ity pursuant to clause (i) or (ii) of subparagraph (B) may 

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

8 stop loss insurance as the qualified actuary may rec9 ommend, taking into account the specific circumstances 

10 of the plan. 

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

12 RESERVES.—In the case of any association health plan de13 scribed in subsection (a)(2), the requirements of this sub14 section are met if the plan establishes and maintains sur15 plus in an amount at least equal to— 

16 ‘‘(1) $500,000, or 

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

18 $2,000,000) as may be set forth in regulations pre19 scribed by the applicable authority, considering the 

20 level of aggregate and specific excess/stop loss insur21 ance provided with respect to such plan and other 

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

23 projected levels of participation or claims, the nature 

24 of the plan’s liabilities, and the types of assets avail25 able to assure that such liabilities are met. 


smartinez on DSKB9S0YB1PROD with BILLS
63 

•HR 3889 IH

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

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

3 the applicable authority may provide such additional re4 quirements relating to reserves, excess/stop loss insurance, 

5 and indemnification insurance as the applicable authority 

6 considers appropriate. Such requirements may be provided 

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

8 of such plans. 

9 ‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR10 ANCE.—The applicable authority may provide for adjust11 ments to the levels of reserves otherwise required under 

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

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

14 provided with respect to such plan or plans. 

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

16 applicable authority may permit an association health plan 

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

18 of the requirements of this section (except subsection 

19 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar20 rangement, or other financial arrangement as the applica21 ble authority determines to be adequate to enable the plan 

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

23 and is otherwise no less protective of the interests of par24 ticipants and beneficiaries than the requirements for 

25 which it is substituted. The applicable authority may take 


smartinez on DSKB9S0YB1PROD with BILLS
64 

•HR 3889 IH

1 into account, for purposes of this subsection, evidence pro2 vided by the plan or sponsor which demonstrates an as3 sumption of liability with respect to the plan. Such evi4 dence may be in the form of a contract of indemnification, 

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

6 applicable terms of the plan in the form of assessments 

7 of participating employers, security, or other financial ar8 rangement. 

9 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

10 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

11 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO12 CIATION HEALTH PLAN FUND.— 

13 ‘‘(A) IN GENERAL.—In the case of an as14 sociation health plan described in subsection 

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

16 met if the plan makes payments into the Asso17 ciation Health Plan Fund under this subpara18 graph when they are due. Such payments shall 

19 consist of annual payments in the amount of 

20 $5,000, and, in addition to such annual pay21 ments, such supplemental payments as the Sec22 retary may determine to be necessary under 

23 paragraph (2). Payments under this paragraph 

24 are payable to the Fund at the time determined 

25 by the Secretary. Initial payments are due in 


smartinez on DSKB9S0YB1PROD with BILLS
65 

•HR 3889 IH

1 advance of certification under this part. Pay2 ments shall continue to accrue until a plan’s as3 sets are distributed pursuant to a termination 

4 procedure. 

5 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

8 not more than 100 percent of the payment 

9 which was not timely paid shall be payable by 

10 the plan to the Fund. 

11 ‘‘(C) CONTINUED DUTY OF THE SEC12 RETARY.—The Secretary shall not cease to 

13 carry out the provisions of paragraph (2) on ac14 count of the failure of a plan to pay any pay15 ment when due. 

16 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

17 EXCESS/STOP LOSS INSURANCE COVERAGE AND IN18 DEMNIFICATION INSURANCE COVERAGE FOR CER19 TAIN PLANS.—In any case in which the applicable 

20 authority determines that there is, or that there is 

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

22 take necessary corrective actions under section 

23 809(a) with respect to an association health plan de24 scribed in subsection (a)(2); or (B) a termination of 

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


smartinez on DSKB9S0YB1PROD with BILLS
66 

•HR 3889 IH

1 if the applicable authority is not the Secretary, cer2 tifies such determination to the Secretary), the Sec3 retary shall determine the amounts necessary to 

4 make payments to an insurer (designated by the 

5 Secretary) to maintain in force excess/stop loss in6 surance coverage or indemnification insurance cov7 erage for such plan, if the Secretary determines that 

8 there is a reasonable expectation that, without such 

9 payments, claims would not be satisfied by reason of 

10 termination of such coverage. The Secretary shall, to 

11 the extent provided in advance in appropriation 

12 Acts, pay such amounts so determined to the insurer 

13 designated by the Secretary. 

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

15 ‘‘(A) IN GENERAL.—There is established 

16 on the books of the Treasury a fund to be 

17 known as the ‘Association Health Plan Fund’. 

18 The Fund shall be available for making pay19 ments pursuant to paragraph (2). The Fund 

20 shall be credited with payments received pursu21 ant to paragraph (1)(A), penalties received pur22 suant to paragraph (1)(B); and earnings on in23 vestments of amounts of the Fund under sub24 paragraph (B). 


smartinez on DSKB9S0YB1PROD with BILLS
67 

•HR 3889 IH

1 ‘‘(B) INVESTMENT.—Whenever the Sec2 retary determines that the moneys of the fund 

3 are in excess of current needs, the Secretary 

4 may request the investment of such amounts as 

5 the Secretary determines advisable by the Sec6 retary of the Treasury in obligations issued or 

7 guaranteed by the United States. 

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

9 of this section— 

10 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR11 ANCE.—The term ‘aggregate excess/stop loss insur12 ance’ means, in connection with an association 

13 health plan, a contract— 

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

15 minimum standards as the applicable authority 

16 may prescribe by regulation) provides for pay17 ment to the plan with respect to aggregate 

18 claims under the plan in excess of an amount 

19 or amounts specified in such contract; 

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

21 ‘‘(C) which allows for payment of pre22 miums by any third party on behalf of the in23 sured plan. 

24 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR25 ANCE.—The term ‘specific excess/stop loss insurVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00067 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
68 

•HR 3889 IH

1 ance’ means, in connection with an association 

2 health plan, a contract— 

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

4 minimum standards as the applicable authority 

5 may prescribe by regulation) provides for pay6 ment to the plan with respect to claims under 

7 the plan in connection with a covered individual 

8 in excess of an amount or amounts specified in 

9 such contract in connection with such covered 

10 individual; 

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

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

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

16 of this section, the term ‘indemnification insurance’ 

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

18 contract— 

19 ‘‘(1) under which an insurer (meeting such min20 imum standards as the applicable authority may pre21 scribe by regulation) provides for payment to the 

22 plan with respect to claims under the plan which the 

23 plan is unable to satisfy by reason of a termination 

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

25 termination); 


smartinez on DSKB9S0YB1PROD with BILLS
69 

•HR 3889 IH

1 ‘‘(2) which is guaranteed renewable and 

2 noncancellable for any reason (except as the applica3 ble authority may prescribe by regulation); and 

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

5 any third party on behalf of the insured plan. 

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

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

8 health plan, plan assets which meet the fiduciary stand9 ards under part 4 and such additional requirements re10 garding liquidity as the applicable authority may prescribe 

11 by regulation. 

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

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

14 date of the enactment of the Small Business Health 

15 Fairness Act of 2009, the applicable authority shall 

16 establish a Solvency Standards Working Group. In 

17 prescribing the initial regulations under this section, 

18 the applicable authority shall take into account the 

19 recommendations of such Working Group. 

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

21 consist of not more than 15 members appointed by 

22 the applicable authority. The applicable authority 

23 shall include among persons invited to membership 

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

25 following: 


smartinez on DSKB9S0YB1PROD with BILLS
70 

•HR 3889 IH

1 ‘‘(A) a representative of the National Asso2 ciation of Insurance Commissioners; 

3 ‘‘(B) a representative of the American 

4 Academy of Actuaries; 

5 ‘‘(C) a representative of the State govern6 ments, or their interests; 

7 ‘‘(D) a representative of existing self-in8 sured arrangements, or their interests; 

9 ‘‘(E) a representative of associations of the 

10 type referred to in section 801(b)(1), or their 

11 interests; and 

12 ‘‘(F) a representative of multi-employer 

13 plans that are group health plans, or their in14 terests. 

15 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE16 LATED REQUIREMENTS. 

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

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

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

20 an application for certification under this part a filing fee 

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

22 case of the Secretary, to the extent provided in appropria23 tion Acts, for the sole purpose of administering the certifi24 cation procedures applicable with respect to association 

25 health plans. 


smartinez on DSKB9S0YB1PROD with BILLS
71 

•HR 3889 IH

1 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA2 TION FOR CERTIFICATION.—An application for certifi3 cation under this part meets the requirements of this sec4 tion only if it includes, in a manner and form which shall 

5 be prescribed by the applicable authority by regulation, at 

6 least the following information: 

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

8 and addresses of— 

9 ‘‘(A) the sponsor; and 

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

11 of the plan. 

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

13 BUSINESS.—The States in which participants and 

14 beneficiaries under the plan are to be located and 

15 the number of them expected to be located in each 

16 such State. 

17 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro18 vided by the board of trustees that the bonding re19 quirements of section 412 will be met as of the date 

20 of the application or (if later) commencement of op21 erations. 

22 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu23 ments governing the plan (including any bylaws and 

24 trust agreements), the summary plan description, 

25 and other material describing the benefits that will 


smartinez on DSKB9S0YB1PROD with BILLS
72 

•HR 3889 IH

1 be provided to participants and beneficiaries under 

2 the plan. 

3 ‘‘(5) AGREEMENTS WITH SERVICE PRO4 VIDERS.—A copy of any agreements between the 

5 plan and contract administrators and other service 

6 providers. 

7 ‘‘(6) FUNDING REPORT.—In the case of asso8 ciation health plans providing benefits options in ad9 dition to health insurance coverage, a report setting 

10 forth information with respect to such additional 

11 benefit options determined as of a date within the 

12 120-day period ending with the date of the applica13 tion, including the following: 

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

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

16 statement of actuarial opinion, signed by a 

17 qualified actuary, that all applicable require18 ments of section 806 are or will be met in ac19 cordance with regulations which the applicable 

20 authority shall prescribe. 

21 ‘‘(B) ADEQUACY OF CONTRIBUTION

22 RATES.—A statement of actuarial opinion, 

23 signed by a qualified actuary, which sets forth 

24 a description of the extent to which contribution 

25 rates are adequate to provide for the payment 


smartinez on DSKB9S0YB1PROD with BILLS
73 

•HR 3889 IH

1 of all obligations and the maintenance of re2 quired reserves under the plan for the 12- 

3 month period beginning with such date within 

4 such 120-day period, taking into account the 

5 expected coverage and experience of the plan. If 

6 the contribution rates are not fully adequate, 

7 the statement of actuarial opinion shall indicate 

8 the extent to which the rates are inadequate 

9 and the changes needed to ensure adequacy. 

10 ‘‘(C) CURRENT AND PROJECTED VALUE OF

11 ASSETS AND LIABILITIES.—A statement of ac12 tuarial opinion signed by a qualified actuary, 

13 which sets forth the current value of the assets 

14 and liabilities accumulated under the plan and 

15 a projection of the assets, liabilities, income, 

16 and expenses of the plan for the 12-month pe17 riod referred to in subparagraph (B). The in18 come statement shall identify separately the 

19 plan’s administrative expenses and claims. 

20 ‘‘(D) COSTS OF COVERAGE TO BE

21 CHARGED AND OTHER EXPENSES.—A state22 ment of the costs of coverage to be charged, in23 cluding an itemization of amounts for adminis24 tration, reserves, and other expenses associated 

25 with the operation of the plan. 


smartinez on DSKB9S0YB1PROD with BILLS
74 

•HR 3889 IH

1 ‘‘(E) OTHER INFORMATION.—Any other 

2 information as may be determined by the appli3 cable authority, by regulation, as necessary to 

4 carry out the purposes of this part. 

5 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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

7 association health plan shall not be effective unless written 

8 notice of such certification is filed with the applicable 

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

10 of the participants and beneficiaries under the plan are 

11 located. For purposes of this subsection, an individual 

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

13 known address of such individual is located or in which 

14 such individual is employed. 

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

16 of any association health plan certified under this part, 

17 descriptions of material changes in any information which 

18 was required to be submitted with the application for the 

19 certification under this part shall be filed in such form 

20 and manner as shall be prescribed by the applicable au21 thority by regulation. The applicable authority may re22 quire by regulation prior notice of material changes with 

23 respect to specified matters which might serve as the basis 

24 for suspension or revocation of the certification. 


smartinez on DSKB9S0YB1PROD with BILLS
75 

•HR 3889 IH

1 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS2 SOCIATION HEALTH PLANS.—An association health plan 

3 certified under this part which provides benefit options in 

4 addition to health insurance coverage for such plan year 

5 shall meet the requirements of section 103 by filing an 

6 annual report under such section which shall include infor7 mation described in subsection (b)(6) with respect to the 

8 plan year and, notwithstanding section 104(a)(1)(A), shall 

9 be filed with the applicable authority not later than 90 

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

11 as may be prescribed by the applicable authority). The ap12 plicable authority may require by regulation such interim 

13 reports as it considers appropriate. 

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

15 board of trustees of each association health plan which 

16 provides benefits options in addition to health insurance 

17 coverage and which is applying for certification under this 

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

19 of all participants and beneficiaries, a qualified actuary 

20 who shall be responsible for the preparation of the mate21 rials comprising information necessary to be submitted by 

22 a qualified actuary under this part. The qualified actuary 

23 shall utilize such assumptions and techniques as are nec24 essary to enable such actuary to form an opinion as to 


smartinez on DSKB9S0YB1PROD with BILLS
76 

•HR 3889 IH

1 whether the contents of the matters reported under this 

2 part— 

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

4 the experience of the plan and to reasonable expecta5 tions; and 

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

7 anticipated experience under the plan. 

8 The opinion by the qualified actuary shall be made with 

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

10 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER11 MINATION. 

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

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

14 may terminate (upon or at any time after cessation of ac15 cruals in benefit liabilities) only if the board of trustees, 

16 not less than 60 days before the proposed termination 

17 date— 

18 ‘‘(1) provides to the participants and bene19 ficiaries a written notice of intent to terminate stat20 ing that such termination is intended and the pro21 posed termination date; 

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

23 of the plan in connection with such termination in 

24 a manner which will result in timely payment of all 

25 benefits for which the plan is obligated; and 


smartinez on DSKB9S0YB1PROD with BILLS
77 

•HR 3889 IH

1 ‘‘(3) submits such plan in writing to the appli2 cable authority. 

3 Actions required under this section shall be taken in such 

4 form and manner as may be prescribed by the applicable 

5 authority by regulation. 

6 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI7 NATION. 

8 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE9 SERVES.—An association health plan which is certified 

10 under this part and which provides benefits other than 

11 health insurance coverage shall continue to meet the re12 quirements of section 806, irrespective of whether such 

13 certification continues in effect. The board of trustees of 

14 such plan shall determine quarterly whether the require15 ments of section 806 are met. In any case in which the 

16 board determines that there is reason to believe that there 

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

18 applicable authority makes such a determination and so 

19 notifies the board, the board shall immediately notify the 

20 qualified actuary engaged by the plan, and such actuary 

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

22 make such recommendations to the board for corrective 

23 action as the actuary determines necessary to ensure com24 pliance with section 806. Not later than 30 days after re25 ceiving from the actuary recommendations for corrective 


smartinez on DSKB9S0YB1PROD with BILLS
78 

•HR 3889 IH

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

2 such form and manner as the applicable authority may 

3 prescribe by regulation) of such recommendations of the 

4 actuary for corrective action, together with a description 

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

6 to take in response to such recommendations. The board 

7 shall thereafter report to the applicable authority, in such 

8 form and frequency as the applicable authority may speci9 fy to the board, regarding corrective action taken by the 

10 board until the requirements of section 806 are met. 

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

12 which— 

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

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

15 loss insurance or indemnity insurance pursuant to 

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

17 plan which is or has been certified under this part 

18 and is described in section 806(a)(2) to meet the re19 quirements of section 806 and has not been notified 

20 by the board of trustees of the plan that corrective 

21 action has restored compliance with such require22 ments; and 

23 ‘‘(2) the applicable authority determines that 

24 there is a reasonable expectation that the plan will 


smartinez on DSKB9S0YB1PROD with BILLS
79 

•HR 3889 IH

1 continue to fail to meet the requirements of section 

2 806, 

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

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

5 course of the termination, take such actions as the appli6 cable authority may require, including satisfying any 

7 claims referred to in section 806(a)(2)(B)(iii) and recov8 ering for the plan any liability under subsection 

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

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

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

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

13 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL14 VENT ASSOCIATION HEALTH PLANS PRO15 VIDING HEALTH BENEFITS IN ADDITION TO 

16 HEALTH INSURANCE COVERAGE. 

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

18 INSOLVENT PLANS.—Whenever the Secretary determines 

19 that an association health plan which is or has been cer20 tified under this part and which is described in section 

21 806(a)(2) will be unable to provide benefits when due or 

22 is otherwise in a financially hazardous condition, as shall 

23 be defined by the Secretary by regulation, the Secretary 

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

25 United States district court for appointment of the SecVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00079 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
80 

•HR 3889 IH

1 retary as trustee to administer the plan for the duration 

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

3 other interested persons may intervene in the proceedings 

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

5 Secretary trustee if the court determines that the trustee6 ship is necessary to protect the interests of the partici7 pants and beneficiaries or providers of medical care or to 

8 avoid any unreasonable deterioration of the financial con9 dition of the plan. The trusteeship of such Secretary shall 

10 continue until the conditions described in the first sen11 tence of this subsection are remedied or the plan is termi12 nated. 

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

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

15 the power— 

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

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

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

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

20 of the assets and records of the plan to the Sec21 retary as trustee; 

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

23 Secretary holds in accordance with the provisions of 

24 the plan, regulations prescribed by the Secretary, 

25 and applicable provisions of law; 


smartinez on DSKB9S0YB1PROD with BILLS
81 

•HR 3889 IH

1 ‘‘(4) to require the sponsor, the plan adminis2 trator, any participating employer, and any employee 

3 organization representing plan participants to fur4 nish any information with respect to the plan which 

5 the Secretary as trustee may reasonably need in 

6 order to administer the plan; 

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

8 plan and to recover reasonable expenses of the trust9 eeship; 

10 ‘‘(6) to commence, prosecute, or defend on be11 half of the plan any suit or proceeding involving the 

12 plan; 

13 ‘‘(7) to issue, publish, or file such notices, state14 ments, and reports as may be required by the Sec15 retary by regulation or required by any order of the 

16 court; 

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

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

19 liquidate the plan assets, to restore the plan to the 

20 responsibility of the sponsor, or to continue the 

21 trusteeship; 

22 ‘‘(9) to provide for the enrollment of plan par23 ticipants and beneficiaries under appropriate cov24 erage options; and 


smartinez on DSKB9S0YB1PROD with BILLS
82 

•HR 3889 IH

1 ‘‘(10) to do such other acts as may be nec2 essary to comply with this title or any order of the 

3 court and to protect the interests of plan partici4 pants and beneficiaries and providers of medical 

5 care. 

6 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac7 ticable after the Secretary’s appointment as trustee, the 

8 Secretary shall give notice of such appointment to— 

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

10 ‘‘(2) each participant; 

11 ‘‘(3) each participating employer; and 

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

13 which, for purposes of collective bargaining, rep14 resents plan participants. 

15 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in16 consistent with the provisions of this title, or as may be 

17 otherwise ordered by the court, the Secretary, upon ap18 pointment as trustee under this section, shall be subject 

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

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

21 of a fiduciary for purposes of this title. 

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

23 Secretary under this subsection may be filed notwith24 standing the pendency in the same or any other court of 

25 any bankruptcy, mortgage foreclosure, or equity receiverVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00082 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
83 

•HR 3889 IH

1 ship proceeding, or any proceeding to reorganize, conserve, 

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

3 to enforce a lien against property of the plan. 

4 ‘‘(f) JURISDICTION OF COURT.— 

5 ‘‘(1) IN GENERAL.—Upon the filing of an appli6 cation for the appointment as trustee or the issuance 

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

8 application is made shall have exclusive jurisdiction 

9 of the plan involved and its property wherever lo10 cated with the powers, to the extent consistent with 

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

12 States having jurisdiction over cases under chapter 

13 11 of title 11, United States Code. Pending an adju14 dication under this section such court shall stay, and 

15 upon appointment by it of the Secretary as trustee, 

16 such court shall continue the stay of, any pending 

17 mortgage foreclosure, equity receivership, or other 

18 proceeding to reorganize, conserve, or liquidate the 

19 plan, the sponsor, or property of such plan or spon20 sor, and any other suit against any receiver, conser21 vator, or trustee of the plan, the sponsor, or prop22 erty of the plan or sponsor. Pending such adjudica23 tion and upon the appointment by it of the Sec24 retary as trustee, the court may stay any proceeding 

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


smartinez on DSKB9S0YB1PROD with BILLS
84 

•HR 3889 IH

1 sponsor or any other suit against the plan or the 

2 sponsor. 

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

4 may be brought in the judicial district where the 

5 sponsor or the plan administrator resides or does 

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

7 A district court in which such action is brought may 

8 issue process with respect to such action in any 

9 other judicial district. 

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

11 which shall be prescribed by the Secretary, the Secretary 

12 shall appoint, retain, and compensate accountants, actu13 aries, and other professional service personnel as may be 

14 necessary in connection with the Secretary’s service as 

15 trustee under this section. 

16 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

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

18 State may impose by law a contribution tax on an associa19 tion health plan described in section 806(a)(2), if the plan 

20 commenced operations in such State after the date of the 

21 enactment of the Small Business Health Fairness Act of 

22 2009. 

23 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec24 tion, the term ‘contribution tax’ imposed by a State on 


smartinez on DSKB9S0YB1PROD with BILLS
85 

•HR 3889 IH

1 an association health plan means any tax imposed by such 

2 State if— 

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

4 the amount of premiums or contributions, with re5 spect to individuals covered under the plan who are 

6 residents of such State, which are received by the 

7 plan from participating employers located in such 

8 State or from such individuals; 

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

10 rate of any tax imposed by such State on premiums 

11 or contributions received by insurers or health main12 tenance organizations for health insurance coverage 

13 offered in such State in connection with a group 

14 health plan; 

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

16 and 

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

18 the plan is reduced by the amount of any tax or as19 sessment otherwise imposed by the State on pre20 miums, contributions, or both received by insurers or 

21 health maintenance organizations for health insur22 ance coverage, aggregate excess/stop loss insurance 

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

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

25 other insurance related to the provision of medical 


smartinez on DSKB9S0YB1PROD with BILLS
86 

•HR 3889 IH

1 care under the plan, or any combination thereof pro2 vided by such insurers or health maintenance organi3 zations in such State in connection with such plan. 

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

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

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

7 health plan’ has the meaning provided in section 

8 733(a)(1) (after applying subsection (b) of this sec9 tion). 

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

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

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

13 term ‘health insurance coverage’ has the meaning 

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

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

16 ‘health insurance issuer’ has the meaning provided 

17 in section 733(b)(2). 

18 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap19 plicable authority’ means the Secretary, except that, 

20 in connection with any exercise of the Secretary’s 

21 authority regarding which the Secretary is required 

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

23 term means the Secretary, in consultation with such 

24 State. 


smartinez on DSKB9S0YB1PROD with BILLS
87 

•HR 3889 IH

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

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

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

4 ‘‘(7) INDIVIDUAL MARKET.— 

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

6 market’ means the market for health insurance 

7 coverage offered to individuals other than in 

8 connection with a group health plan. 

9 ‘‘(B) TREATMENT OF VERY SMALL

10 GROUPS.— 

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

12 (ii), such term includes coverage offered in 

13 connection with a group health plan that 

14 has fewer than 2 participants as current 

15 employees or participants described in sec16 tion 732(d)(3) on the first day of the plan 

17 year. 

18 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

19 shall not apply in the case of health insur20 ance coverage offered in a State if such 

21 State regulates the coverage described in 

22 such clause in the same manner and to the 

23 same extent as coverage in the small group 

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


smartinez on DSKB9S0YB1PROD with BILLS
88 

•HR 3889 IH

1 the Public Health Service Act) is regulated 

2 by such State. 

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

4 ‘participating employer’ means, in connection with 

5 an association health plan, any employer, if any indi6 vidual who is an employee of such employer, a part7 ner in such employer, or a self-employed individual 

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

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

10 or was covered under such plan in connection with 

11 the status of such individual as such an employee, 

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

13 plan. 

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

15 term ‘applicable State authority’ means, with respect 

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

19 title XXVII of the Public Health Service Act for the 

20 State involved with respect to such issuer. 

21 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali22 fied actuary’ means an individual who is a member 

23 of the American Academy of Actuaries. 

24 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili25 ated member’ means, in connection with a sponsor— 


smartinez on DSKB9S0YB1PROD with BILLS
89 

•HR 3889 IH

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

2 be a member of the sponsor but who elects an 

3 affiliated status with the sponsor, 

4 ‘‘(B) in the case of a sponsor with mem5 bers which consist of associations, a person who 

6 is a member of any such association and elects 

7 an affiliated status with the sponsor, or 

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

9 plan in existence on the date of the enactment 

10 of the Small Business Health Fairness Act of 

11 2009, a person eligible to be a member of the 

12 sponsor or one of its member associations. 

13 ‘‘(12) LARGE EMPLOYER.—The term ‘large em14 ployer’ means, in connection with a group health 

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

16 employed an average of at least 51 employees on 

17 business days during the preceding calendar year 

18 and who employs at least 2 employees on the first 

19 day of the plan year. 

20 ‘‘(13) SMALL EMPLOYER.—The term ‘small em21 ployer’ means, in connection with a group health 

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

23 is not a large employer. 

24 ‘‘(b) RULES OF CONSTRUCTION.— 


smartinez on DSKB9S0YB1PROD with BILLS
90 

•HR 3889 IH

1 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur2 poses of determining whether a plan, fund, or pro3 gram is an employee welfare benefit plan which is an 

4 association health plan, and for purposes of applying 

5 this title in connection with such plan, fund, or pro6 gram so determined to be such an employee welfare 

7 benefit plan— 

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

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

10 the partnership in relation to the partners, and 

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

12 includes any partner in relation to the partner13 ship; and 

14 ‘‘(B) in the case of a self-employed indi15 vidual, the term ‘employer’ (as defined in sec16 tion 3(5)) and the term ‘employee’ (as defined 

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

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

19 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

20 case of any plan, fund, or program which was estab21 lished or is maintained for the purpose of providing 

22 medical care (through the purchase of insurance or 

23 otherwise) for employees (or their dependents) cov24 ered thereunder and which demonstrates to the Sec25 retary that all requirements for certification under 


smartinez on DSKB9S0YB1PROD with BILLS
91 

•HR 3889 IH

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

2 fund, or program if such plan, fund, or program 

3 were a group health plan, such plan, fund, or pro4 gram shall be treated for purposes of this title as an 

5 employee welfare benefit plan on and after the date 

6 of such demonstration.’’. 

7 (b) CONFORMING AMENDMENTS TO PREEMPTION

8 RULES.— 

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

10 1144(b)(6)) is amended by adding at the end the 

11 following new subparagraph: 

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

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

14 of an association health plan which is certified under part 

15 8.’’. 

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

17 is amended— 

18 (A) in subsection (b)(4), by striking ‘‘Sub19 section (a)’’ and inserting ‘‘Subsections (a) and 

20 (d)’’; 

21 (B) in subsection (b)(5), by striking ‘‘sub22 section (a)’’ in subparagraph (A) and inserting 

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

24 (a)(2)(B) and (b) of section 805’’, and by strik25 ing ‘‘subsection (a)’’ in subparagraph (B) and 


smartinez on DSKB9S0YB1PROD with BILLS
92 

•HR 3889 IH

1 inserting ‘‘subsection (a) of this section or sub2 section (a)(2)(B) or (b) of section 805’’; 

3 (C) by redesignating subsection (d) as sub4 section (e); and 

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

6 following new subsection: 

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

8 provisions of this title shall supersede any and all State 

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

10 have the effect of precluding, a health insurance issuer 

11 from offering health insurance coverage in connection with 

12 an association health plan which is certified under part 

13 8. 

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

15 of subsection (b) of this section— 

16 ‘‘(A) In any case in which health insurance cov17 erage of any policy type is offered under an associa18 tion health plan certified under part 8 to a partici19 pating employer operating in such State, the provi20 sions of this title shall supersede any and all laws 

21 of such State insofar as they may preclude a health 

22 insurance issuer from offering health insurance cov23 erage of the same policy type to other employers op24 erating in the State which are eligible for coverage 

25 under such association health plan, whether or not 


smartinez on DSKB9S0YB1PROD with BILLS
93 

•HR 3889 IH

1 such other employers are participating employers in 

2 such plan. 

3 ‘‘(B) In any case in which health insurance cov4 erage of any policy type is offered in a State under 

5 an association health plan certified under part 8 and 

6 the filing, with the applicable State authority (as de7 fined in section 812(a)(9)), of the policy form in 

8 connection with such policy type is approved by such 

9 State authority, the provisions of this title shall su10 persede any and all laws of any other State in which 

11 health insurance coverage of such type is offered, in12 sofar as they may preclude, upon the filing in the 

13 same form and manner of such policy form with the 

14 applicable State authority in such other State, the 

15 approval of the filing in such other State. 

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

17 provisions of this subsection shall be construed, with re18 spect to health insurance issuers or health insurance cov19 erage, to supersede or impair the law of any State— 

20 ‘‘(A) providing solvency standards or similar 

21 standards regarding the adequacy of insurer capital, 

22 surplus, reserves, or contributions, or 

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


smartinez on DSKB9S0YB1PROD with BILLS
94 

•HR 3889 IH

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

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

3 805. 

4 ‘‘(5) For purposes of this subsection, the term ‘asso5 ciation health plan’ has the meaning provided in section 

6 801(a), and the terms ‘health insurance coverage’, ‘par7 ticipating employer’, and ‘health insurance issuer’ have 

8 the meanings provided such terms in section 812, respec9 tively.’’. 

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

11 U.S.C. 1144(b)(6)(A)) is amended— 

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

13 the end; 

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

15 does not provide medical care (within the mean16 ing of section 733(a)(2)),’’ after ‘‘arrange17 ment,’’, and by striking ‘‘title.’’ and inserting 

18 ‘‘title, and’’; and 

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

20 clause: 

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

22 of any other employee welfare benefit plan which is 

23 a multiple employer welfare arrangement and which 

24 provides medical care (within the meaning of section 


smartinez on DSKB9S0YB1PROD with BILLS
95 

•HR 3889 IH

1 733(a)(2)), any law of any State which regulates in2 surance may apply.’’. 

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

4 by paragraph (2)(C)) is amended— 

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

6 ‘‘(1) Except as provided in paragraph (2), noth7 ing’’; and 

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

9 paragraph: 

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

11 on or after the date of the enactment of the Small Busi12 ness Health Fairness Act of 2009 shall be construed to 

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

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

15 the affected section.’’. 

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

17 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

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

19 person serving as the sponsor of an association health plan 

20 under part 8.’’. 

21 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE22 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

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

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

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


smartinez on DSKB9S0YB1PROD with BILLS
96 

•HR 3889 IH

1 include in its summary plan description, in connection 

2 with each benefit option, a description of the form of sol3 vency or guarantee fund protection secured pursuant to 

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

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

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

7 (f) REPORT TO THE CONGRESS REGARDING CERTIFI8 CATION OF SELF-INSURED ASSOCIATION HEALTH

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

10 of Labor shall report to the Committee on Education and 

11 the Workforce of the House of Representatives and the 

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

13 the Senate the effect association health plans have had, 

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

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

16 in section 1 of the Employee Retirement Income Security 

17 Act of 1974 is amended by inserting after the item relat18 ing to section 734 the following new items: 

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘801. Association health plans. 

‘‘802. Certification of association health plans. 

‘‘803. Requirements relating to sponsors and boards of trustees. 

‘‘804. Participation and coverage requirements. 

‘‘805. Other requirements relating to plan documents, contribution rates, and 

benefit options. 

‘‘806. Maintenance of reserves and provisions for solvency for plans providing 

health benefits in addition to health insurance coverage. 

‘‘807. Requirements for application and related requirements. 

‘‘808. Notice requirements for voluntary termination. 

‘‘809. Corrective actions and mandatory termination. 

‘‘810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. 


smartinez on DSKB9S0YB1PROD with BILLS
97 

•HR 3889 IH

‘‘811. State assessment authority. 

‘‘812. Definitions and rules of construction.’’. 

1 SEC. 503. CLARIFICATION OF TREATMENT OF SINGLE EM2 PLOYER ARRANGEMENTS. 

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

4 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend5 ed— 

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

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

8 which the benefit referred to in subparagraph (A) 

9 consists of medical care (as defined in section 

10 812(a)(2)), two or more trades or businesses, wheth11 er or not incorporated, shall be deemed a single em12 ployer for any plan year of such plan, or any fiscal 

13 year of such other arrangement, if such trades or 

14 businesses are within the same control group during 

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

16 period,’’; 

17 (2) in clause (iii), by striking ‘‘(iii) the deter18 mination’’ and inserting the following: 

19 ‘‘(iii)(I) in any case in which the benefit re20 ferred to in subparagraph (A) consists of medical 

21 care (as defined in section 812(a)(2)), the deter22 mination of whether a trade or business is under 

23 ‘common control’ with another trade or business 

24 shall be determined under regulations of the SecVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00097 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
98 

•HR 3889 IH

1 retary applying principles consistent and coextensive 

2 with the principles applied in determining whether 

3 employees of two or more trades or businesses are 

4 treated as employed by a single employer under sec5 tion 4001(b), except that, for purposes of this para6 graph, an interest of greater than 25 percent may 

7 not be required as the minimum interest necessary 

8 for common control, or 

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

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

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

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

13 new clause: 

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

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

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

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

18 provided to employees of two or more employers, the 

19 arrangement shall be treated as having only one par20 ticipating employer if, after the application of clause 

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

22 former employees of any one participating employer 

23 and who are covered under the arrangement is 

24 greater than 75 percent of the aggregate number of 

25 all individuals who are employees or former employVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00098 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
99 

•HR 3889 IH

1 ees of participating employers and who are covered 

2 under the arrangement,’’. 

3 SEC. 504. ENFORCEMENT PROVISIONS RELATING TO ASSO4 CIATION HEALTH PLANS. 

5 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

6 MISREPRESENTATIONS.—Section 501 of the Employee 

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

8 is amended— 

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

10 (2) by adding at the end the following new sub11 section: 

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

13 any employee, any employee’s beneficiary, any employer, 

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

15 established or maintained for the purpose of offering or 

16 providing any benefit described in section 3(1) to employ17 ees or their beneficiaries as— 

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

19 been certified under part 8; 

20 ‘‘(2) having been established or maintained 

21 under or pursuant to one or more collective bar22 gaining agreements which are reached pursuant to 

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

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

25 paragraph Fourth of section 2 of the Railway Labor 


smartinez on DSKB9S0YB1PROD with BILLS
100 

•HR 3889 IH

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

2 reached pursuant to labor-management negotiations 

3 under similar provisions of State public employee re4 lations laws; or 

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

6 section 3(40)(A)(I), 

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

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

9 both.’’. 

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

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

12 end the following new subsection: 

13 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE14 SIST ORDERS.— 

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

16 upon application by the Secretary showing the oper17 ation, promotion, or marketing of an association 

18 health plan (or similar arrangement providing bene19 fits consisting of medical care (as defined in section 

20 733(a)(2))) that— 

21 ‘‘(A) is not certified under part 8, is sub22 ject under section 514(b)(6) to the insurance 

23 laws of any State in which the plan or arrange24 ment offers or provides benefits, and is not liVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00100 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
101 

•HR 3889 IH

1 censed, registered, or otherwise approved under 

2 the insurance laws of such State; or 

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

4 under part 8 and is not operating in accordance 

5 with the requirements under part 8 for such 

6 certification, 

7 a district court of the United States shall enter an 

8 order requiring that the plan or arrangement cease 

9 activities. 

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

11 apply in the case of an association health plan or 

12 other arrangement if the plan or arrangement shows 

13 that— 

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

15 paragraph (1) consist of health insurance cov16 erage; and 

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

18 the plan or arrangement offers or provides ben19 efits, the plan or arrangement is operating in 

20 accordance with applicable State laws that are 

21 not superseded under section 514. 

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

23 court may grant such additional equitable relief, in24 cluding any relief available under this title, as it 

25 deems necessary to protect the interests of the pubVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00101 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
102 

•HR 3889 IH

1 lic and of persons having claims for benefits against 

2 the plan.’’. 

3 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.— 

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

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

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

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

8 each association health plan which is or has been certified 

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

10 named fiduciary (as applicable) to ensure that the require11 ments of this section are met in connection with claims 

12 filed under the plan.’’. 

13 SEC. 505. COOPERATION BETWEEN FEDERAL AND STATE 

14 AUTHORITIES. 

15 Section 506 of the Employee Retirement Income Se16 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

17 at the end the following new subsection: 

18 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

19 TO ASSOCIATION HEALTH PLANS.— 

20 ‘‘(1) AGREEMENTS WITH STATES.—The Sec21 retary shall consult with the State recognized under 

22 paragraph (2) with respect to an association health 

23 plan regarding the exercise of— 


smartinez on DSKB9S0YB1PROD with BILLS
103 

•HR 3889 IH

1 ‘‘(A) the Secretary’s authority under sec2 tions 502 and 504 to enforce the requirements 

3 for certification under part 8; and 

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

5 association health plans under part 8 in accord6 ance with regulations of the Secretary applica7 ble to certification under part 8. 

8 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

9 STATE.—In carrying out paragraph (1), the Sec10 retary shall ensure that only one State will be recog11 nized, with respect to any particular association 

12 health plan, as the State with which consultation is 

13 required. In carrying out this paragraph— 

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

15 health insurance coverage (as defined in section 

16 812(a)(3)), such State shall be the State with 

17 which filing and approval of a policy type of18 fered by the plan was initially obtained, and 

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

20 take into account the places of residence of the 

21 participants and beneficiaries under the plan 

22 and the State in which the trust is main23 tained.’’. 


smartinez on DSKB9S0YB1PROD with BILLS
104 

•HR 3889 IH

1 SEC. 506. EFFECTIVE DATE AND TRANSITIONAL AND 

2 OTHER RULES. 

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

4 this Act shall take effect 1 year after the date of the enact5 ment of this Act. The Secretary of Labor shall first issue 

6 all regulations necessary to carry out the amendments 

7 made by this Act within 1 year after the date of the enact8 ment of this Act. 

9 (b) TREATMENT OF CERTAIN EXISTING HEALTH

10 BENEFITS PROGRAMS.— 

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

12 the date of the enactment of this Act, an arrange13 ment is maintained in a State for the purpose of 

14 providing benefits consisting of medical care for the 

15 employees and beneficiaries of its participating em16 ployers, at least 200 participating employers make 

17 contributions to such arrangement, such arrange18 ment has been in existence for at least 10 years, and 

19 such arrangement is licensed under the laws of one 

20 or more States to provide such benefits to its par21 ticipating employers, upon the filing with the appli22 cable authority (as defined in section 812(a)(5) of 

23 the Employee Retirement Income Security Act of 

24 1974 (as amended by this subtitle)) by the arrange25 ment of an application for certification of the arVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00104 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
105 

•HR 3889 IH

1 rangement under part 8 of subtitle B of title I of 

2 such Act— 

3 (A) such arrangement shall be deemed to 

4 be a group health plan for purposes of title I 

5 of such Act; 

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

7 and 803(a) of the Employee Retirement Income 

8 Security Act of 1974 shall be deemed met with 

9 respect to such arrangement; 

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

11 such Act shall be deemed met, if the arrange12 ment is operated by a board of directors 

13 which— 

14 (i) is elected by the participating em15 ployers, with each employer having one 

16 vote; and 

17 (ii) has complete fiscal control over 

18 the arrangement and which is responsible 

19 for all operations of the arrangement; 

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

21 such Act shall be deemed met with respect to 

22 such arrangement; and 

23 (E) the arrangement may be certified by 

24 any applicable authority with respect to its opVerDate Nov 24 2008 03:46 Oct 22, 2009 Jkt 089200 PO 00000 Frm 00105 Fmt 6652 Sfmt 6201 E:\BILLS\H3889.IH H3889

smartinez on DSKB9S0YB1PROD with BILLS
106 

•HR 3889 IH

1 erations in any State only if it operates in such 

2 State on the date of certification. 

3 The provisions of this subsection shall cease to apply 

4 with respect to any such arrangement at such time 

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

6 applicable requirements of this subsection are not 

7 met with respect to such arrangement. 

8 (2) DEFINITIONS.—For purposes of this sub9 section, the terms ‘‘group health plan’’, ‘‘medical 

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

11 meanings provided in section 812 of the Employee 

12 Retirement Income Security Act of 1974, except 

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

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

15 reference to an arrangement referred to in this sub16 section. 

Æ 


smartinez on DSKB9S0YB1PROD with BILLS