```

[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4038 Introduced in House (IH)]

111th CONGRESS
  1st Session
                                H. R. 4038

To take meaningful steps to lower health care costs and increase access 
 to health insurance coverage without raising taxes, cutting Medicare 
 benefits for seniors, adding to the national deficit, intervening in 
 the doctor-patient relationship, or instituting a government takeover 
                            of health care.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            November 6, 2009

    Mr. Camp (for himself, Mr. Boehner, Mr. Cantor, Mr. Pence, Mr. 
  McCotter, Mr. Carter, Mr. Sessions, Mr. McCarthy of California, Mr. 
  Blunt, Mr. Kline of Minnesota, Mr. Barton of Texas, Mr. Dreier, Mr. 
 Herger, Mr. Tiberi, Mr. Davis of Kentucky, Mr. Sam Johnson of Texas, 
   Mr. Boustany, Mr. Scalise, Mr. Brady of Texas, Mr. Reichert, Mr. 
    Roskam, Mr. Linder, Mr. Stearns, and Mr. Buyer) introduced the 
   following bill; which was referred to the Committee on Energy and 
    Commerce, and in addition to the Committees on Ways and Means, 
Education and Labor, and the Judiciary, for a period to be subsequently 
   determined by the Speaker, in each case for consideration of such 
 provisions as fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL

 
To take meaningful steps to lower health care costs and increase access 
 to health insurance coverage without raising taxes, cutting Medicare 
 benefits for seniors, adding to the national deficit, intervening in 
 the doctor-patient relationship, or instituting a government takeover 
                            of health care.

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

SECTION 1. SHORT TITLE; PURPOSE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Common Sense 
Health Care Reform and Affordability Act''.
    (b) Purpose.--The purpose of this Act is to take meaningful steps 
to lower health care costs and increase access to health insurance 
coverage (especially for individuals with preexisting conditions) 
without--
            (1) raising taxes;
            (2) cutting Medicare benefits for seniors;
            (3) adding to the national deficit;
            (4) intervening in the doctor-patient relationship; or
            (5) instituting a government takeover of health care.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; purpose; table of contents.
 DIVISION A--MAKING HEALTH CARE COVERAGE AFFORDABLE FOR EVERY AMERICAN

TITLE I--ENSURING COVERAGE FOR INDIVIDUALS WITH PREEXISTING CONDITIONS 
                     AND MULTIPLE HEALTH CARE NEEDS

Sec. 101. Establish universal access programs to improve high risk 
                            pools and reinsurance markets.
Sec. 102. Elimination of certain requirements for guaranteed 
                            availability in individual market.
Sec. 103. No annual or lifetime spending caps.
Sec. 104. Preventing unjust cancellation of insurance coverage.
  TITLE II--REDUCING HEALTH CARE PREMIUMS AND THE NUMBER OF UNINSURED 
                               AMERICANS

Sec. 111. State innovation programs.
Sec. 112. Health plan finders.
Sec. 113. Administrative simplification.
              DIVISION B--IMPROVING ACCESS TO HEALTH CARE

   TITLE I--EXPANDING ACCESS AND LOWERING COSTS FOR SMALL BUSINESSES

Sec. 201. Rules governing association health plans.
Sec. 202. Clarification of treatment of single employer arrangements.
Sec. 203. Enforcement provisions relating to association health plans.
Sec. 204. Cooperation between Federal and State authorities.
Sec. 205. Effective date and transitional and other rules.
              TITLE II--TARGETED EFFORTS TO EXPAND ACCESS

Sec. 211. Extending coverage of dependents.
Sec. 212. Allowing auto-enrollment for employer sponsored coverage.
 TITLE III--EXPANDING CHOICES BY ALLOWING AMERICANS TO BUY HEALTH CARE 
                      COVERAGE ACROSS STATE LINES

Sec. 221. Interstate purchasing of health insurance.
              TITLE IV--IMPROVING HEALTH SAVINGS ACCOUNTS

Sec. 231. Saver's credit for contributions to health savings accounts.
Sec. 232. HSA funds for premiums for high deductible health plans.
Sec. 233. Requiring greater coordination between HDHP administrators 
                            and HSA account administrators so that 
                            enrollees can enroll in both at the same 
                            time.
Sec. 234. Special rule for certain medical expenses incurred before 
                            establishment of account.
           DIVISION C--ENACTING REAL MEDICAL LIABILITY REFORM

Sec. 301. Encouraging speedy resolution of claims.
Sec. 302. Compensating patient injury.
Sec. 303. Maximizing patient recovery.
Sec. 304. Additional health benefits.
Sec. 305. Punitive damages.
Sec. 306. Authorization of payment of future damages to claimants in 
                            health care lawsuits.
Sec. 307. Definitions.
Sec. 308. Effect on other laws.
Sec. 309. State flexibility and protection of states' rights.
Sec. 310. Applicability; effective date.
         DIVISION D--PROTECTING THE DOCTOR-PATIENT RELATIONSHIP

Sec. 401. Rule of construction.
Sec. 402. Repeal of Federal Coordinating Council for Comparative 
                            Effectiveness Research.
      DIVISION E--INCENTIVIZING WELLNESS AND QUALITY IMPROVEMENTS

Sec. 501. Incentives for prevention and wellness programs.
                    DIVISION F--PROTECTING TAXPAYERS

Sec. 601. Provide full funding to HHS OIG and HCFAC.
Sec. 602. Prohibiting taxpayer funded abortions and conscience 
                            protections.
Sec. 603. Improved enforcement of the Medicare and Medicaid secondary 
                            payer provisions.
Sec. 604. Strengthen Medicare provider enrollment standards and 
                            safeguards.
Sec. 605. Tracking banned providers across State lines.
         DIVISION G--PATHWAY FOR BIOSIMILAR BIOLOGICAL PRODUCTS

Sec. 701. Licensure pathway for biosimilar biological products.
Sec. 702. Fees relating to biosimilar biological products.
Sec. 703. Amendments to certain patent provisions.

 DIVISION A--MAKING HEALTH CARE COVERAGE AFFORDABLE FOR EVERY AMERICAN

TITLE I--ENSURING COVERAGE FOR INDIVIDUALS WITH PREEXISTING CONDITIONS 
                     AND MULTIPLE HEALTH CARE NEEDS

SEC. 101. ESTABLISH UNIVERSAL ACCESS PROGRAMS TO IMPROVE HIGH RISK 
              POOLS AND REINSURANCE MARKETS.

    (a) State Requirement.--
            (1) In general.--Not later than January 1, 2010, each State 
        shall--
                    (A) subject to paragraph (3), operate--
                            (i) a qualified State reinsurance program 
                        described in subsection (b); or
                            (ii) qualifying State high risk pool 
                        described in subsection (c)(1); and
                    (B) subject to paragraph (3), apply to the 
                operation of such a program from State funds an amount 
                equivalent to the portion of State funds derived from 
                State premium assessments (as defined by the Secretary) 
                that are not otherwise used on State health care 
                programs.
            (2) Relation to current qualified high risk pool program.--
                    (A) States not operating a qualified high risk 
                pool.--In the case of a State that is not operating a 
                current section 2745 qualified high risk pool as of the 
                date of the enactment of this Act--
                            (i) the State may only meet the requirement 
                        of paragraph (1) through the operation of a 
                        qualified State reinsurance program described 
                        in subsection (b); and
                            (ii) the State's operation of such a 
                        reinsurance program shall be treated, for 
                        purposes of section 2745 of the Public Health 
                        Service Act, as the operation of a qualified 
                        high risk pool described in such section.
                    (B) State operating a qualified high risk pool.--In 
                the case of a State that is operating a current section 
                2745 qualified high risk pool as of the date of the 
                enactment of this Act--
                            (i) as of January 1, 2010, such a pool 
                        shall not be treated as a qualified high risk 
                        pool under section 2745 of the Public Health 
                        Service Act unless the pool is a qualifying 
                        State high risk pool described in subsection 
                        (c)(1); and
                            (ii) the State may use premium assessment 
                        funds described in paragraph (1)(B) to 
                        transition from operation of such a pool to 
                        operation of a qualified State reinsurance 
                        program described in subsection (b).
            (3) Application of funds.--If the program or pool operated 
        under paragraph (1)(A) is in strong fiscal health, as 
        determined in accordance with standards established by the 
        National Association of Insurance Commissioners and as approved 
        by the State Insurance Commissioner involved, the requirement 
        of paragraph (1)(B) shall be deemed to be met.
    (b) Qualified State Reinsurance Program.--
            (1) In general.--For purposes of this section, a 
        ``qualified State reinsurance program'' means a program 
        operated by a State program that provides reinsurance for 
        health insurance coverage offered in the small group market in 
        accordance with the model for such a program established (as of 
        the date of the enactment of this Act).
            (2) Form of program.--A qualified State reinsurance program 
        may provide reinsurance--
                    (A) on a prospective or retrospective basis; and
                    (B) on a basis that protects health insurance 
                issuers against the annual aggregate spending of their 
                enrollees as well as purchase protection against 
                individual catastrophic costs.
            (3) Satisfaction of hipaa requirement.--A qualified State 
        reinsurance program shall be deemed, for purposes of section 
        2745 of the Public Health Service Act, to be a qualified high 
        risk pool under such section.
    (c) Qualifying State High Risk Pool.--
            (1) In general.--A qualifying State high risk pool 
        described in this subsection means a current section 2745 
        qualified high risk pool that meets the following requirements:
                    (A) The pool must provide at least two coverage 
                options, one of which must be a high deductible health 
                plan coupled with a health savings account.
                    (B) The pool must be funded with a stable funding 
                source.
                    (C) The pool must eliminate any waiting lists so 
                that all eligible residents who are seeking coverage 
                through the pool should be allowed to receive coverage 
                through the pool.
                    (D) The pool must allow for coverage of individuals 
                who, but for the 24-month disability waiting period 
                under section 226(b) of the Social Security Act, would 
                be eligible for Medicare during the period of such 
                waiting period.
                    (E) The pool must limit the pool premiums to no 
                more than 150 percent of the average premium for 
                applicable standard risk rates in that State.
                    (F) The pool must conduct education and outreach 
                initiatives so that residents and brokers understand 
                that the pool is available to eligible residents.
                    (G) The pool must provide coverage for preventive 
                services and disease management for chronic diseases.
            (2) Verification of citizenship or alien qualification.--
                    (A) In general.--Notwithstanding any other 
                provision of law, only citizens and nationals of the 
                United States shall be eligible to participate in a 
                qualifying State high risk pool that receives funds 
                under section 2745 of the Public Health Service Act or 
                this section.
                    (B) Condition of participation.--As a condition of 
                a State receiving such funds, the Secretary shall 
                require the State to certify, to the satisfaction of 
                the Secretary, that such State requires all applicants 
                for coverage in the qualifying State high risk pool to 
                provide satisfactory documentation of citizenship or 
                nationality in a manner consistent with section 1903(x) 
                of the Social Security Act.
                    (C) Records.--The Secretary shall keep sufficient 
                records such that a determination of citizenship or 
                nationality only has to be made once for any individual 
                under this paragraph.
            (3) Relation to section 2745.--As of January 1, 2010, a 
        pool shall not qualify as qualified high risk pool under 
        section 2745 of the Public Health Service Act unless the pool 
        is a qualifying State high risk pool described in paragraph 
        (1).
    (d) Waivers.--In order to accommodate new and innovative programs, 
the Secretary may waive such requirements of this section for qualified 
State reinsurance programs and for qualifying State high risk pools as 
the Secretary deems appropriate.
    (e) Funding.--In addition to any other amounts appropriated, there 
is appropriated to carry out section 2745 of the Public Health Service 
Act (including through a program or pool described in subsection 
(a)(1))--
            (1) $15,000,000,000 for the period of fiscal years 2010 
        through 2019; and
            (2) an additional $10,000,000,000 for the period of fiscal 
        years 2015 through 2019.
    (f) Definitions.--In this section:
            (1) Health insurance coverage; health insurance issuer.--
        The terms ``health insurance coverage'' and ``health insurance 
        issuer'' have the meanings given such terms in section 2791 of 
        the Public Health Service Act.
            (2) Current section 2745 qualified high risk pool.--The 
        term ``current section 2745 qualified high risk pool'' has the 
        meaning given the term ``qualified high risk pool'' under 
        section 2745(g) of the Public Health Service Act as in effect 
        as of the date of the enactment of this Act.
            (3) Secretary.--The term ``Secretary'' means Secretary of 
        Health and Human Services.
            (4) Standard risk rate.--The term ``standard risk rate'' 
        means a rate that--
                    (A) is determined under the State high risk pool by 
                considering the premium rates charged by other health 
                insurance issuers offering health insurance coverage to 
                individuals in the insurance market served;
                    (B) is established using reasonable actuarial 
                techniques; and
                    (C) reflects anticipated claims experience and 
                expenses for the coverage involved.
            (5) State.--The term ``State'' means any of the 50 States 
        or the District of Columbia.

SEC. 102. ELIMINATION OF CERTAIN REQUIREMENTS FOR GUARANTEED 
              AVAILABILITY IN INDIVIDUAL MARKET.

    (a) In General.--Section 2741(b) of the Public Health Service Act 
(42 U.S.C. 300gg-41(b)) is amended--
            (1) in paragraph (1)--
                    (A) by striking ``(1)(A)'' and inserting ``(1)''; 
                and
                    (B) by striking ``and (B)'' and all that follows up 
                to the semicolon at the end;
            (2) by adding ``and'' at the end of paragraph (2);
            (3) in paragraph (3)--
                    (A) by striking ``(1)(A)'' and inserting ``(1)''; 
                and
                    (B) by striking the semicolon at the end and 
                inserting a period; and
            (4) by striking paragraphs (4) and (5).
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 103. NO ANNUAL OR LIFETIME SPENDING CAPS.

    Notwithstanding any other provision of law, a health insurance 
issuer (including an entity licensed to sell insurance with respect to 
a State or group health plan) may not apply an annual or lifetime 
aggregate spending cap on any health insurance coverage or plan offered 
by such issuer.

SEC. 104. PREVENTING UNJUST CANCELLATION OF INSURANCE COVERAGE.

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

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

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

  TITLE II--REDUCING HEALTH CARE PREMIUMS AND THE NUMBER OF UNINSURED 
                               AMERICANS

SEC. 111. STATE INNOVATION PROGRAMS.

    (a) Programs That Reduce the Cost of Health Insurance Premiums.--
            (1) Payments to states.--
                    (A) For premium reductions in the small group 
                market.--If the Secretary determines that a State has 
                reduced the average per capita premium for health 
                insurance coverage in the small group market in year 3, 
                in year 6, or year 9 (as defined in subsection (c)) 
                below the premium baseline for such year (as defined 
                paragraph (2)), the Secretary shall pay the State an 
                amount equal to the product of--
                            (i) bonus premium percentage (as defined in 
                        paragraph (3)) for the State, market, and year; 
                        and
                            (ii) the maximum State premium payment 
                        amount (as defined in paragraph (4)) for the 
                        State, market, and year
                    (B) For premium reductions in the individual 
                market.--If the Secretary determines that a State has 
                reduced the average per capita premium for health 
                insurance coverage in the individual market in year 3, 
                in year 6, or in year 9 below the premium baseline for 
                such year, the Secretary shall pay the State an amount 
                equal to the product of--
                            (i) bonus premium percentage for the State, 
                        market, and year; and
                            (ii) the maximum State premium payment 
                        amount for the State, market, and year.
            (2) Premium baseline.--For purposes of this subsection, the 
        term ``premium baseline'' means, for a market in a State--
                    (A) for year 1, the average per capita premiums for 
                health insurance coverage in such market in the State 
                in such year; or
                    (B) for a subsequent year, the baseline for the 
                market in the State for the previous year under this 
                paragraph increased by a percentage specified in 
                accordance with a formula established by the Secretary, 
                in consultation with the Congressional Budget Office 
                and the Bureau of the Census, that takes into account 
                at least the following:
                            (i) Growth factor.--The inflation in the 
                        costs of inputs to health care services in the 
                        year.
                            (ii) Historic premium growth rates.--
                        Historic growth rates, during the 10 years 
                        before year 1, of per capita premiums for 
                        health insurance coverage.
                            (iii) Demographic considerations.--Historic 
                        average changes in the demographics of the 
                        population covered that impact on the rate of 
                        growth of per capita health care costs.
            (3) Bonus premium percentage defined.--
                    (A) In general.--For purposes of this subsection, 
                the term ``bonus premium percentage'' means, for the 
                small group market or individual market in a State for 
                a year, such percentage as determined in accordance 
                with the following table based on the State's premium 
                performance level (as defined in subparagraph (B)) for 
                such market and year:

----------------------------------------------------------------------------------------------------------------
   The bonus
    premium        For year 3 if the premium        For year 6 if the premium        For year 9 if the premium
percentage for   performance level of the State   performance level of the State  performance level of the State
 a State is--                 is--                             is--                            is--
----------------------------------------------------------------------------------------------------------------
  100 percent   at least 8.5%                    at least 11%                     at least 13.5%
----------------------------------------------------------------------------------------------------------------
   50 percent   at least 6.38%, but less than    at least 10.38%, but less than   at least 12.88%, but less than
                 8.5%                             11%                              13.5%
----------------------------------------------------------------------------------------------------------------
   25 percent   at least 4.25%, but less than     at least 9.75%, but less than   at least 12.25%, but less than
                 6.38%                            10.38%                           12.88%
----------------------------------------------------------------------------------------------------------------
    0 percent   less than 4.25%                  less than 9.75%                  less than 12.25%.
----------------------------------------------------------------------------------------------------------------

                    (B) Premium performance level.--For purposes of 
                this subsection, the term ``premium performance level'' 
                means, for a State, market, and year, the percentage 
                reduction in the average per capita premiums for health 
                insurance coverage for the State, market, and year, as 
                compared to the premium baseline for such State, 
                market, and year.
            (4) Maximum state premium payment amount defined.--For 
        purposes of this subsection, the term ``maximum State premium 
        payment amount'' means, for a State for the small group market 
        or the individual market for a year, the product of--
                    (A) the proportion (as determined by the 
                Secretary), of the number of nonelderly individuals 
                lawfully residing in all the States who are enrolled in 
                health insurance coverage in the respective market in 
                the year, who are residents of the State; and
                    (B) the amount available for obligation from 
                amounts appropriated under subsection (d) for such 
                market with respect to performance in such year.
            (5) Methodology for calculating average per capita 
        premiums.--
                    (A) Establishment.--The Secretary shall establish, 
                by rule and consistent with this subsection, a 
                methodology for computing the average per capita 
                premiums for health insurance coverage for the small 
                group market and for the individual market in each 
                State for each year beginning with year 1.
                    (B) Adjustments.--Under such methodology, the 
                Secretary shall provide for the following adjustments 
                (in a manner determined appropriate by the Secretary):
                            (i) Exclusion of illegal aliens.--An 
                        adjustment so as not to take into account 
                        enrollees who are not lawfully present in the 
                        United States and their premium costs.
                            (ii) Treating state premium subsidies as 
                        premium costs.--An adjustment so as to increase 
                        per capita premiums to remove the impact of 
                        premium subsidies made directly by a State to 
                        reduce health insurance premiums.
            (6) Conditions of payment.--As a condition of receiving a 
        payment under paragraph (1), a State must agree to submit 
        aggregate, non-individually identifiable data to the Secretary, 
        in a form and manner specified by the Secretary, for use by the 
        Secretary to determine the State's premium baseline and premium 
        performance level for purposes of this subsection.
    (b) Programs That Reduce the Number of Uninsured.--
            (1) In general.--If the Secretary determines that a State 
        has reduced the percentage of uninsured nonelderly residents in 
        year 5, year 7, or year 9, below the uninsured baseline (as 
        defined in paragraph (2)) for the State for the year, the 
        Secretary shall pay the State an amount equal to the product 
        of--
                    (A) bonus uninsured percentage (as defined in 
                paragraph (3)) for the State and year; and
                    (B) the maximum uninsured payment amount (as 
                defined in paragraph (4)) for the State and year.
            (2) Uninsured baseline.--
                    (A) In general.--For purposes of this subsection, 
                and subject to subparagraph (B), the term ``uninsured 
                baseline'' means, for a State, the percentage of 
                nonelderly residents in the State who are uninsured in 
                year 1.
                    (B) Adjustment.--The Secretary may, at the written 
                request of a State, adjust the uninsured baseline for 
                States for a year to take into account unanticipated 
                and exceptional changes, such as an unanticipated 
                migration, of nonelderly individuals into, or out of, 
                States in a manner that does not reflect substantially 
                the proportion of uninsured nonelderly residents in the 
                States involved in year 1. Any such adjustment shall 
                only be done in a manner that does not result in the 
                average of the uninsured baselines for nonelderly 
                residents for all States being changed.
            (3) Bonus uninsured percentage.--
                    (A) Bonus uninsured percentage.--For purposes of 
                this subsection, the term ``bonus uninsured 
                percentage'' means, for a State for a year, such 
                percentage as determined in accordance with the 
                following table, based on the uninsured performance 
                level (as defined in subparagraph (B)) for such State 
                and year:

----------------------------------------------------------------------------------------------------------------
   The bonus
   uninsured      For year 5 if the uninsured      For year 7 if the uninsured      For year 9 if the uninsured
percentage for   performance level of the State   performance level of the State  performance level of the State
 a State is--                 is--                             is--                            is--
----------------------------------------------------------------------------------------------------------------
  100 percent   at least 10%                     at least 15%                     at least 20%
----------------------------------------------------------------------------------------------------------------
   50 percent   at least 7.5% but less than 10%  at least 13.75% but less than    at least 18.75% but less than
                                                  15%                              20%
----------------------------------------------------------------------------------------------------------------
   25 percent   at least 5% but less than 7.5%   at least 12.5% but less than     at least 17.5% but less than
                                                  13.75%                           18.75%
----------------------------------------------------------------------------------------------------------------
    0 percent   less than 5%                     less than 12.5%                  less than 17.5%.
----------------------------------------------------------------------------------------------------------------

                    (B) Uninsured performance level.--For purposes of 
                this subsection, the term ``uninsured performance 
                level'' means, for a State for a year, the reduction 
                (expressed as a percentage) in the percentage of 
                uninsured nonelderly residents in such State in the 
                year as compared to the uninsured baseline for such 
                State for such year.
            (4) Maximum state uninsured payment amount defined.--For 
        purposes of this subsection, the term ``maximum State uninsured 
        payment amount'' means, for a State for a year, the product 
        of--
                    (A) the proportion (as determined by the 
                Secretary), of the number of uninsured nonelderly 
                individuals lawfully residing in all the States in the 
                year, who are residents of the State; and
                    (B) the amount available for obligation under this 
                subsection from amounts appropriated under subsection 
                (d) with respect to performance in such year.
            (5) Methodology for computing the percentage of uninsured 
        nonelderly residents in a state.--
                    (A) Establishment.--The Secretary shall establish, 
                by rule and consistent with this subsection, a 
                methodology for computing the percentage of nonelderly 
                residents in a State who are uninsured in each year 
                beginning with year 1.
                    (B) Rules.--
                            (i) Treatment of uninsured.--Such 
                        methodology shall treat as uninsured those 
                        residents who do not have health insurance 
                        coverage or other creditable coverage (as 
                        defined in section 9801(c)(1) of the Internal 
                        Revenue Code of 1986), except that such 
                        methodology shall rely upon data on the 
                        nonelderly and uninsured populations within 
                        each State in such year provided through 
                        population surveys conducted by federal 
                        agencies.
                            (ii) Limitation to nonelderly.--Such 
                        methodology shall exclude individuals who are 
                        65 years of age or older.
                            (iii) Exclusion of illegal aliens.--Such 
                        methodology shall exclude individuals not 
                        lawfully present in the United States.
            (6) Conditions of payment.--As a condition of receiving a 
        payment under paragraph (1), a State must agree to submit 
        aggregate, non-individually identifiable data to the Secretary, 
        in a form and manner specified by the Secretary, for use by the 
        Secretary in determining the State's uninsured baseline and 
        uninsured performance level for purposes of this subsection.
    (c) Definitions.--For purposes of this section:
            (1) Group health plan.--The term ``group health plan'' has 
        the meaning given such term in section 9832(a) of the Internal 
        Revenue Code of 1986.
            (2) Health insurance coverage.--The term ``health insurance 
        coverage'' has the meaning given such term in section 
        9832(b)(1) of the Internal Revenue Code of 1986.
            (3) Individual market.--Except as the Secretary may 
        otherwise provide in the case of group health plans that have 
        fewer than 2 participants as current employees on the first day 
        of a plan year, the term ``individual market'' means the market 
        for health insurance coverage offered to individuals other than 
        in connection with a group health plan.
            (4) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (5) Small group market.--The term ``small group market'' 
        means the market for health insurance coverage under which 
        individuals obtain health insurance coverage (directly or 
        through any arrangement) on behalf of themselves (and their 
        dependents) through a group health plan maintained by an 
        employer who employed on average at least 2 but not more than 
        50 employees on business days during a calendar year.
            (6) State.--The term ``State'' means any of the 50 States 
        and the District of Columbia.
            (7) Years.--The terms ``year 1'', ``year 2'', ``year 3'', 
        and similar subsequently numbered years mean 2010, 2011, 2012, 
        and subsequent sequentially numbered years.
    (d) Appropriations; Payments.--
            (1) Payments for reductions in cost of health insurance 
        coverage.--
                    (A) Small group market.--
                            (i) In general.--From any funds in the 
                        Treasury not otherwise appropriated, there is 
                        appropriated for payments under subsection 
                        (a)(1)(A)--
                                    (I) $18,000,000,000 with respect to 
                                performance in year 3;
                                    (II) $5,000,000,000 with respect to 
                                performance in year 6; and
                                    (III) $2,000,000,000 with respect 
                                to performance in year 9.
                            (ii) Availability of appropriated funds.--
                        Funds appropriated under clause (i) shall 
                        remain available until expended.
                    (B) Individual market.--
                            (i) In general.--Subject to clause (ii), 
                        from any funds in the Treasury not otherwise 
                        appropriated, there is appropriated for 
                        payments under subsection (a)(1)(B)--
                                    (I) $7,000,000,000 with respect to 
                                performance in year 3;
                                    (II) $2,000,000,000 with respect to 
                                performance in year 6; and
                                    (III) $1,000,000,000 with respect 
                                to performance in year 9.
                            (ii) Availability of appropriated funds.--
                        Of the funds appropriated under clause (i) that 
                        are not expended or obligated by the end of the 
                        year following the year for which the funds are 
                        appropriated--
                                    (I) 75 percent shall remain 
                                available until expended for payments 
                                under subsection (a)(1)(B); and
                                    (II) 25 percent shall remain 
                                available until expended for payments 
                                under subsection (a)(1)(A).
            (2) Payments for reductions in the percentage of 
        uninsured.--
                    (A) In general.--From any funds in the Treasury not 
                otherwise appropriated, there is appropriated for 
                payments under subsection (b)(1)--
                            (i) $10,000,000,000 with respect to 
                        performance in year 5;
                            (ii) $3,000,000,000 with respect to 
                        performance in year 7; and
                            (iii) $2,000,000,000 with respect to 
                        performance in year 9
                    (B) Availability of appropriated funds.--Funds 
                appropriated under subparagraph (A) shall remain 
                available until expended.
            (3) Payment timing.--Payments under this section shall be 
        made in a form and manner specified by the Secretary in the 
        year after the performance year involved.

SEC. 112. HEALTH PLAN FINDERS.

    (a) State Plan Finders.--Not later than 12 months after the date of 
the enactment of this Act, each State may contract with a private 
entity to develop and operate a plan finder website (referred to in 
this section as a ``State plan finder'') which shall provide 
information to individuals in such State on plans of health insurance 
coverage that are available to individuals in such State (in this 
section referred to as a ``health insurance plan'') . Such State may 
not operate a plan finder itself.
    (b) Multi-State Plan Finders.--
            (1) In general.--A private entity may operate a multi-State 
        finder that operates under this section in the States involved 
        in the same manner as a State plan finder would operate in a 
        single State.
            (2) Sharing of information.--States shall regulate the 
        manner in which data is shared between plan finders to ensure 
        consistency and accuracy in the information about health 
        insurance plans contained in such finders.
    (c) Requirements for Plan Finders.--Each plan finder shall meet the 
following requirements:
            (1) The plan finder shall ensure that each health insurance 
        plan in the plan finder meets the requirements for such plans 
        under subsection (d).
            (2) The plan finder shall present complete information on 
        the costs and benefits of health insurance plans (including 
        information on monthly premium, copayments, and deductibles) in 
        a uniform manner that--
                    (A) uses the standard definitions developed under 
                paragraph (3); and
                    (B) is designed to allow consumers to easily 
                compare such plans.
            (3) The plan finder shall be available on the Internet and 
        accessible to all individuals in the State or, in the case of a 
        multi-State plan finder, in all States covered by the multi-
        State plan finder.
            (4) The plan finder shall allow consumers to search and 
        sort data on the health insurance plans in the plan finder on 
        criteria such as coverage of specific benefits (such as 
        coverage of disease management services or pediatric care 
        services), as well as data available on quality.
            (5) The plan finder shall meet all relevant State laws and 
        regulations, including laws and regulations related to the 
        marketing of insurance products. In the case of a multi-State 
        plan finder, the finder shall meet such laws and regulations 
        for all of the States involved.
            (6) The plan finder shall meet solvency, financial, and 
        privacy requirements established by the State or States in 
        which the plan finder operates or the Secretary for multi-State 
        finders.
            (7) The plan finder and the employees of the plan finder 
        shall be appropriately licensed in the State or States in which 
        the plan finder operates, if such licensure is required by such 
        State or States.
            (8) Notwithstanding subsection (f)(1), the plan finder 
        shall assist individuals who are eligible for the Medicaid 
        program under title XIX of the Social Security Act or State 
        Children's Health Insurance Program under title XXI of such Act 
        by including information on Medicaid options, eligibility, and 
        how to enroll.
    (d) Requirements for Plans Participating in a Plan Finder.--
            (1) In general.--Each State shall ensure that health 
        insurance plans participating in the State plan finder or in a 
        multi-State plan finder meet the requirements of paragraph (2) 
        (relating to adequacy of insurance coverage, consumer 
        protection, and financial strength).
            (2) Specific requirements.--In order to participate in a 
        plan finder, a health insurance plan must meet all of the 
        following requirements, as determined by each State in which 
        such plan operates:
                    (A) The health insurance plan shall be actuarially 
                sound.
                    (B) The health insurance plan may not have a 
                history of abusive policy rescissions.
                    (C) The health insurance plan shall meet financial 
                and solvency requirements.
                    (D) The health insurance plan shall disclose--
                            (i) all financial arrangements involving 
                        the sale and purchase of health insurance, such 
                        as the payment of fees and commissions; and
                            (ii) such arrangements may not be abusive.
                    (E) The health insurance plan shall maintain 
                electronic health records that comply with the 
                requirements of the American Recovery and Reinvestment 
                Act of 2009 (Public Law 111-5) related to electronic 
                health records.
                    (F) The health insurance plan shall make available 
                to plan enrollees via the finder, whether by 
                information provided to the finder or by a website link 
                directing the enrollee from the finder to the health 
                insurance plan website, data that includes the price 
                and cost to the individual of services offered by a 
                provider according to the terms and conditions of the 
                health plan. Data described in this paragraph is not 
                made public by the finder, only made available to the 
                individual once enrolled in the health plan.
    (e) Prohibitions.--
            (1) Direct enrollment.--The State plan finder may not 
        directly enroll individuals in health insurance plans.
            (2) Conflicts of interest.--
                    (A) Companies.--A health insurance issuer offering 
                a health insurance plan through a plan finder may not--
                            (i) be the private entity developing and 
                        maintaining a plan finder under subsections (a) 
                        and (b); or
                            (ii) have an ownership interest in such 
                        private entity or in the plan finder.
                    (B) Individuals.--An individual employed by a 
                health insurance issuer offering a health insurance 
                plan through a plan finder may not serve as a director 
                or officer for--
                            (i) the private entity developing and 
                        maintaining a plan finder under subsections (a) 
                        and (b); or
                            (ii) the plan finder.
    (f) Construction.--Nothing in this section shall be construed to 
allow the Secretary authority to regulate benefit packages or to 
prohibit health insurance brokers and agents from--
            (1) utilizing the plan finder for any purpose; or
            (2) marketing or offering health insurance products.
    (g) Plan Finder Defined.--For purposes of this section, the term 
``plan finder'' means a State plan finder under subsection (a) or a 
multi-State plan finder under subsection (b).
    (h) State Defined.--In this section, the term ``State'' has the 
meaning given such term for purposes of title XIX of the Social 
Security Act.

SEC. 113. ADMINISTRATIVE SIMPLIFICATION.

    (a) Operating Rules for Health Information Transactions.--
            (1) Definition of operating rules.--Section 1171 of the 
        Social Security Act (42 U.S.C. 1320d) is amended by adding at 
        the end the following:
            ``(9) Operating rules.--The term `operating rules' means 
        the necessary business rules and guidelines for the electronic 
        exchange of information that are not defined by a standard or 
        its implementation specifications as adopted for purposes of 
        this part.''.
            (2) Operating rules and compliance.--Section 1173 of the 
        Social Security Act (42 U.S.C. 1320d-2) is amended--
                    (A) in subsection (a)(2), by adding at the end the 
                following new subparagraph:
                    ``(J) Electronic funds transfers.''; and
                    (B) by adding at the end the following new 
                subsections:
    ``(g) Operating Rules.--
            ``(1) In general.--The Secretary shall adopt a single set 
        of operating rules for each transaction described in subsection 
        (a)(2) with the goal of creating as much uniformity in the 
        implementation of the electronic standards as possible. Such 
        operating rules shall be consensus-based and reflect the 
        necessary business rules affecting health plans and health care 
        providers and the manner in which they operate pursuant to 
        standards issued under Health Insurance Portability and 
        Accountability Act of 1996.
            ``(2) Operating rules development.--In adopting operating 
        rules under this subsection, the Secretary shall rely on 
        recommendations for operating rules developed by a qualified 
        nonprofit entity, as selected by the Secretary, that meets the 
        following requirements:
                    ``(A) The entity focuses its mission on 
                administrative simplification.
                    ``(B) The entity demonstrates an established multi-
                stakeholder and consensus-based process for development 
                of operating rules, including representation by or 
                participation from health plans, health care providers, 
                vendors, relevant Federal agencies, and other standard 
                development organizations.
                    ``(C) The entity has established a public set of 
                guiding principles that ensure the operating rules and 
                process are open and transparent.
                    ``(D) The entity coordinates its activities with 
                the HIT Policy Committee and the HIT Standards 
                Committee (as established under title XXX of the Public 
                Health Service Act) and complements the efforts of the 
                Office of the National Healthcare Coordinator and its 
                related health information exchange goals.
                    ``(E) The entity incorporates national standards, 
                including the transaction standards issued under Health 
                Insurance Portability and Accountability Act of 1996.
                    ``(F) The entity supports nondiscrimination and 
                conflict of interest policies that demonstrate a 
                commitment to open, fair, and nondiscriminatory 
                practices.
                    ``(G) The entity allows for public review and 
                updates of the operating rules.
            ``(3) Review and recommendations.--The National Committee 
        on Vital and Health Statistics shall--
                    ``(A) review the operating rules developed by a 
                nonprofit entity described under paragraph (2);
                    ``(B) determine whether such rules represent a 
                consensus view of the health care industry and are 
                consistent with and do not alter current standards;
                    ``(C) evaluate whether such rules are consistent 
                with electronic standards adopted for health 
                information technology; and
                    ``(D) submit to the Secretary a recommendation as 
                to whether the Secretary should adopt such rules.
            ``(4) Implementation.--
                    ``(A) In general.--The Secretary shall adopt 
                operating rules under this subsection, by regulation in 
                accordance with subparagraph (C), following 
                consideration of the rules developed by the non-profit 
                entity described in paragraph (2) and the 
                recommendation submitted by the National Committee on 
                Vital and Health Statistics under paragraph (3)(D) and 
                having ensured consultation with providers.
                    ``(B) Adoption requirements; effective dates.--
                            ``(i) Eligibility for a health plan and 
                        health claim status.--The set of operating 
                        rules for transactions for eligibility for a 
                        health plan and health claim status shall be 
                        adopted not later than July 1, 2011, in a 
                        manner ensuring that such rules are effective 
                        not later than January 1, 2013, and may allow 
                        for the use of a machine readable 
                        identification card.
                            ``(ii) Electronic funds transfers and 
                        health care payment and remittance advice.--The 
                        set of operating rules for electronic funds 
                        transfers and health care payment and 
                        remittance advice shall be adopted not later 
                        than July 1, 2012, in a manner ensuring that 
                        such rules are effective not later than January 
                        1, 2014.
                            ``(iii) Other completed transactions.--The 
                        set of operating rules for the remainder of the 
                        completed transactions described in subsection 
                        (a)(2), including health claims or equivalent 
                        encounter information, enrollment and 
                        disenrollment in a health plan, health plan 
                        premium payments, and referral certification 
                        and authorization, shall be adopted not later 
                        than July 1, 2014, in a manner ensuring that 
                        such rules are effective not later than January 
                        1, 2016.
                    ``(C) Expedited rulemaking.--The Secretary shall 
                promulgate an interim final rule applying any standard 
                or operating rule recommended by the National Committee 
                on Vital and Health Statistics pursuant to paragraph 
                (3). The Secretary shall accept public comments on any 
                interim final rule published under this subparagraph 
                for 60 days after the date of such publication.
    ``(h) Compliance.--
            ``(1) Health plan certification.--
                    ``(A) Eligibility for a health plan, health claim 
                status, electronic funds transfers, health care payment 
                and remittance advice.--Not later than December 31, 
                2013, a health plan shall file a statement with the 
                Secretary, in such form as the Secretary may require, 
                certifying that the data and information systems for 
                such plan are in compliance with any applicable 
                standards (as described under paragraph (7) of section 
                1171) and operating rules (as described under paragraph 
                (9) of such section) for electronic funds transfers, 
                eligibility for a health plan, health claim status, and 
                health care payment and remittance advice, 
                respectively.
                    ``(B) Other completed transactions.--Not later than 
                December 31, 2015, a health plan shall file a statement 
                with the Secretary, in such form as the Secretary may 
                require, certifying that the data and information 
                systems for such plan are in compliance with any 
                applicable standards and operating rules for the 
                remainder of the completed transactions described in 
                subsection (a)(2), including health claims or 
                equivalent encounter information, enrollment and 
                disenrollment in a health plan, health plan premium 
                payments, and referral certification and authorization, 
                respectively. A health plan shall provide the same 
                level of documentation to certify compliance with such 
                transactions as is required to certify compliance with 
                the transactions specified in subparagraph (A).
            ``(2) Documentation of compliance.--A health plan shall 
        provide the Secretary, in such form as the Secretary may 
        require, with adequate documentation of compliance with the 
        standards and operating rules described under paragraph (1). A 
        health plan shall not be considered to have provided adequate 
        documentation and shall not be certified as being in compliance 
        with such standards, unless the health plan--
                    ``(A) demonstrates to the Secretary that the plan 
                conducts the electronic transactions specified in 
                paragraph (1) in a manner that fully complies with the 
                regulations of the Secretary; and
                    ``(B) provides documentation showing that the plan 
                has completed end-to-end testing for such transactions 
                with their partners, such as hospitals and physicians.
            ``(3) Service contracts.--A health plan shall be required 
        to comply with any applicable certification and compliance 
        requirements (and provide the Secretary with adequate 
        documentation of such compliance) under this subsection for any 
        entities that provide services pursuant to a contract with such 
        health plan.
            ``(4) Certification by outside entity.--The Secretary may 
        contract with an independent, outside entity to certify that a 
        health plan has complied with the requirements under this 
        subsection, provided that the certification standards employed 
        by such entities are in accordance with any standards or rules 
        issued by the Secretary.
            ``(5) Compliance with revised standards and rules.--A 
        health plan (including entities described under paragraph (3)) 
        shall comply with the certification and documentation 
        requirements under this subsection for any interim final rule 
        promulgated by the Secretary under subsection (i) that amends 
        any standard or operating rule described under paragraph (1) of 
        this subsection. A health plan shall comply with such 
        requirements not later than the effective date of the 
        applicable interim final rule.
            ``(6) Audits of health plans.--The Secretary shall conduct 
        periodic audits to ensure that health plans (including entities 
        described under paragraph (3)) are in compliance with any 
        standards and operating rules that are described under 
        paragraph (1).
    ``(i) Review and Amendment of Standards and Rules.--
            ``(1) Establishment.--Not later than January 1, 2014, the 
        Secretary shall establish a review committee (as described 
        under paragraph (4)).
            ``(2) Evaluations and reports.--
                    ``(A) Hearings.--Not later than April 1, 2014, and 
                not less than biennially thereafter, the Secretary, 
                acting through the review committee, shall conduct 
                hearings to evaluate and review the existing standards 
                and operating rules established under this section.
                    ``(B) Report.--Not later than July 1, 2014, and not 
                less than biennially thereafter, the review committee 
                shall provide recommendations for updating and 
                improving such standards and rules. The review 
                committee shall recommend a single set of operating 
                rules per transaction standard and maintain the goal of 
                creating as much uniformity as possible in the 
                implementation of the electronic standards.
            ``(3) Interim final rulemaking.--
                    ``(A) In general.--Any recommendations to amend 
                existing standards and operating rules that have been 
                approved by the review committee and reported to the 
                Secretary under paragraph (2)(B) shall be adopted by 
                the Secretary through promulgation of an interim final 
                rule not later than 90 days after receipt of the 
                committee's report.
                    ``(B) Public comment.--
                            ``(i) Public comment period.--The Secretary 
                        shall accept public comments on any interim 
                        final rule published under this paragraph for 
                        60 days after the date of such publication.
                            ``(ii) Effective date.--The effective date 
                        of any amendment to existing standards or 
                        operating rules that is adopted through an 
                        interim final rule published under this 
                        paragraph shall be 25 months following the 
                        close of such public comment period.
            ``(4) Review committee.--
                    ``(A) Definition.--For the purposes of this 
                subsection, the term `review committee' means a 
                committee within the Department of Health and Human 
                services that has been designated by the Secretary to 
                carry out this subsection, including--
                            ``(i) the National Committee on Vital and 
                        Health Statistics; or
                            ``(ii) any appropriate committee as 
                        determined by the Secretary.
                    ``(B) Coordination of hit standards.--In developing 
                recommendations under this subsection, the review 
                committee shall consider the standards approved by the 
                Office of the National Coordinator for Health 
                Information Technology.
    ``(j) Penalties.--
            ``(1) Penalty fee.--
                    ``(A) In general.--Not later than April 1, 2014, 
                and annually thereafter, the Secretary shall assess a 
                penalty fee (as determined under subparagraph (B)) 
                against a health plan that has failed to meet the 
                requirements under subsection (h) with respect to 
                certification and documentation of compliance with the 
                standards (and their operating rules) as described 
                under paragraph (1) of such subsection.
                    ``(B) Fee amount.--Subject to subparagraphs (C), 
                (D), and (E), the Secretary shall assess a penalty fee 
                against a health plan in the amount of $1 per covered 
                life until certification is complete. The penalty shall 
                be assessed per person covered by the plan for which 
                its data systems for major medical policies are not in 
                compliance and shall be imposed against the health plan 
                for each day that the plan is not in compliance with 
                the requirements under subsection (h).
                    ``(C) Additional penalty for misrepresentation.--A 
                health plan that knowingly provides inaccurate or 
                incomplete information in a statement of certification 
                or documentation of compliance under subsection (h) 
                shall be subject to a penalty fee that is double the 
                amount that would otherwise be imposed under this 
                subsection.
                    ``(D) Annual fee increase.--The amount of the 
                penalty fee imposed under this subsection shall be 
                increased on an annual basis by the annual percentage 
                increase in total national health care expenditures, as 
                determined by the Secretary.
                    ``(E) Penalty limit.--A penalty fee assessed 
                against a health plan under this subsection shall not 
                exceed, on an annual basis--
                            ``(i) an amount equal to $20 per covered 
                        life under such plan; or
                            ``(ii) an amount equal to $40 per covered 
                        life under the plan if such plan has knowingly 
                        provided inaccurate or incomplete information 
                        (as described under subparagraph (C)).
                    ``(F) Determination of covered individuals.--The 
                Secretary shall determine the number of covered lives 
                under a health plan based upon the most recent 
                statements and filings that have been submitted by such 
                plan to the Securities and Exchange Commission.
            ``(2) Notice and dispute procedure.--The Secretary shall 
        establish a procedure for assessment of penalty fees under this 
        subsection that provides a health plan with reasonable notice 
        and a dispute resolution procedure prior to provision of a 
        notice of assessment by the Secretary of the Treasury (as 
        described under paragraph (4)(B)).
            ``(3) Penalty fee report.--Not later than May 1, 2014, and 
        annually thereafter, the Secretary shall provide the Secretary 
        of the Treasury with a report identifying those health plans 
        that have been assessed a penalty fee under this subsection.
            ``(4) Collection of penalty fee.--
                    ``(A) In general.--The Secretary of the Treasury, 
                acting through the Financial Management Service, shall 
                administer the collection of penalty fees from health 
                plans that have been identified by the Secretary in the 
                penalty fee report provided under paragraph (3).
                    ``(B) Notice.--Not later than August 1, 2014, and 
                annually thereafter, the Secretary of the Treasury 
                shall provide notice to each health plan that has been 
                assessed a penalty fee by the Secretary under this 
                subsection. Such notice shall include the amount of the 
                penalty fee assessed by the Secretary and the due date 
                for payment of such fee to the Secretary of the 
                Treasury (as described in subparagraph (C)).
                    ``(C) Payment due date.--Payment by a health plan 
                for a penalty fee assessed under this subsection shall 
                be made to the Secretary of the Treasury not later than 
                November 1, 2014, and annually thereafter.
                    ``(D) Unpaid penalty fees.--Any amount of a penalty 
                fee assessed against a health plan under this 
                subsection for which payment has not been made by the 
                due date provided under subparagraph (C) shall be--
                            ``(i) increased by the interest accrued on 
                        such amount, as determined pursuant to the 
                        underpayment rate established under section 
                        6601 of the Internal Revenue Code of 1986; and
                            ``(ii) treated as a past-due, legally 
                        enforceable debt owed to a Federal agency for 
                        purposes of section 6402(d) of the Internal 
                        Revenue Code of 1986.
                    ``(E) Administrative fees.--Any fee charged or 
                allocated for collection activities conducted by the 
                Financial Management Service will be passed on to a 
                health plan on a pro-rata basis and added to any 
                penalty fee collected from the plan.''.
    (b) Promulgation of Rules.--
            (1) Unique health plan identifier.--The Secretary shall 
        promulgate a final rule to establish a unique health plan 
        identifier (as described in section 1173(b) of the Social 
        Security Act (42 U.S.C. 1320d-2(b))) based on the input of the 
        National Committee of Vital and Health Statistics. The 
        Secretary may do so on an interim final basis and such rule 
        shall be effective not later than October 1, 2012.
            (2) Electronic funds transfer.--The Secretary shall 
        promulgate a final rule to establish a standard for electronic 
        funds transfers (as described in section 1173(a)(2)(J) of the 
        Social Security Act, as added by subsection (a)(2)(A)). The 
        Secretary may do so on an interim final basis and shall adopt 
        such standard not later than January 1, 2012, in a manner 
        ensuring that such standard is effective not later than January 
        1, 2014.
    (c) Expansion of Electronic Transactions in Medicare.--Section 
1862(a) of the Social Security Act (42 U.S.C. 1395y(a)) is amended--
            (1) in paragraph (23), by striking the ``or'' at the end;
            (2) in paragraph (24), by striking the period and inserting 
        ``; or''; and
            (3) by inserting after paragraph (24) the following new 
        paragraph:
            ``(25) not later than January 1, 2014, for which the 
        payment is other than by electronic funds transfer (EFT) or an 
        electronic remittance in a form as specified in ASC X12 835 
        Health Care Payment and Remittance Advice or subsequent 
        standard.''.
    (d) Medicare and Medicaid Compliance Reports.--Not later than July 
1, 2013, the Secretary of Health and Human Services shall submit a 
report to the chairs and ranking members of the Committee on Ways and 
Means and the Committee on Energy and Commerce of the House of 
Representatives and the chairs and ranking members of the Committee on 
Health, Education, Labor, and Pensions and the Committee on Finance of 
the Senate on the extent to which the Medicare program and providers 
that serve beneficiaries under that program, and State Medicaid 
programs and providers that serve beneficiaries under those programs, 
transact electronically in accordance with transaction standards issued 
under the Health Insurance Portability and Accountability Act of 1996, 
part C of title XI of the Social Security Act, and regulations 
promulgated under such Acts.

              DIVISION B--IMPROVING ACCESS TO HEALTH CARE

   TITLE I--EXPANDING ACCESS AND LOWERING COSTS FOR SMALL BUSINESSES

SEC. 201. RULES GOVERNING ASSOCIATION HEALTH PLANS.

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

           ``PART 8--RULES GOVERNING ASSOCIATION HEALTH PLANS

``SEC. 801. ASSOCIATION HEALTH PLANS.

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

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

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

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

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

``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

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

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

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

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

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

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

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

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

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

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

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

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

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

``SEC. 811. STATE ASSESSMENT AUTHORITY.

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

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

    ``(a) Definitions.--For purposes of this part--
            ``(1) Group health plan.--The term `group health plan' has 
        the meaning provided in section 733(a)(1) (after applying 
        subsection (b) of this section).
            ``(2) Medical care.--The term `medical care' has the 
        meaning provided in section 733(a)(2).
            ``(3) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning provided in section 
        733(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning provided in section 733(b)(2).
            ``(5) Applicable authority.--The term `applicable 
        authority' means the Secretary, except that, in connection with 
        any exercise of the Secretary's authority regarding which the 
        Secretary is required under section 506(d) to consult with a 
        State, such term means the Secretary, in consultation with such 
        State.
            ``(6) Health status-related factor.--The term `health 
        status-related factor' has the meaning provided in section 
        733(d)(2).
            ``(7) Individual market.--
                    ``(A) In general.--The term `individual market' 
                means the market for health insurance coverage offered 
                to individuals other than in connection with a group 
                health plan.
                    ``(B) Treatment of very small groups.--
                            ``(i) In general.--Subject to clause (ii), 
                        such term includes coverage offered in 
                        connection with a group health plan that has 
                        fewer than 2 participants as current employees 
                        or participants described in section 732(d)(3) 
                        on the first day of the plan year.
                            ``(ii) State exception.--Clause (i) shall 
                        not apply in the case of health insurance 
                        coverage offered in a State if such State 
                        regulates the coverage described in such clause 
                        in the same manner and to the same extent as 
                        coverage in the small group market (as defined 
                        in section 2791(e)(5) of the Public Health 
                        Service Act) is regulated by such State.
            ``(8) Participating employer.--The term `participating 
        employer' means, in connection with an association health plan, 
        any employer, if any individual who is an employee of such 
        employer, a partner in such employer, or a self-employed 
        individual who is such employer (or any dependent, as defined 
        under the terms of the plan, of such individual) is or was 
        covered under such plan in connection with the status of such 
        individual as such an employee, partner, or self-employed 
        individual in relation to the plan.
            ``(9) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of title XXVII of the Public Health Service Act 
        for the State involved with respect to such issuer.
            ``(10) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries.
            ``(11) Affiliated member.--The term `affiliated member' 
        means, in connection with a sponsor--
                    ``(A) a person who is otherwise eligible to be a 
                member of the sponsor but who elects an affiliated 
                status with the sponsor,
                    ``(B) in the case of a sponsor with members which 
                consist of associations, a person who is a member of 
                any such association and elects an affiliated status 
                with the sponsor, or
                    ``(C) in the case of an association health plan in 
                existence on the date of the enactment of the Small 
                Business Health Fairness Act of 2009, a person eligible 
                to be a member of the sponsor or one of its member 
                associations.
            ``(12) Large employer.--The term `large employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who employed an average of at least 51 
        employees on business days during the preceding calendar year 
        and who employs at least 2 employees on the first day of the 
        plan year.
            ``(13) Small employer.--The term `small employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who is not a large employer.
    ``(b) Rules of Construction.--
            ``(1) Employers and employees.--For purposes of determining 
        whether a plan, fund, or program is an employee welfare benefit 
        plan which is an association health plan, and for purposes of 
        applying this title in connection with such plan, fund, or 
        program so determined to be such an employee welfare benefit 
        plan--
                    ``(A) in the case of a partnership, the term 
                `employer' (as defined in section 3(5)) includes the 
                partnership in relation to the partners, and the term 
                `employee' (as defined in section 3(6)) includes any 
                partner in relation to the partnership; and
                    ``(B) in the case of a self-employed individual, 
                the term `employer' (as defined in section 3(5)) and 
                the term `employee' (as defined in section 3(6)) shall 
                include such individual.
            ``(2) Plans, funds, and programs treated as employee 
        welfare benefit plans.--In the case of any plan, fund, or 
        program which was established or is maintained for the purpose 
        of providing medical care (through the purchase of insurance or 
        otherwise) for employees (or their dependents) covered 
        thereunder and which demonstrates to the Secretary that all 
        requirements for certification under this part would be met 
        with respect to such plan, fund, or program if such plan, fund, 
        or program were a group health plan, such plan, fund, or 
        program shall be treated for purposes of this title as an 
        employee welfare benefit plan on and after the date of such 
        demonstration.''.
    (b) Conforming Amendments to Preemption Rules.--
            (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is 
        amended by adding at the end the following new subparagraph:
    ``(E) The preceding subparagraphs of this paragraph do not apply 
with respect to any State law in the case of an association health plan 
which is certified under part 8.''.
            (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
                    (A) in subsection (b)(4), by striking ``Subsection 
                (a)'' and inserting ``Subsections (a) and (d)'';
                    (B) in subsection (b)(5), by striking ``subsection 
                (a)'' in subparagraph (A) and inserting ``subsection 
                (a) of this section and subsections (a)(2)(B) and (b) 
                of section 805'', and by striking ``subsection (a)'' in 
                subparagraph (B) and inserting ``subsection (a) of this 
                section or subsection (a)(2)(B) or (b) of section 
                805'';
                    (C) by redesignating subsections (d) and (e) as 
                subsections (e) and (f), respectively; and
                    (D) by inserting after subsection (c) the following 
                new subsection:
    ``(d)(1) Except as provided in subsection (b)(4), the provisions of 
this title shall supersede any and all State laws insofar as they may 
now or hereafter preclude, or have the effect of precluding, a health 
insurance issuer from offering health insurance coverage in connection 
with an association health plan which is certified under part 8.
    ``(2) Except as provided in paragraphs (4) and (5) of subsection 
(b) of this section--
            ``(A) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan 
        certified under part 8 to a participating employer operating in 
        such State, the provisions of this title shall supersede any 
        and all laws of such State insofar as they may preclude a 
        health insurance issuer from offering health insurance coverage 
        of the same policy type to other employers operating in the 
        State which are eligible for coverage under such association 
        health plan, whether or not such other employers are 
        participating employers in such plan.
            ``(B) In any case in which health insurance coverage of any 
        policy type is offered in a State under an association health 
        plan certified under part 8 and the filing, with the applicable 
        State authority (as defined in section 812(a)(9)), of the 
        policy form in connection with such policy type is approved by 
        such State authority, the provisions of this title shall 
        supersede any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as they may 
        preclude, upon the filing in the same form and manner of such 
        policy form with the applicable State authority in such other 
        State, the approval of the filing in such other State.
    ``(3) Nothing in subsection (b)(6)(E) or the preceding provisions 
of this subsection shall be construed, with respect to health insurance 
issuers or health insurance coverage, to supersede or impair the law of 
any State--
            ``(A) providing solvency standards or similar standards 
        regarding the adequacy of insurer capital, surplus, reserves, 
        or contributions, or
            ``(B) relating to prompt payment of claims.
    ``(4) For additional provisions relating to association health 
plans, see subsections (a)(2)(B) and (b) of section 805.
    ``(5) For purposes of this subsection, the term `association health 
plan' has the meaning provided in section 801(a), and the terms `health 
insurance coverage', `participating employer', and `health insurance 
issuer' have the meanings provided such terms in section 812, 
respectively.''.
            (3) Section 514(b)(6)(A) of such Act (29 U.S.C. 
        1144(b)(6)(A)) is amended--
                    (A) in clause (i)(II), by striking ``and'' at the 
                end;
                    (B) in clause (ii), by inserting ``and which does 
                not provide medical care (within the meaning of section 
                733(a)(2)),'' after ``arrangement,'', and by striking 
                ``title.'' and inserting ``title, and''; and
                    (C) by adding at the end the following new clause:
            ``(iii) subject to subparagraph (E), in the case of any 
        other employee welfare benefit plan which is a multiple 
        employer welfare arrangement and which provides medical care 
        (within the meaning of section 733(a)(2)), any law of any State 
        which regulates insurance may apply.''.
            (4) Section 514(e) of such Act (as redesignated by 
        paragraph (2)(C)) is amended--
                    (A) by striking ``Nothing'' and inserting ``(1) 
                Except as provided in paragraph (2), nothing''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(2) Nothing in any other provision of law enacted on or after the 
date of the enactment of the Small Business Health Fairness Act of 2009 
shall be construed to alter, amend, modify, invalidate, impair, or 
supersede any provision of this title, except by specific cross-
reference to the affected section.''.
    (c) Plan Sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
102(16)(B)) is amended by adding at the end the following new sentence: 
``Such term also includes a person serving as the sponsor of an 
association health plan under part 8.''.
    (d) Disclosure of Solvency Protections Related to Self-Insured and 
Fully Insured Options Under Association Health Plans.--Section 102(b) 
of such Act (29 U.S.C. 102(b)) is amended by adding at the end the 
following: ``An association health plan shall include in its summary 
plan description, in connection with each benefit option, a description 
of the form of solvency or guarantee fund protection secured pursuant 
to this Act or applicable State law, if any.''.
    (e) Savings Clause.--Section 731(c) of such Act is amended by 
inserting ``or part 8'' after ``this part''.
    (f) Report to the Congress Regarding Certification of Self-Insured 
Association Health Plans.--Not later than January 1, 2012, the 
Secretary of Labor shall report to the Committee on Education and the 
Workforce of the House of Representatives and the Committee on Health, 
Education, Labor, and Pensions of the Senate the effect association 
health plans have had, if any, on reducing the number of uninsured 
individuals.
    (g) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 734 the following new items:

           ``Part 8--Rules Governing Association Health Plans

``801. Association health plans.
``802. Certification of association health plans.
``803. Requirements relating to sponsors and boards of trustees.
``804. Participation and coverage requirements.
``805. Other requirements relating to plan documents, contribution 
                            rates, and benefit options.
``806. Maintenance of reserves and provisions for solvency for plans 
                            providing health benefits in addition to 
                            health insurance coverage.
``807. Requirements for application and related requirements.
``808. Notice requirements for voluntary termination.
``809. Corrective actions and mandatory termination.
``810. Trusteeship by the Secretary of insolvent association health 
                            plans providing health benefits in addition 
                            to health insurance coverage.
``811. State assessment authority.
``812. Definitions and rules of construction.''.

SEC. 202. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

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

SEC. 203. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION HEALTH PLANS.

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

SEC. 204. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

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

SEC. 205. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES.

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

              TITLE II--TARGETED EFFORTS TO EXPAND ACCESS

SEC. 211. EXTENDING COVERAGE OF DEPENDENTS.

    (a) Employee Retirement Income Security Act of 1974.--
            (1) In general.--Part 7 of subtitle B of title I of the 
        Employee Retirement Income Security Act of 1974 is amended by 
        inserting after section 2714 the following new section:

``SEC. 715. EXTENDING COVERAGE OF DEPENDENTS.

    ``(a) In General.--In the case of a group health plan, or health 
insurance coverage offered in connection with a group health plan, that 
treats as a beneficiary under the plan an individual who is a dependent 
child of a participant or beneficiary under the plan, the plan or 
coverage shall continue to treat the individual as a dependent child 
without regard to the individual's age through at least the end of the 
plan year in which the individual turns an age specified in the plan, 
but not less than 25 years of age.
    ``(b) Construction.--Nothing in this section shall be construed as 
requiring a group health plan to provide benefits for dependent 
children as beneficiaries under the plan or to require a participant to 
elect coverage of dependent children.''.
            (2) Clerical amendment.--The table of contents of such Act 
        is amended by inserting after the item relating to section 714 
        the following new item:

``Sec. 715. Extending coverage of dependents through plan year that 
                            includes 25th birthday.''.
    (b) PHSA.--Title XXVII of the Public Health Service Act is amended 
by inserting after section 2707 the following new section:

``SEC. 2708. EXTENDING COVERAGE OF DEPENDENTS.

    ``(a) In General.--In the case of a group health plan, or health 
insurance coverage offered in connection with a group health plan, that 
treats as a beneficiary under the plan an individual who is a dependent 
child of a participant or beneficiary under the plan, the plan or 
coverage shall continue to treat the individual as a dependent child 
without regard to the individual's age through at least the end of the 
plan year in which the individual turns an age specified in the plan, 
but not less than 25 years of age.
    ``(b) Construction.--Nothing in this section shall be construed as 
requiring a group health plan to provide benefits for dependent 
children as beneficiaries under the plan or to require a participant to 
elect coverage of dependent children.''.
    (c) IRC.--
            (1) In general.--Subchapter B of chapter 100 of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following new section:

``SEC. 9814. EXTENDING COVERAGE OF DEPENDENTS.

    ``(a) In General.--In the case of a group health plan that treats 
as a beneficiary under the plan an individual who is a dependent child 
of a participant or beneficiary under the plan, the plan shall continue 
to treat the individual as a dependent child without regard to the 
individual's age through at least the end of the plan year in which the 
individual turns an age specified in the plan, but not less than 25 
years of age.
    ``(b) Construction.--Nothing in this section shall be construed as 
requiring a group health plan to provide coverage for dependent 
children as beneficiaries under the plan or to require a participant to 
elect coverage of dependent children.''.
            (2) Clerical amendment.--The table of sections in such 
        subchapter is amended by adding at the end the following new 
        item:

``Sec. 9814. Extending coverage of dependents through plan year that 
                            includes 25th birthday.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to group health plans for plan years beginning more than 3 months 
after the date of the enactment of this Act and shall apply to 
individuals who are dependent children under a group health plan, or 
health insurance coverage offered in connection with such a plan, on or 
after such date.

SEC. 212. ALLOWING AUTO-ENROLLMENT FOR EMPLOYER SPONSORED COVERAGE.

    (a) In General.--No State shall establish a law that prevents an 
employer from instituting auto-enrollment for coverage of a participant 
or beneficiary, including current employees, under a group health plan, 
or health insurance coverage offered in connection with such a plan, so 
long as the participant or beneficiary has the option of declining such 
coverage.
    (b) Auto-Enrollment.--
            (1) Notice required.--Employers with auto-enrollment under 
        a group health plan or health insurance coverage shall provide 
        annual notification, within a reasonable period before the 
        beginning of each plan year, to each employee eligible to 
        participate in the plan. The notice shall explain the employee 
        contribution to such plan and the employee's right to decline 
        coverage.
            (2) Treatment of non-action.--After a reasonable period of 
        time after receipt of the notice, if an employee fails to make 
        an affirmative declaration declining coverage, then such an 
        employee may be enrolled in the group health plan or health 
        insurance coverage offered in connection with such a plan.''
    (c) Construction.--Nothing in this section shall be construed to 
supersede State law which establishes, implements, or continues in 
effect any standard or requirement relating to employers in connection 
with payroll or the sponsoring of employer sponsored health insurance 
coverage except to the extent that such standard or requirement 
prevents an employer from instituting the auto-enrollment described in 
subsection (a).

 TITLE III--EXPANDING CHOICES BY ALLOWING AMERICANS TO BUY HEALTH CARE 
                      COVERAGE ACROSS STATE LINES

SEC. 221. INTERSTATE PURCHASING OF HEALTH INSURANCE.

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

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

``SEC. 2795. DEFINITIONS.

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

``SEC. 2796. APPLICATION OF LAW.

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

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

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

``SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCEDURES.

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

``SEC. 2799. ENFORCEMENT.

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

              TITLE IV--IMPROVING HEALTH SAVINGS ACCOUNTS

SEC. 231. SAVER'S CREDIT FOR CONTRIBUTIONS TO HEALTH SAVINGS ACCOUNTS.

    (a) Allowance of Credit.--Subsection (a) of section 25B of the 
Internal Revenue Code of 1986 is amended by inserting ``aggregate 
qualified HSA contributions and'' after ``so much of the''.
    (b) Qualified HSA Contributions.--Subsection (d) of section 25B of 
such Code is amended by redesignating paragraph (2) as paragraph (3) 
and by inserting after paragraph (1) the following new paragraph:
            ``(2) Qualified hsa contributions.--The term `qualified HSA 
        contribution' means, with respect to any taxable year, a 
        contribution of the eligible individual to a health savings 
        account (as defined in section 223(d)(1)) for which a deduction 
        is allowable under section 223(a) for such taxable year.''.
    (c) Conforming Amendment.--The first sentence of section 
25B(d)(3)(A) of such Code (as redesignated by subsection (b)) is 
amended to read as follows: ``The aggregate qualified retirement 
savings contributions determined under paragraph (1) and qualified HSA 
contributions determined under paragraph (2) shall be reduced (but not 
below zero) by the aggregate distributions received by the individual 
during the testing period from any entity of a type to which 
contributions under paragraph (1) or paragraph (2) (as the case may be) 
may be made.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to contributions made after December 31, 2009.

SEC. 232. HSA FUNDS FOR PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    (a) In General.--Subparagraph (C) of section 223(d)(2) of the 
Internal Revenue Code of 1986 is amended by striking ``or'' at the end 
of clause (iii), by striking the period at the end of clause (iv) and 
inserting ``, or'', and by adding at the end the following:
                            ``(v) a high deductible health plan if--
                                    ``(I) such plan is not offered in 
                                connection with a group health plan,
                                    ``(II) no portion of any premium 
                                (within the meaning of applicable 
                                premium under section 4980B(f)(4)) for 
                                such plan is excludable from gross 
                                income under section 106, and
                                    ``(III) the account beneficiary 
                                demonstrates, using procedures deemed 
                                appropriate by the Secretary, that 
                                after payment of the premium for such 
                                insurance the balance in the health 
                                savings account is at least twice the 
                                minimum deductible in effect under 
                                subsection (c)(2)(A)(i) which is 
                                applicable to such plan.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to premiums for a high deductible health plan for periods 
beginning after December 31, 2009.

SEC. 233. REQUIRING GREATER COORDINATION BETWEEN HDHP ADMINISTRATORS 
              AND HSA ACCOUNT ADMINISTRATORS SO THAT ENROLLEES CAN 
              ENROLL IN BOTH AT THE SAME TIME.

    The Secretary of the Treasury, through the issuance of regulations 
or other guidance, shall encourage administrators of health plans and 
trustees of health savings accounts to provide for simultaneous 
enrollment in high deductible health plans and setup of health savings 
accounts.

SEC. 234. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE 
              ESTABLISHMENT OF ACCOUNT.

    (a) In General.--Subsection (d) of section 223 of the Internal 
Revenue Code of 1986 is amended by redesignating paragraph (4) as 
paragraph (5) and by inserting after paragraph (3) the following new 
paragraph:
            ``(4) Certain medical expenses incurred before 
        establishment of account treated as qualified.--
                    ``(A) In general.--For purposes of paragraph (2), 
                an expense shall not fail to be treated as a qualified 
                medical expense solely because such expense was 
                incurred before the establishment of the health savings 
                account if such expense was incurred during the 60-day 
                period beginning on the date on which the high 
                deductible health plan is first effective.
                    ``(B) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) an individual shall be treated as an 
                        eligible individual for any portion of a month 
                        for which the individual is described in 
                        subsection (c)(1), determined without regard to 
                        whether the individual is covered under a high 
                        deductible health plan on the 1st day of such 
                        month, and
                            ``(ii) the effective date of the health 
                        savings account is deemed to be the date on 
                        which the high deductible health plan is first 
                        effective after the date of the enactment of 
                        this paragraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to insurance purchased after the date of the enactment of 
this Act in taxable years beginning after such date.

           DIVISION C--ENACTING REAL MEDICAL LIABILITY REFORM

SEC. 301. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

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

SEC. 302. COMPENSATING PATIENT INJURY.

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

SEC. 303. MAXIMIZING PATIENT RECOVERY.

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

SEC. 304. ADDITIONAL HEALTH BENEFITS.

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

SEC. 305. PUNITIVE DAMAGES.

    (a) In General.--Punitive damages may, if otherwise permitted by 
applicable State or Federal law, be awarded against any person in a 
health care lawsuit only if it is proven by clear and convincing 
evidence that such person acted with malicious intent to injure the 
claimant, or that such person deliberately failed to avoid unnecessary 
injury that such person knew the claimant was substantially certain to 
suffer. In any health care lawsuit where no judgment for compensatory 
damages is rendered against such person, no punitive damages may be 
awarded with respect to the claim in such lawsuit. No demand for 
punitive damages shall be included in a health care lawsuit as 
initially filed. A court may allow a claimant to file an amended 
pleading for punitive damages only upon a motion by the claimant and 
after a finding by the court, upon review of supporting and opposing 
affidavits or after a hearing, after weighing the evidence, that the 
claimant has established by a substantial probability that the claimant 
will prevail on the claim for punitive damages. At the request of any 
party in a health care lawsuit, the trier of fact shall consider in a 
separate proceeding--
            (1) whether punitive damages are to be awarded and the 
        amount of such award; and
            (2) the amount of punitive damages following a 
        determination of punitive liability.
If a separate proceeding is requested, evidence relevant only to the 
claim for punitive damages, as determined by applicable State law, 
shall be inadmissible in any proceeding to determine whether 
compensatory damages are to be awarded.
    (b) Determining Amount of Punitive Damages.--
            (1) Factors considered.--In determining the amount of 
        punitive damages, if awarded, in a health care lawsuit, the 
        trier of fact shall consider only the following--
                    (A) the severity of the harm caused by the conduct 
                of such party;
                    (B) the duration of the conduct or any concealment 
                of it by such party;
                    (C) the profitability of the conduct to such party;
                    (D) the number of products sold or medical 
                procedures rendered for compensation, as the case may 
                be, by such party, of the kind causing the harm 
                complained of by the claimant;
                    (E) any criminal penalties imposed on such party, 
                as a result of the conduct complained of by the 
                claimant; and
                    (F) the amount of any civil fines assessed against 
                such party as a result of the conduct complained of by 
                the claimant.
            (2) Maximum award.--The amount of punitive damages, if 
        awarded, in a health care lawsuit may be as much as $250,000 or 
        as much as two times the amount of economic damages awarded, 
        whichever is greater. The jury shall not be informed of this 
        limitation.

SEC. 306. AUTHORIZATION OF PAYMENT OF FUTURE DAMAGES TO CLAIMANTS IN 
              HEALTH CARE LAWSUITS.

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

SEC. 307. DEFINITIONS.

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

SEC. 308. EFFECT ON OTHER LAWS.

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

SEC. 309. STATE FLEXIBILITY AND PROTECTION OF STATES' RIGHTS.

    (a) Health Care Lawsuits.--The provisions governing health care 
lawsuits set forth in this title preempt, subject to subsections (b) 
and (c), State law to the extent that State law prevents the 
application of any provisions of law established by or under this 
title. The provisions governing health care lawsuits set forth in this 
title supersede chapter 171 of title 28, United States Code, to the 
extent that such chapter--
            (1) provides for a greater amount of damages or contingent 
        fees, a longer period in which a health care lawsuit may be 
        commenced, or a reduced applicability or scope of periodic 
        payment of future damages, than provided in this title; or
            (2) prohibits the introduction of evidence regarding 
        collateral source benefits, or mandates or permits subrogation 
        or a lien on collateral source benefits.
    (b) Protection of States' Rights and Other Laws.--(1) Any issue 
that is not governed by any provision of law established by or under 
this title (including State standards of negligence) shall be governed 
by otherwise applicable State or Federal law.
    (2) This title shall not preempt or supersede any State or Federal 
law that imposes greater procedural or substantive protections for 
health care providers and health care organizations from liability, 
loss, or damages than those provided by this title or create a cause of 
action.
    (c) State Flexibility.--No provision of this title shall be 
construed to preempt--
            (1) any State law (whether effective before, on, or after 
        the date of the enactment of this Act) that specifies a 
        particular monetary amount of compensatory or punitive damages 
        (or the total amount of damages) that may be awarded in a 
        health care lawsuit, regardless of whether such monetary amount 
        is greater or lesser than is provided for under this title, 
        notwithstanding section 302(a); or
            (2) any defense available to a party in a health care 
        lawsuit under any other provision of State or Federal law.

SEC. 310. APPLICABILITY; EFFECTIVE DATE.

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

         DIVISION D--PROTECTING THE DOCTOR-PATIENT RELATIONSHIP

SEC. 401. RULE OF CONSTRUCTION.

    Nothing in this Act shall be construed to interfere with the 
doctor-patient relationship or the practice of medicine.

SEC. 402. REPEAL OF FEDERAL COORDINATING COUNCIL FOR COMPARATIVE 
              EFFECTIVENESS RESEARCH.

    Effective on the date of the enactment of this Act, section 804 of 
the American Recovery and Reinvestment Act of 2009 is repealed.

      DIVISION E--INCENTIVIZING WELLNESS AND QUALITY IMPROVEMENTS

SEC. 501. INCENTIVES FOR PREVENTION AND WELLNESS PROGRAMS.

    (a) Employee Retirement Income Security Act of 1974 Limitation on 
Exception for Wellness Programs Under HIPAA Discrimination Rules.--
            (1) In general.--Section 702(b)(2) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1182(b)(2)) 
        is amended by adding after and below subparagraph (B) the 
        following:
        ``In applying subparagraph (B), a group health plan (or a 
        health insurance issuer with respect to health insurance 
        coverage) may vary premiums and cost-sharing by up to 50 
        percent of the value of the benefits under the plan (or 
        coverage) based on participation in a standards-based wellness 
        program.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to plan years beginning more than 1 year after the 
        date of the enactment of this Act.
    (b) Conforming Amendments to PHSA.--
            (1) Group market rules.--
                    (A) In general.--Section 2702(b)(2) of the Public 
                Health Service Act (42 U.S.C. 300gg-1(b)(2)) is amended 
                by adding after and below subparagraph (B) the 
                following:
        ``In applying subparagraph (B), a group health plan (or a 
        health insurance issuer with respect to health insurance 
        coverage) may vary premiums and cost-sharing by up to 50 
        percent of the value of the benefits under the plan (or 
        coverage) based on participation in a standards-based wellness 
        program.''.
                    (B) Effective date.--The amendment made by 
                subparagraph (A) shall apply to plan years beginning 
                more than 1 year after the date of the enactment of 
                this Act.
            (2) Individual market rules relating to guaranteed 
        availability.--
                    (A) In general.--Section 2741(f) of the Public 
                Health Service Act (42 U.S.C. 300gg-1(b)(2)) is amended 
                by adding after and below paragraph (1) the following:
``In applying paragraph (2), a health insurance issuer may vary 
premiums and cost-sharing under health insurance coverage by up to 50 
percent of the value of the benefits under the coverage based on 
participation in a standards-based wellness program.''.
                    (B) Effective date.--The amendment made by 
                paragraph (1) shall apply to health insurance coverage 
                offered or renewed on and after the date that is 1 year 
                after the date of the enactment of this Act.
    (c) Conforming Amendments to IRC.--
            (1) In general.--Section 9802(b)(2) of the Internal Revenue 
        Code of 1986 is amended by adding after and below subparagraph 
        (B) the following:
        ``In applying subparagraph (B), a group health plan (or a 
        health insurance issuer with respect to health insurance 
        coverage) may vary premiums and cost-sharing by up to 50 
        percent of the value of the benefits under the plan (or 
        coverage) based on participation in a standards-based wellness 
        program.''.
            (2) Effective date.--The amendment made by paragraph (1) 
        shall apply to plan years beginning more than 1 year after the 
        date of the enactment of this Act.

                    DIVISION F--PROTECTING TAXPAYERS

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

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

SEC. 602. PROHIBITING TAXPAYER FUNDED ABORTIONS AND CONSCIENCE 
              PROTECTIONS.

    Title 1 of the United States Code is amended by adding at the end 
the following new chapter:

   ``CHAPTER 4--PROHIBITING TAXPAYER FUNDED ABORTIONS AND CONSCIENCE 
                              PROTECTIONS

``SEC. 301. PROHIBITION ON FUNDING FOR ABORTIONS.

    ``No funds authorized or appropriated by federal law, and none of 
the funds in any trust fund to which funds are authorized or 
appropriated by federal law, shall be expended for any abortion.

``SEC. 302. PROHIBITION ON FUNDING FOR HEALTH BENEFITS PLANS THAT COVER 
              ABORTION.

    ``None of the funds authorized or appropriated by federal law, and 
none of the funds in any trust fund to which funds are authorized or 
appropriated by federal law, shall be expended for a health benefits 
plan that includes coverage of abortion.

``SEC. 303. TREATMENT OF ABORTIONS RELATED TO RAPE, INCEST, OR 
              PRESERVING THE LIFE OF THE MOTHER.

    ``The limitations established in sections 301 and 302 shall not 
apply to an abortion--
            ``(1) if the pregnancy is the result of an act of rape or 
        incest; or
            ``(2) in the case where a woman suffers from a physical 
        disorder, physical injury, or physical illness that would, as 
        certified by a physician, place the woman in danger of death 
        unless an abortion is performed, including a life-endangering 
        physical condition caused by or arising from the pregnancy 
        itself.

``SEC. 304. CONSTRUCTION RELATING TO SUPPLEMENTAL COVERAGE.

    ``Nothing in this chapter shall be construed as prohibiting any 
individual, entity, or State or locality from purchasing separate 
supplemental abortion plan or coverage that includes abortion so long 
as such plan or coverage is paid for entirely using only funds not 
authorized or appropriated by federal law and such plan or coverage 
shall not be purchased using matching funds required for a federally 
subsidized program, including a State's or locality's contribution of 
Medicaid matching funds.

``SEC. 305. CONSTRUCTION RELATING TO THE USE OF NON-FEDERAL FUNDS FOR 
              HEALTH COVERAGE.

    ``Nothing in this chapter shall be construed as restricting the 
ability of any managed care provider or other organization from 
offering abortion coverage or the ability of a State to contract 
separately with such a provider or organization for such coverage with 
funds not authorized or appropriated by federal law and such plan or 
coverage shall not be purchased using matching funds required for a 
federally subsidized program, including a State's or locality's 
contribution of Medicaid matching funds.

``SEC. 306. NO GOVERNMENT DISCRIMINATION AGAINST CERTAIN HEALTH CARE 
              ENTITIES.

    ``(a) In General.--No funds authorized or appropriated by federal 
law may be made available to a Federal agency or program, or to a State 
or local government, if such agency, program, or government subjects 
any institutional or individual health care entity to discrimination on 
the basis that the health care entity does not provide, pay for, 
provide coverage of, or refer for abortions.
    ``(b) Health Care Entity Defined.--For purposes of this section, 
the term `health care entity' includes an individual physician or other 
health care professional, a hospital, a provider-sponsored 
organization, a health maintenance organization, a health insurance 
plan, or any other kind of health care facility, organization, or 
plan.''.

SEC. 603. IMPROVED ENFORCEMENT OF THE MEDICARE AND MEDICAID SECONDARY 
              PAYER PROVISIONS.

    (a) Medicare.--
            (1) In general.--The Secretary, in coordination with the 
        Inspector General of the Department of Health and Human 
        Services, shall provide through the Coordination of Benefits 
        Contractor for the identification of instances where the 
        Medicare program should be, but is not, acting as a secondary 
        payer to an individual's private health benefits coverage under 
        section 1862(b) of the Social Security Act (42 U.S.C. 
        1395y(b)).
            (2) Updating procedures.--The Secretary shall update 
        procedures for identifying and resolving credit balance 
        situations which occur under the Medicare program when payment 
        under such title and from other health benefit plans exceed the 
        providers' charges or the allowed amount.
            (3) Report on improved enforcement.--Not later than 1 year 
        after the date of the enactment of this Act, the Secretary 
        shall submit a report to Congress on progress made in improved 
        enforcement of the Medicare secondary payer provisions, 
        including recoupment of credit balances.
    (b) Medicaid.--Section 1903 of the Social Security Act (42 U.S.C. 
1396b) is amended by adding at the end the following new subsection:
    ``(aa) Enforcement of Payer of Last Resort Provisions.--
            ``(1) Submission of state plan amendment.--Each State shall 
        submit, not later than 1 year after the date of the enactment 
        of this subsection, a State plan amendment that details how the 
        State will become fully compliant with the requirements of 
        section 1902(a)(25).
            ``(2) Bonus for compliance.--If a State submits a timely 
        State plan amendment under paragraph (1) that the Secretary 
        determines provides for full compliance of the State with the 
        requirements of section 1902(a)(25), the Secretary shall 
        provide for an additional payment to the State of $1,000,000. 
        If a State certifies, to the Secretary's satisfaction, that it 
        is already fully compliant with such requirements, such amount 
        shall be increased to $2,000,000.
            ``(3) Reduction for noncompliance.--If a State does not 
        submit such an amendment, the Secretary shall reduce the 
        Federal medical assistance percentage otherwise applicable 
        under this title by 1 percentage point until the State submits 
        such an amendment.
            ``(4) Ongoing reduction.--If at any time the Secretary 
        determines that a State is not in compliance with section 
        1902(a)(25), regardless of the status of the State's submission 
        of a State plan amendment under this subsection or previous 
        determinations of compliance such requirements, the Secretary 
        shall reduce the Federal medical assistance percentage 
        otherwise applicable under this title for the State by 1 
        percentage point during the period of non-compliance as 
        determined by the Secretary.''.

SEC. 604. STRENGTHEN MEDICARE PROVIDER ENROLLMENT STANDARDS AND 
              SAFEGUARDS.

    (a) Protecting Against the Fraudulent Use of Medicare Provider 
Numbers.--Subject to subsection (c)(2)--
            (1) Screening new providers.--As a condition of a provider 
        of services or a supplier, including durable medical equipment 
        suppliers and home health agencies, applying for the first time 
        for a provider number under the Medicare program and before 
        granting billing privileges under such title, the Secretary 
        shall screen the provider or supplier for a criminal background 
        or other financial or operational irregularities through 
        fingerprinting, licensure checks, site-visits, other database 
        checks.
            (2) Application fees.--The Secretary shall impose an 
        application charge on such a provider or supplier in order to 
        cover the Secretary's costs in performing the screening 
        required under paragraph (1) and that is revenue neutral to the 
        Federal government.
            (3) Provisional approval.--During an initial, provisional 
        period (specified by the Secretary) In which such a provider or 
        supplier has been issued such a number, the Secretary shall 
        provide enhanced oversight of the activities of such provider 
        or supplier under the Medicare program, such as through 
        prepayment review and payment limitations.
            (4) Penalties for false statements.--In the case of a 
        provider or supplier that makes a false statement in an 
        application for such a number, the Secretary may exclude the 
        provider or supplier from participation under the Medicare 
        program, or may impose a civil money penalty (in the amount 
        described in section 1128A(a)(4) of the Social Security Act), 
        in the same manner as the Secretary may impose such an 
        exclusion or penalty under sections 1128 and 1128A, 
        respectively, of such Act in the case of knowing presentation 
        of a false claim described in section 1128A(a)(1)(A) of such 
        Act.
            (5) Disclosure requirements.--With respect to approval of 
        such an application, the Secretary--
                    (A) shall require applicants to disclose previous 
                affiliation with enrolled entities that have 
                uncollected debt related to the Medicare or Medicaid 
                programs;
                    (B) may deny approval if the Secretary determines 
                that these affiliations pose undue risk to the Medicare 
                or Medicaid program, subject to an appeals process for 
                the applicant as determined by the Secretary; and
                    (C) may implement enhanced safeguards (such as 
                surety bonds).
    (b) Moratoria.--The Secretary may impose moratoria on approval of 
provider and supplier numbers under the Medicare program for new 
providers of services and suppliers as determined necessary to prevent 
or combat fraud a period of delay for any one applicant cannot exceed 
30 days unless cause is shown by the Secretary.
    (c) Funding.--
            (1) In general.--There are authorized to be appropriated to 
        carry out this section such sums as may be necessary.
            (2) Condition.--The provisions of paragraphs (1) and (2) of 
        subsection (a) shall not apply unless and until funds are 
        appropriated to carry out such provisions.

SEC. 605. TRACKING BANNED PROVIDERS ACROSS STATE LINES.

    (a) Greater Coordination.--The Secretary of Health and Human 
Services shall provide for increased coordination between the 
Administrator of the Centers for Medicare & Medicaid Services (in this 
section referred to as ``CMS'') and its regional offices to ensure that 
providers of services and suppliers that have operated in one State and 
are excluded from participation in the Medicare program are unable to 
begin operation and participation in the Medicare program in another 
State.
    (b) Improved Information Systems.--
            (1) In general.--The Secretary shall improve information 
        systems to allow greater integration between databases under 
        the Medicare program so that--
                    (A) Medicare administrative contractors, fiscal 
                intermediaries, and carriers have immediate access to 
                information identifying providers and suppliers 
                excluded from participation in the Medicare and 
                Medicaid program and other Federal health care 
                programs; and
                    (B) such information can be shared across Federal 
                health care programs and agencies, including between 
                the Departments of Health and Human Services, the 
                Social Security Administration, the Department of 
                Veterans Affairs, the Department of Defense, the 
                Department of Justice, and the Office of Personnel 
                Management.
    (c) Medicare/Medicaid ``One PI'' Database.--The Secretary shall 
implement a database that includes claims and payment data for all 
components of the Medicare program and the Medicaid program.
    (d) Authorizing Expanded Data Matching.--Notwithstanding any 
provision of the Computer Matching and Privacy Protection Act of 1988 
to the contrary--
            (1) the Secretary and the Inspector General in the 
        Department of Health and Human Services may perform data 
        matching of data from the Medicare program with data from the 
        Medicaid program; and
            (2) the Commissioner of Social Security and the Secretary 
        may perform data matching of data of the Social Security 
        Administration with data from the Medicare and Medicaid 
        programs.
    (e) Consolidation of Databases.--The Secretary shall consolidate 
and expand into a centralized database for individuals and entities 
that have been excluded from Federal health care programs the 
Healthcare Integrity and Protection Data Bank, the National 
Practitioner Data Bank, the List of Excluded Individuals/Entities, and 
a national patient abuse/neglect registry.
    (f) Comprehensive Provider Database.--
            (1) Establishment.--The Secretary shall establish a 
        comprehensive database that includes information on providers 
        of services, suppliers, and related entities participating in 
        the Medicare program, the Medicaid program, or both. Such 
        database shall include, information on ownership and business 
        relationships, history of adverse actions, results of site 
        visits or other monitoring by any program.
            (2) Use.--Prior to issuing a provider or supplier number 
        for an entity under the Medicare program, the Secretary shall 
        obtain information on the entity from such database to assure 
        the entity qualifies for the issuance of such a number.
    (g) Comprehensive Sanctions Database.--The Secretary shall 
establish a comprehensive sanctions database on sanctions imposed on 
providers of services, suppliers, and related entities. Such database 
shall be overseen by the Inspector General of the Department of Health 
and Human Services and shall be linked to related databases maintained 
by State licensure boards and by Federal or State law enforcement 
agencies.
    (h) Access to Claims and Payment Databases.--The Secretary shall 
ensure that the Inspector General of the Department of Health and Human 
Services and Federal law enforcement agencies have direct access to all 
claims and payment databases of the Secretary under the Medicare or 
Medicaid programs.
    (i) Civil Money Penalties for Submission of Erroneous 
Information.--In the case of a provider of services, supplier, or other 
entity that submits erroneous information that serves as a basis for 
payment of any entity under the Medicare or Medicaid program, the 
Secretary may impose a civil money penalty of not to exceed $50,000 for 
each such erroneous submission. A civil money penalty under this 
subsection shall be imposed and collected in the same manner as a civil 
money penalty under subsection (a) of section 1128A of the Social 
Security Act is imposed and collected under that section.

         DIVISION G--PATHWAY FOR BIOSIMILAR BIOLOGICAL PRODUCTS

SEC. 701. LICENSURE PATHWAY FOR BIOSIMILAR BIOLOGICAL PRODUCTS.

    (a) Licensure of Biological Products as Biosimilar or 
Interchangeable.--Section 351 of the Public Health Service Act (42 
U.S.C. 262) is amended--
            (1) in subsection (a)(1)(A), by inserting ``under this 
        subsection or subsection (k)'' after ``biologics license''; and
            (2) by adding at the end the following:
    ``(k) Licensure of Biological Products as Biosimilar or 
Interchangeable.--
            ``(1) In general.--Any person may submit an application for 
        licensure of a biological product under this subsection.
            ``(2) Content.--
                    ``(A) In general.--
                            ``(i) Required information.--An application 
                        submitted under this subsection shall include 
                        information demonstrating that--
                                    ``(I) the biological product is 
                                biosimilar to a reference product based 
                                upon data derived from--
                                            ``(aa) analytical studies 
                                        that demonstrate that the 
                                        biological product is highly 
                                        similar to the reference 
                                        product notwithstanding minor 
                                        differences in clinically 
                                        inactive components;
                                            ``(bb) animal studies 
                                        (including the assessment of 
                                        toxicity); and
                                            ``(cc) a clinical study or 
                                        studies (including the 
                                        assessment of immunogenicity 
                                        and pharmacokinetics or 
                                        pharmacodynamics) that are 
                                        sufficient to demonstrate 
                                        safety, purity, and potency in 
                                        1 or more appropriate 
                                        conditions of use for which the 
                                        reference product is licensed 
                                        and intended to be used and for 
                                        which licensure is sought for 
                                        the biological product;
                                    ``(II) the biological product and 
                                reference product utilize the same 
                                mechanism or mechanisms of action for 
                                the condition or conditions of use 
                                prescribed, recommended, or suggested 
                                in the proposed labeling, but only to 
                                the extent the mechanism or mechanisms 
                                of action are known for the reference 
                                product;
                                    ``(III) the condition or conditions 
                                of use prescribed, recommended, or 
                                suggested in the labeling proposed for 
                                the biological product have been 
                                previously approved for the reference 
                                product;
                                    ``(IV) the route of administration, 
                                the dosage form, and the strength of 
                                the biological product are the same as 
                                those of the reference product; and
                                    ``(V) the facility in which the 
                                biological product is manufactured, 
                                processed, packed, or held meets 
                                standards designed to assure that the 
                                biological product continues to be 
                                safe, pure, and potent.
                            ``(ii) Determination by secretary.--The 
                        Secretary may determine, in the Secretary's 
                        discretion, that an element described in clause 
                        (i)(I) is unnecessary in an application 
                        submitted under this subsection.
                            ``(iii) Additional information.--An 
                        application submitted under this subsection--
                                    ``(I) shall include publicly 
                                available information regarding the 
                                Secretary's previous determination that 
                                the reference product is safe, pure, 
                                and potent; and
                                    ``(II) may include any additional 
                                information in support of the 
                                application, including publicly 
                                available information with respect to 
                                the reference product or another 
                                biological product.
                    ``(B) Interchangeability.--An application (or a 
                supplement to an application) submitted under this 
                subsection may include information demonstrating that 
                the biological product meets the standards described in 
                paragraph (4).
            ``(3) Evaluation by secretary.--Upon review of an 
        application (or a supplement to an application) submitted under 
        this subsection, the Secretary shall license the biological 
        product under this subsection if--
                    ``(A) the Secretary determines that the information 
                submitted in the application (or the supplement) is 
                sufficient to show that the biological product--
                            ``(i) is biosimilar to the reference 
                        product; or
                            ``(ii) meets the standards described in 
                        paragraph (4), and therefore is interchangeable 
                        with the reference product; and
                    ``(B) the applicant (or other appropriate person) 
                consents to the inspection of the facility that is the 
                subject of the application, in accordance with 
                subsection (c).
            ``(4) Safety standards for determining 
        interchangeability.--Upon review of an application submitted 
        under this subsection or any supplement to such application, 
        the Secretary shall determine the biological product to be 
        interchangeable with the reference product if the Secretary 
        determines that the information submitted in the application 
        (or a supplement to such application) is sufficient to show 
        that--
                    ``(A) the biological product--
                            ``(i) is biosimilar to the reference 
                        product; and
                            ``(ii) can be expected to produce the same 
                        clinical result as the reference product in any 
                        given patient; and
                    ``(B) for a biological product that is administered 
                more than once to an individual, the risk in terms of 
                safety or diminished efficacy of alternating or 
                switching between use of the biological product and the 
                reference product is not greater than the risk of using 
                the reference product without such alternation or 
                switch.
            ``(5) General rules.--
                    ``(A) One reference product per application.--A 
                biological product, in an application submitted under 
                this subsection, may not be evaluated against more than 
                1 reference product.
                    ``(B) Review.--An application submitted under this 
                subsection shall be reviewed by the division within the 
                Food and Drug Administration that is responsible for 
                the review and approval of the application under which 
                the reference product is licensed.
                    ``(C) Risk evaluation and mitigation strategies.--
                The authority of the Secretary with respect to risk 
                evaluation and mitigation strategies under the Federal 
                Food, Drug, and Cosmetic Act shall apply to biological 
                products licensed under this subsection in the same 
                manner as such authority applies to biological products 
                licensed under subsection (a).
                    ``(D) Restrictions on biological products 
                containing dangerous ingredients.--If information in an 
                application submitted under this subsection, in a 
                supplement to such an application, or otherwise 
                available to the Secretary shows that a biological 
                product--
                            ``(i) is, bears, or contains a select agent 
                        or toxin listed in section 73.3 or 73.4 of 
                        title 42, section 121.3 or 121.4 of title 9, or 
                        section 331.3 of title 7, Code of Federal 
                        Regulations (or any successor regulations); or
                            ``(ii) is, bears, or contains a controlled 
                        substance in schedule I or II of section 202 of 
                        the Controlled Substances Act, as listed in 
                        part 1308 of title 21, Code of Federal 
                        Regulations (or any successor regulations);
                the Secretary shall not license the biological product 
                under this subsection unless the Secretary determines, 
                after consultation with appropriate national security 
                and drug enforcement agencies, that there would be no 
                increased risk to the security or health of the public 
                from licensing such biological product under this 
                subsection.
            ``(6) Exclusivity for first interchangeable biological 
        product.--Upon review of an application submitted under this 
        subsection relying on the same reference product for which a 
        prior biological product has received a determination of 
        interchangeability for any condition of use, the Secretary 
        shall not make a determination under paragraph (4) that the 
        second or subsequent biological product is interchangeable for 
        any condition of use until the earlier of--
                    ``(A) 1 year after the first commercial marketing 
                of the first interchangeable biosimilar biological 
                product to be approved as interchangeable for that 
                reference product;
                    ``(B) 18 months after--
                            ``(i) a final court decision on all patents 
                        in suit in an action instituted under 
                        subsection (l)(5) against the applicant that 
                        submitted the application for the first 
                        approved interchangeable biosimilar biological 
                        product; or
                            ``(ii) the dismissal with or without 
                        prejudice of an action instituted under 
                        subsection (l)(5) against the applicant that 
                        submitted the application for the first 
                        approved interchangeable biosimilar biological 
                        product; or
                    ``(C)(i) 42 months after approval of the first 
                interchangeable biosimilar biological product if the 
                applicant that submitted such application has been sued 
                under subsection (l)(5) and such litigation is still 
                ongoing within such 42-month period; or
                    ``(ii) 18 months after approval of the first 
                interchangeable biosimilar biological product if the 
                applicant that submitted such application has not been 
                sued under subsection (l)(5).
        For purposes of this paragraph, the term `final court decision' 
        means a final decision of a court from which no appeal (other 
        than a petition to the United States Supreme Court for a writ 
        of certiorari) has been or can be taken.
            ``(7) Exclusivity for reference product.--
                    ``(A) Effective date of biosimilar application 
                approval.--Approval of an application under this 
                subsection may not be made effective by the Secretary 
                until the date that is 12 years after the date on which 
                the reference product was first licensed under 
                subsection (a).
                    ``(B) Filing period.--An application under this 
                subsection may not be submitted to the Secretary until 
                the date that is 4 years after the date on which the 
                reference product was first licensed under subsection 
                (a).
                    ``(C) First licensure.--Subparagraphs (A) and (B) 
                shall not apply to a license for or approval of--
                            ``(i) a supplement for the biological 
                        product that is the reference product; or
                            ``(ii) a subsequent application filed by 
                        the same sponsor or manufacturer of the 
                        biological product that is the reference 
                        product (or a licensor, predecessor in 
                        interest, or other related entity) for--
                                    ``(I) a change (not including a 
                                modification to the structure of the 
                                biological product) that results in a 
                                new indication, route of 
                                administration, dosing schedule, dosage 
                                form, delivery system, delivery device, 
                                or strength; or
                                    ``(II) a modification to the 
                                structure of the biological product 
                                that does not result in a change in 
                                safety, purity, or potency.
            ``(8) Pediatric studies.--
                    ``(A) Exclusivity.--If, before or after licensure 
                of the reference product under subsection (a) of this 
                section, the Secretary determines that information 
                relating to the use of such product in the pediatric 
                population may produce health benefits in that 
                population, the Secretary makes a written request for 
                pediatric studies (which shall include a timeframe for 
                completing such studies), the applicant or holder of 
                the approved application agrees to the request, such 
                studies are completed using appropriate formulations 
                for each age group for which the study is requested 
                within any such timeframe, and the reports thereof are 
                submitted and accepted in accordance with section 
                505A(d)(3) of the Federal Food, Drug, and Cosmetic Act 
                the period referred to in paragraph (7)(A) of this 
                subsection is deemed to be 12 years and 6 months rather 
                than 12 years.
                    ``(B) Exception.--The Secretary shall not extend 
                the period referred to in subparagraph (A) of this 
                paragraph if the determination under section 505A(d)(3) 
                of the Federal Food, Drug, and Cosmetic Act is made 
                later than 9 months prior to the expiration of such 
                period.
                    ``(C) Application of certain provisions.--The 
                provisions of subsections (a), (d), (e), (f), (h), (j), 
                (k), and (l) of section 505A of the Federal Food, Drug, 
                and Cosmetic Act shall apply with respect to the 
                extension of a period under subparagraph (A) of this 
                paragraph to the same extent and in the same manner as 
                such provisions apply with respect to the extension of 
                a period under subsection (b) or (c) of section 505A of 
                the Federal Food, Drug, and Cosmetic Act.
            ``(9) Guidance documents.--
                    ``(A) In general.--The Secretary may, after 
                opportunity for public comment, issue guidance in 
                accordance, except as provided in subparagraph (B)(i), 
                with section 701(h) of the Federal Food, Drug, and 
                Cosmetic Act with respect to the licensure of a 
                biological product under this subsection. Any such 
                guidance may be general or specific.
                    ``(B) Public comment.--
                            ``(i) In general.--The Secretary shall 
                        provide the public an opportunity to comment on 
                        any proposed guidance issued under subparagraph 
                        (A) before issuing final guidance.
                            ``(ii) Input regarding most valuable 
                        guidance.--The Secretary shall establish a 
                        process through which the public may provide 
                        the Secretary with input regarding priorities 
                        for issuing guidance.
                    ``(C) No requirement for application 
                consideration.--The issuance (or non-issuance) of 
                guidance under subparagraph (A) shall not preclude the 
                review of, or action on, an application submitted under 
                this subsection.
                    ``(D) Requirement for product class-specific 
                guidance.--If the Secretary issues product class-
                specific guidance under subparagraph (A), such guidance 
                shall include a description of--
                            ``(i) the criteria that the Secretary will 
                        use to determine whether a biological product 
                        is highly similar to a reference product in 
                        such product class; and
                            ``(ii) the criteria, if available, that the 
                        Secretary will use to determine whether a 
                        biological product meets the standards 
                        described in paragraph (4).
                    ``(E) Certain product classes.--
                            ``(i) Guidance.--The Secretary may indicate 
                        in a guidance document that the science and 
                        experience, as of the date of such guidance, 
                        with respect to a product or product class (not 
                        including any recombinant protein) does not 
                        allow approval of an application for a license 
                        as provided under this subsection for such 
                        product or product class.
                            ``(ii) Modification or reversal.--The 
                        Secretary may issue a subsequent guidance 
                        document under subparagraph (A) to modify or 
                        reverse a guidance document under clause (i).
                            ``(iii) No effect on ability to deny 
                        license.--Clause (i) shall not be construed to 
                        require the Secretary to approve a product with 
                        respect to which the Secretary has not 
                        indicated in a guidance document that the 
                        science and experience, as described in clause 
                        (i), does not allow approval of such an 
                        application.
            ``(10) Naming.--The Secretary shall ensure that the 
        labeling and packaging of each biological product licensed 
        under this subsection bears a name that uniquely identifies the 
        biological product and distinguishes it from the reference 
        product and any other biological products licensed under this 
        subsection following evaluation against such reference product.
    ``(l) Patent Notices; Relationship to Final Approval.--
            ``(1) Definitions.--For the purposes of this subsection, 
        the term--
                    ``(A) `biosimilar product' means the biological 
                product that is the subject of the application under 
                subsection (k);
                    ``(B) `relevant patent' means a patent that--
                            ``(i) expires after the date specified in 
                        subsection (k)(7)(A) that applies to the 
                        reference product; and
                            ``(ii) could reasonably be asserted against 
                        the applicant due to the unauthorized making, 
                        use, sale, or offer for sale within the United 
                        States, or the importation into the United 
                        States of the biosimilar product, or materials 
                        used in the manufacture of the biosimilar 
                        product, or due to a use of the biosimilar 
                        product in a method of treatment that is 
                        indicated in the application;
                    ``(C) `reference product sponsor' means the holder 
                of an approved application or license for the reference 
                product; and
                    ``(D) `interested third party' means a person other 
                than the reference product sponsor that owns a relevant 
                patent, or has the right to commence or participate in 
                an action for infringement of a relevant patent.
            ``(2) Handling of confidential information.--Any entity 
        receiving confidential information pursuant to this subsection 
        shall designate one or more individuals to receive such 
        information. Each individual so designated shall execute an 
        agreement in accordance with regulations promulgated by the 
        Secretary. The regulations shall require each such individual 
        to take reasonable steps to maintain the confidentiality of 
        information received pursuant to this subsection and use the 
        information solely for purposes authorized by this subsection. 
        The obligations imposed on an individual who has received 
        confidential information pursuant to this subsection shall 
        continue until the individual returns or destroys the 
        confidential information, a court imposes a protective order 
        that governs the use or handling of the confidential 
        information, or the party providing the confidential 
        information agrees to other terms or conditions regarding the 
        handling or use of the confidential information.
            ``(3) Public notice by secretary.--Within 30 days of 
        acceptance by the Secretary of an application filed under 
        subsection (k), the Secretary shall publish a notice 
        identifying--
                    ``(A) the reference product identified in the 
                application; and
                    ``(B) the name and address of an agent designated 
                by the applicant to receive notices pursuant to 
                paragraph (4)(B).
            ``(4) Exchanges concerning patents.--
                    ``(A) Exchanges with reference product sponsor.--
                            ``(i) Within 30 days of the date of 
                        acceptance of the application by the Secretary, 
                        the applicant shall provide the reference 
                        product sponsor with a copy of the application 
                        and information concerning the biosimilar 
                        product and its production. This information 
                        shall include a detailed description of the 
                        biosimilar product, its method of manufacture, 
                        and the materials used in the manufacture of 
                        the product.
                            ``(ii) Within 60 days of the date of 
                        receipt of the information required to be 
                        provided under clause (i), the reference 
                        product sponsor shall provide to the applicant 
                        a list of relevant patents owned by the 
                        reference product sponsor, or in respect of 
                        which the reference product sponsor has the 
                        right to commence an action of infringement or 
                        otherwise has an interest in the patent as such 
                        patent concerns the biosimilar product.
                            ``(iii) If the reference product sponsor is 
                        issued or acquires an interest in a relevant 
                        patent after the date on which the reference 
                        product sponsor provides the list required by 
                        clause (ii) to the applicant, the reference 
                        product sponsor shall identify that patent to 
                        the applicant within 30 days of the date of 
                        issue of the patent, or the date of acquisition 
                        of the interest in the patent, as applicable.
                    ``(B) Exchanges with interested third parties.--
                            ``(i) At any time after the date on which 
                        the Secretary publishes a notice for an 
                        application under paragraph (3), any interested 
                        third party may provide notice to the 
                        designated agent of the applicant that the 
                        interested third party owns or has rights under 
                        1 or more patents that may be relevant patents. 
                        The notice shall identify at least 1 patent and 
                        shall designate an individual who has executed 
                        an agreement in accordance with paragraph (2) 
                        to receive confidential information from the 
                        applicant.
                            ``(ii) Within 30 days of the date of 
                        receiving notice pursuant to clause (i), the 
                        applicant shall send to the individual 
                        designated by the interested third party the 
                        information specified in subparagraph (A)(i), 
                        unless the applicant and interested third party 
                        otherwise agree.
                            ``(iii) Within 90 days of the date of 
                        receiving information pursuant to clause (ii), 
                        the interested third party shall provide to the 
                        applicant a list of relevant patents which the 
                        interested third party owns, or in respect of 
                        which the interested third party has the right 
                        to commence or participate in an action for 
                        infringement.
                            ``(iv) If the interested third party is 
                        issued or acquires an interest in a relevant 
                        patent after the date on which the interested 
                        third party provides the list required by 
                        clause (iii), the interested third party shall 
                        identify that patent within 30 days of the date 
                        of issue of the patent, or the date of 
                        acquisition of the interest in the patent, as 
                        applicable.
                    ``(C) Identification of basis for infringement.--
                For any patent identified under clause (ii) or (iii) of 
                subparagraph (A) or under clause (iii) or (iv) of 
                subparagraph (B), the reference product sponsor or the 
                interested third party, as applicable--
                            ``(i) shall explain in writing why the 
                        sponsor or the interested third party believes 
                        the relevant patent would be infringed by the 
                        making, use, sale, or offer for sale within the 
                        United States, or importation into the United 
                        States, of the biosimilar product or by a use 
                        of the biosimilar product in treatment that is 
                        indicated in the application;
                            ``(ii) may specify whether the relevant 
                        patent is available for licensing; and
                            ``(iii) shall specify the number and date 
                        of expiration of the relevant patent.
                    ``(D) Certification by applicant concerning 
                identified relevant patents.--Not later than 45 days 
                after the date on which a patent is identified under 
                clause (ii) or (iii) of subparagraph (A) or under 
                clause (iii) or (iv) of subparagraph (B), the applicant 
                shall send a written statement regarding each 
                identified patent to the party that identified the 
                patent. Such statement shall either--
                            ``(i) state that the applicant will not 
                        commence marketing of the biosimilar product 
                        and has requested the Secretary to not grant 
                        final approval of the application before the 
                        date of expiration of the noticed patent; or
                            ``(ii) provide a detailed written 
                        explanation setting forth the reasons why the 
                        applicant believes--
                                    ``(I) the making, use, sale, or 
                                offer for sale within the United 
                                States, or the importation into the 
                                United States, of the biosimilar 
                                product, or the use of the biosimilar 
                                product in a treatment indicated in the 
                                application, would not infringe the 
                                patent; or
                                    ``(II) the patent is invalid or 
                                unenforceable.
            ``(5) Action for infringement involving reference product 
        sponsor.--If an action for infringement concerning a relevant 
        patent identified by the reference product sponsor under clause 
        (ii) or (iii) of paragraph (4)(A), or by an interested third 
        party under clause (iii) or (iv) of paragraph (4)(B), is 
        brought within 60 days of the date of receipt of a statement 
        under paragraph (4)(D)(ii), and the court in which such action 
        has been commenced determines the patent is infringed prior to 
        the date applicable under subsection (k)(7)(A) or (k)(8), the 
        Secretary shall make approval of the application effective on 
        the day after the date of expiration of the patent that has 
        been found to be infringed. If more than one such patent is 
        found to be infringed by the court, the approval of the 
        application shall be made effective on the day after the date 
        that the last such patent expires.
            ``(6) Notification of agreements.--
                    ``(A) Requirements.--
                            ``(i) Agreement between biosimilar product 
                        applicant and reference product sponsor.--If a 
                        biosimilar product applicant under subsection 
                        (k) and the reference product sponsor enter 
                        into an agreement described in subparagraph 
                        (B), the applicant and sponsor shall each file 
                        the agreement in accordance with subparagraph 
                        (C).
                            ``(ii) Agreement between biosimilar product 
                        applicants.--If 2 or more biosimilar product 
                        applicants submit an application under 
                        subsection (k) for biosimilar products with the 
                        same reference product and enter into an 
                        agreement described in subparagraph (B), the 
                        applicants shall each file the agreement in 
                        accordance with subparagraph (C).
                    ``(B) Subject matter of agreement.--An agreement 
                described in this subparagraph--
                            ``(i) is an agreement between the 
                        biosimilar product applicant under subsection 
                        (k) and the reference product sponsor or 
                        between 2 or more biosimilar product applicants 
                        under subsection (k) regarding the manufacture, 
                        marketing, or sale of--
                                    ``(I) the biosimilar product (or 
                                biosimilar products) for which an 
                                application was submitted; or
                                    ``(II) the reference product;
                            ``(ii) includes any agreement between the 
                        biosimilar product applicant under subsection 
                        (k) and the reference product sponsor or 
                        between 2 or more biosimilar product applicants 
                        under subsection (k) that is contingent upon, 
                        provides a contingent condition for, or 
                        otherwise relates to an agreement described in 
                        clause (i); and
                            ``(iii) excludes any agreement that solely 
                        concerns--
                                    ``(I) purchase orders for raw 
                                material supplies;
                                    ``(II) equipment and facility 
                                contracts;
                                    ``(III) employment or consulting 
                                contracts; or
                                    ``(IV) packaging and labeling 
                                contracts.
                    ``(C) Filing.--
                            ``(i) In general.--The text of an agreement 
                        required to be filed by subparagraph (A) shall 
                        be filed with the Assistant Attorney General 
                        and the Federal Trade Commission not later 
                        than--
                                    ``(I) 10 business days after the 
                                date on which the agreement is 
                                executed; and
                                    ``(II) prior to the date of the 
                                first commercial marketing of, for 
                                agreements described in subparagraph 
                                (A)(i), the biosimilar product that is 
                                the subject of the application or, for 
                                agreements described in subparagraph 
                                (A)(ii), any biosimilar product that is 
                                the subject of an application described 
                                in such subparagraph.
                            ``(ii) If agreement not reduced to text.--
                        If an agreement required to be filed by 
                        subparagraph (A) has not been reduced to text, 
                        the persons required to file the agreement 
                        shall each file written descriptions of the 
                        agreement that are sufficient to disclose all 
                        the terms and conditions of the agreement.
                            ``(iii) Certification.--The chief executive 
                        officer or the company official responsible for 
                        negotiating any agreement required to be filed 
                        by subparagraph (A) shall include in any filing 
                        under this paragraph a certification as 
                        follows: `I declare under penalty of perjury 
                        that the following is true and correct: The 
                        materials filed with the Federal Trade 
                        Commission and the Department of Justice under 
                        section 351(l)(6) of the Public Health Service 
                        Act, with respect to the agreement referenced 
                        in this certification: (1) represent the 
                        complete, final, and exclusive agreement 
                        between the parties; (2) include any ancillary 
                        agreements that are contingent upon, provide a 
                        contingent condition for, or are otherwise 
                        related to, the referenced agreement; and (3) 
                        include written descriptions of any oral 
                        agreements, representations, commitments, or 
                        promises between the parties that are 
                        responsive to such section and have not been 
                        reduced to writing.'.
                    ``(D) Disclosure exemption.--Any information or 
                documentary material filed with the Assistant Attorney 
                General or the Federal Trade Commission pursuant to 
                this paragraph shall be exempt from disclosure under 
                section 552 of title 5, United States Code, and no such 
                information or documentary material may be made public, 
                except as may be relevant to any administrative or 
                judicial action or proceeding. Nothing in this 
                subparagraph prevents disclosure of information or 
                documentary material to either body of the Congress or 
                to any duly authorized committee or subcommittee of the 
                Congress.
                    ``(E) Enforcement.--
                            ``(i) Civil penalty.--Any person that 
                        violates a provision of this paragraph shall be 
                        liable for a civil penalty of not more than 
                        $11,000 for each day on which the violation 
                        occurs. Such penalty may be recovered in a 
                        civil action--
                                    ``(I) brought by the United States; 
                                or
                                    ``(II) brought by the Federal Trade 
                                Commission in accordance with the 
                                procedures established in section 
                                16(a)(1) of the Federal Trade 
                                Commission Act.
                            ``(ii) Compliance and equitable relief.--If 
                        any person violates any provision of this 
                        paragraph, the United States district court may 
                        order compliance, and may grant such other 
                        equitable relief as the court in its discretion 
                        determines necessary or appropriate, upon 
                        application of the Assistant Attorney General 
                        or the Federal Trade Commission.
                    ``(F) Rulemaking.--The Federal Trade Commission, 
                with the concurrence of the Assistant Attorney General 
                and by rule in accordance with section 553 of title 5, 
                United States Code, consistent with the purposes of 
                this paragraph--
                            ``(i) may define the terms used in this 
                        paragraph;
                            ``(ii) may exempt classes of persons or 
                        agreements from the requirements of this 
                        paragraph; and
                            ``(iii) may prescribe such other rules as 
                        may be necessary and appropriate to carry out 
                        the purposes of this paragraph.
                    ``(G) Savings clause.--Any action taken by the 
                Assistant Attorney General or the Federal Trade 
                Commission, or any failure of the Assistant Attorney 
                General or the Commission to take action, under this 
                paragraph shall not at any time bar any proceeding or 
                any action with respect to any agreement between a 
                biosimilar product applicant under subsection (k) and 
                the reference product sponsor, or any agreement between 
                biosimilar product applicants under subsection (k), 
                under any other provision of law, nor shall any filing 
                under this paragraph constitute or create a presumption 
                of any violation of any competition laws.''.
    (b) Definitions.--Section 351(i) of the Public Health Service Act 
(42 U.S.C. 262(i)) is amended--
            (1) by striking ``In this section, the term `biological 
        product' means'' and inserting the following: ``In this 
        section:
            ``(1) The term `biological product' means'';
            (2) in paragraph (1), as so designated, by inserting 
        ``protein (except any chemically synthesized polypeptide),'' 
        after ``allergenic product,''; and
            (3) by adding at the end the following:
            ``(2) The term `biosimilar' or `biosimilarity', in 
        reference to a biological product that is the subject of an 
        application under subsection (k), means--
                    ``(A) that the biological product is highly similar 
                to the reference product notwithstanding minor 
                differences in clinically inactive components; and
                    ``(B) there are no clinically meaningful 
                differences between the biological product and the 
                reference product in terms of the safety, purity, and 
                potency of the product.
            ``(3) The term `interchangeable' or `interchangeability', 
        in reference to a biological product that is shown to meet the 
        standards described in subsection (k)(4), means that the 
        biological product may be substituted for the reference product 
        without the intervention of the health care provider who 
        prescribed the reference product.
            ``(4) The term `reference product' means the single 
        biological product licensed under subsection (a) against which 
        a biological product is evaluated in an application submitted 
        under subsection (k).''.
    (c) Products Previously Approved Under Section 505.--
            (1) Requirement to follow section 351.--Except as provided 
        in paragraph (2), an application for a biological product shall 
        be submitted under section 351 of the Public Health Service Act 
        (42 U.S.C. 262) (as amended by this Act).
            (2) Exception.--An application for a biological product may 
        be submitted under section 505 of the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 355) if--
                    (A) such biological product is in a product class 
                for which a biological product in such product class is 
                the subject of an application approved under such 
                section 505 not later than the date of enactment of 
                this Act; and
                    (B) such application--
                            (i) has been submitted to the Secretary of 
                        Health and Human Services (referred to in this 
                        Act as the ``Secretary'') before the date of 
                        enactment of this Act; or
                            (ii) is submitted to the Secretary not 
                        later than the date that is 10 years after the 
                        date of enactment of this Act.
            (3) Limitation.--Notwithstanding paragraph (2), an 
        application for a biological product may not be submitted under 
        section 505 of the Federal Food, Drug, and Cosmetic Act (21 
        U.S.C. 355) if there is another biological product approved 
        under subsection (a) of section 351 of the Public Health 
        Service Act that could be a reference product with respect to 
        such application (within the meaning of such section 351) if 
        such application were submitted under subsection (k) of such 
        section 351.
            (4) Deemed approved under section 351.--An approved 
        application for a biological product under section 505 of the 
        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) shall be 
        deemed to be a license for the biological product under such 
        section 351 on the date that is 10 years after the date of 
        enactment of this Act.
            (5) Definitions.--For purposes of this subsection, the term 
        ``biological product'' has the meaning given such term under 
        section 351 of the Public Health Service Act (42 U.S.C. 262) 
        (as amended by this Act).

SEC. 702. FEES RELATING TO BIOSIMILAR BIOLOGICAL PRODUCTS.

    Subparagraph (B) of section 735(1) of the Federal Food, Drug, and 
Cosmetic Act (21 U.S.C. 379g(1)) is amended by inserting ``, including 
licensure of a biological product under section 351(k) of such Act'' 
before the period at the end.

SEC. 703. AMENDMENTS TO CERTAIN PATENT PROVISIONS.

    (a) Section 271(e)(2) of title 35, United States Code is amended--
            (1) in subparagraph (A), by striking ``or'' after 
        ``patent,'';
            (2) in subparagraph (B), by adding ``or'' after the comma 
        at the end;
            (3) by inserting the following after subparagraph (B):
                    ``(C) a statement under section 351(l)(4)(D)(ii) of 
                the Public Health Service Act,''; and
            (4) in the matter following subparagraph (C) (as added by 
        paragraph (3)), by inserting before the period the following: 
        ``, or if the statement described in subparagraph (C) is 
        provided in connection with an application to obtain a license 
        to engage in the commercial manufacture, use, or sale of a 
        biological product claimed in a patent or the use of which is 
        claimed in a patent before the expiration of such patent''.
    (b) Section 271(e)(4) of title 35, United States Code, is amended 
by striking ``in paragraph (2)'' in both places it appears and 
inserting ``in paragraph (2)(A) or (2)(B)''.
                                 <all>
```