I 

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. 


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

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

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

5 ‘‘Common Sense Health Care Reform and Affordability 

6 Act’’. 

7 (b) PURPOSE.—The purpose of this Act is to take 

8 meaningful steps to lower health care costs and increase 

9 access to health insurance coverage (especially for individ10 uals with preexisting conditions) without— 

11 (1) raising taxes; 

12 (2) cutting Medicare benefits for seniors; 

13 (3) adding to the national deficit; 

14 (4) intervening in the doctor-patient relation15 ship; or 

16 (5) instituting a government takeover of health 

17 care. 

18 (c) TABLE OF CONTENTS.—The table of contents of 

19 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. 


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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. 


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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. 

1 DIVISION A—MAKING HEALTH 

2 CARE COVERAGE AFFORD3 ABLE FOR EVERY AMERICAN 

4 TITLE I—ENSURING COVERAGE 

5 FOR INDIVIDUALS WITH PRE6 EXISTING CONDITIONS AND 

7 MULTIPLE HEALTH CARE 

8 NEEDS 

9 SEC. 101. ESTABLISH UNIVERSAL ACCESS PROGRAMS TO 

10 IMPROVE HIGH RISK POOLS AND REINSUR11 ANCE MARKETS. 

12 (a) STATE REQUIREMENT.— 

13 (1) IN GENERAL.—Not later than January 1, 

14 2010, each State shall— 

15 (A) subject to paragraph (3), operate— 

16 (i) a qualified State reinsurance pro17 gram described in subsection (b); or 


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1 (ii) qualifying State high risk pool de2 scribed in subsection (c)(1); and 

3 (B) subject to paragraph (3), apply to the 

4 operation of such a program from State funds 

5 an amount equivalent to the portion of State 

6 funds derived from State premium assessments 

7 (as defined by the Secretary) that are not oth8 erwise used on State health care programs. 

9 (2) RELATION TO CURRENT QUALIFIED HIGH

10 RISK POOL PROGRAM.— 

11 (A) STATES NOT OPERATING A QUALIFIED

12 HIGH RISK POOL.—In the case of a State that 

13 is not operating a current section 2745 quali14 fied high risk pool as of the date of the enact15 ment of this Act— 

16 (i) the State may only meet the re17 quirement of paragraph (1) through the 

18 operation of a qualified State reinsurance 

19 program described in subsection (b); and 

20 (ii) the State’s operation of such a re21 insurance program shall be treated, for 

22 purposes of section 2745 of the Public 

23 Health Service Act, as the operation of a 

24 qualified high risk pool described in such 

25 section. 


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1 (B) STATE OPERATING A QUALIFIED HIGH

2 RISK POOL.—In the case of a State that is op3 erating a current section 2745 qualified high 

4 risk pool as of the date of the enactment of this 

5 Act— 

6 (i) as of January 1, 2010, such a pool 

7 shall not be treated as a qualified high risk 

8 pool under section 2745 of the Public 

9 Health Service Act unless the pool is a 

10 qualifying State high risk pool described in 

11 subsection (c)(1); and 

12 (ii) the State may use premium as13 sessment funds described in paragraph 

14 (1)(B) to transition from operation of such 

15 a pool to operation of a qualified State re16 insurance program described in subsection 

17 (b). 

18 (3) APPLICATION OF FUNDS.—If the program 

19 or pool operated under paragraph (1)(A) is in strong 

20 fiscal health, as determined in accordance with 

21 standards established by the National Association of 

22 Insurance Commissioners and as approved by the 

23 State Insurance Commissioner involved, the require24 ment of paragraph (1)(B) shall be deemed to be 

25 met. 


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1 (b) QUALIFIED STATE REINSURANCE PROGRAM.— 

2 (1) IN GENERAL.—For purposes of this section, 

3 a ‘‘qualified State reinsurance program’’ means a 

4 program operated by a State program that provides 

5 reinsurance for health insurance coverage offered in 

6 the small group market in accordance with the 

7 model for such a program established (as of the date 

8 of the enactment of this Act). 

9 (2) FORM OF PROGRAM.—A qualified State re10 insurance program may provide reinsurance— 

11 (A) on a prospective or retrospective basis; 

12 and 

13 (B) on a basis that protects health insur14 ance issuers against the annual aggregate 

15 spending of their enrollees as well as purchase 

16 protection against individual catastrophic costs. 

17 (3) SATISFACTION OF HIPAA REQUIREMENT.— 

18 A qualified State reinsurance program shall be 

19 deemed, for purposes of section 2745 of the Public 

20 Health Service Act, to be a qualified high risk pool 

21 under such section. 

22 (c) QUALIFYING STATE HIGH RISK POOL.— 

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

24 pool described in this subsection means a current 


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1 section 2745 qualified high risk pool that meets the 

2 following requirements: 

3 (A) The pool must provide at least two 

4 coverage options, one of which must be a high 

5 deductible health plan coupled with a health 

6 savings account. 

7 (B) The pool must be funded with a stable 

8 funding source. 

9 (C) The pool must eliminate any waiting 

10 lists so that all eligible residents who are seek11 ing coverage through the pool should be allowed 

12 to receive coverage through the pool. 

13 (D) The pool must allow for coverage of 

14 individuals who, but for the 24-month disability 

15 waiting period under section 226(b) of the So16 cial Security Act, would be eligible for Medicare 

17 during the period of such waiting period. 

18 (E) The pool must limit the pool premiums 

19 to no more than 150 percent of the average 

20 premium for applicable standard risk rates in 

21 that State. 

22 (F) The pool must conduct education and 

23 outreach initiatives so that residents and bro24 kers understand that the pool is available to eli25 gible residents. 


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1 (G) The pool must provide coverage for 

2 preventive services and disease management for 

3 chronic diseases. 

4 (2) VERIFICATION OF CITIZENSHIP OR ALIEN

5 QUALIFICATION.— 

6 (A) IN GENERAL.—Notwithstanding any 

7 other provision of law, only citizens and nation8 als of the United States shall be eligible to par9 ticipate in a qualifying State high risk pool that 

10 receives funds under section 2745 of the Public 

11 Health Service Act or this section. 

12 (B) CONDITION OF PARTICIPATION.—As a 

13 condition of a State receiving such funds, the 

14 Secretary shall require the State to certify, to 

15 the satisfaction of the Secretary, that such 

16 State requires all applicants for coverage in the 

17 qualifying State high risk pool to provide satis18 factory documentation of citizenship or nation19 ality in a manner consistent with section 

20 1903(x) of the Social Security Act. 

21 (C) RECORDS.—The Secretary shall keep 

22 sufficient records such that a determination of 

23 citizenship or nationality only has to be made 

24 once for any individual under this paragraph. 


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1 (3) RELATION TO SECTION 2745.—As of Janu2 ary 1, 2010, a pool shall not qualify as qualified 

3 high risk pool under section 2745 of the Public 

4 Health Service Act unless the pool is a qualifying 

5 State high risk pool described in paragraph (1). 

6 (d) WAIVERS.—In order to accommodate new and in7 novative programs, the Secretary may waive such require8 ments of this section for qualified State reinsurance pro9 grams and for qualifying State high risk pools as the Sec10 retary deems appropriate. 

11 (e) FUNDING.—In addition to any other amounts ap12 propriated, there is appropriated to carry out section 2745 

13 of the Public Health Service Act (including through a pro14 gram or pool described in subsection (a)(1))— 

15 (1) $15,000,000,000 for the period of fiscal 

16 years 2010 through 2019; and 

17 (2) an additional $10,000,000,000 for the pe18 riod of fiscal years 2015 through 2019. 

19 (f) DEFINITIONS.—In this section: 

20 (1) HEALTH INSURANCE COVERAGE; HEALTH

21 INSURANCE ISSUER.—The terms ‘‘health insurance 

22 coverage’’ and ‘‘health insurance issuer’’ have the 

23 meanings given such terms in section 2791 of the 

24 Public Health Service Act. 


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1 (2) CURRENT SECTION 2745 QUALIFIED HIGH

2 RISK POOL.—The term ‘‘current section 2745 quali3 fied high risk pool’’ has the meaning given the term 

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

5 the Public Health Service Act as in effect as of the 

6 date of the enactment of this Act. 

7 (3) SECRETARY.—The term ‘‘Secretary’’ means 

8 Secretary of Health and Human Services. 

9 (4) STANDARD RISK RATE.—The term ‘‘stand10 ard risk rate’’ means a rate that— 

11 (A) is determined under the State high 

12 risk pool by considering the premium rates 

13 charged by other health insurance issuers offer14 ing health insurance coverage to individuals in 

15 the insurance market served; 

16 (B) is established using reasonable actu17 arial techniques; and 

18 (C) reflects anticipated claims experience 

19 and expenses for the coverage involved. 

20 (5) STATE.—The term ‘‘State’’ means any of 

21 the 50 States or the District of Columbia. 


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1 SEC. 102. ELIMINATION OF CERTAIN REQUIREMENTS FOR 

2 GUARANTEED AVAILABILITY IN INDIVIDUAL 

3 MARKET. 

4 (a) IN GENERAL.—Section 2741(b) of the Public 

5 Health Service Act (42 U.S.C. 300gg–41(b)) is amend6 ed— 

7 (1) in paragraph (1)— 

8 (A) by striking ‘‘(1)(A)’’ and inserting 

9 ‘‘(1)’’; and 

10 (B) by striking ‘‘and (B)’’ and all that fol11 lows up to the semicolon at the end; 

12 (2) by adding ‘‘and’’ at the end of paragraph 

13 (2); 

14 (3) in paragraph (3)— 

15 (A) by striking ‘‘(1)(A)’’ and inserting 

16 ‘‘(1)’’; and 

17 (B) by striking the semicolon at the end 

18 and inserting a period; and 

19 (4) by striking paragraphs (4) and (5). 

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

21 subsection (a) shall take effect on the date of the enact22 ment of this Act. 

23 SEC. 103. NO ANNUAL OR LIFETIME SPENDING CAPS. 

24 Notwithstanding any other provision of law, a health 

25 insurance issuer (including an entity licensed to sell insur26 ance with respect to a State or group health plan) may 


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1 not apply an annual or lifetime aggregate spending cap 

2 on any health insurance coverage or plan offered by such 

3 issuer. 

4 SEC. 104. PREVENTING UNJUST CANCELLATION OF INSUR5 ANCE COVERAGE. 

6 (a) CLARIFICATION REGARDING APPLICATION OF

7 GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH

8 INSURANCE COVERAGE.—Section 2742 of the Public 

9 Health Service Act (42 U.S.C. 300gg–42) is amended— 

10 (1) in its heading, by inserting ‘‘, CONTINU11 ATION IN FORCE, INCLUDING PROHIBITION OF

12 RESCISSION,’’ after ‘‘GUARANTEED RENEW13 ABILITY’’; 

14 (2) in subsection (a), by inserting ‘‘, including 

15 without rescission,’’ after ‘‘continue in force’’; and 

16 (3) in subsection (b)(2), by inserting before the 

17 period at the end the following: ‘‘, including inten18 tional concealment of material facts regarding a 

19 health condition related to the condition for which 

20 coverage is being claimed’’. 

21 (b) OPPORTUNITY FOR INDEPENDENT, EXTERNAL

22 THIRD PARTY REVIEW IN CERTAIN CASES.—Subpart 1 

23 of part B of title XXVII of the Public Health Service Act 

24 is amended by adding at the end the following new section: 


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1 ‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 

2 THIRD PARTY REVIEW IN CERTAIN CASES. 

3 ‘‘(a) NOTICE AND REVIEW RIGHT.—If a health in4 surance issuer determines to nonrenew or not continue in 

5 force, including rescind, health insurance coverage for an 

6 individual in the individual market on the basis described 

7 in section 2742(b)(2) before such nonrenewal, discontinu8 ation, or rescission, may take effect the issuer shall pro9 vide the individual with notice of such proposed non10 renewal, discontinuation, or rescission and an opportunity 

11 for a review of such determination by an independent, ex12 ternal third party under procedures specified by the Sec13 retary. 

14 ‘‘(b) INDEPENDENT DETERMINATION.—If the indi15 vidual requests such review by an independent, external 

16 third party of a nonrenewal, discontinuation, or rescission 

17 of health insurance coverage, the coverage shall remain in 

18 effect until such third party determines that the coverage 

19 may be nonrenewed, discontinued, or rescinded under sec20 tion 2742(b)(2).’’. 

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

22 this section shall apply after the date of the enactment 

23 of this Act with respect to health insurance coverage 

24 issued before, on, or after such date. 


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1 TITLE II—REDUCING HEALTH 

2 CARE PREMIUMS AND THE 

3 NUMBER OF UNINSURED 

4 AMERICANS 

5 SEC. 111. STATE INNOVATION PROGRAMS. 

6 (a) PROGRAMS THAT REDUCE THE COST OF

7 HEALTH INSURANCE PREMIUMS.— 

8 (1) PAYMENTS TO STATES.— 

9 (A) FOR PREMIUM REDUCTIONS IN THE

10 SMALL GROUP MARKET.—If the Secretary de11 termines that a State has reduced the average 

12 per capita premium for health insurance cov13 erage in the small group market in year 3, in 

14 year 6, or year 9 (as defined in subsection (c)) 

15 below the premium baseline for such year (as 

16 defined paragraph (2)), the Secretary shall pay 

17 the State an amount equal to the product of— 

18 (i) bonus premium percentage (as de19 fined in paragraph (3)) for the State, mar20 ket, and year; and 

21 (ii) the maximum State premium pay22 ment amount (as defined in paragraph (4)) 

23 for the State, market, and year 

24 (B) FOR PREMIUM REDUCTIONS IN THE

25 INDIVIDUAL MARKET.—If the Secretary deterVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 mines that a State has reduced the average per 

2 capita premium for health insurance coverage 

3 in the individual market in year 3, in year 6, 

4 or in year 9 below the premium baseline for 

5 such year, the Secretary shall pay the State an 

6 amount equal to the product of— 

7 (i) bonus premium percentage for the 

8 State, market, and year; and 

9 (ii) the maximum State premium pay10 ment amount for the State, market, and 

11 year. 

12 (2) PREMIUM BASELINE.—For purposes of this 

13 subsection, the term ‘‘premium baseline’’ means, for 

14 a market in a State— 

15 (A) for year 1, the average per capita pre16 miums for health insurance coverage in such 

17 market in the State in such year; or 

18 (B) for a subsequent year, the baseline for 

19 the market in the State for the previous year 

20 under this paragraph increased by a percentage 

21 specified in accordance with a formula estab22 lished by the Secretary, in consultation with the 

23 Congressional Budget Office and the Bureau of 

24 the Census, that takes into account at least the 

25 following: 


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1 (i) GROWTH FACTOR.—The inflation 

2 in the costs of inputs to health care serv3 ices in the year. 

4 (ii) HISTORIC PREMIUM GROWTH

5 RATES.—Historic growth rates, during the 

6 10 years before year 1, of per capita pre7 miums for health insurance coverage. 

8 (iii) DEMOGRAPHIC CONSIDER9 ATIONS.—Historic average changes in the 

10 demographics of the population covered 

11 that impact on the rate of growth of per 

12 capita health care costs. 

13 (3) BONUS PREMIUM PERCENTAGE DEFINED.— 

14 (A) IN GENERAL.—For purposes of this 

15 subsection, the term ‘‘bonus premium percent16 age’’ means, for the small group market or indi17 vidual market in a State for a year, such per18 centage as determined in accordance with the 

19 following table based on the State’s premium 

20 performance level (as defined in subparagraph 

21 (B)) for such market and year: 

The bonus 

premium percentage for a 

State is— 

For year 3 if the 

premium performance level of the 

State is— 

For year 6 if the 

premium performance level of the 

State is— 

For year 9 if the 

premium performance level of the 

State is— 

100 percent at least 8.5% at least 11% at least 13.5% 


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The bonus 

premium percentage for a 

State is— 

For year 3 if the 

premium performance level of the 

State is— 

For year 6 if the 

premium performance level of the 

State is— 

For year 9 if the 

premium performance level of the 

State is— 

50 percent at least 6.38%, 

but less than 8.5% 

at least 10.38%, 

but less than 11% 

at least 12.88%, 

but less than 

13.5% 

25 percent at least 4.25%, 

but less than 

6.38% 

at least 9.75%, 

but less than 

10.38% 

at least 12.25%, 

but less than 

12.88% 

0 percent less than 4.25% less than 9.75% less than 12.25%. 

1 (B) PREMIUM PERFORMANCE LEVEL.—For 

2 purposes of this subsection, the term ‘‘premium 

3 performance level’’ means, for a State, market, 

4 and year, the percentage reduction in the aver5 age per capita premiums for health insurance 

6 coverage for the State, market, and year, as 

7 compared to the premium baseline for such 

8 State, market, and year. 

9 (4) MAXIMUM STATE PREMIUM PAYMENT

10 AMOUNT DEFINED.—For purposes of this sub11 section, the term ‘‘maximum State premium pay12 ment amount’’ means, for a State for the small 

13 group market or the individual market for a year, 

14 the product of— 

15 (A) the proportion (as determined by the 

16 Secretary), of the number of nonelderly individ17 uals lawfully residing in all the States who are 

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1 spective market in the year, who are residents 

2 of the State; and 

3 (B) the amount available for obligation 

4 from amounts appropriated under subsection 

5 (d) for such market with respect to perform6 ance in such year. 

7 (5) METHODOLOGY FOR CALCULATING AVER8 AGE PER CAPITA PREMIUMS.— 

9 (A) ESTABLISHMENT.—The Secretary 

10 shall establish, by rule and consistent with this 

11 subsection, a methodology for computing the 

12 average per capita premiums for health insur13 ance coverage for the small group market and 

14 for the individual market in each State for each 

15 year beginning with year 1. 

16 (B) ADJUSTMENTS.—Under such method17 ology, the Secretary shall provide for the fol18 lowing adjustments (in a manner determined 

19 appropriate by the Secretary): 

20 (i) EXCLUSION OF ILLEGAL ALIENS.— 

21 An adjustment so as not to take into ac22 count enrollees who are not lawfully 

23 present in the United States and their pre24 mium costs. 


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1 (ii) TREATING STATE PREMIUM SUB2 SIDIES AS PREMIUM COSTS.—An adjust3 ment so as to increase per capita pre4 miums to remove the impact of premium 

5 subsidies made directly by a State to re6 duce health insurance premiums. 

7 (6) CONDITIONS OF PAYMENT.—As a condition 

8 of receiving a payment under paragraph (1), a State 

9 must agree to submit aggregate, non-individually 

10 identifiable data to the Secretary, in a form and 

11 manner specified by the Secretary, for use by the 

12 Secretary to determine the State’s premium baseline 

13 and premium performance level for purposes of this 

14 subsection. 

15 (b) PROGRAMS THAT REDUCE THE NUMBER OF UN16 INSURED.— 

17 (1) IN GENERAL.—If the Secretary determines 

18 that a State has reduced the percentage of unin19 sured nonelderly residents in year 5, year 7, or year 

20 9, below the uninsured baseline (as defined in para21 graph (2)) for the State for the year, the Secretary 

22 shall pay the State an amount equal to the product 

23 of— 


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1 (A) bonus uninsured percentage (as de2 fined in paragraph (3)) for the State and year; 

3 and 

4 (B) the maximum uninsured payment 

5 amount (as defined in paragraph (4)) for the 

6 State and year. 

7 (2) UNINSURED BASELINE.— 

8 (A) IN GENERAL.—For purposes of this 

9 subsection, and subject to subparagraph (B), 

10 the term ‘‘uninsured baseline’’ means, for a 

11 State, the percentage of nonelderly residents in 

12 the State who are uninsured in year 1. 

13 (B) ADJUSTMENT.—The Secretary may, at 

14 the written request of a State, adjust the unin15 sured baseline for States for a year to take into 

16 account unanticipated and exceptional changes, 

17 such as an unanticipated migration, of non18 elderly individuals into, or out of, States in a 

19 manner that does not reflect substantially the 

20 proportion of uninsured nonelderly residents in 

21 the States involved in year 1. Any such adjust22 ment shall only be done in a manner that does 

23 not result in the average of the uninsured base24 lines for nonelderly residents for all States 

25 being changed. 


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1 (3) BONUS UNINSURED PERCENTAGE.— 

2 (A) BONUS UNINSURED PERCENTAGE.— 

3 For purposes of this subsection, the term 

4 ‘‘bonus uninsured percentage’’ means, for a 

5 State for a year, such percentage as determined 

6 in accordance with the following table, based on 

7 the uninsured performance level (as defined in 

8 subparagraph (B)) for such State and year: 

The bonus uninsured percentage for a 

State is— 

For year 5 if the 

uninsured performance level of 

the State is— 

For year 7 if the 

uninsured performance level of 

the State is— 

For year 9 if the 

uninsured performance level of 

the State 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 15% 

at least 18.75% 

but less than 20% 

25 percent at least 5% but 

less than 7.5% 

at least 12.5% but 

less than 13.75% 

at least 17.5% but 

less than 18.75% 

0 percent less than 5% less than 12.5% less than 17.5%. 

9 (B) UNINSURED PERFORMANCE LEVEL.— 

10 For purposes of this subsection, the term ‘‘un11 insured performance level’’ means, for a State 

12 for a year, the reduction (expressed as a per13 centage) in the percentage of uninsured non14 elderly residents in such State in the year as 

15 compared to the uninsured baseline for such 

16 State for such year. 

17 (4) MAXIMUM STATE UNINSURED PAYMENT

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1 section, the term ‘‘maximum State uninsured pay2 ment amount’’ means, for a State for a year, the 

3 product of— 

4 (A) the proportion (as determined by the 

5 Secretary), of the number of uninsured non6 elderly individuals lawfully residing in all the 

7 States in the year, who are residents of the 

8 State; and 

9 (B) the amount available for obligation 

10 under this subsection from amounts appro11 priated under subsection (d) with respect to 

12 performance in such year. 

13 (5) METHODOLOGY FOR COMPUTING THE PER14 CENTAGE OF UNINSURED NONELDERLY RESIDENTS

15 IN A STATE.— 

16 (A) ESTABLISHMENT.—The Secretary 

17 shall establish, by rule and consistent with this 

18 subsection, a methodology for computing the 

19 percentage of nonelderly residents in a State 

20 who are uninsured in each year beginning with 

21 year 1. 

22 (B) RULES.— 

23 (i) TREATMENT OF UNINSURED.— 

24 Such methodology shall treat as uninsured 

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1 surance coverage or other creditable cov2 erage (as defined in section 9801(c)(1) of 

3 the Internal Revenue Code of 1986), ex4 cept that such methodology shall rely upon 

5 data on the nonelderly and uninsured pop6 ulations within each State in such year 

7 provided through population surveys con8 ducted by federal agencies. 

9 (ii) LIMITATION TO NONELDERLY.— 

10 Such methodology shall exclude individuals 

11 who are 65 years of age or older. 

12 (iii) EXCLUSION OF ILLEGAL

13 ALIENS.—Such methodology shall exclude 

14 individuals not lawfully present in the 

15 United States. 

16 (6) CONDITIONS OF PAYMENT.—As a condition 

17 of receiving a payment under paragraph (1), a State 

18 must agree to submit aggregate, non-individually 

19 identifiable data to the Secretary, in a form and 

20 manner specified by the Secretary, for use by the 

21 Secretary in determining the State’s uninsured base22 line and uninsured performance level for purposes of 

23 this subsection. 

24 (c) DEFINITIONS.—For purposes of this section: 


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

2 health plan’’ has the meaning given such term in 

3 section 9832(a) of the Internal Revenue Code of 

4 1986. 

5 (2) HEALTH INSURANCE COVERAGE.—The term 

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

7 such term in section 9832(b)(1) of the Internal Rev8 enue Code of 1986. 

9 (3) INDIVIDUAL MARKET.—Except as the Sec10 retary may otherwise provide in the case of group 

11 health plans that have fewer than 2 participants as 

12 current employees on the first day of a plan year, 

13 the term ‘‘individual market’’ means the market for 

14 health insurance coverage offered to individuals 

15 other than in connection with a group health plan. 

16 (4) SECRETARY.—The term ‘‘Secretary’’ means 

17 the Secretary of Health and Human Services. 

18 (5) SMALL GROUP MARKET.—The term ‘‘small 

19 group market’’ means the market for health insur20 ance coverage under which individuals obtain health 

21 insurance coverage (directly or through any arrange22 ment) on behalf of themselves (and their depend23 ents) through a group health plan maintained by an 

24 employer who employed on average at least 2 but 


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1 not more than 50 employees on business days during 

2 a calendar year. 

3 (6) STATE.—The term ‘‘State’’ means any of 

4 the 50 States and the District of Columbia. 

5 (7) YEARS.—The terms ‘‘year 1’’, ‘‘year 2’’, 

6 ‘‘year 3’’, and similar subsequently numbered years 

7 mean 2010, 2011, 2012, and subsequent sequen8 tially numbered years. 

9 (d) APPROPRIATIONS; PAYMENTS.— 

10 (1) PAYMENTS FOR REDUCTIONS IN COST OF

11 HEALTH INSURANCE COVERAGE.— 

12 (A) SMALL GROUP MARKET.— 

13 (i) IN GENERAL.—From any funds in 

14 the Treasury not otherwise appropriated, 

15 there is appropriated for payments under 

16 subsection (a)(1)(A)— 

17 (I) $18,000,000,000 with respect 

18 to performance in year 3; 

19 (II) $5,000,000,000 with respect 

20 to performance in year 6; and 

21 (III) $2,000,000,000 with re22 spect to performance in year 9. 

23 (ii) AVAILABILITY OF APPROPRIATED

24 FUNDS.—Funds appropriated under clause 

25 (i) shall remain available until expended. 


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1 (B) INDIVIDUAL MARKET.— 

2 (i) IN GENERAL.—Subject to clause 

3 (ii), from any funds in the Treasury not 

4 otherwise appropriated, there is appro5 priated for payments under subsection 

6 (a)(1)(B)— 

7 (I) $7,000,000,000 with respect 

8 to performance in year 3; 

9 (II) $2,000,000,000 with respect 

10 to performance in year 6; and 

11 (III) $1,000,000,000 with re12 spect to performance in year 9. 

13 (ii) AVAILABILITY OF APPROPRIATED

14 FUNDS.—Of the funds appropriated under 

15 clause (i) that are not expended or obli16 gated by the end of the year following the 

17 year for which the funds are appro18 priated— 

19 (I) 75 percent shall remain avail20 able until expended for payments 

21 under subsection (a)(1)(B); and 

22 (II) 25 percent shall remain 

23 available until expended for payments 

24 under subsection (a)(1)(A). 


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1 (2) PAYMENTS FOR REDUCTIONS IN THE PER2 CENTAGE OF UNINSURED.— 

3 (A) IN GENERAL.—From any funds in the 

4 Treasury not otherwise appropriated, there is 

5 appropriated for payments under subsection 

6 (b)(1)— 

7 (i) $10,000,000,000 with respect to 

8 performance in year 5; 

9 (ii) $3,000,000,000 with respect to 

10 performance in year 7; and 

11 (iii) $2,000,000,000 with respect to 

12 performance in year 9 

13 (B) AVAILABILITY OF APPROPRIATED

14 FUNDS.—Funds appropriated under subpara15 graph (A) shall remain available until expended. 

16 (3) PAYMENT TIMING.—Payments under this 

17 section shall be made in a form and manner speci18 fied by the Secretary in the year after the perform19 ance year involved. 

20 SEC. 112. HEALTH PLAN FINDERS. 

21 (a) STATE PLAN FINDERS.—Not later than 12 

22 months after the date of the enactment of this Act, each 

23 State may contract with a private entity to develop and 

24 operate a plan finder website (referred to in this section 

25 as a ‘‘State plan finder’’) which shall provide information 


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1 to individuals in such State on plans of health insurance 

2 coverage that are available to individuals in such State (in 

3 this section referred to as a ‘‘health insurance plan’’) . 

4 Such State may not operate a plan finder itself. 

5 (b) MULTI-STATE PLAN FINDERS.— 

6 (1) IN GENERAL.—A private entity may operate 

7 a multi-State finder that operates under this section 

8 in the States involved in the same manner as a State 

9 plan finder would operate in a single State. 

10 (2) SHARING OF INFORMATION.—States shall 

11 regulate the manner in which data is shared between 

12 plan finders to ensure consistency and accuracy in 

13 the information about health insurance plans con14 tained in such finders. 

15 (c) REQUIREMENTS FOR PLAN FINDERS.—Each plan 

16 finder shall meet the following requirements: 

17 (1) The plan finder shall ensure that each 

18 health insurance plan in the plan finder meets the 

19 requirements for such plans under subsection (d). 

20 (2) The plan finder shall present complete in21 formation on the costs and benefits of health insur22 ance plans (including information on monthly pre23 mium, copayments, and deductibles) in a uniform 

24 manner that— 


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1 (A) uses the standard definitions developed 

2 under paragraph (3); and 

3 (B) is designed to allow consumers to eas4 ily compare such plans. 

5 (3) The plan finder shall be available on the 

6 Internet and accessible to all individuals in the State 

7 or, in the case of a multi-State plan finder, in all 

8 States covered by the multi-State plan finder. 

9 (4) The plan finder shall allow consumers to 

10 search and sort data on the health insurance plans 

11 in the plan finder on criteria such as coverage of 

12 specific benefits (such as coverage of disease man13 agement services or pediatric care services), as well 

14 as data available on quality. 

15 (5) The plan finder shall meet all relevant State 

16 laws and regulations, including laws and regulations 

17 related to the marketing of insurance products. In 

18 the case of a multi-State plan finder, the finder shall 

19 meet such laws and regulations for all of the States 

20 involved. 

21 (6) The plan finder shall meet solvency, finan22 cial, and privacy requirements established by the 

23 State or States in which the plan finder operates or 

24 the Secretary for multi-State finders. 


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1 (7) The plan finder and the employees of the 

2 plan finder shall be appropriately licensed in the 

3 State or States in which the plan finder operates, if 

4 such licensure is required by such State or States. 

5 (8) Notwithstanding subsection (f)(1), the plan 

6 finder shall assist individuals who are eligible for the 

7 Medicaid program under title XIX of the Social Se8 curity Act or State Children’s Health Insurance Pro9 gram under title XXI of such Act by including infor10 mation on Medicaid options, eligibility, and how to 

11 enroll. 

12 (d) REQUIREMENTS FOR PLANS PARTICIPATING IN

13 A PLAN FINDER.— 

14 (1) IN GENERAL.—Each State shall ensure that 

15 health insurance plans participating in the State 

16 plan finder or in a multi-State plan finder meet the 

17 requirements of paragraph (2) (relating to adequacy 

18 of insurance coverage, consumer protection, and fi19 nancial strength). 

20 (2) SPECIFIC REQUIREMENTS.—In order to 

21 participate in a plan finder, a health insurance plan 

22 must meet all of the following requirements, as de23 termined by each State in which such plan operates: 

24 (A) The health insurance plan shall be ac25 tuarially sound. 


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1 (B) The health insurance plan may not 

2 have a history of abusive policy rescissions. 

3 (C) The health insurance plan shall meet 

4 financial and solvency requirements. 

5 (D) The health insurance plan shall dis6 close— 

7 (i) all financial arrangements involv8 ing the sale and purchase of health insur9 ance, such as the payment of fees and 

10 commissions; and 

11 (ii) such arrangements may not be 

12 abusive. 

13 (E) The health insurance plan shall main14 tain electronic health records that comply with 

15 the requirements of the American Recovery and 

16 Reinvestment Act of 2009 (Public Law 111–5) 

17 related to electronic health records. 

18 (F) The health insurance plan shall make 

19 available to plan enrollees via the finder, wheth20 er by information provided to the finder or by 

21 a website link directing the enrollee from the 

22 finder to the health insurance plan website, 

23 data that includes the price and cost to the in24 dividual of services offered by a provider ac25 cording to the terms and conditions of the 


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1 health plan. Data described in this paragraph is 

2 not made public by the finder, only made avail3 able to the individual once enrolled in the 

4 health plan. 

5 (e) PROHIBITIONS.— 

6 (1) DIRECT ENROLLMENT.—The State plan 

7 finder may not directly enroll individuals in health 

8 insurance plans. 

9 (2) CONFLICTS OF INTEREST.— 

10 (A) COMPANIES.—A health insurance 

11 issuer offering a health insurance plan through 

12 a plan finder may not— 

13 (i) be the private entity developing 

14 and maintaining a plan finder under sub15 sections (a) and (b); or 

16 (ii) have an ownership interest in such 

17 private entity or in the plan finder. 

18 (B) INDIVIDUALS.—An individual em19 ployed by a health insurance issuer offering a 

20 health insurance plan through a plan finder 

21 may not serve as a director or officer for— 

22 (i) the private entity developing and 

23 maintaining a plan finder under sub24 sections (a) and (b); or 

25 (ii) the plan finder. 


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1 (f) CONSTRUCTION.—Nothing in this section shall be 

2 construed to allow the Secretary authority to regulate ben3 efit packages or to prohibit health insurance brokers and 

4 agents from— 

5 (1) utilizing the plan finder for any purpose; or 

6 (2) marketing or offering health insurance 

7 products. 

8 (g) PLAN FINDER DEFINED.—For purposes of this 

9 section, the term ‘‘plan finder’’ means a State plan finder 

10 under subsection (a) or a multi-State plan finder under 

11 subsection (b). 

12 (h) STATE DEFINED.—In this section, the term 

13 ‘‘State’’ has the meaning given such term for purposes of 

14 title XIX of the Social Security Act. 

15 SEC. 113. ADMINISTRATIVE SIMPLIFICATION. 

16 (a) OPERATING RULES FOR HEALTH INFORMATION

17 TRANSACTIONS.— 

18 (1) DEFINITION OF OPERATING RULES.—Sec19 tion 1171 of the Social Security Act (42 U.S.C. 

20 1320d) is amended by adding at the end the fol21 lowing: 

22 ‘‘(9) OPERATING RULES.—The term ‘operating 

23 rules’ means the necessary business rules and guide24 lines for the electronic exchange of information that 


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1 are not defined by a standard or its implementation 

2 specifications as adopted for purposes of this part.’’. 

3 (2) OPERATING RULES AND COMPLIANCE.— 

4 Section 1173 of the Social Security Act (42 U.S.C. 

5 1320d–2) is amended— 

6 (A) in subsection (a)(2), by adding at the 

7 end the following new subparagraph: 

8 ‘‘(J) Electronic funds transfers.’’; and 

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

10 subsections: 

11 ‘‘(g) OPERATING RULES.— 

12 ‘‘(1) IN GENERAL.—The Secretary shall adopt 

13 a single set of operating rules for each transaction 

14 described in subsection (a)(2) with the goal of cre15 ating as much uniformity in the implementation of 

16 the electronic standards as possible. Such operating 

17 rules shall be consensus-based and reflect the nec18 essary business rules affecting health plans and 

19 health care providers and the manner in which they 

20 operate pursuant to standards issued under Health 

21 Insurance Portability and Accountability Act of 

22 1996. 

23 ‘‘(2) OPERATING RULES DEVELOPMENT.—In 

24 adopting operating rules under this subsection, the 

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1 ating rules developed by a qualified nonprofit entity, 

2 as selected by the Secretary, that meets the fol3 lowing requirements: 

4 ‘‘(A) The entity focuses its mission on ad5 ministrative simplification. 

6 ‘‘(B) The entity demonstrates an estab7 lished multi-stakeholder and consensus-based 

8 process for development of operating rules, in9 cluding representation by or participation from 

10 health plans, health care providers, vendors, rel11 evant Federal agencies, and other standard de12 velopment organizations. 

13 ‘‘(C) The entity has established a public 

14 set of guiding principles that ensure the oper15 ating rules and process are open and trans16 parent. 

17 ‘‘(D) The entity coordinates its activities 

18 with the HIT Policy Committee and the HIT 

19 Standards Committee (as established under 

20 title XXX of the Public Health Service Act) 

21 and complements the efforts of the Office of the 

22 National Healthcare Coordinator and its related 

23 health information exchange goals. 

24 ‘‘(E) The entity incorporates national 

25 standards, including the transaction standards 


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1 issued under Health Insurance Portability and 

2 Accountability Act of 1996. 

3 ‘‘(F) The entity supports nondiscrimina4 tion and conflict of interest policies that dem5 onstrate a commitment to open, fair, and non6 discriminatory practices. 

7 ‘‘(G) The entity allows for public review 

8 and updates of the operating rules. 

9 ‘‘(3) REVIEW AND RECOMMENDATIONS.—The 

10 National Committee on Vital and Health Statistics 

11 shall— 

12 ‘‘(A) review the operating rules developed 

13 by a nonprofit entity described under paragraph 

14 (2); 

15 ‘‘(B) determine whether such rules rep16 resent a consensus view of the health care in17 dustry and are consistent with and do not alter 

18 current standards; 

19 ‘‘(C) evaluate whether such rules are con20 sistent with electronic standards adopted for 

21 health information technology; and 

22 ‘‘(D) submit to the Secretary a rec23 ommendation as to whether the Secretary 

24 should adopt such rules. 

25 ‘‘(4) IMPLEMENTATION.— 


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1 ‘‘(A) IN GENERAL.—The Secretary shall 

2 adopt operating rules under this subsection, by 

3 regulation in accordance with subparagraph 

4 (C), following consideration of the rules devel5 oped by the non-profit entity described in para6 graph (2) and the recommendation submitted 

7 by the National Committee on Vital and Health 

8 Statistics under paragraph (3)(D) and having 

9 ensured consultation with providers. 

10 ‘‘(B) ADOPTION REQUIREMENTS; EFFEC11 TIVE DATES.— 

12 ‘‘(i) ELIGIBILITY FOR A HEALTH

13 PLAN AND HEALTH CLAIM STATUS.—The 

14 set of operating rules for transactions for 

15 eligibility for a health plan and health 

16 claim status shall be adopted not later 

17 than July 1, 2011, in a manner ensuring 

18 that such rules are effective not later than 

19 January 1, 2013, and may allow for the 

20 use of a machine readable identification 

21 card. 

22 ‘‘(ii) ELECTRONIC FUNDS TRANSFERS

23 AND HEALTH CARE PAYMENT AND REMIT24 TANCE ADVICE.—The set of operating 

25 rules for electronic funds transfers and 


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1 health care payment and remittance advice 

2 shall be adopted not later than July 1, 

3 2012, in a manner ensuring that such 

4 rules are effective not later than January 

5 1, 2014. 

6 ‘‘(iii) OTHER COMPLETED TRANS7 ACTIONS.—The set of operating rules for 

8 the remainder of the completed trans9 actions described in subsection (a)(2), in10 cluding health claims or equivalent encoun11 ter information, enrollment and 

12 disenrollment in a health plan, health plan 

13 premium payments, and referral certifi14 cation and authorization, shall be adopted 

15 not later than July 1, 2014, in a manner 

16 ensuring that such rules are effective not 

17 later than January 1, 2016. 

18 ‘‘(C) EXPEDITED RULEMAKING.—The Sec19 retary shall promulgate an interim final rule 

20 applying any standard or operating rule rec21 ommended by the National Committee on Vital 

22 and Health Statistics pursuant to paragraph 

23 (3). The Secretary shall accept public comments 

24 on any interim final rule published under this 


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1 subparagraph for 60 days after the date of such 

2 publication. 

3 ‘‘(h) COMPLIANCE.— 

4 ‘‘(1) HEALTH PLAN CERTIFICATION.— 

5 ‘‘(A) ELIGIBILITY FOR A HEALTH PLAN, 

6 HEALTH CLAIM STATUS, ELECTRONIC FUNDS

7 TRANSFERS, HEALTH CARE PAYMENT AND RE8 MITTANCE ADVICE.—Not later than December 

9 31, 2013, a health plan shall file a statement 

10 with the Secretary, in such form as the Sec11 retary may require, certifying that the data and 

12 information systems for such plan are in com13 pliance with any applicable standards (as de14 scribed under paragraph (7) of section 1171) 

15 and operating rules (as described under para16 graph (9) of such section) for electronic funds 

17 transfers, eligibility for a health plan, health 

18 claim status, and health care payment and re19 mittance advice, respectively. 

20 ‘‘(B) OTHER COMPLETED TRANS21 ACTIONS.—Not later than December 31, 2015, 

22 a health plan shall file a statement with the 

23 Secretary, in such form as the Secretary may 

24 require, certifying that the data and informa25 tion systems for such plan are in compliance 


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1 with any applicable standards and operating 

2 rules for the remainder of the completed trans3 actions described in subsection (a)(2), including 

4 health claims or equivalent encounter informa5 tion, enrollment and disenrollment in a health 

6 plan, health plan premium payments, and refer7 ral certification and authorization, respectively. 

8 A health plan shall provide the same level of 

9 documentation to certify compliance with such 

10 transactions as is required to certify compliance 

11 with the transactions specified in subparagraph 

12 (A). 

13 ‘‘(2) DOCUMENTATION OF COMPLIANCE.—A 

14 health plan shall provide the Secretary, in such form 

15 as the Secretary may require, with adequate docu16 mentation of compliance with the standards and op17 erating rules described under paragraph (1). A 

18 health plan shall not be considered to have provided 

19 adequate documentation and shall not be certified as 

20 being in compliance with such standards, unless the 

21 health plan— 

22 ‘‘(A) demonstrates to the Secretary that 

23 the plan conducts the electronic transactions 

24 specified in paragraph (1) in a manner that 


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1 fully complies with the regulations of the Sec2 retary; and 

3 ‘‘(B) provides documentation showing that 

4 the plan has completed end-to-end testing for 

5 such transactions with their partners, such as 

6 hospitals and physicians. 

7 ‘‘(3) SERVICE CONTRACTS.—A health plan shall 

8 be required to comply with any applicable certifi9 cation and compliance requirements (and provide the 

10 Secretary with adequate documentation of such com11 pliance) under this subsection for any entities that 

12 provide services pursuant to a contract with such 

13 health plan. 

14 ‘‘(4) CERTIFICATION BY OUTSIDE ENTITY.— 

15 The Secretary may contract with an independent, 

16 outside entity to certify that a health plan has com17 plied with the requirements under this subsection, 

18 provided that the certification standards employed 

19 by such entities are in accordance with any stand20 ards or rules issued by the Secretary. 

21 ‘‘(5) COMPLIANCE WITH REVISED STANDARDS

22 AND RULES.—A health plan (including entities de23 scribed under paragraph (3)) shall comply with the 

24 certification and documentation requirements under 

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1 gated by the Secretary under subsection (i) that 

2 amends any standard or operating rule described 

3 under paragraph (1) of this subsection. A health 

4 plan shall comply with such requirements not later 

5 than the effective date of the applicable interim final 

6 rule. 

7 ‘‘(6) AUDITS OF HEALTH PLANS.—The Sec8 retary shall conduct periodic audits to ensure that 

9 health plans (including entities described under 

10 paragraph (3)) are in compliance with any standards 

11 and operating rules that are described under para12 graph (1). 

13 ‘‘(i) REVIEW AND AMENDMENT OF STANDARDS AND

14 RULES.— 

15 ‘‘(1) ESTABLISHMENT.—Not later than Janu16 ary 1, 2014, the Secretary shall establish a review 

17 committee (as described under paragraph (4)). 

18 ‘‘(2) EVALUATIONS AND REPORTS.— 

19 ‘‘(A) HEARINGS.—Not later than April 1, 

20 2014, and not less than biennially thereafter, 

21 the Secretary, acting through the review com22 mittee, shall conduct hearings to evaluate and 

23 review the existing standards and operating 

24 rules established under this section. 


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1 ‘‘(B) REPORT.—Not later than July 1, 

2 2014, and not less than biennially thereafter, 

3 the review committee shall provide rec4 ommendations for updating and improving such 

5 standards and rules. The review committee 

6 shall recommend a single set of operating rules 

7 per transaction standard and maintain the goal 

8 of creating as much uniformity as possible in 

9 the implementation of the electronic standards. 

10 ‘‘(3) INTERIM FINAL RULEMAKING.— 

11 ‘‘(A) IN GENERAL.—Any recommendations 

12 to amend existing standards and operating 

13 rules that have been approved by the review 

14 committee and reported to the Secretary under 

15 paragraph (2)(B) shall be adopted by the Sec16 retary through promulgation of an interim final 

17 rule not later than 90 days after receipt of the 

18 committee’s report. 

19 ‘‘(B) PUBLIC COMMENT.— 

20 ‘‘(i) PUBLIC COMMENT PERIOD.—The 

21 Secretary shall accept public comments on 

22 any interim final rule published under this 

23 paragraph for 60 days after the date of 

24 such publication. 


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1 ‘‘(ii) EFFECTIVE DATE.—The effective 

2 date of any amendment to existing stand3 ards or operating rules that is adopted 

4 through an interim final rule published 

5 under this paragraph shall be 25 months 

6 following the close of such public comment 

7 period. 

8 ‘‘(4) REVIEW COMMITTEE.— 

9 ‘‘(A) DEFINITION.—For the purposes of 

10 this subsection, the term ‘review committee’ 

11 means a committee within the Department of 

12 Health and Human services that has been des13 ignated by the Secretary to carry out this sub14 section, including— 

15 ‘‘(i) the National Committee on Vital 

16 and Health Statistics; or 

17 ‘‘(ii) any appropriate committee as de18 termined by the Secretary. 

19 ‘‘(B) COORDINATION OF HIT STAND20 ARDS.—In developing recommendations under 

21 this subsection, the review committee shall con22 sider the standards approved by the Office of 

23 the National Coordinator for Health Informa24 tion Technology. 

25 ‘‘(j) PENALTIES.— 


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1 ‘‘(1) PENALTY FEE.— 

2 ‘‘(A) IN GENERAL.—Not later than April 

3 1, 2014, and annually thereafter, the Secretary 

4 shall assess a penalty fee (as determined under 

5 subparagraph (B)) against a health plan that 

6 has failed to meet the requirements under sub7 section (h) with respect to certification and doc8 umentation of compliance with the standards 

9 (and their operating rules) as described under 

10 paragraph (1) of such subsection. 

11 ‘‘(B) FEE AMOUNT.—Subject to subpara12 graphs (C), (D), and (E), the Secretary shall 

13 assess a penalty fee against a health plan in the 

14 amount of $1 per covered life until certification 

15 is complete. The penalty shall be assessed per 

16 person covered by the plan for which its data 

17 systems for major medical policies are not in 

18 compliance and shall be imposed against the 

19 health plan for each day that the plan is not in 

20 compliance with the requirements under sub21 section (h). 

22 ‘‘(C) ADDITIONAL PENALTY FOR MIS23 REPRESENTATION.—A health plan that know24 ingly provides inaccurate or incomplete informa25 tion in a statement of certification or docuVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00046 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 mentation of compliance under subsection (h) 

2 shall be subject to a penalty fee that is double 

3 the amount that would otherwise be imposed 

4 under this subsection. 

5 ‘‘(D) ANNUAL FEE INCREASE.—The 

6 amount of the penalty fee imposed under this 

7 subsection shall be increased on an annual basis 

8 by the annual percentage increase in total na9 tional health care expenditures, as determined 

10 by the Secretary. 

11 ‘‘(E) PENALTY LIMIT.—A penalty fee as12 sessed against a health plan under this sub13 section shall not exceed, on an annual basis— 

14 ‘‘(i) an amount equal to $20 per cov15 ered life under such plan; or 

16 ‘‘(ii) an amount equal to $40 per cov17 ered life under the plan if such plan has 

18 knowingly provided inaccurate or incom19 plete information (as described under sub20 paragraph (C)). 

21 ‘‘(F) DETERMINATION OF COVERED INDI22 VIDUALS.—The Secretary shall determine the 

23 number of covered lives under a health plan 

24 based upon the most recent statements and filVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00047 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 ings that have been submitted by such plan to 

2 the Securities and Exchange Commission. 

3 ‘‘(2) NOTICE AND DISPUTE PROCEDURE.—The 

4 Secretary shall establish a procedure for assessment 

5 of penalty fees under this subsection that provides a 

6 health plan with reasonable notice and a dispute res7 olution procedure prior to provision of a notice of as8 sessment by the Secretary of the Treasury (as de9 scribed under paragraph (4)(B)). 

10 ‘‘(3) PENALTY FEE REPORT.—Not later than 

11 May 1, 2014, and annually thereafter, the Secretary 

12 shall provide the Secretary of the Treasury with a 

13 report identifying those health plans that have been 

14 assessed a penalty fee under this subsection. 

15 ‘‘(4) COLLECTION OF PENALTY FEE.— 

16 ‘‘(A) IN GENERAL.—The Secretary of the 

17 Treasury, acting through the Financial Man18 agement Service, shall administer the collection 

19 of penalty fees from health plans that have been 

20 identified by the Secretary in the penalty fee re21 port provided under paragraph (3). 

22 ‘‘(B) NOTICE.—Not later than August 1, 

23 2014, and annually thereafter, the Secretary of 

24 the Treasury shall provide notice to each health 

25 plan that has been assessed a penalty fee by the 


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1 Secretary under this subsection. Such notice 

2 shall include the amount of the penalty fee as3 sessed by the Secretary and the due date for 

4 payment of such fee to the Secretary of the 

5 Treasury (as described in subparagraph (C)). 

6 ‘‘(C) PAYMENT DUE DATE.—Payment by a 

7 health plan for a penalty fee assessed under 

8 this subsection shall be made to the Secretary 

9 of the Treasury not later than November 1, 

10 2014, and annually thereafter. 

11 ‘‘(D) UNPAID PENALTY FEES.—Any 

12 amount of a penalty fee assessed against a 

13 health plan under this subsection for which pay14 ment has not been made by the due date pro15 vided under subparagraph (C) shall be— 

16 ‘‘(i) increased by the interest accrued 

17 on such amount, as determined pursuant 

18 to the underpayment rate established 

19 under section 6601 of the Internal Rev20 enue Code of 1986; and 

21 ‘‘(ii) treated as a past-due, legally en22 forceable debt owed to a Federal agency 

23 for purposes of section 6402(d) of the In24 ternal Revenue Code of 1986. 


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1 ‘‘(E) ADMINISTRATIVE FEES.—Any fee 

2 charged or allocated for collection activities con3 ducted by the Financial Management Service 

4 will be passed on to a health plan on a pro-rata 

5 basis and added to any penalty fee collected 

6 from the plan.’’. 

7 (b) PROMULGATION OF RULES.— 

8 (1) UNIQUE HEALTH PLAN IDENTIFIER.—The 

9 Secretary shall promulgate a final rule to establish 

10 a unique health plan identifier (as described in sec11 tion 1173(b) of the Social Security Act (42 U.S.C. 

12 1320d–2(b))) based on the input of the National 

13 Committee of Vital and Health Statistics. The Sec14 retary may do so on an interim final basis and such 

15 rule shall be effective not later than October 1, 

16 2012. 

17 (2) ELECTRONIC FUNDS TRANSFER.—The Sec18 retary shall promulgate a final rule to establish a 

19 standard for electronic funds transfers (as described 

20 in section 1173(a)(2)(J) of the Social Security Act, 

21 as added by subsection (a)(2)(A)). The Secretary 

22 may do so on an interim final basis and shall adopt 

23 such standard not later than January 1, 2012, in a 

24 manner ensuring that such standard is effective not 

25 later than January 1, 2014. 


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1 (c) EXPANSION OF ELECTRONIC TRANSACTIONS IN

2 MEDICARE.—Section 1862(a) of the Social Security Act 

3 (42 U.S.C. 1395y(a)) is amended— 

4 (1) in paragraph (23), by striking the ‘‘or’’ at 

5 the end; 

6 (2) in paragraph (24), by striking the period 

7 and inserting ‘‘; or’’; and 

8 (3) by inserting after paragraph (24) the fol9 lowing new paragraph: 

10 ‘‘(25) not later than January 1, 2014, for 

11 which the payment is other than by electronic funds 

12 transfer (EFT) or an electronic remittance in a form 

13 as specified in ASC X12 835 Health Care Payment 

14 and Remittance Advice or subsequent standard.’’. 

15 (d) MEDICARE AND MEDICAID COMPLIANCE RE16 PORTS.—Not later than July 1, 2013, the Secretary of 

17 Health and Human Services shall submit a report to the 

18 chairs and ranking members of the Committee on Ways 

19 and Means and the Committee on Energy and Commerce 

20 of the House of Representatives and the chairs and rank21 ing members of the Committee on Health, Education, 

22 Labor, and Pensions and the Committee on Finance of 

23 the Senate on the extent to which the Medicare program 

24 and providers that serve beneficiaries under that program, 

25 and State Medicaid programs and providers that serve 


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1 beneficiaries under those programs, transact electronically 

2 in accordance with transaction standards issued under the 

3 Health Insurance Portability and Accountability Act of 

4 1996, part C of title XI of the Social Security Act, and 

5 regulations promulgated under such Acts. 

6 DIVISION B—IMPROVING 

7 ACCESS TO HEALTH CARE 

8 TITLE I—EXPANDING ACCESS 

9 AND LOWERING COSTS FOR 

10 SMALL BUSINESSES 

11 SEC. 201. RULES GOVERNING ASSOCIATION HEALTH 

12 PLANS. 

13 (a) IN GENERAL.—Subtitle B of title I of the Em14 ployee Retirement Income Security Act of 1974 is amend15 ed by adding after part 7 the following new part: 

16 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

17 HEALTH PLANS 

18 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

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

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

21 whose sponsor is (or is deemed under this part to be) de22 scribed in subsection (b). 

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

24 plan is described in this subsection if such sponsor— 


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

2 with a constitution and bylaws specifically stating its 

3 purpose and providing for periodic meetings on at 

4 least an annual basis, as a bona fide trade associa5 tion, a bona fide industry association (including a 

6 rural electric cooperative association or a rural tele7 phone cooperative association), a bona fide profes8 sional association, or a bona fide chamber of com9 merce (or similar bona fide business association, in10 cluding a corporation or similar organization that 

11 operates on a cooperative basis (within the meaning 

12 of section 1381 of the Internal Revenue Code of 

13 1986)), for substantial purposes other than that of 

14 obtaining or providing medical care; 

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

16 receives the active support of its members and re17 quires for membership payment on a periodic basis 

18 of dues or payments necessary to maintain eligibility 

19 for membership in the sponsor; and 

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

21 or payments, or coverage under the plan on the 

22 basis of health status-related factors with respect to 

23 the employees of its members (or affiliated mem24 bers), or the dependents of such employees, and does 


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1 not condition such dues or payments on the basis of 

2 group health plan participation. 

3 Any sponsor consisting of an association of entities which 

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

5 shall be deemed to be a sponsor described in this sub6 section. 

7 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

8 PLANS. 

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

10 prescribe by regulation a procedure under which, subject 

11 to subsection (b), the applicable authority shall certify as12 sociation health plans which apply for certification as 

13 meeting the requirements of this part. 

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

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

16 health plan that provides at least one benefit option which 

17 does not consist of health insurance coverage, the applica18 ble authority shall certify such plan as meeting the re19 quirements of this part only if the applicable authority is 

20 satisfied that the applicable requirements of this part are 

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

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

23 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

25 certification under this part is in effect shall meet the apVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00054 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 plicable requirements of this part, effective on the date 

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

3 is to commence operations). 

4 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI5 CATION.—The applicable authority may provide by regula6 tion for continued certification of association health plans 

7 under this part. 

8 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

9 PLANS.—The applicable authority shall establish a class 

10 certification procedure for association health plans under 

11 which all benefits consist of health insurance coverage. 

12 Under such procedure, the applicable authority shall pro13 vide for the granting of certification under this part to 

14 the plans in each class of such association health plans 

15 upon appropriate filing under such procedure in connec16 tion with plans in such class and payment of the pre17 scribed fee under section 807(a). 

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

19 HEALTH PLANS.—An association health plan which offers 

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

21 insurance coverage may be certified under this part only 

22 if such plan consists of any of the following: 

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

24 date of the enactment of the Small Business Health 

25 Fairness Act of 2009, 


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

2 restrict membership to one or more trades and busi3 nesses or industries and whose eligible participating 

4 employers represent a broad cross-section of trades 

5 and businesses or industries, or 

6 ‘‘(3) a plan whose eligible participating employ7 ers represent one or more trades or businesses, or 

8 one or more industries, consisting of any of the fol9 lowing: agriculture; equipment and automobile deal10 erships; barbering and cosmetology; certified public 

11 accounting practices; child care; construction; dance, 

12 theatrical and orchestra productions; disinfecting 

13 and pest control; financial services; fishing; food 

14 service establishments; hospitals; labor organiza15 tions; logging; manufacturing (metals); mining; med16 ical and dental practices; medical laboratories; pro17 fessional consulting services; sanitary services; trans18 portation (local and freight); warehousing; whole19 saling/distributing; or any other trade or business or 

20 industry which has been indicated as having average 

21 or above-average risk or health claims experience by 

22 reason of State rate filings, denials of coverage, pro23 posed premium rate levels, or other means dem24 onstrated by such plan in accordance with regula25 tions. 


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

2 BOARDS OF TRUSTEES. 

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

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

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

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

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

8 the application for certification under this part. 

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

10 this subsection are met with respect to an association 

11 health plan if the following requirements are met: 

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

13 pursuant to a trust agreement, by a board of trust14 ees which has complete fiscal control over the plan 

15 and which is responsible for all operations of the 

16 plan. 

17 ‘‘(2) RULES OF OPERATION AND FINANCIAL

18 CONTROLS.—The board of trustees has in effect 

19 rules of operation and financial controls, based on a 

20 3-year plan of operation, adequate to carry out the 

21 terms of the plan and to meet all requirements of 

22 this title applicable to the plan. 

23 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

24 PARTICIPATING EMPLOYERS AND TO CONTRAC25 TORS.— 

26 ‘‘(A) BOARD MEMBERSHIP.— 


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1 ‘‘(i) IN GENERAL.—Except as pro2 vided in clauses (ii) and (iii), the members 

3 of the board of trustees are individuals se4 lected from individuals who are the owners, 

5 officers, directors, or employees of the par6 ticipating employers or who are partners in 

7 the participating employers and actively 

8 participate in the business. 

9 ‘‘(ii) LIMITATION.— 

10 ‘‘(I) GENERAL RULE.—Except as 

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

12 no such member is an owner, officer, 

13 director, or employee of, or partner in, 

14 a contract administrator or other 

15 service provider to the plan. 

16 ‘‘(II) LIMITED EXCEPTION FOR

17 PROVIDERS OF SERVICES SOLELY ON

18 BEHALF OF THE SPONSOR.—Officers 

19 or employees of a sponsor which is a 

20 service provider (other than a contract 

21 administrator) to the plan may be 

22 members of the board if they con23 stitute not more than 25 percent of 

24 the membership of the board and they 


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1 do not provide services to the plan 

2 other than on behalf of the sponsor. 

3 ‘‘(III) TREATMENT OF PRO4 VIDERS OF MEDICAL CARE.—In the 

5 case of a sponsor which is an associa6 tion whose membership consists pri7 marily of providers of medical care, 

8 subclause (I) shall not apply in the 

9 case of any service provider described 

10 in subclause (I) who is a provider of 

11 medical care under the plan. 

12 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

13 Clause (i) shall not apply to an association 

14 health plan which is in existence on the 

15 date of the enactment of the Small Busi16 ness Health Fairness Act of 2009. 

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

18 sole authority under the plan to approve appli19 cations for participation in the plan and to con20 tract with a service provider to administer the 

21 day-to-day affairs of the plan. 

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

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

24 maintained by a franchiser for a franchise network con25 sisting of its franchisees— 


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1 ‘‘(1) the requirements of subsection (a) and sec2 tion 801(a) shall be deemed met if such require3 ments would otherwise be met if the franchiser were 

4 deemed to be the sponsor referred to in section 

5 801(b), such network were deemed to be an associa6 tion described in section 801(b), and each franchisee 

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

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

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

10 be deemed met. 

11 The Secretary may by regulation define for purposes of 

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

13 and ‘franchisee’. 

14 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE15 MENTS. 

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

17 requirements of this subsection are met with respect to 

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

19 plan— 

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

21 ‘‘(A) a member of the sponsor, 

22 ‘‘(B) the sponsor, or 

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

24 with respect to which the requirements of sub25 section (b) are met, 


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1 except that, in the case of a sponsor which is a pro2 fessional association or other individual-based asso3 ciation, if at least one of the officers, directors, or 

4 employees of an employer, or at least one of the in5 dividuals who are partners in an employer and who 

6 actively participates in the business, is a member or 

7 such an affiliated member of the sponsor, partici8 pating employers may also include such employer; 

9 and 

10 ‘‘(2) all individuals commencing coverage under 

11 the plan after certification under this part must 

12 be— 

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

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

15 employees of, or partners in, participating em16 ployers; or 

17 ‘‘(B) the beneficiaries of individuals de18 scribed in subparagraph (A). 

19 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM20 PLOYEES.—In the case of an association health plan in 

21 existence on the date of the enactment of the Small Busi22 ness Health Fairness Act of 2009, an affiliated member 

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

24 the plan as a participating employer only if— 


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

2 member on the date of certification under this part; 

3 or 

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

5 date of the offering of such coverage, the affiliated 

6 member has not maintained or contributed to a 

7 group health plan with respect to any of its employ8 ees who would otherwise be eligible to participate in 

9 such association health plan. 

10 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re11 quirements of this subsection are met with respect to an 

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

13 no participating employer may provide health insurance 

14 coverage in the individual market for any employee not 

15 covered under the plan which is similar to the coverage 

16 contemporaneously provided to employees of the employer 

17 under the plan, if such exclusion of the employee from cov18 erage under the plan is based on a health status-related 

19 factor with respect to the employee and such employee 

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

21 for coverage under the plan. 

22 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

23 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI24 PATE.—The requirements of this subsection are met with 

25 respect to an association health plan if— 


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

2 meeting the preceding requirements of this section 

3 are eligible to qualify as participating employers for 

4 all geographically available coverage options, unless, 

5 in the case of any such employer, participation or 

6 contribution requirements of the type referred to in 

7 section 2711 of the Public Health Service Act are 

8 not met; 

9 ‘‘(2) upon request, any employer eligible to par10 ticipate is furnished information regarding all cov11 erage options available under the plan; and 

12 ‘‘(3) the applicable requirements of sections 

13 701, 702, and 703 are met with respect to the plan. 

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

15 DOCUMENTS, CONTRIBUTION RATES, AND 

16 BENEFIT OPTIONS. 

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

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

19 following requirements are met: 

20 ‘‘(1) CONTENTS OF GOVERNING INSTRU21 MENTS.—The instruments governing the plan in22 clude a written instrument, meeting the require23 ments of an instrument required under section 

24 402(a)(1), which— 


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

2 serves as the named fiduciary required for plans 

3 under section 402(a)(1) and serves in the ca4 pacity of a plan administrator (referred to in 

5 section 3(16)(A)); 

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

7 is to serve as plan sponsor (referred to in sec8 tion 3(16)(B)); and 

9 ‘‘(C) incorporates the requirements of sec10 tion 806. 

11 ‘‘(2) CONTRIBUTION RATES MUST BE NON12 DISCRIMINATORY.— 

13 ‘‘(A) The contribution rates for any par14 ticipating small employer do not vary on the 

15 basis of any health status-related factor in rela16 tion to employees of such employer or their 

17 beneficiaries and do not vary on the basis of the 

18 type of business or industry in which such em19 ployer is engaged. 

20 ‘‘(B) Nothing in this title or any other pro21 vision of law shall be construed to preclude an 

22 association health plan, or a health insurance 

23 issuer offering health insurance coverage in 

24 connection with an association health plan, 

25 from— 


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1 ‘‘(i) setting contribution rates based 

2 on the claims experience of the plan; or 

3 ‘‘(ii) varying contribution rates for 

4 small employers in a State to the extent 

5 that such rates could vary using the same 

6 methodology employed in such State for 

7 regulating premium rates in the small 

8 group market with respect to health insur9 ance coverage offered in connection with 

10 bona fide associations (within the meaning 

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

12 Service Act), 

13 subject to the requirements of section 702(b) 

14 relating to contribution rates. 

15 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI16 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If 

17 any benefit option under the plan does not consist 

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

19 beginning of the plan year not fewer than 1,000 par20 ticipants and beneficiaries. 

21 ‘‘(4) MARKETING REQUIREMENTS.— 

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

23 which consists of health insurance coverage is 

24 offered under the plan, State-licensed insurance 

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1 ployers coverage which does not consist of 

2 health insurance coverage in a manner com3 parable to the manner in which such agents are 

4 used to distribute health insurance coverage. 

5 ‘‘(B) STATE-LICENSED INSURANCE

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

7 the term ‘State-licensed insurance agents’ 

8 means one or more agents who are licensed in 

9 a State and are subject to the laws of such 

10 State relating to licensure, qualification, test11 ing, examination, and continuing education of 

12 persons authorized to offer, sell, or solicit 

13 health insurance coverage in such State. 

14 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

15 other requirements as the applicable authority deter16 mines are necessary to carry out the purposes of this 

17 part, which shall be prescribed by the applicable au18 thority by regulation. 

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

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

21 nothing in this part or any provision of State law (as de22 fined in section 514(c)(1)) shall be construed to preclude 

23 an association health plan, or a health insurance issuer 

24 offering health insurance coverage in connection with an 

25 association health plan, from exercising its sole discretion 


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1 in selecting the specific items and services consisting of 

2 medical care to be included as benefits under such plan 

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

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

5 section 731(a)(1) with respect to matters governed by sec6 tion 711, 712, or 713, or (2) any law of the State with 

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

8 plan was initially obtained to the extent that such law pro9 hibits an exclusion of a specific disease from such cov10 erage. 

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

12 FOR SOLVENCY FOR PLANS PROVIDING 

13 HEALTH BENEFITS IN ADDITION TO HEALTH 

14 INSURANCE COVERAGE. 

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

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

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

18 of health insurance coverage; or 

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

20 options which do not consist of health insurance cov21 erage, the plan— 

22 ‘‘(A) establishes and maintains reserves 

23 with respect to such additional benefit options, 

24 in amounts recommended by the qualified actu25 ary, consisting of— 


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1 ‘‘(i) a reserve sufficient for unearned 

2 contributions; 

3 ‘‘(ii) a reserve sufficient for benefit li4 abilities which have been incurred, which 

5 have not been satisfied, and for which risk 

6 of loss has not yet been transferred, and 

7 for expected administrative costs with re8 spect to such benefit liabilities; 

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

10 obligations of the plan; and 

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

12 of error and other fluctuations, taking into 

13 account the specific circumstances of the 

14 plan; and 

15 ‘‘(B) establishes and maintains aggregate 

16 and specific excess/stop loss insurance and sol17 vency indemnification, with respect to such ad18 ditional benefit options for which risk of loss 

19 has not yet been transferred, as follows: 

20 ‘‘(i) The plan shall secure aggregate 

21 excess/stop loss insurance for the plan with 

22 an attachment point which is not greater 

23 than 125 percent of expected gross annual 

24 claims. The applicable authority may by 

25 regulation provide for upward adjustments 


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1 in the amount of such percentage in speci2 fied circumstances in which the plan spe3 cifically provides for and maintains re4 serves in excess of the amounts required 

5 under subparagraph (A). 

6 ‘‘(ii) The plan shall secure specific ex7 cess/stop loss insurance for the plan with 

8 an attachment point which is at least equal 

9 to an amount recommended by the plan’s 

10 qualified actuary. The applicable authority 

11 may by regulation provide for adjustments 

12 in the amount of such insurance in speci13 fied circumstances in which the plan spe14 cifically provides for and maintains re15 serves in excess of the amounts required 

16 under subparagraph (A). 

17 ‘‘(iii) The plan shall secure indem18 nification insurance for any claims which 

19 the plan is unable to satisfy by reason of 

20 a plan termination. 

21 Any person issuing to a plan insurance described in clause 

22 (i), (ii), or (iii) of subparagraph (B) shall notify the Sec23 retary of any failure of premium payment meriting can24 cellation of the policy prior to undertaking such a cancella25 tion. Any regulations prescribed by the applicable authorVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00069 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 ity pursuant to clause (i) or (ii) of subparagraph (B) may 

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

3 stop loss insurance as the qualified actuary may rec4 ommend, taking into account the specific circumstances 

5 of the plan. 

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

7 RESERVES.—In the case of any association health plan de8 scribed in subsection (a)(2), the requirements of this sub9 section are met if the plan establishes and maintains sur10 plus in an amount at least equal to— 

11 ‘‘(1) $500,000, or 

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

13 $2,000,000) as may be set forth in regulations pre14 scribed by the applicable authority, considering the 

15 level of aggregate and specific excess/stop loss insur16 ance provided with respect to such plan and other 

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

18 projected levels of participation or claims, the nature 

19 of the plan’s liabilities, and the types of assets avail20 able to assure that such liabilities are met. 

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

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

23 the applicable authority may provide such additional re24 quirements relating to reserves, excess/stop loss insurance, 

25 and indemnification insurance as the applicable authority 


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1 considers appropriate. Such requirements may be provided 

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

3 of such plans. 

4 ‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR5 ANCE.—The applicable authority may provide for adjust6 ments to the levels of reserves otherwise required under 

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

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

9 provided with respect to such plan or plans. 

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

11 applicable authority may permit an association health plan 

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

13 of the requirements of this section (except subsection 

14 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar15 rangement, or other financial arrangement as the applica16 ble authority determines to be adequate to enable the plan 

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

18 and is otherwise no less protective of the interests of par19 ticipants and beneficiaries than the requirements for 

20 which it is substituted. The applicable authority may take 

21 into account, for purposes of this subsection, evidence pro22 vided by the plan or sponsor which demonstrates an as23 sumption of liability with respect to the plan. Such evi24 dence may be in the form of a contract of indemnification, 

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


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1 applicable terms of the plan in the form of assessments 

2 of participating employers, security, or other financial ar3 rangement. 

4 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

5 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

6 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO7 CIATION HEALTH PLAN FUND.— 

8 ‘‘(A) IN GENERAL.—In the case of an as9 sociation health plan described in subsection 

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

11 met if the plan makes payments into the Asso12 ciation Health Plan Fund under this subpara13 graph when they are due. Such payments shall 

14 consist of annual payments in the amount of 

15 $5,000, and, in addition to such annual pay16 ments, such supplemental payments as the Sec17 retary may determine to be necessary under 

18 paragraph (2). Payments under this paragraph 

19 are payable to the Fund at the time determined 

20 by the Secretary. Initial payments are due in 

21 advance of certification under this part. Pay22 ments shall continue to accrue until a plan’s as23 sets are distributed pursuant to a termination 

24 procedure. 


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1 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

4 not more than 100 percent of the payment 

5 which was not timely paid shall be payable by 

6 the plan to the Fund. 

7 ‘‘(C) CONTINUED DUTY OF THE SEC8 RETARY.—The Secretary shall not cease to 

9 carry out the provisions of paragraph (2) on ac10 count of the failure of a plan to pay any pay11 ment when due. 

12 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

13 EXCESS/STOP LOSS INSURANCE COVERAGE AND IN14 DEMNIFICATION INSURANCE COVERAGE FOR CER15 TAIN PLANS.—In any case in which the applicable 

16 authority determines that there is, or that there is 

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

18 take necessary corrective actions under section 

19 809(a) with respect to an association health plan de20 scribed in subsection (a)(2); or (B) a termination of 

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

22 if the applicable authority is not the Secretary, cer23 tifies such determination to the Secretary), the Sec24 retary shall determine the amounts necessary to 

25 make payments to an insurer (designated by the 


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1 Secretary) to maintain in force excess/stop loss in2 surance coverage or indemnification insurance cov3 erage for such plan, if the Secretary determines that 

4 there is a reasonable expectation that, without such 

5 payments, claims would not be satisfied by reason of 

6 termination of such coverage. The Secretary shall, to 

7 the extent provided in advance in appropriation 

8 Acts, pay such amounts so determined to the insurer 

9 designated by the Secretary. 

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

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

12 on the books of the Treasury a fund to be 

13 known as the ‘Association Health Plan Fund’. 

14 The Fund shall be available for making pay15 ments pursuant to paragraph (2). The Fund 

16 shall be credited with payments received pursu17 ant to paragraph (1)(A), penalties received pur18 suant to paragraph (1)(B); and earnings on in19 vestments of amounts of the Fund under sub20 paragraph (B). 

21 ‘‘(B) INVESTMENT.—Whenever the Sec22 retary determines that the moneys of the fund 

23 are in excess of current needs, the Secretary 

24 may request the investment of such amounts as 

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1 retary of the Treasury in obligations issued or 

2 guaranteed by the United States. 

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

4 of this section— 

5 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR6 ANCE.—The term ‘aggregate excess/stop loss insur7 ance’ means, in connection with an association 

8 health plan, a contract— 

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

10 minimum standards as the applicable authority 

11 may prescribe by regulation) provides for pay12 ment to the plan with respect to aggregate 

13 claims under the plan in excess of an amount 

14 or amounts specified in such contract; 

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

16 ‘‘(C) which allows for payment of pre17 miums by any third party on behalf of the in18 sured plan. 

19 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR20 ANCE.—The term ‘specific excess/stop loss insur21 ance’ means, in connection with an association 

22 health plan, a contract— 

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

24 minimum standards as the applicable authority 

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1 ment to the plan with respect to claims under 

2 the plan in connection with a covered individual 

3 in excess of an amount or amounts specified in 

4 such contract in connection with such covered 

5 individual; 

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

7 ‘‘(C) which allows for payment of pre8 miums by any third party on behalf of the in9 sured plan. 

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

11 of this section, the term ‘indemnification insurance’ 

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

13 contract— 

14 ‘‘(1) under which an insurer (meeting such min15 imum standards as the applicable authority may pre16 scribe by regulation) provides for payment to the 

17 plan with respect to claims under the plan which the 

18 plan is unable to satisfy by reason of a termination 

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

20 termination); 

21 ‘‘(2) which is guaranteed renewable and 

22 noncancellable for any reason (except as the applica23 ble authority may prescribe by regulation); and 

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

25 any third party on behalf of the insured plan. 


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

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

3 health plan, plan assets which meet the fiduciary stand4 ards under part 4 and such additional requirements re5 garding liquidity as the applicable authority may prescribe 

6 by regulation. 

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

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

9 date of the enactment of the Small Business Health 

10 Fairness Act of 2009, the applicable authority shall 

11 establish a Solvency Standards Working Group. In 

12 prescribing the initial regulations under this section, 

13 the applicable authority shall take into account the 

14 recommendations of such Working Group. 

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

16 consist of not more than 15 members appointed by 

17 the applicable authority. The applicable authority 

18 shall include among persons invited to membership 

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

20 following: 

21 ‘‘(A) a representative of the National Asso22 ciation of Insurance Commissioners; 

23 ‘‘(B) a representative of the American 

24 Academy of Actuaries; 


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1 ‘‘(C) a representative of the State govern2 ments, or their interests; 

3 ‘‘(D) a representative of existing self-in4 sured arrangements, or their interests; 

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

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

7 interests; and 

8 ‘‘(F) a representative of multiemployer 

9 plans that are group health plans, or their in10 terests. 

11 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE12 LATED REQUIREMENTS. 

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

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

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

16 an application for certification under this part a filing fee 

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

18 case of the Secretary, to the extent provided in appropria19 tion Acts, for the sole purpose of administering the certifi20 cation procedures applicable with respect to association 

21 health plans. 

22 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA23 TION FOR CERTIFICATION.—An application for certifi24 cation under this part meets the requirements of this sec25 tion only if it includes, in a manner and form which shall 


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1 be prescribed by the applicable authority by regulation, at 

2 least the following information: 

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

4 and addresses of— 

5 ‘‘(A) the sponsor; and 

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

7 of the plan. 

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

9 BUSINESS.—The States in which participants and 

10 beneficiaries under the plan are to be located and 

11 the number of them expected to be located in each 

12 such State. 

13 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro14 vided by the board of trustees that the bonding re15 quirements of section 412 will be met as of the date 

16 of the application or (if later) commencement of op17 erations. 

18 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu19 ments governing the plan (including any bylaws and 

20 trust agreements), the summary plan description, 

21 and other material describing the benefits that will 

22 be provided to participants and beneficiaries under 

23 the plan. 

24 ‘‘(5) AGREEMENTS WITH SERVICE PRO25 VIDERS.—A copy of any agreements between the 


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1 plan and contract administrators and other service 

2 providers. 

3 ‘‘(6) FUNDING REPORT.—In the case of asso4 ciation health plans providing benefits options in ad5 dition to health insurance coverage, a report setting 

6 forth information with respect to such additional 

7 benefit options determined as of a date within the 

8 120-day period ending with the date of the applica9 tion, including the following: 

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

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

12 statement of actuarial opinion, signed by a 

13 qualified actuary, that all applicable require14 ments of section 806 are or will be met in ac15 cordance with regulations which the applicable 

16 authority shall prescribe. 

17 ‘‘(B) ADEQUACY OF CONTRIBUTION

18 RATES.—A statement of actuarial opinion, 

19 signed by a qualified actuary, which sets forth 

20 a description of the extent to which contribution 

21 rates are adequate to provide for the payment 

22 of all obligations and the maintenance of re23 quired reserves under the plan for the 12- 

24 month period beginning with such date within 

25 such 120-day period, taking into account the 


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1 expected coverage and experience of the plan. If 

2 the contribution rates are not fully adequate, 

3 the statement of actuarial opinion shall indicate 

4 the extent to which the rates are inadequate 

5 and the changes needed to ensure adequacy. 

6 ‘‘(C) CURRENT AND PROJECTED VALUE OF

7 ASSETS AND LIABILITIES.—A statement of ac8 tuarial opinion signed by a qualified actuary, 

9 which sets forth the current value of the assets 

10 and liabilities accumulated under the plan and 

11 a projection of the assets, liabilities, income, 

12 and expenses of the plan for the 12-month pe13 riod referred to in subparagraph (B). The in14 come statement shall identify separately the 

15 plan’s administrative expenses and claims. 

16 ‘‘(D) COSTS OF COVERAGE TO BE

17 CHARGED AND OTHER EXPENSES.—A state18 ment of the costs of coverage to be charged, in19 cluding an itemization of amounts for adminis20 tration, reserves, and other expenses associated 

21 with the operation of the plan. 

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

23 information as may be determined by the appli24 cable authority, by regulation, as necessary to 

25 carry out the purposes of this part. 


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1 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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

3 association health plan shall not be effective unless written 

4 notice of such certification is filed with the applicable 

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

6 of the participants and beneficiaries under the plan are 

7 located. For purposes of this subsection, an individual 

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

9 known address of such individual is located or in which 

10 such individual is employed. 

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

12 of any association health plan certified under this part, 

13 descriptions of material changes in any information which 

14 was required to be submitted with the application for the 

15 certification under this part shall be filed in such form 

16 and manner as shall be prescribed by the applicable au17 thority by regulation. The applicable authority may re18 quire by regulation prior notice of material changes with 

19 respect to specified matters which might serve as the basis 

20 for suspension or revocation of the certification. 

21 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS22 SOCIATION HEALTH PLANS.—An association health plan 

23 certified under this part which provides benefit options in 

24 addition to health insurance coverage for such plan year 

25 shall meet the requirements of section 103 by filing an 


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1 annual report under such section which shall include infor2 mation described in subsection (b)(6) with respect to the 

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

4 be filed with the applicable authority not later than 90 

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

6 as may be prescribed by the applicable authority). The ap7 plicable authority may require by regulation such interim 

8 reports as it considers appropriate. 

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

10 board of trustees of each association health plan which 

11 provides benefits options in addition to health insurance 

12 coverage and which is applying for certification under this 

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

14 of all participants and beneficiaries, a qualified actuary 

15 who shall be responsible for the preparation of the mate16 rials comprising information necessary to be submitted by 

17 a qualified actuary under this part. The qualified actuary 

18 shall utilize such assumptions and techniques as are nec19 essary to enable such actuary to form an opinion as to 

20 whether the contents of the matters reported under this 

21 part— 

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

23 the experience of the plan and to reasonable expecta24 tions; and 


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

2 anticipated experience under the plan. 

3 The opinion by the qualified actuary shall be made with 

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

5 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER6 MINATION. 

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

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

9 may terminate (upon or at any time after cessation of ac10 cruals in benefit liabilities) only if the board of trustees, 

11 not less than 60 days before the proposed termination 

12 date— 

13 ‘‘(1) provides to the participants and bene14 ficiaries a written notice of intent to terminate stat15 ing that such termination is intended and the pro16 posed termination date; 

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

18 of the plan in connection with such termination in 

19 a manner which will result in timely payment of all 

20 benefits for which the plan is obligated; and 

21 ‘‘(3) submits such plan in writing to the appli22 cable authority. 

23 Actions required under this section shall be taken in such 

24 form and manner as may be prescribed by the applicable 

25 authority by regulation. 


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

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

5 under this part and which provides benefits other than 

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

8 certification continues in effect. The board of trustees of 

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

11 board determines that there is reason to believe that there 

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

13 applicable authority makes such a determination and so 

14 notifies the board, the board shall immediately notify the 

15 qualified actuary engaged by the plan, and such actuary 

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

17 make such recommendations to the board for corrective 

18 action as the actuary determines necessary to ensure com19 pliance with section 806. Not later than 30 days after re20 ceiving from the actuary recommendations for corrective 

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

22 such form and manner as the applicable authority may 

23 prescribe by regulation) of such recommendations of the 

24 actuary for corrective action, together with a description 

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

26 to take in response to such recommendations. The board 


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1 shall thereafter report to the applicable authority, in such 

2 form and frequency as the applicable authority may speci3 fy to the board, regarding corrective action taken by the 

4 board until the requirements of section 806 are met. 

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

6 which— 

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

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

9 loss insurance or indemnity insurance pursuant to 

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

11 plan which is or has been certified under this part 

12 and is described in section 806(a)(2) to meet the re13 quirements of section 806 and has not been notified 

14 by the board of trustees of the plan that corrective 

15 action has restored compliance with such require16 ments; and 

17 ‘‘(2) the applicable authority determines that 

18 there is a reasonable expectation that the plan will 

19 continue to fail to meet the requirements of section 

20 806, 

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

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

23 course of the termination, take such actions as the appli24 cable authority may require, including satisfying any 

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1 ering for the plan any liability under subsection 

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

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

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

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

6 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL7 VENT ASSOCIATION HEALTH PLANS PRO8 VIDING HEALTH BENEFITS IN ADDITION TO 

9 HEALTH INSURANCE COVERAGE. 

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

11 INSOLVENT PLANS.—Whenever the Secretary determines 

12 that an association health plan which is or has been cer13 tified under this part and which is described in section 

14 806(a)(2) will be unable to provide benefits when due or 

15 is otherwise in a financially hazardous condition, as shall 

16 be defined by the Secretary by regulation, the Secretary 

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

18 United States district court for appointment of the Sec19 retary as trustee to administer the plan for the duration 

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

21 other interested persons may intervene in the proceedings 

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

23 Secretary trustee if the court determines that the trustee24 ship is necessary to protect the interests of the partici25 pants and beneficiaries or providers of medical care or to 


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1 avoid any unreasonable deterioration of the financial con2 dition of the plan. The trusteeship of such Secretary shall 

3 continue until the conditions described in the first sen4 tence of this subsection are remedied or the plan is termi5 nated. 

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

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

8 the power— 

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

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

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

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

13 of the assets and records of the plan to the Sec14 retary as trustee; 

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

16 Secretary holds in accordance with the provisions of 

17 the plan, regulations prescribed by the Secretary, 

18 and applicable provisions of law; 

19 ‘‘(4) to require the sponsor, the plan adminis20 trator, any participating employer, and any employee 

21 organization representing plan participants to fur22 nish any information with respect to the plan which 

23 the Secretary as trustee may reasonably need in 

24 order to administer the plan; 


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

2 plan and to recover reasonable expenses of the trust3 eeship; 

4 ‘‘(6) to commence, prosecute, or defend on be5 half of the plan any suit or proceeding involving the 

6 plan; 

7 ‘‘(7) to issue, publish, or file such notices, state8 ments, and reports as may be required by the Sec9 retary by regulation or required by any order of the 

10 court; 

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

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

13 liquidate the plan assets, to restore the plan to the 

14 responsibility of the sponsor, or to continue the 

15 trusteeship; 

16 ‘‘(9) to provide for the enrollment of plan par17 ticipants and beneficiaries under appropriate cov18 erage options; and 

19 ‘‘(10) to do such other acts as may be nec20 essary to comply with this title or any order of the 

21 court and to protect the interests of plan partici22 pants and beneficiaries and providers of medical 

23 care. 


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1 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac2 ticable after the Secretary’s appointment as trustee, the 

3 Secretary shall give notice of such appointment to— 

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

5 ‘‘(2) each participant; 

6 ‘‘(3) each participating employer; and 

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

8 which, for purposes of collective bargaining, rep9 resents plan participants. 

10 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in11 consistent with the provisions of this title, or as may be 

12 otherwise ordered by the court, the Secretary, upon ap13 pointment as trustee under this section, shall be subject 

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

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

16 of a fiduciary for purposes of this title. 

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

18 Secretary under this subsection may be filed notwith19 standing the pendency in the same or any other court of 

20 any bankruptcy, mortgage foreclosure, or equity receiver21 ship proceeding, or any proceeding to reorganize, conserve, 

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

23 to enforce a lien against property of the plan. 

24 ‘‘(f) JURISDICTION OF COURT.— 


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1 ‘‘(1) IN GENERAL.—Upon the filing of an appli2 cation for the appointment as trustee or the issuance 

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

4 application is made shall have exclusive jurisdiction 

5 of the plan involved and its property wherever lo6 cated with the powers, to the extent consistent with 

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

8 States having jurisdiction over cases under chapter 

9 11 of title 11, United States Code. Pending an adju10 dication under this section such court shall stay, and 

11 upon appointment by it of the Secretary as trustee, 

12 such court shall continue the stay of, any pending 

13 mortgage foreclosure, equity receivership, or other 

14 proceeding to reorganize, conserve, or liquidate the 

15 plan, the sponsor, or property of such plan or spon16 sor, and any other suit against any receiver, conser17 vator, or trustee of the plan, the sponsor, or prop18 erty of the plan or sponsor. Pending such adjudica19 tion and upon the appointment by it of the Sec20 retary as trustee, the court may stay any proceeding 

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

22 sponsor or any other suit against the plan or the 

23 sponsor. 

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

25 may be brought in the judicial district where the 


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1 sponsor or the plan administrator resides or does 

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

3 A district court in which such action is brought may 

4 issue process with respect to such action in any 

5 other judicial district. 

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

7 which shall be prescribed by the Secretary, the Secretary 

8 shall appoint, retain, and compensate accountants, actu9 aries, and other professional service personnel as may be 

10 necessary in connection with the Secretary’s service as 

11 trustee under this section. 

12 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

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

14 State may impose by law a contribution tax on an associa15 tion health plan described in section 806(a)(2), if the plan 

16 commenced operations in such State after the date of the 

17 enactment of the Small Business Health Fairness Act of 

18 2009. 

19 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec20 tion, the term ‘contribution tax’ imposed by a State on 

21 an association health plan means any tax imposed by such 

22 State if— 

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

24 the amount of premiums or contributions, with re25 spect to individuals covered under the plan who are 


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1 residents of such State, which are received by the 

2 plan from participating employers located in such 

3 State or from such individuals; 

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

5 rate of any tax imposed by such State on premiums 

6 or contributions received by insurers or health main7 tenance organizations for health insurance coverage 

8 offered in such State in connection with a group 

9 health plan; 

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

11 and 

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

13 the plan is reduced by the amount of any tax or as14 sessment otherwise imposed by the State on pre15 miums, contributions, or both received by insurers or 

16 health maintenance organizations for health insur17 ance coverage, aggregate excess/stop loss insurance 

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

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

20 other insurance related to the provision of medical 

21 care under the plan, or any combination thereof pro22 vided by such insurers or health maintenance organi23 zations in such State in connection with such plan. 

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

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


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

2 health plan’ has the meaning provided in section 

3 733(a)(1) (after applying subsection (b) of this sec4 tion). 

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

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

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

8 term ‘health insurance coverage’ has the meaning 

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

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

11 ‘health insurance issuer’ has the meaning provided 

12 in section 733(b)(2). 

13 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap14 plicable authority’ means the Secretary, except that, 

15 in connection with any exercise of the Secretary’s 

16 authority regarding which the Secretary is required 

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

18 term means the Secretary, in consultation with such 

19 State. 

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

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

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

23 ‘‘(7) INDIVIDUAL MARKET.— 

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

25 market’ means the market for health insurance 


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1 coverage offered to individuals other than in 

2 connection with a group health plan. 

3 ‘‘(B) TREATMENT OF VERY SMALL

4 GROUPS.— 

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

6 (ii), such term includes coverage offered in 

7 connection with a group health plan that 

8 has fewer than 2 participants as current 

9 employees or participants described in sec10 tion 732(d)(3) on the first day of the plan 

11 year. 

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

13 shall not apply in the case of health insur14 ance coverage offered in a State if such 

15 State regulates the coverage described in 

16 such clause in the same manner and to the 

17 same extent as coverage in the small group 

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

19 the Public Health Service Act) is regulated 

20 by such State. 

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

22 ‘participating employer’ means, in connection with 

23 an association health plan, any employer, if any indi24 vidual who is an employee of such employer, a part25 ner in such employer, or a self-employed individual 


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

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

3 or was covered under such plan in connection with 

4 the status of such individual as such an employee, 

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

6 plan. 

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

8 term ‘applicable State authority’ means, with respect 

9 to a health insurance issuer in a State, the State in10 surance commissioner or official or officials des11 ignated by the State to enforce the requirements of 

12 title XXVII of the Public Health Service Act for the 

13 State involved with respect to such issuer. 

14 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali15 fied actuary’ means an individual who is a member 

16 of the American Academy of Actuaries. 

17 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili18 ated member’ means, in connection with a sponsor— 

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

20 be a member of the sponsor but who elects an 

21 affiliated status with the sponsor, 

22 ‘‘(B) in the case of a sponsor with mem23 bers which consist of associations, a person who 

24 is a member of any such association and elects 

25 an affiliated status with the sponsor, or 


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

2 plan in existence on the date of the enactment 

3 of the Small Business Health Fairness Act of 

4 2009, a person eligible to be a member of the 

5 sponsor or one of its member associations. 

6 ‘‘(12) LARGE EMPLOYER.—The term ‘large em7 ployer’ means, in connection with a group health 

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

9 employed an average of at least 51 employees on 

10 business days during the preceding calendar year 

11 and who employs at least 2 employees on the first 

12 day of the plan year. 

13 ‘‘(13) SMALL EMPLOYER.—The term ‘small em14 ployer’ means, in connection with a group health 

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

16 is not a large employer. 

17 ‘‘(b) RULES OF CONSTRUCTION.— 

18 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur19 poses of determining whether a plan, fund, or pro20 gram is an employee welfare benefit plan which is an 

21 association health plan, and for purposes of applying 

22 this title in connection with such plan, fund, or pro23 gram so determined to be such an employee welfare 

24 benefit plan— 


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

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

3 the partnership in relation to the partners, and 

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

5 includes any partner in relation to the partner6 ship; and 

7 ‘‘(B) in the case of a self-employed indi8 vidual, the term ‘employer’ (as defined in sec9 tion 3(5)) and the term ‘employee’ (as defined 

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

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

12 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

13 case of any plan, fund, or program which was estab14 lished or is maintained for the purpose of providing 

15 medical care (through the purchase of insurance or 

16 otherwise) for employees (or their dependents) cov17 ered thereunder and which demonstrates to the Sec18 retary that all requirements for certification under 

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

20 fund, or program if such plan, fund, or program 

21 were a group health plan, such plan, fund, or pro22 gram shall be treated for purposes of this title as an 

23 employee welfare benefit plan on and after the date 

24 of such demonstration.’’. 


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1 (b) CONFORMING AMENDMENTS TO PREEMPTION

2 RULES.— 

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

4 1144(b)(6)) is amended by adding at the end the 

5 following new subparagraph: 

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

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

8 of an association health plan which is certified under part 

9 8.’’. 

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

11 is amended— 

12 (A) in subsection (b)(4), by striking ‘‘Sub13 section (a)’’ and inserting ‘‘Subsections (a) and 

14 (d)’’; 

15 (B) in subsection (b)(5), by striking ‘‘sub16 section (a)’’ in subparagraph (A) and inserting 

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

18 (a)(2)(B) and (b) of section 805’’, and by strik19 ing ‘‘subsection (a)’’ in subparagraph (B) and 

20 inserting ‘‘subsection (a) of this section or sub21 section (a)(2)(B) or (b) of section 805’’; 

22 (C) by redesignating subsections (d) and 

23 (e) as subsections (e) and (f), respectively; and 

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

25 following new subsection: 


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

2 provisions of this title shall supersede any and all State 

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

4 have the effect of precluding, a health insurance issuer 

5 from offering health insurance coverage in connection with 

6 an association health plan which is certified under part 

7 8. 

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

9 of subsection (b) of this section— 

10 ‘‘(A) In any case in which health insurance cov11 erage of any policy type is offered under an associa12 tion health plan certified under part 8 to a partici13 pating employer operating in such State, the provi14 sions of this title shall supersede any and all laws 

15 of such State insofar as they may preclude a health 

16 insurance issuer from offering health insurance cov17 erage of the same policy type to other employers op18 erating in the State which are eligible for coverage 

19 under such association health plan, whether or not 

20 such other employers are participating employers in 

21 such plan. 

22 ‘‘(B) In any case in which health insurance cov23 erage of any policy type is offered in a State under 

24 an association health plan certified under part 8 and 

25 the filing, with the applicable State authority (as deVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00100 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 fined in section 812(a)(9)), of the policy form in 

2 connection with such policy type is approved by such 

3 State authority, the provisions of this title shall su4 persede any and all laws of any other State in which 

5 health insurance coverage of such type is offered, in6 sofar as they may preclude, upon the filing in the 

7 same form and manner of such policy form with the 

8 applicable State authority in such other State, the 

9 approval of the filing in such other State. 

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

11 provisions of this subsection shall be construed, with re12 spect to health insurance issuers or health insurance cov13 erage, to supersede or impair the law of any State— 

14 ‘‘(A) providing solvency standards or similar 

15 standards regarding the adequacy of insurer capital, 

16 surplus, reserves, or contributions, or 

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

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

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

20 805. 

21 ‘‘(5) For purposes of this subsection, the term ‘asso22 ciation health plan’ has the meaning provided in section 

23 801(a), and the terms ‘health insurance coverage’, ‘par24 ticipating employer’, and ‘health insurance issuer’ have 


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1 the meanings provided such terms in section 812, respec2 tively.’’. 

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

4 U.S.C. 1144(b)(6)(A)) is amended— 

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

6 the end; 

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

8 does not provide medical care (within the mean9 ing of section 733(a)(2)),’’ after ‘‘arrange10 ment,’’, and by striking ‘‘title.’’ and inserting 

11 ‘‘title, and’’; and 

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

13 clause: 

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

15 of any other employee welfare benefit plan which is 

16 a multiple employer welfare arrangement and which 

17 provides medical care (within the meaning of section 

18 733(a)(2)), any law of any State which regulates in19 surance may apply.’’. 

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

21 by paragraph (2)(C)) is amended— 

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

23 ‘‘(1) Except as provided in paragraph (2), noth24 ing’’; and 


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

2 paragraph: 

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

4 on or after the date of the enactment of the Small Busi5 ness Health Fairness Act of 2009 shall be construed to 

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

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

8 the affected section.’’. 

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

10 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

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

12 person serving as the sponsor of an association health plan 

13 under part 8.’’. 

14 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE15 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

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

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

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

19 include in its summary plan description, in connection 

20 with each benefit option, a description of the form of sol21 vency or guarantee fund protection secured pursuant to 

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

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

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


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1 (f) REPORT TO THE CONGRESS REGARDING CERTIFI2 CATION OF SELF-INSURED ASSOCIATION HEALTH

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

4 of Labor shall report to the Committee on Education and 

5 the Workforce of the House of Representatives and the 

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

7 the Senate the effect association health plans have had, 

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

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

10 in section 1 of the Employee Retirement Income Security 

11 Act of 1974 is amended by inserting after the item relat12 ing to section 734 the following new items: 

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘801. Association health plans. 

‘‘802. Certification of association health plans. 

‘‘803. Requirements relating to sponsors and boards of trustees. 

‘‘804. Participation and coverage requirements. 

‘‘805. Other requirements relating to plan documents, contribution rates, and 

benefit options. 

‘‘806. Maintenance of reserves and provisions for solvency for plans providing 

health benefits in addition to health insurance coverage. 

‘‘807. Requirements for application and related requirements. 

‘‘808. Notice requirements for voluntary termination. 

‘‘809. Corrective actions and mandatory termination. 

‘‘810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. 

‘‘811. State assessment authority. 

‘‘812. Definitions and rules of construction.’’. 

13 SEC. 202. CLARIFICATION OF TREATMENT OF SINGLE EM14 PLOYER ARRANGEMENTS. 

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

16 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend17 ed— 


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

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

3 which the benefit referred to in subparagraph (A) 

4 consists of medical care (as defined in section 

5 812(a)(2)), two or more trades or businesses, wheth6 er or not incorporated, shall be deemed a single em7 ployer for any plan year of such plan, or any fiscal 

8 year of such other arrangement, if such trades or 

9 businesses are within the same control group during 

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

11 period,’’; 

12 (2) in clause (iii), by striking ‘‘(iii) the deter13 mination’’ and inserting the following: 

14 ‘‘(iii)(I) in any case in which the benefit re15 ferred to in subparagraph (A) consists of medical 

16 care (as defined in section 812(a)(2)), the deter17 mination of whether a trade or business is under 

18 ‘common control’ with another trade or business 

19 shall be determined under regulations of the Sec20 retary applying principles consistent and coextensive 

21 with the principles applied in determining whether 

22 employees of two or more trades or businesses are 

23 treated as employed by a single employer under sec24 tion 4001(b), except that, for purposes of this para25 graph, an interest of greater than 25 percent may 


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1 not be required as the minimum interest necessary 

2 for common control, or 

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

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

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

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

7 new clause: 

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

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

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

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

12 provided to employees of two or more employers, the 

13 arrangement shall be treated as having only one par14 ticipating employer if, after the application of clause 

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

16 former employees of any one participating employer 

17 and who are covered under the arrangement is 

18 greater than 75 percent of the aggregate number of 

19 all individuals who are employees or former employ20 ees of participating employers and who are covered 

21 under the arrangement,’’. 

22 SEC. 203. ENFORCEMENT PROVISIONS RELATING TO ASSO23 CIATION HEALTH PLANS. 

24 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

25 MISREPRESENTATIONS.—Section 501 of the Employee 


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

2 is amended— 

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

4 (2) by adding at the end the following new sub5 section: 

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

7 any employee, any employee’s beneficiary, any employer, 

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

9 established or maintained for the purpose of offering or 

10 providing any benefit described in section 3(1) to employ11 ees or their beneficiaries as— 

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

13 been certified under part 8; 

14 ‘‘(2) having been established or maintained 

15 under or pursuant to one or more collective bar16 gaining agreements which are reached pursuant to 

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

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

19 paragraph fourth of section 2 of the Railway Labor 

20 Act (45 U.S.C. 152, paragraph fourth) or which are 

21 reached pursuant to labor-management negotiations 

22 under similar provisions of State public employee re23 lations laws; or 

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

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


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

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

3 both.’’. 

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

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

6 end the following new subsection: 

7 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE8 SIST ORDERS.— 

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

10 upon application by the Secretary showing the oper11 ation, promotion, or marketing of an association 

12 health plan (or similar arrangement providing bene13 fits consisting of medical care (as defined in section 

14 733(a)(2))) that— 

15 ‘‘(A) is not certified under part 8, is sub16 ject under section 514(b)(6) to the insurance 

17 laws of any State in which the plan or arrange18 ment offers or provides benefits, and is not li19 censed, registered, or otherwise approved under 

20 the insurance laws of such State; or 

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

22 under part 8 and is not operating in accordance 

23 with the requirements under part 8 for such 

24 certification, 


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1 a district court of the United States shall enter an 

2 order requiring that the plan or arrangement cease 

3 activities. 

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

5 apply in the case of an association health plan or 

6 other arrangement if the plan or arrangement shows 

7 that— 

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

9 paragraph (1) consist of health insurance cov10 erage; and 

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

12 the plan or arrangement offers or provides ben13 efits, the plan or arrangement is operating in 

14 accordance with applicable State laws that are 

15 not superseded under section 514. 

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

17 court may grant such additional equitable relief, in18 cluding any relief available under this title, as it 

19 deems necessary to protect the interests of the pub20 lic and of persons having claims for benefits against 

21 the plan.’’. 

22 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.— 

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

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

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


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

2 each association health plan which is or has been certified 

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

4 named fiduciary (as applicable) to ensure that the require5 ments of this section are met in connection with claims 

6 filed under the plan.’’. 

7 SEC. 204. COOPERATION BETWEEN FEDERAL AND STATE 

8 AUTHORITIES. 

9 Section 506 of the Employee Retirement Income Se10 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

11 at the end the following new subsection: 

12 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

13 TO ASSOCIATION HEALTH PLANS.— 

14 ‘‘(1) AGREEMENTS WITH STATES.—The Sec15 retary shall consult with the State recognized under 

16 paragraph (2) with respect to an association health 

17 plan regarding the exercise of— 

18 ‘‘(A) the Secretary’s authority under sec19 tions 502 and 504 to enforce the requirements 

20 for certification under part 8; and 

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

22 association health plans under part 8 in accord23 ance with regulations of the Secretary applica24 ble to certification under part 8. 


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1 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

2 STATE.—In carrying out paragraph (1), the Sec3 retary shall ensure that only one State will be recog4 nized, with respect to any particular association 

5 health plan, as the State with which consultation is 

6 required. In carrying out this paragraph— 

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

8 health insurance coverage (as defined in section 

9 812(a)(3)), such State shall be the State with 

10 which filing and approval of a policy type of11 fered by the plan was initially obtained, and 

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

13 take into account the places of residence of the 

14 participants and beneficiaries under the plan 

15 and the State in which the trust is main16 tained.’’. 

17 SEC. 205. EFFECTIVE DATE AND TRANSITIONAL AND 

18 OTHER RULES. 

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

20 this title shall take effect 1 year after the date of the en21 actment of this Act. The Secretary of Labor shall first 

22 issue all regulations necessary to carry out the amend23 ments made by this title within 1 year after the date of 

24 the enactment of this Act. 


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1 (b) TREATMENT OF CERTAIN EXISTING HEALTH

2 BENEFITS PROGRAMS.— 

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

4 the date of the enactment of this Act, an arrange5 ment is maintained in a State for the purpose of 

6 providing benefits consisting of medical care for the 

7 employees and beneficiaries of its participating em8 ployers, at least 200 participating employers make 

9 contributions to such arrangement, such arrange10 ment has been in existence for at least 10 years, and 

11 such arrangement is licensed under the laws of one 

12 or more States to provide such benefits to its par13 ticipating employers, upon the filing with the appli14 cable authority (as defined in section 812(a)(5) of 

15 the Employee Retirement Income Security Act of 

16 1974 (as amended by this subtitle)) by the arrange17 ment of an application for certification of the ar18 rangement under part 8 of subtitle B of title I of 

19 such Act— 

20 (A) such arrangement shall be deemed to 

21 be a group health plan for purposes of title I 

22 of such Act; 

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

24 and 803(a) of the Employee Retirement Income 


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1 Security Act of 1974 shall be deemed met with 

2 respect to such arrangement; 

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

4 such Act shall be deemed met, if the arrange5 ment is operated by a board of directors 

6 which— 

7 (i) is elected by the participating em8 ployers, with each employer having one 

9 vote; and 

10 (ii) has complete fiscal control over 

11 the arrangement and which is responsible 

12 for all operations of the arrangement; 

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

14 such Act shall be deemed met with respect to 

15 such arrangement; and 

16 (E) the arrangement may be certified by 

17 any applicable authority with respect to its op18 erations in any State only if it operates in such 

19 State on the date of certification. 

20 The provisions of this subsection shall cease to apply 

21 with respect to any such arrangement at such time 

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

23 applicable requirements of this subsection are not 

24 met with respect to such arrangement. 


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1 (2) DEFINITIONS.—For purposes of this sub2 section, the terms ‘‘group health plan’’, ‘‘medical 

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

4 meanings provided in section 812 of the Employee 

5 Retirement Income Security Act of 1974, except 

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

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

8 reference to an arrangement referred to in this sub9 section. 

10 TITLE II—TARGETED EFFORTS 

11 TO EXPAND ACCESS 

12 SEC. 211. EXTENDING COVERAGE OF DEPENDENTS. 

13 (a) EMPLOYEE RETIREMENT INCOME SECURITY ACT

14 OF 1974.— 

15 (1) IN GENERAL.—Part 7 of subtitle B of title 

16 I of the Employee Retirement Income Security Act 

17 of 1974 is amended by inserting after section 2714 

18 the following new section: 

19 ‘‘SEC. 715. EXTENDING COVERAGE OF DEPENDENTS. 

20 ‘‘(a) IN GENERAL.—In the case of a group health 

21 plan, or health insurance coverage offered in connection 

22 with a group health plan, that treats as a beneficiary 

23 under the plan an individual who is a dependent child of 

24 a participant or beneficiary under the plan, the plan or 

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1 ent child without regard to the individual’s age through 

2 at least the end of the plan year in which the individual 

3 turns an age specified in the plan, but not less than 25 

4 years of age. 

5 ‘‘(b) CONSTRUCTION.—Nothing in this section shall 

6 be construed as requiring a group health plan to provide 

7 benefits for dependent children as beneficiaries under the 

8 plan or to require a participant to elect coverage of de9 pendent children.’’. 

10 (2) CLERICAL AMENDMENT.—The table of con11 tents of such Act is amended by inserting after the 

12 item relating to section 714 the following new item: 

‘‘Sec. 715. Extending coverage of dependents through plan year that includes 

25th birthday.’’. 

13 (b) PHSA.—Title XXVII of the Public Health Serv14 ice Act is amended by inserting after section 2707 the fol15 lowing new section: 

16 ‘‘SEC. 2708. EXTENDING COVERAGE OF DEPENDENTS. 

17 ‘‘(a) IN GENERAL.—In the case of a group health 

18 plan, or health insurance coverage offered in connection 

19 with a group health plan, that treats as a beneficiary 

20 under the plan an individual who is a dependent child of 

21 a participant or beneficiary under the plan, the plan or 

22 coverage shall continue to treat the individual as a depend23 ent child without regard to the individual’s age through 

24 at least the end of the plan year in which the individual 


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1 turns an age specified in the plan, but not less than 25 

2 years of age. 

3 ‘‘(b) CONSTRUCTION.—Nothing in this section shall 

4 be construed as requiring a group health plan to provide 

5 benefits for dependent children as beneficiaries under the 

6 plan or to require a participant to elect coverage of de7 pendent children.’’. 

8 (c) IRC.— 

9 (1) IN GENERAL.—Subchapter B of chapter 

10 100 of the Internal Revenue Code of 1986 is amend11 ed by adding at the end the following new section: 

12 ‘‘SEC. 9814. EXTENDING COVERAGE OF DEPENDENTS. 

13 ‘‘(a) IN GENERAL.—In the case of a group health 

14 plan that treats as a beneficiary under the plan an indi15 vidual who is a dependent child of a participant or bene16 ficiary under the plan, the plan shall continue to treat the 

17 individual as a dependent child without regard to the indi18 vidual’s age through at least the end of the plan year in 

19 which the individual turns an age specified in the plan, 

20 but not less than 25 years of age. 

21 ‘‘(b) CONSTRUCTION.—Nothing in this section shall 

22 be construed as requiring a group health plan to provide 

23 coverage for dependent children as beneficiaries under the 

24 plan or to require a participant to elect coverage of de25 pendent children.’’. 


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1 (2) CLERICAL AMENDMENT.—The table of sec2 tions in such subchapter is amended by adding at 

3 the end the following new item: 

‘‘Sec. 9814. Extending coverage of dependents through plan year that includes 

25th birthday.’’. 

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

5 this section shall apply to group health plans for plan 

6 years beginning more than 3 months after the date of the 

7 enactment of this Act and shall apply to individuals who 

8 are dependent children under a group health plan, or 

9 health insurance coverage offered in connection with such 

10 a plan, on or after such date. 

11 SEC. 212. ALLOWING AUTO-ENROLLMENT FOR EMPLOYER 

12 SPONSORED COVERAGE. 

13 (a) IN GENERAL.—No State shall establish a law 

14 that prevents an employer from instituting auto-enroll15 ment for coverage of a participant or beneficiary, including 

16 current employees, under a group health plan, or health 

17 insurance coverage offered in connection with such a plan, 

18 so long as the participant or beneficiary has the option 

19 of declining such coverage. 

20 (b) AUTO-ENROLLMENT.— 

21 (1) NOTICE REQUIRED.—Employers with auto22 enrollment under a group health plan or health in23 surance coverage shall provide annual notification, 

24 within a reasonable period before the beginning of 


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1 each plan year, to each employee eligible to partici2 pate in the plan. The notice shall explain the em3 ployee contribution to such plan and the employee’s 

4 right to decline coverage. 

5 (2) TREATMENT OF NON-ACTION.—After a rea6 sonable period of time after receipt of the notice, if 

7 an employee fails to make an affirmative declaration 

8 declining coverage, then such an employee may be 

9 enrolled in the group health plan or health insurance 

10 coverage offered in connection with such a plan.’’ 

11 (c) CONSTRUCTION.—Nothing in this section shall be 

12 construed to supersede State law which establishes, imple13 ments, or continues in effect any standard or requirement 

14 relating to employers in connection with payroll or the 

15 sponsoring of employer sponsored health insurance cov16 erage except to the extent that such standard or require17 ment prevents an employer from instituting the auto-en18 rollment described in subsection (a). 


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1 TITLE III—EXPANDING CHOICES 

2 BY ALLOWING AMERICANS TO 

3 BUY HEALTH CARE COV4 ERAGE ACROSS STATE LINES 

5 SEC. 221. INTERSTATE PURCHASING OF HEALTH INSUR6 ANCE. 

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

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

10 ‘‘PART D—COOPERATIVE GOVERNING OF 

11 INDIVIDUAL HEALTH INSURANCE COVERAGE 

12 ‘‘SEC. 2795. DEFINITIONS. 

13 ‘‘In this part: 

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

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

17 the State designated by the issuer as the State 

18 whose covered laws shall govern the health insurance 

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

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

21 only designate one such State as its primary State 

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

23 issuer may not change the designated primary State 

24 with respect to individual health insurance coverage 

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


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

3 to be doing business in that State. 

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

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

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

8 of a health insurance issuer that is selling a policy 

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

10 is deemed to be doing business in that secondary 

11 State. 

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

13 ‘health insurance issuer’ has the meaning given such 

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

15 issuer must be licensed in the primary State and be 

16 qualified to sell individual health insurance coverage 

17 in that State. 

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

21 the individual market, as defined in section 

22 2791(e)(1). 

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

24 term ‘applicable State authority’ means, with respect 

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

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

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

5 term ‘hazardous financial condition’ means that, 

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

8 to be able— 

9 ‘‘(A) to meet obligations to policyholders 

10 with respect to known claims and reasonably 

11 anticipated claims; or 

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

13 course of business. 

14 ‘‘(7) COVERED LAWS.— 

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

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

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

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

22 medical underwriting), renewal, and 

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


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

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

4 services; 

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

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

9 issuer; and 

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

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

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

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

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

21 adequacy, health care data collection, or quality 

22 assurance. 

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

24 States and includes the District of Columbia, Puerto 


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

2 and the Northern Mariana Islands. 

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

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

8 policy provisions relating to coverage at issue. 

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

11 respect to claims arising under policies. 

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

14 and settlement of claims arising under policies. 

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

16 and equitable settlement of claims submitted in 

17 which liability has become reasonably clear. 

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

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

21 claims within a reasonable period of time after 

22 having completed an investigation related to 

23 those claims. 

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

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1 stitute suits to recover amounts due under its 

2 policies by offering substantially less than the 

3 amounts ultimately recovered in suits brought 

4 by them. 

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

6 to settle or settling claims for less than the 

7 amount that a reasonable person would believe 

8 the insured individual or his or her beneficiary 

9 was entitled by reference to written or printed 

10 advertising material accompanying or made 

11 part of an application. 

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

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

15 consent of, the insured. 

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

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

19 their use. 

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

21 time than that prescribed in the policy or by the 

22 law of the primary State. 

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

24 and abuse’ means an act or omission committed by 

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


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

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

4 or preparing with knowledge or belief that it 

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

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

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

10 renewal of an insurance policy or reinsur11 ance contract. 

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

13 or reinsurance contract. 

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

15 pursuant to an insurance policy or reinsur16 ance contract. 

17 ‘‘(iv) Premiums paid on an insurance 

18 policy or reinsurance contract. 

19 ‘‘(v) Payments made in accordance 

20 with the terms of an insurance policy or 

21 reinsurance contract. 

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

24 official of another jurisdiction. 


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

3 ‘‘(viii) The formation, acquisition, 

4 merger, reconsolidation, dissolution or 

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

7 State by an insurer or reinsurer. 

8 ‘‘(ix) The issuance of written evidence 

9 of insurance. 

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

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

13 renewal insurance risks on behalf of an insurer 

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

16 should know that the insurer or other person 

17 responsible for the risk is insolvent at the time 

18 of the transaction. 

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

22 the transaction of the business of insurance. 

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

3 ‘‘SEC. 2796. APPLICATION OF LAW. 

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

5 State shall apply to individual health insurance coverage 

6 offered by a health insurance issuer in the primary State 

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

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

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

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

14 issuance of individual health insurance coverage in any 

15 secondary State is exempt from any covered laws of the 

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

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

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

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

21 operating in the secondary State, except that any 

22 secondary State may require such an issuer— 

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

24 applicable premium and other taxes (including 

25 high risk pool assessments) which are levied on 


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1 insurers and surplus lines insurers, brokers, or 

2 policyholders under the laws of the State; 

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

4 State insurance commissioner as its agent solely 

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

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

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

12 ‘‘(i) the State insurance commissioner 

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

15 by the National Association of Insurance 

16 Commissioners; and 

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

19 handbook of the National Association of 

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

22 unjustified repetition; 

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

24 issued— 


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

5 or 

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

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

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

12 condition; 

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

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

16 health insurance issuer in the State is required 

17 to belong; 

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

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

22 subparagraph, such injunction must be obtained 

23 from a court of competent jurisdiction; 


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

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

6 2798 with respect to coverage offered in the 

7 State; 

8 ‘‘(2) require any individual health insurance 

9 coverage issued by the issuer to be countersigned by 

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

12 ‘‘(3) otherwise discriminate against the issuer 

13 issuing insurance in both the primary State and in 

14 any secondary State. 

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

16 health insurance issuer shall provide the following notice, 

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

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

20 blank spaces therein being appropriately filled with the 

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

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

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


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1 THIS POLICY IS ISSUED BY lllll AND 

2 IS GOVERNED BY THE LAWS AND REGULA3 TIONS OF THE STATE OF lllll, AND IT 

4 HAS MET ALL THE LAWS OF THAT STATE 

5 AS DETERMINED BY THAT STATE’S DE6 PARTMENT OF INSURANCE. THIS POLICY 

7 MAY BE LESS EXPENSIVE THAN OTHERS 

8 BECAUSE IT IS NOT SUBJECT TO ALL OF 

9 THE INSURANCE LAWS AND REGULATIONS 

10 OF THE STATE OF lllll, INCLUDING 

11 COVERAGE OF SOME SERVICES OR BENE12 FITS MANDATED BY THE LAW OF THE 

13 STATE OF lllll. ADDITIONALLY, THIS 

14 POLICY IS NOT SUBJECT TO ALL OF THE 

15 CONSUMER PROTECTION LAWS OR RE16 STRICTIONS ON RATE CHANGES OF THE 

17 STATE OF lllll. AS WITH ALL INSUR18 ANCE PRODUCTS, BEFORE PURCHASING 

19 THIS POLICY, YOU SHOULD CAREFULLY 

20 REVIEW THE POLICY AND DETERMINE 

21 WHAT HEALTH CARE SERVICES THE POL22 ICY COVERS AND WHAT BENEFITS IT PRO23 VIDES, INCLUDING ANY EXCLUSIONS, LIM24 ITATIONS, OR CONDITIONS FOR SUCH 

25 SERVICES OR BENEFITS.’’. 


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1 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

2 AND PREMIUM INCREASES.— 

3 ‘‘(1) IN GENERAL.—For purposes of this sec4 tion, a health insurance issuer that provides indi5 vidual health insurance coverage to an individual 

6 under this part in a primary or secondary State may 

7 not upon renewal— 

8 ‘‘(A) move or reclassify the individual in9 sured under the health insurance coverage from 

10 the class such individual is in at the time of 

11 issue of the contract based on the health-status 

12 related factors of the individual; or 

13 ‘‘(B) increase the premiums assessed the 

14 individual for such coverage based on a health 

15 status-related factor or change of a health sta16 tus-related factor or the past or prospective 

17 claim experience of the insured individual. 

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

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

20 issuer— 

21 ‘‘(A) from terminating or discontinuing 

22 coverage or a class of coverage in accordance 

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


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

2 policy holders within a class based on claims ex3 perience; 

4 ‘‘(C) from changing premiums or offering 

5 discounted premiums to individuals who engage 

6 in wellness activities at intervals prescribed by 

7 the issuer, if such premium changes or incen8 tives— 

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

10 the insurance contract; 

11 ‘‘(ii) are based on specific wellness ac12 tivities that are not applicable to all indi13 viduals; and 

14 ‘‘(iii) are not obtainable by all individ15 uals to whom coverage is offered; 

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

17 ‘‘(E) from retroactively adjusting the rates 

18 charged an insured individual if the initial rates 

19 were set based on material misrepresentation by 

20 the individual at the time of issue. 

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

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

23 individual health insurance coverage in a secondary State 

24 unless that coverage is currently offered for sale in the 

25 primary State. 


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

2 HEALTH INSURANCE ISSUERS.—Any State may require 

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

4 broker for a health insurance issuer with respect to the 

5 offering of individual health insurance coverage obtain a 

6 license from that State, with commissions or other com7 pensation subject to the provisions of the laws of that 

8 State, except that a State may not impose any qualifica9 tion or requirement which discriminates against a non10 resident agent or broker. 

11 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN12 SURANCE COMMISSIONER.—Each health insurance issuer 

13 issuing individual health insurance coverage in both pri14 mary and secondary States shall submit— 

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

16 State in which it intends to offer such coverage, be17 fore it may offer individual health insurance cov18 erage in such State— 

19 ‘‘(A) a copy of the plan of operation or fea20 sibility study or any similar statement of the 

21 policy being offered and its coverage (which 

22 shall include the name of its primary State and 

23 its principal place of business); 

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

25 designation of its primary State; and 


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

2 issuer’s compliance with all the laws of the pri3 mary State; and 

4 ‘‘(2) to the insurance commissioner of each sec5 ondary State in which it offers individual health in6 surance coverage, a copy of the issuer’s quarterly fi7 nancial statement submitted to the primary State, 

8 which statement shall be certified by an independent 

9 public accountant and contain a statement of opin10 ion on loss and loss adjustment expense reserves 

11 made by— 

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

13 of Actuaries; or 

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

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

16 Nothing in this section shall be construed to affect the 

17 authority of any Federal or State court to enjoin— 

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

19 insurance coverage by a health insurance issuer to 

20 any person or group who is not eligible for such in21 surance; or 

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

23 insurance coverage that violates the requirements of 

24 the law of a secondary State which are described in 


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1 subparagraphs (A) through (H) of section 

2 2796(b)(1). 

3 ‘‘(i) POWER OF SECONDARY STATES TO TAKE AD4 MINISTRATIVE ACTION.—Nothing in this section shall be 

5 construed to affect the authority of any State to enjoin 

6 conduct in violation of that State’s laws described in sec7 tion 2796(b)(1). 

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

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

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

11 paragraph (2), nothing in this section shall be con12 strued to affect the authority of any State to make 

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

14 State with respect to which a health insurance issuer 

15 is not exempt under subsection (b). 

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

17 If a State seeks an injunction regarding the conduct 

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

19 (h), such injunction must be obtained from a Fed20 eral or State court of competent jurisdiction. 

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

22 section shall affect the authority of any State to bring ac23 tion in any Federal or State court. 

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

25 this section shall be construed to affect the applicability 


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1 of State laws generally applicable to persons or corpora2 tions. 

3 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

4 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 

5 health insurance issuer is offering coverage in a primary 

6 State that does not accommodate residents of secondary 

7 States or does not provide a working mechanism for resi8 dents of a secondary State, and the issuer is offering cov9 erage under this part in such secondary State which has 

10 not adopted a qualified high risk pool as its acceptable 

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

12 the issuer shall, with respect to any individual health in13 surance coverage offered in a secondary State under this 

14 part, comply with the guaranteed availability requirements 

15 for eligible individuals in section 2741. 

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

17 BEFORE ISSUER MAY SELL INTO SECONDARY 

18 STATES. 

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

20 issue individual health insurance coverage in a secondary 

21 State if the State insurance commissioner does not use 

22 a risk-based capital formula for the determination of cap23 ital and surplus requirements for all health insurance 

24 issuers. 


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1 ‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE2 DURES. 

3 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur4 ance issuer may not offer, sell, or issue individual health 

5 insurance coverage in a secondary State under the provi6 sions of this title unless— 

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

8 State have legislation or regulations in place estab9 lishing an independent review process for individuals 

10 who are covered by individual health insurance cov11 erage, or 

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

13 subparagraph (A) are not met with respect to the ei14 ther of such States, the issuer provides an inde15 pendent review mechanism substantially identical (as 

16 determined by the applicable State authority of such 

17 State) to that prescribed in the ‘Health Carrier Ex18 ternal Review Model Act’ of the National Association 

19 of Insurance Commissioners for all individuals who 

20 purchase insurance coverage under the terms of this 

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

22 is conducted by an independent medical reviewer, or 

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

24 requirements of subsection (b) are met. 


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1 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL

2 REVIEWERS.—In the case of any independent review 

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

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

5 claim to an independent medical reviewer, or to any 

6 panel of such reviewers, to conduct independent 

7 medical review, the issuer shall ensure that— 

8 ‘‘(A) each independent medical reviewer 

9 meets the qualifications described in paragraphs 

10 (2) and (3); 

11 ‘‘(B) with respect to each review, each re12 viewer meets the requirements of paragraph (4) 

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

14 panel, meets the requirements described in 

15 paragraph (5); and 

16 ‘‘(C) compensation provided by the issuer 

17 to each reviewer is consistent with paragraph 

18 (6). 

19 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde20 pendent medical reviewer shall be a physician 

21 (allopathic or osteopathic) or health care profes22 sional who— 

23 ‘‘(A) is appropriately credentialed or li24 censed in 1 or more States to deliver health 

25 care services; and 


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

2 the diagnosis, or provides the type of treatment 

3 under review. 

4 ‘‘(3) INDEPENDENCE.— 

5 ‘‘(A) IN GENERAL.—Subject to subpara6 graph (B), each independent medical reviewer 

7 in a case shall— 

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

9 in paragraph (7)); 

10 ‘‘(ii) not have a material familial, fi11 nancial, or professional relationship with 

12 such a party; and 

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

14 interest with such a party (as determined 

15 under regulations). 

16 ‘‘(B) EXCEPTION.—Nothing in subpara17 graph (A) shall be construed to— 

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

19 the basis of affiliation with the issuer, 

20 from serving as an independent medical re21 viewer if— 

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

23 not reasonably available; 


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1 ‘‘(II) the affiliated individual is 

2 not involved in the provision of items 

3 or services in the case under review; 

4 ‘‘(III) the fact of such an affili5 ation is disclosed to the issuer and the 

6 enrollee (or authorized representative) 

7 and neither party objects; and 

8 ‘‘(IV) the affiliated individual is 

9 not an employee of the issuer and 

10 does not provide services exclusively or 

11 primarily to or on behalf of the issuer; 

12 ‘‘(ii) prohibit an individual who has 

13 staff privileges at the institution where the 

14 treatment involved takes place from serv15 ing as an independent medical reviewer 

16 merely on the basis of such affiliation if 

17 the affiliation is disclosed to the issuer and 

18 the enrollee (or authorized representative), 

19 and neither party objects; or 

20 ‘‘(iii) prohibit receipt of compensation 

21 by an independent medical reviewer from 

22 an entity if the compensation is provided 

23 consistent with paragraph (6). 

24 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

25 IN SAME FIELD.— 


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

2 treatment, or the provision of items or serv3 ices— 

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

5 a practicing physician (allopathic or osteo6 pathic) of the same or similar specialty, as 

7 a physician who, acting within the appro8 priate scope of practice within the State in 

9 which the service is provided or rendered, 

10 typically treats the condition, makes the 

11 diagnosis, or provides the type of treat12 ment under review; or 

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

14 professional, the reviewer, or at least 1 

15 member of the review panel, shall be a 

16 practicing non-physician health care pro17 fessional of the same or similar specialty 

18 as the non-physician health care profes19 sional who, acting within the appropriate 

20 scope of practice within the State in which 

21 the service is provided or rendered, typi22 cally treats the condition, makes the diag23 nosis, or provides the type of treatment 

24 under review. 


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1 ‘‘(B) PRACTICING DEFINED.—For pur2 poses of this paragraph, the term ‘practicing’ 

3 means, with respect to an individual who is a 

4 physician or other health care professional, that 

5 the individual provides health care services to 

6 individual patients on average at least 2 days 

7 per week. 

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

9 external review relating to a child, a reviewer shall 

10 have expertise under paragraph (2) in pediatrics. 

11 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA12 TION.—Compensation provided by the issuer to an 

13 independent medical reviewer in connection with a 

14 review under this section shall— 

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

16 ‘‘(B) not be contingent on the decision ren17 dered by the reviewer. 

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

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

20 respect to a denial of a claim under a coverage relat21 ing to an enrollee, any of the following: 

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

23 officer, director, or employee of the issuer. 

24 ‘‘(B) The enrollee (or authorized represent25 ative). 


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1 ‘‘(C) The health care professional that pro2 vides the items or services involved in the de3 nial. 

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

5 services (or treatment) involved in the denial 

6 are provided. 

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

8 other item that is included in the items or serv9 ices involved in the denial. 

10 ‘‘(F) Any other party determined under 

11 any regulations to have a substantial interest in 

12 the denial involved. 

13 ‘‘(8) DEFINITIONS.—For purposes of this sub14 section: 

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

16 means, with respect to health insurance cov17 erage offered by a health insurance issuer, an 

18 individual enrolled with the issuer to receive 

19 such coverage. 

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

21 term ‘health care professional’ means an indi22 vidual who is licensed, accredited, or certified 

23 under State law to provide specified health care 

24 services and who is operating within the scope 

25 of such licensure, accreditation, or certification. 


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1 ‘‘SEC. 2799. ENFORCEMENT. 

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

3 respect to specific individual health insurance coverage the 

4 primary State for such coverage has sole jurisdiction to 

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

6 State and any secondary State. 

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

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

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

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

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

12 initiated by the applicable secondary State authority, the 

13 court of competent jurisdiction shall apply the covered 

14 laws of the primary State. 

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

16 of individual health insurance coverage offered in a sec17 ondary State that fails to comply with the covered laws 

18 of the primary State, the applicable State authority of the 

19 secondary State may notify the applicable State authority 

20 of the primary State.’’. 

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

22 subsection (a) shall apply to individual health insurance 

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

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

25 (c) GAO ONGOING STUDY AND REPORTS.— 


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

2 United States shall conduct an ongoing study con3 cerning the effect of the amendment made by sub4 section (a) on— 

5 (A) the number of uninsured and under-in6 sured; 

7 (B) the availability and cost of health in8 surance policies for individuals with preexisting 

9 medical conditions; 

10 (C) the availability and cost of health in11 surance policies generally; 

12 (D) the elimination or reduction of dif13 ferent types of benefits under health insurance 

14 policies offered in different States; and 

15 (E) cases of fraud or abuse relating to 

16 health insurance coverage offered under such 

17 amendment and the resolution of such cases. 

18 (2) ANNUAL REPORTS.—The Comptroller Gen19 eral shall submit to Congress an annual report, after 

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

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

22 the ongoing study conducted under paragraph (1). 


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1 TITLE IV—IMPROVING HEALTH 

2 SAVINGS ACCOUNTS 

3 SEC. 231. SAVER’S CREDIT FOR CONTRIBUTIONS TO 

4 HEALTH SAVINGS ACCOUNTS. 

5 (a) ALLOWANCE OF CREDIT.—Subsection (a) of sec6 tion 25B of the Internal Revenue Code of 1986 is amend7 ed by inserting ‘‘aggregate qualified HSA contributions 

8 and’’ after ‘‘so much of the’’. 

9 (b) QUALIFIED HSA CONTRIBUTIONS.—Subsection 

10 (d) of section 25B of such Code is amended by redesig11 nating paragraph (2) as paragraph (3) and by inserting 

12 after paragraph (1) the following new paragraph: 

13 ‘‘(2) QUALIFIED HSA CONTRIBUTIONS.—The 

14 term ‘qualified HSA contribution’ means, with re15 spect to any taxable year, a contribution of the eligi16 ble individual to a health savings account (as defined 

17 in section 223(d)(1)) for which a deduction is allow18 able under section 223(a) for such taxable year.’’. 

19 (c) CONFORMING AMENDMENT.—The first sentence 

20 of section 25B(d)(3)(A) of such Code (as redesignated by 

21 subsection (b)) is amended to read as follows: ‘‘The aggre22 gate qualified retirement savings contributions determined 

23 under paragraph (1) and qualified HSA contributions de24 termined under paragraph (2) shall be reduced (but not 

25 below zero) by the aggregate distributions received by the 


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1 individual during the testing period from any entity of a 

2 type to which contributions under paragraph (1) or para3 graph (2) (as the case may be) may be made.’’. 

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

5 this section shall apply to contributions made after De6 cember 31, 2009. 

7 SEC. 232. HSA FUNDS FOR PREMIUMS FOR HIGH DEDUCT8 IBLE HEALTH PLANS. 

9 (a) IN GENERAL.—Subparagraph (C) of section 

10 223(d)(2) of the Internal Revenue Code of 1986 is amend11 ed by striking ‘‘or’’ at the end of clause (iii), by striking 

12 the period at the end of clause (iv) and inserting ‘‘, or’’, 

13 and by adding at the end the following: 

14 ‘‘(v) a high deductible health plan if— 

15 ‘‘(I) such plan is not offered in 

16 connection with a group health plan, 

17 ‘‘(II) no portion of any premium 

18 (within the meaning of applicable pre19 mium under section 4980B(f)(4)) for 

20 such plan is excludable from gross in21 come under section 106, and 

22 ‘‘(III) the account beneficiary 

23 demonstrates, using procedures 

24 deemed appropriate by the Secretary, 

25 that after payment of the premium 


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1 for such insurance the balance in the 

2 health savings account is at least 

3 twice the minimum deductible in ef4 fect under subsection (c)(2)(A)(i) 

5 which is applicable to such plan.’’. 

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

7 subsection (a) shall apply to premiums for a high deduct8 ible health plan for periods beginning after December 31, 

9 2009. 

10 SEC. 233. REQUIRING GREATER COORDINATION BETWEEN 

11 HDHP ADMINISTRATORS AND HSA ACCOUNT 

12 ADMINISTRATORS SO THAT ENROLLEES CAN 

13 ENROLL IN BOTH AT THE SAME TIME. 

14 The Secretary of the Treasury, through the issuance 

15 of regulations or other guidance, shall encourage adminis16 trators of health plans and trustees of health savings ac17 counts to provide for simultaneous enrollment in high de18 ductible health plans and setup of health savings accounts. 

19 SEC. 234. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

20 INCURRED BEFORE ESTABLISHMENT OF AC21 COUNT. 

22 (a) IN GENERAL.—Subsection (d) of section 223 of 

23 the Internal Revenue Code of 1986 is amended by redesig24 nating paragraph (4) as paragraph (5) and by inserting 

25 after paragraph (3) the following new paragraph: 


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1 ‘‘(4) CERTAIN MEDICAL EXPENSES INCURRED

2 BEFORE ESTABLISHMENT OF ACCOUNT TREATED AS

3 QUALIFIED.— 

4 ‘‘(A) IN GENERAL.—For purposes of para5 graph (2), an expense shall not fail to be treat6 ed as a qualified medical expense solely because 

7 such expense was incurred before the establish8 ment of the health savings account if such ex9 pense was incurred during the 60-day period 

10 beginning on the date on which the high de11 ductible health plan is first effective. 

12 ‘‘(B) SPECIAL RULES.—For purposes of 

13 subparagraph (A)— 

14 ‘‘(i) an individual shall be treated as 

15 an eligible individual for any portion of a 

16 month for which the individual is described 

17 in subsection (c)(1), determined without 

18 regard to whether the individual is covered 

19 under a high deductible health plan on the 

20 1st day of such month, and 

21 ‘‘(ii) the effective date of the health 

22 savings account is deemed to be the date 

23 on which the high deductible health plan is 

24 first effective after the date of the enact25 ment of this paragraph.’’. 


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

2 this section shall apply with respect to insurance pur3 chased after the date of the enactment of this Act in tax4 able years beginning after such date. 

5 DIVISION C—ENACTING REAL 

6 MEDICAL LIABILITY REFORM 

7 SEC. 301. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS. 

8 The time for the commencement of a health care law9 suit shall be 3 years after the date of manifestation of 

10 injury or 1 year after the claimant discovers, or through 

11 the use of reasonable diligence should have discovered, the 

12 injury, whichever occurs first. In no event shall the time 

13 for commencement of a health care lawsuit exceed 3 years 

14 after the date of manifestation of injury unless tolled for 

15 any of the following— 

16 (1) upon proof of fraud; 

17 (2) intentional concealment; or 

18 (3) the presence of a foreign body, which has no 

19 therapeutic or diagnostic purpose or effect, in the 

20 person of the injured person. 

21 Actions by a minor shall be commenced within 3 years 

22 from the date of the alleged manifestation of injury except 

23 that actions by a minor under the full age of 6 years shall 

24 be commenced within 3 years of manifestation of injury 

25 or prior to the minor’s 8th birthday, whichever provides 


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1 a longer period. Such time limitation shall be tolled for 

2 minors for any period during which a parent or guardian 

3 and a health care provider or health care organization 

4 have committed fraud or collusion in the failure to bring 

5 an action on behalf of the injured minor. 

6 SEC. 302. COMPENSATING PATIENT INJURY. 

7 (a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL

8 ECONOMIC LOSSES IN HEALTH CARE LAWSUITS.—In any 

9 health care lawsuit, nothing in this title shall limit a claim10 ant’s recovery of the full amount of the available economic 

11 damages, notwithstanding the limitation in subsection (b). 

12 (b) ADDITIONAL NONECONOMIC DAMAGES.—In any 

13 health care lawsuit, the amount of noneconomic damages, 

14 if available, may be as much as $250,000, regardless of 

15 the number of parties against whom the action is brought 

16 or the number of separate claims or actions brought with 

17 respect to the same injury. 

18 (c) NO DISCOUNT OF AWARD FOR NONECONOMIC

19 DAMAGES.—For purposes of applying the limitation in 

20 subsection (b), future noneconomic damages shall not be 

21 discounted to present value. The jury shall not be in22 formed about the maximum award for noneconomic dam23 ages. An award for noneconomic damages in excess of 

24 $250,000 shall be reduced either before the entry of judg25 ment, or by amendment of the judgment after entry of 


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1 judgment, and such reduction shall be made before ac2 counting for any other reduction in damages required by 

3 law. If separate awards are rendered for past and future 

4 noneconomic damages and the combined awards exceed 

5 $250,000, the future noneconomic damages shall be re6 duced first. 

7 (d) FAIR SHARE RULE.—In any health care lawsuit, 

8 each party shall be liable for that party’s several share 

9 of any damages only and not for the share of any other 

10 person. Each party shall be liable only for the amount of 

11 damages allocated to such party in direct proportion to 

12 such party’s percentage of responsibility. Whenever a 

13 judgment of liability is rendered as to any party, a sepa14 rate judgment shall be rendered against each such party 

15 for the amount allocated to such party. For purposes of 

16 this section, the trier of fact shall determine the propor17 tion of responsibility of each party for the claimant’s 

18 harm. 

19 SEC. 303. MAXIMIZING PATIENT RECOVERY. 

20 (a) COURT SUPERVISION OF SHARE OF DAMAGES

21 ACTUALLY PAID TO CLAIMANTS.—In any health care law22 suit, the court shall supervise the arrangements for pay23 ment of damages to protect against conflicts of interest 

24 that may have the effect of reducing the amount of dam25 ages awarded that are actually paid to claimants. In parVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00153 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 ticular, in any health care lawsuit in which the attorney 

2 for a party claims a financial stake in the outcome by vir3 tue of a contingent fee, the court shall have the power 

4 to restrict the payment of a claimant’s damage recovery 

5 to such attorney, and to redirect such damages to the 

6 claimant based upon the interests of justice and principles 

7 of equity. In no event shall the total of all contingent fees 

8 for representing all claimants in a health care lawsuit ex9 ceed the following limits: 

10 (1) 40 percent of the first $50,000 recovered by 

11 the claimant(s). 

(2) 331 12 ⁄3 percent of the next $50,000 recovered 

13 by the claimant(s). 

14 (3) 25 percent of the next $500,000 recovered 

15 by the claimant(s). 

16 (4) 15 percent of any amount by which the re17 covery by the claimant(s) is in excess of $600,000. 

18 (b) APPLICABILITY.—The limitations in this section 

19 shall apply whether the recovery is by judgment, settle20 ment, mediation, arbitration, or any other form of alter21 native dispute resolution. In a health care lawsuit involv22 ing a minor or incompetent person, a court retains the 

23 authority to authorize or approve a fee that is less than 

24 the maximum permitted under this section. The requireVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00154 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 ment for court supervision in the first two sentences of 

2 subsection (a) applies only in civil actions. 

3 SEC. 304. ADDITIONAL HEALTH BENEFITS. 

4 In any health care lawsuit involving injury or wrong5 ful death, any party may introduce evidence of collateral 

6 source benefits. If a party elects to introduce such evi7 dence, any opposing party may introduce evidence of any 

8 amount paid or contributed or reasonably likely to be paid 

9 or contributed in the future by or on behalf of the oppos10 ing party to secure the right to such collateral source bene11 fits. No provider of collateral source benefits shall recover 

12 any amount against the claimant or receive any lien or 

13 credit against the claimant’s recovery or be equitably or 

14 legally subrogated to the right of the claimant in a health 

15 care lawsuit involving injury or wrongful death. This sec16 tion shall apply to any health care lawsuit that is settled 

17 as well as a health care lawsuit that is resolved by a fact 

18 finder. This section shall not apply to section 1862(b) (42 

19 U.S.C. 1395y(b)) or section 1902(a)(25) (42 U.S.C. 

20 1396a(a)(25)) of the Social Security Act. 

21 SEC. 305. PUNITIVE DAMAGES. 

22 (a) IN GENERAL.—Punitive damages may, if other23 wise permitted by applicable State or Federal law, be 

24 awarded against any person in a health care lawsuit only 

25 if it is proven by clear and convincing evidence that such 


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1 person acted with malicious intent to injure the claimant, 

2 or that such person deliberately failed to avoid unneces3 sary injury that such person knew the claimant was sub4 stantially certain to suffer. In any health care lawsuit 

5 where no judgment for compensatory damages is rendered 

6 against such person, no punitive damages may be awarded 

7 with respect to the claim in such lawsuit. No demand for 

8 punitive damages shall be included in a health care lawsuit 

9 as initially filed. A court may allow a claimant to file an 

10 amended pleading for punitive damages only upon a mo11 tion by the claimant and after a finding by the court, upon 

12 review of supporting and opposing affidavits or after a 

13 hearing, after weighing the evidence, that the claimant has 

14 established by a substantial probability that the claimant 

15 will prevail on the claim for punitive damages. At the re16 quest of any party in a health care lawsuit, the trier of 

17 fact shall consider in a separate proceeding— 

18 (1) whether punitive damages are to be award19 ed and the amount of such award; and 

20 (2) the amount of punitive damages following a 

21 determination of punitive liability. 

22 If a separate proceeding is requested, evidence relevant 

23 only to the claim for punitive damages, as determined by 

24 applicable State law, shall be inadmissible in any proVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00156 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 ceeding to determine whether compensatory damages are 

2 to be awarded. 

3 (b) DETERMINING AMOUNT OF PUNITIVE DAM4 AGES.— 

5 (1) FACTORS CONSIDERED.—In determining 

6 the amount of punitive damages, if awarded, in a 

7 health care lawsuit, the trier of fact shall consider 

8 only the following— 

9 (A) the severity of the harm caused by the 

10 conduct of such party; 

11 (B) the duration of the conduct or any 

12 concealment of it by such party; 

13 (C) the profitability of the conduct to such 

14 party; 

15 (D) the number of products sold or med16 ical procedures rendered for compensation, as 

17 the case may be, by such party, of the kind 

18 causing the harm complained of by the claim19 ant; 

20 (E) any criminal penalties imposed on such 

21 party, as a result of the conduct complained of 

22 by the claimant; and 

23 (F) the amount of any civil fines assessed 

24 against such party as a result of the conduct 

25 complained of by the claimant. 


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1 (2) MAXIMUM AWARD.—The amount of punitive 

2 damages, if awarded, in a health care lawsuit may 

3 be as much as $250,000 or as much as two times 

4 the amount of economic damages awarded, which5 ever is greater. The jury shall not be informed of 

6 this limitation. 

7 SEC. 306. AUTHORIZATION OF PAYMENT OF FUTURE DAM8 AGES TO CLAIMANTS IN HEALTH CARE LAW9 SUITS. 

10 (a) IN GENERAL.—In any health care lawsuit, if an 

11 award of future damages, without reduction to present 

12 value, equaling or exceeding $50,000 is made against a 

13 party with sufficient insurance or other assets to fund a 

14 periodic payment of such a judgment, the court shall, at 

15 the request of any party, enter a judgment ordering that 

16 the future damages be paid by periodic payments. In any 

17 health care lawsuit, the court may be guided by the Uni18 form Periodic Payment of Judgments Act promulgated by 

19 the National Conference of Commissioners on Uniform 

20 State Laws. 

21 (b) APPLICABILITY.—This section applies to all ac22 tions which have not been first set for trial or retrial be23 fore the effective date of this title. 

24 SEC. 307. DEFINITIONS. 

25 In this title: 


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1 (1) ALTERNATIVE DISPUTE RESOLUTION SYS2 TEM; ADR.—The term ‘‘alternative dispute resolution 

3 system’’ or ‘‘ADR’’ means a system that provides 

4 for the resolution of health care lawsuits in a man5 ner other than through a civil action brought in a 

6 State or Federal court. 

7 (2) CLAIMANT.—The term ‘‘claimant’’ means 

8 any person who brings a health care lawsuit, includ9 ing a person who asserts or claims a right to legal 

10 or equitable contribution, indemnity, or subrogation, 

11 arising out of a health care liability claim or action, 

12 and any person on whose behalf such a claim is as13 serted or such an action is brought, whether de14 ceased, incompetent, or a minor. 

15 (3) COLLATERAL SOURCE BENEFITS.—The 

16 term ‘‘collateral source benefits’’ means any amount 

17 paid or reasonably likely to be paid in the future to 

18 or on behalf of the claimant, or any service, product, 

19 or other benefit provided or reasonably likely to be 

20 provided in the future to or on behalf of the claim21 ant, as a result of the injury or wrongful death, pur22 suant to— 

23 (A) any State or Federal health, sickness, 

24 income-disability, accident, or workers’ com25 pensation law; 


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1 (B) any health, sickness, income-disability, 

2 or accident insurance that provides health bene3 fits or income-disability coverage; 

4 (C) any contract or agreement of any 

5 group, organization, partnership, or corporation 

6 to provide, pay for, or reimburse the cost of 

7 medical, hospital, dental, or income-disability 

8 benefits; and 

9 (D) any other publicly or privately funded 

10 program. 

11 (4) COMPENSATORY DAMAGES.—The term 

12 ‘‘compensatory damages’’ means objectively 

13 verifiable monetary losses incurred as a result of the 

14 provision of, use of, or payment for (or failure to 

15 provide, use, or pay for) health care services or med16 ical products, such as past and future medical ex17 penses, loss of past and future earnings, cost of ob18 taining domestic services, loss of employment, and 

19 loss of business or employment opportunities, dam20 ages for physical and emotional pain, suffering, in21 convenience, physical impairment, mental anguish, 

22 disfigurement, loss of enjoyment of life, loss of soci23 ety and companionship, loss of consortium (other 

24 than loss of domestic service), hedonic damages, in25 jury to reputation, and all other nonpecuniary losses 


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1 of any kind or nature. The term ‘‘compensatory 

2 damages’’ includes economic damages and non3 economic damages, as such terms are defined in this 

4 section. 

5 (5) CONTINGENT FEE.—The term ‘‘contingent 

6 fee’’ includes all compensation to any person or per7 sons which is payable only if a recovery is effected 

8 on behalf of one or more claimants. 

9 (6) ECONOMIC DAMAGES.—The term ‘‘economic 

10 damages’’ means objectively verifiable monetary 

11 losses incurred as a result of the provision of, use 

12 of, or payment for (or failure to provide, use, or pay 

13 for) health care services or medical products, such as 

14 past and future medical expenses, loss of past and 

15 future earnings, cost of obtaining domestic services, 

16 loss of employment, and loss of business or employ17 ment opportunities. 

18 (7) HEALTH CARE LAWSUIT.—The term 

19 ‘‘health care lawsuit’’ means any health care liability 

20 claim concerning the provision of health care goods 

21 or services or any medical product affecting inter22 state commerce, or any health care liability action 

23 concerning the provision of health care goods or 

24 services or any medical product affecting interstate 

25 commerce, brought in a State or Federal court or 


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1 pursuant to an alternative dispute resolution system, 

2 against a health care provider, a health care organi3 zation, or the manufacturer, distributor, supplier, 

4 marketer, promoter, or seller of a medical product, 

5 regardless of the theory of liability on which the 

6 claim is based, or the number of claimants, plain7 tiffs, defendants, or other parties, or the number of 

8 claims or causes of action, in which the claimant al9 leges a health care liability claim. Such term does 

10 not include a claim or action which is based on 

11 criminal liability; which seeks civil fines or penalties 

12 paid to Federal, State, or local government; or which 

13 is grounded in antitrust. 

14 (8) HEALTH CARE LIABILITY ACTION.—The 

15 term ‘‘health care liability action’’ means a civil ac16 tion brought in a State or Federal court or pursuant 

17 to an alternative dispute resolution system, against 

18 a health care provider, a health care organization, or 

19 the manufacturer, distributor, supplier, marketer, 

20 promoter, or seller of a medical product, regardless 

21 of the theory of liability on which the claim is based, 

22 or the number of plaintiffs, defendants, or other par23 ties, or the number of causes of action, in which the 

24 claimant alleges a health care liability claim. 


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1 (9) HEALTH CARE LIABILITY CLAIM.—The 

2 term ‘‘health care liability claim’’ means a demand 

3 by any person, whether or not pursuant to ADR, 

4 against a health care provider, health care organiza5 tion, or the manufacturer, distributor, supplier, mar6 keter, promoter, or seller of a medical product, in7 cluding, but not limited to, third-party claims, cross8 claims, counter-claims, or contribution claims, which 

9 are based upon the provision of, use of, or payment 

10 for (or the failure to provide, use, or pay for) health 

11 care services or medical products, regardless of the 

12 theory of liability on which the claim is based, or the 

13 number of plaintiffs, defendants, or other parties, or 

14 the number of causes of action. 

15 (10) HEALTH CARE ORGANIZATION.—The term 

16 ‘‘health care organization’’ means any person or en17 tity which is obligated to provide or pay for health 

18 benefits under any health plan, including any person 

19 or entity acting under a contract or arrangement 

20 with a health care organization to provide or admin21 ister any health benefit. 

22 (11) HEALTH CARE PROVIDER.—The term 

23 ‘‘health care provider’’ means any person or entity 

24 required by State or Federal laws or regulations to 

25 be licensed, registered, or certified to provide health 


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1 care services, and being either so licensed, reg2 istered, or certified, or exempted from such require3 ment by other statute or regulation. 

4 (12) HEALTH CARE GOODS OR SERVICES.—The 

5 term ‘‘health care goods or services’’ means any 

6 goods or services provided by a health care organiza7 tion, provider, or by any individual working under 

8 the supervision of a health care provider, that relates 

9 to the diagnosis, prevention, or treatment of any 

10 human disease or impairment, or the assessment or 

11 care of the health of human beings. 

12 (13) MALICIOUS INTENT TO INJURE.—The 

13 term ‘‘malicious intent to injure’’ means inten14 tionally causing or attempting to cause physical in15 jury other than providing health care goods or serv16 ices. 

17 (14) MEDICAL PRODUCT.—The term ‘‘medical 

18 product’’ means a drug, device, or biological product 

19 intended for humans, and the terms ‘‘drug’’, ‘‘de20 vice’’, and ‘‘biological product’’ have the meanings 

21 given such terms in sections 201(g)(1) and 201(h) 

22 of the Federal Food, Drug and Cosmetic Act (21 

23 U.S.C. 321(g)(1) and (h)) and section 351(a) of the 

24 Public Health Service Act (42 U.S.C. 262(a)), reVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00164 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 spectively, including any component or raw material 

2 used therein, but excluding health care services. 

3 (15) NONECONOMIC DAMAGES.—The term 

4 ‘‘noneconomic damages’’ means damages for phys5 ical and emotional pain, suffering, inconvenience, 

6 physical impairment, mental anguish, disfigurement, 

7 loss of enjoyment of life, loss of society and compan8 ionship, loss of consortium (other than loss of do9 mestic service), hedonic damages, injury to reputa10 tion, and all other nonpecuniary losses of any kind 

11 or nature. 

12 (16) PUNITIVE DAMAGES.—The term ‘‘punitive 

13 damages’’ means damages awarded, for the purpose 

14 of punishment or deterrence, and not solely for com15 pensatory purposes, against a health care provider, 

16 health care organization, or a manufacturer, dis17 tributor, or supplier of a medical product. Punitive 

18 damages are neither economic nor noneconomic 

19 damages. 

20 (17) RECOVERY.—The term ‘‘recovery’’ means 

21 the net sum recovered after deducting any disburse22 ments or costs incurred in connection with prosecu23 tion or settlement of the claim, including all costs 

24 paid or advanced by any person. Costs of health care 

25 incurred by the plaintiff and the attorneys’ office 


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1 overhead costs or charges for legal services are not 

2 deductible disbursements or costs for such purpose. 

3 (18) STATE.—The term ‘‘State’’ means each of 

4 the several States, the District of Columbia, the 

5 Commonwealth of Puerto Rico, the Virgin Islands, 

6 Guam, American Samoa, the Northern Mariana Is7 lands, the Trust Territory of the Pacific Islands, and 

8 any other territory or possession of the United 

9 States, or any political subdivision thereof. 

10 SEC. 308. EFFECT ON OTHER LAWS. 

11 (a) VACCINE INJURY.— 

12 (1) To the extent that title XXI of the Public 

13 Health Service Act establishes a Federal rule of law 

14 applicable to a civil action brought for a vaccine-re15 lated injury or death— 

16 (A) this title does not affect the application 

17 of the rule of law to such an action; and 

18 (B) any rule of law prescribed by this title 

19 in conflict with a rule of law of such title XXI 

20 shall not apply to such action. 

21 (2) If there is an aspect of a civil action 

22 brought for a vaccine-related injury or death to 

23 which a Federal rule of law under title XXI of the 

24 Public Health Service Act does not apply, then this 

25 title or otherwise applicable law (as determined 


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1 under this title) will apply to such aspect of such ac2 tion. 

3 (b) OTHER FEDERAL LAW.—Except as provided in 

4 this section, nothing in this title shall be deemed to affect 

5 any defense available to a defendant in a health care law6 suit or action under any other provision of Federal law. 

7 SEC. 309. STATE FLEXIBILITY AND PROTECTION OF 

8 STATES’ RIGHTS. 

9 (a) HEALTH CARE LAWSUITS.—The provisions gov10 erning health care lawsuits set forth in this title preempt, 

11 subject to subsections (b) and (c), State law to the extent 

12 that State law prevents the application of any provisions 

13 of law established by or under this title. The provisions 

14 governing health care lawsuits set forth in this title super15 sede chapter 171 of title 28, United States Code, to the 

16 extent that such chapter— 

17 (1) provides for a greater amount of damages 

18 or contingent fees, a longer period in which a health 

19 care lawsuit may be commenced, or a reduced appli20 cability or scope of periodic payment of future dam21 ages, than provided in this title; or 

22 (2) prohibits the introduction of evidence re23 garding collateral source benefits, or mandates or 

24 permits subrogation or a lien on collateral source 

25 benefits. 


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1 (b) PROTECTION OF STATES’ RIGHTS AND OTHER

2 LAWS.—(1) Any issue that is not governed by any provi3 sion of law established by or under this title (including 

4 State standards of negligence) shall be governed by other5 wise applicable State or Federal law. 

6 (2) This title shall not preempt or supersede any 

7 State or Federal law that imposes greater procedural or 

8 substantive protections for health care providers and 

9 health care organizations from liability, loss, or damages 

10 than those provided by this title or create a cause of ac11 tion. 

12 (c) STATE FLEXIBILITY.—No provision of this title 

13 shall be construed to preempt— 

14 (1) any State law (whether effective before, on, 

15 or after the date of the enactment of this Act) that 

16 specifies a particular monetary amount of compen17 satory or punitive damages (or the total amount of 

18 damages) that may be awarded in a health care law19 suit, regardless of whether such monetary amount is 

20 greater or lesser than is provided for under this title, 

21 notwithstanding section 302(a); or 

22 (2) any defense available to a party in a health 

23 care lawsuit under any other provision of State or 

24 Federal law. 


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1 SEC. 310. APPLICABILITY; EFFECTIVE DATE. 

2 This title shall apply to any health care lawsuit 

3 brought in a Federal or State court, or subject to an alter4 native dispute resolution system, that is initiated on or 

5 after the date of the enactment of this Act, except that 

6 any health care lawsuit arising from an injury occurring 

7 prior to the date of the enactment of this Act shall be 

8 governed by the applicable statute of limitations provisions 

9 in effect at the time the injury occurred. 

10 DIVISION D—PROTECTING THE 

11 DOCTOR-PATIENT RELATION12 SHIP 

13 SEC. 401. RULE OF CONSTRUCTION. 

14 Nothing in this Act shall be construed to interfere 

15 with the doctor-patient relationship or the practice of med16 icine. 

17 SEC. 402. REPEAL OF FEDERAL COORDINATING COUNCIL 

18 FOR COMPARATIVE EFFECTIVENESS RE19 SEARCH. 

20 Effective on the date of the enactment of this Act, 

21 section 804 of the American Recovery and Reinvestment 

22 Act of 2009 is repealed. 


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1 DIVISION E—INCENTIVIZING 

2 WELLNESS AND QUALITY IM3 PROVEMENTS 

4 SEC. 501. INCENTIVES FOR PREVENTION AND WELLNESS 

5 PROGRAMS. 

6 (a) EMPLOYEE RETIREMENT INCOME SECURITY ACT

7 OF 1974 LIMITATION ON EXCEPTION FOR WELLNESS

8 PROGRAMS UNDER HIPAA DISCRIMINATION RULES.— 

9 (1) IN GENERAL.—Section 702(b)(2) of the 

10 Employee Retirement Income Security Act of 1974 

11 (29 U.S.C. 1182(b)(2)) is amended by adding after 

12 and below subparagraph (B) the following: 

13 ‘‘In applying subparagraph (B), a group health plan 

14 (or a health insurance issuer with respect to health 

15 insurance coverage) may vary premiums and cost16 sharing by up to 50 percent of the value of the bene17 fits under the plan (or coverage) based on participa18 tion in a standards-based wellness program.’’. 

19 (2) EFFECTIVE DATE.—The amendment made 

20 by paragraph (1) shall apply to plan years beginning 

21 more than 1 year after the date of the enactment of 

22 this Act. 

23 (b) CONFORMING AMENDMENTS TO PHSA.— 

24 (1) GROUP MARKET RULES.— 


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1 (A) IN GENERAL.—Section 2702(b)(2) of 

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

3 300gg–1(b)(2)) is amended by adding after and 

4 below subparagraph (B) the following: 

5 ‘‘In applying subparagraph (B), a group health plan 

6 (or a health insurance issuer with respect to health 

7 insurance coverage) may vary premiums and cost8 sharing by up to 50 percent of the value of the bene9 fits under the plan (or coverage) based on participa10 tion in a standards-based wellness program.’’. 

11 (B) EFFECTIVE DATE.—The amendment 

12 made by subparagraph (A) shall apply to plan 

13 years beginning more than 1 year after the date 

14 of the enactment of this Act. 

15 (2) INDIVIDUAL MARKET RULES RELATING TO

16 GUARANTEED AVAILABILITY.— 

17 (A) IN GENERAL.—Section 2741(f) of the 

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

19 1(b)(2)) is amended by adding after and below 

20 paragraph (1) the following: 

21 ‘‘In applying paragraph (2), a health insurance issuer may 

22 vary premiums and cost-sharing under health insurance 

23 coverage by up to 50 percent of the value of the benefits 

24 under the coverage based on participation in a standards25 based wellness program.’’. 


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1 (B) EFFECTIVE DATE.—The amendment 

2 made by paragraph (1) shall apply to health in3 surance coverage offered or renewed on and 

4 after the date that is 1 year after the date of 

5 the enactment of this Act. 

6 (c) CONFORMING AMENDMENTS TO IRC.— 

7 (1) IN GENERAL.—Section 9802(b)(2) of the 

8 Internal Revenue Code of 1986 is amended by add9 ing after and below subparagraph (B) the following: 

10 ‘‘In applying subparagraph (B), a group health plan 

11 (or a health insurance issuer with respect to health 

12 insurance coverage) may vary premiums and cost13 sharing by up to 50 percent of the value of the bene14 fits under the plan (or coverage) based on participa15 tion in a standards-based wellness program.’’. 

16 (2) EFFECTIVE DATE.—The amendment made 

17 by paragraph (1) shall apply to plan years beginning 

18 more than 1 year after the date of the enactment of 

19 this Act. 


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1 DIVISION F—PROTECTING 

2 TAXPAYERS 

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

4 HCFAC. 

5 (a) HCFAC FUNDING.—Section 1817(k)(3)(A) of 

6 the Social Security Act (42 U.S.C. 1395i(k)(3)(A)) is 

7 amended— 

8 (1) in clause (i)— 

9 (A) in subclause (IV), by striking ‘‘2009, 

10 and 2010’’ and inserting ‘‘and 2009’’; and 

11 (B) by amending subclause (V) to read as 

12 follows: 

13 ‘‘(V) for each fiscal year after fis14 cal year 2009, $300,000,000.’’; and 

15 (2) in clause (ii)— 

16 (A) in subclause (IX), by striking ‘‘2009, 

17 and 2010’’ and inserting ‘‘and 2009’’; and 

18 (B) in subclause (X), by striking ‘‘2010’’ 

19 and inserting ‘‘2009’’ and by inserting before 

20 the period at the end the following: ‘‘, plus the 

21 amount by which the amount made available 

22 under clause (i)(V) for fiscal year 2010 exceeds 

23 the amount made available under clause (i)(IV) 

24 for 2009’’. 


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1 (b) OIG FUNDING.—There are authorized to be ap2 propriated for each of fiscal years 2010 through 2019 

3 $100,000,000 for the Office of the Inspector General of 

4 the Department of Health and Human Services for fraud 

5 prevention activities under the Medicare and Medicaid 

6 programs. 

7 SEC. 602. PROHIBITING TAXPAYER FUNDED ABORTIONS 

8 AND CONSCIENCE PROTECTIONS. 

9 Title 1 of the United States Code is amended by add10 ing at the end the following new chapter: 

11 ‘‘CHAPTER 4—PROHIBITING TAXPAYER 

12 FUNDED ABORTIONS AND CON13 SCIENCE PROTECTIONS 

14 ‘‘SEC. 301. PROHIBITION ON FUNDING FOR ABORTIONS. 

15 ‘‘No funds authorized or appropriated by federal law, 

16 and none of the funds in any trust fund to which funds 

17 are authorized or appropriated by federal law, shall be ex18 pended for any abortion. 

19 ‘‘SEC. 302. PROHIBITION ON FUNDING FOR HEALTH BENE20 FITS PLANS THAT COVER ABORTION. 

21 ‘‘None of the funds authorized or appropriated by 

22 federal law, and none of the funds in any trust fund to 

23 which funds are authorized or appropriated by federal law, 

24 shall be expended for a health benefits plan that includes 

25 coverage of abortion. 


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1 ‘‘SEC. 303. TREATMENT OF ABORTIONS RELATED TO RAPE, 

2 INCEST, OR PRESERVING THE LIFE OF THE 

3 MOTHER. 

4 ‘‘The limitations established in sections 301 and 302 

5 shall not apply to an abortion— 

6 ‘‘(1) if the pregnancy is the result of an act of 

7 rape or incest; or 

8 ‘‘(2) in the case where a woman suffers from a 

9 physical disorder, physical injury, or physical illness 

10 that would, as certified by a physician, place the 

11 woman in danger of death unless an abortion is per12 formed, including a life-endangering physical condi13 tion caused by or arising from the pregnancy itself. 

14 ‘‘SEC. 304. CONSTRUCTION RELATING TO SUPPLEMENTAL 

15 COVERAGE. 

16 ‘‘Nothing in this chapter shall be construed as pro17 hibiting any individual, entity, or State or locality from 

18 purchasing separate supplemental abortion plan or cov19 erage that includes abortion so long as such plan or cov20 erage is paid for entirely using only funds not authorized 

21 or appropriated by federal law and such plan or coverage 

22 shall not be purchased using matching funds required for 

23 a federally subsidized program, including a State’s or lo24 cality’s contribution of Medicaid matching funds. 


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1 ‘‘SEC. 305. CONSTRUCTION RELATING TO THE USE OF NON2 FEDERAL FUNDS FOR HEALTH COVERAGE. 

3 ‘‘Nothing in this chapter shall be construed as re4 stricting the ability of any managed care provider or other 

5 organization from offering abortion coverage or the ability 

6 of a State to contract separately with such a provider or 

7 organization for such coverage with funds not authorized 

8 or appropriated by federal law and such plan or coverage 

9 shall not be purchased using matching funds required for 

10 a federally subsidized program, including a State’s or lo11 cality’s contribution of Medicaid matching funds. 

12 ‘‘SEC. 306. NO GOVERNMENT DISCRIMINATION AGAINST 

13 CERTAIN HEALTH CARE ENTITIES. 

14 ‘‘(a) IN GENERAL.—No funds authorized or appro15 priated by federal law may be made available to a Federal 

16 agency or program, or to a State or local government, if 

17 such agency, program, or government subjects any institu18 tional or individual health care entity to discrimination on 

19 the basis that the health care entity does not provide, pay 

20 for, provide coverage of, or refer for abortions. 

21 ‘‘(b) HEALTH CARE ENTITY DEFINED.—For pur22 poses of this section, the term ‘health care entity’ includes 

23 an individual physician or other health care professional, 

24 a hospital, a provider-sponsored organization, a health 

25 maintenance organization, a health insurance plan, or any 

26 other kind of health care facility, organization, or plan.’’. 


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1 SEC. 603. IMPROVED ENFORCEMENT OF THE MEDICARE 

2 AND MEDICAID SECONDARY PAYER PROVI3 SIONS. 

4 (a) MEDICARE.— 

5 (1) IN GENERAL.—The Secretary, in coordina6 tion with the Inspector General of the Department 

7 of Health and Human Services, shall provide 

8 through the Coordination of Benefits Contractor for 

9 the identification of instances where the Medicare 

10 program should be, but is not, acting as a secondary 

11 payer to an individual’s private health benefits cov12 erage under section 1862(b) of the Social Security 

13 Act (42 U.S.C. 1395y(b)). 

14 (2) UPDATING PROCEDURES.—The Secretary 

15 shall update procedures for identifying and resolving 

16 credit balance situations which occur under the 

17 Medicare program when payment under such title 

18 and from other health benefit plans exceed the pro19 viders’ charges or the allowed amount. 

20 (3) REPORT ON IMPROVED ENFORCEMENT.— 

21 Not later than 1 year after the date of the enact22 ment of this Act, the Secretary shall submit a report 

23 to Congress on progress made in improved enforce24 ment of the Medicare secondary payer provisions, in25 cluding recoupment of credit balances. 


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1 (b) MEDICAID.—Section 1903 of the Social Security 

2 Act (42 U.S.C. 1396b) is amended by adding at the end 

3 the following new subsection: 

4 ‘‘(aa) ENFORCEMENT OF PAYER OF LAST RESORT

5 PROVISIONS.— 

6 ‘‘(1) SUBMISSION OF STATE PLAN AMEND7 MENT.—Each State shall submit, not later than 1 

8 year after the date of the enactment of this sub9 section, a State plan amendment that details how 

10 the State will become fully compliant with the re11 quirements of section 1902(a)(25). 

12 ‘‘(2) BONUS FOR COMPLIANCE.—If a State sub13 mits a timely State plan amendment under para14 graph (1) that the Secretary determines provides for 

15 full compliance of the State with the requirements of 

16 section 1902(a)(25), the Secretary shall provide for 

17 an additional payment to the State of $1,000,000. If 

18 a State certifies, to the Secretary’s satisfaction, that 

19 it is already fully compliant with such requirements, 

20 such amount shall be increased to $2,000,000. 

21 ‘‘(3) REDUCTION FOR NONCOMPLIANCE.—If a 

22 State does not submit such an amendment, the Sec23 retary shall reduce the Federal medical assistance 

24 percentage otherwise applicable under this title by 1 


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1 percentage point until the State submits such an 

2 amendment. 

3 ‘‘(4) ONGOING REDUCTION.—If at any time the 

4 Secretary determines that a State is not in compli5 ance with section 1902(a)(25), regardless of the sta6 tus of the State’s submission of a State plan amend7 ment under this subsection or previous determina8 tions of compliance such requirements, the Secretary 

9 shall reduce the Federal medical assistance percent10 age otherwise applicable under this title for the 

11 State by 1 percentage point during the period of 

12 non-compliance as determined by the Secretary.’’. 

13 SEC. 604. STRENGTHEN MEDICARE PROVIDER ENROLL14 MENT STANDARDS AND SAFEGUARDS. 

15 (a) PROTECTING AGAINST THE FRAUDULENT USE

16 OF MEDICARE PROVIDER NUMBERS.—Subject to sub17 section (c)(2)— 

18 (1) SCREENING NEW PROVIDERS.—As a condi19 tion of a provider of services or a supplier, including 

20 durable medical equipment suppliers and home 

21 health agencies, applying for the first time for a pro22 vider number under the Medicare program and be23 fore granting billing privileges under such title, the 

24 Secretary shall screen the provider or supplier for a 

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1 ational irregularities through fingerprinting, licen2 sure checks, site-visits, other database checks. 

3 (2) APPLICATION FEES.—The Secretary shall 

4 impose an application charge on such a provider or 

5 supplier in order to cover the Secretary’s costs in 

6 performing the screening required under paragraph 

7 (1) and that is revenue neutral to the Federal gov8 ernment. 

9 (3) PROVISIONAL APPROVAL.—During an ini10 tial, provisional period (specified by the Secretary) 

11 In which such a provider or supplier has been issued 

12 such a number, the Secretary shall provide enhanced 

13 oversight of the activities of such provider or sup14 plier under the Medicare program, such as through 

15 prepayment review and payment limitations. 

16 (4) PENALTIES FOR FALSE STATEMENTS.—In 

17 the case of a provider or supplier that makes a false 

18 statement in an application for such a number, the 

19 Secretary may exclude the provider or supplier from 

20 participation under the Medicare program, or may 

21 impose a civil money penalty (in the amount de22 scribed in section 1128A(a)(4) of the Social Security 

23 Act), in the same manner as the Secretary may im24 pose such an exclusion or penalty under sections 

25 1128 and 1128A, respectively, of such Act in the 


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1 case of knowing presentation of a false claim de2 scribed in section 1128A(a)(1)(A) of such Act. 

3 (5) DISCLOSURE REQUIREMENTS.—With re4 spect to approval of such an application, the Sec5 retary— 

6 (A) shall require applicants to disclose pre7 vious affiliation with enrolled entities that have 

8 uncollected debt related to the Medicare or 

9 Medicaid programs; 

10 (B) may deny approval if the Secretary de11 termines that these affiliations pose undue risk 

12 to the Medicare or Medicaid program, subject 

13 to an appeals process for the applicant as deter14 mined by the Secretary; and 

15 (C) may implement enhanced safeguards 

16 (such as surety bonds). 

17 (b) MORATORIA.—The Secretary may impose mora18 toria on approval of provider and supplier numbers under 

19 the Medicare program for new providers of services and 

20 suppliers as determined necessary to prevent or combat 

21 fraud a period of delay for any one applicant cannot ex22 ceed 30 days unless cause is shown by the Secretary. 

23 (c) FUNDING.— 


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1 (1) IN GENERAL.—There are authorized to be 

2 appropriated to carry out this section such sums as 

3 may be necessary. 

4 (2) CONDITION.—The provisions of paragraphs 

5 (1) and (2) of subsection (a) shall not apply unless 

6 and until funds are appropriated to carry out such 

7 provisions. 

8 SEC. 605. TRACKING BANNED PROVIDERS ACROSS STATE 

9 LINES. 

10 (a) GREATER COORDINATION.—The Secretary of 

11 Health and Human Services shall provide for increased 

12 coordination between the Administrator of the Centers for 

13 Medicare & Medicaid Services (in this section referred to 

14 as ‘‘CMS’’) and its regional offices to ensure that pro15 viders of services and suppliers that have operated in one 

16 State and are excluded from participation in the Medicare 

17 program are unable to begin operation and participation 

18 in the Medicare program in another State. 

19 (b) IMPROVED INFORMATION SYSTEMS.— 

20 (1) IN GENERAL.—The Secretary shall improve 

21 information systems to allow greater integration be22 tween databases under the Medicare program so 

23 that— 

24 (A) Medicare administrative contractors, 

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1 diate access to information identifying providers 

2 and suppliers excluded from participation in the 

3 Medicare and Medicaid program and other Fed4 eral health care programs; and 

5 (B) such information can be shared across 

6 Federal health care programs and agencies, in7 cluding between the Departments of Health and 

8 Human Services, the Social Security Adminis9 tration, the Department of Veterans Affairs, 

10 the Department of Defense, the Department of 

11 Justice, and the Office of Personnel Manage12 ment. 

13 (c) MEDICARE/MEDICAID ‘‘ONE PI’’ DATABASE.— 

14 The Secretary shall implement a database that includes 

15 claims and payment data for all components of the Medi16 care program and the Medicaid program. 

17 (d) AUTHORIZING EXPANDED DATA MATCHING.— 

18 Notwithstanding any provision of the Computer Matching 

19 and Privacy Protection Act of 1988 to the contrary— 

20 (1) the Secretary and the Inspector General in 

21 the Department of Health and Human Services may 

22 perform data matching of data from the Medicare 

23 program with data from the Medicaid program; and 

24 (2) the Commissioner of Social Security and the 

25 Secretary may perform data matching of data of the 


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1 Social Security Administration with data from the 

2 Medicare and Medicaid programs. 

3 (e) CONSOLIDATION OF DATABASES.—The Secretary 

4 shall consolidate and expand into a centralized database 

5 for individuals and entities that have been excluded from 

6 Federal health care programs the Healthcare Integrity 

7 and Protection Data Bank, the National Practitioner 

8 Data Bank, the List of Excluded Individuals/Entities, and 

9 a national patient abuse/neglect registry. 

10 (f) COMPREHENSIVE PROVIDER DATABASE.— 

11 (1) ESTABLISHMENT.—The Secretary shall es12 tablish a comprehensive database that includes infor13 mation on providers of services, suppliers, and re14 lated entities participating in the Medicare program, 

15 the Medicaid program, or both. Such database shall 

16 include, information on ownership and business rela17 tionships, history of adverse actions, results of site 

18 visits or other monitoring by any program. 

19 (2) USE.—Prior to issuing a provider or sup20 plier number for an entity under the Medicare pro21 gram, the Secretary shall obtain information on the 

22 entity from such database to assure the entity quali23 fies for the issuance of such a number. 

24 (g) COMPREHENSIVE SANCTIONS DATABASE.—The 

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1 base on sanctions imposed on providers of services, sup2 pliers, and related entities. Such database shall be over3 seen by the Inspector General of the Department of 

4 Health and Human Services and shall be linked to related 

5 databases maintained by State licensure boards and by 

6 Federal or State law enforcement agencies. 

7 (h) ACCESS TO CLAIMS AND PAYMENT DATA8 BASES.—The Secretary shall ensure that the Inspector 

9 General of the Department of Health and Human Services 

10 and Federal law enforcement agencies have direct access 

11 to all claims and payment databases of the Secretary 

12 under the Medicare or Medicaid programs. 

13 (i) CIVIL MONEY PENALTIES FOR SUBMISSION OF

14 ERRONEOUS INFORMATION.—In the case of a provider of 

15 services, supplier, or other entity that submits erroneous 

16 information that serves as a basis for payment of any enti17 ty under the Medicare or Medicaid program, the Secretary 

18 may impose a civil money penalty of not to exceed $50,000 

19 for each such erroneous submission. A civil money penalty 

20 under this subsection shall be imposed and collected in the 

21 same manner as a civil money penalty under subsection 

22 (a) of section 1128A of the Social Security Act is imposed 

23 and collected under that section. 


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1 DIVISION G—PATHWAY FOR BIO2 SIMILAR BIOLOGICAL PROD3 UCTS 

4 SEC. 701. LICENSURE PATHWAY FOR BIOSIMILAR BIOLOGI5 CAL PRODUCTS. 

6 (a) LICENSURE OF BIOLOGICAL PRODUCTS AS BIO7 SIMILAR OR INTERCHANGEABLE.—Section 351 of the 

8 Public Health Service Act (42 U.S.C. 262) is amended— 

9 (1) in subsection (a)(1)(A), by inserting ‘‘under 

10 this subsection or subsection (k)’’ after ‘‘biologics li11 cense’’; and 

12 (2) by adding at the end the following: 

13 ‘‘(k) LICENSURE OF BIOLOGICAL PRODUCTS AS BIO14 SIMILAR OR INTERCHANGEABLE.— 

15 ‘‘(1) IN GENERAL.—Any person may submit an 

16 application for licensure of a biological product 

17 under this subsection. 

18 ‘‘(2) CONTENT.— 

19 ‘‘(A) IN GENERAL.— 

20 ‘‘(i) REQUIRED INFORMATION.—An 

21 application submitted under this subsection 

22 shall include information demonstrating 

23 that— 


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1 ‘‘(I) the biological product is bio2 similar to a reference product based 

3 upon data derived from— 

4 ‘‘(aa) analytical studies that 

5 demonstrate that the biological 

6 product is highly similar to the 

7 reference product notwith8 standing minor differences in 

9 clinically inactive components; 

10 ‘‘(bb) animal studies (includ11 ing the assessment of toxicity); 

12 and 

13 ‘‘(cc) a clinical study or 

14 studies (including the assessment 

15 of immunogenicity and phar16 macokinetics or 

17 pharmacodynamics) that are suf18 ficient to demonstrate safety, pu19 rity, and potency in 1 or more 

20 appropriate conditions of use for 

21 which the reference product is li22 censed and intended to be used 

23 and for which licensure is sought 

24 for the biological product; 


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1 ‘‘(II) the biological product and 

2 reference product utilize the same 

3 mechanism or mechanisms of action 

4 for the condition or conditions of use 

5 prescribed, recommended, or sug6 gested in the proposed labeling, but 

7 only to the extent the mechanism or 

8 mechanisms of action are known for 

9 the reference product; 

10 ‘‘(III) the condition or conditions 

11 of use prescribed, recommended, or 

12 suggested in the labeling proposed for 

13 the biological product have been pre14 viously approved for the reference 

15 product; 

16 ‘‘(IV) the route of administra17 tion, the dosage form, and the 

18 strength of the biological product are 

19 the same as those of the reference 

20 product; and 

21 ‘‘(V) the facility in which the bio22 logical product is manufactured, proc23 essed, packed, or held meets stand24 ards designed to assure that the bioVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00188 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 logical product continues to be safe, 

2 pure, and potent. 

3 ‘‘(ii) DETERMINATION BY SEC4 RETARY.—The Secretary may determine, 

5 in the Secretary’s discretion, that an ele6 ment described in clause (i)(I) is unneces7 sary in an application submitted under this 

8 subsection. 

9 ‘‘(iii) ADDITIONAL INFORMATION.— 

10 An application submitted under this sub11 section— 

12 ‘‘(I) shall include publicly avail13 able information regarding the Sec14 retary’s previous determination that 

15 the reference product is safe, pure, 

16 and potent; and 

17 ‘‘(II) may include any additional 

18 information in support of the applica19 tion, including publicly available infor20 mation with respect to the reference 

21 product or another biological product. 

22 ‘‘(B) INTERCHANGEABILITY.—An applica23 tion (or a supplement to an application) sub24 mitted under this subsection may include infor25 mation demonstrating that the biological prodVerDate Nov 24 2008 23:16 Nov 07, 2009 Jkt 089200 PO 00000 Frm 00189 Fmt 6652 Sfmt 6201 E:\BILLS\H4038.IH H4038

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1 uct meets the standards described in paragraph 

2 (4). 

3 ‘‘(3) EVALUATION BY SECRETARY.—Upon re4 view of an application (or a supplement to an appli5 cation) submitted under this subsection, the Sec6 retary shall license the biological product under this 

7 subsection if— 

8 ‘‘(A) the Secretary determines that the in9 formation submitted in the application (or the 

10 supplement) is sufficient to show that the bio11 logical product— 

12 ‘‘(i) is biosimilar to the reference 

13 product; or 

14 ‘‘(ii) meets the standards described in 

15 paragraph (4), and therefore is inter16 changeable with the reference product; and 

17 ‘‘(B) the applicant (or other appropriate 

18 person) consents to the inspection of the facility 

19 that is the subject of the application, in accord20 ance with subsection (c). 

21 ‘‘(4) SAFETY STANDARDS FOR DETERMINING

22 INTERCHANGEABILITY.—Upon review of an applica23 tion submitted under this subsection or any supple24 ment to such application, the Secretary shall deter25 mine the biological product to be interchangeable 


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1 with the reference product if the Secretary deter2 mines that the information submitted in the applica3 tion (or a supplement to such application) is suffi4 cient to show that— 

5 ‘‘(A) the biological product— 

6 ‘‘(i) is biosimilar to the reference 

7 product; and 

8 ‘‘(ii) can be expected to produce the 

9 same clinical result as the reference prod10 uct in any given patient; and 

11 ‘‘(B) for a biological product that is ad12 ministered more than once to an individual, the 

13 risk in terms of safety or diminished efficacy of 

14 alternating or switching between use of the bio15 logical product and the reference product is not 

16 greater than the risk of using the reference 

17 product without such alternation or switch. 

18 ‘‘(5) GENERAL RULES.— 

19 ‘‘(A) ONE REFERENCE PRODUCT PER AP20 PLICATION.—A biological product, in an appli21 cation submitted under this subsection, may not 

22 be evaluated against more than 1 reference 

23 product. 

24 ‘‘(B) REVIEW.—An application submitted 

25 under this subsection shall be reviewed by the 


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1 division within the Food and Drug Administra2 tion that is responsible for the review and ap3 proval of the application under which the ref4 erence product is licensed. 

5 ‘‘(C) RISK EVALUATION AND MITIGATION

6 STRATEGIES.—The authority of the Secretary 

7 with respect to risk evaluation and mitigation 

8 strategies under the Federal Food, Drug, and 

9 Cosmetic Act shall apply to biological products 

10 licensed under this subsection in the same man11 ner as such authority applies to biological prod12 ucts licensed under subsection (a). 

13 ‘‘(D) RESTRICTIONS ON BIOLOGICAL PROD14 UCTS CONTAINING DANGEROUS INGREDI15 ENTS.—If information in an application sub16 mitted under this subsection, in a supplement 

17 to such an application, or otherwise available to 

18 the Secretary shows that a biological product— 

19 ‘‘(i) is, bears, or contains a select 

20 agent or toxin listed in section 73.3 or 

21 73.4 of title 42, section 121.3 or 121.4 of 

22 title 9, or section 331.3 of title 7, Code of 

23 Federal Regulations (or any successor reg24 ulations); or 


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1 ‘‘(ii) is, bears, or contains a controlled 

2 substance in schedule I or II of section 

3 202 of the Controlled Substances Act, as 

4 listed in part 1308 of title 21, Code of 

5 Federal Regulations (or any successor reg6 ulations); 

7 the Secretary shall not license the biological 

8 product under this subsection unless the Sec9 retary determines, after consultation with ap10 propriate national security and drug enforce11 ment agencies, that there would be no increased 

12 risk to the security or health of the public from 

13 licensing such biological product under this sub14 section. 

15 ‘‘(6) EXCLUSIVITY FOR FIRST INTERCHANGE16 ABLE BIOLOGICAL PRODUCT.—Upon review of an 

17 application submitted under this subsection relying 

18 on the same reference product for which a prior bio19 logical product has received a determination of inter20 changeability for any condition of use, the Secretary 

21 shall not make a determination under paragraph (4) 

22 that the second or subsequent biological product is 

23 interchangeable for any condition of use until the 

24 earlier of— 


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1 ‘‘(A) 1 year after the first commercial 

2 marketing of the first interchangeable bio3 similar biological product to be approved as 

4 interchangeable for that reference product; 

5 ‘‘(B) 18 months after— 

6 ‘‘(i) a final court decision on all pat7 ents in suit in an action instituted under 

8 subsection (l)(5) against the applicant that 

9 submitted the application for the first ap10 proved interchangeable biosimilar biological 

11 product; or 

12 ‘‘(ii) the dismissal with or without 

13 prejudice of an action instituted under sub14 section (l)(5) against the applicant that 

15 submitted the application for the first ap16 proved interchangeable biosimilar biological 

17 product; or 

18 ‘‘(C)(i) 42 months after approval of the 

19 first interchangeable biosimilar biological prod20 uct if the applicant that submitted such appli21 cation has been sued under subsection (l)(5) 

22 and such litigation is still ongoing within such 

23 42-month period; or 

24 ‘‘(ii) 18 months after approval of the first 

25 interchangeable biosimilar biological product if 


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1 the applicant that submitted such application 

2 has not been sued under subsection (l)(5). 

3 For purposes of this paragraph, the term ‘final court 

4 decision’ means a final decision of a court from 

5 which no appeal (other than a petition to the United 

6 States Supreme Court for a writ of certiorari) has 

7 been or can be taken. 

8 ‘‘(7) EXCLUSIVITY FOR REFERENCE PROD9 UCT.— 

10 ‘‘(A) EFFECTIVE DATE OF BIOSIMILAR AP11 PLICATION APPROVAL.—Approval of an applica12 tion under this subsection may not be made ef13 fective by the Secretary until the date that is 

14 12 years after the date on which the reference 

15 product was first licensed under subsection (a). 

16 ‘‘(B) FILING PERIOD.—An application 

17 under this subsection may not be submitted to 

18 the Secretary until the date that is 4 years 

19 after the date on which the reference product 

20 was first licensed under subsection (a). 

21 ‘‘(C) FIRST LICENSURE.—Subparagraphs 

22 (A) and (B) shall not apply to a license for or 

23 approval of— 

24 ‘‘(i) a supplement for the biological 

25 product that is the reference product; or 


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1 ‘‘(ii) a subsequent application filed by 

2 the same sponsor or manufacturer of the 

3 biological product that is the reference 

4 product (or a licensor, predecessor in inter5 est, or other related entity) for— 

6 ‘‘(I) a change (not including a 

7 modification to the structure of the bi8 ological product) that results in a new 

9 indication, route of administration, 

10 dosing schedule, dosage form, delivery 

11 system, delivery device, or strength; or 

12 ‘‘(II) a modification to the struc13 ture of the biological product that 

14 does not result in a change in safety, 

15 purity, or potency. 

16 ‘‘(8) PEDIATRIC STUDIES.— 

17 ‘‘(A) EXCLUSIVITY.—If, before or after li18 censure of the reference product under sub19 section (a) of this section, the Secretary deter20 mines that information relating to the use of 

21 such product in the pediatric population may 

22 produce health benefits in that population, the 

23 Secretary makes a written request for pediatric 

24 studies (which shall include a timeframe for 

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1 er of the approved application agrees to the re2 quest, such studies are completed using appro3 priate formulations for each age group for 

4 which the study is requested within any such 

5 timeframe, and the reports thereof are sub6 mitted and accepted in accordance with section 

7 505A(d)(3) of the Federal Food, Drug, and 

8 Cosmetic Act the period referred to in para9 graph (7)(A) of this subsection is deemed to be 

10 12 years and 6 months rather than 12 years. 

11 ‘‘(B) EXCEPTION.—The Secretary shall 

12 not extend the period referred to in subpara13 graph (A) of this paragraph if the determina14 tion under section 505A(d)(3) of the Federal 

15 Food, Drug, and Cosmetic Act is made later 

16 than 9 months prior to the expiration of such 

17 period. 

18 ‘‘(C) APPLICATION OF CERTAIN PROVI19 SIONS.—The provisions of subsections (a), (d), 

20 (e), (f), (h), (j), (k), and (l) of section 505A of 

21 the Federal Food, Drug, and Cosmetic Act 

22 shall apply with respect to the extension of a 

23 period under subparagraph (A) of this para24 graph to the same extent and in the same man25 ner as such provisions apply with respect to the 


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1 extension of a period under subsection (b) or 

2 (c) of section 505A of the Federal Food, Drug, 

3 and Cosmetic Act. 

4 ‘‘(9) GUIDANCE DOCUMENTS.— 

5 ‘‘(A) IN GENERAL.—The Secretary may, 

6 after opportunity for public comment, issue 

7 guidance in accordance, except as provided in 

8 subparagraph (B)(i), with section 701(h) of the 

9 Federal Food, Drug, and Cosmetic Act with re10 spect to the licensure of a biological product 

11 under this subsection. Any such guidance may 

12 be general or specific. 

13 ‘‘(B) PUBLIC COMMENT.— 

14 ‘‘(i) IN GENERAL.—The Secretary 

15 shall provide the public an opportunity to 

16 comment on any proposed guidance issued 

17 under subparagraph (A) before issuing 

18 final guidance. 

19 ‘‘(ii) INPUT REGARDING MOST VALU20 ABLE GUIDANCE.—The Secretary shall es21 tablish a process through which the public 

22 may provide the Secretary with input re23 garding priorities for issuing guidance. 

24 ‘‘(C) NO REQUIREMENT FOR APPLICATION

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1 issuance) of guidance under subparagraph (A) 

2 shall not preclude the review of, or action on, 

3 an application submitted under this subsection. 

4 ‘‘(D) REQUIREMENT FOR PRODUCT CLASS5 SPECIFIC GUIDANCE.—If the Secretary issues 

6 product class-specific guidance under subpara7 graph (A), such guidance shall include a de8 scription of— 

9 ‘‘(i) the criteria that the Secretary will 

10 use to determine whether a biological prod11 uct is highly similar to a reference product 

12 in such product class; and 

13 ‘‘(ii) the criteria, if available, that the 

14 Secretary will use to determine whether a 

15 biological product meets the standards de16 scribed in paragraph (4). 

17 ‘‘(E) CERTAIN PRODUCT CLASSES.— 

18 ‘‘(i) GUIDANCE.—The Secretary may 

19 indicate in a guidance document that the 

20 science and experience, as of the date of 

21 such guidance, with respect to a product or 

22 product class (not including any recom23 binant protein) does not allow approval of 

24 an application for a license as provided 


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1 under this subsection for such product or 

2 product class. 

3 ‘‘(ii) MODIFICATION OR REVERSAL.— 

4 The Secretary may issue a subsequent 

5 guidance document under subparagraph 

6 (A) to modify or reverse a guidance docu7 ment under clause (i). 

8 ‘‘(iii) NO EFFECT ON ABILITY TO

9 DENY LICENSE.—Clause (i) shall not be 

10 construed to require the Secretary to ap11 prove a product with respect to which the 

12 Secretary has not indicated in a guidance 

13 document that the science and experience, 

14 as described in clause (i), does not allow 

15 approval of such an application. 

16 ‘‘(10) NAMING.—The Secretary shall ensure 

17 that the labeling and packaging of each biological 

18 product licensed under this subsection bears a name 

19 that uniquely identifies the biological product and 

20 distinguishes it from the reference product and any 

21 other biological products licensed under this sub22 section following evaluation against such reference 

23 product. 

24 ‘‘(l) PATENT NOTICES; RELATIONSHIP TO FINAL AP25 PROVAL.— 


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1 ‘‘(1) DEFINITIONS.—For the purposes of this 

2 subsection, the term— 

3 ‘‘(A) ‘biosimilar product’ means the bio4 logical product that is the subject of the appli5 cation under subsection (k); 

6 ‘‘(B) ‘relevant patent’ means a patent 

7 that— 

8 ‘‘(i) expires after the date specified in 

9 subsection (k)(7)(A) that applies to the 

10 reference product; and 

11 ‘‘(ii) could reasonably be asserted 

12 against the applicant due to the unauthor13 ized making, use, sale, or offer for sale 

14 within the United States, or the importa15 tion into the United States of the bio16 similar product, or materials used in the 

17 manufacture of the biosimilar product, or 

18 due to a use of the biosimilar product in 

19 a method of treatment that is indicated in 

20 the application; 

21 ‘‘(C) ‘reference product sponsor’ means the 

22 holder of an approved application or license for 

23 the reference product; and 

24 ‘‘(D) ‘interested third party’ means a per25 son other than the reference product sponsor 


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1 that owns a relevant patent, or has the right to 

2 commence or participate in an action for in3 fringement of a relevant patent. 

4 ‘‘(2) HANDLING OF CONFIDENTIAL INFORMA5 TION.—Any entity receiving confidential information 

6 pursuant to this subsection shall designate one or 

7 more individuals to receive such information. Each 

8 individual so designated shall execute an agreement 

9 in accordance with regulations promulgated by the 

10 Secretary. The regulations shall require each such 

11 individual to take reasonable steps to maintain the 

12 confidentiality of information received pursuant to 

13 this subsection and use the information solely for 

14 purposes authorized by this subsection. The obliga15 tions imposed on an individual who has received con16 fidential information pursuant to this subsection 

17 shall continue until the individual returns or de18 stroys the confidential information, a court imposes 

19 a protective order that governs the use or handling 

20 of the confidential information, or the party pro21 viding the confidential information agrees to other 

22 terms or conditions regarding the handling or use of 

23 the confidential information. 

24 ‘‘(3) PUBLIC NOTICE BY SECRETARY.—Within 

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1 cation filed under subsection (k), the Secretary shall 

2 publish a notice identifying— 

3 ‘‘(A) the reference product identified in the 

4 application; and 

5 ‘‘(B) the name and address of an agent 

6 designated by the applicant to receive notices 

7 pursuant to paragraph (4)(B). 

8 ‘‘(4) EXCHANGES CONCERNING PATENTS.— 

9 ‘‘(A) EXCHANGES WITH REFERENCE

10 PRODUCT SPONSOR.— 

11 ‘‘(i) Within 30 days of the date of ac12 ceptance of the application by the Sec13 retary, the applicant shall provide the ref14 erence product sponsor with a copy of the 

15 application and information concerning the 

16 biosimilar product and its production. This 

17 information shall include a detailed de18 scription of the biosimilar product, its 

19 method of manufacture, and the materials 

20 used in the manufacture of the product. 

21 ‘‘(ii) Within 60 days of the date of re22 ceipt of the information required to be pro23 vided under clause (i), the reference prod24 uct sponsor shall provide to the applicant 

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1 erence product sponsor, or in respect of 

2 which the reference product sponsor has 

3 the right to commence an action of in4 fringement or otherwise has an interest in 

5 the patent as such patent concerns the bio6 similar product. 

7 ‘‘(iii) If the reference product sponsor 

8 is issued or acquires an interest in a rel9 evant patent after the date on which the 

10 reference product sponsor provides the list 

11 required by clause (ii) to the applicant, the 

12 reference product sponsor shall identify 

13 that patent to the applicant within 30 days 

14 of the date of issue of the patent, or the 

15 date of acquisition of the interest in the 

16 patent, as applicable. 

17 ‘‘(B) EXCHANGES WITH INTERESTED

18 THIRD PARTIES.— 

19 ‘‘(i) At any time after the date on 

20 which the Secretary publishes a notice for 

21 an application under paragraph (3), any 

22 interested third party may provide notice 

23 to the designated agent of the applicant 

24 that the interested third party owns or has 

25 rights under 1 or more patents that may 


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1 be relevant patents. The notice shall iden2 tify at least 1 patent and shall designate 

3 an individual who has executed an agree4 ment in accordance with paragraph (2) to 

5 receive confidential information from the 

6 applicant. 

7 ‘‘(ii) Within 30 days of the date of re8 ceiving notice pursuant to clause (i), the 

9 applicant shall send to the individual des10 ignated by the interested third party the 

11 information specified in subparagraph 

12 (A)(i), unless the applicant and interested 

13 third party otherwise agree. 

14 ‘‘(iii) Within 90 days of the date of 

15 receiving information pursuant to clause 

16 (ii), the interested third party shall provide 

17 to the applicant a list of relevant patents 

18 which the interested third party owns, or 

19 in respect of which the interested third 

20 party has the right to commence or partici21 pate in an action for infringement. 

22 ‘‘(iv) If the interested third party is 

23 issued or acquires an interest in a relevant 

24 patent after the date on which the inter25 ested third party provides the list required 


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1 by clause (iii), the interested third party 

2 shall identify that patent within 30 days of 

3 the date of issue of the patent, or the date 

4 of acquisition of the interest in the patent, 

5 as applicable. 

6 ‘‘(C) IDENTIFICATION OF BASIS FOR IN7 FRINGEMENT.—For any patent identified under 

8 clause (ii) or (iii) of subparagraph (A) or under 

9 clause (iii) or (iv) of subparagraph (B), the ref10 erence product sponsor or the interested third 

11 party, as applicable— 

12 ‘‘(i) shall explain in writing why the 

13 sponsor or the interested third party be14 lieves the relevant patent would be in15 fringed by the making, use, sale, or offer 

16 for sale within the United States, or im17 portation into the United States, of the 

18 biosimilar product or by a use of the bio19 similar product in treatment that is indi20 cated in the application; 

21 ‘‘(ii) may specify whether the relevant 

22 patent is available for licensing; and 

23 ‘‘(iii) shall specify the number and 

24 date of expiration of the relevant patent. 


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1 ‘‘(D) CERTIFICATION BY APPLICANT CON2 CERNING IDENTIFIED RELEVANT PATENTS.— 

3 Not later than 45 days after the date on which 

4 a patent is identified under clause (ii) or (iii) of 

5 subparagraph (A) or under clause (iii) or (iv) of 

6 subparagraph (B), the applicant shall send a 

7 written statement regarding each identified pat8 ent to the party that identified the patent. Such 

9 statement shall either— 

10 ‘‘(i) state that the applicant will not 

11 commence marketing of the biosimilar 

12 product and has requested the Secretary to 

13 not grant final approval of the application 

14 before the date of expiration of the noticed 

15 patent; or 

16 ‘‘(ii) provide a detailed written expla17 nation setting forth the reasons why the 

18 applicant believes— 

19 ‘‘(I) the making, use, sale, or 

20 offer for sale within the United 

21 States, or the importation into the 

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1 plication, would not infringe the pat2 ent; or 

3 ‘‘(II) the patent is invalid or un4 enforceable. 

5 ‘‘(5) ACTION FOR INFRINGEMENT INVOLVING

6 REFERENCE PRODUCT SPONSOR.—If an action for 

7 infringement concerning a relevant patent identified 

8 by the reference product sponsor under clause (ii) or 

9 (iii) of paragraph (4)(A), or by an interested third 

10 party under clause (iii) or (iv) of paragraph (4)(B), 

11 is brought within 60 days of the date of receipt of 

12 a statement under paragraph (4)(D)(ii), and the 

13 court in which such action has been commenced de14 termines the patent is infringed prior to the date ap15 plicable under subsection (k)(7)(A) or (k)(8), the 

16 Secretary shall make approval of the application ef17 fective on the day after the date of expiration of the 

18 patent that has been found to be infringed. If more 

19 than one such patent is found to be infringed by the 

20 court, the approval of the application shall be made 

21 effective on the day after the date that the last such 

22 patent expires. 

23 ‘‘(6) NOTIFICATION OF AGREEMENTS.— 

24 ‘‘(A) REQUIREMENTS.— 


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1 ‘‘(i) AGREEMENT BETWEEN BIO2 SIMILAR PRODUCT APPLICANT AND REF3 ERENCE PRODUCT SPONSOR.—If a bio4 similar product applicant under subsection 

5 (k) and the reference product sponsor 

6 enter into an agreement described in sub7 paragraph (B), the applicant and sponsor 

8 shall each file the agreement in accordance 

9 with subparagraph (C). 

10 ‘‘(ii) AGREEMENT BETWEEN BIO11 SIMILAR PRODUCT APPLICANTS.—If 2 or 

12 more biosimilar product applicants submit 

13 an application under subsection (k) for bio14 similar products with the same reference 

15 product and enter into an agreement de16 scribed in subparagraph (B), the appli17 cants shall each file the agreement in ac18 cordance with subparagraph (C). 

19 ‘‘(B) SUBJECT MATTER OF AGREEMENT.— 

20 An agreement described in this subparagraph— 

21 ‘‘(i) is an agreement between the bio22 similar product applicant under subsection 

23 (k) and the reference product sponsor or 

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1 plicants under subsection (k) regarding the 

2 manufacture, marketing, or sale of— 

3 ‘‘(I) the biosimilar product (or 

4 biosimilar products) for which an ap5 plication was submitted; or 

6 ‘‘(II) the reference product; 

7 ‘‘(ii) includes any agreement between 

8 the biosimilar product applicant under sub9 section (k) and the reference product spon10 sor or between 2 or more biosimilar prod11 uct applicants under subsection (k) that is 

12 contingent upon, provides a contingent 

13 condition for, or otherwise relates to an 

14 agreement described in clause (i); and 

15 ‘‘(iii) excludes any agreement that 

16 solely concerns— 

17 ‘‘(I) purchase orders for raw ma18 terial supplies; 

19 ‘‘(II) equipment and facility con20 tracts; 

21 ‘‘(III) employment or consulting 

22 contracts; or 

23 ‘‘(IV) packaging and labeling 

24 contracts. 

25 ‘‘(C) FILING.— 


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1 ‘‘(i) IN GENERAL.—The text of an 

2 agreement required to be filed by subpara3 graph (A) shall be filed with the Assistant 

4 Attorney General and the Federal Trade 

5 Commission not later than— 

6 ‘‘(I) 10 business days after the 

7 date on which the agreement is exe8 cuted; and 

9 ‘‘(II) prior to the date of the first 

10 commercial marketing of, for agree11 ments described in subparagraph 

12 (A)(i), the biosimilar product that is 

13 the subject of the application or, for 

14 agreements described in subparagraph 

15 (A)(ii), any biosimilar product that is 

16 the subject of an application described 

17 in such subparagraph. 

18 ‘‘(ii) IF AGREEMENT NOT REDUCED

19 TO TEXT.—If an agreement required to be 

20 filed by subparagraph (A) has not been re21 duced to text, the persons required to file 

22 the agreement shall each file written de23 scriptions of the agreement that are suffi24 cient to disclose all the terms and condi25 tions of the agreement. 


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1 ‘‘(iii) CERTIFICATION.—The chief ex2 ecutive officer or the company official re3 sponsible for negotiating any agreement re4 quired to be filed by subparagraph (A) 

5 shall include in any filing under this para6 graph a certification as follows: ‘I declare 

7 under penalty of perjury that the following 

8 is true and correct: The materials filed 

9 with the Federal Trade Commission and 

10 the Department of Justice under section 

11 351(l)(6) of the Public Health Service Act, 

12 with respect to the agreement referenced in 

13 this certification: (1) represent the com14 plete, final, and exclusive agreement be15 tween the parties; (2) include any ancillary 

16 agreements that are contingent upon, pro17 vide a contingent condition for, or are oth18 erwise related to, the referenced agree19 ment; and (3) include written descriptions 

20 of any oral agreements, representations, 

21 commitments, or promises between the 

22 parties that are responsive to such section 

23 and have not been reduced to writing.’. 

24 ‘‘(D) DISCLOSURE EXEMPTION.—Any in25 formation or documentary material filed with 


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1 the Assistant Attorney General or the Federal 

2 Trade Commission pursuant to this paragraph 

3 shall be exempt from disclosure under section 

4 552 of title 5, United States Code, and no such 

5 information or documentary material may be 

6 made public, except as may be relevant to any 

7 administrative or judicial action or proceeding. 

8 Nothing in this subparagraph prevents disclo9 sure of information or documentary material to 

10 either body of the Congress or to any duly au11 thorized committee or subcommittee of the Con12 gress. 

13 ‘‘(E) ENFORCEMENT.— 

14 ‘‘(i) CIVIL PENALTY.—Any person 

15 that violates a provision of this paragraph 

16 shall be liable for a civil penalty of not 

17 more than $11,000 for each day on which 

18 the violation occurs. Such penalty may be 

19 recovered in a civil action— 

20 ‘‘(I) brought by the United 

21 States; or 

22 ‘‘(II) brought by the Federal 

23 Trade Commission in accordance with 

24 the procedures established in section 


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1 16(a)(1) of the Federal Trade Com2 mission Act. 

3 ‘‘(ii) COMPLIANCE AND EQUITABLE

4 RELIEF.—If any person violates any provi5 sion of this paragraph, the United States 

6 district court may order compliance, and 

7 may grant such other equitable relief as 

8 the court in its discretion determines nec9 essary or appropriate, upon application of 

10 the Assistant Attorney General or the Fed11 eral Trade Commission. 

12 ‘‘(F) RULEMAKING.—The Federal Trade 

13 Commission, with the concurrence of the Assist14 ant Attorney General and by rule in accordance 

15 with section 553 of title 5, United States Code, 

16 consistent with the purposes of this para17 graph— 

18 ‘‘(i) may define the terms used in this 

19 paragraph; 

20 ‘‘(ii) may exempt classes of persons or 

21 agreements from the requirements of this 

22 paragraph; and 

23 ‘‘(iii) may prescribe such other rules 

24 as may be necessary and appropriate to 

25 carry out the purposes of this paragraph. 


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1 ‘‘(G) SAVINGS CLAUSE.—Any action taken 

2 by the Assistant Attorney General or the Fed3 eral Trade Commission, or any failure of the 

4 Assistant Attorney General or the Commission 

5 to take action, under this paragraph shall not 

6 at any time bar any proceeding or any action 

7 with respect to any agreement between a bio8 similar product applicant under subsection (k) 

9 and the reference product sponsor, or any 

10 agreement between biosimilar product appli11 cants under subsection (k), under any other 

12 provision of law, nor shall any filing under this 

13 paragraph constitute or create a presumption of 

14 any violation of any competition laws.’’. 

15 (b) DEFINITIONS.—Section 351(i) of the Public 

16 Health Service Act (42 U.S.C. 262(i)) is amended— 

17 (1) by striking ‘‘In this section, the term ‘bio18 logical product’ means’’ and inserting the following: 

19 ‘‘In this section: 

20 ‘‘(1) The term ‘biological product’ means’’; 

21 (2) in paragraph (1), as so designated, by in22 serting ‘‘protein (except any chemically synthesized 

23 polypeptide),’’ after ‘‘allergenic product,’’; and 

24 (3) by adding at the end the following: 


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1 ‘‘(2) The term ‘biosimilar’ or ‘biosimilarity’, in 

2 reference to a biological product that is the subject 

3 of an application under subsection (k), means— 

4 ‘‘(A) that the biological product is highly 

5 similar to the reference product notwith6 standing minor differences in clinically inactive 

7 components; and 

8 ‘‘(B) there are no clinically meaningful dif9 ferences between the biological product and the 

10 reference product in terms of the safety, purity, 

11 and potency of the product. 

12 ‘‘(3) The term ‘interchangeable’ or ‘inter13 changeability’, in reference to a biological product 

14 that is shown to meet the standards described in 

15 subsection (k)(4), means that the biological product 

16 may be substituted for the reference product without 

17 the intervention of the health care provider who pre18 scribed the reference product. 

19 ‘‘(4) The term ‘reference product’ means the 

20 single biological product licensed under subsection 

21 (a) against which a biological product is evaluated in 

22 an application submitted under subsection (k).’’. 

23 (c) PRODUCTS PREVIOUSLY APPROVED UNDER SEC24 TION 505.— 


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1 (1) REQUIREMENT TO FOLLOW SECTION 351.— 

2 Except as provided in paragraph (2), an application 

3 for a biological product shall be submitted under 

4 section 351 of the Public Health Service Act (42 

5 U.S.C. 262) (as amended by this Act). 

6 (2) EXCEPTION.—An application for a biologi7 cal product may be submitted under section 505 of 

8 the Federal Food, Drug, and Cosmetic Act (21 

9 U.S.C. 355) if— 

10 (A) such biological product is in a product 

11 class for which a biological product in such 

12 product class is the subject of an application 

13 approved under such section 505 not later than 

14 the date of enactment of this Act; and 

15 (B) such application— 

16 (i) has been submitted to the Sec17 retary of Health and Human Services (re18 ferred to in this Act as the ‘‘Secretary’’) 

19 before the date of enactment of this Act; 

20 or 

21 (ii) is submitted to the Secretary not 

22 later than the date that is 10 years after 

23 the date of enactment of this Act. 

24 (3) LIMITATION.—Notwithstanding paragraph 

25 (2), an application for a biological product may not 


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1 be submitted under section 505 of the Federal Food, 

2 Drug, and Cosmetic Act (21 U.S.C. 355) if there is 

3 another biological product approved under sub4 section (a) of section 351 of the Public Health Serv5 ice Act that could be a reference product with re6 spect to such application (within the meaning of 

7 such section 351) if such application were submitted 

8 under subsection (k) of such section 351. 

9 (4) DEEMED APPROVED UNDER SECTION 351.— 

10 An approved application for a biological product 

11 under section 505 of the Federal Food, Drug, and 

12 Cosmetic Act (21 U.S.C. 355) shall be deemed to be 

13 a license for the biological product under such sec14 tion 351 on the date that is 10 years after the date 

15 of enactment of this Act. 

16 (5) DEFINITIONS.—For purposes of this sub17 section, the term ‘‘biological product’’ has the mean18 ing given such term under section 351 of the Public 

19 Health Service Act (42 U.S.C. 262) (as amended by 

20 this Act). 

21 SEC. 702. FEES RELATING TO BIOSIMILAR BIOLOGICAL 

22 PRODUCTS. 

23 Subparagraph (B) of section 735(1) of the Federal 

24 Food, Drug, and Cosmetic Act (21 U.S.C. 379g(1)) is 

25 amended by inserting ‘‘, including licensure of a biological 


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1 product under section 351(k) of such Act’’ before the pe2 riod at the end. 

3 SEC. 703. AMENDMENTS TO CERTAIN PATENT PROVISIONS. 

4 (a) Section 271(e)(2) of title 35, United States Code 

5 is amended— 

6 (1) in subparagraph (A), by striking ‘‘or’’ after 

7 ‘‘patent,’’; 

8 (2) in subparagraph (B), by adding ‘‘or’’ after 

9 the comma at the end; 

10 (3) by inserting the following after subpara11 graph (B): 

12 ‘‘(C) a statement under section 

13 351(l)(4)(D)(ii) of the Public Health Service 

14 Act,’’; and 

15 (4) in the matter following subparagraph (C) 

16 (as added by paragraph (3)), by inserting before the 

17 period the following: ‘‘, or if the statement described 

18 in subparagraph (C) is provided in connection with 

19 an application to obtain a license to engage in the 

20 commercial manufacture, use, or sale of a biological 

21 product claimed in a patent or the use of which is 

22 claimed in a patent before the expiration of such 

23 patent’’. 


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1 (b) Section 271(e)(4) of title 35, United States Code, 

2 is amended by striking ‘‘in paragraph (2)’’ in both places 

3 it appears and inserting ‘‘in paragraph (2)(A) or (2)(B)’’. 

Æ 


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