I 

111TH CONGRESS 

1ST SESSION H. R. 859 

To encourage the development of small business cooperatives for healthcare 

options to improve coverage for employees (CHOICE) including through 

a small business CHOICE tax credit. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 4, 2009 

Ms. VELA ́ZQUEZ (for herself, Mr. PITTS, Mr. GRAVES, Mr. SHULER, Mr. 

MORAN of Virginia, Mr. FATTAH, Mr. BARTLETT, Mr. LUETKEMEYER, 

Ms. CLARKE, Mr. GRIFFITH, and Mr. SCHOCK) introduced the following 

bill; which was referred to the Committee on Energy and Commerce, and 

in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of 

such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To encourage the development of small business cooperatives 

for healthcare options to improve coverage for employees 

(CHOICE) including through a small business CHOICE 

tax credit. 

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 TITLES; TABLE OF CONTENTS. 

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

5 ‘‘Small Business Cooperative for Healthcare Options to 


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1 Improve Coverage for Employees (CHOICE) Act of 2009’’ 

2 or as the ‘‘Small Business CHOICE Act of 2009’’. 

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

4 this Act is as follows: 

Sec. 1. Short titles; table of contents. 

TITLE I—FULLY FUNDED SMALL BUSINESS HEALTH INSURANCE 

COOPERATIVES 

Sec. 101. Definitions. 

Sec. 102. Commission to promote Fully Funded Small Business Health Insurance cooperatives. 

Sec. 103. Fully Funded Small Business Health Insurance cooperatives exempted from certain State laws. 

Sec. 104. Preservation of State benefit mandates. 

Sec. 105. Access to claims reporting data. 

TITLE II—SMALL BUSINESS CHOICE CREDIT 

Sec. 201. Small Business CHOICE credit. 

5 TITLE I—FULLY FUNDED SMALL 

6 BUSINESS HEALTH INSUR7 ANCE COOPERATIVES 

8 SEC. 101. DEFINITIONS. 

9 For purposes of this title: 

10 (1) FULLY FUNDED HEALTH INSURANCE.—The 

11 term ‘‘fully funded health insurance’’ means, with 

12 respect to a fully funded small business health insur13 ance cooperative, insurance provided to assume and 

14 spread a portion, of the risk of insuring the health 

15 liability exposure of the members of such coopera16 tive. 

17 (2) FULLY FUNDED SMALL BUSINESS HEALTH

18 INSURANCE COOPERATIVE.—The term ‘‘Fully FundVerDate Nov 24 2008 22:30 Feb 06, 2009 Jkt 079200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H859.IH H859

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1 ed Small Business Health Insurance cooperative’’ 

2 means a bona fide association or financial coopera3 tive organization of persons with a common affili4 ation (such as employment, labor union membership, 

5 place of residence, industry, or line of business) that 

6 form a captive insurance company chartered in a 

7 State that has adopted laws and regulations for cap8 tive insurers that are materially identical to stand9 ards to be developed by the National Association of 

10 Insurance Commissioners by July 1, 2010, if each of 

11 the following conditions are met: 

12 (A) The cooperative— 

13 (i) has no fewer than 100 members 

14 and no fewer than 5,000 lives (or, begin15 ning as of 5 years after the date of the en16 actment of this Act, 15,000 lives); or 

17 (ii) meets such minimum capital re18 quirements as the Secretary shall specify, 

19 taking into account recommendations of 

20 the commission established under section 

21 102. 

22 (B) The cooperative administers the activi23 ties described in paragraph (1) separately from 

24 other activities of the cooperative. 


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1 (C) The cooperative is chartered or li2 censed as a captive insurance company under 

3 the laws of a State and is authorized to engage 

4 in the business of insurance under the laws of 

5 such State. 

6 (D) The cooperative does not vary the pre7 mium paid for a small business participating in 

8 the cooperative based on the health status of in9 dividuals for whom such small business pur10 chases health insurance, or the claims experi11 ence of such small business and does not ex12 clude such an individual from coverage based on 

13 the health status or claims experience of such 

14 individual. 

15 (E) The cooperative has as its owners only 

16 small businesses— 

17 (i) that comprise the membership of 

18 the cooperative; and 

19 (ii) that are provided excess claims 

20 coverage insurance by the cooperative. 

21 (F) Ownership, with respect to a member, 

22 is shared equitably among all participants in 

23 the cooperative. 

24 (G) Each owner of a small business par25 ticipating in the cooperative contracts with a 


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1 primary insurer to provide fully insured em2 ployee health insurance. 

3 (H) The cooperative provides excess claims 

4 coverage insurance that does not pay benefits in 

5 a year for an insured person until the annual 

6 maximum of the policy purchased from the in7 surer has been exceeded. The annual maximum 

8 of the primary insurance policy shall not be less 

9 than $10,000, and not be more than $250,000, 

10 per insured person in paid claims. The Sec11 retary shall provide for an annual increase in 

12 the dollar amounts specified in the previous 

13 sentence based on annual inflation in health 

14 care expenses per capita for such persons. 

15 (I) Benefits provided by excess claims cov16 erage insurers must meet the high deductible 

17 health plan requirements of section 

18 223(c)(2)(A)(ii) of the Internal Revenue Code 

19 of 1986 for a high deductible health plan pro20 vided under applicable State law. 

21 (J) The excess claims coverage insurance 

22 offered by the cooperative meets all require23 ments of State law for the State in which it is 

24 offered. 


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1 (K) The name of the cooperative includes 

2 the phrase ‘‘Fully Funded Small Business 

3 Health Insurance cooperative’’. 

4 Nothing in this paragraph shall be construed as pre5 venting such a cooperative from requiring a small 

6 business, as a condition of becoming a member of 

7 the cooperative, to have a written commitment to the 

8 cooperative for such membership for a period of 

9 time. 

10 (3) SMALL BUSINESS.—The term ‘‘small busi11 ness’’ means a business that— 

12 (A) has been classified as a small business 

13 concern by the Small Business Administration 

14 for purposes of the Small Business Act (15 

15 U.S.C. 631 et seq.) under size standards estab16 lished under section 3 of such Act (15 U.S.C. 

17 632); or 

18 (B) has no more than 500 employees, as 

19 calculated under section 121.106 of title 13, 

20 Code of Federal Regulations, as in effect as of 

21 January 1, 2008. 

22 (4) STATE.—The term ‘‘State’’ means each of 

23 the 50 States, the District of Columbia, and Puerto 

24 Rico. 


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1 SEC. 102. COMMISSION TO PROMOTE FULLY FUNDED 

2 SMALL BUSINESS HEALTH INSURANCE CO3 OPERATIVES. 

4 (a) ESTABLISHMENT.—Not later than January 1, 

5 2010, the Secretary of the Treasury, in consultation with 

6 the Administrator of the Small Business Administration, 

7 shall establish, and provide for the operation of, an inde8 pendent commission (in this section referred to as the 

9 ‘‘commission’’) on Fully Funded Small Business Health 

10 Insurance cooperatives consistent with this section. 

11 (b) COMPOSITION.— 

12 (1) IN GENERAL.—Subject to subparagraph 

13 (B), the commission shall be comprised of one rep14 resentative from each of the following organizations, 

15 as nominated by the organization to the Secretary of 

16 the Treasury: 

17 (A) The American Academy of Actuaries. 

18 (B) The National Association of Insurance 

19 Commissioners. 

20 (C) The Captive Insurance Companies As21 sociation. 

22 (D) The Conference of Consulting Actu23 aries. 

24 (E) The Society of Actuaries. 

25 (F) The Actuarial Board for Counseling 

26 and Discipline. 


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1 (G) The Actuarial Standards Board. 

2 (2) LIMITATION.—No individual who has a 

3 business relationship with an active Fully Funded 

4 Small Business Health Insurance cooperative or who 

5 is employed by any State, Federal, or local entity 

6 may serve as a member of the commission. 

7 (3) COMPENSATION.— 

8 (A) IN GENERAL.—The Secretary shall 

9 provide to members of the commission com10 pensation in an annual amount that does not 

11 exceed the amount specified in subparagraph 

12 (B). 

13 (B) LIMITATION.—The amount specified in 

14 this subparagraph is $50,000, or, for a year 

15 after 2010, the amount specified in this sub16 paragraph for the previous year increased by 

17 the annual percentage increase in the consumer 

18 price index for all urban consumers for the pre19 vious year. 

20 (c) FUNCTIONS.—The commission shall— 

21 (1) promote the development of Fully Funded 

22 Small Business Health Insurance cooperatives; 

23 (2) provide for technical assistance in such de24 velopment; 


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1 (3) make recommendations to the Secretary re2 garding minimum capital requirements referred to in 

3 section 102(2)(A)(ii); 

4 (4) conduct oversight of Fully Funded Small 

5 Business Health Insurance cooperatives; and 

6 (5) make quarterly reports to Congress regard7 ing the development, implementation, and mainte8 nance of such cooperatives, including the appropriate 

9 number of businesses and lives that should be re10 quired under section 101(2)(A) and the maximum 

11 amount of excess claims coverage insurance that 

12 should be provided per covered person. 

13 (d) COMMISSION STAFF.—The commission shall pro14 vide for such staff, including an executive director, as it 

15 determines necessary to carry out its functions. 

16 (e) COMMISSION HEADQUARTERS.—The commission 

17 shall be domiciled within the District of Columbia. 

18 (f) AUTHORIZATION OF APPROPRIATIONS.—There is 

19 authorized to be appropriated for purposes of carrying out 

20 subsection (a) $4,000,000 for fiscal year 2010 and 

21 $2,000,000 for each of fiscal years 2011 through 2014. 

22 (g) RELATION TO FACA.—The provisions of section 

23 14 of the Federal Advisory Committee Act shall not apply 

24 to the commission. 


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1 SEC. 103. FULLY FUNDED SMALL BUSINESS HEALTH INSUR2 ANCE COOPERATIVES EXEMPTED FROM CER3 TAIN STATE LAWS. 

4 (a) IN GENERAL.—Except as provided in this title, 

5 a Fully Funded Small Business Health Insurance coopera6 tive is exempt from any State law, rule, regulation, or 

7 order to the extent that such law, rule, regulation, or order 

8 would— 

9 (1) prohibit the establishment of a Fully Fund10 ed Small Business Health Insurance cooperative; 

11 (2) impose any material requirements, proce12 dures, or standards (other than solvency require13 ments) on a Fully Funded Small Business Health 

14 Insurance cooperative that are not generally applica15 ble to other entities engaged in a substantially simi16 lar business; 

17 (3) require that a Fully Funded Small Business 

18 Health Insurance cooperative must have a minimum 

19 number of members, common ownership or affili20 ation, or a certain legal structure; 

21 (4) require that any excess claims coverage in22 surance policy issued to a Fully Funded Small Busi23 ness Health Insurance cooperative or any members 

24 of the cooperative be countersigned by an insurance 

25 agent or broker residing in the State involved; or 


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1 (5) otherwise discriminate against a Fully 

2 Funded Small Business Health Insurance coopera3 tive or any of its members. 

4 (b) APPLICATION OF EXEMPTIONS.—The exemptions 

5 specified in subsection (a) apply to— 

6 (1) excess claims coverage insurance provided 

7 to— 

8 (A) a Fully Funded Small Business Health 

9 Insurance cooperative; or 

10 (B) any small business who is a member of 

11 a Fully Funded Small Business Health Insur12 ance cooperative; and 

13 (2) the provision of— 

14 (A) excess claims coverage insurance cov15 erage; 

16 (B) excess claims coverage insurance re17 lated services; 

18 (C) health management services such as— 

19 (i) third party administrators; 

20 (ii) disease management; 

21 (iii) managed care organizations; and 

22 (iv) data warehousing services; or 

23 (D) health information technology, includ24 ing electronic health records; 


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1 to a Fully Funded Small Business Health Insurance 

2 cooperative or member of the cooperative. 

3 (c) REQUIREMENT FOR STATE LICENSURE PER4 MITTED.—A State may require that a person acting, or 

5 offering to act, as an agent or broker for a Fully Funded 

6 Small Business Health Insurance cooperative obtain a li7 cense from that State, except that a State may not impose 

8 any qualification or requirement which prohibits a licensed 

9 resident or nonresident agent or broker from selling within 

10 the State. 

11 (d) STATE AUTHORITY PRESERVED.— 

12 (1) Nothing in this section shall be construed to 

13 affect the authority of any State to make use of any 

14 of its powers to enforce the laws of such State with 

15 respect to which a Fully Funded Small Business 

16 Health Insurance cooperative is not exempt under 

17 this section. 

18 (2) Nothing in this section shall affect the au19 thority of any State to bring an action in any Fed20 eral or State court. 

21 (3) Nothing in this section shall affect any 

22 State law regarding prompt payment of benefits. 

23 (e) REQUIREMENTS FOR FINANCIAL INFORMA24 TION.—Financial information submitted to the State in25 surance commissioner by a Fully Funded Small Business 


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1 Health Insurance cooperative must be certified by an inde2 pendent public accountant and must include a statement 

3 of opinion on loss and loss adjustment expense reserves 

4 made by a certified actuary. 

5 (f) FIDUCIARY RESPONSIBILITY.— 

6 (1) IN GENERAL.—Each fiduciary (as defined 

7 in paragraph (3)(A)) of a Fully Funded Small Busi8 ness Health Insurance cooperative shall exercise fi9 duciary responsibility (as defined in paragraph 

10 (3)(B)) in relation to activities of the cooperative. 

11 (2) STATE AND FEDERAL RIGHTS OF ACTION.— 

12 (A) LIMITATIONS ON LIABILITY UNDER

13 STATE OR FEDERAL LAW.—In the case of a 

14 bona fide association or financial cooperative 

15 organization of individuals with a common af16 filiation (such as employment, labor union 

17 membership, or place of residence) that forms 

18 a Fully Funded Small Business Health Insur19 ance cooperative in accordance with this Act, 

20 such association or organization shall not be lia21 ble in any action under State or Federal law for 

22 the actions of such cooperative except insofar as 

23 the association or organization is acting as a fi24 duciary with respect to the cooperative. 


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1 (B) EXCLUSIVE FEDERAL REMEDY FOR FI2 DUCIARY BREACHES.—To the extent that such 

3 association or organization exercises control 

4 over such cooperative and has breached a fidu5 ciary responsibility to its membership in the 

6 formation or operation of such cooperative, a 

7 member of the association or organization may 

8 seek a remedy for such breach only in Federal 

9 court. 

10 (C) LIMITATION ON VICARIOUS LIABIL11 ITY.—A fiduciary shall not be vicariously liable 

12 for the actions (including a failure to act) of an 

13 agent of the fiduciary in the absence of— 

14 (i) actual knowledge of the fiduciary; 

15 and 

16 (ii) approval or acquiescence by the fi17 duciary in the action (or failure to act). 

18 (3) DEFINITIONS.—For purposes of this sub19 section: 

20 (A) FIDUCIARY.—The term ‘‘fiduciary’’, 

21 with respect to a Fully Funded Small Business 

22 Health Insurance cooperative— 

23 (i) means an officer, agent, or em24 ployee of the cooperative; and 


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1 (ii) includes any other person acting 

2 in concert with any such officer, agent, or 

3 employee with respect to the cooperative, if 

4 such other person has actual notice of such 

5 order. 

6 (B) FIDUCIARY RESPONSIBILITY.—The 

7 term ‘‘fiduciary responsibility’’ means, with re8 spect to a fiduciary of a cooperative, acting pru9 dently and solely in the interest of the coopera10 tive participants, including in the case of ac11 tions with respect to the selection and moni12 toring of the cooperative’s relationship with a 

13 primary insurer and reinsurer. 

14 (g) EFFECTIVE DATE.—This section shall apply to 

15 Fully Funded Small Business Health Insurance coopera16 tive on and after the date of the enactment of this Act. 

17 SEC. 104. PRESERVATION OF STATE BENEFIT MANDATES. 

18 Notwithstanding any other provision of this title a 

19 primary health insurer to which this title applies shall not 

20 be exempted from benefit mandates under State law. 

21 SEC. 105. ACCESS TO CLAIMS REPORTING DATA. 

22 (a) FEDERAL PREEMPTION.—No law, regulation, or 

23 administrative action of a State or political subdivision 

24 thereof, or any decision or order rendered by a court under 

25 State law, shall have any effect if such law, regulation, 


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1 or decision conflicts with, hinders, poses an obstacle to or 

2 frustrates the purposes of this section. 

3 (b) REQUIREMENTS UPON RECEIPT AND REQUEST

4 OF CLAIMS INFORMATION.— 

5 (1) IN GENERAL.—Not later than the 30th day 

6 after the date a health insurance issuer (as defined 

7 in section 2791(b)(2) of the Public Health Service 

8 Act), contracted to provide fully funded health insur9 ance to members of a Fully Funded Small Business 

10 Health Insurance cooperative (referred to in this 

11 section as a ‘‘Cooperative’’), receives a written re12 quest for a report of claim information from the fi13 duciary (as defined in section 103(f)(3)(A)) of the 

14 Cooperative, the health insurance issuer shall pro15 vide the report to such fiduciary in accordance with 

16 this subsection. 

17 (2) LIMITATION ON OBLIGATION.—The health 

18 insurance issuer is not obligated to provide a report 

19 under this subsection— 

20 (A) regarding a particular employer or 

21 group health plan more than twice in any 12- 

22 month period; or 

23 (B) unless the request is made not later 

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1 mination of coverage under a group health plan 

2 issued by the health insurance issuer. 

3 (3) FORM OF REPORT.—A health insurance 

4 issuer shall provide the report of claim information 

5 under paragraph (1) through one of the following 

6 methods: 

7 (A) In written form. 

8 (B) Through an electronic file transmitted 

9 by secure electronic mail or a file transfer pro10 tocol site. 

11 (C) By making the required information 

12 available through a secure website or web portal 

13 accessible by the Cooperative fiduciary. 

14 (4) GENERAL CONTENTS OF REPORT.—A re15 port of claim information provided under paragraph 

16 (1) shall contain all information available to the 

17 health insurance issuer that is responsive to the re18 quest made under such paragraph, including, subject 

19 to paragraphs (6) through (8), protected health in20 formation, for the 36-month period preceding the 

21 date of the report, or for the entire period of cov22 erage, whichever period is shorter. 

23 (5) SPECIFIC CONTENTS.—Subject to para24 graphs (6) through (8), a report under paragraph 

25 (1) shall include the following: 


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1 (A) Aggregate paid claims experience by 

2 month, including claims experience for medical, 

3 dental, and pharmacy benefits, as applicable. 

4 (B) Total premium paid by month. 

5 (C) Total number of covered employees on 

6 a monthly basis by coverage tier, including 

7 whether coverage was for— 

8 (i) an employee only; 

9 (ii) an employee with dependents only; 

10 (iii) an employee with a spouse only; 

11 or 

12 (iv) an employee with a spouse and 

13 dependents. 

14 (D) The total dollar amount of claims 

15 pending as of the date of the report. 

16 (E) A separate description and individual 

17 claims report for any individual whose total 

18 paid claims exceed $10,000 during the 12- 

19 month period preceding the date of the report, 

20 including the following information related to 

21 the claims for that individual: 

22 (i) A unique identifying number, char23 acteristic, or code for the individual. 

24 (ii) The amounts paid. 

25 (iii) Dates of service. 


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1 (iv) Applicable procedure codes and 

2 diagnosis codes. 

3 (F) A statement describing precertification 

4 requests for hospital stays of five days or longer 

5 that were made during the 30-day period pre6 ceding the date of the report for claims that are 

7 not part of the report described by subpara8 graphs (A) through (E). 

9 (6) PROTECTED HEALTH INFORMATION.—A 

10 health insurance issuer may not disclose, in a report 

11 of claim information provided under this section, 

12 protected health information if the health insurance 

13 issuer is prohibited from disclosing such information 

14 under the regulations promulgated under section 

15 264(c) of the Health Insurance Portability and Ac16 countability Act of 1996 (Public Law 104–191). To 

17 withhold information in accordance with this para18 graph, the health insurance issuer shall— 

19 (A) notify the requesting Cooperative fidu20 ciary that information is being withheld; and 

21 (B) provide to the Cooperative fiduciary a 

22 list of categories of claim information that the 

23 health insurance issuer has determined are sub24 ject to the more stringent privacy restrictions 

25 under such regulations. 


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1 (7) COOPERATIVE FIDUCIARY CERTIFI2 CATION.—A Cooperative fiduciary is entitled to re3 ceive protected health information under subpara4 graphs (E) and (F) of paragraph (5) only after the 

5 Cooperative fiduciary makes to the health insurance 

6 issuer a certification substantially similar to the fol7 lowing: ‘‘I hereby certify that the Cooperative will 

8 safeguard and limit the use and disclosure of pro9 tected health information that is received from the 

10 group health plan to perform the plan administra11 tion functions.’’. 

12 (8) INFORMATION AS OF DATE OF TERMI13 NATION OF COVERAGE.—In the case of a request 

14 made under paragraph (1) after the date of termi15 nation of coverage, the report shall contain all infor16 mation available to the health insurance issuer as of 

17 the date of the report that is responsive to the re18 quest, including protected health information, and 

19 including the information described in subpara20 graphs (A) through (F) of paragraph (5) for the pe21 riod described in such paragraph preceding the date 

22 of termination of coverage or for the entire policy 

23 period, whichever period is shorter. Notwithstanding 

24 this paragraph, such a report may not include the 

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1 graph (E) or (F) of paragraph (5) unless a certifi2 cation has been provided in accordance with para3 graph (7). 

4 (c) REQUEST FOR ADDITIONAL INFORMATION.— 

5 (1) IN GENERAL.—On receipt of a report re6 quired by subsection (b), the Cooperative fiduciary 

7 may review the report and, not later than the 10th 

8 day after the date the report is received, may make 

9 a written request to the health insurance issuer for 

10 additional information in accordance with this sub11 section for specified individuals. 

12 (2) PROVISION OF ADDITIONAL INFORMA13 TION.—With respect to a request for additional in14 formation under paragraph (1) concerning specified 

15 individuals for whom claims information has been 

16 provided under subsection (b)(5)(E), the health in17 surance issuer shall provide additional information 

18 on the prognosis or recovery if available and, for in19 dividuals in active case management, the most re20 cent case management information, including any 

21 future expected costs and treatment plan, that relate 

22 to the claims for that individual. 

23 (3) TIMELY RESPONSE.—The health insurance 

24 issuer shall respond to the request for additional in25 formation under this subsection not later than the 


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1 15th day after the date of receiving the request un2 less the Cooperative fiduciary agrees to a request for 

3 additional time. 

4 (4) CERTIFICATION REQUIREMENT.—The 

5 health insurance issuer is not required to produce 

6 the report described by this subsection unless a cer7 tification has been provided in accordance with sub8 section (b)(7). 

9 (d) LIMITATION ON LIABILITY FOR DISCLOSURE OF

10 INFORMATION.—A health insurance issuer that releases 

11 information, including protected health information, in ac12 cordance with this section has not violated a standard of 

13 care and is not liable for civil damages resulting from, and 

14 is not subject to criminal prosecution for, releasing that 

15 information. 

16 (e) PENALTIES.—A health insurance issuer that does 

17 not comply with a request for information in accordance 

18 with this section is subject to administrative penalties in 

19 an amount not to exceed $25,000 per affected individual. 

20 TITLE II—SMALL BUSINESS 

21 CHOICE CREDIT 

22 SEC. 201. SMALL BUSINESS CHOICE CREDIT. 

23 (a) IN GENERAL.—Subpart D of part IV of sub24 chapter A of chapter 1 of the Internal Revenue Code of 


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1 1986 (relating to business related credits) is amended by 

2 adding at the end the following new section: 

3 ‘‘SEC. 45R. SMALL BUSINESS CHOICE CREDIT. 

4 ‘‘(a) IN GENERAL.—For purposes of section 38, the 

5 small business CHOICE credit determined under this sec6 tion for any taxable year is an amount equal to 65 percent 

7 of the amount paid or incurred by the employer for self 

8 only or family coverage of an employee under a qualified 

9 employer-subsidized health coverage for eligible coverage 

10 months beginning in the taxable year. 

11 ‘‘(b) LIMITATIONS.— 

12 ‘‘(1) SIZE LIMITATION.—The credit allowed 

13 under subsection (a) shall not be allowed with re14 spect to more than 100 employees of the employer 

15 for any eligible coverage month beginning in any 

16 taxable year. 

17 ‘‘(2) WELLNESS PROGRAM REQUIREMENT.— 

18 ‘‘(A) IN GENERAL.—The credit allowed 

19 under subsection (a) shall not be allowed with 

20 respect to coverage of an employee and family 

21 members of the employee unless the employer 

22 offers a qualified small business wellness pro23 gram with respect to such covered employees 

24 and such covered family members. 


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1 ‘‘(B) EXEMPTION FOR SINGLE EMPLOYEE

2 FIRMS.—Subparagraph (A) shall not apply to 

3 an employer that has only 1 employee. 

4 ‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur5 poses of this section: 

6 ‘‘(1) ELIGIBLE COVERAGE MONTH.—The term 

7 ‘eligible coverage month’ means any month if— 

8 ‘‘(A) as of the first day of such month, the 

9 employer is a member of a Fully Funded Small 

10 Business Health Insurance cooperative and pur11 chases excess coverage from such cooperative’s 

12 captive insurance company; and 

13 ‘‘(B) for the month the employee with re14 spect to whom the credit is determined is cov15 ered under a qualified employer-subsidized 

16 health coverage of the employer. 

17 ‘‘(2) FULLY FUNDED SMALL BUSINESS HEALTH

18 INSURANCE COOPERATIVE.—The term ‘Fully Fund19 ed Small Business Health Insurance cooperative’ has 

20 the meaning given such term in section 101(2) of 

21 the Small Business CHOICE Act of 2009. 

22 ‘‘(3) QUALIFIED EMPLOYER-SUBSIDIZED

23 HEALTH COVERAGE.— 

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

25 employer-subsidized health coverage’ means any 


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1 insurance coverage which constitutes medical 

2 care under an insurance policy— 

3 ‘‘(i) which is maintained in conjunc4 tion with excess coverage purchased from a 

5 fully funded small business captive com6 pany and coverage purchased from a li7 censed primary insurer; 

8 ‘‘(ii) which is available to all full-time 

9 employees working a minimum of 35 hours 

10 per week or its monthly equivalent; 

11 ‘‘(iii) under which at least the applica12 ble percentage of the cost of such coverage 

13 (determined under section 4980B) is paid 

14 or incurred by the employer; 

15 ‘‘(iv) under which the percentage of 

16 the cost of such coverage paid or incurred 

17 by the employer with respect to highly 

18 compensated employees (as defined in sec19 tion 414(q)) does not exceed the percent20 age of such cost paid or incurred by the 

21 employer with respect to employees who 

22 are not highly compensated employees; and 

23 ‘‘(v) the primary insurance and excess 

24 claims coverage plans are the only plans of 


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1 the employer to which the employer con2 tributes to the cost of coverage. 

3 ‘‘(B) EXCEPTION FOR CERTAIN COV4 ERAGE.—Such term does not include a health 

5 plan substantially all of the coverage of which 

6 is of excepted benefits described in section 

7 9832(c). 

8 ‘‘(C) APPLICABLE PERCENTAGE.—For 

9 purposes of subparagraph (A), the applicable 

10 percentage is— 

11 ‘‘(i) 65 percent, with respect to self 

12 only coverage; and 

13 ‘‘(ii) 35 percent, with respect to fam14 ily coverage. 

15 ‘‘(4) QUALIFIED SMALL BUSINESS WELLNESS

16 PROGRAM.—The term ‘qualified small business 

17 wellness program’ means a program which— 

18 ‘‘(A) is established by an entity with exper19 tise in lifestyle management and wellness tools 

20 that enable employers and covered individuals 

21 to lower health claims and costs while improv22 ing the health of such individuals; and 

23 ‘‘(B) is certified by the Secretary of Health 

24 and Human Services, in consultation with per25 sons with expertise in employer health proVerDate Nov 24 2008 22:30 Feb 06, 2009 Jkt 079200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\H859.IH H859

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1 motion and wellness programs, as a qualified 

2 small business wellness program under this sec3 tion. 

4 ‘‘(5) SMALL EMPLOYER.— 

5 ‘‘(A) IN GENERAL.—The term ‘small em6 ployer’ means, with respect to a taxable year, 

7 any employer or sole proprietor which employed 

8 an average of 100 or fewer employees on busi9 ness days during the preceding calendar year. 

10 For purposes of the preceding sentence, a pre11 ceding calendar year may be taken into account 

12 only if the employer or sole proprietor was in 

13 existence throughout such year. 

14 ‘‘(B) EMPLOYERS AND SOLE PROPRIETORS

15 NOT IN EXISTENCE IN PRECEDING TAXABLE

16 YEAR.—In the case of an employer or sole pro17 prietor which was not in existence throughout 

18 the preceding calendar year, the determination 

19 under subparagraph (A) shall be based on the 

20 average number of employees that it is reason21 ably expected such employer or sole proprietor 

22 will employ on business days in the current cal23 endar year. 

24 ‘‘(6) SPECIAL RULE FOR FIRST YEAR OF PRO25 VIDING HEALTH BENEFITS COVERAGE.—In the case 


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1 of the first taxable year for which an employer or 

2 sole proprietor is allowed a credit under this section, 

3 if the employer or proprietor has not previous to 

4 such taxable year offered any health benefits cov5 erage to any employee, subsection (a) shall be ap6 plied by substituting ‘70 percent’ for ‘65 percent’. 

7 ‘‘(7) TIME WHEN CONTRIBUTIONS DEEMED

8 MADE.—A rule similar to the rule of section 

9 219(f)(3) shall apply for purposes of this section. 

10 ‘‘(8) CONTROLLED GROUPS AND PREDE11 CESSORS.—For purposes of paragraphs (5) and 

12 (6)— 

13 ‘‘(A) except as provided by the Secretary, 

14 all persons treated as a single employer under 

15 subsection (b), (c), (m), or (o) of section 414 

16 shall be treated as 1 employer; and 

17 ‘‘(B) any reference to an employer shall in18 clude a reference to any predecessor of such 

19 employer. 

20 ‘‘(9) ELECTION TO HAVE CREDIT APPLY.—This 

21 section shall apply with respect to a taxpayer for any 

22 taxable year only if there is an election in effect by 

23 such taxpayer (at such time and in such manner as 

24 the Secretary may by regulations prescribe) to have 

25 this section apply for such taxable year. No deducVerDate Nov 24 2008 22:30 Feb 06, 2009 Jkt 079200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\H859.IH H859

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1 tion shall be allowed with respect to amounts paid 

2 by the taxpayer during the taxable year for insur3 ance which constitutes medical care for the taxpayer 

4 or any employee of the taxpayer if such election is 

5 in effect for such taxable year.’’. 

6 (b) CREDIT TO BE PART OF GENERAL BUSINESS

7 CREDIT.—Subsection (b) of section 38 of such Code (re8 lating to general business credit) is amended by striking 

9 ‘‘plus’’ at the end of paragraph (34), by striking the period 

10 at the end of paragraph (35) and inserting ‘‘plus’’, and 

11 by adding at the end the following new paragraph: 

12 ‘‘(36) the Small Business CHOICE credit de13 termined under section 45R(a).’’. 

14 (c) CLERICAL AMENDMENT.—The table of sections 

15 for subpart D of part IV of subchapter A of chapter 1 

16 of such Code is amended by adding at the end the fol17 lowing new item: 

‘‘Sec. 45R. Small Business CHOICE credit.’’. 

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

19 this section shall apply to amounts paid for eligible cov20 erage months beginning in taxable years beginning after 

21 December 31, 2009. 

Æ 


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