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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 859 Introduced in House (IH)]

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. Velazquez (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.

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

SECTION 1. SHORT TITLES; TABLE OF CONTENTS.

    (a) Short Titles.--This Act may be cited as the ``Small Business 
Cooperative for Healthcare Options to Improve Coverage for Employees 
(CHOICE) Act of 2009'' or as the ``Small Business CHOICE Act of 2009''.
    (b) Table of Contents.--The table of contents of 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.

   TITLE I--FULLY FUNDED SMALL BUSINESS HEALTH INSURANCE COOPERATIVES

SEC. 101. DEFINITIONS.

    For purposes of this title:
            (1) Fully funded health insurance.--The term ``fully funded 
        health insurance'' means, with respect to a fully funded small 
        business health insurance cooperative, insurance provided to 
        assume and spread a portion, of the risk of insuring the health 
        liability exposure of the members of such cooperative.
            (2) Fully funded small business health insurance 
        cooperative.--The term ``Fully Funded Small Business Health 
        Insurance cooperative'' means a bona fide association or 
        financial cooperative organization of persons with a common 
        affiliation (such as employment, labor union membership, place 
        of residence, industry, or line of business) that form a 
        captive insurance company chartered in a State that has adopted 
        laws and regulations for captive insurers that are materially 
        identical to standards to be developed by the National 
        Association of Insurance Commissioners by July 1, 2010, if each 
        of the following conditions are met:
                    (A) The cooperative--
                            (i) has no fewer than 100 members and no 
                        fewer than 5,000 lives (or, beginning as of 5 
                        years after the date of the enactment of this 
                        Act, 15,000 lives); or
                            (ii) meets such minimum capital 
                        requirements as the Secretary shall specify, 
                        taking into account recommendations of the 
                        commission established under section 102.
                    (B) The cooperative administers the activities 
                described in paragraph (1) separately from other 
                activities of the cooperative.
                    (C) The cooperative is chartered or licensed as a 
                captive insurance company under the laws of a State and 
                is authorized to engage in the business of insurance 
                under the laws of such State.
                    (D) The cooperative does not vary the premium paid 
                for a small business participating in the cooperative 
                based on the health status of individuals for whom such 
                small business purchases health insurance, or the 
                claims experience of such small business and does not 
                exclude such an individual from coverage based on the 
                health status or claims experience of such individual.
                    (E) The cooperative has as its owners only small 
                businesses--
                            (i) that comprise the membership of the 
                        cooperative; and
                            (ii) that are provided excess claims 
                        coverage insurance by the cooperative.
                    (F) Ownership, with respect to a member, is shared 
                equitably among all participants in the cooperative.
                    (G) Each owner of a small business participating in 
                the cooperative contracts with a primary insurer to 
                provide fully insured employee health insurance.
                    (H) The cooperative provides excess claims coverage 
                insurance that does not pay benefits in a year for an 
                insured person until the annual maximum of the policy 
                purchased from the insurer has been exceeded. The 
                annual maximum of the primary insurance policy shall 
                not be less than $10,000, and not be more than 
                $250,000, per insured person in paid claims. The 
                Secretary shall provide for an annual increase in the 
                dollar amounts specified in the previous sentence based 
                on annual inflation in health care expenses per capita 
                for such persons.
                    (I) Benefits provided by excess claims coverage 
                insurers must meet the high deductible health plan 
                requirements of section 223(c)(2)(A)(ii) of the 
                Internal Revenue Code of 1986 for a high deductible 
                health plan provided under applicable State law.
                    (J) The excess claims coverage insurance offered by 
                the cooperative meets all requirements of State law for 
                the State in which it is offered.
                    (K) The name of the cooperative includes the phrase 
                ``Fully Funded Small Business Health Insurance 
                cooperative''.
        Nothing in this paragraph shall be construed as preventing such 
        a cooperative from requiring a small business, as a condition 
        of becoming a member of the cooperative, to have a written 
        commitment to the cooperative for such membership for a period 
        of time.
            (3) Small business.--The term ``small business'' means a 
        business that--
                    (A) has been classified as a small business concern 
                by the Small Business Administration for purposes of 
                the Small Business Act (15 U.S.C. 631 et seq.) under 
                size standards established under section 3 of such Act 
                (15 U.S.C. 632); or
                    (B) has no more than 500 employees, as calculated 
                under section 121.106 of title 13, Code of Federal 
                Regulations, as in effect as of January 1, 2008.
            (4) State.--The term ``State'' means each of the 50 States, 
        the District of Columbia, and Puerto Rico.

SEC. 102. COMMISSION TO PROMOTE FULLY FUNDED SMALL BUSINESS HEALTH 
              INSURANCE COOPERATIVES.

    (a) Establishment.--Not later than January 1, 2010, the Secretary 
of the Treasury, in consultation with the Administrator of the Small 
Business Administration, shall establish, and provide for the operation 
of, an independent commission (in this section referred to as the 
``commission'') on Fully Funded Small Business Health Insurance 
cooperatives consistent with this section.
    (b) Composition.--
            (1) In general.--Subject to subparagraph (B), the 
        commission shall be comprised of one representative from each 
        of the following organizations, as nominated by the 
        organization to the Secretary of the Treasury:
                    (A) The American Academy of Actuaries.
                    (B) The National Association of Insurance 
                Commissioners.
                    (C) The Captive Insurance Companies Association.
                    (D) The Conference of Consulting Actuaries.
                    (E) The Society of Actuaries.
                    (F) The Actuarial Board for Counseling and 
                Discipline.
                    (G) The Actuarial Standards Board.
            (2) Limitation.--No individual who has a business 
        relationship with an active Fully Funded Small Business Health 
        Insurance cooperative or who is employed by any State, Federal, 
        or local entity may serve as a member of the commission.
            (3) Compensation.--
                    (A) In general.--The Secretary shall provide to 
                members of the commission compensation in an annual 
                amount that does not exceed the amount specified in 
                subparagraph (B).
                    (B) Limitation.--The amount specified in this 
                subparagraph is $50,000, or, for a year after 2010, the 
                amount specified in this subparagraph for the previous 
                year increased by the annual percentage increase in the 
                consumer price index for all urban consumers for the 
                previous year.
    (c) Functions.--The commission shall--
            (1) promote the development of Fully Funded Small Business 
        Health Insurance cooperatives;
            (2) provide for technical assistance in such development;
            (3) make recommendations to the Secretary regarding minimum 
        capital requirements referred to in section 102(2)(A)(ii);
            (4) conduct oversight of Fully Funded Small Business Health 
        Insurance cooperatives; and
            (5) make quarterly reports to Congress regarding the 
        development, implementation, and maintenance of such 
        cooperatives, including the appropriate number of businesses 
        and lives that should be required under section 101(2)(A) and 
        the maximum amount of excess claims coverage insurance that 
        should be provided per covered person.
    (d) Commission Staff.--The commission shall provide for such staff, 
including an executive director, as it determines necessary to carry 
out its functions.
    (e) Commission Headquarters.--The commission shall be domiciled 
within the District of Columbia.
    (f) Authorization of Appropriations.--There is authorized to be 
appropriated for purposes of carrying out subsection (a) $4,000,000 for 
fiscal year 2010 and $2,000,000 for each of fiscal years 2011 through 
2014.
    (g) Relation to FACA.--The provisions of section 14 of the Federal 
Advisory Committee Act shall not apply to the commission.

SEC. 103. FULLY FUNDED SMALL BUSINESS HEALTH INSURANCE COOPERATIVES 
              EXEMPTED FROM CERTAIN STATE LAWS.

    (a) In General.--Except as provided in this title, a Fully Funded 
Small Business Health Insurance cooperative is exempt from any State 
law, rule, regulation, or order to the extent that such law, rule, 
regulation, or order would--
            (1) prohibit the establishment of a Fully Funded Small 
        Business Health Insurance cooperative;
            (2) impose any material requirements, procedures, or 
        standards (other than solvency requirements) on a Fully Funded 
        Small Business Health Insurance cooperative that are not 
        generally applicable to other entities engaged in a 
        substantially similar business;
            (3) require that a Fully Funded Small Business Health 
        Insurance cooperative must have a minimum number of members, 
        common ownership or affiliation, or a certain legal structure;
            (4) require that any excess claims coverage insurance 
        policy issued to a Fully Funded Small Business Health Insurance 
        cooperative or any members of the cooperative be countersigned 
        by an insurance agent or broker residing in the State involved; 
        or
            (5) otherwise discriminate against a Fully Funded Small 
        Business Health Insurance cooperative or any of its members.
    (b) Application of Exemptions.--The exemptions specified in 
subsection (a) apply to--
            (1) excess claims coverage insurance provided to--
                    (A) a Fully Funded Small Business Health Insurance 
                cooperative; or
                    (B) any small business who is a member of a Fully 
                Funded Small Business Health Insurance cooperative; and
            (2) the provision of--
                    (A) excess claims coverage insurance coverage;
                    (B) excess claims coverage insurance related 
                services;
                    (C) health management services such as--
                            (i) third party administrators;
                            (ii) disease management;
                            (iii) managed care organizations; and
                            (iv) data warehousing services; or
                    (D) health information technology, including 
                electronic health records;
        to a Fully Funded Small Business Health Insurance cooperative 
        or member of the cooperative.
    (c) Requirement for State Licensure Permitted.--A State may require 
that a person acting, or offering to act, as an agent or broker for a 
Fully Funded Small Business Health Insurance cooperative obtain a 
license from that State, except that a State may not impose any 
qualification or requirement which prohibits a licensed resident or 
nonresident agent or broker from selling within the State.
    (d) State Authority Preserved.--
            (1) Nothing in this section shall be construed to affect 
        the authority of any State to make use of any of its powers to 
        enforce the laws of such State with respect to which a Fully 
        Funded Small Business Health Insurance cooperative is not 
        exempt under this section.
            (2) Nothing in this section shall affect the authority of 
        any State to bring an action in any Federal or State court.
            (3) Nothing in this section shall affect any State law 
        regarding prompt payment of benefits.
    (e) Requirements for Financial Information.--Financial information 
submitted to the State insurance commissioner by a Fully Funded Small 
Business Health Insurance cooperative must be certified by an 
independent public accountant and must include a statement of opinion 
on loss and loss adjustment expense reserves made by a certified 
actuary.
    (f) Fiduciary Responsibility.--
            (1) In general.--Each fiduciary (as defined in paragraph 
        (3)(A)) of a Fully Funded Small Business Health Insurance 
        cooperative shall exercise fiduciary responsibility (as defined 
        in paragraph (3)(B)) in relation to activities of the 
        cooperative.
            (2) State and federal rights of action.--
                    (A) Limitations on liability under state or federal 
                law.--In the case of a bona fide association or 
                financial cooperative organization of individuals with 
                a common affiliation (such as employment, labor union 
                membership, or place of residence) that forms a Fully 
                Funded Small Business Health Insurance cooperative in 
                accordance with this Act, such association or 
                organization shall not be liable in any action under 
                State or Federal law for the actions of such 
                cooperative except insofar as the association or 
                organization is acting as a fiduciary with respect to 
                the cooperative.
                    (B) Exclusive federal remedy for fiduciary 
                breaches.--To the extent that such association or 
                organization exercises control over such cooperative 
                and has breached a fiduciary responsibility to its 
                membership in the formation or operation of such 
                cooperative, a member of the association or 
                organization may seek a remedy for such breach only in 
                Federal court.
                    (C) Limitation on vicarious liability.--A fiduciary 
                shall not be vicariously liable for the actions 
                (including a failure to act) of an agent of the 
                fiduciary in the absence of--
                            (i) actual knowledge of the fiduciary; and
                            (ii) approval or acquiescence by the 
                        fiduciary in the action (or failure to act).
            (3) Definitions.--For purposes of this subsection:
                    (A) Fiduciary.--The term ``fiduciary'', with 
                respect to a Fully Funded Small Business Health 
                Insurance cooperative--
                            (i) means an officer, agent, or employee of 
                        the cooperative; and
                            (ii) includes any other person acting in 
                        concert with any such officer, agent, or 
                        employee with respect to the cooperative, if 
                        such other person has actual notice of such 
                        order.
                    (B) Fiduciary responsibility.--The term ``fiduciary 
                responsibility'' means, with respect to a fiduciary of 
                a cooperative, acting prudently and solely in the 
                interest of the cooperative participants, including in 
                the case of actions with respect to the selection and 
                monitoring of the cooperative's relationship with a 
                primary insurer and reinsurer.
    (g) Effective Date.--This section shall apply to Fully Funded Small 
Business Health Insurance cooperative on and after the date of the 
enactment of this Act.

SEC. 104. PRESERVATION OF STATE BENEFIT MANDATES.

    Notwithstanding any other provision of this title a primary health 
insurer to which this title applies shall not be exempted from benefit 
mandates under State law.

SEC. 105. ACCESS TO CLAIMS REPORTING DATA.

    (a) Federal Preemption.--No law, regulation, or administrative 
action of a State or political subdivision thereof, or any decision or 
order rendered by a court under State law, shall have any effect if 
such law, regulation, or decision conflicts with, hinders, poses an 
obstacle to or frustrates the purposes of this section.
    (b) Requirements Upon Receipt and Request of Claims Information.--
            (1) In general.--Not later than the 30th day after the date 
        a health insurance issuer (as defined in section 2791(b)(2) of 
        the Public Health Service Act), contracted to provide fully 
        funded health insurance to members of a Fully Funded Small 
        Business Health Insurance cooperative (referred to in this 
        section as a ``Cooperative''), receives a written request for a 
        report of claim information from the fiduciary (as defined in 
        section 103(f)(3)(A)) of the Cooperative, the health insurance 
        issuer shall provide the report to such fiduciary in accordance 
        with this subsection.
            (2) Limitation on obligation.--The health insurance issuer 
        is not obligated to provide a report under this subsection--
                    (A) regarding a particular employer or group health 
                plan more than twice in any 12-month period; or
                    (B) unless the request is made not later than the 
                second anniversary of the date of termination of 
                coverage under a group health plan issued by the health 
                insurance issuer.
            (3) Form of report.--A health insurance issuer shall 
        provide the report of claim information under paragraph (1) 
        through one of the following methods:
                    (A) In written form.
                    (B) Through an electronic file transmitted by 
                secure electronic mail or a file transfer protocol 
                site.
                    (C) By making the required information available 
                through a secure website or web portal accessible by 
                the Cooperative fiduciary.
            (4) General contents of report.--A report of claim 
        information provided under paragraph (1) shall contain all 
        information available to the health insurance issuer that is 
        responsive to the request made under such paragraph, including, 
        subject to paragraphs (6) through (8), protected health 
        information, for the 36-month period preceding the date of the 
        report, or for the entire period of coverage, whichever period 
        is shorter.
            (5) Specific contents.--Subject to paragraphs (6) through 
        (8), a report under paragraph (1) shall include the following:
                    (A) Aggregate paid claims experience by month, 
                including claims experience for medical, dental, and 
                pharmacy benefits, as applicable.
                    (B) Total premium paid by month.
                    (C) Total number of covered employees on a monthly 
                basis by coverage tier, including whether coverage was 
                for--
                            (i) an employee only;
                            (ii) an employee with dependents only;
                            (iii) an employee with a spouse only; or
                            (iv) an employee with a spouse and 
                        dependents.
                    (D) The total dollar amount of claims pending as of 
                the date of the report.
                    (E) A separate description and individual claims 
                report for any individual whose total paid claims 
                exceed $10,000 during the 12-month period preceding the 
                date of the report, including the following information 
                related to the claims for that individual:
                            (i) A unique identifying number, 
                        characteristic, or code for the individual.
                            (ii) The amounts paid.
                            (iii) Dates of service.
                            (iv) Applicable procedure codes and 
                        diagnosis codes.
                    (F) A statement describing precertification 
                requests for hospital stays of five days or longer that 
                were made during the 30-day period preceding the date 
                of the report for claims that are not part of the 
                report described by subparagraphs (A) through (E).
            (6) Protected health information.--A health insurance 
        issuer may not disclose, in a report of claim information 
        provided under this section, protected health information if 
        the health insurance issuer is prohibited from disclosing such 
        information under the regulations promulgated under section 
        264(c) of the Health Insurance Portability and Accountability 
        Act of 1996 (Public Law 104-191). To withhold information in 
        accordance with this paragraph, the health insurance issuer 
        shall--
                    (A) notify the requesting Cooperative fiduciary 
                that information is being withheld; and
                    (B) provide to the Cooperative fiduciary a list of 
                categories of claim information that the health 
                insurance issuer has determined are subject to the more 
                stringent privacy restrictions under such regulations.
            (7) Cooperative fiduciary certification.--A Cooperative 
        fiduciary is entitled to receive protected health information 
        under subparagraphs (E) and (F) of paragraph (5) only after the 
        Cooperative fiduciary makes to the health insurance issuer a 
        certification substantially similar to the following: ``I 
        hereby certify that the Cooperative will safeguard and limit 
        the use and disclosure of protected health information that is 
        received from the group health plan to perform the plan 
        administration functions.''.
            (8) Information as of date of termination of coverage.--In 
        the case of a request made under paragraph (1) after the date 
        of termination of coverage, the report shall contain all 
        information available to the health insurance issuer as of the 
        date of the report that is responsive to the request, including 
        protected health information, and including the information 
        described in subparagraphs (A) through (F) of paragraph (5) for 
        the period described in such paragraph preceding the date of 
        termination of coverage or for the entire policy period, 
        whichever period is shorter. Notwithstanding this paragraph, 
        such a report may not include the protected health information 
        described in subparagraph (E) or (F) of paragraph (5) unless a 
        certification has been provided in accordance with paragraph 
        (7).
    (c) Request for Additional Information.--
            (1) In general.--On receipt of a report required by 
        subsection (b), the Cooperative fiduciary may review the report 
        and, not later than the 10th day after the date the report is 
        received, may make a written request to the health insurance 
        issuer for additional information in accordance with this 
        subsection for specified individuals.
            (2) Provision of additional information.--With respect to a 
        request for additional information under paragraph (1) 
        concerning specified individuals for whom claims information 
        has been provided under subsection (b)(5)(E), the health 
        insurance issuer shall provide additional information on the 
        prognosis or recovery if available and, for individuals in 
        active case management, the most recent case management 
        information, including any future expected costs and treatment 
        plan, that relate to the claims for that individual.
            (3) Timely response.--The health insurance issuer shall 
        respond to the request for additional information under this 
        subsection not later than the 15th day after the date of 
        receiving the request unless the Cooperative fiduciary agrees 
        to a request for additional time.
            (4) Certification requirement.--The health insurance issuer 
        is not required to produce the report described by this 
        subsection unless a certification has been provided in 
        accordance with subsection (b)(7).
    (d) Limitation on Liability for Disclosure of Information.--A 
health insurance issuer that releases information, including protected 
health information, in accordance with this section has not violated a 
standard of care and is not liable for civil damages resulting from, 
and is not subject to criminal prosecution for, releasing that 
information.
    (e) Penalties.--A health insurance issuer that does not comply with 
a request for information in accordance with this section is subject to 
administrative penalties in an amount not to exceed $25,000 per 
affected individual.

                 TITLE II--SMALL BUSINESS CHOICE CREDIT

SEC. 201. SMALL BUSINESS CHOICE CREDIT.

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

``SEC. 45R. SMALL BUSINESS CHOICE CREDIT.

    ``(a) In General.--For purposes of section 38, the small business 
CHOICE credit determined under this section for any taxable year is an 
amount equal to 65 percent of the amount paid or incurred by the 
employer for self only or family coverage of an employee under a 
qualified employer-subsidized health coverage for eligible coverage 
months beginning in the taxable year.
    ``(b) Limitations.--
            ``(1) Size limitation.--The credit allowed under subsection 
        (a) shall not be allowed with respect to more than 100 
        employees of the employer for any eligible coverage month 
        beginning in any taxable year.
            ``(2) Wellness program requirement.--
                    ``(A) In general.--The credit allowed under 
                subsection (a) shall not be allowed with respect to 
                coverage of an employee and family members of the 
                employee unless the employer offers a qualified small 
                business wellness program with respect to such covered 
                employees and such covered family members.
                    ``(B) Exemption for single employee firms.--
                Subparagraph (A) shall not apply to an employer that 
                has only 1 employee.
    ``(c) Definitions and Special Rule.--For purposes of this section:
            ``(1) Eligible coverage month.--The term `eligible coverage 
        month' means any month if--
                    ``(A) as of the first day of such month, the 
                employer is a member of a Fully Funded Small Business 
                Health Insurance cooperative and purchases excess 
                coverage from such cooperative's captive insurance 
                company; and
                    ``(B) for the month the employee with respect to 
                whom the credit is determined is covered under a 
                qualified employer-subsidized health coverage of the 
                employer.
            ``(2) Fully funded small business health insurance 
        cooperative.--The term `Fully Funded Small Business Health 
        Insurance cooperative' has the meaning given such term in 
        section 101(2) of the Small Business CHOICE Act of 2009.
            ``(3) Qualified employer-subsidized health coverage.--
                    ``(A) In general.--The term `qualified employer-
                subsidized health coverage' means any insurance 
                coverage which constitutes medical care under an 
                insurance policy--
                            ``(i) which is maintained in conjunction 
                        with excess coverage purchased from a fully 
                        funded small business captive company and 
                        coverage purchased from a licensed primary 
                        insurer;
                            ``(ii) which is available to all full-time 
                        employees working a minimum of 35 hours per 
                        week or its monthly equivalent;
                            ``(iii) under which at least the applicable 
                        percentage of the cost of such coverage 
                        (determined under section 4980B) is paid or 
                        incurred by the employer;
                            ``(iv) under which the percentage of the 
                        cost of such coverage paid or incurred by the 
                        employer with respect to highly compensated 
                        employees (as defined in section 414(q)) does 
                        not exceed the percentage of such cost paid or 
                        incurred by the employer with respect to 
                        employees who are not highly compensated 
                        employees; and
                            ``(v) the primary insurance and excess 
                        claims coverage plans are the only plans of the 
                        employer to which the employer contributes to 
                        the cost of coverage.
                    ``(B) Exception for certain coverage.--Such term 
                does not include a health plan substantially all of the 
                coverage of which is of excepted benefits described in 
                section 9832(c).
                    ``(C) Applicable percentage.--For purposes of 
                subparagraph (A), the applicable percentage is--
                            ``(i) 65 percent, with respect to self only 
                        coverage; and
                            ``(ii) 35 percent, with respect to family 
                        coverage.
            ``(4) Qualified small business wellness program.--The term 
        `qualified small business wellness program' means a program 
        which--
                    ``(A) is established by an entity with expertise in 
                lifestyle management and wellness tools that enable 
                employers and covered individuals to lower health 
                claims and costs while improving the health of such 
                individuals; and
                    ``(B) is certified by the Secretary of Health and 
                Human Services, in consultation with persons with 
                expertise in employer health promotion and wellness 
                programs, as a qualified small business wellness 
                program under this section.
            ``(5) Small employer.--
                    ``(A) In general.--The term `small employer' means, 
                with respect to a taxable year, any employer or sole 
                proprietor which employed an average of 100 or fewer 
                employees on business days during the preceding 
                calendar year. For purposes of the preceding sentence, 
                a preceding calendar year may be taken into account 
                only if the employer or sole proprietor was in 
                existence throughout such year.
                    ``(B) Employers and sole proprietors not in 
                existence in preceding taxable year.--In the case of an 
                employer or sole proprietor which was not in existence 
                throughout the preceding calendar year, the 
                determination under subparagraph (A) shall be based on 
                the average number of employees that it is reasonably 
                expected such employer or sole proprietor will employ 
                on business days in the current calendar year.
            ``(6) Special rule for first year of providing health 
        benefits coverage.--In the case of the first taxable year for 
        which an employer or sole proprietor is allowed a credit under 
        this section, if the employer or proprietor has not previous to 
        such taxable year offered any health benefits coverage to any 
        employee, subsection (a) shall be applied by substituting `70 
        percent' for `65 percent'.
            ``(7) Time when contributions deemed made.--A rule similar 
        to the rule of section 219(f)(3) shall apply for purposes of 
        this section.
            ``(8) Controlled groups and predecessors.--For purposes of 
        paragraphs (5) and (6)--
                    ``(A) except as provided by the Secretary, all 
                persons treated as a single employer under subsection 
                (b), (c), (m), or (o) of section 414 shall be treated 
                as 1 employer; and
                    ``(B) any reference to an employer shall include a 
                reference to any predecessor of such employer.
            ``(9) Election to have credit apply.--This section shall 
        apply with respect to a taxpayer for any taxable year only if 
        there is an election in effect by such taxpayer (at such time 
        and in such manner as the Secretary may by regulations 
        prescribe) to have this section apply for such taxable year. No 
        deduction shall be allowed with respect to amounts paid by the 
        taxpayer during the taxable year for insurance which 
        constitutes medical care for the taxpayer or any employee of 
        the taxpayer if such election is in effect for such taxable 
        year.''.
    (b) Credit To Be Part of General Business Credit.--Subsection (b) 
of section 38 of such Code (relating to general business credit) is 
amended by striking ``plus'' at the end of paragraph (34), by striking 
the period at the end of paragraph (35) and inserting ``plus'', and by 
adding at the end the following new paragraph:
            ``(36) the Small Business CHOICE credit determined under 
        section 45R(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 45R. Small Business CHOICE credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts paid for eligible coverage months beginning in taxable 
years beginning after December 31, 2009.
                                 <all>
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