I

106TH CONGRESS

1ST SESSION H. R. 1496

To amend title I of the Employee Retirement Income Security Act of 1974

and the Internal Revenue Code of 1986 to improve access and choice

for entrepreneurs with small businesses with respect to medical care

for their employees.

IN THE HOUSE OF REPRESENTATIVES

APRIL 20, 1999

Mr. TALENT (for himself, Mr. DOOLEY of California, Mr. HASTERT, Mr.

MORAN of Virginia, Mr. GOODLING, Mr. COSTELLO, Mr. GREENWOOD,

Mr. CONDIT, Mr. EHLERS, Mr. GOODE, Mrs. KELLY, Mr. BLAGOJEVICH,

Mrs. BIGGERT, and Mr. ARMEY) introduced the following bill; which was

referred to the Committee on Education and the Workforce, 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 amend title I of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of

1986 to improve access and choice for entrepreneurs

with small businesses with respect to medical care for

their employees.

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

2 This Act may be cited as the ‘‘Small Business Access

3 and Choice for Entrepreneurs Act of 1999’’.

4 TITLE I—AFFORDABLE HEALTH

5 COVERAGE FOR EMPLOYEES

6 OF SMALL BUSINESSES

7 SEC. 101. RULES GOVERNING ASSOCIATION HEALTH

8 PLANS.

9 (a) IN GENERAL.—Subtitle B of title I of the Em10 ployee Retirement Income Security Act of 1974 is amend11 ed by adding after part 7 the following new part:

12 ‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH

13 PLANS

14 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS.

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

16 term ‘association health plan’ means a group health

17 plan—

18 ‘‘(1) whose sponsor is (or is deemed under this

19 part to be) described in subsection (b); and

20 ‘‘(2) under which at least one option of health

21 insurance coverage offered by a health insurance

22 issuer (which may include, among other options,

23 managed care options, point of service options, and

24 preferred provider options) is provided to partici25 pants and beneficiaries, unless, for any plan year,

26 such coverage remains unavailable to the plan de-
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1 spite good faith efforts exercised by the plan to se2 cure such coverage.

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

4 plan is described in this subsection if such sponsor—

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

6 with a constitution and bylaws specifically stating its

7 purpose and providing for periodic meetings on at

8 least an annual basis, as a bona fide trade associa9 tion, a bona fide industry association (including a

10 rural electric cooperative association or a rural tele11 phone cooperative association), a bona fide profes12 sional association, or a bona fide chamber of com13 merce (or similar bona fide business association, in14 cluding a corporation or similar organization that

15 operates on a cooperative basis (within the meaning

16 of section 1381 of the Internal Revenue Code of

17 1986)), for substantial purposes other than that of

18 obtaining or providing medical care;

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

20 receives the active support of its members and col21 lects from its members on a periodic basis dues or

22 payments necessary to maintain eligibility for mem23 bership in the sponsor; and

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

25 or payments, or coverage under the plan on the
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1 basis of health status-related factors with respect to

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

4 not condition such dues or payments on the basis of

5 group health plan participation.

6 Any sponsor consisting of an association of entities which

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

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

10 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH

11 PLANS.

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

13 prescribe by regulation, through negotiated rulemaking, a

14 procedure under which, subject to subsection (b), the ap15 plicable authority shall certify association health plans

16 which apply for certification as meeting the requirements

17 of this part.

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

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

20 health plan that provides at least one benefit option which

21 does not consist of health insurance coverage, the applica22 ble authority shall certify such plan as meeting the re23 quirements of this part only if the applicable authority is

24 satisfied that—

25 ‘‘(1) such certification—
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1 ‘‘(A) is administratively feasible;

2 ‘‘(B) is not adverse to the interests of the

3 individuals covered under the plan; and

4 ‘‘(C) is protective of the rights and benefits

5 of the individuals covered under the plan; and

6 ‘‘(2) the applicable requirements of this part

7 are met (or, upon the date on which the plan is to

8 commence operations, will be met) with respect to

9 the plan.

10 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

12 certification under this part is in effect shall meet the ap13 plicable requirements of this part, effective on the date

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

15 is to commence operations).

16 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI17 CATION.—The applicable authority may provide by regula18 tion, through negotiated rulemaking, for continued certifi19 cation of association health plans under this part.

20 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

21 PLANS.—The applicable authority shall establish a class

22 certification procedure for association health plans under

23 which all benefits consist of health insurance coverage.

24 Under such procedure, the applicable authority shall pro25 vide for the granting of certification under this part to
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1 the plans in each class of such association health plans

2 upon appropriate filing under such procedure in connec3 tion with plans in such class and payment of the pre4 scribed fee under section 807(a).

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

6 HEALTH PLANS.—An association health plan which offers

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

8 insurance coverage may be certified under this part only

9 if such plan consists of any of the following:

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

11 date of the enactment of the Small Business Access

12 and Choice for Entrepreneurs Act of 1999,

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

14 restrict membership to one or more trades and busi15 nesses or industries and whose eligible participating

16 employers represent a broad cross-section of trades

17 and businesses or industries, or

18 ‘‘(3) a plan whose eligible participating employ19 ers represent one or more trades or businesses, or

20 one or more industries, which have been indicated as

21 having average or above-average health insurance

22 risk or health claims experience by reason of State

23 rate filings, denials of coverage, proposed premium

24 rate levels, and other means demonstrated by such

25 plan in accordance with regulations which the Sec-
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1 retary shall prescribe through negotiated rule2 making, including (but not limited to) the following:

3 agriculture; automobile dealerships; barbering and

4 cosmetology; child care; construction; dance, theat5 rical, and orchestra productions; disinfecting and

6 pest control; eating and drinking establishments;

7 fishing; hospitals; labor organizations; logging; man8 ufacturing (metals); mining; medical and dental

9 practices; medical laboratories; sanitary services;

10 transportation (local and freight); and warehousing.

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

12 BOARDS OF TRUSTEES.

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

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

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

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

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

18 the application for certification under this part.

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

20 this subsection are met with respect to an association

21 health plan if the following requirements are met:

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

23 pursuant to a trust agreement, by a board of trust24 ees which has complete fiscal control over the plan
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1 and which is responsible for all operations of the

2 plan.

3 ‘‘(2) RULES OF OPERATION AND FINANCIAL

4 CONTROLS.—The board of trustees has in effect

5 rules of operation and financial controls, based on a

6 3-year plan of operation, adequate to carry out the

7 terms of the plan and to meet all requirements of

8 this title applicable to the plan.

9 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

10 PARTICIPATING EMPLOYERS AND TO CONTRAC11 TORS.—

12 ‘‘(A) IN GENERAL.—Except as provided in

13 subparagraphs (B) and (C), the members of the

14 board of trustees are individuals selected from

15 individuals who are the owners, officers, direc16 tors, or employees of the participating employ17 ers or who are partners in the participating em18 ployers and actively participate in the business.

19 ‘‘(B) LIMITATION.—

20 ‘‘(i) GENERAL RULE.—Except as pro21 vided in clauses (ii) and (iii), no such

22 member is an owner, officer, director, or

23 employee of, or partner in, a contract ad24 ministrator or other service provider to the

25 plan.
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1 ‘‘(ii) LIMITED EXCEPTION FOR PRO2 VIDERS OF SERVICES SOLELY ON BEHALF

3 OF THE SPONSOR.—Officers or employees

4 of a sponsor which is a service provider

5 (other than a contract administrator) to

6 the plan may be members of the board if

7 they constitute not more than 25 percent

8 of the membership of the board and they

9 do not provide services to the plan other

10 than on behalf of the sponsor.

11 ‘‘(iii) TREATMENT OF PROVIDERS OF

12 MEDICAL CARE.—In the case of a sponsor

13 which is an association whose membership

14 consists primarily of providers of medical

15 care, clause (i) shall not apply in the case

16 of any service provider described in sub17 paragraph (A) who is a provider of medical

18 care under the plan.

19 ‘‘(C) CERTAIN PLANS EXCLUDED.—Sub20 paragraph (A) shall not apply to an association

21 health plan which is in existence on the date of

22 the enactment of the Small Business Access

23 and Choice for Entrepreneurs Act of 1999.

24 ‘‘(D) SOLE AUTHORITY.—The board has

25 sole authority under the plan to approve appli-
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1 cations for participation in the plan and to con2 tract with a service provider to administer the

3 day-to-day affairs of the plan.

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

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

6 maintained by a franchiser for a franchise network con7 sisting of its franchisees—

8 ‘‘(1) the requirements of subsection (a) and sec9 tion 801(a)(1) shall be deemed met if such require10 ments would otherwise be met if the franchiser were

11 deemed to be the sponsor referred to in section

12 801(b), such network were deemed to be an associa13 tion described in section 801(b), and each franchisee

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

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

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

17 be deemed met.

18 The Secretary may by regulation, through negotiated rule19 making, define for purposes of this subsection the terms

20 ‘franchiser’, ‘franchise network’, and ‘franchisee’.

21 ‘‘(d) CERTAIN COLLECTIVELY BARGAINED PLANS.—

22 ‘‘(1) IN GENERAL.—In the case of a group

23 health plan described in paragraph (2)—

24 ‘‘(A) the requirements of subsection (a)

25 and section 801(a)(1) shall be deemed met;
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1 ‘‘(B) the joint board of trustees shall be

2 deemed a board of trustees with respect to

3 which the requirements of subsection (b) are

4 met; and

5 ‘‘(C) the requirements of section 804 shall

6 be deemed met.

7 ‘‘(2) REQUIREMENTS.—A group health plan is

8 described in this paragraph if—

9 ‘‘(A) the plan is a multiemployer plan; or

10 ‘‘(B) the plan is in existence on April 1,

11 1997, and would be described in section

12 3(40)(A)(i) but solely for the failure to meet

13 the requirements of section 3(40)(C)(ii).

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 Access and Choice for Entrepreneurs Act of 1999,

23 an affiliated member of the sponsor of the plan may be

24 offered coverage under the plan as a participating em25 ployer 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 the claims experience of such employer

16 and do not vary on the basis of the type of

17 business or industry in which such employer is

18 engaged.

19 ‘‘(B) Nothing in this title or any other pro20 vision of law shall be construed to preclude an

21 association health plan, or a health insurance

22 issuer offering health insurance coverage in

23 connection with an association health plan,

24 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

25 agents shall be used to distribute to small em-
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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 through negotiated rulemaking.

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 any law to the extent that it (1) prohibits an exclusion

5 of a specific disease from such coverage, or (2) is not pre6 empted under section 731(a)(1) with respect to matters

7 governed by section 711 or 712.

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

9 FOR SOLVENCY FOR PLANS PROVIDING

10 HEALTH BENEFITS IN ADDITION TO HEALTH

11 INSURANCE COVERAGE.

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

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

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

15 of health insurance coverage; or

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

17 options which do not consist of health insurance cov18 erage, the plan—

19 ‘‘(A) establishes and maintains reserves

20 with respect to such additional benefit options,

21 in amounts recommended by the qualified actu22 ary, consisting of—

23 ‘‘(i) a reserve sufficient for unearned

24 contributions;
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1 ‘‘(ii) a reserve sufficient for benefit li2 abilities which have been incurred, which

3 have not been satisfied, and for which risk

4 of loss has not yet been transferred, and

5 for expected administrative costs with re6 spect to such benefit liabilities;

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

8 obligations of the plan; and

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

10 of error and other fluctuations, taking into

11 account the specific circumstances of the

12 plan; and

13 ‘‘(B) establishes and maintains aggregate

14 and specific excess /stop loss insurance and sol15 vency indemnification, with respect to such ad16 ditional benefit options for which risk of loss

17 has not yet been transferred, as follows:

18 ‘‘(i) The plan shall secure aggregate

19 excess /stop loss insurance for the plan

20 with an attachment point which is not

21 greater than 125 percent of expected gross

22 annual claims. The applicable authority

23 may by regulation, through negotiated

24 rulemaking, provide for upward adjust25 ments in the amount of such percentage in
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1 specified circumstances in which the plan

2 specifically provides for and maintains re3 serves in excess of the amounts required

4 under subparagraph (A).

5 ‘‘(ii) The plan shall secure specific ex6 cess /stop loss insurance for the plan with

7 an attachment point which is at least equal

8 to an amount recommended by the plan’s

9 qualified actuary (but not more than

10 $175,000). The applicable authority may

11 by regulation, through negotiated rule12 making, provide for adjustments in the

13 amount of such insurance in specified cir14 cumstances in which the plan specifically

15 provides for and maintains reserves in ex16 cess of the amounts required under sub17 paragraph (A).

18 ‘‘(iii) The plan shall secure indem19 nification insurance for any claims which

20 the plan is unable to satisfy by reason of

21 a plan termination.

22 Any regulations prescribed by the applicable authority

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

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

25 stop loss insurance as the qualified actuary may rec-
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1 ommend, taking into account the specific circumstances

2 of the plan.

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

4 RESERVES.—In the case of any association health plan de5 scribed in subsection (a)(2), the requirements of this sub6 section are met if the plan establishes and maintains sur7 plus in an amount at least equal to—

8 ‘‘(1) $500,000, or

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

10 $2,000,000) as may be set forth in regulations pre11 scribed by the applicable authority through nego12 tiated rulemaking, based on the level of aggregate

13 and specific excess /stop loss insurance provided with

14 respect to such plan.

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

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

17 the applicable authority may provide such additional re18 quirements relating to reserves and excess /stop loss insur19 ance as the applicable authority considers appropriate.

20 Such requirements may be provided by regulation, through

21 negotiated rulemaking, with respect to any such plan or

22 any class of such plans.

23 ‘‘(d) ADJUSTMENTS FOR EXCESS /STOP LOSS INSUR24 ANCE.—The applicable authority may provide for adjust25 ments to the levels of reserves otherwise required under
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1 subsections (a) and (b) with respect to any plan or class

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

3 provided with respect to such plan or plans.

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

5 applicable authority may permit an association health plan

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

7 of the requirements of this section (except subsection

8 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar9 rangement, or other financial arrangement as the applica10 ble authority determines to be adequate to enable the plan

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

12 and is otherwise no less protective of the interests of par13 ticipants and beneficiaries than the requirements for

14 which it is substituted. The applicable authority may take

15 into account, for purposes of this subsection, evidence pro16 vided by the plan or sponsor which demonstrates an as17 sumption of liability with respect to the plan. Such evi18 dence may be in the form of a contract of indemnification,

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

20 applicable terms of the plan in the form of assessments

21 of participating employers, security, or other financial ar22 rangement.

23 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

24 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.—
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1 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO2 CIATION HEALTH PLAN FUND.—

3 ‘‘(A) IN GENERAL.—In the case of an as4 sociation health plan described in subsection

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

6 met if the plan makes payments into the Asso7 ciation Health Plan Fund under this subpara8 graph when they are due. Such payments shall

9 consist of annual payments in the amount of

10 $5,000, and, in addition to such annual pay11 ments, such supplemental payments as the Sec12 retary may determine to be necessary under

13 paragraph (2). Payments under this paragraph

14 are payable to the Fund at the time determined

15 by the Secretary. Initial payments are due in

16 advance of certification under this part. Pay17 ments shall continue to accrue until a plan’s as18 sets are distributed pursuant to a termination

19 procedure.

20 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

23 not more than 100 percent of the payment

24 which was not timely paid shall be payable by

25 the plan to the Fund.
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1 ‘‘(C) CONTINUED DUTY OF THE SEC2 RETARY.—The Secretary shall not cease to

3 carry out the provisions of paragraph (2) on ac4 count of the failure of a plan to pay any pay5 ment when due.

6 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

7 EXCESS /STOP LOSS INSURANCE COVERAGE AND IN8 DEMNIFICATION INSURANCE COVERAGE FOR CER9 TAIN PLANS.—In any case in which the applicable

10 authority determines that there is, or that there is

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

12 take necessary corrective actions under section

13 809(a) with respect to an association health plan de14 scribed in subsection (a)(2); or (B) a termination of

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

16 if the applicable authority is not the Secretary, cer17 tifies such determination to the Secretary), the Sec18 retary shall determine the amounts necessary to

19 make payments to an insurer (designated by the

20 Secretary) to maintain in force excess /stop loss in21 surance coverage or indemnification insurance cov22 erage for such plan, if the Secretary determines that

23 there is a reasonable expectation that, without such

24 payments, claims would not be satisfied by reason of

25 termination of such coverage. The Secretary shall, to
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1 the extent provided in advance in appropriation

2 Acts, pay such amounts so determined to the insurer

3 designated by the Secretary.

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

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

6 on the books of the Treasury a fund to be

7 known as the ‘Association Health Plan Fund’.

8 The Fund shall be available for making pay9 ments pursuant to paragraph (2). The Fund

10 shall be credited with payments received pursu11 ant to paragraph (1)(A), penalties received pur12 suant to paragraph (1)(B); and earnings on in13 vestments of amounts of the Fund under sub14 paragraph (B).

15 ‘‘(B) INVESTMENT.—Whenever the Sec16 retary determines that the moneys of the fund

17 are in excess of current needs, the Secretary

18 may request the investment of such amounts as

19 the Secretary determines advisable by the Sec20 retary of the Treasury in obligations issued or

21 guaranteed by the United States.

22 ‘‘(g) EXCESS /STOP LOSS INSURANCE.—For pur23 poses of this section—

24 ‘‘(1) AGGREGATE EXCESS /STOP LOSS INSUR25 ANCE.—The term ‘aggregate excess /stop loss insur-
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1 ance’ means, in connection with an association

2 health plan, a contract—

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

4 minimum standards as the applicable authority may

5 prescribe by regulation through negotiated rule6 making) provides for payment to the plan with re7 spect to aggregate claims under the plan in excess

8 of an amount or amounts specified in such contract;

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

10 ‘‘(C) which allows for payment of premiums by

11 any third party on behalf of the insured plan.

12 ‘‘(2) SPECIFIC EXCESS /STOP LOSS INSUR13 ANCE.—The term ‘specific excess /stop loss insur14 ance’ means, in connection with an association

15 health plan, a contract—

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

17 minimum standards as the applicable authority

18 may prescribe by regulation through negotiated

19 rulemaking) provides for payment to the plan

20 with respect to claims under the plan in connec21 tion with a covered individual in excess of an

22 amount or amounts specified in such contract

23 in connection with such covered individual;

24 ‘‘(B) which is guaranteed renewable; and
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1 ‘‘(C) which allows for payment of pre2 miums by any third party on behalf of the in3 sured plan.

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

5 of this section, the term ‘indemnification insurance’

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

7 contract—

8 ‘‘(1) under which an insurer (meeting such min9 imum standards as the applicable authority may pre10 scribe through negotiated rulemaking) provides for

11 payment to the plan with respect to claims under the

12 plan which the plan is unable to satisfy by reason

13 of a termination pursuant to section 809(b) (relating

14 to mandatory termination);

15 ‘‘(2) which is guaranteed renewable and

16 noncancellable for any reason (except as the applica17 ble authority may prescribe by regulation through

18 negotiated rulemaking); and

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

20 any third party on behalf of the insured plan.

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

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

23 health plan, plan assets which meet the fiduciary stand24 ards under part 4 and such additional requirements re-
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1 garding liquidity as the applicable authority may prescribe

2 through negotiated rulemaking.

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

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

5 date of the enactment of the Small Business Access

6 and Choice for Entrepreneurs Act of 1999, the ap7 plicable authority shall establish a Solvency Stand8 ards Working Group. In prescribing the initial regu9 lations under this section, the applicable authority

10 shall take into account the recommendations of such

11 Working Group.

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

13 consist of not more than 15 members appointed by

14 the applicable authority. The applicable authority

15 shall include among persons invited to membership

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

17 following:

18 ‘‘(A) a representative of the National Asso19 ciation of Insurance Commissioners;

20 ‘‘(B) a representative of the American

21 Academy of Actuaries;

22 ‘‘(C) a representative of the State govern23 ments, or their interests;

24 ‘‘(D) a representative of existing self-in25 sured arrangements, or their interests;
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1 ‘‘(E) a representative of associations of the

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

3 interests; and

4 ‘‘(F) a representative of multiemployer

5 plans that are group health plans, or their in6 terests.

7 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE8 LATED REQUIREMENTS.

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

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

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

12 an application for certification under this part a filing fee

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

14 case of the Secretary, to the extent provided in appropria15 tion Acts, for the sole purpose of administering the certifi16 cation procedures applicable with respect to association

17 health plans.

18 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA19 TION FOR CERTIFICATION.—An application for certifi20 cation under this part meets the requirements of this sec21 tion only if it includes, in a manner and form which shall

22 be prescribed by the applicable authority through nego23 tiated rulemaking, at least the following information:

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

25 and addresses of—
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1 ‘‘(A) the sponsor; and

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

3 of the plan.

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

5 BUSINESS.—The States in which participants and

6 beneficiaries under the plan are to be located and

7 the number of them expected to be located in each

8 such State.

9 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro10 vided by the board of trustees that the bonding re11 quirements of section 412 will be met as of the date

12 of the application or (if later) commencement of op13 erations.

14 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu15 ments governing the plan (including any bylaws and

16 trust agreements), the summary plan description,

17 and other material describing the benefits that will

18 be provided to participants and beneficiaries under

19 the plan.

20 ‘‘(5) AGREEMENTS WITH SERVICE PRO21 VIDERS.—A copy of any agreements between the

22 plan and contract administrators and other service

23 providers.

24 ‘‘(6) FUNDING REPORT.—In the case of asso25 ciation health plans providing benefits options in ad-
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1 dition to health insurance coverage, a report setting

2 forth information with respect to such additional

3 benefit options determined as of a date within the

4 120-day period ending with the date of the applica5 tion, including the following:

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

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

8 statement of actuarial opinion, signed by a

9 qualified actuary, that all applicable require10 ments of section 806 are or will be met in ac11 cordance with regulations which the applicable

12 authority shall prescribe through negotiated

13 rulemaking.

14 ‘‘(B) ADEQUACY OF CONTRIBUTION

15 RATES.—A statement of actuarial opinion,

16 signed by a qualified actuary, which sets forth

17 a description of the extent to which contribution

18 rates are adequate to provide for the payment

19 of all obligations and the maintenance of re20 quired reserves under the plan for the 12-

21 month period beginning with such date within

22 such 120-day period, taking into account the

23 expected coverage and experience of the plan. If

24 the contribution rates are not fully adequate,

25 the statement of actuarial opinion shall indicate
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1 the extent to which the rates are inadequate

2 and the changes needed to ensure adequacy.

3 ‘‘(C) CURRENT AND PROJECTED VALUE OF

4 ASSETS AND LIABILITIES.—A statement of ac5 tuarial opinion signed by a qualified actuary,

6 which sets forth the current value of the assets

7 and liabilities accumulated under the plan and

8 a projection of the assets, liabilities, income,

9 and expenses of the plan for the 12-month pe10 riod referred to in subparagraph (B). The in11 come statement shall identify separately the

12 plan’s administrative expenses and claims.

13 ‘‘(D) COSTS OF COVERAGE TO BE

14 CHARGED AND OTHER EXPENSES.—A state15 ment of the costs of coverage to be charged, in16 cluding an itemization of amounts for adminis17 tration, reserves, and other expenses associated

18 with the operation of the plan.

19 ‘‘(E) OTHER INFORMATION.—Any other

20 information as may be determined by the appli21 cable authority, by regulation through nego22 tiated rulemaking, as necessary to carry out the

23 purposes of this part.

24 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

25 STATES.—A certification granted under this part to an
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1 association health plan shall not be effective unless written

2 notice of such certification is filed with the applicable

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

4 of the participants and beneficiaries under the plan are

5 located. For purposes of this subsection, an individual

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

7 known address of such individual is located or in which

8 such individual is employed.

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

10 of any association health plan certified under this part,

11 descriptions of material changes in any information which

12 was required to be submitted with the application for the

13 certification under this part shall be filed in such form

14 and manner as shall be prescribed by the applicable au15 thority by regulation through negotiated rulemaking. The

16 applicable authority may require by regulation, through

17 negotiated rulemaking, prior notice of material changes

18 with respect to specified matters which might serve as the

19 basis for suspension or revocation of the certification.

20 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS21 SOCIATION HEALTH PLANS.—An association health plan

22 certified under this part which provides benefit options in

23 addition to health insurance coverage for such plan year

24 shall meet the requirements of section 103 by filing an

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

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

3 be filed with the applicable authority not later than 90

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

5 as may be prescribed by the applicable authority). The ap6 plicable authority may require by regulation through nego7 tiated rulemaking such interim reports as it considers ap8 propriate.

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 ‘‘(1) not less than 60 days before the proposed

12 termination date, provides to the participants and

13 beneficiaries a written notice of intent to terminate

14 stating that such termination is intended and the

15 proposed termination date;

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

17 of the plan in connection with such termination in

18 a manner which will result in timely payment of all

19 benefits for which the plan is obligated; and

20 ‘‘(3) submits such plan in writing to the appli21 cable authority.

22 Actions required under this section shall be taken in such

23 form and manner as may be prescribed by the applicable

24 authority by regulation through negotiated rulemaking.
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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 through negotiated rulemaking) of

24 such recommendations of the actuary for corrective action,

25 together with a description of the actions (if any) that the

26 board has taken or plans to take in response to such rec-
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1 ommendations. The board shall thereafter report to the

2 applicable authority, in such form and frequency as the

3 applicable authority may specify to the board, regarding

4 corrective action taken by the board until the requirements

5 of section 806 are met.

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

7 which—

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

9 under subsection (a) of a failure of an association

10 health plan which is or has been certified under this

11 part and is described in section 806(a)(2) to meet

12 the requirements of section 806 and has not been

13 notified by the board of trustees of the plan that

14 corrective action has restored compliance with such

15 requirements; and

16 ‘‘(2) the applicable authority determines that

17 there is a reasonable expectation that the plan will

18 continue to fail to meet the requirements of section

19 806,

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

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

22 course of the termination, take such actions as the appli23 cable authority may require, including satisfying any

24 claims referred to in section 806(a)(2)(B)(iii) and recov25 ering for the plan any liability under subsection
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1 (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure

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

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

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

5 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL6 VENT ASSOCIATION HEALTH PLANS PRO7 VIDING HEALTH BENEFITS IN ADDITION TO

8 HEALTH INSURANCE COVERAGE.

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

10 INSOLVENT PLANS.—Whenever the Secretary determines

11 that an association health plan which is or has been cer12 tified under this part and which is described in section

13 806(a)(2) will be unable to provide benefits when due or

14 is otherwise in a financially hazardous condition, as shall

15 be defined by the Secretary by regulation through nego16 tiated rulemaking, the Secretary shall, upon notice to the

17 plan, apply to the appropriate United States district court

18 for appointment of the Secretary as trustee to administer

19 the plan for the duration of the insolvency. The plan may

20 appear as a party and other interested persons may inter21 vene in the proceedings at the discretion of the court. The

22 court shall appoint such Secretary trustee if the court de23 termines that the trusteeship is necessary to protect the

24 interests of the participants and beneficiaries or providers

25 of medical care or to avoid any unreasonable deterioration
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1 of the financial condition of the plan. The trusteeship of

2 such Secretary shall continue until the conditions de3 scribed in the first sentence of this subsection are rem4 edied or the plan is terminated.

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

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

7 the power—

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

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

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

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

12 of the assets and records of the plan to the Sec13 retary as trustee;

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

15 Secretary holds in accordance with the provisions of

16 the plan, regulations prescribed by the Secretary

17 through negotiated rulemaking, and applicable provi18 sions 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 through negotiated rulemaking

10 or required by any order of the court;

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

12 termination accordance with section 809(b)) and liq13 uidate the plan assets, to restore the plan to the re14 sponsibility of the sponsor, or to continue the trust15 eeship;

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 through nego8 tiated rulemaking, the Secretary shall appoint, retain, and

9 compensate accountants, actuaries, and other professional

10 service personnel as may be necessary in connection with

11 the Secretary’s service as 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 Access and Choice for

18 Entrepreneurs Act of 1999.

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 /

19 stop 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.—

14 ‘‘(A) IN GENERAL.—Except as provided in

15 subparagraph (B), the term ‘applicable author16 ity’ means, in connection with an association

17 health plan—

18 ‘‘(i) the State recognized pursuant to

19 subsection (c) of section 506 as the State

20 to which authority has been delegated in

21 connection with such plan; or

22 ‘‘(ii) if there if no State referred to in

23 clause (i), the Secretary.

24 ‘‘(B) EXCEPTIONS.—
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1 ‘‘(i) JOINT AUTHORITIES.—Where

2 such term appears in section 808(3), sec3 tion 807(e) (in the first instance), section

4 809(a) (in the second instance), section

5 809(a) (in the fourth instance), and sec6 tion 809(b)(1), such term means, in con7 nection with an association health plan, the

8 Secretary and the State referred to in sub9 paragraph (A)(i) (if any) in connection

10 with such plan.

11 ‘‘(ii) REGULATORY AUTHORITIES.—

12 Where such term appears in section 802(a)

13 (in the first instance), section 802(d), sec14 tion 802(e), section 803(d), section

15 805(a)(5), section 806(a)(2), section

16 806(b), section 806(c), section 806(d),

17 paragraphs (1)(A) and (2)(A) of section

18 806(g), section 806(h), section 806(i), sec19 tion 806(j), section 807(a) (in the second

20 instance), section 807(b), section 807(d),

21 section 807(e) (in the second instance),

22 section 808 (in the matter after paragraph

23 (3)), and section 809(a) (in the third in24 stance), such term means, in connection
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1 with an association health plan, the Sec2 retary.

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

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

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

6 ‘‘(7) INDIVIDUAL MARKET.—

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

8 market’ means the market for health insurance

9 coverage offered to individuals other than in

10 connection with a group health plan.

11 ‘‘(B) TREATMENT OF VERY SMALL

12 GROUPS.—

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

14 (ii), such term includes coverage offered in

15 connection with a group health plan that

16 has fewer than 2 participants as current

17 employees or participants described in sec18 tion 732(d)(3) on the first day of the plan

19 year.

20 ‘‘(ii) STATE EXCEPTION.—Clause (i)

21 shall not apply in the case of health insur22 ance coverage offered in a State if such

23 State regulates the coverage described in

24 such clause in the same manner and to the

25 same extent as coverage in the small group
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1 market (as defined in section 2791(e)(5) of

2 the Public Health Service Act) is regulated

3 by such State.

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

5 ‘participating employer’ means, in connection with

6 an association health plan, any employer, if any indi7 vidual who is an employee of such employer, a part8 ner in such employer, or a self-employed individual

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

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

11 or was covered under such plan in connection with

12 the status of such individual as such an employee,

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

14 plan.

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

16 term ‘applicable State authority’ means, with respect

17 to a health insurance issuer in a State, the State in18 surance commissioner or official or officials des19 ignated by the State to enforce the requirements of

20 title XXVII of the Public Health Service Act for the

21 State involved with respect to such issuer.

22 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali23 fied actuary’ means an individual who is a member

24 of the American Academy of Actuaries or meets

25 such reasonable standards and qualifications as the
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1 Secretary may provide by regulation through nego2 tiated rulemaking.

3 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili4 ated member’ means, in connection with a sponsor—

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

6 be a member of the sponsor but who elects an

7 affiliated status with the sponsor,

8 ‘‘(B) in the case of a sponsor with mem9 bers which consist of associations, a person who

10 is a member of any such association and elects

11 an affiliated status with the sponsor, or

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

13 plan in existence on the date of the enactment

14 of the Small Business Access and Choice for

15 Entrepreneurs Act of 1999, a person eligible to

16 be a member of the sponsor or one of its mem17 ber associations.

18 ‘‘(12) LARGE EMPLOYER.—The term ‘large em19 ployer’ means, in connection with a group health

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

21 employed an average of at least 51 employees on

22 business days during the preceding calendar year

23 and who employs at least 2 employees on the first

24 day of the plan year.
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1 ‘‘(13) SMALL EMPLOYER.—The term ‘small em2 ployer’ means, in connection with a group health

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

4 is not a large employer.

5 ‘‘(b) RULES OF CONSTRUCTION.—

6 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur7 poses of determining whether a plan, fund, or pro8 gram is an employee welfare benefit plan which is an

9 association health plan, and for purposes of applying

10 this title in connection with such plan, fund, or pro11 gram so determined to be such an employee welfare

12 benefit plan—

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

14 ‘employer’ (as defined in section (3)(5)) in15 cludes the partnership in relation to the part16 ners, and the term ‘employee’ (as defined in

17 section (3)(6)) includes any partner in relation

18 to the partnership; and

19 ‘‘(B) in the case of a self-employed indi20 vidual, the term ‘employer’ (as defined in sec21 tion 3(5)) and the term ‘employee’ (as defined

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

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

24 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the

25 case of any plan, fund, or program which was estab-
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1 lished or is maintained for the purpose of providing

2 medical care (through the purchase of insurance or

3 otherwise) for employees (or their dependents) cov4 ered thereunder and which demonstrates to the Sec5 retary that all requirements for certification under

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

7 fund, or program if such plan, fund, or program

8 were a group health plan, such plan, fund, or pro9 gram shall be treated for purposes of this title as an

10 employee welfare benefit plan on and after the date

11 of such demonstration.’’.

12 (b) CONFORMING AMENDMENTS TO PREEMPTION

13 RULES.—

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

15 1144(b)(6)) is amended by adding at the end the

16 following new subparagraph:

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

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

19 of an association health plan which is certified under part

20 8.’’.

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

22 is amended—

23 (A) in subsection (b)(4), by striking ‘‘Sub24 section (a)’’ and inserting ‘‘Subsections (a) and

25 (d)’’;
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1 (B) in subsection (b)(5), by striking ‘‘sub2 section (a)’’ in subparagraph (A) and inserting

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

4 (a)(2)(B) and (b) of section 805’’, and by strik5 ing ‘‘subsection (a)’’ in subparagraph (B) and

6 inserting ‘‘subsection (a) of this section or sub7 section (a)(2)(B) or (b) of section 805’’;

8 (C) by redesignating subsection (d) as sub9 section (e); and

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

11 following new subsection:

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

13 provisions of this title shall supersede any and all State

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

15 have the effect of precluding, a health insurance issuer

16 from offering health insurance coverage in connection with

17 an association health plan which is certified under part

18 8.

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

20 of subsection (b) of this section—

21 ‘‘(A) In any case in which health insurance cov22 erage of any policy type is offered under an associa23 tion health plan certified under part 8 to a partici24 pating employer operating in such State, the provi25 sions of this title shall supersede any and all laws
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1 of such State insofar as they may preclude a health

2 insurance issuer from offering health insurance cov3 erage of the same policy type to other employers op4 erating in the State which are eligible for coverage

5 under such association health plan, whether or not

6 such other employers are participating employers in

7 such plan.

8 ‘‘(B) In any case in which health insurance cov9 erage of any policy type is offered under an associa10 tion health plan in a State and the filing, with the

11 applicable State authority, of the policy form in con12 nection with such policy type is approved by such

13 State authority, the provisions of this title shall su14 persede any and all laws of any other State in which

15 health insurance coverage of such type is offered, in16 sofar as they may preclude, upon the filing in the

17 same form and manner of such policy form with the

18 applicable State authority in such other State, the

19 approval of the filing in such other State.

20 ‘‘(3) For additional provisions relating to association

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

22 805.

23 ‘‘(4) For purposes of this subsection, the term ‘asso24 ciation health plan’ has the meaning provided in section

25 801(a), and the terms ‘health insurance coverage’, ‘par-
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1 ticipating employer’, and ‘health insurance issuer’ have

2 the meanings provided such terms in section 811, respec3 tively.’’.

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

5 U.S.C. 1144(b)(6)(A)) is amended—

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

7 the end;

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

9 does not provide medical care (within the mean10 ing of section 733(a)(2)),’’ after ‘‘arrange11 ment,’’, and by striking ‘‘title.’’ and inserting

12 ‘‘title, and’’; and

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

14 clause:

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

16 of any other employee welfare benefit plan which is

17 a multiple employer welfare arrangement and which

18 provides medical care (within the meaning of section

19 733(a)(2)), any law of any State which regulates in20 surance may apply.’’.

21 (4) Section 514(e) of such Act (as redesignated

22 by paragraph (2)(C)) is amended—

23 (A) by striking ‘‘Nothing’’ and inserting

24 ‘‘(1) Except as provided in paragraph (2), noth25 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 Access and Choice for Entrepreneurs Act of 1999

6 shall be construed to alter, amend, modify, invalidate, im7 pair, or supersede any provision of this title, except by

8 specific cross-reference to 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, 2004, 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

‘‘Sec. 801. Association health plans.

‘‘Sec. 802. Certification of association health plans.

‘‘Sec. 803. Requirements relating to sponsors and boards of trustees.

‘‘Sec. 804. Participation and coverage requirements.

‘‘Sec. 805. Other requirements relating to plan documents, contribution rates,

and benefit options.

‘‘Sec. 806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage.

‘‘Sec. 807. Requirements for application and related requirements.

‘‘Sec. 808. Notice requirements for voluntary termination.

‘‘Sec. 809. Corrective actions and mandatory termination.

‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health plans

providing health benefits in addition to health insurance coverage.

‘‘Sec. 811. State assessment authority.

‘‘Sec. 812. Definitions and rules of construction.’’.

13 SEC. 102. 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

17 amended—
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1 (1) in clause (i), by inserting ‘‘for any plan year

2 of any such plan, or any fiscal year of any such

3 other arrangement;’’ after ‘‘single employer’’, and by

4 inserting ‘‘during such year or at any time during

5 the preceding 1-year period’’ after ‘‘control group’’;

6 (2) in clause (iii)—

7 (A) by striking ‘‘common control shall not

8 be based on an interest of less than 25 percent’’

9 and inserting ‘‘an interest of greater than 25

10 percent may not be required as the minimum

11 interest necessary for common control’’; and

12 (B) by striking ‘‘similar to’’ and inserting

13 ‘‘consistent and coextensive with’’;

14 (3) by redesignating clauses (iv) and (v) as

15 clauses (v) and (vi), respectively; and

16 (4) by inserting after clause (iii) the following

17 new clause:

18 ‘‘(iv) in determining, after the application of

19 clause (i), whether benefits are provided to employ20 ees of two or more employers, the arrangement shall

21 be treated as having only one participating employer

22 if, after the application of clause (i), the number of

23 individuals who are employees and former employees

24 of any one participating employer and who are cov25 ered under the arrangement is greater than 75 per-
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1 cent of the aggregate number of all individuals who

2 are employees or former employees of participating

3 employers and who are covered under the arrange4 ment;’’.

5 SEC. 103. CLARIFICATION OF TREATMENT OF CERTAIN

6 COLLECTIVELY BARGAINED ARRANGE7 MENTS.

8 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em9 ployee Retirement Income Security Act of 1974 (29

10 U.S.C. 1002(40)(A)(i)) is amended to read as follows:

11 ‘‘(i)(I) under or pursuant to one or more collec12 tive bargaining agreements which are reached pursu13 ant to collective bargaining described in section 8(d)

14 of the National Labor Relations Act (29 U.S.C.

15 158(d)) or paragraph Fourth of section 2 of the

16 Railway Labor Act (45 U.S.C. 152, paragraph

17 Fourth) or which are reached pursuant to labor18 management negotiations under similar provisions of

19 State public employee relations laws, and (II) in ac20 cordance with subparagraphs (C), (D), and (E);’’.

21 (b) LIMITATIONS.—Section 3(40) of such Act (29

22 U.S.C. 1002(40)) is amended by adding at the end the

23 following new subparagraphs:

24 ‘‘(C) For purposes of subparagraph (A)(i)(II), a plan

25 or other arrangement shall be treated as established or
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1 maintained in accordance with this subparagraph only if

2 the following requirements are met:

3 ‘‘(i) The plan or other arrangement, and the

4 employee organization or any other entity sponsoring

5 the plan or other arrangement, do not—

6 ‘‘(I) utilize the services of any licensed in7 surance agent or broker for soliciting or enroll8 ing employers or individuals as participating

9 employers or covered individuals under the plan

10 or other arrangement; or

11 ‘‘(II) pay any type of compensation to a

12 person, other than a full time employee of the

13 employee organization (or a member of the or14 ganization to the extent provided in regulations

15 prescribed by the Secretary through negotiated

16 rulemaking), that is related either to the volume

17 or number of employers or individuals solicited

18 or enrolled as participating employers or cov19 ered individuals under the plan or other ar20 rangement, or to the dollar amount or size of

21 the contributions made by participating employ22 ers or covered individuals to the plan or other

23 arrangement;

24 except to the extent that the services used by the

25 plan, arrangement, organization, or other entity con-
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1 sist solely of preparation of documents necessary for

2 compliance with the reporting and disclosure re3 quirements of part 1 or administrative, investment,

4 or consulting services unrelated to solicitation or en5 rollment of covered individuals.

6 ‘‘(ii) As of the end of the preceding plan year,

7 the number of covered individuals under the plan or

8 other arrangement who are neither—

9 ‘‘(I) employed within a bargaining unit

10 covered by any of the collective bargaining

11 agreements with a participating employer (nor

12 covered on the basis of an individual’s employ13 ment in such a bargaining unit); nor

14 ‘‘(II) present employees (or former employ15 ees who were covered while employed) of the

16 sponsoring employee organization, of an em17 ployer who is or was a party to any of the col18 lective bargaining agreements, or of the plan or

19 other arrangement or a related plan or arrange20 ment (nor covered on the basis of such present

21 or former employment);

22 does not exceed 15 percent of the total number of

23 individuals who are covered under the plan or ar24 rangement and who are present or former employees

25 who are or were covered under the plan or arrange-
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1 ment pursuant to a collective bargaining agreement

2 with a participating employer. The requirements of

3 the preceding provisions of this clause shall be treat4 ed as satisfied if, as of the end of the preceding plan

5 year, such covered individuals are comprised solely

6 of individuals who were covered individuals under

7 the plan or other arrangement as of the date of the

8 enactment of the Small Business Access and Choice

9 for Entrepreneurs Act of 1999 and, as of the end of

10 the preceding plan year, the number of such covered

11 individuals does not exceed 25 percent of the total

12 number of present and former employees enrolled

13 under the plan or other arrangement.

14 ‘‘(iii) The employee organization or other entity

15 sponsoring the plan or other arrangement certifies

16 to the Secretary each year, in a form and manner

17 which shall be prescribed by the Secretary through

18 negotiated rulemaking that the plan or other ar19 rangement meets the requirements of clauses (i) and

20 (ii).

21 ‘‘(D) For purposes of subparagraph (A)(i)(II), a plan

22 or arrangement shall be treated as established or main23 tained in accordance with this subparagraph only if—
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1 ‘‘(i) all of the benefits provided under the plan

2 or arrangement consist of health insurance coverage;

3 or

4 ‘‘(ii)(I) the plan or arrangement is a multiem5 ployer plan; and

6 ‘‘(II) the requirements of clause (B) of the pro7 viso to clause (5) of section 302(c) of the Labor

8 Management Relations Act, 1947 (29 U.S.C.

9 186(c)) are met with respect to such plan or other

10 arrangement.

11 ‘‘(E) For purposes of subparagraph (A)(i)(II), a plan

12 or arrangement shall be treated as established or main13 tained in accordance with this subparagraph only if—

14 ‘‘(i) the plan or arrangement is in effect as of

15 the date of the enactment of the Small Business Ac16 cess and Choice for Entrepreneurs Act of 1999; or

17 ‘‘(ii) the employee organization or other entity

18 sponsoring the plan or arrangement—

19 ‘‘(I) has been in existence for at least 3

20 years; or

21 ‘‘(II) demonstrates to the satisfaction of

22 the Secretary that the requirements of subpara23 graphs (C) and (D) are met with respect to the

24 plan or other arrangement.’’.
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1 (c) CONFORMING AMENDMENTS TO DEFINITIONS OF

2 PARTICIPANT AND BENEFICIARY.—Section 3(7) of such

3 Act (29 U.S.C. 1002(7)) is amended by adding at the end

4 the following new sentence: ‘‘Such term includes an indi5 vidual who is a covered individual described in paragraph

6 (40)(C)(ii).’’.

7 SEC. 104. ENFORCEMENT PROVISIONS RELATING TO ASSO8 CIATION HEALTH PLANS.

9 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

10 MISREPRESENTATIONS.—Section 501 of the Employee

11 Retirement Income Security Act of 1974 (29 U.S.C. 1131)

12 is amended—

13 (1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and

14 (2) by adding at the end the following new sub15 section:

16 ‘‘(b) Any person who willfully falsely represents, to

17 any employee, any employee’s beneficiary, any employer,

18 the Secretary, or any State, a plan or other arrangement

19 established or maintained for the purpose of offering or

20 providing any benefit described in section 3(1) to employ21 ees or their beneficiaries as—

22 ‘‘(1) being an association health plan which has

23 been certified under part 8;

24 ‘‘(2) having been established or maintained

25 under or pursuant to one or more collective bar-
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1 gaining agreements which are reached pursuant to

2 collective bargaining described in section 8(d) of the

3 National Labor Relations Act (29 U.S.C. 158(d)) or

4 paragraph Fourth of section 2 of the Railway Labor

5 Act (45 U.S.C. 152, paragraph Fourth) or which are

6 reached pursuant to labor-management negotiations

7 under similar provisions of State public employee re8 lations laws; or

9 ‘‘(3) being a plan or arrangement with respect

10 to which the requirements of subparagraph (C), (D),

11 or (E) of section 3(40) are met;

12 shall, upon conviction, be imprisoned not more than 5

13 years, be fined under title 18, United States Code, or

14 both.’’.

15 (b) CEASE ACTIVITIES ORDERS.—Section 502 of

16 such Act (29 U.S.C. 1132) is amended by adding at the

17 end the following new subsection:

18 ‘‘(n)(1) Subject to paragraph (2), upon application

19 by the Secretary showing the operation, promotion, or

20 marketing of an association health plan (or similar ar21 rangement providing benefits consisting of medical care

22 (as defined in section 733(a)(2))) that—

23 ‘‘(A) is not certified under part 8, is subject

24 under section 514(b)(6) to the insurance laws of any

25 State in which the plan or arrangement offers or
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1 provides benefits, and is not licensed, registered, or

2 otherwise approved under the insurance laws of such

3 State; or

4 ‘‘(B) is an association health plan certified

5 under part 8 and is not operating in accordance with

6 the requirements under part 8 for such certification,

7 a district court of the United States shall enter an order

8 requiring that the plan or arrangement cease activities.

9 ‘‘(2) Paragraph (1) shall not apply in the case of an

10 association health plan or other arrangement if the plan

11 or arrangement shows that—

12 ‘‘(A) all benefits under it referred to in para13 graph (1) consist of health insurance coverage; and

14 ‘‘(B) with respect to each State in which the

15 plan or arrangement offers or provides benefits, the

16 plan or arrangement is operating in accordance with

17 applicable State laws that are not superseded under

18 section 514.

19 ‘‘(3) The court may grant such additional equitable

20 relief, including any relief available under this title, as it

21 deems necessary to protect the interests of the public and

22 of persons having claims for benefits against the plan.’’.

23 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

24 Section 503 of such Act (29 U.S.C. 1133) (as amended
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1 by title I) is amended by adding at the end the following

2 new subsection:

3 ‘‘(c) ASSOCIATION HEALTH PLANS.—The terms of

4 each association health plan which is or has been certified

5 under part 8 shall require the board of trustees or the

6 named fiduciary (as applicable) to ensure that the require7 ments of this section are met in connection with claims

8 filed under the plan.’’.

9 SEC. 105. COOPERATION BETWEEN FEDERAL AND STATE

10 AUTHORITIES.

11 Section 506 of the Employee Retirement Income Se12 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

13 at the end the following new subsection:

14 ‘‘(c) RESPONSIBILITY OF STATES WITH RESPECT TO

15 ASSOCIATION HEALTH PLANS.—

16 ‘‘(1) AGREEMENTS WITH STATES.—A State

17 may enter into an agreement with the Secretary for

18 delegation to the State of some or all of—

19 ‘‘(A) the Secretary’s authority under sec20 tions 502 and 504 to enforce the requirements

21 for certification under part 8;

22 ‘‘(B) the Secretary’s authority to certify

23 association health plans under part 8 in accord24 ance with regulations of the Secretary applica25 ble to certification under part 8; or
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1 ‘‘(C) any combination of the Secretary’s

2 authority authorized to be delegated under sub3 paragraphs (A) and (B).

4 ‘‘(2) DELEGATIONS.—Any department, agency,

5 or instrumentality of a State to which authority is

6 delegated pursuant to an agreement entered into

7 under this paragraph may, if authorized under State

8 law and to the extent consistent with such agree9 ment, exercise the powers of the Secretary under

10 this title which relate to such authority.

11 ‘‘(3) RECOGNITION OF PRIMARY DOMICILE

12 STATE.—In entering into any agreement with a

13 State under subparagraph (A), the Secretary shall

14 ensure that, as a result of such agreement and all

15 other agreements entered into under subparagraph

16 (A), only one State will be recognized, with respect

17 to any particular association health plan, as the

18 State to which all authority has been delegated pur19 suant to such agreements in connection with such

20 plan. In carrying out this paragraph, the Secretary

21 shall take into account the places of residence of the

22 participants and beneficiaries under the plan and the

23 State in which the trust is maintained.’’.
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1 SEC. 106. EFFECTIVE DATE AND TRANSITIONAL AND

2 OTHER RULES.

3 (a) EFFECTIVE DATE.—The amendments made by

4 sections 101, 104, and 105 shall take effect on January

5 1, 2001. The amendments made by sections 102 and 103

6 shall take effect on the date of the enactment of this Act.

7 The Secretary of Labor shall first issue all regulations

8 necessary to carry out the amendments made by this sub9 title before January 1, 2001. Such regulations shall be

10 issued through negotiated rulemaking.

11 (b) EXCEPTION.—Section 801(a)(2) of the Employee

12 Retirement Income Security Act of 1974 (added by section

13 101) does not apply in connection with an association

14 health plan (certified under part 8 of subtitle B of title

15 I of such Act) existing on the date of the enactment of

16 this Act, if no benefits provided thereunder as of the date

17 of the enactment of this Act consist of health insurance

18 coverage (as defined in section 733(b)(1) of such Act).

19 (c) TREATMENT OF CERTAIN EXISTING HEALTH

20 BENEFITS PROGRAMS.—

21 (1) IN GENERAL.—In any case in which, as of

22 the date of the enactment of this Act, an arrange23 ment is maintained in a State for the purpose of

24 providing benefits consisting of medical care for the

25 employees and beneficiaries of its participating em26 ployers, at least 200 participating employers make
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1 contributions to such arrangement, such arrange2 ment has been in existence for at least 10 years, and

3 such arrangement is licensed under the laws of one

4 or more States to provide such benefits to its par5 ticipating employers, upon the filing with the appli6 cable authority (as defined in section 812(a)(5) of

7 the Employee Retirement Income Security Act of

8 1974 (as amended by this Act)) by the arrangement

9 of an application for certification of the arrangement

10 under part 8 of subtitle B of title I of such Act—

11 (A) such arrangement shall be deemed to

12 be a group health plan for purposes of title I

13 of such Act;

14 (B) the requirements of sections 801(a)(1)

15 and 803(a)(1) of the Employee Retirement In16 come Security Act of 1974 shall be deemed met

17 with respect to such arrangement;

18 (C) the requirements of section 803(b) of

19 such Act shall be deemed met, if the arrange20 ment is operated by a board of directors

21 which—

22 (i) is elected by the participating em23 ployers, with each employer having one

24 vote; and
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1 (ii) has complete fiscal control over

2 the arrangement and which is responsible

3 for all operations of the arrangement;

4 (D) the requirements of section 804(a) of

5 such Act shall be deemed met with respect to

6 such arrangement; and

7 (E) the arrangement may be certified by

8 any applicable authority with respect to its op9 erations in any State only if it operates in such

10 State on the date of certification.

11 The provisions of this subsection shall cease to apply

12 with respect to any such arrangement at such time

13 after the date of the enactment of this Act as the

14 applicable requirements of this subsection are not

15 met with respect to such arrangement.

16 (2) DEFINITIONS.—For purposes of this sub17 section, the terms ‘‘group health plan’’, ‘‘medical

18 care’’, and ‘‘participating employer’’ shall have the

19 meanings provided in section 812 of the Employee

20 Retirement Income Security Act of 1974, except

21 that the reference in paragraph (7) of such section

22 to an ‘‘association health plan’’ shall be deemed a

23 reference to an arrangement referred to in this sub24 section.
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1 TITLE II—DEDUCTION FOR

2 HEALTH INSURANCE COSTS

3 OF SELF-EMPLOYED INDIVID4 UALS

5 SEC. 201. DEDUCTION FOR HEALTH INSURANCE COSTS OF

6 SELF-EMPLOYED INDIVIDUALS INCREASED.

7 (a) IN GENERAL.—Section 162(l)(1) of the Internal

8 Revenue Code of 1986 (relating to special rules for health

9 insurance costs of self-employed individuals) is amended

10 to read as follows:

11 ‘‘(1) ALLOWANCE OF DEDUCTION.—In the case

12 of an individual who is an employee within the

13 meaning of section 401(c)(1), there shall be allowed

14 as a deduction under this section an amount equal

15 to the amount paid during the taxable year for in16 surance which constitutes medical care for the tax17 payer, the taxpayer’s spouse, and dependents.’’

18 (b) CLARIFICATION OF LIMITATIONS ON OTHER COV19 ERAGE.—The first sentence of section 162(l)(2)(B) of the

20 Internal Revenue Code of 1986 is amended to read as fol21 lows: ‘‘Paragraph (1) shall not apply to any taxpayer for

22 any calendar month for which the taxpayer participates

23 in any subsidized health plan maintained by any employer

24 (other than an employer described in section 401(c)(4))

25 of the taxpayer or the spouse of the taxpayer.’’
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1 SEC. 202. EFFECTIVE DATE.

2 The amendments made by section 201 shall apply to

3 taxable years beginning after December 31, 1998.

Æ