I

106TH CONGRESS

1ST SESSION H. R. 1687

To amend the Internal Revenue Code of 1986 to allow individuals a refundable credit against income tax for health insurance costs, to allow employees who elect not to participate in employer subsidized health plans

an exclusion from gross income for employer payments in lieu of such

participation, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 5, 1999

Mr. SHADEGG (for himself, Mr. HOSTETTLER, Mr. LARGENT, Mr. WAMP, Mr.

DOOLITTLE, Mr. ARMEY, Mr. SMITH of Michigan, Mr. GRAHAM, Mrs.

EMERSON, Mr. TANCREDO, Mr. NORWOOD, Mr. SALMON, Mr. WELDON

of Florida, and Mr. COBURN) introduced the following bill; which was referred to the Committee on Commerce, and in addition to the Committees

on Ways and Means, and Education and the Workforce, 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 the Internal Revenue Code of 1986 to allow individuals a refundable credit against income tax for health

insurance costs, to allow employees who elect not to

participate in employer subsidized health plans an exclusion from gross income for employer payments in lieu

of such participation, and for other purposes.

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; TABLE OF CONTENTS.

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

3 ‘‘Patients’ Health Care Choice Act of 1999’’.

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

5 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Sec. 3. Purposes.

TITLE I—HEALTHMARTS

Sec. 101. Expansion of consumer choice through Healthmarts.

TITLE II—HEALTH CARE ACCESS AND CHOICE THROUGH

INDIVIDUAL MEMBERSHIP ASSOCIATIONS (IMAS)

Sec. 201. Expansion of access and choice through individual membership associations (IMAs).

TITLE III—FEDERAL MATCHING FUNDING FOR STATE

INSURANCE EXPENDITURES

Sec. 301. Federal matching funding for State insurance expenditures.

TITLE IV—SMALL BUSINESS ACCESS AND CHOICE FOR

ENTREPRENEURS ACT OF 1999

Sec. 401. Short title of title.

Sec. 402. Rules.

Sec. 403. Clarification of treatment of single employer arrangements.

Sec. 404. Clarification of treatment of certain collectively bargained arrangements.

Sec. 405. Enforcement provisions.

Sec. 406. Cooperation between Federal and State authorities.

Sec. 407. Effective date and transitional and other rules.

TITLE V—IMPROVEMENT TO ACCESS AND CHOICE OF HEALTH

CARE

Sec. 501. Exclusion for employer payments made to compensate employees who

elect not to participate in employer-subsidized health plans.

Sec. 502. Family insurance allowance.

Sec. 503. Medical Savings Account Effectiveness Act of 1999.

Sec. 504. Increase of highest permitted deductibles under high deductible

health plans.

TITLE VI—PATIENT ACCESS TO INFORMATION

Sec. 601. Patient access to information regarding plan coverage, managed care

procedures, health care providers, and quality of medical care.

Sec. 602. Effective date.
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1 (c) CONSTITUTIONAL AUTHORITY TO ENACT THIS

2 LEGISLATION.—The constitutional authority upon which

3 this Act rests is the power of Congress to regulate com4 merce with foreign nations and among the several States,

5 set forth in article I, section 8 of the United States Con6 stitution.

7 SEC. 2. FINDINGS.

8 (a) NEED FOR STRUCTURAL REFORMS.—Congress

9 finds that the majority of Americans are receiving health

10 care of a quality unmatched elsewhere in the world but

11 that the method by which health care currently is financed

12 and delivered is inflationary and does not distribute qual13 ity care to all Americans. Congress further finds that the

14 major structural reforms must be implemented in order

15 to institute a competitive system based on individual

16 choice, under which each American is permitted individual

17 choice to select the method of health care delivery which

18 he believes is most appropriate for himself and his family,

19 with appropriate assistance from the United States gov20 ernment. Such a system would introduce internal incen21 tives for the cost-effective delivery of quality health care

22 to the American people.

23 (b) SPECIFIC DEFICIENCIES.—Congress finds that

24 the major deficiencies of the present method of delivering

25 and financing health care as follows:
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1 (1) EMPLOYER OWNERSHIP OF HEALTH BENE2 FITS.—The biggest problem with health care today

3 is that the tax code has encouraged employers, not

4 individuals, to become the purchaser of health insur5 ance. Employers have a tax incentive to offer health

6 care benefits to their employees, which means that

7 employers are truly the owner of the plan, not indi8 viduals. Therefore employees, who are the consumers

9 of health care services are unconcerned with and not

10 involved with issues of cost and over utilize health

11 care services in the belief that such services are

12 ‘‘free’’.

13 (2) INSUFFICIENT ACCESS.—Numerous persons

14 are not able to obtain sufficient health care either

15 because the necessary personnel and facilities are

16 not located in their communities or because they do

17 not have adequate financial resources to obtain such

18 services, or both.

19 (3) EXCESSIVE GOVERNMENT REGULATION.—

20 Continually increasing and complex Government reg21 ulation of the economic aspects of the health care

22 delivery system has proven ineffective in restraining

23 costs and is itself expensive and counterproductive in

24 fulfilling its purposes and detrimental to the care of

25 patients.
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1 (4) THIRD-PARTY PAYMENT SYSTEMS.—Pay2 ment by third-party payers (including commercial in3 surance companies and various levels of government)

4 for the preponderance of the health care delivered

5 each year insulates patients, as well as physicians,

6 hospitals, and other delivers of health care, from the

7 need to consider the cost of treatment in addition to

8 the medical benefit expected from it.

9 (5) REASONABLE COST REIMBURSEMENT.—Re10 imbursement of hospitals and other health care insti11 tutions by third-party payers on the basis of reason12 able costs of operation provides these institutions in13 sufficient incentives to introduce more efficient

14 methods of delivering care and at the same time di15 minishes the extent to which these institutions and

16 their patients are affected by the consequences of in17 efficiency and overexpansion.

18 (6) GOVERNMENT AND THIRD-PARTY PAYER.—

19 The present role of government as a third-party

20 payer poses a conflict of interest whereby the Gov21 ernment purchases or finances health care services

22 and unilaterally determines the amount the deliverer

23 will be paid for those services.

24 (7) LACK OF COMPETITION.—The present sys25 tem of financing and regulation prevents health care
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1 deliverers from competing with each other on the

2 basis of efficiency and price as well as quality.

3 SEC. 3. PURPOSES.

4 The purposes of Act are—

5 (1) to make it possible for individuals, employ6 ees, and the self-employed to purchase and own their

7 own health insurance without suffering any negative

8 tax consequences;

9 (2) to enable individuals to make their own in10 formed choice of the method by which their health

11 care is provided, the persons who deliver it, and the

12 price they wish to pay for it;

13 (3) to assist individuals in obtaining and in

14 paying for basic health care services;

15 (4) to render patients and deliverers sensitive to

16 the cost of health care, giving them both the incen17 tive and the ability to restrain undesired increases in

18 health care costs;

19 (5) to simplify and rationalize the payment

20 mechanism for health care services;

21 (6) to foster the development of numerous, var22 ied, and innovative systems of providing health care

23 which will compete against each other in terms of

24 price, service, and quality, and thus allow the Amer25 ican people to benefit from competitive forces which
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1 will reward efficient and effective deliverers and

2 eliminate those which provide unsatisfactory quality

3 of care or are inefficient;

4 (7) to replace governmental regulation of the

5 economic aspects of health care delivery with indi6 vidual choice, private initiative, and marketplace in7 centives and disciplines;

8 (8) to encourage the development of systems of

9 delivering health care which are capable of supplying

10 a broad range of health care services in a com11 prehensive and systematic manner, and

12 (9) to preserve the independence of health care

13 deliverers and encourage their close identification

14 with and their accountability to the individuals they

15 serve.

16 TITLE I—HEALTHMARTS

17 SEC. 101. EXPANSION OF CONSUMER CHOICE THROUGH

18 HEALTHMARTS.

19 The Public Health Service Act is amended by adding

20 at the end the following new title:

21 ‘‘TITLE XXVIII—HEALTHMARTS

22 ‘‘SEC. 2801. DEFINITION OF HEALTHMART.

23 ‘‘(a) IN GENERAL.—For purposes of this title, the

24 term ‘HealthMart’ means a legal entity that meets the fol25 lowing requirements:
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1 ‘‘(1) ORGANIZATION.—The HealthMart is an

2 organization operated under the direction of a board

3 of directors which is composed of representatives of

4 not fewer than 2 from each of the following:

5 ‘‘(A) Employers.

6 ‘‘(B) Employees.

7 ‘‘(C) Individuals (other than those de8 scribed in subparagraph (B)) who are eligible to

9 participate in the HealthMart.

10 ‘‘(D) Health care providers, which may be

11 physicians, other health care professionals,

12 health care facilities, or any combination there13 of.

14 ‘‘(E) Entities, such as insurance compa15 nies, health maintenance organizations, and li16 censed provider-sponsored organizations, that

17 underwrite or administer health benefits cov18 erage.

19 ‘‘(2) OFFERING HEALTH BENEFITS COV20 ERAGE.—

21 ‘‘(A) DIFFERENT GROUPS.—The

22 HealthMart, in conjunction with those health

23 insurance issuers that offer health benefits cov24 erage through the HealthMart, makes available

25 health benefits coverage in the manner de-
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1 scribed in subsection (b) to all employers, eligi2 ble employees, and individuals in the manner

3 described in subsection (c)(2) at rates (includ4 ing employer’s and employee’s share, if applica5 ble) that are established by the health insurance

6 issuer on a policy or product specific basis and

7 that may vary only as permissible under State

8 law. A HealthMart is deemed to be a group

9 health plan for purposes of applying section 702

10 of the Employee Retirement Income Security

11 Act of 1974, section 2702 of this Act, and sec12 tion 9802(b) of the Internal Revenue Code of

13 1986 (which limit variation among similarly sit14 uated individuals of required premiums for

15 health benefits coverage on the basis of health

16 status-related factors).

17 ‘‘(B) NONDISCRIMINATION IN COVERAGE

18 OFFERED.—

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

20 (ii), the HealthMart may not offer health

21 benefits coverage to an eligible employee or

22 individual in a geographic area (as speci23 fied under paragraph (3)(A)) unless the

24 same coverage is offered to all such em25 ployees or individuals in the same geo-
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1 graphic area. Section 2711(a)(1)(B) of this

2 Act limits denial of enrollment of certain

3 eligible individuals under health benefits

4 coverage in the small group market.

5 ‘‘(ii) CONSTRUCTION.—Nothing in

6 this title shall be construed as requiring or

7 permitting a health insurance issuer to

8 provide coverage outside the service area of

9 the issuer, as approved under State law.

10 ‘‘(C) NO FINANCIAL UNDERWRITING.—The

11 HealthMart provides health benefits coverage

12 only through contracts with health insurance

13 issuers and does not assume insurance risk with

14 respect to such coverage.

15 ‘‘(D) MINIMUM COVERAGE.—By the end of

16 the first year of its operation and thereafter,

17 the HealthMart maintains not fewer than 10

18 purchasers and 100 members.

19 ‘‘(3) GEOGRAPHIC AREAS.—

20 ‘‘(A) SPECIFICATION OF GEOGRAPHIC

21 AREAS.—The HealthMart shall specify the geo22 graphic area (or areas) in which it makes avail23 able health benefits coverage offered by health

24 insurance issuers to employers, or individuals,

25 as the case may be. Any such area shall encom-
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1 pass at least one entire county or equivalent

2 area.

3 ‘‘(B) MULTISTATE AREAS.—In the case of

4 a HealthMart that serves more than one State,

5 such geographic areas may be areas that in6 clude portions of two or more contiguous

7 States.

8 ‘‘(C) MULTIPLE HEALTHMARTS PER9 MITTED IN SINGLE GEOGRAPHIC AREA.—Noth10 ing in this title shall be construed as preventing

11 the establishment and operation of more than

12 one HealthMart in a geographic area or as lim13 iting the number of HealthMarts that may op14 erate in any area.

15 ‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES

16 TO PURCHASERS.—

17 ‘‘(A) IN GENERAL.—The HealthMart pro18 vides administrative services for purchasers.

19 Such services may include accounting, billing,

20 enrollment information, and employee coverage

21 status reports.

22 ‘‘(B) CONSTRUCTION.—Nothing in this

23 subsection shall be construed as preventing a

24 HealthMart from serving as an administrative

25 service organization to any entity.
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1 ‘‘(5) DISSEMINATION OF INFORMATION.—The

2 HealthMart collects and disseminates (or arranges

3 for the collection and dissemination of) consumer4 oriented information on the scope, cost, and enrollee

5 satisfaction of all coverage options offered through

6 the HealthMart to its members and eligible individ7 uals. Such information shall be defined by the

8 HealthMart and shall be in a manner appropriate to

9 the type of coverage offered. To the extent prac10 ticable, such information shall include information

11 on provider performance, locations and hours of op12 eration of providers, outcomes, and similar matters.

13 Nothing in this section shall be construed as pre14 venting the dissemination of such information or

15 other information by the HealthMart or by health

16 insurance issuers through electronic or other means.

17 ‘‘(6) FILING INFORMATION.—The

18 HealthMart—

19 ‘‘(A) files with the applicable Federal au20 thority information that demonstrates the

21 HealthMart’s compliance with the applicable re22 quirements of this title; or

23 ‘‘(B) in accordance with rules established

24 under section 2803(a), files with a State such
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1 information as the State may require to dem2 onstrate such compliance.

3 ‘‘(b) HEALTH BENEFITS COVERAGE REQUIRE4 MENTS.—

5 ‘‘(1) COMPLIANCE WITH CONSUMER PROTEC6 TION REQUIREMENTS.—Any health benefits coverage

7 offered through a HealthMart shall—

8 ‘‘(A) be underwritten by a health insurance

9 issuer that—

10 ‘‘(i) is licensed (or otherwise regu11 lated) under State law,

12 ‘‘(ii) meets all applicable State stand13 ards relating to consumer protection, sub14 ject to section 2802(b), and

15 ‘‘(iii) offers the coverage under a con16 tract with the HealthMart;

17 ‘‘(B) subject to paragraph (2), be approved

18 or otherwise permitted to be offered under

19 State law; and

20 ‘‘(C) provide full portability of creditable

21 coverage for individuals who remain members of

22 the same HealthMart notwithstanding that they

23 change the employer through which they are

24 members in accordance with the provisions of

25 the parts 6 and 7 of subtitle B of title I of the
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1 Employee Retirement Income Security Act of

2 1974 and titles XXII and XXVII of this Act,

3 so long as both employers are purchasers in the

4 HealthMart, and notwithstanding that they ter5 minate such employment, if the HealthMart

6 permits enrollment directly by eligible individ7 uals.

8 ‘‘(2) ALTERNATIVE PROCESS FOR APPROVAL OF

9 HEALTH BENEFITS COVERAGE IN CASE OF DISCRIMI10 NATION OR DELAY.—

11 ‘‘(A) IN GENERAL.—The requirement of

12 paragraph (1)(B) shall not apply to a policy or

13 product of health benefits coverage offered in a

14 State if the health insurance issuer seeking to

15 offer such policy or product files an application

16 to waive such requirement with the applicable

17 Federal authority, and the authority deter18 mines, based on the application and other evi19 dence presented to the authority, that—

20 ‘‘(i) either (or both) of the grounds

21 described in subparagraph (B) for approval

22 of the application has been met; and

23 ‘‘(ii) the coverage meets the applicable

24 State standards (other than those that

25 have been preempted under section 2802).
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1 ‘‘(B) GROUNDS.—The grounds described

2 in this subparagraph with respect to a policy or

3 product of health benefits coverage are as fol4 lows:

5 ‘‘(i) FAILURE TO ACT ON POLICY,

6 PRODUCT, OR RATE APPLICATION ON A

7 TIMELY BASIS.—The State has failed to

8 complete action on the policy or product

9 (or rates for the policy or product) within

10 90 days of the date of the State’s receipt

11 of a substantially complete application. No

12 period before the date of the enactment of

13 this section shall be included in deter14 mining such 90-day period.

15 ‘‘(ii) DENIAL OF APPLICATION BASED

16 ON DISCRIMINATORY TREATMENT.—The

17 State has denied such an application

18 and—

19 ‘‘(I) the standards or review

20 process imposed by the State as a

21 condition of approval of the policy or

22 product imposes either any material

23 requirements, procedures, or stand24 ards to such policy or product that

25 are not generally applicable to other
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1 policies and products offered or any

2 requirements that are preempted

3 under section 2802; or

4 ‘‘(II) the State requires the

5 issuer, as a condition of approval of

6 the policy or product, to offer any pol7 icy or product other than such policy

8 or product.

9 ‘‘(C) ENFORCEMENT.—In the case of a

10 waiver granted under subparagraph (A) to an

11 issuer with respect to a State, the Secretary

12 may enter into an agreement with the State

13 under which the State agrees to provide for

14 monitoring and enforcement activities with re15 spect to compliance of such an issuer and its

16 health insurance coverage with the applicable

17 State standards described in subparagraph

18 (A)(ii). Such monitoring and enforcement shall

19 be conducted by the State in the same manner

20 as the State enforces such standards with re21 spect to other health insurance issuers and

22 plans, without discrimination based on the type

23 of issuer to which the standards apply. Such an

24 agreement shall specify or establish mechanisms

25 by which compliance activities are undertaken,
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1 while not lengthening the time required to re2 view and process applications for waivers under

3 subparagraph (A).

4 ‘‘(3) EXAMPLES OF TYPES OF COVERAGE.—The

5 benefits coverage made available through a

6 HealthMart may include, but is not limited to, any

7 of the following if it meets the other applicable re8 quirements of this title:

9 ‘‘(A) Coverage through a health mainte10 nance organization.

11 ‘‘(B) Coverage in connection with a pre12 ferred provider organization.

13 ‘‘(C) Coverage in connection with a li14 censed provider-sponsored organization.

15 ‘‘(D) Indemnity coverage through an insur16 ance company.

17 ‘‘(E) Coverage offered in connection with a

18 contribution into a medical savings account or

19 flexible spending account.

20 ‘‘(F) Coverage that includes a point-of21 service option.

22 ‘‘(G) Any combination of such types of

23 coverage.

24 ‘‘(4) WELLNESS BONUSES FOR HEALTH PRO25 MOTION.—Nothing in this title shall be construed as
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1 precluding a health insurance issuer offering health

2 benefits coverage through a HealthMart from estab3 lishing premium discounts or rebates for members or

4 from modifying otherwise applicable copayments or

5 deductibles in return for adherence to programs of

6 health promotion and disease prevention so long as

7 such programs are agreed to in advance by the

8 HealthMart and comply with all other provisions of

9 this title and do not discriminate among similarly

10 situated members.

11 ‘‘(c) PURCHASERS; MEMBERS; HEALTH INSURANCE

12 ISSUERS.—

13 ‘‘(1) PURCHASERS.—

14 ‘‘(A) IN GENERAL.—Subject to the provi15 sions of this title, a HealthMart shall permit

16 any employer or any individual described in

17 subsection (a)(1)(C) to contract with the

18 HealthMart for the purchase of health benefits

19 coverage for its employees and dependents of

20 those employees or for the individual (and the

21 individual’s dependents), respectively, and may

22 not vary conditions of eligibility (including pre23 mium rates and membership fees) of an em24 ployer or individual to be a purchaser.
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1 ‘‘(B) ROLE OF ASSOCIATIONS, BROKERS,

2 AND LICENSED HEALTH INSURANCE AGENTS.—

3 Nothing in this section shall be construed as

4 preventing an association, broker, licensed

5 health insurance agent, or other entity from as6 sisting or representing a HealthMart or employ7 ers or individuals from entering into appro8 priate arrangements to carry out this title.

9 ‘‘(C) PERIOD OF CONTRACT.—The

10 HealthMart may not require a contract under

11 subparagraph (A) between a HealthMart and a

12 purchaser to be effective for a period of longer

13 than 24 months. The previous sentence shall

14 not be construed as preventing such a contract

15 from being extended for additional 24-month

16 periods or preventing the purchaser from volun17 tarily electing a contract period of longer than

18 24 months.

19 ‘‘(D) EXCLUSIVE NATURE OF CON20 TRACT.—

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

22 (ii), such a contract shall provide that the

23 purchaser agrees not to obtain or sponsor

24 health benefits coverage, on behalf of any
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1 eligible employees (and their dependents),

2 other than through the HealthMart.

3 ‘‘(ii) EXCEPTION IF NO COVERAGE OF4 FERED IN AREA OF RESIDENCES.—Clause

5 (i) shall not apply to an eligible individual

6 who resides in an area for which no cov7 erage is offered by any health insurance

8 issuer through the HealthMart.

9 ‘‘(iii) NOTHING PRECLUDING INDI10 VIDUAL EMPLOYEE OPT-OUT.—Nothing in

11 this subparagraph shall be construed as re12 quiring an eligible employee of a large or

13 small employer that is a purchaser to ob14 tain health benefits coverage through the

15 HealthMart.

16 ‘‘(2) MEMBERS.—

17 ‘‘(A) IN GENERAL.—

18 ‘‘(i) EMPLOYMENT BASED MEMBER19 SHIP.—Under rules established to carry

20 out this title, with respect to an employer

21 that has a purchaser contract with a

22 HealthMart, individuals who are employees

23 of the employer may enroll for health bene24 fits coverage (including coverage for de25 pendents of such enrolling employees) of-
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1 fered by a health insurance issuer through

2 the HealthMart.

3 ‘‘(ii) INDIVIDUALS.—Under rules es4 tablished to carry out this title, with re5 spect to an individual who has a purchaser

6 contract with a HealthMart for himself or

7 herself, the individual may enroll for health

8 benefits coverage (including coverage for

9 dependents of such individual) offered by a

10 health insurance issuer through the

11 HealthMart.

12 ‘‘(B) NONDISCRIMINATION IN ENROLL13 MENT.—A HealthMart may not deny enroll14 ment as a member to an individual who is an

15 employee or individual (or dependent of such an

16 employee or individual) eligible to be so enrolled

17 based on health status-related factors, except as

18 may be permitted consistent with section

19 2742(b).

20 ‘‘(C) ANNUAL OPEN ENROLLMENT PE21 RIOD.—In the case of members enrolled in

22 health benefits coverage offered by a health in23 surance issuer through a HealthMart, subject

24 to subparagraph (D), the HealthMart shall pro25 vide for an annual open enrollment period of 30
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1 days during which such members may change

2 the coverage option in which the members are

3 enrolled.

4 ‘‘(D) RULES OF ELIGIBILITY.—Nothing in

5 this paragraph shall preclude a HealthMart

6 from establishing rules of employee or indi7 vidual eligibility for enrollment and reenroll8 ment of members during the annual open en9 rollment period under subparagraph (C). Such

10 rules shall be applied consistently to all pur11 chasers and members within the HealthMart

12 and shall not be based in any manner on health

13 status-related factors and may not conflict with

14 sections 2701 and 2702 of this Act.

15 ‘‘(3) HEALTH INSURANCE ISSUERS.—

16 ‘‘(A) PREMIUM COLLECTION.—The con17 tract between a HealthMart and a health insur18 ance issuer shall provide, with respect to a

19 member enrolled with health benefits coverage

20 offered by the issuer through the HealthMart,

21 for the payment of the premiums collected by

22 the HealthMart (or the issuer) for such cov23 erage (less a pre-determined administrative

24 charge negotiated by the HealthMart and the

25 issuer) to the issuer.
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1 ‘‘(B) SCOPE OF SERVICE AREA.—Nothing

2 in this title shall be construed as requiring the

3 service area of a health insurance issuer with

4 respect to health insurance coverage to cover

5 the entire geographic area served by a

6 HealthMart.

7 ‘‘(C) AVAILABILITY OF COVERAGE OP8 TIONS.—

9 ‘‘(i) IN GENERAL.—A HealthMart

10 shall enter into contracts with one or more

11 health insurance issuers in a manner that

12 assures that at least 2 health insurance

13 coverage options are made available.

14 ‘‘(ii) REQUIREMENT OF NON-NET15 WORK OPTION.—At least one of the health

16 insurance coverage options made available

17 under clause (i) shall be a non-network

18 coverage option under which enrollees may

19 obtain benefits for health care items and

20 services that are not provided under a con21 tract between the provider of the service

22 and the issuer involved.

23 ‘‘(d) PREVENTION OF CONFLICTS OF INTEREST.—

24 ‘‘(1) FOR BOARDS OF DIRECTORS.—A member

25 of a board of directors of a HealthMart may not
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1 serve as an employee or paid consultant to the

2 HealthMart, but may receive reasonable reimburse3 ment for travel expenses for purposes of attending

4 meetings of the board or committees thereof.

5 ‘‘(2) FOR BOARDS OF DIRECTORS OR EMPLOY6 EES.—An individual is not eligible to serve in a paid

7 or unpaid capacity on the board of directors of a

8 HealthMart or as an employee of the HealthMart, if

9 the individual is employed by, represents in any ca10 pacity, owns, or controls any ownership interest in

11 an organization from whom the HealthMart receives

12 contributions, grants, or other funds not connected

13 with a contract for coverage through the

14 HealthMart.

15 ‘‘(3) EMPLOYMENT AND EMPLOYEE REP16 RESENTATIVES.—

17 ‘‘(A) IN GENERAL.—An individual who is

18 serving on a board of directors of a HealthMart

19 as a representative described in subparagraph

20 (A) or (B) of section 2801(a)(1) shall not be

21 employed by or affiliated with a health insur22 ance issuer or be licensed as or employed by or

23 affiliated with a health care provider.

24 ‘‘(B) CONSTRUCTION.—For purposes of

25 subparagraph (A), the term ‘‘affiliated’’ does
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1 not include membership in a health benefits

2 plan or the obtaining of health benefits cov3 erage offered by a health insurance issuer.

4 ‘‘(e) CONSTRUCTION.—

5 ‘‘(1) NETWORK OF AFFILIATED

6 HEALTHMARTS.—Nothing in this section shall be

7 construed as preventing one or more HealthMarts

8 serving different areas (whether or not contiguous)

9 from providing for some or all of the following

10 (through a single administrative organization or oth11 erwise):

12 ‘‘(A) Coordinating the offering of the same

13 or similar health benefits coverage in different

14 areas served by the different HealthMarts.

15 ‘‘(B) Providing for crediting of deductibles

16 and other cost-sharing for individuals who are

17 provided health benefits coverage through the

18 HealthMarts (or affiliated HealthMarts)

19 after—

20 ‘‘(i) a change of employers through

21 which the coverage is provided, or

22 ‘‘(ii) a change in place of employment

23 to an area not served by the previous

24 HealthMart.
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1 ‘‘(2) PERMITTING HEALTHMARTS TO ADJUST

2 DISTRIBUTIONS AMONG ISSUERS TO REFLECT REL3 ATIVE RISK OF ENROLLEES.—Nothing in this sec4 tion shall be construed as precluding a HealthMart

5 from providing for adjustments in amounts distrib6 uted among the health insurance issuers offering

7 health benefits coverage through the HealthMart

8 based on factors such as the relative health care risk

9 of members enrolled under the coverage offered by

10 the different issuers.

11 ‘‘SEC. 2802. APPLICATION OF CERTAIN LAWS AND REQUIRE12 MENTS.

13 ‘‘(a) AUTHORITY OF STATES.—Nothing in this sec14 tion shall be construed as preempting State laws relating

15 to the following:

16 ‘‘(1) The regulation of underwriters of health

17 coverage, including licensure and solvency require18 ments.

19 ‘‘(2) The application of premium taxes and re20 quired payments for guaranty funds or for contribu21 tions to high-risk pools.

22 ‘‘(3) The application of fair marketing require23 ments and other consumer protections (other than

24 those specifically relating to an item described in

25 subsection (b)).
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1 ‘‘(4) The application of requirements relating to

2 the adjustment of rates for health insurance cov3 erage.

4 ‘‘(b) TREATMENT OF BENEFIT AND GROUPING RE5 QUIREMENTS.—State laws insofar as they relate to any

6 of the following are superseded and shall not apply to

7 health benefits coverage made available through a

8 HealthMart:

9 ‘‘(1) Benefit requirements for health benefits

10 coverage offered through a HealthMart, including

11 (but not limited to) requirements relating to cov12 erage of specific providers, specific services or condi13 tions, or the amount, duration, or scope of benefits,

14 but not including requirements to the extent re15 quired to implement title XXVII or other Federal

16 law and to the extent the requirement prohibits an

17 exclusion of a specific disease from such coverage.

18 ‘‘(2) Requirements (commonly referred to as

19 fictitious group laws) relating to grouping and simi20 lar requirements for such coverage to the extent

21 such requirements impede the establishment and op22 eration of HealthMarts pursuant to this title.

23 ‘‘(3) Any other requirements (including limita24 tions on compensation arrangements) that, directly

25 or indirectly, preclude (or have the effect of pre-
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1 cluding) the offering of such coverage through a

2 HealthMart, if the HealthMart meets the require3 ments of this title.

4 Any State law or regulation relating to the composition

5 or organization of a HealthMart is preempted to the ex6 tent the law or regulation is inconsistent with the provi7 sions of this title.

8 ‘‘(c) APPLICATION OF ERISA FIDUCIARY AND DIS9 CLOSURE REQUIREMENTS.—The board of directors of a

10 HealthMart is deemed to be a plan administrator of an

11 employee welfare benefit plan which is a group health plan

12 for purposes of applying parts 1 and 4 of subtitle B of

13 title I of the Employee Retirement Income Security Act

14 of 1974 and those provisions of part 5 of such subtitle

15 which are applicable to enforcement of such parts 1 and

16 4, and the HealthMart shall be treated as such a plan

17 and the enrollees enrolled on the basis of employment shall

18 be treated as participants and beneficiaries for purposes

19 of applying such provisions pursuant to this subsection.

20 ‘‘(d) APPLICATION OF ERISA RENEWABILITY PRO21 TECTION.—A HealthMart is deemed to be group health

22 plan that is a multiple employer welfare arrangement for

23 purposes of applying section 703 of the Employee Retire24 ment Income Security Act of 1974.
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1 ‘‘(e) APPLICATION OF RULES FOR NETWORK PLANS

2 AND FINANCIAL CAPACITY.—The provisions of sub3 sections (c) and (d) of section 2711 apply to health bene4 fits coverage offered by a health insurance issuer through

5 a HealthMart.

6 ‘‘(f) CONSTRUCTION RELATING TO OFFERING RE7 QUIREMENT.—Nothing in section 2711(a) of this Act or

8 703 of the Employee Retirement Income Security Act of

9 1974 shall be construed as permitting the offering outside

10 the HealthMart of health benefits coverage that is only

11 made available through a HealthMart under this section

12 because of the application of subsection (b).

13 ‘‘(g) APPLICATION TO GUARANTEED RENEWABILITY

14 REQUIREMENTS IN CASE OF DISCONTINUATION OF AN

15 ISSUER.—For purposes of applying section 2712 in the

16 case of health insurance coverage offered by a health in17 surance issuer through a HealthMart, if the contract be18 tween the HealthMart and the issuer is terminated and

19 the HealthMart continues to make available any health in20 surance coverage after the date of such termination, the

21 following rules apply:

22 ‘‘(1) RENEWABILITY.—The HealthMart shall

23 fulfill the obligation under such section of the issuer

24 renewing and continuing in force coverage by offer25 ing purchasers (and members and their dependents)
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1 all available health benefits coverage that would oth2 erwise be available to similarly-situated purchasers

3 and members from the remaining participating

4 health insurance issuers in the same manner as

5 would be required of issuers under section 2712(c).

6 ‘‘(2) APPLICATION OF ASSOCIATION RULES.—

7 The HealthMart shall be considered an association

8 for purposes of applying section 2712(e).

9 ‘‘(h) CONSTRUCTION IN RELATION TO CERTAIN

10 OTHER LAWS.—Nothing in this title shall be construed

11 as modifying or affecting the applicability to HealthMarts

12 or health benefits coverage offered by a health insurance

13 issuer through a HealthMart of parts 6 and 7 of subtitle

14 B of title I of the Employee Retirement Income Security

15 Act of 1974 or titles XXII and XXVII of this Act.

16 ‘‘SEC. 2803. ADMINISTRATION.

17 ‘‘(a) IN GENERAL.—The applicable Federal authority

18 shall administer this title and is authorized to issue such

19 regulations as may be required to carry out this title. Such

20 regulations shall be subject to Congressional review under

21 the provisions of chapter 8 of title 5, United States Code.

22 The applicable Federal authority shall incorporate the

23 process of ‘deemed file and use’ with respect to the infor24 mation filed under section 2801(a)(6)(A) and shall deter25 mine whether information filed by a HealthMart dem-
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1 onstrates compliance with the applicable requirements of

2 this title. Such authority shall exercise its authority under

3 this title in a manner that fosters and promotes the devel4 opment of HealthMarts in order to improve access to

5 health care coverage and services.

6 ‘‘(b) PERIODIC REPORTS.—The applicable Federal

7 authority shall submit to Congress a report every 30

8 months, during the 10-year period beginning on the effec9 tive date of the rules promulgated by the applicable Fed10 eral authority to carry out this title, on the effectiveness

11 of this title in promoting coverage of uninsured individ12 uals. Such authority may provide for the production of

13 such reports through one or more contracts with appro14 priate private entities.

15 ‘‘SEC. 2804. DEFINITIONS.

16 ‘‘For purposes of this title:

17 ‘‘(1) APPLICABLE FEDERAL AUTHORITY.—The

18 term ‘applicable Federal authority’ means the Sec19 retary of Health and Human Services .

20 ‘‘(2) ELIGIBLE EMPLOYEE OR INDIVIDUAL.—

21 The term ‘eligible’ means, with respect to an em22 ployee or other individual and a HealthMart, an em23 ployee or individual who is eligible under section

24 2801(c)(2) to enroll or be enrolled in health benefits

25 coverage offered through the HealthMart.
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1 ‘‘(3) EMPLOYER; EMPLOYEE; DEPENDENT.—

2 Except as the applicable Federal authority may oth3 erwise provide, the terms ‘employer’, ‘employee’, and

4 ‘dependent’, as applied to health insurance coverage

5 offered by a health insurance issuer licensed (or oth6 erwise regulated) in a State, shall have the meanings

7 applied to such terms with respect to such coverage

8 under the laws of the State relating to such coverage

9 and such an issuer. The term ‘dependent’ may in10 clude the spouse and children of the individual in11 volved.

12 ‘‘(4) HEALTH BENEFITS COVERAGE.—The term

13 ‘health benefits coverage’ has the meaning given the

14 term group health insurance coverage in section

15 2791(b)(4).

16 ‘‘(5) HEALTH INSURANCE ISSUER.—The term

17 ‘health insurance issuer’ has the meaning given such

18 term in section 2791(b)(2).

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

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

21 given such term in section 2791(d)(9).

22 ‘‘(7) HEALTHMART.—The term ‘HealthMart’ is

23 defined in section 2801(a).

24 ‘‘(8) MEMBER.—The term ‘member‘‘ means,

25 with respect to a HealthMart, an individual enrolled
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1 for health benefits coverage through the HealthMart

2 under section 2801(c)(2).

3 ‘‘(9) PURCHASER.—The term ‘purchaser’

4 means, with respect to a HealthMart, an employer

5 or individual that has contracted under section

6 2801(c)(1)(A) with the HealthMart for the purchase

7 of health benefits coverage.’’.

8 TITLE II—HEALTH CARE ACCESS

9 AND CHOICE THROUGH INDI10 VIDUAL MEMBERSHIP ASSO11 CIATIONS (IMAs)

12 SEC. 201. EXPANSION OF ACCESS AND CHOICE THROUGH

13 INDIVIDUAL MEMBERSHIP ASSOCIATIONS

14 (IMAs).

15 The Public Health Service Act, as amended by sec16 tion 101, is further amended by adding at the end the

17 following new title:

18 ‘‘TITLE XXIX—INDIVIDUAL MEMBERSHIP

19 ASSOCIATIONS

20 ‘‘SEC. 2901. DEFINITION OF INDIVIDUAL MEMBERSHIP AS21 SOCIATION (IMA).

22 ‘‘(a) IN GENERAL.—For purposes of this title, the

23 terms ‘individual membership association’ and ‘IMA’

24 mean a legal entity that meets the following requirements:
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1 ‘‘(1) ORGANIZATION.—The IMA is an organiza2 tion operated under the direction of an association

3 (as defined in section 2904(1)).

4 ‘‘(2) OFFERING HEALTH BENEFITS COV5 ERAGE.—

6 ‘‘(A) DIFFERENT GROUPS.—The IMA, in

7 conjunction with those health insurance issuers

8 that offer health benefits coverage through the

9 IMA, makes available health benefits coverage

10 in the manner described in subsection (b) to all

11 members of the IMA and the dependents of

12 such members in the manner described in sub13 section (c)(2) at rates that are established by

14 the health insurance issuer on a policy or prod15 uct specific basis and that may vary only as

16 permissible under State law.

17 ‘‘(B) NONDISCRIMINATION IN COVERAGE

18 OFFERED.—

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

20 (ii), the IMA may not offer health benefits

21 coverage to a member of an IMA unless

22 the same coverage is offered to all such

23 members of the IMA.

24 ‘‘(ii) CONSTRUCTION.—Nothing in

25 this title shall be construed as requiring or
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1 permitting a health insurance issuer to

2 provide coverage outside the service area of

3 the issuer, as approved under State law, or

4 requiring a health insurance issuer from

5 excluding or limiting the coverage on any

6 individual, subject to the requirement of

7 section 2741.

8 ‘‘(C) NO FINANCIAL UNDERWRITING.—The

9 IMA provides health benefits coverage only

10 through contracts with health insurance issuers

11 and does not assume insurance risk with re12 spect to such coverage.

13 ‘‘(3) GEOGRAPHIC AREAS.—Nothing in this title

14 shall be construed as preventing the establishment

15 and operation of more than one IMA in a geographic

16 area or as limiting the number of IMAs that may

17 operate in any area.

18 ‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES

19 TO PURCHASERS.—

20 ‘‘(A) IN GENERAL.—The IMA may provide

21 administrative services for members. Such serv22 ices may include accounting, billing, and enroll23 ment information.

24 ‘‘(B) CONSTRUCTION.—Nothing in this

25 subsection shall be construed as preventing an
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1 IMA from serving as an administrative service

2 organization to any entity.

3 ‘‘(5) FILING INFORMATION.—The IMA files

4 with the Secretary information that demonstrates

5 the IMA’s compliance with the applicable require6 ments of this title.

7 ‘‘(b) HEALTH BENEFITS COVERAGE REQUIRE8 MENTS.—

9 ‘‘(1) COMPLIANCE WITH CONSUMER PROTEC10 TION REQUIREMENTS.—Any health benefits coverage

11 offered through an IMA shall—

12 ‘‘(A) be underwritten by a health insurance

13 issuer that—

14 ‘‘(i) is licensed (or otherwise regu15 lated) under State law,

16 ‘‘(ii) meets all applicable State stand17 ards relating to consumer protection, sub18 ject to section 2902(b), and

19 ‘‘(iii) offers the coverage under a con20 tract with the IMA; and

21 ‘‘(B) subject to paragraph (2), be approved

22 or otherwise permitted to be offered under

23 State law.

24 ‘‘(2) EXAMPLES OF TYPES OF COVERAGE.—The

25 benefits coverage made available through an IMA
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1 may include, but is not limited to, any of the fol2 lowing if it meets the other applicable requirements

3 of this title:

4 ‘‘(A) Coverage through a health mainte5 nance organization.

6 ‘‘(B) Coverage in connection with a pre7 ferred provider organization.

8 ‘‘(C) Coverage in connection with a li9 censed provider-sponsored organization.

10 ‘‘(D) Indemnity coverage through an insur11 ance company.

12 ‘‘(E) Coverage offered in connection with a

13 contribution into a medical savings account or

14 flexible spending account.

15 ‘‘(F) Coverage that includes a point-of16 service option.

17 ‘‘(G) Any combination of such types of

18 coverage.

19 ‘‘(3) WELLNESS BONUSES FOR HEALTH PRO20 MOTION.—Nothing in this title shall be construed as

21 precluding a health insurance issuer offering health

22 benefits coverage through an IMA from establishing

23 premium discounts or rebates for members or from

24 modifying otherwise applicable copayments or

25 deductibles in return for adherence to programs of
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1 health promotion and disease prevention so long as

2 such programs are agreed to in advance by the IMA

3 and comply with all other provisions of this title and

4 do not discriminate among similarly situated mem5 bers.

6 ‘‘(c) MEMBERS; HEALTH INSURANCE ISSUERS.—

7 ‘‘(1) MEMBERS.—

8 ‘‘(A) IN GENERAL.—Under rules estab9 lished to carry out this title, with respect to an

10 individual who is a member of an IMA, the in11 dividual may enroll for health benefits coverage

12 (including coverage for dependents of such indi13 vidual) offered by a health insurance issuer

14 through the IMA.

15 ‘‘(B) RULES FOR ENROLLMENT.—Nothing

16 in this paragraph shall preclude an IMA from

17 establishing rules of enrollment and reenroll18 ment of members. Such rules shall be applied

19 consistently to all members within the IMA and

20 shall not be based in any manner on health sta21 tus-related factors.

22 ‘‘(2) HEALTH INSURANCE ISSUERS.—The con23 tract between an IMA and a health insurance issuer

24 shall provide, with respect to a member enrolled with

25 health benefits coverage offered by the issuer
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1 through the IMA, for the payment of the premiums

2 collected by the issuer.

3 ‘‘SEC. 2902. APPLICATION OF CERTAIN LAWS AND REQUIRE4 MENTS.

5 ‘‘State laws insofar as they relate to any of the fol6 lowing are superseded and shall not apply to health bene7 fits coverage made available through an IMA:

8 ‘‘(1) Benefit requirements for health benefits

9 coverage offered through an IMA, including (but not

10 limited to) requirements relating to coverage of spe11 cific providers, specific services or conditions, or the

12 amount, duration, or scope of benefits, but not in13 cluding requirements to the extent required to imple14 ment title XXVII or other Federal law and to the

15 extent the requirement prohibits an exclusion of a

16 specific disease from such coverage.

17 ‘‘(2) Any other requirements (including limita18 tions on compensation arrangements) that, directly

19 or indirectly, preclude (or have the effect of pre20 cluding) the offering of such coverage through an

21 IMA, if the IMA meets the requirements of this

22 title.

23 Any State law or regulation relating to the composition

24 or organization of an IMA is preempted to the extent the
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1 law or regulation is inconsistent with the provisions of this

2 title.

3 ‘‘SEC. 2903. ADMINISTRATION.

4 ‘‘(a) IN GENERAL.—The Secretary shall administer

5 this title and is authorized to issue such regulations as

6 may be required to carry out this title. Such regulations

7 shall be subject to Congressional review under the provi8 sions of chapter 8 of title 5, United States Code. The Sec9 retary shall incorporate the process of ‘deemed file and

10 use’ with respect to the information filed under section

11 2901(a)(5)(A) and shall determine whether information

12 filed by an IMA demonstrates compliance with the applica13 ble requirements of this title. The Secretary shall exercise

14 authority under this title in a manner that fosters and

15 promotes the development of IMAs in order to improve

16 access to health care coverage and services.

17 ‘‘(b) PERIODIC REPORTS.—The Secretary shall sub18 mit to Congress a report every 30 months, during the 10-

19 year period beginning on the effective date of the rules

20 promulgated by the Secretary to carry out this title, on

21 the effectiveness of this title in promoting coverage of un22 insured individuals. The Secretary may provide for the

23 production of such reports through one or more contracts

24 with appropriate private entities.
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1 ‘‘SEC. 2904. DEFINITIONS.

2 ‘‘For purposes of this title:

3 ‘‘(1) ASSOCIATION.—The term ‘association’

4 means, with respect to health insurance coverage of5 fered in a State, an association which—

6 ‘‘(A) has been actively in existence for at

7 least 5 years;

8 ‘‘(B) has been formed and maintained in

9 good faith for purposes other than obtaining in10 surance;

11 ‘‘(C) does not condition membership in the

12 association on any health status-related factor

13 relating to an individual (including an employee

14 of an employer or a dependent of an employee);

15 and

16 ‘‘(D) does not make health insurance cov17 erage offered through the association available

18 other than in connection with a member of the

19 association.

20 ‘‘(2) DEPENDENT.—The term ‘dependent’, as

21 applied to health insurance coverage offered by a

22 health insurance issuer licensed (or otherwise regu23 lated) in a State, shall have the meaning applied to

24 such term with respect to such coverage under the

25 laws of the State relating to such coverage and such
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1 an issuer. Such term may include the spouse and

2 children of the individual involved.

3 ‘‘(3) HEALTH BENEFITS COVERAGE.—The term

4 ‘health benefits coverage’ has the meaning given the

5 term health insurance coverage in section

6 2791(b)(1).

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

8 ‘health insurance issuer’ has the meaning given such

9 term in section 2791(b)(2).

10 ‘‘(5) HEALTH STATUS-RELATED FACTOR.—The

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

12 given such term in section 2791(d)(9).

13 ‘‘(6) IMA; INDIVIDUAL MEMBERSHIP ASSOCIA14 TION.—The terms ‘IMA’ and ‘individual membership

15 association’ are defined in section 2901(a).

16 ‘‘(7) MEMBER.—The term ‘member’ means,

17 with respect to an IMA, an individual who is a mem18 ber of the association to which the IMA is offering

19 coverage.’’.
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1 TITLE III—FEDERAL MATCHING

2 FUNDING FOR STATE INSUR3 ANCE EXPENDITURES

4 SEC. 301. FEDERAL MATCHING FUNDING FOR STATE IN5 SURANCE EXPENDITURES.

6 (a) IN GENERAL.—Subject to the succeeding provi7 sions of this section, each State shall receive from the Sec8 retary of Health and Human Services an amount equal

9 to 50 percent of the funds expended by the State in pro10 viding for the use, in connection with providing health ben11 efits coverage, of a high-risk pool, a reinsurance pool, or

12 other risk-adjustment mechanism used for the purpose of

13 subsidizing the purchase of private health insurance.

14 (b) FUNDING LIMITATION.—A State shall not receive

15 under this section for a fiscal year more than a total of

16 50 cents multiplied by the average number of residents

17 (as estimated by the Secretary) in the State in the fiscal

18 year.

19 (c) ADMINISTRATION.—The Secretary of Health and

20 Human Services shall provide for the administration of

21 this section and may establish such terms and conditions,

22 including the requirement of an application, as may be ap23 propriate to carry out this section.

24 (d) CONSTRUCTION.—Nothing in this section shall be

25 construed as requiring a State to operate a reinsurance
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1 pool (or other risk-adjustment mechanism) under this sec2 tion or as preventing a State from operating such a pool

3 or mechanism through one or more private entities.

4 (e) HIGH-RISK POOL.—For purposes of this section,

5 the term ‘‘high-risk pool’’ means any qualified high risk

6 pool (as defined in section 2744(c)(2) of the Public Health

7 Service Act).

8 (f) REINSURANCE POOL OR OTHER RISK-ADJUST9 MENT MECHANISM DEFINED.—For purposes of this sec10 tion, the term ‘‘reinsurance pool or other risk-adjustment

11 mechanism’’ means any State-based risk spreading mecha12 nism to subsidize the purchase of private health insurance

13 for the high-risk population.

14 (g) HIGH-RISK POPULATION.—For purposes of this

15 section, the term ‘‘high-risk population’’ means—

16 (1) individuals who, by reason of the existence

17 or history of a medical condition, are able to acquire

18 health coverage only at rates which are at least 150

19 percent of the standard risk rates for such coverage,

20 and

21 (2) individuals who are provided health cov22 erage by a high-risk pool.

23 (h) STATE DEFINED.—For purposes of this section,

24 the term ‘‘State’’ includes the District of Columbia, Puer-
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1 to Rico, the Virgin Islands, Guam, American Samoa, and

2 the Northern Mariana Islands.

3 TITLE IV—AFFORDABLE HEALTH

4 COVERAGE FOR EMPLOYEES

5 OF SMALL BUSINESSES

6 SEC. 401. SHORT TITLE OF TITLE.

7 This title may be cited as the ‘‘Small Business Access

8 and Choice for Entrepreneurs Act of 1999’’.

9 SEC. 402. RULES.

10 (a) IN GENERAL.—Subtitle B of title I of the Em11 ployee Retirement Income Security Act of 1974 is amend12 ed by adding after part 7 the following new part:

13 ‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH

14 PLANS

15 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS.

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

17 term ‘association health plan’ means a group health

18 plan—

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

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

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

22 insurance coverage offered by a health insurance

23 issuer (which may include, among other options,

24 managed care options, point of service options, and

25 preferred provider options) is provided to partici-
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1 pants and beneficiaries, unless, for any plan year,

2 such coverage remains unavailable to the plan de3 spite good faith efforts exercised by the plan to se4 cure such coverage.

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

6 plan is described in this subsection if such sponsor—

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

8 with a constitution and bylaws specifically stating its

9 purpose and providing for periodic meetings on at

10 least an annual basis, as a bona fide trade associa11 tion, a bona fide industry association (including a

12 rural electric cooperative association or a rural tele13 phone cooperative association), a bona fide profes14 sional association, or a bona fide chamber of com15 merce (or similar bona fide business association, in16 cluding a corporation or similar organization that

17 operates on a cooperative basis (within the meaning

18 of section 1381 of the Internal Revenue Code of

19 1986)), for substantial purposes other than that of

20 obtaining or providing medical care;

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

22 receives the active support of its members and col23 lects from its members on a periodic basis dues or

24 payments necessary to maintain eligibility for mem25 bership in the sponsor; and
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1 ‘‘(3) does not condition membership, such dues

2 or payments, or coverage under the plan on the

3 basis of health status-related factors with respect to

4 the employees of its members (or affiliated mem5 bers), or the dependents of such employees, and does

6 not condition such dues or payments on the basis of

7 group health plan participation.

8 Any sponsor consisting of an association of entities which

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

10 shall be deemed to be a sponsor described in this sub11 section.

12 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH

13 PLANS.

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

15 prescribe by regulation, through negotiated rulemaking, a

16 procedure under which, subject to subsection (b), the ap17 plicable authority shall certify association health plans

18 which apply for certification as meeting the requirements

19 of this part.

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

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

22 health plan that provides at least one benefit option which

23 does not consist of health insurance coverage, the applica24 ble authority shall certify such plan as meeting the re-
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1 quirements of this part only if the applicable authority is

2 satisfied that—

3 ‘‘(1) such certification—

4 ‘‘(A) is administratively feasible;

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

6 individuals covered under the plan; and

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

8 of the individuals covered under the plan; and

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

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

11 commence operations, will be met) with respect to

12 the plan.

13 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

15 certification under this part is in effect shall meet the ap16 plicable requirements of this part, effective on the date

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

18 is to commence operations).

19 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI20 CATION.—The applicable authority may provide by regula21 tion, through negotiated rulemaking, for continued certifi22 cation of association health plans under this part.

23 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

24 PLANS.—The applicable authority shall establish a class

25 certification procedure for association health plans under
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1 which all benefits consist of health insurance coverage.

2 Under such procedure, the applicable authority shall pro3 vide for the granting of certification under this part to

4 the plans in each class of such association health plans

5 upon appropriate filing under such procedure in connec6 tion with plans in such class and payment of the pre7 scribed fee under section 807(a).

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

9 HEALTH PLANS.—An association health plan which offers

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

11 insurance coverage may be certified under this part only

12 if such plan consists of any of the following:

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

14 date of the enactment of the Small Business Access

15 and Choice for Entrepreneurs Act of 1999,

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

17 restrict membership to one or more trades and busi18 nesses or industries and whose eligible participating

19 employers represent a broad cross-section of trades

20 and businesses or industries, or

21 ‘‘(3) a plan whose eligible participating employ22 ers represent one or more trades or businesses, or

23 one or more industries, which have been indicated as

24 having average or above-average health insurance

25 risk or health claims experience by reason of State
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1 rate filings, denials of coverage, proposed premium

2 rate levels, and other means demonstrated by such

3 plan in accordance with regulations which the Sec4 retary shall prescribe through negotiated rule5 making, including (but not limited to) the following:

6 agriculture; automobile dealerships; barbering and

7 cosmetology; child care; construction; dance, theat8 rical, and orchestra productions; disinfecting and

9 pest control; eating and drinking establishments;

10 fishing; hospitals; labor organizations; logging; man11 ufacturing (metals); mining; medical and dental

12 practices; medical laboratories; sanitary services;

13 transportation (local and freight); and warehousing.

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

15 BOARDS OF TRUSTEES.

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

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

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

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

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

21 the application for certification under this part.

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

23 this subsection are met with respect to an association

24 health plan if the following requirements are met:
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1 ‘‘(1) FISCAL CONTROL.—The plan is operated,

2 pursuant to a trust agreement, by a board of trust3 ees which has complete fiscal control over the plan

4 and which is responsible for all operations of the

5 plan.

6 ‘‘(2) RULES OF OPERATION AND FINANCIAL

7 CONTROLS.—The board of trustees has in effect

8 rules of operation and financial controls, based on a

9 3-year plan of operation, adequate to carry out the

10 terms of the plan and to meet all requirements of

11 this title applicable to the plan.

12 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

13 PARTICIPATING EMPLOYERS AND TO CONTRAC14 TORS.—

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

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

17 board of trustees are individuals selected from

18 individuals who are the owners, officers, direc19 tors, or employees of the participating employ20 ers or who are partners in the participating em21 ployers and actively participate in the business.

22 ‘‘(B) LIMITATION.—

23 ‘‘(i) GENERAL RULE.—Except as pro24 vided in clauses (ii) and (iii), no such

25 member is an owner, officer, director, or
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•HR 1687 IH

1 employee of, or partner in, a contract ad2 ministrator or other service provider to the

3 plan.

4 ‘‘(ii) LIMITED EXCEPTION FOR PRO5 VIDERS OF SERVICES SOLELY ON BEHALF

6 OF THE SPONSOR.—Officers or employees

7 of a sponsor which is a service provider

8 (other than a contract administrator) to

9 the plan may be members of the board if

10 they constitute not more than 25 percent

11 of the membership of the board and they

12 do not provide services to the plan other

13 than on behalf of the sponsor.

14 ‘‘(iii) TREATMENT OF PROVIDERS OF

15 MEDICAL CARE.—In the case of a sponsor

16 which is an association whose membership

17 consists primarily of providers of medical

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

19 of any service provider described in sub20 paragraph (A) who is a provider of medical

21 care under the plan.

22 ‘‘(C) CERTAIN PLANS EXCLUDED.—Sub23 paragraph (A) shall not apply to an association

24 health plan which is in existence on the date of
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•HR 1687 IH

1 the enactment of the Small Business Access

2 and Choice for Entrepreneurs Act of 1999.

3 ‘‘(D) SOLE AUTHORITY.—The board has

4 sole authority under the plan to approve appli5 cations for participation in the plan and to con6 tract with a service provider to administer the

7 day-to-day affairs of the plan.

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

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

10 maintained by a franchiser for a franchise network con11 sisting of its franchisees—

12 ‘‘(1) the requirements of subsection (a) and sec13 tion 801(a)(1) shall be deemed met if such require14 ments would otherwise be met if the franchiser were

15 deemed to be the sponsor referred to in section

16 801(b), such network were deemed to be an associa17 tion described in section 801(b), and each franchisee

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

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

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

21 be deemed met.

22 The Secretary may by regulation, through negotiated rule23 making, define for purposes of this subsection the terms

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

25 ‘‘(d) CERTAIN COLLECTIVELY BARGAINED PLANS.—
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1 ‘‘(1) IN GENERAL.—In the case of a group

2 health plan described in paragraph (2)—

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

4 and section 801(a)(1) shall be deemed met;

5 ‘‘(B) the joint board of trustees shall be

6 deemed a board of trustees with respect to

7 which the requirements of subsection (b) are

8 met; and

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

10 be deemed met.

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

12 described in this paragraph if—

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

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

15 1997, and would be described in section

16 3(40)(A)(i) but solely for the failure to meet

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

18 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE19 MENTS.

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

21 requirements of this subsection are met with respect to

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

23 plan—

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

25 ‘‘(A) a member of the sponsor;
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•HR 1687 IH

1 ‘‘(B) the sponsor; or

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

3 with respect to which the requirements of sub4 section (b) are met;

5 except that, in the case of a sponsor which is a pro6 fessional association or other individual-based asso7 ciation, if at least one of the officers, directors, or

8 employees of an employer, or at least one of the in9 dividuals who are partners in an employer and who

10 actively participates in the business, is a member or

11 such an affiliated member of the sponsor, partici12 pating employers may also include such employer;

13 and

14 ‘‘(2) all individuals commencing coverage under

15 the plan after certification under this part must

16 be—

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

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

19 employees of, or partners in, participating em20 ployers; or

21 ‘‘(B) the beneficiaries of individuals de22 scribed in subparagraph (A).

23 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM24 PLOYEES.—In the case of an association health plan in

25 existence on the date of the enactment of the Small Busi-
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•HR 1687 IH

1 ness Access and Choice for Entrepreneurs Act of 1999,

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

3 offered coverage under the plan as a participating em4 ployer only if—

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

6 member on the date of certification under this part;

7 or

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

9 date of the offering of such coverage, the affiliated

10 member has not maintained or contributed to a

11 group health plan with respect to any of its employ12 ees who would otherwise be eligible to participate in

13 such association health plan.

14 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re15 quirements of this subsection are met with respect to an

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

17 no participating employer may provide health insurance

18 coverage in the individual market for any employee not

19 covered under the plan which is similar to the coverage

20 contemporaneously provided to employees of the employer

21 under the plan, if such exclusion of the employee from cov22 erage under the plan is based on a health status-related

23 factor with respect to the employee and such employee

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

25 for coverage under the plan.
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1 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

2 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI3 PATE.—The requirements of this subsection are met with

4 respect to an association health plan if—

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

6 meeting the preceding requirements of this section

7 are eligible to qualify as participating employers for

8 all geographically available coverage options, unless,

9 in the case of any such employer, participation or

10 contribution requirements of the type referred to in

11 section 2711 of the Public Health Service Act are

12 not met;

13 ‘‘(2) upon request, any employer eligible to par14 ticipate is furnished information regarding all cov15 erage options available under the plan; and

16 ‘‘(3) the applicable requirements of sections

17 701, 702, and 703 are met with respect to the plan.

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

19 DOCUMENTS, CONTRIBUTION RATES, AND

20 BENEFIT OPTIONS.

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

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

23 following requirements are met:

24 ‘‘(1) CONTENTS OF GOVERNING INSTRU25 MENTS.—The instruments governing the plan in-
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•HR 1687 IH

1 clude a written instrument, meeting the require2 ments of an instrument required under section

3 402(a)(1), which—

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

5 serves as the named fiduciary required for plans

6 under section 402(a)(1) and serves in the ca7 pacity of a plan administrator (referred to in

8 section 3(16)(A));

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

10 is to serve as plan sponsor (referred to in sec11 tion 3(16)(B)); and

12 ‘‘(C) incorporates the requirements of sec13 tion 806.

14 ‘‘(2) CONTRIBUTION RATES MUST BE NON15 DISCRIMINATORY.—

16 ‘‘(A) The contribution rates for any par17 ticipating small employer do not vary on the

18 basis of the claims experience of such employer

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

20 business or industry in which such employer is

21 engaged.

22 ‘‘(B) Nothing in this title or any other pro23 vision of law shall be construed to preclude an

24 association health plan, or a health insurance

25 issuer offering health insurance coverage in
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•HR 1687 IH

1 connection with an association health plan,

2 from—

3 ‘‘(i) setting contribution rates based

4 on the claims experience of the plan; or

5 ‘‘(ii) varying contribution rates for

6 small employers in a State to the extent

7 that such rates could vary using the same

8 methodology employed in such State for

9 regulating premium rates in the small

10 group market with respect to health insur11 ance coverage offered in connection with

12 bona fide associations (within the meaning

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

14 Service Act),

15 subject to the requirements of section 702(b)

16 relating to contribution rates.

17 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI18 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If

19 any benefit option under the plan does not consist

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

21 beginning of the plan year not fewer than 1,000 par22 ticipants and beneficiaries.

23 ‘‘(4) MARKETING REQUIREMENTS.—

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

25 which consists of health insurance coverage is
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1 offered under the plan, State-licensed insurance

2 agents shall be used to distribute to small em3 ployers coverage which does not consist of

4 health insurance coverage in a manner com5 parable to the manner in which such agents are

6 used to distribute health insurance coverage.

7 ‘‘(B) STATE-LICENSED INSURANCE

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

9 the term ‘State-licensed insurance agents’

10 means one or more agents who are licensed in

11 a State and are subject to the laws of such

12 State relating to licensure, qualification, test13 ing, examination, and continuing education of

14 persons authorized to offer, sell, or solicit

15 health insurance coverage in such State.

16 ‘‘(5) REGULATORY REQUIREMENTS.—Such

17 other requirements as the applicable authority deter18 mines are necessary to carry out the purposes of this

19 part, which shall be prescribed by the applicable au20 thority by regulation through negotiated rulemaking.

21 ‘‘(b) HEALTH BENEFIT OPTIONS UNDER AN ASSO22 CIATION HEALTH PLAN.—

23 ‘‘(1) EXAMPLES OF TYPES OF COVERAGE.—The

24 health benefits coverage made available through an

25 association health plan may include, but is not lim-
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•HR 1687 IH

1 ited to, any of the following if it meets the other ap2 plicable requirements of this title:

3 ‘‘(A) Coverage through a health mainte4 nance organization.

5 ‘‘(B) Coverage in connection with a pre6 ferred provider organization.

7 ‘‘(C) Coverage in connection with a li8 censed provider-sponsored organization.

9 ‘‘(D) Indemnity coverage through an insur10 ance company.

11 ‘‘(E) Coverage offered in connection with a

12 contribution into a medical savings account or

13 flexible spending account.

14 ‘‘(F) Coverage that includes a point-of15 service option.

16 ‘‘(G) Any combination of such types of

17 coverage.

18 ‘‘(2) HEALTH INSURANCE COVERAGE OP19 TIONS.—

20 ‘‘(A) IN GENERAL.—An association health

21 plan shall include a minimum of 4 health insur22 ance coverage options. At least 1 option shall be

23 a non network option. At least 2 options shall

24 meet all applicable State benefit mandates.
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1 ‘‘(B) MODEL BENEFITS PACKAGE.—The

2 Secretary in consultation with the National As3 sociation of Insurance Commissioners shall de4 velop a model benefits package for health insur5 ance coverage not later than one year after the

6 date of the enactment of the Consensus Health

7 Care Access and Choice Act of 1999.

8 ‘‘(C) EXCEPTION TO GENERAL RULE.—An

9 association health plan may offer 2 options that

10 meet the requirements of the model benefits

11 package in lieu of the State benefit mandate of12 ferings required under subparagraph (A).

13 ‘‘(3) PERMITTING ASSOCIATION HEALTH PLANS

14 TO ADJUST DISTRIBUTIONS AMONG ISSUERS TO RE15 FLECT RELATIVE RISK OF ENROLLEES.—Nothing in

16 this section shall be construed as precluding an asso17 ciation health plan from providing for adjustments

18 in amounts distributed among the health insurance

19 issuers offering health benefits coverage through the

20 association health plan based on factors such as the

21 relative health care risk of members enrolled under

22 the coverage offered by the different issuers.

23 ‘‘(4) CONSTRUCTION.—Except as provided in

24 subparagraph (2), nothing in this part or any provi25 sion of State law (as defined in section 514(c)(1))
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1 shall be construed to preclude an association health

2 plan, or a health insurance issuer offering health in3 surance coverage in connection with an association

4 health plan, from exercising its sole discretion in se5 lecting the specific items and services consisting of

6 medical care to be included as benefits under such

7 plan or coverage, except (subject to section 514) in

8 the case of any law to the extent that it (1) prohibits

9 an exclusion of a specific disease from such cov10 erage, or (2) is not preempted under section

11 731(a)(1) with respect to matters governed by sec12 tion 711 or 712.

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

14 FOR SOLVENCY FOR PLANS PROVIDING

15 HEALTH BENEFITS IN ADDITION TO HEALTH

16 INSURANCE COVERAGE.

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

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

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

20 of health insurance coverage; or

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

22 options which do not consist of health insurance cov23 erage, the plan—

24 ‘‘(A) establishes and maintains reserves

25 with respect to such additional benefit options,
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1 in amounts recommended by the qualified actu2 ary, consisting of—

3 ‘‘(i) a reserve sufficient for unearned

4 contributions;

5 ‘‘(ii) a reserve sufficient for benefit li6 abilities which have been incurred, which

7 have not been satisfied, and for which risk

8 of loss has not yet been transferred, and

9 for expected administrative costs with re10 spect to such benefit liabilities;

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

12 obligations of the plan; and

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

14 of error and other fluctuations, taking into

15 account the specific circumstances of the

16 plan; and

17 ‘‘(B) establishes and maintains aggregate

18 and specific excess /stop loss insurance and sol19 vency indemnification, with respect to such ad20 ditional benefit options for which risk of loss

21 has not yet been transferred, as follows:

22 ‘‘(i) The plan shall secure aggregate

23 excess /stop loss insurance for the plan

24 with an attachment point which is not

25 greater than 125 percent of expected gross
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1 annual claims. The applicable authority

2 may by regulation, through negotiated

3 rulemaking, provide for upward adjust4 ments in the amount of such percentage in

5 specified circumstances in which the plan

6 specifically provides for and maintains re7 serves in excess of the amounts required

8 under subparagraph (A).

9 ‘‘(ii) The plan shall secure specific ex10 cess /stop loss insurance for the plan with

11 an attachment point which is at least equal

12 to an amount recommended by the plan’s

13 qualified actuary (but not more than

14 $175,000). The applicable authority may

15 by regulation, through negotiated rule16 making, provide for adjustments in the

17 amount of such insurance in specified cir18 cumstances in which the plan specifically

19 provides for and maintains reserves in ex20 cess of the amounts required under sub21 paragraph (A).

22 ‘‘(iii) The plan shall secure indem23 nification insurance for any claims which

24 the plan is unable to satisfy by reason of

25 a plan termination.
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1 Any regulations prescribed by the applicable authority

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

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

4 stop loss insurance as the qualified actuary may rec5 ommend, taking into account the specific circumstances

6 of the plan.

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

8 RESERVES.—In the case of any association health plan de9 scribed in subsection (a)(2), the requirements of this sub10 section are met if the plan establishes and maintains sur11 plus in an amount at least equal to—

12 ‘‘(1) $500,000, or

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

14 $2,000,000) as may be set forth in regulations pre15 scribed by the applicable authority through nego16 tiated rulemaking, based on the level of aggregate

17 and specific excess /stop loss insurance provided with

18 respect to such plan.

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

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

21 the applicable authority may provide such additional re22 quirements relating to reserves and excess /stop loss insur23 ance as the applicable authority considers appropriate.

24 Such requirements may be provided by regulation, through
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1 negotiated rulemaking, with respect to any such plan or

2 any class of such plans.

3 ‘‘(d) ADJUSTMENTS FOR EXCESS /STOP LOSS INSUR4 ANCE.—The applicable authority may provide for adjust5 ments to the levels of reserves otherwise required under

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

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

8 provided with respect to such plan or plans.

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

10 applicable authority may permit an association health plan

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

12 of the requirements of this section (except subsection

13 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar14 rangement, or other financial arrangement as the applica15 ble authority determines to be adequate to enable the plan

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

17 and is otherwise no less protective of the interests of par18 ticipants and beneficiaries than the requirements for

19 which it is substituted. The applicable authority may take

20 into account, for purposes of this subsection, evidence pro21 vided by the plan or sponsor which demonstrates an as22 sumption of liability with respect to the plan. Such evi23 dence may be in the form of a contract of indemnification,

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

25 applicable terms of the plan in the form of assessments
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1 of participating employers, security, or other financial ar2 rangement.

3 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

4 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.—

5 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO6 CIATION HEALTH PLAN FUND.—

7 ‘‘(A) IN GENERAL.—In the case of an as8 sociation health plan described in subsection

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

10 met if the plan makes payments into the Asso11 ciation Health Plan Fund under this subpara12 graph when they are due. Such payments shall

13 consist of annual payments in the amount of

14 $5,000, and, in addition to such annual pay15 ments, such supplemental payments as the Sec16 retary may determine to be necessary under

17 paragraph (2). Payments under this paragraph

18 are payable to the Fund at the time determined

19 by the Secretary. Initial payments are due in

20 advance of certification under this part. Pay21 ments shall continue to accrue until a plan’s as22 sets are distributed pursuant to a termination

23 procedure.

24 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

25 PAYMENTS.—If any payment is not made by a
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1 plan when it is due, a late payment charge of

2 not more than 100 percent of the payment

3 which was not timely paid shall be payable by

4 the plan to the Fund.

5 ‘‘(C) CONTINUED DUTY OF THE SEC6 RETARY.—The Secretary shall not cease to

7 carry out the provisions of paragraph (2) on ac8 count of the failure of a plan to pay any pay9 ment when due.

10 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

11 EXCESS /STOP LOSS INSURANCE COVERAGE AND IN12 DEMNIFICATION INSURANCE COVERAGE FOR CER13 TAIN PLANS.—In any case in which the applicable

14 authority determines that there is, or that there is

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

16 take necessary corrective actions under section

17 809(a) with respect to an association health plan de18 scribed in subsection (a)(2); or (B) a termination of

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

20 if the applicable authority is not the Secretary, cer21 tifies such determination to the Secretary), the Sec22 retary shall determine the amounts necessary to

23 make payments to an insurer (designated by the

24 Secretary) to maintain in force excess /stop loss in25 surance coverage or indemnification insurance cov-
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1 erage for such plan, if the Secretary determines that

2 there is a reasonable expectation that, without such

3 payments, claims would not be satisfied by reason of

4 termination of such coverage. The Secretary shall, to

5 the extent provided in advance in appropriation

6 Acts, pay such amounts so determined to the insurer

7 designated by the Secretary.

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

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

10 on the books of the Treasury a fund to be

11 known as the ‘Association Health Plan Fund’.

12 The Fund shall be available for making pay13 ments pursuant to paragraph (2). The Fund

14 shall be credited with payments received pursu15 ant to paragraph (1)(A), penalties received pur16 suant to paragraph (1)(B); and earnings on in17 vestments of amounts of the Fund under sub18 paragraph (B).

19 ‘‘(B) INVESTMENT.—Whenever the Sec20 retary determines that the moneys of the fund

21 are in excess of current needs, the Secretary

22 may request the investment of such amounts as

23 the Secretary determines advisable by the Sec24 retary of the Treasury in obligations issued or

25 guaranteed by the United States.
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1 ‘‘(g) EXCESS /STOP LOSS INSURANCE.—For pur2 poses of this section—

3 ‘‘(1) AGGREGATE EXCESS /STOP LOSS INSUR4 ANCE.—The term ‘aggregate excess /stop loss insur5 ance’ means, in connection with an association

6 health plan, a contract—

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

8 minimum standards as the applicable authority

9 may prescribe by regulation through negotiated

10 rulemaking) provides for payment to the plan

11 with respect to aggregate claims under the plan

12 in excess of an amount or amounts specified in

13 such contract;

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

15 ‘‘(C) which allows for payment of pre16 miums by any third party on behalf of the in17 sured plan.

18 ‘‘(2) SPECIFIC EXCESS /STOP LOSS INSUR19 ANCE.—The term ‘specific excess /stop loss insur20 ance’ means, in connection with an association

21 health plan, a contract—

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

23 minimum standards as the applicable authority

24 may prescribe by regulation through negotiated

25 rulemaking) provides for payment to the plan
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1 with respect to claims under the plan in connec2 tion with a covered individual in excess of an

3 amount or amounts specified in such contract

4 in connection with such covered individual;

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

6 ‘‘(C) which allows for payment of pre7 miums by any third party on behalf of the in8 sured plan.

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

10 of this section, the term ‘indemnification insurance’

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

12 contract—

13 ‘‘(1) under which an insurer (meeting such min14 imum standards as the applicable authority may pre15 scribe through negotiated rulemaking) provides for

16 payment to the plan with respect to claims under the

17 plan which the plan is unable to satisfy by reason

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

19 to mandatory termination);

20 ‘‘(2) which is guaranteed renewable and

21 noncancellable for any reason (except as the applica22 ble authority may prescribe by regulation through

23 negotiated rulemaking); and

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

25 any third party on behalf of the insured plan.
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1 ‘‘(i) RESERVES.—For purposes of this section, the

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

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

6 through negotiated rulemaking.

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

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

9 date of the enactment of the Small Business Access

10 and Choice for Entrepreneurs Act of 1999, the ap11 plicable authority shall establish a Solvency Stand12 ards Working Group. In prescribing the initial regu13 lations under this section, the applicable authority

14 shall take into account the recommendations of such

15 Working Group.

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

17 consist of not more than 15 members appointed by

18 the applicable authority. The applicable authority

19 shall include among persons invited to membership

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

21 following:

22 ‘‘(A) a representative of the National Asso23 ciation of Insurance Commissioners;

24 ‘‘(B) a representative of the American

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

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

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

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

7 interests; and

8 ‘‘(F) a representative of multiemployer

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

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

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

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

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

16 an application for certification under this part a filing fee

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

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

21 health plans.

22 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA23 TION FOR CERTIFICATION.—An application for certifi24 cation under this part meets the requirements of this sec25 tion only if it includes, in a manner and form which shall
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1 be prescribed by the applicable authority through nego2 tiated rulemaking, at least the following information:

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

4 and addresses of—

5 ‘‘(A) the sponsor; and

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

7 of the plan.

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

9 BUSINESS.—The States in which participants and

10 beneficiaries under the plan are to be located and

11 the number of them expected to be located in each

12 such State.

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

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

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

20 trust agreements), the summary plan description,

21 and other material describing the benefits that will

22 be provided to participants and beneficiaries under

23 the plan.

24 ‘‘(5) AGREEMENTS WITH SERVICE PRO25 VIDERS.—A copy of any agreements between the
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1 plan and contract administrators and other service

2 providers.

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

6 forth information with respect to such additional

7 benefit options determined as of a date within the

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

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

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

12 statement of actuarial opinion, signed by a

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

16 authority shall prescribe through negotiated

17 rulemaking.

18 ‘‘(B) ADEQUACY OF CONTRIBUTION

19 RATES.—A statement of actuarial opinion,

20 signed by a qualified actuary, which sets forth

21 a description of the extent to which contribution

22 rates are adequate to provide for the payment

23 of all obligations and the maintenance of re24 quired reserves under the plan for the 12-

25 month period beginning with such date within
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1 such 120-day period, taking into account the

2 expected coverage and experience of the plan. If

3 the contribution rates are not fully adequate,

4 the statement of actuarial opinion shall indicate

5 the extent to which the rates are inadequate

6 and the changes needed to ensure adequacy.

7 ‘‘(C) CURRENT AND PROJECTED VALUE OF

8 ASSETS AND LIABILITIES.—A statement of ac9 tuarial opinion signed by a qualified actuary,

10 which sets forth the current value of the assets

11 and liabilities accumulated under the plan and

12 a projection of the assets, liabilities, income,

13 and expenses of the plan for the 12-month pe14 riod referred to in subparagraph (B). The in15 come statement shall identify separately the

16 plan’s administrative expenses and claims.

17 ‘‘(D) COSTS OF COVERAGE TO BE

18 CHARGED AND OTHER EXPENSES.—A state19 ment of the costs of coverage to be charged, in20 cluding an itemization of amounts for adminis21 tration, reserves, and other expenses associated

22 with the operation of the plan.

23 ‘‘(E) OTHER INFORMATION.—Any other

24 information as may be determined by the appli25 cable authority, by regulation through nego-
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1 tiated rulemaking, as necessary to carry out the

2 purposes of this part.

3 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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

5 association health plan shall not be effective unless written

6 notice of such certification is filed with the applicable

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

8 of the participants and beneficiaries under the plan are

9 located. For purposes of this subsection, an individual

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

11 known address of such individual is located or in which

12 such individual is employed.

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

14 of any association health plan certified under this part,

15 descriptions of material changes in any information which

16 was required to be submitted with the application for the

17 certification under this part shall be filed in such form

18 and manner as shall be prescribed by the applicable au19 thority by regulation through negotiated rulemaking. The

20 applicable authority may require by regulation, through

21 negotiated rulemaking, prior notice of material changes

22 with respect to specified matters which might serve as the

23 basis for suspension or revocation of the certification.

24 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS25 SOCIATION HEALTH PLANS.—An association health plan
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1 certified under this part which provides benefit options in

2 addition to health insurance coverage for such plan year

3 shall meet the requirements of section 103 by filing an

4 annual report under such section which shall include infor5 mation described in subsection (b)(6) with respect to the

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

7 be filed with the applicable authority not later than 90

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

9 as may be prescribed by the applicable authority). The ap10 plicable authority may require by regulation through nego11 tiated rulemaking such interim reports as it considers ap12 propriate.

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

14 board of trustees of each association health plan which

15 provides benefits options in addition to health insurance

16 coverage and which is applying for certification under this

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

18 of all participants and beneficiaries, a qualified actuary

19 who shall be responsible for the preparation of the mate20 rials comprising information necessary to be submitted by

21 a qualified actuary under this part. The qualified actuary

22 shall utilize such assumptions and techniques as are nec23 essary to enable such actuary to form an opinion as to

24 whether the contents of the matters reported under this

25 part—
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1 ‘‘(1) are in the aggregate reasonably related to

2 the experience of the plan and to reasonable expecta3 tions; and

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

5 anticipated experience under the plan.

6 The opinion by the qualified actuary shall be made with

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

8 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER9 MINATION.

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

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

12 may terminate (upon or at any time after cessation of ac13 cruals in benefit liabilities) only if the board of trustees—

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

15 termination date, provides to the participants and

16 beneficiaries a written notice of intent to terminate

17 stating that such termination is intended and the

18 proposed termination date;

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

20 of the plan in connection with such termination in

21 a manner which will result in timely payment of all

22 benefits for which the plan is obligated; and

23 ‘‘(3) submits such plan in writing to the appli24 cable authority.
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1 Actions required under this section shall be taken in such

2 form and manner as may be prescribed by the applicable

3 authority by regulation through negotiated rulemaking.

4 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI5 NATION.

6 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE7 SERVES.—An association health plan which is certified

8 under this part and which provides benefits other than

9 health insurance coverage shall continue to meet the re10 quirements of section 806, irrespective of whether such

11 certification continues in effect. The board of trustees of

12 such plan shall determine quarterly whether the require13 ments of section 806 are met. In any case in which the

14 board determines that there is reason to believe that there

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

16 applicable authority makes such a determination and so

17 notifies the board, the board shall immediately notify the

18 qualified actuary engaged by the plan, and such actuary

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

20 make such recommendations to the board for corrective

21 action as the actuary determines necessary to ensure com22 pliance with section 806. Not later than 30 days after re23 ceiving from the actuary recommendations for corrective

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

25 such form and manner as the applicable authority may
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1 prescribe by regulation through negotiated rulemaking) of

2 such recommendations of the actuary for corrective action,

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

4 board has taken or plans to take in response to such rec5 ommendations. The board shall thereafter report to the

6 applicable authority, in such form and frequency as the

7 applicable authority may specify to the board, regarding

8 corrective action taken by the board until the requirements

9 of section 806 are met.

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

11 which—

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

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

14 health plan which is or has been certified under this

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

16 the requirements of section 806 and has not been

17 notified by the board of trustees of the plan that

18 corrective action has restored compliance with such

19 requirements; and

20 ‘‘(2) the applicable authority determines that

21 there is a reasonable expectation that the plan will

22 continue to fail to meet the requirements of section

23 806,

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

25 of the applicable authority, terminate the plan and, in the
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1 course of the termination, take such actions as the appli2 cable authority may require, including satisfying any

3 claims referred to in section 806(a)(2)(B)(iii) and recov4 ering for the plan any liability under subsection

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

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

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

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

9 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL10 VENT ASSOCIATION HEALTH PLANS PRO11 VIDING HEALTH BENEFITS IN ADDITION TO

12 HEALTH INSURANCE COVERAGE.

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

14 INSOLVENT PLANS.—Whenever the Secretary determines

15 that an association health plan which is or has been cer16 tified under this part and which is described in section

17 806(a)(2) will be unable to provide benefits when due or

18 is otherwise in a financially hazardous condition, as shall

19 be defined by the Secretary by regulation through nego20 tiated rulemaking, the Secretary shall, upon notice to the

21 plan, apply to the appropriate United States district court

22 for appointment of the Secretary as trustee to administer

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

24 appear as a party and other interested persons may inter25 vene in the proceedings at the discretion of the court. The
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1 court shall appoint such Secretary trustee if the court de2 termines that the trusteeship is necessary to protect the

3 interests of the participants and beneficiaries or providers

4 of medical care or to avoid any unreasonable deterioration

5 of the financial condition of the plan. The trusteeship of

6 such Secretary shall continue until the conditions de7 scribed in the first sentence of this subsection are rem8 edied or the plan is terminated.

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

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

11 the power—

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

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

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

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

16 of the assets and records of the plan to the Sec17 retary as trustee;

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

19 Secretary holds in accordance with the provisions of

20 the plan, regulations prescribed by the Secretary

21 through negotiated rulemaking, and applicable provi22 sions of law;

23 ‘‘(4) to require the sponsor, the plan adminis24 trator, any participating employer, and any employee

25 organization representing plan participants to fur-
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1 nish any information with respect to the plan which

2 the Secretary as trustee may reasonably need in

3 order to administer the plan;

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

5 plan and to recover reasonable expenses of the trust6 eeship;

7 ‘‘(6) to commence, prosecute, or defend on be8 half of the plan any suit or proceeding involving the

9 plan;

10 ‘‘(7) to issue, publish, or file such notices, state11 ments, and reports as may be required by the Sec12 retary by regulation through negotiated rulemaking

13 or required by any order of the court;

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

15 termination accordance with section 809(b)) and liq16 uidate the plan assets, to restore the plan to the re17 sponsibility of the sponsor, or to continue the trust18 eeship;

19 ‘‘(9) to provide for the enrollment of plan par20 ticipants and beneficiaries under appropriate cov21 erage options; and

22 ‘‘(10) to do such other acts as may be nec23 essary to comply with this title or any order of the

24 court and to protect the interests of plan partici-
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1 pants and beneficiaries and providers of medical

2 care.

3 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac4 ticable after the Secretary’s appointment as trustee, the

5 Secretary shall give notice of such appointment to—

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

7 ‘‘(2) each participant;

8 ‘‘(3) each participating employer; and

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

10 which, for purposes of collective bargaining, rep11 resents plan participants.

12 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in13 consistent with the provisions of this title, or as may be

14 otherwise ordered by the court, the Secretary, upon ap15 pointment as trustee under this section, shall be subject

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

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

18 of a fiduciary for purposes of this title.

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

20 Secretary under this subsection may be filed notwith21 standing the pendency in the same or any other court of

22 any bankruptcy, mortgage foreclosure, or equity receiver23 ship proceeding, or any proceeding to reorganize, conserve,

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

25 to enforce a lien against property of the plan.
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1 ‘‘(f) JURISDICTION OF COURT.—

2 ‘‘(1) IN GENERAL.—Upon the filing of an appli3 cation for the appointment as trustee or the issuance

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

5 application is made shall have exclusive jurisdiction

6 of the plan involved and its property wherever lo7 cated with the powers, to the extent consistent with

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

9 States having jurisdiction over cases under chapter

10 11 of title 11, United States Code. Pending an adju11 dication under this section such court shall stay, and

12 upon appointment by it of the Secretary as trustee,

13 such court shall continue the stay of, any pending

14 mortgage foreclosure, equity receivership, or other

15 proceeding to reorganize, conserve, or liquidate the

16 plan, the sponsor, or property of such plan or spon17 sor, and any other suit against any receiver, conser18 vator, or trustee of the plan, the sponsor, or prop19 erty of the plan or sponsor. Pending such adjudica20 tion and upon the appointment by it of the Sec21 retary as trustee, the court may stay any proceeding

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

23 sponsor or any other suit against the plan or the

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

2 may be brought in the judicial district where the

3 sponsor or the plan administrator resides or does

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

5 A district court in which such action is brought may

6 issue process with respect to such action in any

7 other judicial district.

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

9 which shall be prescribed by the Secretary through nego10 tiated rulemaking, the Secretary shall appoint, retain, and

11 compensate accountants, actuaries, and other professional

12 service personnel as may be necessary in connection with

13 the Secretary’s service as trustee under this section.

14 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY.

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

16 State may impose by law a contribution tax on an associa17 tion health plan described in section 806(a)(2), if the plan

18 commenced operations in such State after the date of the

19 enactment of the Small Business Access and Choice for

20 Entrepreneurs Act of 1999.

21 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec22 tion, the term ‘contribution tax’ imposed by a State on

23 an association health plan means any tax imposed by such

24 State if—
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1 ‘‘(1) such tax is computed by applying a rate to

2 the amount of premiums or contributions, with re3 spect to individuals covered under the plan who are

4 residents of such State, which are received by the

5 plan from participating employers located in such

6 State or from such individuals;

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

8 rate of any tax imposed by such State on premiums

9 or contributions received by insurers or health main10 tenance organizations for health insurance coverage

11 offered in such State in connection with a group

12 health plan;

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

14 and

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

16 the plan is reduced by the amount of any tax or as17 sessment otherwise imposed by the State on pre18 miums, contributions, or both received by insurers or

19 health maintenance organizations for health insur20 ance coverage, aggregate excess /stop loss insurance

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

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

23 other insurance related to the provision of medical

24 care under the plan, or any combination thereof pro-
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1 vided by such insurers or health maintenance organi2 zations in such State in connection with such plan.

3 ‘‘SEC. 812. SPECIAL RULES FOR CHURCH PLANS.

4 ‘‘(a) ELECTION FOR CHURCH PLANS.—Notwith5 standing section 4(b)(2), if a church, a convention or asso6 ciation of churches, or an organization described in section

7 3(33)(C)(i) maintains a church plan which is a group

8 health plan (as defined in section 733(a)(1)), and such

9 church, convention, association, or organization makes an

10 election with respect to such plan under this subsection

11 (in such form and manner as the Secretary may by regula12 tion prescribe), then the provisions of this section shall

13 apply to such plan, with respect to benefits provided under

14 such plan consisting of medical care, as if section 4(b)(2)

15 did not contain an exclusion for church plans. Nothing in

16 this subsection shall be construed to render any other sec17 tion of this title applicable to church plans, except to the

18 extent that such other section is incorporated by reference

19 in this section.

20 ‘‘(b) EFFECT OF ELECTION.—

21 ‘‘(1) PREEMPTION OF STATE INSURANCE LAWS

22 REGULATING COVERED CHURCH PLANS.—Subject to

23 paragraphs (2) and (3), this section shall supersede

24 any and all State laws which regulate insurance in25 sofar as they may now or hereafter regulate church
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1 plans to which this section applies or trusts estab2 lished under such church plans.

3 ‘‘(2) GENERAL STATE INSURANCE REGULATION

4 UNAFFECTED.—

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

6 subparagraph (B) and paragraph (3), nothing

7 in this section shall be construed to exempt or

8 relieve any person from any provision of State

9 law which regulates insurance.

10 ‘‘(B) CHURCH PLANS NOT TO BE DEEMED

11 INSURANCE COMPANIES OR INSURERS.—Neither

12 a church plan to which this section applies, nor

13 any trust established under such a church plan,

14 shall be deemed to be an insurance company or

15 other insurer or to be engaged in the business

16 of insurance for purposes of any State law pur17 porting to regulate insurance companies or in18 surance contracts.

19 ‘‘(3) PREEMPTION OF CERTAIN STATE LAWS

20 RELATING TO PREMIUM RATE REGULATION AND

21 BENEFIT MANDATES.—The provisions of subsections

22 (a)(2)(B) and (b) of section 805 shall apply with re23 spect to a church plan to which this section applies

24 in the same manner and to the same extent as such
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1 provisions apply with respect to association health

2 plans.

3 ‘‘(4) DEFINITIONS.—For purposes of this

4 subsection—

5 ‘‘(A) STATE LAW.—The term ‘State law’

6 includes all laws, decisions, rules, regulations,

7 or other State action having the effect of law,

8 of any State. A law of the United States appli9 cable only to the District of Columbia shall be

10 treated as a State law rather than a law of the

11 United States.

12 ‘‘(B) STATE.—The term ‘State’ includes a

13 State, any political subdivision thereof, or any

14 agency or instrumentality of either, which pur15 ports to regulate, directly or indirectly, the

16 terms and conditions of church plans covered by

17 this section.

18 ‘‘(c) REQUIREMENTS FOR COVERED CHURCH

19 PLANS.—

20 ‘‘(1) FIDUCIARY RULES AND EXCLUSIVE PUR21 POSE.—A fiduciary shall discharge his duties with

22 respect to a church plan to which this section

23 applies—

24 ‘‘(A) for the exclusive purpose of:
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1 ‘‘(i) providing benefits to participants

2 and their beneficiaries; and

3 ‘‘(ii) defraying reasonable expenses of

4 administering the plan;

5 ‘‘(B) with the care, skill, prudence and dili6 gence under the circumstances then prevailing

7 that a prudent man acting in a like capacity

8 and familiar with such matters would use in the

9 conduct of an enterprise of a like character and

10 with like aims; and

11 ‘‘(C) in accordance with the documents

12 and instruments governing the plan.

13 The requirements of this paragraph shall not be

14 treated as not satisfied solely because the plan as15 sets are commingled with other church assets, to the

16 extent that such plan assets are separately ac17 counted for.

18 ‘‘(2) CLAIMS PROCEDURE.—In accordance with

19 regulations of the Secretary, every church plan to

20 which this section applies shall—

21 ‘‘(A) provide adequate notice in writing to

22 any participant or beneficiary whose claim for

23 benefits under the plan has been denied, setting

24 forth the specific reasons for such denial, writ-
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1 ten in a manner calculated to be understood by

2 the participant;

3 ‘‘(B) afford a reasonable opportunity to

4 any participant whose claim for benefits has

5 been denied for a full and fair review by the ap6 propriate fiduciary of the decision denying the

7 claim; and

8 ‘‘(C) provide a written statement to each

9 participant describing the procedures estab10 lished pursuant to this paragraph.

11 ‘‘(3) ANNUAL STATEMENTS.—In accordance

12 with regulations of the Secretary, every church plan

13 to which this section applies shall file with the Sec14 retary an annual statement—

15 ‘‘(A) stating the names and addresses of

16 the plan and of the church, convention, or asso17 ciation maintaining the plan (and its principal

18 place of business);

19 ‘‘(B) certifying that it is a church plan to

20 which this section applies and that it complies

21 with the requirements of paragraphs (1) and

22 (2);

23 ‘‘(C) identifying the States in which par24 ticipants and beneficiaries under the plan are or
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1 likely will be located during the 1-year period

2 covered by the statement; and

3 ‘‘(D) containing a copy of a statement of

4 actuarial opinion signed by a qualified actuary

5 that the plan maintains capital, reserves, insur6 ance, other financial arrangements, or any com7 bination thereof adequate to enable the plan to

8 fully meet all of its financial obligations on a

9 timely basis.

10 ‘‘(4) DISCLOSURE.—At the time that the an11 nual statement is filed by a church plan with the

12 Secretary pursuant to paragraph (3), a copy of such

13 statement shall be made available by the Secretary

14 to the State insurance commissioner (or similar offi15 cial) of any State. The name of each church plan

16 and sponsoring organization filing an annual state17 ment in compliance with paragraph (3) shall be pub18 lished annually in the Federal Register.

19 ‘‘(c) ENFORCEMENT.—The Secretary may enforce

20 the provisions of this section in a manner consistent with

21 section 502, to the extent applicable with respect to ac22 tions under section 502(a)(5), and with section 3(33)(D),

23 except that, other than for the purpose of seeking a tem24 porary restraining order, a civil action may be brought

25 with respect to the plan’s failure to meet any requirement
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1 of this section only if the plan fails to correct its failure

2 within the correction period described in section 3(33)(D).

3 The other provisions of part 5 (except sections 501(a),

4 503, 512, 514, and 515) shall apply with respect to the

5 enforcement and administration of this section.

6 ‘‘(d) DEFINITIONS AND OTHER RULES.—For pur7 poses of this section—

8 ‘‘(1) IN GENERAL.—Except as otherwise pro9 vided in this section, any term used in this section

10 which is defined in any provision of this title shall

11 have the definition provided such term by such pro12 vision.

13 ‘‘(2) SEMINARY STUDENTS.—Seminary students

14 who are enrolled in an institution of higher learning

15 described in section 3(33)(C)(iv) and who are treat16 ed as participants under the terms of a church plan

17 to which this section applies shall be deemed to be

18 employees as defined in section 3(6) if the number

19 of such students constitutes an insignificant portion

20 of the total number of individuals who are treated

21 as participants under the terms of the plan.

22 ‘‘SEC. 813. DEFINITIONS AND RULES OF CONSTRUCTION.

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

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

25 health plan’ has the meaning provided in section
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1 733(a)(1) (after applying subsection (b) of this sec2 tion).

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

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

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

6 term ‘health insurance coverage’ has the meaning

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

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

9 ‘health insurance issuer’ has the meaning provided

10 in section 733(b)(2).

11 ‘‘(5) APPLICABLE AUTHORITY.—

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

13 subparagraph (B), the term ‘applicable author14 ity’ means, in connection with an association

15 health plan—

16 ‘‘(i) the State recognized pursuant to

17 subsection (c) of section 506 as the State

18 to which authority has been delegated in

19 connection with such plan; or

20 ‘‘(ii) if there is no State referred to in

21 clause (i), the Secretary.

22 ‘‘(B) EXCEPTIONS.—

23 ‘‘(i) JOINT AUTHORITIES.—Where

24 such term appears in section 808(3), sec25 tion 807(e) (in the first instance), section
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1 809(a) (in the second instance), section

2 809(a) (in the fourth instance), and sec3 tion 809(b)(1), such term means, in con4 nection with an association health plan, the

5 Secretary and the State referred to in sub6 paragraph (A)(i) (if any) in connection

7 with such plan.

8 ‘‘(ii) REGULATORY AUTHORITIES.—

9 Where such term appears in section 802(a)

10 (in the first instance), section 802(d), sec11 tion 802(e), section 803(d), section

12 805(a)(5), section 806(a)(2), section

13 806(b), section 806(c), section 806(d),

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

15 806(g), section 806(h), section 806(i), sec16 tion 806(j), section 807(a) (in the second

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

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

19 section 808 (in the matter after paragraph

20 (3)), and section 809(a) (in the third in21 stance), such term means, in connection

22 with an association health plan, the Sec23 retary.
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1 ‘‘(6) HEALTH STATUS-RELATED FACTOR.—The

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

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

4 ‘‘(7) INDIVIDUAL MARKET.—

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

6 market’ means the market for health insurance

7 coverage offered to individuals other than in

8 connection with a group health plan.

9 ‘‘(B) TREATMENT OF VERY SMALL

10 GROUPS.—

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

12 (ii), such term includes coverage offered in

13 connection with a group health plan that

14 has fewer than 2 participants as current

15 employees or participants described in sec16 tion 732(d)(3) on the first day of the plan

17 year.

18 ‘‘(ii) STATE EXCEPTION.—Clause (i)

19 shall not apply in the case of health insur20 ance coverage offered in a State if such

21 State regulates the coverage described in

22 such clause in the same manner and to the

23 same extent as coverage in the small group

24 market (as defined in section 2791(e)(5) of
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1 the Public Health Service Act) is regulated

2 by such State.

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

4 ‘participating employer’ means, in connection with

5 an association health plan, any employer, if any indi6 vidual who is an employee of such employer, a part7 ner in such employer, or a self-employed individual

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

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

10 or was covered under such plan in connection with

11 the status of such individual as such an employee,

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

13 plan.

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

15 term ‘applicable State authority’ means, with respect

16 to a health insurance issuer in a State, the State in17 surance commissioner or official or officials des18 ignated by the State to enforce the requirements of

19 title XXVII of the Public Health Service Act for the

20 State involved with respect to such issuer.

21 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali22 fied actuary’ means an individual who is a member

23 of the American Academy of Actuaries or meets

24 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. Special rules for church plans.

‘‘Sec. 813. Definitions and rules of construction.’’.
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1 SEC. 403. CLARIFICATION OF TREATMENT OF SINGLE EM2 PLOYER ARRANGEMENTS.

3 Section 3(40)(B) of the Employee Retirement Income

4 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is

5 amended—

6 (1) in clause (i), by inserting ‘‘for any plan year

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

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

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

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

11 (2) in clause (iii)—

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

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

14 and inserting ‘‘an interest of greater than 25

15 percent may not be required as the minimum

16 interest necessary for common control’’; and

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

18 ‘‘consistent and coextensive with’’;

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

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

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

22 new clause:

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

24 clause (i), whether benefits are provided to employ25 ees of two or more employers, the arrangement shall

26 be treated as having only one participating employer
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1 if, after the application of clause (i), the number of

2 individuals who are employees and former employees

3 of any one participating employer and who are cov4 ered under the arrangement is greater than 75 per5 cent of the aggregate number of all individuals who

6 are employees or former employees of participating

7 employers and who are covered under the arrange8 ment;’’.

9 SEC. 404. CLARIFICATION OF TREATMENT OF CERTAIN

10 COLLECTIVELY BARGAINED ARRANGE11 MENTS.

12 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em13 ployee Retirement Income Security Act of 1974 (29

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

15 ‘‘(i)(I) under or pursuant to one or more collec16 tive bargaining agreements which are reached pursu17 ant to collective bargaining described in section 8(d)

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

19 158(d)) or paragraph Fourth of section 2 of the

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

21 Fourth) or which are reached pursuant to labor22 management negotiations under similar provisions of

23 State public employee relations laws, and (II) in ac24 cordance with subparagraphs (C), (D), and (E);’’.
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1 (b) LIMITATIONS.—Section 3(40) of such Act (29

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

3 following new subparagraphs:

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

5 or other arrangement shall be treated as established or

6 maintained in accordance with this subparagraph only if

7 the following requirements are met:

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

9 employee organization or any other entity sponsoring

10 the plan or other arrangement, do not—

11 ‘‘(I) utilize the services of any licensed in12 surance agent or broker for soliciting or enroll13 ing employers or individuals as participating

14 employers or covered individuals under the plan

15 or other arrangement; or

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

17 person, other than a full time employee of the

18 employee organization (or a member of the or19 ganization to the extent provided in regulations

20 prescribed by the Secretary through negotiated

21 rulemaking), that is related either to the volume

22 or number of employers or individuals solicited

23 or enrolled as participating employers or cov24 ered individuals under the plan or other ar25 rangement, or to the dollar amount or size of
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1 the contributions made by participating employ2 ers or covered individuals to the plan or other

3 arrangement;

4 except to the extent that the services used by the

5 plan, arrangement, organization, or other entity con6 sist solely of preparation of documents necessary for

7 compliance with the reporting and disclosure re8 quirements of part 1 or administrative, investment,

9 or consulting services unrelated to solicitation or en10 rollment of covered individuals.

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

12 the number of covered individuals under the plan or

13 other arrangement who are neither—

14 ‘‘(I) employed within a bargaining unit

15 covered by any of the collective bargaining

16 agreements with a participating employer (nor

17 covered on the basis of an individual’s employ18 ment in such a bargaining unit); nor

19 ‘‘(II) present employees (or former employ20 ees who were covered while employed) of the

21 sponsoring employee organization, of an em22 ployer who is or was a party to any of the col23 lective bargaining agreements, or of the plan or

24 other arrangement or a related plan or arrange-
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1 ment (nor covered on the basis of such present

2 or former employment);

3 does not exceed 15 percent of the total number of

4 individuals who are covered under the plan or ar5 rangement and who are present or former employees

6 who are or were covered under the plan or arrange7 ment pursuant to a collective bargaining agreement

8 with a participating employer. The requirements of

9 the preceding provisions of this clause shall be treat10 ed as satisfied if, as of the end of the preceding plan

11 year, such covered individuals are comprised solely

12 of individuals who were covered individuals under

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

14 enactment of the Small Business Access and Choice

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

16 the preceding plan year, the number of such covered

17 individuals does not exceed 25 percent of the total

18 number of present and former employees enrolled

19 under the plan or other arrangement.

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

21 sponsoring the plan or other arrangement certifies

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

23 which shall be prescribed by the Secretary through

24 negotiated rulemaking that the plan or other ar-
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1 rangement meets the requirements of clauses (i) and

2 (ii).

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

4 or arrangement shall be treated as established or main5 tained in accordance with this subparagraph only if—

6 ‘‘(i) all of the benefits provided under the plan

7 or arrangement consist of health insurance coverage;

8 or

9 ‘‘(ii)(I) the plan or arrangement is a multiem10 ployer plan; and

11 ‘‘(II) the requirements of clause (B) of the pro12 viso to clause (5) of section 302(c) of the Labor

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

14 186(c)) are met with respect to such plan or other

15 arrangement.

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

17 or arrangement shall be treated as established or main18 tained in accordance with this subparagraph only if—

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

20 the date of the enactment of the Small Business Ac21 cess and Choice for Entrepreneurs Act of 1999; or

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

23 sponsoring the plan or arrangement—

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

25 years; or
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1 ‘‘(II) demonstrates to the satisfaction of

2 the Secretary that the requirements of subpara3 graphs (C) and (D) are met with respect to the

4 plan or other arrangement.’’.

5 (c) CONFORMING AMENDMENTS TO DEFINITIONS OF

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

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

8 the following new sentence: ‘‘Such term includes an indi9 vidual who is a covered individual described in paragraph

10 (40)(C)(ii).’’.

11 SEC. 405. ENFORCEMENT PROVISIONS.

12 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

13 MISREPRESENTATIONS.—Section 501 of the Employee

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

15 is amended—

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

17 (2) by adding at the end the following new sub18 section:

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

20 any employee, any employee’s beneficiary, any employer,

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

22 established or maintained for the purpose of offering or

23 providing any benefit described in section 3(1) to employ24 ees or their beneficiaries as—
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1 ‘‘(1) being an association health plan which has

2 been certified under part 8;

3 ‘‘(2) having been established or maintained

4 under or pursuant to one or more collective bar5 gaining agreements which are reached pursuant to

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

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

8 paragraph Fourth of section 2 of the Railway Labor

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

10 reached pursuant to labor-management negotiations

11 under similar provisions of State public employee re12 lations laws; or

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

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

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

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

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

18 both.’’.

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

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

21 end the following new subsection:

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

23 by the Secretary showing the operation, promotion, or

24 marketing of an association health plan (or similar ar-
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1 rangement providing benefits consisting of medical care

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

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

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

5 State in which the plan or arrangement offers or

6 provides benefits, and is not licensed, registered, or

7 otherwise approved under the insurance laws of such

8 State; or

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

10 under part 8 and is not operating in accordance with

11 the requirements under part 8 for such certification,

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

13 requiring that the plan or arrangement cease activities.

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

15 association health plan or other arrangement if the plan

16 or arrangement shows that—

17 ‘‘(A) all benefits under it referred to in para18 graph (1) consist of health insurance coverage; and

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

20 plan or arrangement offers or provides benefits, the

21 plan or arrangement is operating in accordance with

22 applicable State laws that are not superseded under

23 section 514.

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

25 relief, including any relief available under this title, as it
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1 deems necessary to protect the interests of the public and

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

3 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

4 Section 503 of such Act (29 U.S.C. 1133) (as amended

5 by title I) is amended by adding at the end the following

6 new subsection:

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

8 each association health plan which is or has been certified

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

10 named fiduciary (as applicable) to ensure that the require11 ments of this section are met in connection with claims

12 filed under the plan.’’.

13 SEC. 406. COOPERATION BETWEEN FEDERAL AND STATE

14 AUTHORITIES.

15 Section 506 of the Employee Retirement Income Se16 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

17 at the end the following new subsection:

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

19 ASSOCIATION HEALTH PLANS.—

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

21 may enter into an agreement with the Secretary for

22 delegation to the State of some or all of—

23 ‘‘(A) the Secretary’s authority under sec24 tions 502 and 504 to enforce the requirements

25 for certification under part 8;
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1 ‘‘(B) the Secretary’s authority to certify

2 association health plans under part 8 in accord3 ance with regulations of the Secretary applica4 ble to certification under part 8; or

5 ‘‘(C) any combination of the Secretary’s

6 authority authorized to be delegated under sub7 paragraphs (A) and (B).

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

9 or instrumentality of a State to which authority is

10 delegated pursuant to an agreement entered into

11 under this paragraph may, if authorized under State

12 law and to the extent consistent with such agree13 ment, exercise the powers of the Secretary under

14 this title which relate to such authority.

15 ‘‘(3) RECOGNITION OF PRIMARY DOMICILE

16 STATE.—In entering into any agreement with a

17 State under subparagraph (A), the Secretary shall

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

19 other agreements entered into under subparagraph

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

21 to any particular association health plan, as the

22 State to which all authority has been delegated pur23 suant to such agreements in connection with such

24 plan. In carrying out this paragraph, the Secretary

25 shall take into account the places of residence of the
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1 participants and beneficiaries under the plan and the

2 State in which the trust is maintained.’’.

3 SEC. 407. EFFECTIVE DATE AND TRANSITIONAL AND

4 OTHER RULES.

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

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

7 1, 2001. The amendments made by sections 102 and 103

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

9 The Secretary of Labor shall first issue all regulations

10 necessary to carry out the amendments made by this sub11 title before January 1, 2001. Such regulations shall be

12 issued through negotiated rulemaking.

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

14 Retirement Income Security Act of 1974 (added by section

15 101) does not apply in connection with an association

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

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

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

19 of the enactment of this Act consist of health insurance

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

21 (c) TREATMENT OF CERTAIN EXISTING HEALTH

22 BENEFITS PROGRAMS.—

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

24 the date of the enactment of this Act, an arrange25 ment is maintained in a State for the purpose of
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1 providing benefits consisting of medical care for the

2 employees and beneficiaries of its participating em3 ployers, at least 200 participating employers make

4 contributions to such arrangement, such arrange5 ment has been in existence for at least 10 years, and

6 such arrangement is licensed under the laws of one

7 or more States to provide such benefits to its par8 ticipating employers, upon the filing with the appli9 cable authority (as defined in section 813(a)(5) of

10 the Employee Retirement Income Security Act of

11 1974 (as amended by this Act)) by the arrangement

12 of an application for certification of the arrangement

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

14 (A) such arrangement shall be deemed to

15 be a group health plan for purposes of title I

16 of such Act;

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

18 and 803(a)(1) of the Employee Retirement In19 come Security Act of 1974 shall be deemed met

20 with respect to such arrangement;

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

22 such Act shall be deemed met, if the arrange23 ment is operated by a board of directors

24 which—
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1 (i) is elected by the participating em2 ployers, with each employer having one

3 vote; and

4 (ii) has complete fiscal control over

5 the arrangement and which is responsible

6 for all operations of the arrangement;

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

8 such Act shall be deemed met with respect to

9 such arrangement; and

10 (E) the arrangement may be certified by

11 any applicable authority with respect to its op12 erations in any State only if it operates in such

13 State on the date of certification.

14 The provisions of this subsection shall cease to apply

15 with respect to any such arrangement at such time

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

17 applicable requirements of this subsection are not

18 met with respect to such arrangement.

19 (2) DEFINITIONS.—For purposes of this sub20 section, the terms ‘‘group health plan’’, ‘‘medical

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

22 meanings provided in section 813 of the Employee

23 Retirement Income Security Act of 1974, except

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

25 to an ‘‘association health plan’’ shall be deemed a
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1 reference to an arrangement referred to in this sub2 section.

3 TITLE V—IMPROVEMENT TO AC4 CESS AND CHOICE OF

5 HEALTH CARE

6 SEC. 501. EXCLUSION FOR EMPLOYER PAYMENTS MADE TO

7 COMPENSATE EMPLOYEES WHO ELECT NOT

8 TO PARTICIPATE IN EMPLOYER-SUBSIDIZED

9 HEALTH PLANS.

10 (a) IN GENERAL.—Part III of subchapter B of chap11 ter 1 of the Internal Revenue Code of 1986 (relating to

12 items specifically excluded from gross income) is amended

13 by redesignating section 139 as section 140 and by insert14 ing after section 138 the following new section:

15 ‘‘SEC. 139. TREATMENT OF COMPENSATING PAYMENTS

16 MADE FOR EMPLOYEES WHO ELECT NOT TO

17 PARTICIPATE IN EMPLOYER-SUBSIDIZED

18 HEALTH PLANS.

19 ‘‘(a) IN GENERAL.—Gross income of an eligible em20 ployee shall not include the amount of any compensating

21 coverage payment made by an employer of such employee

22 for such employee’s benefit.

23 ‘‘(b) ELIGIBLE EMPLOYEE.—For purposes of this

24 section, the term ‘eligible employee’ means any employee

25 who is eligible to participate in any subsidized health plan
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1 of an employer for any period and who elects not to par2 ticipate in any subsidized health plan of such employer

3 for such period.

4 ‘‘(c) COMPENSATING COVERAGE PAYMENT.—For

5 purposes of this section, the term ‘compensating coverage

6 payment’ means—

7 ‘‘(1) any payment made by the employer for

8 qualified health insurance (as defined in section

9 35(c)) specified by the employee (for any period for

10 which the employee is described in subsection (a)(1))

11 which covers all of the individuals who, but for the

12 election referred to in subsection (b), would be cov13 ered under the subsidized health plan of the em14 ployer, and

15 ‘‘(2) any payment made by the employer to any

16 medical savings account of such employee or spouse.

17 Paragraph (2) shall only apply to payments for a period

18 for which the employee is covered by qualified health in19 surance.

20 ‘‘(3) EMPLOYER HEALTH PLAN CONTRIBU21 TION.—For purposes of this section—

22 ‘‘(A) IN GENERAL.—The term ‘employer

23 health plan contribution’ means the applicable

24 premium for the employee reduced by the em25 ployee’s share of such premium.
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1 ‘‘(B) APPLICABLE PREMIUM.—Except as

2 provided in subparagraph (D), the term ‘appli3 cable premium’ means an amount which is not

4 less than 98 percent of—

5 ‘‘(i) the applicable premium (as de6 fined in section 4980B(f)(4)) for the em7 ployee, or

8 ‘‘(ii) if an election under subpara9 graph (D) is in effect with respect to an

10 employee, the applicable premium deter11 mined under subparagraph (D).

12 ‘‘(C) EMPLOYEE’S SHARE.—The term ‘em13 ployee’s share’ means, with respect to the appli14 cable premium for any employee, the amount of

15 the cost to the plan which is paid by the simi16 larly situated beneficiaries who are taken into

17 account in determining such premium for such

18 employee.

19 ‘‘(D) AUTHORITY TO USE AGE, SEX, AND

20 GEOGRAPHY IN DETERMINING CONTRIBU21 TION.—

22 ‘‘(i) IN GENERAL.—An employer may

23 determine the applicable premium for an

24 employee on an actuarial basis taking into
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1 account age, sex, and geography of the em2 ployee and similarly situated beneficiaries.

3 ‘‘(ii) DETERMINATION OF EMPLOY4 EE’S SHARE.—In the case of an employer

5 who determines the applicable premium

6 under clause (i), the employee’s share of

7 such premium shall be the same percent8 age of such premium as the employee’s

9 share of the applicable premium deter10 mined without regard to clause (i).

11 ‘‘(iii) CONSISTENCY REQUIRED.—

12 ‘‘(I) IN GENERAL.—Except as

13 provided in subclause (III), an em14 ployer may determine the applicable

15 premium under this subparagraph for

16 any employee only if such employer,

17 and all other employers which are

18 members of any controlled group

19 which includes such employer, elect to

20 determine the applicable premium

21 under this subparagraph for all their

22 employees.

23 ‘‘(II) CONTROLLED GROUP.—All

24 persons treated as a single employer

25 under subsection (a) or (b) of section
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1 52 or subsection (m) or (o) of section

2 414 shall be treated as members of a

3 controlled group for purposes of sub4 clause (I).

5 ‘‘(III) TREATMENT OF SEPARATE

6 LINES OF BUSINESS.—If an employer

7 is treated under section 414(r) as op8 erating separate lines of business dur9 ing any taxable year, subclause (I)

10 shall not apply to employees employed

11 in such separate lines of business.

12 ‘‘(d) EMPLOYER PARTICIPATION.—

13 ‘‘(1) IN GENERAL.—This section shall apply to

14 a compensating coverage payment made by an em15 ployer for an employee’s benefit only if—

16 ‘‘(A) the employer, and all other employers

17 which are members of any controlled group

18 which includes such employer, agree to make

19 such payments to all their eligible employees,

20 ‘‘(B) the amount of such payment is not

21 less than the employer health plan contribution

22 for such period with respect to the employee,

23 and
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1 ‘‘(C) the employer permits the election re2 ferred to in subsection (b) to be made by

3 employees—

4 ‘‘(i) at the commencement of employ5 ment with the employer, and

6 ‘‘(ii) during open enrollment periods

7 (not less frequently than annually) of at

8 least 30 days.

9 ‘‘(2) EXCEPTION FOR CERTAIN EMPLOYEES.—

10 Paragraph (1) shall not apply to—

11 ‘‘(A) any employee who is covered under a

12 subsidized health plan of another employer of

13 such employee or of an employer of such em14 ployee’s spouse,

15 ‘‘(B) any employee who normally works

16 less than 25 hours per week,

17 ‘‘(C) any employee who normally works

18 during not more than 6 months during any

19 year,

20 ‘‘(D) any employee who has not attained

21 age 21, and

22 ‘‘(E) except to the extent provided in regu23 lations, any employee who is included in a unit

24 of employees covered by an agreement which

25 the Secretary of Labor finds to be a collective
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1 bargaining agreement between employee rep2 resentatives and the employer.

3 ‘‘(3) CONTROLLED GROUPS.—Rules similar to

4 the rules of subclauses (II) and (III) of subsection

5 (c)(3)(D)(iii) shall apply for purposes of paragraph

6 (1)(A).

7 ‘‘(e) SPECIAL RULE FOR MEDICAL SAVINGS AC8 COUNT CONTRIBUTIONS.—Section 220(b)(5) shall not

9 apply to an employer contribution which is excludable

10 from gross income under subsection (a).

11 ‘‘(f) EXCLUSION APPLICABLE IN DETERMINING EM12 PLOYMENT TAX LIABILITY.—The exclusion under this

13 section shall be treated for purposes of subtitle C in the

14 same manner as the exclusion under section 106.’’

15 (b) EMPLOYER HEALTH PLAN CONTRIBUTION TO

16 BE REPORTED ON W–2.—Subsection (a) of section 6051

17 of such Code (relating to receipts to employees) is amend18 ed by striking ‘‘and’’ at the end of paragraph (10), by

19 striking the period at the end of paragraph (11) and in20 serting a comma, and by inserting after paragraph (11)

21 the following new paragraphs:

22 ‘‘(12) the amount of the employer health plan

23 contribution (as defined in section 139(c)(3)), and

24 ‘‘(13) the amount of compensating coverage

25 payment (as defined in section 139(c)(1)).’’
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1 (c) CLERICAL AMENDMENT.—The table of sections

2 for such part III is amended by striking the last item and

3 inserting the following new items:

‘‘Sec. 139. Treatment of compensating payments made for employees who elect not to participate in employersubsidized health plans.

‘‘Sec. 140. Cross references to other Acts.’’

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

5 this section shall apply to taxable years beginning after

6 December 31, 1999.

7 SEC. 502. FAMILY INSURANCE ALLOWANCE.

8 (a) IN GENERAL.—Subpart C of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of

10 1986 (relating to refundable credits) is amended by redes11 ignating section 35 as section 36 and by inserting after

12 section 34 the following new section:

13 ‘‘SEC. 35. HEALTH INSURANCE COSTS.

14 ‘‘(a) IN GENERAL.—In the case of an individual,

15 there shall be allowed as a credit against the tax imposed

16 by this subtitle an amount equal to the amount paid dur17 ing the taxable year for qualified health insurance for cov18 erage of the taxpayer, his spouse, and dependents.

19 ‘‘(b) LIMITATIONS.—

20 ‘‘(1) MAXIMUM CREDIT.—

21 ‘‘(A) IN GENERAL.—The amount allowed

22 as a credit under subsection (a) to the taxpayer

23 for the taxable year shall not exceed the sum of
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1 the monthly limitations for months during such

2 taxable year.

3 ‘‘(B) MONTHLY LIMITATION.—The month4 ly limitation for any month is the amount equal

to 1 5 ⁄12 of—

6 ‘‘(i) $500 if the taxpayer has self-only

7 coverage under qualified health insurance

8 as of the first day of such month, or

9 ‘‘(ii) $1,000 if the taxpayer has family

10 coverage under qualified health insurance

11 as of the first day of such month.

12 ‘‘(C) SPECIAL RULE FOR MARRIED INDI13 VIDUALS.—In the case of an individual—

14 ‘‘(i) who is married as of the close of

15 the taxable year (within the meaning of

16 section 7703) but does not file a joint re17 turn for such year, and

18 ‘‘(ii) who does not live apart from

19 such individual’s spouse at all times during

20 the taxable year,

21 the limitation under subparagraph (B)(i), and

22 not the limitation under subparagraph (B)(ii),

23 shall apply to such individual.

24 ‘‘(2) EMPLOYER SUBSIDIZED COVERAGE.—Sub25 section (a) shall not apply to amounts paid for cov-
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1 erage of any individual for any month for which

2 such individual participates in any subsidized health

3 plan maintained by any employer of the taxpayer or

4 of the spouse of the taxpayer. The rule of the last

5 sentence of section 162(l)(2)(B) shall apply for pur6 poses of the preceding sentence.

7 ‘‘(3) EMPLOYER COMPENSATING PAYMENTS.—

8 Subsection (a) shall not apply to a taxpayer for any

9 taxable year for which any amount is excluded from

10 the gross income of the taxpayer under section 139.

11 ‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur12 poses of this section—

13 ‘‘(1) IN GENERAL.—The term ‘qualified health

14 insurance’ means insurance which constitutes med15 ical care if—

16 ‘‘(A) there is an annual deductible which is

17 not more than the highest deductible permitted

18 under—

19 ‘‘(i) section 220(c)(2)(A)(i) in the

20 case of self-only coverage, or

21 ‘‘(ii) section 220(c)(2)(A)(ii) in the

22 case of family coverage,

23 ‘‘(B) the annual out-of-pocket expenses re24 quired to be paid (other than for premiums) for
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1 covered benefits does not exceed the amounts

2 specified in section 220(c)(2)(A)(iii),

3 ‘‘(C) there is no exclusion from, or limita4 tion on, coverage for any preexisting medical

5 condition of any applicant who, on the date the

6 application is made, has been continuously in7 sured during the 1-year period ending on the

8 date of the application under—

9 ‘‘(i) qualified health insurance (deter10 mined without regard to this subpara11 graph), or

12 ‘‘(ii) a program described in—

13 ‘‘(I) title XVIII or XIX of the

14 Social Security Act,

15 ‘‘(II) chapter 55 of title 10,

16 United States Code,

17 ‘‘(III) chapter 17 of title 38,

18 United States Code,

19 ‘‘(IV) chapter 89 of title 5,

20 United States Code, or

21 ‘‘(V) the Indian Health Care

22 Improvement Act, and

23 ‘‘(D) in the case of each applicant who has

24 not been continuously so insured during the 1-

25 year period ending on the date the application
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1 is made, the exclusion from, or limitation on,

2 coverage for any preexisting medical condition

3 does not extend beyond the period after such

4 date equal to the lesser of—

5 ‘‘(i) the number of months imme6 diately prior to such date during which the

7 individual was not so insured since the ill8 ness or condition in question was first di9 agnosed, or

10 ‘‘(ii) 1 year.

11 ‘‘(2) EXCLUSION OF CERTAIN PLANS.—Such

12 term does not include—

13 ‘‘(A) insurance if substantially all of its

14 coverage is coverage described in section

15 220(c)(1)(B),

16 ‘‘(B) insurance under a program described

17 in paragraph (1)(C)(ii).

18 ‘‘(3) TRANSITION RULE FOR 2000.—In the case

19 of applications made during 2000, the requirements

20 of subparagraphs (C) and (D) of paragraph (1) are

21 met only if the insurance does not exclude from cov22 erage, or limit coverage for, any preexisting medical

23 condition of any applicant.

24 ‘‘(d) SPECIAL RULES.—
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1 ‘‘(1) COORDINATION WITH MEDICAL DEDUC2 TION, ETC.—Any amount paid by a taxpayer for in3 surance to which subsection (a) applies shall not be

4 taken into account in computing the amount allow5 able to the taxpayer as a deduction under section

6 162(l) or 213(a).

7 ‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No

8 credit shall be allowed under this section to any indi9 vidual with respect to whom a deduction under sec10 tion 151 is allowable to another taxpayer for a tax11 able year beginning in the calendar year in which

12 such individual’s taxable year begins.

13 ‘‘(3) VERIFICATION OF COVERAGE, ETC.—No

14 credit shall be allowed under this section to any indi15 vidual unless such individual’s coverage under quali16 fied health insurance, and the amount paid for such

17 coverage, are verified in such manner as the Sec18 retary may prescribe.

19 ‘‘(4) COST-OF-LIVING ADJUSTMENT.—In the

20 case of any taxable year beginning in a calendar

21 year after 2000, each dollar amount contained in

22 subsection (b)(1)(B) shall be increased by an

23 amount equal to—

24 ‘‘(A) such dollar amount, multiplied by
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1 ‘‘(B) the cost-of-living adjustment deter2 mined under section 1(f)(3) for the calendar

3 year in which the taxable year begins by sub4 stituting ‘calendar year 1999’ for ‘calendar year

5 1992’ in subparagraph (B) thereof.

6 Any increase determined under the preceding sen7 tence shall be rounded to the nearest multiple of

8 $10.

9 ‘‘(e) TERMINATION.—This section shall not apply to

10 any taxable year beginning after December 31, 2002.’’

11 (b) CONFORMING AMENDMENTS.—

12 (1) Paragraph (2) of section 1324(b) of title

13 31, United States Code, is amended by inserting be14 fore the period ‘‘or from section 35 of such Code’’.

15 (2) The table of sections for subpart C of part

16 IV of subchapter A of chapter 1 of such Code is

17 amended by striking the last item and inserting the

18 following new items:

‘‘Sec. 35. Health insurance costs.

‘‘Sec. 36. Overpayments of tax.’’

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

20 this section shall apply to taxable years beginning after

21 December 31, 1999.

22 (d) RATIONALE FOR CREDIT TERMINATION.—The

23 purpose of the credit provided by section 35 of the Inter24 nal Revenue Code of 1986 (as added by this section) is
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1 to improve access to health coverage for Americans with2 out creating an open-ended entitlement. Although Con3 gress intends that the credit be permanent, providing that

4 the credit be extended in 2-year intervals insures proper

5 oversight. During the oversight and extension process, the

6 credit should be adjusted to maintain tax equity with the

7 average tax subsidy received by those in an employer-pro8 vided group health plan and ensure the ability to purchase

9 at least catastrophic health coverage.

10 SEC. 503. MEDICAL SAVINGS ACCOUNT EFFECTIVENESS

11 ACT OF 1999.

12 (a) REPEAL OF LIMITATIONS ON NUMBER OF MED13 ICAL SAVINGS ACCOUNTS.—

14 (1) IN GENERAL.—Subsections (i) and (j) of

15 section 220 of the Internal Revenue Code of 1986

16 are hereby repealed.

17 (2) CONFORMING AMENDMENT.—Paragraph (1)

18 of section 220(c) of such Code is amended by strik19 ing subparagraph (D).

20 (b) ALL EMPLOYERS MAY OFFER MEDICAL SAVINGS

21 ACCOUNTS.—

22 (1) IN GENERAL.—Subclause (I) of section

23 220(c)(1)(A)(iii) of such Code (defining eligible indi24 vidual) is amended by striking ‘‘and such employer

25 is a small employer’’.
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1 (2) CONFORMING AMENDMENTS.—

2 (A) Paragraph (1) of section 220(c) of

3 such Code is amended by striking subparagraph

4 (C).

5 (B) Subsection (c) of section 220 of such

6 Code is amended by striking paragraph (4) and

7 by redesignating paragraph (5) as paragraph

8 (4).

9 (c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED

10 FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.—

11 (1) IN GENERAL.—Paragraph (2) of section

12 220(b) of such Code is amended to read as follows:

13 ‘‘(2) MONTHLY LIMITATION.—The monthly limitation for any month is the amount equal to 1 14 ⁄12 of

15 the annual deductible (as of the first day of such

16 month) of the individual’s coverage under the high

17 deductible health plan.’’.

18 (2) CONFORMING AMENDMENT.—Clause (ii) of

19 section 220(d)(1)(A) of such Code is amended by

20 striking ‘‘75 percent of’’.

21 (d) BOTH EMPLOYERS AND EMPLOYEES MAY CON22 TRIBUTE TO MEDICAL SAVINGS ACCOUNTS.—Paragraph

23 (5) of section 220(b) of such Code is amended to read

24 as follows:
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1 ‘‘(5) COORDINATION WITH EXCLUSION FOR EM2 PLOYER CONTRIBUTIONS.—The limitation which

3 would (but for this paragraph) apply under this sub4 section to the taxpayer for any taxable year shall be

5 reduced (but not below zero) by the amount which

6 would (but for section 106(b)) be includible in the

7 taxpayer’s gross income for such taxable year.’’.

8 (e) REDUCTION OF PERMITTED DEDUCTIBLES

9 UNDER HIGH DEDUCTIBLE HEALTH PLANS.—

10 (1) IN GENERAL.—Subparagraph (A) of section

11 220(c)(2) of such Code (defining high deductible

12 health plan) is amended—

13 (A) by striking ‘‘$1,500’’ and inserting

14 ‘‘$1,000’’, and

15 (B) by striking ‘‘$3,000’’ in clause (ii) and

16 inserting ‘‘$2,000’’.

17 (2) CONFORMING AMENDMENT.—Subsection (g)

18 of section 220 of such Code is amended—

19 (A) by striking ‘‘1998’’ and inserting

20 ‘‘1999’’; and

21 (B) by striking ‘‘1997’’ and inserting

22 ‘‘1998’’.

23 (f) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED

24 UNDER CAFETERIA PLANS.—Subsection (f) of section

25 125 of such Code is amended by striking ‘‘106(b),’’.
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1 (g) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years ending after the

3 date of the enactment of this Act.

4 SEC. 504. INCREASE OF HIGHEST PERMITTED

5 DEDUCTIBLES UNDER HIGH DEDUCTIBLE

6 HEALTH PLANS.

7 (a) IN GENERAL.—Subparagraph (A) of section

8 220(c)(2) of the Internal Revenue Code of 1986 (defining

9 high deductible health plan) is amended—

10 (1) by striking ‘‘$2,250’’ and inserting

11 ‘‘$5,000’’; and

12 (2) by striking ‘‘$4,500’’ in clause (ii) and in13 serting ‘‘$10,000’’.

14 (b) MAINTAINING TAX DEDUCTION LIMITS.—Para15 graph (2) of section 220(a) of such Code (relating to

16 montly limitation) is amended—

17 (1) in subparagraph (A), by inserting ‘‘or, if

18 less, $2,250’’ after ‘‘under such coverage’’; and

19 (2) in subparagraph (B), by inserting ‘‘or, if

20 less, $4,500’’ after ‘‘under such coverage’’.

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

22 this section shall apply to taxable years ending after the

23 date of the enactment of this Act.
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1 TITLE VI—PATIENT ACCESS TO

2 INFORMATION

3 SEC. 601. PATIENT ACCESS TO INFORMATION REGARDING

4 PLAN COVERAGE, MANAGED CARE PROCE5 DURES, HEALTH CARE PROVIDERS, AND

6 QUALITY OF MEDICAL CARE.

7 (a) IN GENERAL.—Subpart 2 of part A of title

8 XXVII of the Public Health Service Act is amended by

9 adding at the end the following new section:

10 ‘‘SEC. 2707. PATIENT ACCESS TO INFORMATION REGARD11 ING PLAN COVERAGE, MANAGED CARE PRO12 CEDURES, HEALTH CARE PROVIDERS, AND

13 QUALITY OF MEDICAL CARE.

14 ‘‘(a) DISCLOSURE REQUIREMENT.—Each health in15 surance issuer offering health insurance coverage in con16 nection with a group health plan shall provide the adminis17 trator of such plan on a timely basis with the information

18 necessary to enable the administrator to include in the

19 summary plan description of the plan required under sec20 tion 102 of the Employee Retirement Income Security Act

21 of 1974 (or each summary plan description in any case

22 in which different summary plan descriptions are appro23 priate under part 1 of subtitle B of title I of such Act

24 for different options of coverage) the information required

25 under subsections (b), (c), (d), and (e)(2)(A). To the ex-
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1 tent that any such issuer provides such information on a

2 timely basis to plan participants and beneficiaries, the re3 quirements of this subsection shall be deemed satisfied in

4 the case of such plan with respect to such information.

5 ‘‘(b) PLAN BENEFITS.—The information required

6 under subsection (a) includes the following:

7 ‘‘(1) COVERED ITEMS AND SERVICES.—

8 ‘‘(A) CATEGORIZATION OF INCLUDED BEN9 EFITS.—A description of covered benefits, cat10 egorized by—

11 ‘‘(i) types of items and services (in12 cluding any special disease management

13 program); and

14 ‘‘(ii) types of health care professionals

15 providing such items and services.

16 ‘‘(B) EMERGENCY MEDICAL CARE.—A de17 scription of the extent to which the coverage in18 cludes emergency medical care (including the

19 extent to which the coverage provides for access

20 to urgent care centers), and any definitions pro21 vided under in connection with such coverage

22 for the relevant coverage terminology referring

23 to such care.
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1 ‘‘(C) PREVENTATIVE SERVICES.—A de2 scription of the extent to which the coverage in3 cludes benefits for preventative services.

4 ‘‘(D) DRUG FORMULARIES.—A description

5 of the extent to which covered benefits are de6 termined by the use or application of a drug

7 formulary and a summary of the process for de8 termining what is included in such formulary.

9 ‘‘(E) COBRA CONTINUATION COV10 ERAGE.—A description of the benefits available

11 under the coverage provided pursuant to part 6

12 of subtitle B of title I of the Employee Retire13 ment Income Security Act of 1974.

14 ‘‘(2) LIMITATIONS, EXCLUSIONS, AND RESTRIC15 TIONS ON COVERED BENEFITS.—

16 ‘‘(A) CATEGORIZATION OF EXCLUDED

17 BENEFITS.—A description of benefits specifi18 cally excluded from coverage, categorized by

19 types of items and services.

20 ‘‘(B) UTILIZATION REVIEW AND

21 PREAUTHORIZATION REQUIREMENTS.—Whether

22 coverage for medical care is limited or excluded

23 on the basis of utilization review or

24 preauthorization requirements.
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1 ‘‘(C) LIFETIME, ANNUAL, OR OTHER PE2 RIOD LIMITATIONS.—A description of the cir3 cumstances under which, and the extent to

4 which, coverage is subject to lifetime, annual, or

5 other period limitations, categorized by types of

6 benefits.

7 ‘‘(D) CUSTODIAL CARE.—A description of

8 the circumstances under which, and the extent

9 to which, the coverage of benefits for custodial

10 care is limited or excluded, and a statement of

11 the definition used in connection with such cov12 erage for custodial care.

13 ‘‘(E) EXPERIMENTAL TREATMENTS.—

14 Whether coverage for any medical care is lim15 ited or excluded because it constitutes experi16 mental treatment or technology, and any defini17 tions provided in connection with such coverage

18 for the relevant plan terminology referring to

19 such limited or excluded care.

20 ‘‘(F) MEDICAL APPROPRIATENESS OR NE21 CESSITY.—Whether coverage for medical care

22 may be limited or excluded by reason of a fail23 ure to meet the plan’s requirements for medical

24 appropriateness or necessity, and any defini25 tions provided in connection with such coverage
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1 for the relevant coverage terminology referring

2 to such limited or excluded care.

3 ‘‘(G) SECOND OR SUBSEQUENT OPIN4 IONS.—A description of the circumstances

5 under which, and the extent to which, coverage

6 for second or subsequent opinions is limited or

7 excluded.

8 ‘‘(H) SPECIALTY CARE.—A description of

9 the circumstances under which, and the extent

10 to which, coverage of benefits for specialty care

11 is conditioned on referral from a primary care

12 provider.

13 ‘‘(I) CONTINUITY OF CARE.—A description

14 of the circumstances under which, and the ex15 tent to which, coverage of items and services

16 provided by any health care professional is lim17 ited or excluded by reason of the departure by

18 the professional from any defined set of pro19 viders.

20 ‘‘(J) RESTRICTIONS ON COVERAGE OF

21 EMERGENCY SERVICES.—A description of the

22 circumstances under which, and the extent to

23 which, the coverage, in including emergency

24 medical care furnished to a participant or bene25 ficiary of the plan imposes any financial respon-
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1 sibility described in subsection (c) on partici2 pants or beneficiaries or limits or conditions

3 benefits for such care subject to any other term

4 or condition of such coverage.

5 ‘‘(c) PARTICIPANT’S FINANCIAL RESPONSIBIL6 ITIES.—The information required under subsection (a) in7 cludes an explanation of—

8 ‘‘(1) a participant’s financial responsibility for

9 payment of premiums, coinsurance, copayments,

10 deductibles, and any other charges; and

11 ‘‘(2) the circumstances under which, and the

12 extent to which, the participant’s financial responsi13 bility described in paragraph (1) may vary, including

14 any distinctions based on whether a health care pro15 vider from whom covered benefits are obtained is in16 cluded in a defined set of providers.

17 ‘‘(d) ACCOUNTABILITY.—The information required

18 under subsection (a) includes a description of the legal re19 course options available for participants and beneficiaries

20 under the plan including—

21 ‘‘(1) the preemption that applies under section

22 514 of the Employee Retirement Income Security

23 Act of 1974 (29 U.S.C. 1144) to certain actions

24 arising out of the provision of health benefits;
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1 ‘‘(2) the ability of a participant or beneficiary

2 (or the estate of the participant or beneficiary)

3 under State law to recover damages resulting from

4 personal injury or for wrongful death against any

5 person in connection with the provision of insurance,

6 administrative services, or medical services by such

7 person to or for a group health plan; and

8 ‘‘(3) the extent to which coverage decisions

9 made by the plan are subject to internal review or

10 any external review and the proper time frames

11 under which such reviews may be requested and con12 ducted.

13 ‘‘(e) INFORMATION AVAILABLE ON REQUEST.—

14 ‘‘(1) ACCESS TO PLAN BENEFIT INFORMATION

15 IN ELECTRONIC FORM.—

16 ‘‘(A) IN GENERAL.—A group health plan

17 (and a health insurance issuer offering health

18 insurance coverage in connection with a group

19 health plan) shall, upon written request (made

20 not more frequently than annually), make avail21 able to participants and beneficiaries, in a gen22 erally recognized electronic format, the fol23 lowing information:
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1 ‘‘(i) the latest summary plan descrip2 tion, including the latest summary of ma3 terial modifications; and

4 ‘‘(ii) the actual plan provisions setting

5 forth the benefits available under the plan,

6 to the extent such information relates to the

7 coverage options under the plan available to the

8 participant or beneficiary. A reasonable charge

9 may be made to cover the cost of providing

10 such information in such generally recognized

11 electronic format. The Secretary may by regula12 tion prescribe a maximum amount which will

13 constitute a reasonable charge under the pre14 ceding sentence.

15 ‘‘(B) ALTERNATIVE ACCESS.—The require16 ments of this paragraph may be met by making

17 such information generally available (rather

18 than upon request) on the Internet or on a pro19 prietary computer network in a format which is

20 readily accessible to participants and bene21 ficiaries.

22 ‘‘(2) ADDITIONAL INFORMATION TO BE PRO23 VIDED ON REQUEST.—

24 ‘‘(A) INCLUSION IN SUMMARY PLAN DE25 SCRIPTION OF SUMMARY OF ADDITIONAL IN-
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1 FORMATION.—The information required under

2 subsection (a) includes a summary description

3 of the types of information required by this

4 subsection to be made available to participants

5 and beneficiaries on request.

6 ‘‘(B) INFORMATION REQUIRED FROM

7 PLANS AND ISSUERS ON REQUEST.—In addition

8 to information required to be included in sum9 mary plan descriptions under this subsection, a

10 group health plan (and a health insurance

11 issuer offering health insurance coverage in

12 connection with a group health plan) shall pro13 vide the following information to a participant

14 or beneficiary on request:

15 ‘‘(i) NETWORK CHARACTERISTICS.—If

16 the plan (or issuer) utilizes a defined set of

17 providers under contract with the plan (or

18 issuer), a detailed list of the names of such

19 providers and their geographic location, set

20 forth separately with respect to primary

21 care providers and with respect to special22 ists.

23 ‘‘(ii) CARE MANAGEMENT INFORMA24 TION.—A description of the circumstances

25 under which, and the extent to which, the
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1 plan has special disease management pro2 grams or programs for persons with dis3 abilities, indicating whether these pro4 grams are voluntary or mandatory and

5 whether a significant benefit differential

6 results from participation in such pro7 grams.

8 ‘‘(iii) INCLUSION OF DRUGS AND

9 BIOLOGICALS IN FORMULARIES.—A state10 ment of whether a specific drug or biologi11 cal is included in a formulary used to de12 termine benefits under the plan and a de13 scription of the procedures for considering

14 requests for any patient-specific waivers.

15 ‘‘(iv) PROCEDURES FOR DETERMINING

16 EXCLUSIONS BASED ON MEDICAL NECES17 SITY OR EXPERIMENTAL TREATMENTS.—

18 Upon receipt by the participant or bene19 ficiary of any notification of an adverse

20 coverage decision based on a determination

21 relating to medical necessity or an experi22 mental treatment or technology, a descrip23 tion of the procedures and medically-based

24 criteria used in such decision.
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1 ‘‘(v) PREAUTHORIZATION AND UTILI2 ZATION REVIEW PROCEDURES.—Upon re3 ceipt by the participant or beneficiary of

4 any notification of an adverse coverage de5 cision, a description of the basis on which

6 any preauthorization requirement or any

7 utilization review requirement has resulted

8 in such decision.

9 ‘‘(vi) ACCREDITATION STATUS OF

10 HEALTH INSURANCE ISSUERS AND SERV11 ICE PROVIDERS.—A description of the ac12 creditation and licensing status (if any) of

13 each health insurance issuer offering

14 health insurance coverage in connection

15 with the plan and of any utilization review

16 organization utilized by the issuer or the

17 plan, together with the name and address

18 of the accrediting or licensing authority.

19 ‘‘(vii) MEASURES OF ENROLLEE SAT20 ISFACTION.—The latest information (if

21 any) maintained by the plan, or by any

22 health insurance issuer offering health in23 surance coverage in connection with the

24 plan, relating to enrollee satisfaction.
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1 ‘‘(viii) QUALITY PERFORMANCE MEAS2 URES.—The latest information (if any)

3 maintained by the plan, or by any health

4 insurance issuer offering health insurance

5 coverage in connection with the plan, relat6 ing to quality of performance of the deliv7 ery of medical care with respect to cov8 erage options offered under the plan and

9 of health care professionals and facilities

10 providing medical care under the plan.

11 ‘‘(C) INFORMATION REQUIRED FROM

12 HEALTH CARE PROFESSIONALS ON REQUEST.—

13 Any health care professional treating a partici14 pant or beneficiary under a group health plan

15 shall provide to the participant or beneficiary,

16 on request, a description of his or her profes17 sional qualifications (including board certifi18 cation status, licensing status, and accreditation

19 status, if any), privileges, and experience and a

20 general description by category (including sal21 ary, fee-for-service, capitation, and such other

22 categories as may be specified in regulations of

23 the Secretary) of the applicable method by

24 which such professional is compensated in con25 nection with the provision of such medical care.
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1 ‘‘(D) INFORMATION REQUIRED FROM

2 HEALTH CARE FACILITIES ON REQUEST.—Any

3 health care facility from which a participant or

4 beneficiary has sought treatment under a group

5 health plan shall provide to the participant or

6 beneficiary, on request, a description of the fa7 cility’s corporate form or other organizational

8 form and all forms of licensing and accredita9 tion status (if any) assigned to the facility by

10 standard-setting organizations.

11 ‘‘(f) ACCESS TO INFORMATION RELEVANT TO THE

12 COVERAGE OPTIONS UNDER WHICH THE PARTICIPANT

13 OR BENEFICIARY IS ELIGIBLE TO ENROLL.—In addition

14 to information otherwise required to be made available

15 under this section, a group health plan (and a health in16 surance issuer offering health insurance coverage in con17 nection with a group health plan) shall, upon written re18 quest (made not more frequently than annually), make

19 available to a participant (and an employee who, under

20 the terms of the plan, is eligible for coverage but not en21 rolled) in connection with a period of enrollment the sum22 mary plan description for any coverage option under the

23 plan under which the participant is eligible to enroll and

24 any information described in clauses (i), (ii), (iii), (vi),

25 (vii), and (viii) of subsection (e)(2)(B).
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1 ‘‘(g) ADVANCE NOTICE OF CHANGES IN DRUG

2 FORMULARIES.—Not later than 30 days before the effec3 tive date of any exclusion of a specific drug or biological

4 from any drug formulary under the plan that is used in

5 the treatment of a chronic illness or disease, the plan shall

6 take such actions as are necessary to reasonably ensure

7 that plan participants are informed of such exclusion. The

8 requirements of this subsection may be satisfied—

9 ‘‘(1) by inclusion of information in publications

10 broadly distributed by plan sponsors, employers, or

11 employee organizations;

12 ‘‘(2) by electronic means of communication (in13 cluding the Internet or proprietary computer net14 works in a format which is readily accessible to par15 ticipants);

16 ‘‘(3) by timely informing participants who,

17 under an ongoing program maintained under the

18 plan, have submitted their names for such notifica19 tion; or

20 ‘‘(4) by any other reasonable means of timely

21 informing plan participants.’’.

22 SEC. 602. EFFECTIVE DATE.

23 (a) IN GENERAL.—The amendments made by section

24 601 shall apply with respect to plan years beginning on

25 or after January 1 of the second calendar year following
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1 the date of the enactment of this Act. The Secretary shall

2 first issue all regulations necessary to carry out the

3 amendments made by section 601 before such date.

4 (b) LIMITATION ON ENFORCEMENT ACTIONS.—No

5 enforcement action shall be taken, pursuant to the amend6 ments made by section 601, against a group health plan

7 or health insurance issuer with respect to a violation of

8 a requirement imposed by such amendments before the

9 date of issuance of final regulations issued in connection

10 with such requirement, if the plan or issuer has sought

11 to comply in good faith with such requirement.

Æ