I

106TH CONGRESS

1ST SESSION H. R. 2047

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

to improve access and choice for entrepreneurs with small businesses

with respect to medical care for their employees.

IN THE HOUSE OF REPRESENTATIVES

JUNE 8, 1999

Mr. TALENT (for himself and Mr. DOOLEY of California) introduced the following bill; which was referred to the Committee on Education and the

Workforce

A BILL

To amend title I of the Employee Retirement Income Security Act of 1974 to improve access and choice for entrepreneurs with small businesses with respect to medical

care for their employees.

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

3 SECTION 1. SHORT TITLE.

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

5 and Choice for Entrepreneurs Act of 1999’’.
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1 SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS.

2 (a) IN GENERAL.—Subtitle B of title I of the Em3 ployee Retirement Income Security Act of 1974 is amend4 ed by adding after part 7 the following new part:

5 ‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH

6 PLANS

7 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS.

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

9 term ‘association health plan’ means a group health

10 plan—

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

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

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

14 insurance coverage offered by a health insurance

15 issuer (which may include, among other options,

16 managed care options, point of service options, and

17 preferred provider options) is provided to partici18 pants and beneficiaries, unless, for any plan year,

19 such coverage remains unavailable to the plan de20 spite good faith efforts exercised by the plan to se21 cure such coverage.

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

23 plan is described in this subsection if such sponsor—

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

25 with a constitution and bylaws specifically stating its

26 purpose and providing for periodic meetings on at
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1 least an annual basis, as a bona fide trade associa2 tion, a bona fide industry association (including a

3 rural electric cooperative association or a rural tele4 phone cooperative association), a bona fide profes5 sional association, or a bona fide chamber of com6 merce (or similar bona fide business association, in7 cluding a corporation or similar organization that

8 operates on a cooperative basis (within the meaning

9 of section 1381 of the Internal Revenue Code of

10 1986)), for substantial purposes other than that of

11 obtaining or providing medical care;

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

13 receives the active support of its members and col14 lects from its members on a periodic basis dues or

15 payments necessary to maintain eligibility for mem16 bership in the sponsor; and

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

18 or payments, or coverage under the plan on the

19 basis of health status-related factors with respect to

20 the employees of its members (or affiliated mem21 bers), or the dependents of such employees, and does

22 not condition such dues or payments on the basis of

23 group health plan participation.

24 Any sponsor consisting of an association of entities which

25 meet the requirements of paragraphs (1), (2), and (3)
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1 shall be deemed to be a sponsor described in this sub2 section.

3 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH

4 PLANS.

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

6 prescribe by regulation, through negotiated rulemaking, a

7 procedure under which, subject to subsection (b), the ap8 plicable authority shall certify association health plans

9 which apply for certification as meeting the requirements

10 of this part.

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

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

13 health plan that provides at least one benefit option which

14 does not consist of health insurance coverage, the applica15 ble authority shall certify such plan as meeting the re16 quirements of this part only if the applicable authority is

17 satisfied that—

18 ‘‘(1) such certification—

19 ‘‘(A) is administratively feasible;

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

21 individuals covered under the plan; and

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

23 of the individuals covered under the plan; and

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

25 are met (or, upon the date on which the plan is to
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1 commence operations, will be met) with respect to

2 the plan.

3 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

5 certification under this part is in effect shall meet the ap6 plicable requirements of this part, effective on the date

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

8 is to commence operations).

9 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI10 CATION.—The applicable authority may provide by regula11 tion, through negotiated rulemaking, for continued certifi12 cation of association health plans under this part.

13 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

14 PLANS.—The applicable authority shall establish a class

15 certification procedure for association health plans under

16 which all benefits consist of health insurance coverage.

17 Under such procedure, the applicable authority shall pro18 vide for the granting of certification under this part to

19 the plans in each class of such association health plans

20 upon appropriate filing under such procedure in connec21 tion with plans in such class and payment of the pre22 scribed fee under section 807(a).

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

24 HEALTH PLANS.—An association health plan which offers

25 one or more benefit options which do not consist of health
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1 insurance coverage may be certified under this part only

2 if such plan consists of any of the following:

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

4 date of the enactment of the Small Business Access

5 and Choice for Entrepreneurs Act of 1999,

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

7 restrict membership to one or more trades and busi8 nesses or industries and whose eligible participating

9 employers represent a broad cross-section of trades

10 and businesses or industries, or

11 ‘‘(3) a plan whose eligible participating employ12 ers represent one or more trades or businesses, or

13 one or more industries, which have been indicated as

14 having average or above-average health insurance

15 risk or health claims experience by reason of State

16 rate filings, denials of coverage, proposed premium

17 rate levels, and other means demonstrated by such

18 plan in accordance with regulations which the Sec19 retary shall prescribe through negotiated rule20 making, including (but not limited to) the following:

21 agriculture; automobile dealerships; barbering and

22 cosmetology; child care; construction; dance, theat23 rical, and orchestra productions; disinfecting and

24 pest control; eating and drinking establishments;

25 fishing; hospitals; labor organizations; logging; man-
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1 ufacturing (metals); mining; medical and dental

2 practices; medical laboratories; sanitary services;

3 transportation (local and freight); and warehousing.

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

5 BOARDS OF TRUSTEES.

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

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

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

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

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

11 the application for certification under this part.

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

13 this subsection are met with respect to an association

14 health plan if the following requirements are met:

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

16 pursuant to a trust agreement, by a board of trust17 ees which has complete fiscal control over the plan

18 and which is responsible for all operations of the

19 plan.

20 ‘‘(2) RULES OF OPERATION AND FINANCIAL

21 CONTROLS.—The board of trustees has in effect

22 rules of operation and financial controls, based on a

23 3-year plan of operation, adequate to carry out the

24 terms of the plan and to meet all requirements of

25 this title applicable to the plan.
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1 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

2 PARTICIPATING EMPLOYERS AND TO CONTRAC3 TORS.—

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

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

6 board of trustees are individuals selected from

7 individuals who are the owners, officers, direc8 tors, or employees of the participating employ9 ers or who are partners in the participating em10 ployers and actively participate in the business.

11 ‘‘(B) LIMITATION.—

12 ‘‘(i) GENERAL RULE.—Except as pro13 vided in clauses (ii) and (iii), no such

14 member is an owner, officer, director, or

15 employee of, or partner in, a contract ad16 ministrator or other service provider to the

17 plan.

18 ‘‘(ii) LIMITED EXCEPTION FOR PRO19 VIDERS OF SERVICES SOLELY ON BEHALF

20 OF THE SPONSOR.—Officers or employees

21 of a sponsor which is a service provider

22 (other than a contract administrator) to

23 the plan may be members of the board if

24 they constitute not more than 25 percent

25 of the membership of the board and they
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1 do not provide services to the plan other

2 than on behalf of the sponsor.

3 ‘‘(iii) TREATMENT OF PROVIDERS OF

4 MEDICAL CARE.—In the case of a sponsor

5 which is an association whose membership

6 consists primarily of providers of medical

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

8 of any service provider described in sub9 paragraph (A) who is a provider of medical

10 care under the plan.

11 ‘‘(C) CERTAIN PLANS EXCLUDED.—Sub12 paragraph (A) shall not apply to an association

13 health plan which is in existence on the date of

14 the enactment of the Small Business Access

15 and Choice for Entrepreneurs Act of 1999.

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

17 sole authority under the plan to approve appli18 cations for participation in the plan and to con19 tract with a service provider to administer the

20 day-to-day affairs of the plan.

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

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

23 maintained by a franchiser for a franchise network con24 sisting of its franchisees—
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1 ‘‘(1) the requirements of subsection (a) and sec2 tion 801(a)(1) shall be deemed met if such require3 ments would otherwise be met if the franchiser were

4 deemed to be the sponsor referred to in section

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

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

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

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

10 be deemed met.

11 The Secretary may by regulation, through negotiated rule12 making, define for purposes of this subsection the terms

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

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

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

16 health plan described in paragraph (2)—

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

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

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

20 deemed a board of trustees with respect to

21 which the requirements of subsection (b) are

22 met; and

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

24 be deemed met.
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1 ‘‘(2) REQUIREMENTS.—A group health plan is

2 described in this paragraph if—

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

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

5 1997, and would be described in section

6 3(40)(A)(i) but solely for the failure to meet

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

8 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE9 MENTS.

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

11 requirements of this subsection are met with respect to

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

13 plan—

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

15 ‘‘(A) a member of the sponsor,

16 ‘‘(B) the sponsor, or

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

18 with respect to which the requirements of sub19 section (b) are met,

20 except that, in the case of a sponsor which is a pro21 fessional association or other individual-based asso22 ciation, if at least one of the officers, directors, or

23 employees of an employer, or at least one of the in24 dividuals who are partners in an employer and who

25 actively participates in the business, is a member or
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1 such an affiliated member of the sponsor, partici2 pating employers may also include such employer;

3 and

4 ‘‘(2) all individuals commencing coverage under

5 the plan after certification under this part must

6 be—

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

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

9 employees of, or partners in, participating em10 ployers; or

11 ‘‘(B) the beneficiaries of individuals de12 scribed in subparagraph (A).

13 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM14 PLOYEES.—In the case of an association health plan in

15 existence on the date of the enactment of the Small Busi16 ness Access and Choice for Entrepreneurs Act of 1999,

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

18 offered coverage under the plan as a participating em19 ployer only if—

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

21 member on the date of certification under this part;

22 or

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

24 date of the offering of such coverage, the affiliated

25 member has not maintained or contributed to a
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1 group health plan with respect to any of its employ2 ees who would otherwise be eligible to participate in

3 such association health plan.

4 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re5 quirements of this subsection are met with respect to an

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

7 no participating employer may provide health insurance

8 coverage in the individual market for any employee not

9 covered under the plan which is similar to the coverage

10 contemporaneously provided to employees of the employer

11 under the plan, if such exclusion of the employee from cov12 erage under the plan is based on a health status-related

13 factor with respect to the employee and such employee

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

15 for coverage under the plan.

16 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

17 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI18 PATE.—The requirements of this subsection are met with

19 respect to an association health plan if—

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

21 meeting the preceding requirements of this section

22 are eligible to qualify as participating employers for

23 all geographically available coverage options, unless,

24 in the case of any such employer, participation or

25 contribution requirements of the type referred to in
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1 section 2711 of the Public Health Service Act are

2 not met;

3 ‘‘(2) upon request, any employer eligible to par4 ticipate is furnished information regarding all cov5 erage options available under the plan; and

6 ‘‘(3) the applicable requirements of sections

7 701, 702, and 703 are met with respect to the plan.

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

9 DOCUMENTS, CONTRIBUTION RATES, AND

10 BENEFIT OPTIONS.

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

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

13 following requirements are met:

14 ‘‘(1) CONTENTS OF GOVERNING INSTRU15 MENTS.—The instruments governing the plan in16 clude a written instrument, meeting the require17 ments of an instrument required under section

18 402(a)(1), which—

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

20 serves as the named fiduciary required for plans

21 under section 402(a)(1) and serves in the ca22 pacity of a plan administrator (referred to in

23 section 3(16)(A));
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1 ‘‘(B) provides that the sponsor of the plan

2 is to serve as plan sponsor (referred to in sec3 tion 3(16)(B)); and

4 ‘‘(C) incorporates the requirements of sec5 tion 806.

6 ‘‘(2) CONTRIBUTION RATES MUST BE NON7 DISCRIMINATORY.—

8 ‘‘(A) The contribution rates for any par9 ticipating small employer do not vary on the

10 basis of the claims experience of such employer

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

12 business or industry in which such employer is

13 engaged.

14 ‘‘(B) Nothing in this title or any other pro15 vision of law shall be construed to preclude an

16 association health plan, or a health insurance

17 issuer offering health insurance coverage in

18 connection with an association health plan,

19 from—

20 ‘‘(i) setting contribution rates based

21 on the claims experience of the plan; or

22 ‘‘(ii) varying contribution rates for

23 small employers in a State to the extent

24 that such rates could vary using the same

25 methodology employed in such State for
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1 regulating premium rates in the small

2 group market with respect to health insur3 ance coverage offered in connection with

4 bona fide associations (within the meaning

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

6 Service Act),

7 subject to the requirements of section 702(b)

8 relating to contribution rates.

9 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI10 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If

11 any benefit option under the plan does not consist

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

13 beginning of the plan year not fewer than 1,000 par14 ticipants and beneficiaries.

15 ‘‘(4) MARKETING REQUIREMENTS.—

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

17 which consists of health insurance coverage is

18 offered under the plan, State-licensed insurance

19 agents shall be used to distribute to small em20 ployers coverage which does not consist of

21 health insurance coverage in a manner com22 parable to the manner in which such agents are

23 used to distribute health insurance coverage.

24 ‘‘(B) STATE-LICENSED INSURANCE

25 AGENTS.—For purposes of subparagraph (A),
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1 the term ‘State-licensed insurance agents’

2 means one or more agents who are licensed in

3 a State and are subject to the laws of such

4 State relating to licensure, qualification, test5 ing, examination, and continuing education of

6 persons authorized to offer, sell, or solicit

7 health insurance coverage in such State.

8 ‘‘(5) REGULATORY REQUIREMENTS.—Such

9 other requirements as the applicable authority deter10 mines are necessary to carry out the purposes of this

11 part, which shall be prescribed by the applicable au12 thority by regulation through negotiated rulemaking.

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

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

15 nothing in this part or any provision of State law (as de16 fined in section 514(c)(1)) shall be construed to preclude

17 an association health plan, or a health insurance issuer

18 offering health insurance coverage in connection with an

19 association health plan, from exercising its sole discretion

20 in selecting the specific items and services consisting of

21 medical care to be included as benefits under such plan

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

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

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

2 governed by section 711 or 712.

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

4 FOR SOLVENCY FOR PLANS PROVIDING

5 HEALTH BENEFITS IN ADDITION TO HEALTH

6 INSURANCE COVERAGE.

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

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

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

10 of health insurance coverage; or

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

12 options which do not consist of health insurance cov13 erage, the plan—

14 ‘‘(A) establishes and maintains reserves

15 with respect to such additional benefit options,

16 in amounts recommended by the qualified actu17 ary, consisting of—

18 ‘‘(i) a reserve sufficient for unearned

19 contributions;

20 ‘‘(ii) a reserve sufficient for benefit li21 abilities which have been incurred, which

22 have not been satisfied, and for which risk

23 of loss has not yet been transferred, and

24 for expected administrative costs with re25 spect to such benefit liabilities;
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1 ‘‘(iii) a reserve sufficient for any other

2 obligations of the plan; and

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

4 of error and other fluctuations, taking into

5 account the specific circumstances of the

6 plan; and

7 ‘‘(B) establishes and maintains aggregate

8 and specific excess /stop loss insurance and sol9 vency indemnification, with respect to such ad10 ditional benefit options for which risk of loss

11 has not yet been transferred, as follows:

12 ‘‘(i) The plan shall secure aggregate

13 excess /stop loss insurance for the plan

14 with an attachment point which is not

15 greater than 125 percent of expected gross

16 annual claims. The applicable authority

17 may by regulation, through negotiated

18 rulemaking, provide for upward adjust19 ments in the amount of such percentage in

20 specified circumstances in which the plan

21 specifically provides for and maintains re22 serves in excess of the amounts required

23 under subparagraph (A).

24 ‘‘(ii) The plan shall secure specific ex25 cess /stop loss insurance for the plan with
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1 an attachment point which is at least equal

2 to an amount recommended by the plan’s

3 qualified actuary (but not more than

4 $175,000). The applicable authority may

5 by regulation, through negotiated rule6 making, provide for adjustments in the

7 amount of such insurance in specified cir8 cumstances in which the plan specifically

9 provides for and maintains reserves in ex10 cess of the amounts required under sub11 paragraph (A).

12 ‘‘(iii) The plan shall secure indem13 nification insurance for any claims which

14 the plan is unable to satisfy by reason of

15 a plan termination.

16 Any regulations prescribed by the applicable authority

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

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

19 stop loss insurance as the qualified actuary may rec20 ommend, taking into account the specific circumstances

21 of the plan.

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

23 RESERVES.—In the case of any association health plan de24 scribed in subsection (a)(2), the requirements of this sub-
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1 section are met if the plan establishes and maintains sur2 plus in an amount at least equal to—

3 ‘‘(1) $500,000, or

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

5 $2,000,000) as may be set forth in regulations pre6 scribed by the applicable authority through nego7 tiated rulemaking, based on the level of aggregate

8 and specific excess /stop loss insurance provided with

9 respect to such plan.

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

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

12 the applicable authority may provide such additional re13 quirements relating to reserves and excess /stop loss insur14 ance as the applicable authority considers appropriate.

15 Such requirements may be provided by regulation, through

16 negotiated rulemaking, with respect to any such plan or

17 any class of such plans.

18 ‘‘(d) ADJUSTMENTS FOR EXCESS /STOP LOSS INSUR19 ANCE.—The applicable authority may provide for adjust20 ments to the levels of reserves otherwise required under

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

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

23 provided with respect to such plan or plans.

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

25 applicable authority may permit an association health plan
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1 described in subsection (a)(2) to substitute, for all or part

2 of the requirements of this section (except subsection

3 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar4 rangement, or other financial arrangement as the applica5 ble authority determines to be adequate to enable the plan

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

7 and is otherwise no less protective of the interests of par8 ticipants and beneficiaries than the requirements for

9 which it is substituted. The applicable authority may take

10 into account, for purposes of this subsection, evidence pro11 vided by the plan or sponsor which demonstrates an as12 sumption of liability with respect to the plan. Such evi13 dence may be in the form of a contract of indemnification,

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

15 applicable terms of the plan in the form of assessments

16 of participating employers, security, or other financial ar17 rangement.

18 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

19 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.—

20 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO21 CIATION HEALTH PLAN FUND.—

22 ‘‘(A) IN GENERAL.—In the case of an as23 sociation health plan described in subsection

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

25 met if the plan makes payments into the Asso-
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1 ciation Health Plan Fund under this subpara2 graph when they are due. Such payments shall

3 consist of annual payments in the amount of

4 $5,000, and, in addition to such annual pay5 ments, such supplemental payments as the Sec6 retary may determine to be necessary under

7 paragraph (2). Payments under this paragraph

8 are payable to the Fund at the time determined

9 by the Secretary. Initial payments are due in

10 advance of certification under this part. Pay11 ments shall continue to accrue until a plan’s as12 sets are distributed pursuant to a termination

13 procedure.

14 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

17 not more than 100 percent of the payment

18 which was not timely paid shall be payable by

19 the plan to the Fund.

20 ‘‘(C) CONTINUED DUTY OF THE SEC21 RETARY.—The Secretary shall not cease to

22 carry out the provisions of paragraph (2) on ac23 count of the failure of a plan to pay any pay24 ment when due.
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1 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

2 EXCESS /STOP LOSS INSURANCE COVERAGE AND IN3 DEMNIFICATION INSURANCE COVERAGE FOR CER4 TAIN PLANS.—In any case in which the applicable

5 authority determines that there is, or that there is

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

7 take necessary corrective actions under section

8 809(a) with respect to an association health plan de9 scribed in subsection (a)(2); or (B) a termination of

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

11 if the applicable authority is not the Secretary, cer12 tifies such determination to the Secretary), the Sec13 retary shall determine the amounts necessary to

14 make payments to an insurer (designated by the

15 Secretary) to maintain in force excess /stop loss in16 surance coverage or indemnification insurance cov17 erage for such plan, if the Secretary determines that

18 there is a reasonable expectation that, without such

19 payments, claims would not be satisfied by reason of

20 termination of such coverage. The Secretary shall, to

21 the extent provided in advance in appropriation

22 Acts, pay such amounts so determined to the insurer

23 designated by the Secretary.

24 ‘‘(3) ASSOCIATION HEALTH PLAN FUND.—
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1 ‘‘(A) IN GENERAL.—There is established

2 on the books of the Treasury a fund to be

3 known as the ‘Association Health Plan Fund’.

4 The Fund shall be available for making pay5 ments pursuant to paragraph (2). The Fund

6 shall be credited with payments received pursu7 ant to paragraph (1)(A), penalties received pur8 suant to paragraph (1)(B); and earnings on in9 vestments of amounts of the Fund under sub10 paragraph (B).

11 ‘‘(B) INVESTMENT.—Whenever the Sec12 retary determines that the moneys of the fund

13 are in excess of current needs, the Secretary

14 may request the investment of such amounts as

15 the Secretary determines advisable by the Sec16 retary of the Treasury in obligations issued or

17 guaranteed by the United States.

18 ‘‘(g) EXCESS /STOP LOSS INSURANCE.—For pur19 poses of this section—

20 ‘‘(1) AGGREGATE EXCESS /STOP LOSS INSUR21 ANCE.—The term ‘aggregate excess /stop loss insur22 ance’ means, in connection with an association

23 health plan, a contract—

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

25 minimum standards as the applicable authority may
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1 prescribe by regulation through negotiated rule2 making) provides for payment to the plan with re3 spect to aggregate claims under the plan in excess

4 of an amount or amounts specified in such contract;

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

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

7 any third party on behalf of the insured plan.

8 ‘‘(2) SPECIFIC EXCESS /STOP LOSS INSUR9 ANCE.—The term ‘specific excess /stop loss insur10 ance’ means, in connection with an association

11 health plan, a contract—

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

13 minimum standards as the applicable authority

14 may prescribe by regulation through negotiated

15 rulemaking) provides for payment to the plan

16 with respect to claims under the plan in connec17 tion with a covered individual in excess of an

18 amount or amounts specified in such contract

19 in connection with such covered individual;

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

21 ‘‘(C) which allows for payment of pre22 miums by any third party on behalf of the in23 sured plan.

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

25 of this section, the term ‘indemnification insurance’
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1 means, in connection with an association health plan, a

2 contract—

3 ‘‘(1) under which an insurer (meeting such min4 imum standards as the applicable authority may pre5 scribe through negotiated rulemaking) provides for

6 payment to the plan with respect to claims under the

7 plan which the plan is unable to satisfy by reason

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

9 to mandatory termination);

10 ‘‘(2) which is guaranteed renewable and

11 noncancellable for any reason (except as the applica12 ble authority may prescribe by regulation through

13 negotiated rulemaking); and

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

15 any third party on behalf of the insured plan.

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

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

18 health plan, plan assets which meet the fiduciary stand19 ards under part 4 and such additional requirements re20 garding liquidity as the applicable authority may prescribe

21 through negotiated rulemaking.

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

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

24 date of the enactment of the Small Business Access

25 and Choice for Entrepreneurs Act of 1999, the ap-
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1 plicable authority shall establish a Solvency Stand2 ards Working Group. In prescribing the initial regu3 lations under this section, the applicable authority

4 shall take into account the recommendations of such

5 Working Group.

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

7 consist of not more than 15 members appointed by

8 the applicable authority. The applicable authority

9 shall include among persons invited to membership

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

11 following:

12 ‘‘(A) a representative of the National Asso13 ciation of Insurance Commissioners;

14 ‘‘(B) a representative of the American

15 Academy of Actuaries;

16 ‘‘(C) a representative of the State govern17 ments, or their interests;

18 ‘‘(D) a representative of existing self-in19 sured arrangements, or their interests;

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

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

22 interests; and

23 ‘‘(F) a representative of multiemployer

24 plans that are group health plans, or their in25 terests.
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1 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE2 LATED REQUIREMENTS.

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

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

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

6 an application for certification under this part a filing fee

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

8 case of the Secretary, to the extent provided in appropria9 tion Acts, for the sole purpose of administering the certifi10 cation procedures applicable with respect to association

11 health plans.

12 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA13 TION FOR CERTIFICATION.—An application for certifi14 cation under this part meets the requirements of this sec15 tion only if it includes, in a manner and form which shall

16 be prescribed by the applicable authority through nego17 tiated rulemaking, at least the following information:

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

19 and addresses of—

20 ‘‘(A) the sponsor; and

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

22 of the plan.

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

24 BUSINESS.—The States in which participants and

25 beneficiaries under the plan are to be located and
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1 the number of them expected to be located in each

2 such State.

3 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro4 vided by the board of trustees that the bonding re5 quirements of section 412 will be met as of the date

6 of the application or (if later) commencement of op7 erations.

8 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu9 ments governing the plan (including any bylaws and

10 trust agreements), the summary plan description,

11 and other material describing the benefits that will

12 be provided to participants and beneficiaries under

13 the plan.

14 ‘‘(5) AGREEMENTS WITH SERVICE PRO15 VIDERS.—A copy of any agreements between the

16 plan and contract administrators and other service

17 providers.

18 ‘‘(6) FUNDING REPORT.—In the case of asso19 ciation health plans providing benefits options in ad20 dition to health insurance coverage, a report setting

21 forth information with respect to such additional

22 benefit options determined as of a date within the

23 120-day period ending with the date of the applica24 tion, including the following:
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1 ‘‘(A) RESERVES.—A statement, certified

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

3 statement of actuarial opinion, signed by a

4 qualified actuary, that all applicable require5 ments of section 806 are or will be met in ac6 cordance with regulations which the applicable

7 authority shall prescribe through negotiated

8 rulemaking.

9 ‘‘(B) ADEQUACY OF CONTRIBUTION

10 RATES.—A statement of actuarial opinion,

11 signed by a qualified actuary, which sets forth

12 a description of the extent to which contribution

13 rates are adequate to provide for the payment

14 of all obligations and the maintenance of re15 quired reserves under the plan for the 12-

16 month period beginning with such date within

17 such 120-day period, taking into account the

18 expected coverage and experience of the plan. If

19 the contribution rates are not fully adequate,

20 the statement of actuarial opinion shall indicate

21 the extent to which the rates are inadequate

22 and the changes needed to ensure adequacy.

23 ‘‘(C) CURRENT AND PROJECTED VALUE OF

24 ASSETS AND LIABILITIES.—A statement of ac25 tuarial opinion signed by a qualified actuary,
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1 which sets forth the current value of the assets

2 and liabilities accumulated under the plan and

3 a projection of the assets, liabilities, income,

4 and expenses of the plan for the 12-month pe5 riod referred to in subparagraph (B). The in6 come statement shall identify separately the

7 plan’s administrative expenses and claims.

8 ‘‘(D) COSTS OF COVERAGE TO BE

9 CHARGED AND OTHER EXPENSES.—A state10 ment of the costs of coverage to be charged, in11 cluding an itemization of amounts for adminis12 tration, reserves, and other expenses associated

13 with the operation of the plan.

14 ‘‘(E) OTHER INFORMATION.—Any other

15 information as may be determined by the appli16 cable authority, by regulation through nego17 tiated rulemaking, as necessary to carry out the

18 purposes of this part.

19 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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

21 association health plan shall not be effective unless written

22 notice of such certification is filed with the applicable

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

24 of the participants and beneficiaries under the plan are

25 located. For purposes of this subsection, an individual
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1 shall be considered to be located in the State in which a

2 known address of such individual is located or in which

3 such individual is employed.

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

5 of any association health plan certified under this part,

6 descriptions of material changes in any information which

7 was required to be submitted with the application for the

8 certification under this part shall be filed in such form

9 and manner as shall be prescribed by the applicable au10 thority by regulation through negotiated rulemaking. The

11 applicable authority may require by regulation, through

12 negotiated rulemaking, prior notice of material changes

13 with respect to specified matters which might serve as the

14 basis for suspension or revocation of the certification.

15 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS16 SOCIATION HEALTH PLANS.—An association health plan

17 certified under this part which provides benefit options in

18 addition to health insurance coverage for such plan year

19 shall meet the requirements of section 103 by filing an

20 annual report under such section which shall include infor21 mation described in subsection (b)(6) with respect to the

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

23 be filed with the applicable authority not later than 90

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

25 as may be prescribed by the applicable authority). The ap-
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1 plicable authority may require by regulation through nego2 tiated rulemaking such interim reports as it considers ap3 propriate.

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

5 board of trustees of each association health plan which

6 provides benefits options in addition to health insurance

7 coverage and which is applying for certification under this

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

9 of all participants and beneficiaries, a qualified actuary

10 who shall be responsible for the preparation of the mate11 rials comprising information necessary to be submitted by

12 a qualified actuary under this part. The qualified actuary

13 shall utilize such assumptions and techniques as are nec14 essary to enable such actuary to form an opinion as to

15 whether the contents of the matters reported under this

16 part—

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

18 the experience of the plan and to reasonable expecta19 tions; and

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

21 anticipated experience under the plan.

22 The opinion by the qualified actuary shall be made with

23 respect to, and shall be made a part of, the annual report.
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1 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER2 MINATION.

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

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

5 may terminate (upon or at any time after cessation of ac6 cruals in benefit liabilities) only if the board of trustees—

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

8 termination date, provides to the participants and

9 beneficiaries a written notice of intent to terminate

10 stating that such termination is intended and the

11 proposed termination date;

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

13 of the plan in connection with such termination in

14 a manner which will result in timely payment of all

15 benefits for which the plan is obligated; and

16 ‘‘(3) submits such plan in writing to the appli17 cable authority.

18 Actions required under this section shall be taken in such

19 form and manner as may be prescribed by the applicable

20 authority by regulation through negotiated rulemaking.

21 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI22 NATION.

23 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE24 SERVES.—An association health plan which is certified

25 under this part and which provides benefits other than

26 health insurance coverage shall continue to meet the re-
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1 quirements of section 806, irrespective of whether such

2 certification continues in effect. The board of trustees of

3 such plan shall determine quarterly whether the require4 ments of section 806 are met. In any case in which the

5 board determines that there is reason to believe that there

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

7 applicable authority makes such a determination and so

8 notifies the board, the board shall immediately notify the

9 qualified actuary engaged by the plan, and such actuary

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

11 make such recommendations to the board for corrective

12 action as the actuary determines necessary to ensure com13 pliance with section 806. Not later than 30 days after re14 ceiving from the actuary recommendations for corrective

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

16 such form and manner as the applicable authority may

17 prescribe by regulation through negotiated rulemaking) of

18 such recommendations of the actuary for corrective action,

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

20 board has taken or plans to take in response to such rec21 ommendations. The board shall thereafter report to the

22 applicable authority, in such form and frequency as the

23 applicable authority may specify to the board, regarding

24 corrective action taken by the board until the requirements

25 of section 806 are met.
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1 ‘‘(b) MANDATORY TERMINATION.—In any case in

2 which—

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

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

5 health plan which is or has been certified under this

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

7 the requirements of section 806 and has not been

8 notified by the board of trustees of the plan that

9 corrective action has restored compliance with such

10 requirements; and

11 ‘‘(2) the applicable authority determines that

12 there is a reasonable expectation that the plan will

13 continue to fail to meet the requirements of section

14 806,

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

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

17 course of the termination, take such actions as the appli18 cable authority may require, including satisfying any

19 claims referred to in section 806(a)(2)(B)(iii) and recov20 ering for the plan any liability under subsection

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

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

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

24 provision of all benefits for which the plan is obligated.
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1 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL2 VENT ASSOCIATION HEALTH PLANS PRO3 VIDING HEALTH BENEFITS IN ADDITION TO

4 HEALTH INSURANCE COVERAGE.

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

6 INSOLVENT PLANS.—Whenever the Secretary determines

7 that an association health plan which is or has been cer8 tified under this part and which is described in section

9 806(a)(2) will be unable to provide benefits when due or

10 is otherwise in a financially hazardous condition, as shall

11 be defined by the Secretary by regulation through nego12 tiated rulemaking, the Secretary shall, upon notice to the

13 plan, apply to the appropriate United States district court

14 for appointment of the Secretary as trustee to administer

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

16 appear as a party and other interested persons may inter17 vene in the proceedings at the discretion of the court. The

18 court shall appoint such Secretary trustee if the court de19 termines that the trusteeship is necessary to protect the

20 interests of the participants and beneficiaries or providers

21 of medical care or to avoid any unreasonable deterioration

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

23 such Secretary shall continue until the conditions de24 scribed in the first sentence of this subsection are rem25 edied or the plan is terminated.
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1 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon

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

3 the power—

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

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

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

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

8 of the assets and records of the plan to the Sec9 retary as trustee;

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

11 Secretary holds in accordance with the provisions of

12 the plan, regulations prescribed by the Secretary

13 through negotiated rulemaking, and applicable provi14 sions of law;

15 ‘‘(4) to require the sponsor, the plan adminis16 trator, any participating employer, and any employee

17 organization representing plan participants to fur18 nish any information with respect to the plan which

19 the Secretary as trustee may reasonably need in

20 order to administer the plan;

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

22 plan and to recover reasonable expenses of the trust23 eeship;
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1 ‘‘(6) to commence, prosecute, or defend on be2 half of the plan any suit or proceeding involving the

3 plan;

4 ‘‘(7) to issue, publish, or file such notices, state5 ments, and reports as may be required by the Sec6 retary by regulation through negotiated rulemaking

7 or required by any order of the court;

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

9 termination accordance with section 809(b)) and liq10 uidate the plan assets, to restore the plan to the re11 sponsibility of the sponsor, or to continue the trust12 eeship;

13 ‘‘(9) to provide for the enrollment of plan par14 ticipants and beneficiaries under appropriate cov15 erage options; and

16 ‘‘(10) to do such other acts as may be nec17 essary to comply with this title or any order of the

18 court and to protect the interests of plan partici19 pants and beneficiaries and providers of medical

20 care.

21 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac22 ticable after the Secretary’s appointment as trustee, the

23 Secretary shall give notice of such appointment to—

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

25 ‘‘(2) each participant;
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•HR 2047 IH

1 ‘‘(3) each participating employer; and

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

3 which, for purposes of collective bargaining, rep4 resents plan participants.

5 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in6 consistent with the provisions of this title, or as may be

7 otherwise ordered by the court, the Secretary, upon ap8 pointment as trustee under this section, shall be subject

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

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

11 of a fiduciary for purposes of this title.

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

13 Secretary under this subsection may be filed notwith14 standing the pendency in the same or any other court of

15 any bankruptcy, mortgage foreclosure, or equity receiver16 ship proceeding, or any proceeding to reorganize, conserve,

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

18 to enforce a lien against property of the plan.

19 ‘‘(f) JURISDICTION OF COURT.—

20 ‘‘(1) IN GENERAL.—Upon the filing of an appli21 cation for the appointment as trustee or the issuance

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

23 application is made shall have exclusive jurisdiction

24 of the plan involved and its property wherever lo25 cated with the powers, to the extent consistent with
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1 the purposes of this section, of a court of the United

2 States having jurisdiction over cases under chapter

3 11 of title 11, United States Code. Pending an adju4 dication under this section such court shall stay, and

5 upon appointment by it of the Secretary as trustee,

6 such court shall continue the stay of, any pending

7 mortgage foreclosure, equity receivership, or other

8 proceeding to reorganize, conserve, or liquidate the

9 plan, the sponsor, or property of such plan or spon10 sor, and any other suit against any receiver, conser11 vator, or trustee of the plan, the sponsor, or prop12 erty of the plan or sponsor. Pending such adjudica13 tion and upon the appointment by it of the Sec14 retary as trustee, the court may stay any proceeding

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

16 sponsor or any other suit against the plan or the

17 sponsor.

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

19 may be brought in the judicial district where the

20 sponsor or the plan administrator resides or does

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

22 A district court in which such action is brought may

23 issue process with respect to such action in any

24 other judicial district.
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1 ‘‘(g) PERSONNEL.—In accordance with regulations

2 which shall be prescribed by the Secretary through nego3 tiated rulemaking, the Secretary shall appoint, retain, and

4 compensate accountants, actuaries, and other professional

5 service personnel as may be necessary in connection with

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

7 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY.

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

9 State may impose by law a contribution tax on an associa10 tion health plan described in section 806(a)(2), if the plan

11 commenced operations in such State after the date of the

12 enactment of the Small Business Access and Choice for

13 Entrepreneurs Act of 1999.

14 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec15 tion, the term ‘contribution tax’ imposed by a State on

16 an association health plan means any tax imposed by such

17 State if—

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

19 the amount of premiums or contributions, with re20 spect to individuals covered under the plan who are

21 residents of such State, which are received by the

22 plan from participating employers located in such

23 State or from such individuals;

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

25 rate of any tax imposed by such State on premiums
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1 or contributions received by insurers or health main2 tenance organizations for health insurance coverage

3 offered in such State in connection with a group

4 health plan;

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

6 and

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

8 the plan is reduced by the amount of any tax or as9 sessment otherwise imposed by the State on pre10 miums, contributions, or both received by insurers or

11 health maintenance organizations for health insur12 ance coverage, aggregate excess /stop loss insurance

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

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

15 other insurance related to the provision of medical

16 care under the plan, or any combination thereof pro17 vided by such insurers or health maintenance organi18 zations in such State in connection with such plan.

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

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

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

22 health plan’ has the meaning provided in section

23 733(a)(1) (after applying subsection (b) of this sec24 tion).
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1 ‘‘(2) MEDICAL CARE.—The term ‘medical care’

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

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

4 term ‘health insurance coverage’ has the meaning

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

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

7 ‘health insurance issuer’ has the meaning provided

8 in section 733(b)(2).

9 ‘‘(5) APPLICABLE AUTHORITY.—

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

11 subparagraph (B), the term ‘applicable author12 ity’ means, in connection with an association

13 health plan—

14 ‘‘(i) the State recognized pursuant to

15 subsection (c) of section 506 as the State

16 to which authority has been delegated in

17 connection with such plan; or

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

19 clause (i), the Secretary.

20 ‘‘(B) EXCEPTIONS.—

21 ‘‘(i) JOINT AUTHORITIES.—Where

22 such term appears in section 808(3), sec23 tion 807(e) (in the first instance), section

24 809(a) (in the second instance), section

25 809(a) (in the fourth instance), and sec-
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1 tion 809(b)(1), such term means, in con2 nection with an association health plan, the

3 Secretary and the State referred to in sub4 paragraph (A)(i) (if any) in connection

5 with such plan.

6 ‘‘(ii) REGULATORY AUTHORITIES.—

7 Where such term appears in section 802(a)

8 (in the first instance), section 802(d), sec9 tion 802(e), section 803(d), section

10 805(a)(5), section 806(a)(2), section

11 806(b), section 806(c), section 806(d),

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

13 806(g), section 806(h), section 806(i), sec14 tion 806(j), section 807(a) (in the second

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

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

17 section 808 (in the matter after paragraph

18 (3)), and section 809(a) (in the third in19 stance), such term means, in connection

20 with an association health plan, the Sec21 retary.

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

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

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

25 ‘‘(7) INDIVIDUAL MARKET.—
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1 ‘‘(A) IN GENERAL.—The term ‘individual

2 market’ means the market for health insurance

3 coverage offered to individuals other than in

4 connection with a group health plan.

5 ‘‘(B) TREATMENT OF VERY SMALL

6 GROUPS.—

7 ‘‘(i) IN GENERAL.—Subject to clause

8 (ii), such term includes coverage offered in

9 connection with a group health plan that

10 has fewer than 2 participants as current

11 employees or participants described in sec12 tion 732(d)(3) on the first day of the plan

13 year.

14 ‘‘(ii) STATE EXCEPTION.—Clause (i)

15 shall not apply in the case of health insur16 ance coverage offered in a State if such

17 State regulates the coverage described in

18 such clause in the same manner and to the

19 same extent as coverage in the small group

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

21 the Public Health Service Act) is regulated

22 by such State.

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

24 ‘participating employer’ means, in connection with

25 an association health plan, any employer, if any indi-
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1 vidual who is an employee of such employer, a part2 ner in such employer, or a self-employed individual

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

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

5 or was covered under such plan in connection with

6 the status of such individual as such an employee,

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

8 plan.

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

10 term ‘applicable State authority’ means, with respect

11 to a health insurance issuer in a State, the State in12 surance commissioner or official or officials des13 ignated by the State to enforce the requirements of

14 title XXVII of the Public Health Service Act for the

15 State involved with respect to such issuer.

16 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali17 fied actuary’ means an individual who is a member

18 of the American Academy of Actuaries or meets

19 such reasonable standards and qualifications as the

20 Secretary may provide by regulation through nego21 tiated rulemaking.

22 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili23 ated member’ means, in connection with a sponsor—
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1 ‘‘(A) a person who is otherwise eligible to

2 be a member of the sponsor but who elects an

3 affiliated status with the sponsor,

4 ‘‘(B) in the case of a sponsor with mem5 bers which consist of associations, a person who

6 is a member of any such association and elects

7 an affiliated status with the sponsor, or

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

9 plan in existence on the date of the enactment

10 of the Small Business Access and Choice for

11 Entrepreneurs Act of 1999, a person eligible to

12 be a member of the sponsor or one of its mem13 ber associations.

14 ‘‘(12) LARGE EMPLOYER.—The term ‘large em15 ployer’ means, in connection with a group health

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

17 employed an average of at least 51 employees on

18 business days during the preceding calendar year

19 and who employs at least 2 employees on the first

20 day of the plan year.

21 ‘‘(13) SMALL EMPLOYER.—The term ‘small em22 ployer’ means, in connection with a group health

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

24 is not a large employer.

25 ‘‘(b) RULES OF CONSTRUCTION.—
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1 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur2 poses of determining whether a plan, fund, or pro3 gram is an employee welfare benefit plan which is an

4 association health plan, and for purposes of applying

5 this title in connection with such plan, fund, or pro6 gram so determined to be such an employee welfare

7 benefit plan—

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

9 ‘employer’ (as defined in section (3)(5)) in10 cludes the partnership in relation to the part11 ners, and the term ‘employee’ (as defined in

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

13 to the partnership; and

14 ‘‘(B) in the case of a self-employed indi15 vidual, the term ‘employer’ (as defined in sec16 tion 3(5)) and the term ‘employee’ (as defined

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

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

19 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the

20 case of any plan, fund, or program which was estab21 lished or is maintained for the purpose of providing

22 medical care (through the purchase of insurance or

23 otherwise) for employees (or their dependents) cov24 ered thereunder and which demonstrates to the Sec25 retary that all requirements for certification under
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1 this part would be met with respect to such plan,

2 fund, or program if such plan, fund, or program

3 were a group health plan, such plan, fund, or pro4 gram shall be treated for purposes of this title as an

5 employee welfare benefit plan on and after the date

6 of such demonstration.’’.

7 (b) CONFORMING AMENDMENTS TO PREEMPTION

8 RULES.—

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

10 1144(b)(6)) is amended by adding at the end the

11 following new subparagraph:

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

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

14 of an association health plan which is certified under part

15 8.’’.

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

17 is amended—

18 (A) in subsection (b)(4), by striking ‘‘Sub19 section (a)’’ and inserting ‘‘Subsections (a) and

20 (d)’’;

21 (B) in subsection (b)(5), by striking ‘‘sub22 section (a)’’ in subparagraph (A) and inserting

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

24 (a)(2)(B) and (b) of section 805’’, and by strik25 ing ‘‘subsection (a)’’ in subparagraph (B) and
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1 inserting ‘‘subsection (a) of this section or sub2 section (a)(2)(B) or (b) of section 805’’;

3 (C) by redesignating subsection (d) as sub4 section (e); and

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

6 following new subsection:

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

8 provisions of this title shall supersede any and all State

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

10 have the effect of precluding, a health insurance issuer

11 from offering health insurance coverage in connection with

12 an association health plan which is certified under part

13 8.

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

15 of subsection (b) of this section—

16 ‘‘(A) In any case in which health insurance cov17 erage of any policy type is offered under an associa18 tion health plan certified under part 8 to a partici19 pating employer operating in such State, the provi20 sions of this title shall supersede any and all laws

21 of such State insofar as they may preclude a health

22 insurance issuer from offering health insurance cov23 erage of the same policy type to other employers op24 erating in the State which are eligible for coverage

25 under such association health plan, whether or not
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1 such other employers are participating employers in

2 such plan.

3 ‘‘(B) In any case in which health insurance cov4 erage of any policy type is offered under an associa5 tion health plan in a State and the filing, with the

6 applicable State authority, of the policy form in con7 nection with such policy type is approved by such

8 State authority, the provisions of this title shall su9 persede any and all laws of any other State in which

10 health insurance coverage of such type is offered, in11 sofar as they may preclude, upon the filing in the

12 same form and manner of such policy form with the

13 applicable State authority in such other State, the

14 approval of the filing in such other State.

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

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

17 805.

18 ‘‘(4) For purposes of this subsection, the term ‘asso19 ciation health plan’ has the meaning provided in section

20 801(a), and the terms ‘health insurance coverage’, ‘par21 ticipating employer’, and ‘health insurance issuer’ have

22 the meanings provided such terms in section 811, respec23 tively.’’.

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

25 U.S.C. 1144(b)(6)(A)) is amended—
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1 (A) in clause (i)(II), by striking ‘‘and’’ at

2 the end;

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

4 does not provide medical care (within the mean5 ing of section 733(a)(2)),’’ after ‘‘arrange6 ment,’’, and by striking ‘‘title.’’ and inserting

7 ‘‘title, and’’; and

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

9 clause:

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

11 of any other employee welfare benefit plan which is

12 a multiple employer welfare arrangement and which

13 provides medical care (within the meaning of section

14 733(a)(2)), any law of any State which regulates in15 surance may apply.’’.

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

17 by paragraph (2)(C)) is amended—

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

19 ‘‘(1) Except as provided in paragraph (2), noth20 ing’’; and

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

22 paragraph:

23 ‘‘(2) Nothing in any other provision of law enacted

24 on or after the date of the enactment of the Small Busi25 ness Access and Choice for Entrepreneurs Act of 1999
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1 shall be construed to alter, amend, modify, invalidate, im2 pair, or supersede any provision of this title, except by

3 specific cross-reference to the affected section.’’.

4 (c) PLAN SPONSOR.—Section 3(16)(B) of such Act

5 (29 U.S.C. 102(16)(B)) is amended by adding at the end

6 the following new sentence: ‘‘Such term also includes a

7 person serving as the sponsor of an association health plan

8 under part 8.’’.

9 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE10 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

11 UNDER ASSOCIATION HEALTH PLANS.—Section 102(b)

12 of such Act (29 U.S.C. 102(b)) is amended by adding at

13 the end the following: ‘‘An association health plan shall

14 include in its summary plan description, in connection

15 with each benefit option, a description of the form of sol16 vency or guarantee fund protection secured pursuant to

17 this Act or applicable State law, if any.’’.

18 (e) SAVINGS CLAUSE.—Section 731(c) of such Act is

19 amended by inserting ‘‘or part 8’’ after ‘‘this part’’.

20 (f) REPORT TO THE CONGRESS REGARDING CERTIFI21 CATION OF SELF-INSURED ASSOCIATION HEALTH

22 PLANS.—Not later than January 1, 2004, the Secretary

23 of Labor shall report to the Committee on Education and

24 the Workforce of the House of Representatives and the

25 Committee on Health, Education, Labor, and Pensions of
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1 the Senate the effect association health plans have had,

2 if any, on reducing the number of uninsured individuals.

3 (g) CLERICAL AMENDMENT.—The table of contents

4 in section 1 of the Employee Retirement Income Security

5 Act of 1974 is amended by inserting after the item relat6 ing to section 734 the following new items:

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘Sec. 801. Association health plans.

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

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

‘‘Sec. 804. Participation and coverage requirements.

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

and benefit options.

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

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

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

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

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

providing health benefits in addition to health insurance coverage.

‘‘Sec. 811. State assessment authority.

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

7 SEC. 3. CLARIFICATION OF TREATMENT OF SINGLE EM8 PLOYER ARRANGEMENTS.

9 Section 3(40)(B) of the Employee Retirement Income

10 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is

11 amended—

12 (1) in clause (i), by inserting ‘‘for any plan year

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

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

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

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

17 (2) in clause (iii)—
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1 (A) by striking ‘‘common control shall not

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

3 and inserting ‘‘an interest of greater than 25

4 percent may not be required as the minimum

5 interest necessary for common control’’; and

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

7 ‘‘consistent and coextensive with’’;

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

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

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

11 new clause:

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

13 clause (i), whether benefits are provided to employ14 ees of two or more employers, the arrangement shall

15 be treated as having only one participating employer

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

17 individuals who are employees and former employees

18 of any one participating employer and who are cov19 ered under the arrangement is greater than 75 per20 cent of the aggregate number of all individuals who

21 are employees or former employees of participating

22 employers and who are covered under the arrange23 ment;’’.
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1 SEC. 4. CLARIFICATION OF TREATMENT OF CERTAIN COL2 LECTIVELY BARGAINED ARRANGEMENTS.

3 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em4 ployee Retirement Income Security Act of 1974 (29

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

6 ‘‘(i)(I) under or pursuant to one or more collec7 tive bargaining agreements which are reached pursu8 ant to collective bargaining described in section 8(d)

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

10 158(d)) or paragraph Fourth of section 2 of the

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

12 Fourth) or which are reached pursuant to labor13 management negotiations under similar provisions of

14 State public employee relations laws, and (II) in ac15 cordance with subparagraphs (C), (D), and (E);’’.

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

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

18 following new subparagraphs:

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

20 or other arrangement shall be treated as established or

21 maintained in accordance with this subparagraph only if

22 the following requirements are met:

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

24 employee organization or any other entity sponsoring

25 the plan or other arrangement, do not—
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1 ‘‘(I) utilize the services of any licensed in2 surance agent or broker for soliciting or enroll3 ing employers or individuals as participating

4 employers or covered individuals under the plan

5 or other arrangement; or

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

7 person, other than a full time employee of the

8 employee organization (or a member of the or9 ganization to the extent provided in regulations

10 prescribed by the Secretary through negotiated

11 rulemaking), that is related either to the volume

12 or number of employers or individuals solicited

13 or enrolled as participating employers or cov14 ered individuals under the plan or other ar15 rangement, or to the dollar amount or size of

16 the contributions made by participating employ17 ers or covered individuals to the plan or other

18 arrangement;

19 except to the extent that the services used by the

20 plan, arrangement, organization, or other entity con21 sist solely of preparation of documents necessary for

22 compliance with the reporting and disclosure re23 quirements of part 1 or administrative, investment,

24 or consulting services unrelated to solicitation or en25 rollment of covered individuals.
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1 ‘‘(ii) As of the end of the preceding plan year,

2 the number of covered individuals under the plan or

3 other arrangement who are neither—

4 ‘‘(I) employed within a bargaining unit

5 covered by any of the collective bargaining

6 agreements with a participating employer (nor

7 covered on the basis of an individual’s employ8 ment in such a bargaining unit); nor

9 ‘‘(II) present employees (or former employ10 ees who were covered while employed) of the

11 sponsoring employee organization, of an em12 ployer who is or was a party to any of the col13 lective bargaining agreements, or of the plan or

14 other arrangement or a related plan or arrange15 ment (nor covered on the basis of such present

16 or former employment);

17 does not exceed 15 percent of the total number of

18 individuals who are covered under the plan or ar19 rangement and who are present or former employees

20 who are or were covered under the plan or arrange21 ment pursuant to a collective bargaining agreement

22 with a participating employer. The requirements of

23 the preceding provisions of this clause shall be treat24 ed as satisfied if, as of the end of the preceding plan

25 year, such covered individuals are comprised solely
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1 of individuals who were covered individuals under

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

3 enactment of the Small Business Access and Choice

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

5 the preceding plan year, the number of such covered

6 individuals does not exceed 25 percent of the total

7 number of present and former employees enrolled

8 under the plan or other arrangement.

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

10 sponsoring the plan or other arrangement certifies

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

12 which shall be prescribed by the Secretary through

13 negotiated rulemaking that the plan or other ar14 rangement meets the requirements of clauses (i) and

15 (ii).

16 ‘‘(D) 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) all of the benefits provided under the plan

20 or arrangement consist of health insurance coverage;

21 or

22 ‘‘(ii)(I) the plan or arrangement is a multiem23 ployer plan; and

24 ‘‘(II) the requirements of clause (B) of the pro25 viso to clause (5) of section 302(c) of the Labor
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1 Management Relations Act, 1947 (29 U.S.C.

2 186(c)) are met with respect to such plan or other

3 arrangement.

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

5 or arrangement shall be treated as established or main6 tained in accordance with this subparagraph only if—

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

8 the date of the enactment of the Small Business Ac9 cess and Choice for Entrepreneurs Act of 1999; or

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

11 sponsoring the plan or arrangement—

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

13 years; or

14 ‘‘(II) demonstrates to the satisfaction of

15 the Secretary that the requirements of subpara16 graphs (C) and (D) are met with respect to the

17 plan or other arrangement.’’.

18 (c) CONFORMING AMENDMENTS TO DEFINITIONS OF

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

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

21 the following new sentence: ‘‘Such term includes an indi22 vidual who is a covered individual described in paragraph

23 (40)(C)(ii).’’.
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1 SEC. 5. ENFORCEMENT PROVISIONS RELATING TO ASSO2 CIATION HEALTH PLANS.

3 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

4 MISREPRESENTATIONS.—Section 501 of the Employee

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

6 is amended—

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

8 (2) by adding at the end the following new sub9 section:

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

11 any employee, any employee’s beneficiary, any employer,

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

13 established or maintained for the purpose of offering or

14 providing any benefit described in section 3(1) to employ15 ees or their beneficiaries as—

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

17 been certified under part 8;

18 ‘‘(2) having been established or maintained

19 under or pursuant to one or more collective bar20 gaining agreements which are reached pursuant to

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

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

23 paragraph Fourth of section 2 of the Railway Labor

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

25 reached pursuant to labor-management negotiations
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1 under similar provisions of State public employee re2 lations laws; or

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

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

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

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

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

8 both.’’.

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

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

11 end the following new subsection:

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

13 by the Secretary showing the operation, promotion, or

14 marketing of an association health plan (or similar ar15 rangement providing benefits consisting of medical care

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

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

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

19 State in which the plan or arrangement offers or

20 provides benefits, and is not licensed, registered, or

21 otherwise approved under the insurance laws of such

22 State; or

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

24 under part 8 and is not operating in accordance with

25 the requirements under part 8 for such certification,
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1 a district court of the United States shall enter an order

2 requiring that the plan or arrangement cease activities.

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

4 association health plan or other arrangement if the plan

5 or arrangement shows that—

6 ‘‘(A) all benefits under it referred to in para7 graph (1) consist of health insurance coverage; and

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

9 plan or arrangement offers or provides benefits, the

10 plan or arrangement is operating in accordance with

11 applicable State laws that are not superseded under

12 section 514.

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

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

15 deems necessary to protect the interests of the public and

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

17 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

18 Section 503 of such Act (29 U.S.C. 1133) (as amended

19 by title I) is amended by adding at the end the following

20 new subsection:

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

22 each association health plan which is or has been certified

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

24 named fiduciary (as applicable) to ensure that the require-
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1 ments of this section are met in connection with claims

2 filed under the plan.’’.

3 SEC. 6. COOPERATION BETWEEN FEDERAL AND STATE AU4 THORITIES.

5 Section 506 of the Employee Retirement Income Se6 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

7 at the end the following new subsection:

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

9 ASSOCIATION HEALTH PLANS.—

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

11 may enter into an agreement with the Secretary for

12 delegation to the State of some or all of—

13 ‘‘(A) the Secretary’s authority under sec14 tions 502 and 504 to enforce the requirements

15 for certification under part 8;

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

17 association health plans under part 8 in accord18 ance with regulations of the Secretary applica19 ble to certification under part 8; or

20 ‘‘(C) any combination of the Secretary’s

21 authority authorized to be delegated under sub22 paragraphs (A) and (B).

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

24 or instrumentality of a State to which authority is

25 delegated pursuant to an agreement entered into
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1 under this paragraph may, if authorized under State

2 law and to the extent consistent with such agree3 ment, exercise the powers of the Secretary under

4 this title which relate to such authority.

5 ‘‘(3) RECOGNITION OF PRIMARY DOMICILE

6 STATE.—In entering into any agreement with a

7 State under subparagraph (A), the Secretary shall

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

9 other agreements entered into under subparagraph

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

11 to any particular association health plan, as the

12 State to which all authority has been delegated pur13 suant to such agreements in connection with such

14 plan. In carrying out this paragraph, the Secretary

15 shall take into account the places of residence of the

16 participants and beneficiaries under the plan and the

17 State in which the trust is maintained.’’.

18 SEC. 7. EFFECTIVE DATE AND TRANSITIONAL AND OTHER

19 RULES.

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

21 sections 2, 5, and 6 shall take effect on January 1, 2001.

22 The amendments made by sections 3 and 4 shall take ef23 fect on the date of the enactment of this Act. The Sec24 retary of Labor shall first issue all regulations necessary

25 to carry out the amendments made by this subtitle before
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1 January 1, 2001. Such regulations shall be issued through

2 negotiated rulemaking.

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

4 Retirement Income Security Act of 1974 (added by section

5 2) does not apply in connection with an association health

6 plan (certified under part 8 of subtitle B of title I of such

7 Act) existing on the date of the enactment of this Act,

8 if no benefits provided thereunder as of the date of the

9 enactment of this Act consist of health insurance coverage

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

11 (c) TREATMENT OF CERTAIN EXISTING HEALTH

12 BENEFITS PROGRAMS.—

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

14 the date of the enactment of this Act, an arrange15 ment is maintained in a State for the purpose of

16 providing benefits consisting of medical care for the

17 employees and beneficiaries of its participating em18 ployers, at least 200 participating employers make

19 contributions to such arrangement, such arrange20 ment has been in existence for at least 10 years, and

21 such arrangement is licensed under the laws of one

22 or more States to provide such benefits to its par23 ticipating employers, upon the filing with the appli24 cable authority (as defined in section 812(a)(5) of

25 the Employee Retirement Income Security Act of
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1 1974 (as amended by this Act)) by the arrangement

2 of an application for certification of the arrangement

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

4 (A) such arrangement shall be deemed to

5 be a group health plan for purposes of title I

6 of such Act;

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

8 and 803(a)(1) of the Employee Retirement In9 come Security Act of 1974 shall be deemed met

10 with respect to such arrangement;

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

12 such Act shall be deemed met, if the arrange13 ment is operated by a board of directors

14 which—

15 (i) is elected by the participating em16 ployers, with each employer having one

17 vote; and

18 (ii) has complete fiscal control over

19 the arrangement and which is responsible

20 for all operations of the arrangement;

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

22 such Act shall be deemed met with respect to

23 such arrangement; and

24 (E) the arrangement may be certified by

25 any applicable authority with respect to its op-
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1 erations in any State only if it operates in such

2 State on the date of certification.

3 The provisions of this subsection shall cease to apply

4 with respect to any such arrangement at such time

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

6 applicable requirements of this subsection are not

7 met with respect to such arrangement.

8 (2) DEFINITIONS.—For purposes of this sub9 section, the terms ‘‘group health plan’’, ‘‘medical

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

11 meanings provided in section 812 of the Employee

12 Retirement Income Security Act of 1974, except

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

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

15 reference to an arrangement referred to in this sub16 section.

Æ