II 

110TH CONGRESS 

2D SESSION S. 3072 

To provide for comprehensive health reform. 

IN THE SENATE OF THE UNITED STATES 

MAY 22, 2008 

Mr. WICKER introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To provide for comprehensive health reform. 

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; TABLE OF CONTENTS. 

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

5 ‘‘Making Health Care More Affordable Act of 2008’’. 

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—HEALTH INSURANCE TAX CREDIT 

Sec. 101. Refundable credit for health insurance coverage. 

Sec. 102. Advance payment of credit for purchasers of qualified health insurance. 

TITLE II—SMALL BUSINESS HEALTH PLANS 

Sec. 201. Rules governing association health plans. 


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Sec. 202. Clarification of treatment of single employer arrangements. 

Sec. 203. Enforcement provisions relating to association health plans. 

Sec. 204. Cooperation between Federal and State authorities. 

Sec. 205. Effective date and transitional and other rules. 

TITLE III—PURCHASE HEALTH INSURANCE ACROSS STATE 

LINES 

Sec. 301. Cooperative governing of individual health insurance coverage. 

Sec. 302. Severability. 

TITLE IV—EXPANSION OF HEALTH SAVINGS ACCOUNTS 

Subtitle A—Promoting Health for Future Generations 

Sec. 401. Short title. 

Sec. 402. Increase in HSA contribution limitation. 

Sec. 403. Medicare and VA healthcare enrollees eligible to contribute to HSA. 

Sec. 404. Expanding additional contributions limitation. 

Sec. 405. Eligibility to contribute to HSA. 

Sec. 406. Deduction of premiums for high deductible health plans. 

Sec. 407. MSA plan deductible exception for preventive care. 

Sec. 408. Permitting individual contributions to Medicare Advantage MSA. 

Sec. 409. Allowing MSA and HSA rollover to adult child of account holder. 

Sec. 410. Permitting Medicare Advantage MSA funds to be used for wellness 

and fitness programs. 

Sec. 411. Health reimbursement arrangements and spending arrangements in 

combination with health savings accounts. 

Sec. 412. Special rule for certain medical expenses incurred before establishment of account. 

Sec. 413. Allow both spouses to make catch-up contributions to the same HSA 

account. 

Sec. 414. FSA and HRA Termination to fund HSAs. 

Subtitle B—Increased Access to Health Insurance Through HSAs 

Sec. 421. Short title. 

Sec. 422. Purchase of health insurance from health savings accounts. 

TITLE V—HEALTH CARE TORT REFORM 

Sec. 501. Findings and purpose. 

Sec. 502. Encouraging speedy resolution of claims. 

Sec. 503. Compensating patient injury. 

Sec. 504. Maximizing patient recovery. 

Sec. 505. Additional health tort reform benefits. 

Sec. 506. Punitive damages. 

Sec. 507. Authorization of payment of future damages to claimants in health 

care lawsuits. 

Sec. 508. Definitions. 

Sec. 509. Effect on other laws. 

Sec. 510. State flexibility and protection of states’ rights. 

Sec. 511. Applicability; effective date. 

Sec. 512. Sense of Congress. 

TITLE VI—HEALTH INFORMATION TECHNOLOGY 


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Subtitle A—Assisting the Development of Health Information Technology 

Sec. 601. Purpose. 

Sec. 602. Health record banking. 

Sec. 603. Application of Federal and State security and confidentiality standards. 

Subtitle B—Promoting the Use of Health Information Technology to Better 

Coordinate Health Care 

Sec. 611. Safe harbors to antikickback civil penalties and criminal penalties for 

provision of health information technology and training services. 

Sec. 612. Exception to limitation on certain physician referrals (under stark) 

for provision of health information technology and training 

services to health care professionals. 

Sec. 613. Rules of construction regarding use of consortia. 

1 TITLE I—HEALTH INSURANCE 

2 TAX CREDIT 

3 SEC. 101. REFUNDABLE CREDIT FOR HEALTH INSURANCE 

4 COVERAGE. 

5 (a) IN GENERAL.—Subpart C of part IV of sub6 chapter A of chapter 1 of the Internal Revenue Code of 

7 1986 (relating to refundable credits) is amended by redes8 ignating section 36 as section 37 and by inserting after 

9 section 35 the following new section: 

10 ‘‘SEC. 36. QUALIFIED HEALTH INSURANCE TAX CREDIT. 

11 ‘‘(a) IN GENERAL.—In the case of an individual, 

12 there shall be allowed as a credit against the tax imposed 

13 by this subtitle an amount equal to the amount paid dur14 ing the taxable year for qualified health insurance for the 

15 taxpayer and the taxpayer’s spouse or dependent. 

16 ‘‘(b) LIMITATIONS.— 

17 ‘‘(1) IN GENERAL.—The amount allowed as a 

18 credit under subsection (a) to the taxpayer for the 


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1 taxable year shall not exceed the sum of the monthly 

2 limitations for coverage months during such taxable 

3 year for the individual referred to in subsection (a) 

4 for whom the taxpayer paid during the taxable year 

5 any amount for coverage under qualified health in6 surance. 

7 ‘‘(2) MONTHLY LIMITATION.— 

8 ‘‘(A) IN GENERAL.—The monthly limita9 tion for an individual for each coverage month 

10 of such individual during the taxable year is the 

amount equal to 1 11 ⁄12 of the qualified health in12 surance amount. 

13 ‘‘(B) QUALIFIED HEALTH INSURANCE

14 AMOUNT.—For purposes of this paragraph, the 

15 qualified health insurance amount is— 

16 ‘‘(i) $2,500 if such individual is the 

17 taxpayer, 

18 ‘‘(ii) $2,500 if such individual is the 

19 spouse of the taxpayer, the taxpayer and 

20 such spouse are married as of the first day 

21 of such month, and the taxpayer files a 

22 joint return for the taxable year, or 

23 ‘‘(iii) $500 if such individual is an in24 dividual for whom a deduction under secVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 tion 151(c) is allowable to the taxpayer for 

2 such taxable year. 

3 ‘‘(C) LIMITATION ON DEPENDENTS.—Not 

4 more than 2 individuals may be taken into ac5 count by the taxpayer under subparagraph 

6 (B)(iii). 

7 ‘‘(3) COVERAGE MONTH.—For purposes of this 

8 subsection— 

9 ‘‘(A) IN GENERAL.—The term ‘coverage 

10 month’ means, with respect to an individual, 

11 any month if— 

12 ‘‘(i) as of the first day of such month 

13 such individual is covered by qualified 

14 health insurance, and 

15 ‘‘(ii) the premium for coverage under 

16 such insurance for such month is paid by 

17 the taxpayer. 

18 ‘‘(B) MEDICARE.—Such term shall not in19 clude any month with respect to an individual 

20 if, as of the first day of such month, such indi21 vidual has not made an election to establish and 

22 maintain a Medical Retirement Account under 

23 section 252(a)(2) of the Social Security Act and 

24 is entitled to benefits under title XVIII of the 

25 Social Security Act. 


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1 ‘‘(C) CERTAIN OTHER COVERAGE.—Such 

2 term shall not include any month during a tax3 able year with respect to an individual if, at any 

4 time during such year, any benefit is provided 

5 to such individual under— 

6 ‘‘(i) chapter 55 of title 10, United 

7 States Code, 

8 ‘‘(ii) chapter 17 of title 38, United 

9 States Code, or 

10 ‘‘(iii) any medical care program under 

11 the Indian Health Care Improvement Act. 

12 ‘‘(D) PRISONERS.—Such term shall not in13 clude any month with respect to an individual 

14 if, as of the first day of such month, such indi15 vidual is imprisoned under Federal, State, or 

16 local authority. 

17 ‘‘(E) INSUFFICIENT PRESENCE IN UNITED

18 STATES.—Such term shall not include any 

19 month during a taxable year with respect to an 

20 individual if such individual is present in the 

21 United States on fewer than 183 days during 

22 such year (determined in accordance with sec23 tion 7701(b)(7)). 

24 ‘‘(c) QUALIFIED HEALTH INSURANCE.—For pur25 poses of this section— 


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1 ‘‘(1) IN GENERAL.—The term ‘qualified health 

2 insurance’ means any health plan (within the mean3 ing of section 223(c)(2)) determined without regard 

4 to any annual deductible requirement. 

5 ‘‘(2) ANNUAL WELLNESS EXAM.—Such term 

6 shall include an annual wellness exam fee not to ex7 ceed $150 ($100 in the case of an annual child 

8 wellness exam) if such exam is not covered by the 

9 insurance. 

10 ‘‘(d) ARCHER MSA AND HEALTH SAVINGS ACCOUNT

11 CONTRIBUTIONS.— 

12 ‘‘(1) IN GENERAL.—If a deduction would (but 

13 for paragraph (2)) be allowed under section 220 or 

14 223 to the taxpayer for a payment for the taxable 

15 year to the Archer MSA or health savings account 

16 of an individual, subsection (a) shall be applied by 

17 treating such payment as a payment for qualified 

18 health insurance for such individual. 

19 ‘‘(2) DENIAL OF DOUBLE BENEFIT.—No deduc20 tion shall be allowed under section 220 or 223 for 

21 that portion of the payments otherwise allowable as 

22 a deduction under section 220 or 223 for the taxable 

23 year which is equal to the amount of credit allowed 

24 for such taxable year by reason of this subsection. 


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1 ‘‘(e) SPECIAL RULES.—For purposes of this sec2 tion— 

3 ‘‘(1) MARRIED COUPLES MUST FILE JOINT RE4 TURN.—If the taxpayer is married at the close of 

5 the taxable year, the credit shall be allowed under 

6 subsection (a) only if the taxpayer and the tax7 payer’s spouse file a joint return for the taxable 

8 year. 

9 ‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No 

10 credit shall be allowed under this section to any indi11 vidual with respect to whom a deduction under sec12 tion 151 is allowable to another taxpayer for a tax13 able year beginning in the calendar year in which 

14 such individual’s taxable year begins. 

15 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—No credit 

16 shall be allowed under subsection (a) if the credit 

17 under section 35 is allowed and no credit shall be al18 lowed under 35 if a credit is allowed under this sec19 tion. 

20 ‘‘(4) COORDINATION WITH DEDUCTION FOR

21 HEALTH INSURANCE COSTS.—In the case of a tax22 payer who is eligible to deduct any amount under 

23 section 162(l) or 213 for the taxable year, this sec24 tion shall apply only if the taxpayer elects not to 


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1 claim any amount as a deduction under such section 

2 for such year. 

3 ‘‘(5) ELECTION NOT TO CLAIM CREDIT.—This 

4 section shall not apply to a taxpayer for any taxable 

5 year if such taxpayer elects to have this section not 

6 apply for such taxable year. 

7 ‘‘(6) INFLATION ADJUSTMENT.— 

8 ‘‘(A) IN GENERAL.—In the case of any 

9 taxable year beginning in a calendar year after 

10 2008, each dollar amount contained in sub11 section (b)(2)(B) shall be increased by an 

12 amount equal to— 

13 ‘‘(i) such dollar amount, multiplied by 

14 ‘‘(ii) the cost-of-living adjustment de15 termined under subparagraph (B) for the 

16 calendar year in which such taxable year 

17 begins. 

18 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—For 

19 purposes of subparagraph (A), the cost-of-living 

20 adjustment for any calendar year is the per21 centage (if any) by which— 

22 ‘‘(i) the GDP for the preceding cal23 endar year, exceeds 

24 ‘‘(ii) the GDP for calendar year 2007. 


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1 ‘‘(C) GDP FOR ANY CALENDAR YEAR.— 

2 For purposes of subparagraph (B), the GDP 

3 for any calendar year is the average of the 

4 chain-weighted price index for the gross domes5 tic product as of the close of the 12-month pe6 riod ending on March 31 of such calendar year. 

7 ‘‘(D) CHAIN-WEIGHTED PRICE INDEX FOR

8 THE GROSS DOMESTIC PRODUCT.—For pur9 poses of subparagraph (C), the term ‘chain10 weighted price index for the gross domestic 

11 product’ means the last chain-weighted price 

12 index for the gross domestic product published 

13 by the Department of Commerce. 

14 ‘‘(E) ROUNDING.—Any increase deter15 mined under subparagraph (A) shall be rounded 

16 to the nearest multiple of $50.’’. 

17 (b) INFORMATION REPORTING.— 

18 (1) IN GENERAL.—Subpart B of part III of 

19 subchapter A of chapter 61 of the Internal Revenue 

20 Code of 1986 (relating to information concerning 

21 transactions with other persons) is amended by in22 serting after section 6050V the following new sec23 tion: 


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1 ‘‘SEC. 6050W. RETURNS RELATING TO PAYMENTS FOR 

2 QUALIFIED HEALTH INSURANCE. 

3 ‘‘(a) IN GENERAL.—Any person who, in connection 

4 with a trade or business conducted by such person, re5 ceives payments during any calendar year from any indi6 vidual for coverage of such individual or any other indi7 vidual under creditable health insurance, shall make the 

8 return described in subsection (b) (at such time as the 

9 Secretary may by regulations prescribe) with respect to 

10 each individual from whom such payments were received. 

11 ‘‘(b) FORM AND MANNER OF RETURNS.—A return 

12 is described in this subsection if such return— 

13 ‘‘(1) is in such form as the Secretary may pre14 scribe, and 

15 ‘‘(2) contains— 

16 ‘‘(A) the name, address, and TIN of the 

17 individual from whom payments described in 

18 subsection (a) were received, 

19 ‘‘(B) the name, address, and TIN of each 

20 individual who was provided by such person 

21 with coverage under creditable health insurance 

22 by reason of such payments and the period of 

23 such coverage, and 

24 ‘‘(C) such other information as the Sec25 retary may reasonably prescribe. 


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1 ‘‘(c) CREDITABLE HEALTH INSURANCE.—For pur2 poses of this section, the term ‘creditable health insurance’ 

3 means qualified health insurance (as defined in section 

4 36(c)) other than, to the extent provided in regulations 

5 prescribed by the Secretary, any insurance covering an in6 dividual if no credit is allowable under section 36 with re7 spect to such coverage. 

8 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID9 UALS WITH RESPECT TO WHOM INFORMATION IS RE10 QUIRED.—Every person required to make a return under 

11 subsection (a) shall furnish to each individual whose name 

12 is required under subsection (b)(2)(A) to be set forth in 

13 such return a written statement showing— 

14 ‘‘(1) the name and address of the person re15 quired to make such return and the phone number 

16 of the information contact for such person, 

17 ‘‘(2) the aggregate amount of payments de18 scribed in subsection (a) received by the person re19 quired to make such return from the individual to 

20 whom the statement is required to be furnished, and 

21 ‘‘(3) the information required under subsection 

22 (b)(2)(B) with respect to such payments. 

23 The written statement required under the preceding sen24 tence shall be furnished on or before January 31 of the 


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1 year following the calendar year for which the return 

2 under subsection (a) is required to be made. 

3 ‘‘(e) RETURNS WHICH WOULD BE REQUIRED TO BE

4 MADE BY 2 OR MORE PERSONS.—Except to the extent 

5 provided in regulations prescribed by the Secretary, in the 

6 case of any amount received by any person on behalf of 

7 another person, only the person first receiving such 

8 amount shall be required to make the return under sub9 section (a).’’. 

10 (2) ASSESSABLE PENALTIES.— 

11 (A) Subparagraph (B) of section 

12 6724(d)(1) of such Code (relating to defini13 tions) is amended by redesignating clauses (xv) 

14 through (xx) as clauses (xvi) through (xxi), re15 spectively, and by inserting after clause (xi) the 

16 following new clause: 

17 ‘‘(xv) section 6050W (relating to re18 turns relating to payments for qualified 

19 health insurance),’’. 

20 (B) Paragraph (2) of section 6724(d) of 

21 such Code is amended by striking the period at 

22 the end of subparagraph (CC) and inserting ‘‘, 

23 or’’ and by adding at the end the following new 

24 subparagraph: 


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1 ‘‘(DD) section 6050W(d) (relating to re2 turns relating to payments for qualified health 

3 insurance).’’. 

4 (3) CLERICAL AMENDMENT.—The table of sec5 tions for subpart B of part III of subchapter A of 

6 chapter 61 of such Code is amended by inserting 

7 after the item relating to section 6050V the fol8 lowing new item: 

‘‘Sec. 6050W. Returns relating to payments for qualified health insurance.’’. 

9 (c) CONFORMING AMENDMENTS.— 

10 (1) Paragraph (2) of section 1324(b) of title 

11 31, United States Code, is amended by inserting be12 fore the period ‘‘, or from section 36 of such Code’’. 

13 (2) The table of sections for subpart C of part 

14 IV of subchapter A of chapter 1 of the Internal Rev15 enue Code of 1986 is amended by striking the last 

16 item and inserting the following new items: 

‘‘Sec. 36. Qualified health insurance tax credit. 

‘‘Sec. 37. Overpayments of tax.’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2008. 


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1 SEC. 102. ADVANCE PAYMENT OF CREDIT FOR PUR2 CHASERS OF QUALIFIED HEALTH INSUR3 ANCE. 

4 (a) IN GENERAL.—Chapter 77 of the Internal Rev5 enue Code of 1986 (relating to miscellaneous provisions) 

6 is amended by adding at the end the following new section: 

7 ‘‘SEC. 7529. ADVANCE PAYMENT OF QUALIFIED HEALTH IN8 SURANCE TAX CREDIT. 

9 ‘‘(a) GENERAL RULE.—In the case of an eligible indi10 vidual, the Secretary shall make payments to the provider 

11 of such individual’s qualified health insurance equal to 

12 such individual’s qualified health insurance credit advance 

13 amount with respect to such provider. 

14 ‘‘(b) ELIGIBLE INDIVIDUAL.—For purposes of this 

15 section, the term ‘eligible individual’ means any indi16 vidual— 

17 ‘‘(1) who purchases qualified health insurance 

18 (as defined in section 36(c)), and 

19 ‘‘(2) for whom a qualified health insurance 

20 credit eligibility certificate is in effect. 

21 ‘‘(c) QUALIFIED HEALTH INSURANCE CREDIT ELIGI22 BILITY CERTIFICATE.—For purposes of this section, a 

23 qualified health insurance credit eligibility certificate is a 

24 statement furnished by an individual to the Secretary 

25 which— 


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1 ‘‘(1) certifies that the individual will be eligible 

2 to receive the credit provided by section 36 for the 

3 taxable year, 

4 ‘‘(2) estimates the amount of such credit for 

5 such taxable year, and 

6 ‘‘(3) provides such other information as the 

7 Secretary may require for purposes of this section. 

8 ‘‘(d) QUALIFIED HEALTH INSURANCE CREDIT AD9 VANCE AMOUNT.—For purposes of this section, the term 

10 ‘qualified health insurance credit advance amount’ means, 

11 with respect to any provider of qualified health insurance, 

12 the Secretary’s estimate of the amount of credit allowable 

13 under section 36 to the individual for the taxable year 

14 which is attributable to the insurance provided to the indi15 vidual by such provider. 

16 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

17 such regulations as may be necessary to carry out the pur18 poses of this section.’’. 

19 (b) CLERICAL AMENDMENT.—The table of sections 

20 for chapter 77 of the Internal Revenue Code of 1986 is 

21 amended by adding at the end the following new item: 

‘‘Sec. 7529. Advance payment of qualified health insurance tax credit.’’. 

22 (c) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2008. 


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1 TITLE II—SMALL BUSINESS 

2 HEALTH PLANS 

3 SEC. 201. RULES GOVERNING ASSOCIATION HEALTH 

4 PLANS. 

5 (a) IN GENERAL.—Subtitle B of title I of the Em6 ployee Retirement Income Security Act of 1974 is amend7 ed by adding after part 7 the following new part: 

8 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

9 HEALTH PLANS 

10 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

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

12 term ‘association health plan’ means a group health plan 

13 whose sponsor is (or is deemed under this part to be) de14 scribed in subsection (b). 

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

16 plan is described in this subsection if such sponsor— 

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

18 with a constitution and bylaws specifically stating its 

19 purpose and providing for periodic meetings on at 

20 least an annual basis, as a bona fide trade associa21 tion, a bona fide industry association (including a 

22 rural electric cooperative association or a rural tele23 phone cooperative association), a bona fide profes24 sional association, or a bona fide chamber of com25 merce (or similar bona fide business association, inVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 cluding a corporation or similar organization that 

2 operates on a cooperative basis (within the meaning 

3 of section 1381 of the Internal Revenue Code of 

4 1986)), for substantial purposes other than that of 

5 obtaining or providing medical care; 

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

7 receives the active support of its members and re8 quires for membership payment on a periodic basis 

9 of dues or payments necessary to maintain eligibility 

10 for membership in the sponsor; and 

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

12 or payments, or coverage under the plan on the 

13 basis of health status-related factors with respect to 

14 the employees of its members (or affiliated mem15 bers), or the dependents of such employees, and does 

16 not condition such dues or payments on the basis of 

17 group health plan participation. 

18 Any sponsor consisting of an association of entities which 

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

20 shall be deemed to be a sponsor described in this sub21 section. 

22 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

23 PLANS. 

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

25 prescribe by regulation a procedure under which, subject 


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1 to subsection (b), the applicable authority shall certify as2 sociation health plans which apply for certification as 

3 meeting the requirements of this part. 

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

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

6 health plan that provides at least one benefit option which 

7 does not consist of health insurance coverage, the applica8 ble authority shall certify such plan as meeting the re9 quirements of this part only if the applicable authority is 

10 satisfied that the applicable requirements of this part are 

11 met (or, upon the date on which the plan is to commence 

12 operations, will be met) with respect to 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 for continued certification of association health plans 

22 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 Making Health Care 

15 More Affordable Act of 2008, 

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, consisting of any of the fol24 lowing: agriculture; equipment and automobile deal25 erships; barbering and cosmetology; certified public 


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1 accounting practices; child care; construction; dance, 

2 theatrical and orchestra productions; disinfecting 

3 and pest control; financial services; fishing; food 

4 service establishments; hospitals; labor organiza5 tions; logging; manufacturing (metals); mining; med6 ical and dental practices; medical laboratories; pro7 fessional consulting services; sanitary services; trans8 portation (local and freight); warehousing; whole9 saling/distributing; or any other trade or business or 

10 industry which has been indicated as having average 

11 or above-average risk or health claims experience by 

12 reason of State rate filings, denials of coverage, pro13 posed premium rate levels, or other means dem14 onstrated by such plan in accordance with regula15 tions. 

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

17 BOARDS OF TRUSTEES. 

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

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

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

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

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

23 the application for certification under this part. 


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

2 this subsection are met with respect to an association 

3 health plan if the following requirements are met: 

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

5 pursuant to a trust agreement, by a board of trust6 ees which has complete fiscal control over the plan 

7 and which is responsible for all operations of the 

8 plan. 

9 ‘‘(2) RULES OF OPERATION AND FINANCIAL

10 CONTROLS.—The board of trustees has in effect 

11 rules of operation and financial controls, based on a 

12 3-year plan of operation, adequate to carry out the 

13 terms of the plan and to meet all requirements of 

14 this title applicable to the plan. 

15 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

16 PARTICIPATING EMPLOYERS AND TO CONTRAC17 TORS.— 

18 ‘‘(A) BOARD MEMBERSHIP.— 

19 ‘‘(i) IN GENERAL.—Except as pro20 vided in clauses (ii) and (iii), the members 

21 of the board of trustees are individuals se22 lected from individuals who are the owners, 

23 officers, directors, or employees of the par24 ticipating employers or who are partners in 


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1 the participating employers and actively 

2 participate in the business. 

3 ‘‘(ii) LIMITATION.— 

4 ‘‘(I) GENERAL RULE.—Except as 

5 provided in subclauses (II) and (III), 

6 no such member is an owner, officer, 

7 director, or employee of, or partner in, 

8 a contract administrator or other 

9 service provider to the plan. 

10 ‘‘(II) LIMITED EXCEPTION FOR

11 PROVIDERS OF SERVICES SOLELY ON

12 BEHALF OF THE SPONSOR.—Officers 

13 or employees of a sponsor which is a 

14 service provider (other than a contract 

15 administrator) to the plan may be 

16 members of the board if they con17 stitute not more than 25 percent of 

18 the membership of the board and they 

19 do not provide services to the plan 

20 other than on behalf of the sponsor. 

21 ‘‘(III) TREATMENT OF PRO22 VIDERS OF MEDICAL CARE.—In the 

23 case of a sponsor which is an associa24 tion whose membership consists pri25 marily of providers of medical care, 


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1 subclause (I) shall not apply in the 

2 case of any service provider described 

3 in subclause (I) who is a provider of 

4 medical care under the plan. 

5 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

6 Clause (I) shall not apply to an association 

7 health plan which is in existence on the 

8 date of the enactment of the Making 

9 Health Care More Affordable Act of 2008. 

10 ‘‘(B) SOLE AUTHORITY.—The board has 

11 sole authority under the plan to approve appli12 cations for participation in the plan and to con13 tract with a service provider to administer the 

14 day-to-day affairs of the plan. 

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

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

17 maintained by a franchiser for a franchise network con18 sisting of its franchisees— 

19 ‘‘(1) the requirements of subsection (a) and sec20 tion 801(a) shall be deemed met if such require21 ments would otherwise be met if the franchiser were 

22 deemed to be the sponsor referred to in section 

23 801(b), such network were deemed to be an associa24 tion described in section 801(b), and each franchisee 


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

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

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

4 be deemed met. 

5 The Secretary may by regulation define for purposes of 

6 this subsection the terms ‘franchiser’, ‘franchise network’, 

7 and ‘franchisee’. 

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 Making 

16 Health Care More Affordable Act of 2008, an affiliated 

17 member of the sponsor of the plan may be offered coverage 

18 under the plan as a participating employer only if— 

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

20 member on the date of certification under this part; 

21 or 

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

23 date of the offering of such coverage, the affiliated 

24 member has not maintained or contributed to a 

25 group health plan with respect to any of its employVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 ees who would otherwise be eligible to participate in 

2 such association health plan. 

3 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re4 quirements of this subsection are met with respect to an 

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

6 no participating employer may provide health insurance 

7 coverage in the individual market for any employee not 

8 covered under the plan which is similar to the coverage 

9 contemporaneously provided to employees of the employer 

10 under the plan, if such exclusion of the employee from cov11 erage under the plan is based on a health status-related 

12 factor with respect to the employee and such employee 

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

14 for coverage under the plan. 

15 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

16 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI17 PATE.—The requirements of this subsection are met with 

18 respect to an association health plan if— 

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

20 meeting the preceding requirements of this section 

21 are eligible to qualify as participating employers for 

22 all geographically available coverage options, unless, 

23 in the case of any such employer, participation or 

24 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 any health status-related factor in rela11 tion to employees of such employer or their 

12 beneficiaries and do not vary on the basis of the 

13 type of business or industry in which such em14 ployer is engaged. 

15 ‘‘(B) Nothing in this title or any other pro16 vision of law shall be construed to preclude an 

17 association health plan, or a health insurance 

18 issuer offering health insurance coverage in 

19 connection with an association health plan, 

20 from— 

21 ‘‘(i) setting contribution rates based 

22 on the claims experience of the plan; or 

23 ‘‘(ii) varying contribution rates for 

24 small employers in a State to the extent 

25 that such rates could vary using the same 


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1 methodology employed in such State for 

2 regulating premium rates in the small 

3 group market with respect to health insur4 ance coverage offered in connection with 

5 bona fide associations (within the meaning 

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

7 Service Act), 

8 subject to the requirements of section 702(b) 

9 relating to contribution rates. 

10 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI11 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If 

12 any benefit option under the plan does not consist 

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

14 beginning of the plan year not fewer than 1,000 par15 ticipants and beneficiaries. 

16 ‘‘(4) MARKETING REQUIREMENTS.— 

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

18 which consists of health insurance coverage is 

19 offered under the plan, State-licensed insurance 

20 agents shall be used to distribute to small em21 ployers coverage which does not consist of 

22 health insurance coverage in a manner com23 parable to the manner in which such agents are 

24 used to distribute health insurance coverage. 


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1 ‘‘(B) STATE-LICENSED INSURANCE

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

3 the term ‘State-licensed insurance agents’ 

4 means one or more agents who are licensed in 

5 a State and are subject to the laws of such 

6 State relating to licensure, qualification, test7 ing, examination, and continuing education of 

8 persons authorized to offer, sell, or solicit 

9 health insurance coverage in such State. 

10 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

11 other requirements as the applicable authority deter12 mines are necessary to carry out the purposes of this 

13 part, which shall be prescribed by the applicable au14 thority by regulation. 

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

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

17 nothing in this part or any provision of State law (as de18 fined in section 514(c)(1)) shall be construed to preclude 

19 an association health plan, or a health insurance issuer 

20 offering health insurance coverage in connection with an 

21 association health plan, from exercising its sole discretion 

22 in selecting the specific items and services consisting of 

23 medical care to be included as benefits under such plan 

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

25 of (1) any law to the extent that it is not preempted under 


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1 section 731(a)(1) with respect to matters governed by sec2 tion 711, 712, or 713, or (2) any law of the State with 

3 which filing and approval of a policy type offered by the 

4 plan was initially obtained to the extent that such law pro5 hibits an exclusion of a specific disease from such cov6 erage. 

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

8 FOR SOLVENCY FOR PLANS PROVIDING 

9 HEALTH BENEFITS IN ADDITION TO HEALTH 

10 INSURANCE COVERAGE. 

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

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

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

14 of health insurance coverage; or 

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

16 options which do not consist of health insurance cov17 erage, the plan— 

18 ‘‘(A) establishes and maintains reserves 

19 with respect to such additional benefit options, 

20 in amounts recommended by the qualified actu21 ary, consisting of— 

22 ‘‘(i) a reserve sufficient for unearned 

23 contributions; 

24 ‘‘(ii) a reserve sufficient for benefit li25 abilities which have been incurred, which 


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1 have not been satisfied, and for which risk 

2 of loss has not yet been transferred, and 

3 for expected administrative costs with re4 spect to such benefit liabilities; 

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

6 obligations of the plan; and 

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

8 of error and other fluctuations, taking into 

9 account the specific circumstances of the 

10 plan; and 

11 ‘‘(B) establishes and maintains aggregate 

12 and specific excess/stop loss insurance and sol13 vency indemnification, with respect to such ad14 ditional benefit options for which risk of loss 

15 has not yet been transferred, as follows: 

16 ‘‘(i) The plan shall secure aggregate 

17 excess/stop loss insurance for the plan with 

18 an attachment point which is not greater 

19 than 125 percent of expected gross annual 

20 claims. The applicable authority may by 

21 regulation provide for upward adjustments 

22 in the amount of such percentage in speci23 fied circumstances in which the plan spe24 cifically provides for and maintains reVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 serves in excess of the amounts required 

2 under subparagraph (A). 

3 ‘‘(ii) The plan shall secure specific ex4 cess/stop loss insurance for the plan with 

5 an attachment point which is at least equal 

6 to an amount recommended by the plan’s 

7 qualified actuary. The applicable authority 

8 may by regulation provide for adjustments 

9 in the amount of such insurance in speci10 fied circumstances in which the plan spe11 cifically provides for and maintains re12 serves in excess of the amounts required 

13 under subparagraph (A). 

14 ‘‘(iii) The plan shall secure indem15 nification insurance for any claims which 

16 the plan is unable to satisfy by reason of 

17 a plan termination. 

18 Any person issuing to a plan insurance described in clause 

19 (I), (ii), or (iii) of subparagraph (B) shall notify the Sec20 retary of any failure of premium payment meriting can21 cellation of the policy prior to undertaking such a cancella22 tion. Any regulations prescribed by the applicable author23 ity pursuant to clause (I) or (ii) of subparagraph (B) may 

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

25 stop loss insurance as the qualified actuary may recVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00034 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 ommend, taking into account the specific circumstances 

2 of the plan. 

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

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

8 ‘‘(1) $500,000, or 

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

10 $2,000,000) as may be set forth in regulations pre11 scribed by the applicable authority, considering the 

12 level of aggregate and specific excess/stop loss insur13 ance provided with respect to such plan and other 

14 factors related to solvency risk, such as the plan’s 

15 projected levels of participation or claims, the nature 

16 of the plan’s liabilities, and the types of assets avail17 able to assure that such liabilities are met. 

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

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

20 the applicable authority may provide such additional re21 quirements relating to reserves, excess/stop loss insurance, 

22 and indemnification insurance as the applicable authority 

23 considers appropriate. Such requirements may be provided 

24 by regulation with respect to any such plan or any class 

25 of such plans. 


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1 ‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR2 ANCE.—The applicable authority may provide for adjust3 ments to the levels of reserves otherwise required under 

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

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

6 provided with respect to such plan or plans. 

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

8 applicable authority may permit an association health plan 

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

10 of the requirements of this section (except subsection 

11 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar12 rangement, or other financial arrangement as the applica13 ble authority determines to be adequate to enable the plan 

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

15 and is otherwise no less protective of the interests of par16 ticipants and beneficiaries than the requirements for 

17 which it is substituted. The applicable authority may take 

18 into account, for purposes of this subsection, evidence pro19 vided by the plan or sponsor which demonstrates an as20 sumption of liability with respect to the plan. Such evi21 dence may be in the form of a contract of indemnification, 

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

23 applicable terms of the plan in the form of assessments 

24 of participating employers, security, or other financial ar25 rangement. 


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1 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

2 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

3 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO4 CIATION HEALTH PLAN FUND.— 

5 ‘‘(A) IN GENERAL.—In the case of an as6 sociation health plan described in subsection 

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

8 met if the plan makes payments into the Asso9 ciation Health Plan Fund under this subpara10 graph when they are due. Such payments shall 

11 consist of annual payments in the amount of 

12 $5,000, and, in addition to such annual pay13 ments, such supplemental payments as the Sec14 retary may determine to be necessary under 

15 paragraph (2). Payments under this paragraph 

16 are payable to the Fund at the time determined 

17 by the Secretary. Initial payments are due in 

18 advance of certification under this part. Pay19 ments shall continue to accrue until a plan’s as20 sets are distributed pursuant to a termination 

21 procedure. 

22 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

25 not more than 100 percent of the payment 


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1 which was not timely paid shall be payable by 

2 the plan to the Fund. 

3 ‘‘(C) CONTINUED DUTY OF THE SEC4 RETARY.—The Secretary shall not cease to 

5 carry out the provisions of paragraph (2) on ac6 count of the failure of a plan to pay any pay7 ment when due. 

8 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

9 EXCESS/STOP LOSS INSURANCE COVERAGE AND IN10 DEMNIFICATION INSURANCE COVERAGE FOR CER11 TAIN PLANS.—In any case in which the applicable 

12 authority determines that there is, or that there is 

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

14 take necessary corrective actions under section 

15 809(a) with respect to an association health plan de16 scribed in subsection (a)(2); or (B) a termination of 

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

18 if the applicable authority is not the Secretary, cer19 tifies such determination to the Secretary), the Sec20 retary shall determine the amounts necessary to 

21 make payments to an insurer (designated by the 

22 Secretary) to maintain in force excess/stop loss in23 surance coverage or indemnification insurance cov24 erage for such plan, if the Secretary determines that 

25 there is a reasonable expectation that, without such 


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1 payments, claims would not be satisfied by reason of 

2 termination of such coverage. The Secretary shall, to 

3 the extent provided in advance in appropriation 

4 Acts, pay such amounts so determined to the insurer 

5 designated by the Secretary. 

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

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

8 on the books of the Treasury a fund to be 

9 known as the ‘Association Health Plan Fund’. 

10 The Fund shall be available for making pay11 ments pursuant to paragraph (2). The Fund 

12 shall be credited with payments received pursu13 ant to paragraph (1)(A), penalties received pur14 suant to paragraph (1)(B); and earnings on in15 vestments of amounts of the Fund under sub16 paragraph (B). 

17 ‘‘(B) INVESTMENT.—Whenever the Sec18 retary determines that the moneys of the fund 

19 are in excess of current needs, the Secretary 

20 may request the investment of such amounts as 

21 the Secretary determines advisable by the Sec22 retary of the Treasury in obligations issued or 

23 guaranteed by the United States. 

24 ‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 

25 of this section— 


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1 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR2 ANCE.—The term ‘aggregate excess/stop loss insur3 ance’ means, in connection with an association 

4 health plan, a contract— 

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

6 minimum standards as the applicable authority 

7 may prescribe by regulation) provides for pay8 ment to the plan with respect to aggregate 

9 claims under the plan in excess of an amount 

10 or amounts specified in such contract; 

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

12 ‘‘(C) which allows for payment of pre13 miums by any third party on behalf of the in14 sured plan. 

15 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR16 ANCE.—The term ‘specific excess/stop loss insur17 ance’ means, in connection with an association 

18 health plan, a contract— 

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

20 minimum standards as the applicable authority 

21 may prescribe by regulation) provides for pay22 ment to the plan with respect to claims under 

23 the plan in connection with a covered individual 

24 in excess of an amount or amounts specified in 


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1 such contract in connection with such covered 

2 individual; 

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

4 ‘‘(C) which allows for payment of pre5 miums by any third party on behalf of the in6 sured plan. 

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

8 of this section, the term ‘indemnification insurance’ 

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

10 contract— 

11 ‘‘(1) under which an insurer (meeting such min12 imum standards as the applicable authority may pre13 scribe by regulation) provides for payment to the 

14 plan with respect to claims under the plan which the 

15 plan is unable to satisfy by reason of a termination 

16 pursuant to section 809(b) (relating to mandatory 

17 termination); 

18 ‘‘(2) which is guaranteed renewable and 

19 noncancellable for any reason (except as the applica20 ble authority may prescribe by regulation); and 

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

22 any third party on behalf of the insured plan. 

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

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

25 health plan, plan assets which meet the fiduciary standVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00041 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 ards under part 4 and such additional requirements re2 garding liquidity as the applicable authority may prescribe 

3 by regulation. 

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

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

6 date of the enactment of the Making Health Care 

7 More Affordable Act of 2008, the applicable author8 ity shall establish a Solvency Standards Working 

9 Group. In prescribing the initial regulations under 

10 this section, the applicable authority shall take into 

11 account the recommendations of such Working 

12 Group. 

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

14 consist of not more than 15 members appointed by 

15 the applicable authority. The applicable authority 

16 shall include among persons invited to membership 

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

18 following: 

19 ‘‘(A) a representative of the National Asso20 ciation of Insurance Commissioners; 

21 ‘‘(B) a representative of the American 

22 Academy of Actuaries; 

23 ‘‘(C) a representative of the State govern24 ments, or their interests; 


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1 ‘‘(D) a representative of existing self-in2 sured arrangements, or their interests; 

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

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

5 interests; and 

6 ‘‘(F) a representative of multiemployer 

7 plans that are group health plans, or their in8 terests. 

9 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE10 LATED REQUIREMENTS. 

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

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

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

14 an application for certification under this part a filing fee 

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

16 case of the Secretary, to the extent provided in appropria17 tion Acts, for the sole purpose of administering the certifi18 cation procedures applicable with respect to association 

19 health plans. 

20 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA21 TION FOR CERTIFICATION.—An application for certifi22 cation under this part meets the requirements of this sec23 tion only if it includes, in a manner and form which shall 

24 be prescribed by the applicable authority by regulation, at 

25 least the following information: 


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

2 and addresses of— 

3 ‘‘(A) the sponsor; and 

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

5 of the plan. 

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

7 BUSINESS.—The States in which participants and 

8 beneficiaries under the plan are to be located and 

9 the number of them expected to be located in each 

10 such State. 

11 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro12 vided by the board of trustees that the bonding re13 quirements of section 412 will be met as of the date 

14 of the application or (if later) commencement of op15 erations. 

16 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu17 ments governing the plan (including any bylaws and 

18 trust agreements), the summary plan description, 

19 and other material describing the benefits that will 

20 be provided to participants and beneficiaries under 

21 the plan. 

22 ‘‘(5) AGREEMENTS WITH SERVICE PRO23 VIDERS.—A copy of any agreements between the 

24 plan and contract administrators and other service 

25 providers. 


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1 ‘‘(6) FUNDING REPORT.—In the case of asso2 ciation health plans providing benefits options in ad3 dition to health insurance coverage, a report setting 

4 forth information with respect to such additional 

5 benefit options determined as of a date within the 

6 120-day period ending with the date of the applica7 tion, including the following: 

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

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

10 statement of actuarial opinion, signed by a 

11 qualified actuary, that all applicable require12 ments of section 806 are or will be met in ac13 cordance with regulations which the applicable 

14 authority shall prescribe. 

15 ‘‘(B) ADEQUACY OF CONTRIBUTION

16 RATES.—A statement of actuarial opinion, 

17 signed by a qualified actuary, which sets forth 

18 a description of the extent to which contribution 

19 rates are adequate to provide for the payment 

20 of all obligations and the maintenance of re21 quired reserves under the plan for the 12- 

22 month period beginning with such date within 

23 such 120-day period, taking into account the 

24 expected coverage and experience of the plan. If 

25 the contribution rates are not fully adequate, 


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1 the statement of actuarial opinion shall indicate 

2 the extent to which the rates are inadequate 

3 and the changes needed to ensure adequacy. 

4 ‘‘(C) CURRENT AND PROJECTED VALUE OF

5 ASSETS AND LIABILITIES.—A statement of ac6 tuarial opinion signed by a qualified actuary, 

7 which sets forth the current value of the assets 

8 and liabilities accumulated under the plan and 

9 a projection of the assets, liabilities, income, 

10 and expenses of the plan for the 12-month pe11 riod referred to in subparagraph (B). The in12 come statement shall identify separately the 

13 plan’s administrative expenses and claims. 

14 ‘‘(D) COSTS OF COVERAGE TO BE

15 CHARGED AND OTHER EXPENSES.—A state16 ment of the costs of coverage to be charged, in17 cluding an itemization of amounts for adminis18 tration, reserves, and other expenses associated 

19 with the operation of the plan. 

20 ‘‘(E) OTHER INFORMATION.—Any other 

21 information as may be determined by the appli22 cable authority, by regulation, as necessary to 

23 carry out the purposes of this part. 

24 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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


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•S 3072 IS

1 association health plan shall not be effective unless written 

2 notice of such certification is filed with the applicable 

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

4 of the participants and beneficiaries under the plan are 

5 located. For purposes of this subsection, an individual 

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

7 known address of such individual is located or in which 

8 such individual is employed. 

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

10 of any association health plan certified under this part, 

11 descriptions of material changes in any information which 

12 was required to be submitted with the application for the 

13 certification under this part shall be filed in such form 

14 and manner as shall be prescribed by the applicable au15 thority by regulation. The applicable authority may re16 quire by regulation prior notice of material changes with 

17 respect to specified matters which might serve as the basis 

18 for suspension or revocation of the certification. 

19 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS20 SOCIATION HEALTH PLANS.—An association health plan 

21 certified under this part which provides benefit options in 

22 addition to health insurance coverage for such plan year 

23 shall meet the requirements of section 103 by filing an 

24 annual report under such section which shall include infor25 mation described in subsection (b)(6) with respect to the 


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

2 be filed with the applicable authority not later than 90 

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

4 as may be prescribed by the applicable authority). The ap5 plicable authority may require by regulation such interim 

6 reports as it considers appropriate. 

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

8 board of trustees of each association health plan which 

9 provides benefits options in addition to health insurance 

10 coverage and which is applying for certification under this 

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

12 of all participants and beneficiaries, a qualified actuary 

13 who shall be responsible for the preparation of the mate14 rials comprising information necessary to be submitted by 

15 a qualified actuary under this part. The qualified actuary 

16 shall utilize such assumptions and techniques as are nec17 essary to enable such actuary to form an opinion as to 

18 whether the contents of the matters reported under this 

19 part— 

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

21 the experience of the plan and to reasonable expecta22 tions; and 

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

24 anticipated experience under the plan. 


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1 The opinion by the qualified actuary shall be made with 

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

3 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER4 MINATION. 

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

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

7 may terminate (upon or at any time after cessation of ac8 cruals in benefit liabilities) only if the board of trustees, 

9 not less than 60 days before the proposed termination 

10 date— 

11 ‘‘(1) provides to the participants and bene12 ficiaries a written notice of intent to terminate stat13 ing that such termination is intended and the pro14 posed termination date; 

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

16 of the plan in connection with such termination in 

17 a manner which will result in timely payment of all 

18 benefits for which the plan is obligated; and 

19 ‘‘(3) submits such plan in writing to the appli20 cable authority. 

21 Actions required under this section shall be taken in such 

22 form and manner as may be prescribed by the applicable 

23 authority by regulation. 


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1 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI2 NATION. 

3 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE4 SERVES.—An association health plan which is certified 

5 under this part and which provides benefits other than 

6 health insurance coverage shall continue to meet the re7 quirements of section 806, irrespective of whether such 

8 certification continues in effect. The board of trustees of 

9 such plan shall determine quarterly whether the require10 ments of section 806 are met. In any case in which the 

11 board determines that there is reason to believe that there 

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

13 applicable authority makes such a determination and so 

14 notifies the board, the board shall immediately notify the 

15 qualified actuary engaged by the plan, and such actuary 

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

17 make such recommendations to the board for corrective 

18 action as the actuary determines necessary to ensure com19 pliance with section 806. Not later than 30 days after re20 ceiving from the actuary recommendations for corrective 

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

22 such form and manner as the applicable authority may 

23 prescribe by regulation) of such recommendations of the 

24 actuary for corrective action, together with a description 

25 of the actions (if any) that the board has taken or plans 

26 to take in response to such recommendations. The board 


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1 shall thereafter report to the applicable authority, in such 

2 form and frequency as the applicable authority may speci3 fy to the board, regarding corrective action taken by the 

4 board until the requirements of section 806 are met. 

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

6 which— 

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

8 under subsection (a) (or by an issuer of excess/stop 

9 loss insurance or indemnity insurance pursuant to 

10 section 806(a)) of a failure of an association health 

11 plan which is or has been certified under this part 

12 and is described in section 806(a)(2) to meet the re13 quirements of section 806 and has not been notified 

14 by the board of trustees of the plan that corrective 

15 action has restored compliance with such require16 ments; and 

17 ‘‘(2) the applicable authority determines that 

18 there is a reasonable expectation that the plan will 

19 continue to fail to meet the requirements of section 

20 806, 

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

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

23 course of the termination, take such actions as the appli24 cable authority may require, including satisfying any 

25 claims referred to in section 806(a)(2)(B)(iii) and recovVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 ering for the plan any liability under subsection 

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

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

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

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

6 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL7 VENT ASSOCIATION HEALTH PLANS PRO8 VIDING HEALTH BENEFITS IN ADDITION TO 

9 HEALTH INSURANCE COVERAGE. 

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

11 INSOLVENT PLANS.—Whenever the Secretary determines 

12 that an association health plan which is or has been cer13 tified under this part and which is described in section 

14 806(a)(2) will be unable to provide benefits when due or 

15 is otherwise in a financially hazardous condition, as shall 

16 be defined by the Secretary by regulation, the Secretary 

17 shall, upon notice to the plan, apply to the appropriate 

18 United States district court for appointment of the Sec19 retary as trustee to administer the plan for the duration 

20 of the insolvency. The plan may appear as a party and 

21 other interested persons may intervene in the proceedings 

22 at the discretion of the court. The court shall appoint such 

23 Secretary trustee if the court determines that the trustee24 ship is necessary to protect the interests of the partici25 pants and beneficiaries or providers of medical care or to 


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1 avoid any unreasonable deterioration of the financial con2 dition of the plan. The trusteeship of such Secretary shall 

3 continue until the conditions described in the first sen4 tence of this subsection are remedied or the plan is termi5 nated. 

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

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

8 the power— 

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

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

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

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

13 of the assets and records of the plan to the Sec14 retary as trustee; 

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

16 Secretary holds in accordance with the provisions of 

17 the plan, regulations prescribed by the Secretary, 

18 and applicable provisions of law; 

19 ‘‘(4) to require the sponsor, the plan adminis20 trator, any participating employer, and any employee 

21 organization representing plan participants to fur22 nish any information with respect to the plan which 

23 the Secretary as trustee may reasonably need in 

24 order to administer the plan; 


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

2 plan and to recover reasonable expenses of the trust3 eeship; 

4 ‘‘(6) to commence, prosecute, or defend on be5 half of the plan any suit or proceeding involving the 

6 plan; 

7 ‘‘(7) to issue, publish, or file such notices, state8 ments, and reports as may be required by the Sec9 retary by regulation or required by any order of the 

10 court; 

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

12 termination in accordance with section 809(b)) and 

13 liquidate the plan assets, to restore the plan to the 

14 responsibility of the sponsor, or to continue the 

15 trusteeship; 

16 ‘‘(9) to provide for the enrollment of plan par17 ticipants and beneficiaries under appropriate cov18 erage options; and 

19 ‘‘(10) to do such other acts as may be nec20 essary to comply with this title or any order of the 

21 court and to protect the interests of plan partici22 pants and beneficiaries and providers of medical 

23 care. 


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1 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac2 ticable after the Secretary’s appointment as trustee, the 

3 Secretary shall give notice of such appointment to— 

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

5 ‘‘(2) each participant; 

6 ‘‘(3) each participating employer; and 

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

8 which, for purposes of collective bargaining, rep9 resents plan participants. 

10 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in11 consistent with the provisions of this title, or as may be 

12 otherwise ordered by the court, the Secretary, upon ap13 pointment as trustee under this section, shall be subject 

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

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

16 of a fiduciary for purposes of this title. 

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

18 Secretary under this subsection may be filed notwith19 standing the pendency in the same or any other court of 

20 any bankruptcy, mortgage foreclosure, or equity receiver21 ship proceeding, or any proceeding to reorganize, conserve, 

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

23 to enforce a lien against property of the plan. 

24 ‘‘(f) JURISDICTION OF COURT.— 


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1 ‘‘(1) IN GENERAL.—Upon the filing of an appli2 cation for the appointment as trustee or the issuance 

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

4 application is made shall have exclusive jurisdiction 

5 of the plan involved and its property wherever lo6 cated with the powers, to the extent consistent with 

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

8 States having jurisdiction over cases under chapter 

9 11 of title 11, United States Code. Pending an adju10 dication under this section such court shall stay, and 

11 upon appointment by it of the Secretary as trustee, 

12 such court shall continue the stay of, any pending 

13 mortgage foreclosure, equity receivership, or other 

14 proceeding to reorganize, conserve, or liquidate the 

15 plan, the sponsor, or property of such plan or spon16 sor, and any other suit against any receiver, conser17 vator, or trustee of the plan, the sponsor, or prop18 erty of the plan or sponsor. Pending such adjudica19 tion and upon the appointment by it of the Sec20 retary as trustee, the court may stay any proceeding 

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

22 sponsor or any other suit against the plan or the 

23 sponsor. 

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

25 may be brought in the judicial district where the 


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•S 3072 IS

1 sponsor or the plan administrator resides or does 

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

3 A district court in which such action is brought may 

4 issue process with respect to such action in any 

5 other judicial district. 

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

7 which shall be prescribed by the Secretary, the Secretary 

8 shall appoint, retain, and compensate accountants, actu9 aries, and other professional service personnel as may be 

10 necessary in connection with the Secretary’s service as 

11 trustee under this section. 

12 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

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

14 State may impose by law a contribution tax on an associa15 tion health plan described in section 806(a)(2), if the plan 

16 commenced operations in such State after the date of the 

17 enactment of the Making Health Care More Affordable 

18 Act of 2008. 

19 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec20 tion, the term ‘contribution tax’ imposed by a State on 

21 an association health plan means any tax imposed by such 

22 State if— 

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

24 the amount of premiums or contributions, with re25 spect to individuals covered under the plan who are 


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1 residents of such State, which are received by the 

2 plan from participating employers located in such 

3 State or from such individuals; 

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

5 rate of any tax imposed by such State on premiums 

6 or contributions received by insurers or health main7 tenance organizations for health insurance coverage 

8 offered in such State in connection with a group 

9 health plan; 

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

11 and 

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

13 the plan is reduced by the amount of any tax or as14 sessment otherwise imposed by the State on pre15 miums, contributions, or both received by insurers or 

16 health maintenance organizations for health insur17 ance coverage, aggregate excess/stop loss insurance 

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

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

20 other insurance related to the provision of medical 

21 care under the plan, or any combination thereof pro22 vided by such insurers or health maintenance organi23 zations in such State in connection with such plan. 

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

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


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

2 health plan’ has the meaning provided in section 

3 733(a)(1) (after applying subsection (b) of this sec4 tion). 

5 ‘‘(2) MEDICAL CARE.—The term ‘medical care’ 

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

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

8 term ‘health insurance coverage’ has the meaning 

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

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

11 ‘health insurance issuer’ has the meaning provided 

12 in section 733(b)(2). 

13 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap14 plicable authority’ means the Secretary, except that, 

15 in connection with any exercise of the Secretary’s 

16 authority regarding which the Secretary is required 

17 under section 506(d) to consult with a State, such 

18 term means the Secretary, in consultation with such 

19 State. 

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

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

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

23 ‘‘(7) INDIVIDUAL MARKET.— 

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

25 market’ means the market for health insurance 


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1 coverage offered to individuals other than in 

2 connection with a group health plan. 

3 ‘‘(B) TREATMENT OF VERY SMALL

4 GROUPS.— 

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

6 (ii), such term includes coverage offered in 

7 connection with a group health plan that 

8 has fewer than 2 participants as current 

9 employees or participants described in sec10 tion 732(d)(3) on the first day of the plan 

11 year. 

12 ‘‘(ii) STATE EXCEPTION.—Clause (I) 

13 shall not apply in the case of health insur14 ance coverage offered in a State if such 

15 State regulates the coverage described in 

16 such clause in the same manner and to the 

17 same extent as coverage in the small group 

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

19 the Public Health Service Act) is regulated 

20 by such State. 

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

22 ‘participating employer’ means, in connection with 

23 an association health plan, any employer, if any indi24 vidual who is an employee of such employer, a part25 ner in such employer, or a self-employed individual 


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

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

3 or was covered under such plan in connection with 

4 the status of such individual as such an employee, 

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

6 plan. 

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

8 term ‘applicable State authority’ means, with respect 

9 to a health insurance issuer in a State, the State in10 surance commissioner or official or officials des11 ignated by the State to enforce the requirements of 

12 title XXVII of the Public Health Service Act for the 

13 State involved with respect to such issuer. 

14 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali15 fied actuary’ means an individual who is a member 

16 of the American Academy of Actuaries. 

17 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili18 ated member’ means, in connection with a sponsor— 

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

20 be a member of the sponsor but who elects an 

21 affiliated status with the sponsor, 

22 ‘‘(B) in the case of a sponsor with mem23 bers which consist of associations, a person who 

24 is a member of any such association and elects 

25 an affiliated status with the sponsor, or 


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

2 plan in existence on the date of the enactment 

3 of the Making Health Care More Affordable 

4 Act of 2008, a person eligible to be a member 

5 of the sponsor or one of its member associa6 tions. 

7 ‘‘(12) LARGE EMPLOYER.—The term ‘large em8 ployer’ means, in connection with a group health 

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

10 employed an average of at least 51 employees on 

11 business days during the preceding calendar year 

12 and who employs at least 2 employees on the first 

13 day of the plan year. 

14 ‘‘(13) SMALL EMPLOYER.—The term ‘small em15 ployer’ means, in connection with a group health 

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

17 is not a large employer. 

18 ‘‘(b) RULES OF CONSTRUCTION.— 

19 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur20 poses of determining whether a plan, fund, or pro21 gram is an employee welfare benefit plan which is an 

22 association health plan, and for purposes of applying 

23 this title in connection with such plan, fund, or pro24 gram so determined to be such an employee welfare 

25 benefit plan— 


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

2 ‘employer’ (as defined in section 3(5)) includes 

3 the partnership in relation to the partners, and 

4 the term ‘employee’ (as defined in section 3(6)) 

5 includes any partner in relation to the partner6 ship; and 

7 ‘‘(B) in the case of a self-employed indi8 vidual, the term ‘employer’ (as defined in sec9 tion 3(5)) and the term ‘employee’ (as defined 

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

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

12 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

13 case of any plan, fund, or program which was estab14 lished or is maintained for the purpose of providing 

15 medical care (through the purchase of insurance or 

16 otherwise) for employees (or their dependents) cov17 ered thereunder and which demonstrates to the Sec18 retary that all requirements for certification under 

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

20 fund, or program if such plan, fund, or program 

21 were a group health plan, such plan, fund, or pro22 gram shall be treated for purposes of this title as an 

23 employee welfare benefit plan on and after the date 

24 of such demonstration.’’. 


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1 (b) CONFORMING AMENDMENTS TO PREEMPTION

2 RULES.— 

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

4 1144(b)(6)) is amended by adding at the end the 

5 following new subparagraph: 

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

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

8 of an association health plan which is certified under part 

9 8.’’. 

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

11 is amended— 

12 (A) in subsection (b)(4), by striking ‘‘Sub13 section (a)’’ and inserting ‘‘Subsections (a) and 

14 (d)’’; 

15 (B) in subsection (b)(5), by striking ‘‘sub16 section (a)’’ in subparagraph (A) and inserting 

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

18 (a)(2)(B) and (b) of section 805’’, and by strik19 ing ‘‘subsection (a)’’ in subparagraph (B) and 

20 inserting ‘‘subsection (a) of this section or sub21 section (a)(2)(B) or (b) of section 805’’; 

22 (C) by redesignating subsection (d) as sub23 section (e); and 

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

25 following new subsection: 


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

2 provisions of this title shall supersede any and all State 

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

4 have the effect of precluding, a health insurance issuer 

5 from offering health insurance coverage in connection with 

6 an association health plan which is certified under part 

7 8. 

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

9 of subsection (b) of this section— 

10 ‘‘(A) In any case in which health insurance cov11 erage of any policy type is offered under an associa12 tion health plan certified under part 8 to a partici13 pating employer operating in such State, the provi14 sions of this title shall supersede any and all laws 

15 of such State insofar as they may preclude a health 

16 insurance issuer from offering health insurance cov17 erage of the same policy type to other employers op18 erating in the State which are eligible for coverage 

19 under such association health plan, whether or not 

20 such other employers are participating employers in 

21 such plan. 

22 ‘‘(B) In any case in which health insurance cov23 erage of any policy type is offered in a State under 

24 an association health plan certified under part 8 and 

25 the filing, with the applicable State authority (as deVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00065 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 fined in section 812(a)(9)), of the policy form in 

2 connection with such policy type is approved by such 

3 State authority, the provisions of this title shall su4 persede any and all laws of any other State in which 

5 health insurance coverage of such type is offered, in6 sofar as they may preclude, upon the filing in the 

7 same form and manner of such policy form with the 

8 applicable State authority in such other State, the 

9 approval of the filing in such other State. 

10 ‘‘(3) Nothing in subsection (b)(6)(E) or the preceding 

11 provisions of this subsection shall be construed, with re12 spect to health insurance issuers or health insurance cov13 erage, to supersede or impair the law of any State— 

14 ‘‘(A) providing solvency standards or similar 

15 standards regarding the adequacy of insurer capital, 

16 surplus, reserves, or contributions, or 

17 ‘‘(B) relating to prompt payment of claims. 

18 ‘‘(4) For additional provisions relating to association 

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

20 805. 

21 ‘‘(5) For purposes of this subsection, the term ‘asso22 ciation health plan’ has the meaning provided in section 

23 801(a), and the terms ‘health insurance coverage’, ‘par24 ticipating employer’, and ‘health insurance issuer’ have 


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1 the meanings provided such terms in section 812, respec2 tively.’’. 

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

4 U.S.C. 1144(b)(6)(A)) is amended— 

5 (A) in clause (I)(II), by striking ‘‘and’’ at 

6 the end; 

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

8 does not provide medical care (within the mean9 ing of section 733(a)(2)),’’ after ‘‘arrange10 ment,’’, and by striking ‘‘title.’’ and inserting 

11 ‘‘title, and’’; and 

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

13 clause: 

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

15 of any other employee welfare benefit plan which is 

16 a multiple employer welfare arrangement and which 

17 provides medical care (within the meaning of section 

18 733(a)(2)), any law of any State which regulates in19 surance may apply.’’. 

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

21 by paragraph (2)(C)) is amended— 

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

23 ‘‘(1) Except as provided in paragraph (2), noth24 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 Making 

5 Health Care More Affordable Act of 2008 shall be con6 strued to alter, amend, modify, invalidate, impair, or su7 persede any provision of this title, except by specific cross8 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, 2012, 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

‘‘801. Association health plans. 

‘‘802. Certification of association health plans. 

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

‘‘804. Participation and coverage requirements. 

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

benefit options. 

‘‘806. Maintenance of reserves and provisions for solvency for plans providing 

health benefits in addition to health insurance coverage. 

‘‘807. Requirements for application and related requirements. 

‘‘808. Notice requirements for voluntary termination. 

‘‘809. Corrective actions and mandatory termination. 

‘‘810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage. 

‘‘811. State assessment authority. 

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

13 SEC. 202. CLARIFICATION OF TREATMENT OF SINGLE EM14 PLOYER ARRANGEMENTS. 

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

16 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend17 ed— 


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1 (1) in clause (I), by inserting after ‘‘control 

2 group,’’ the following: ‘‘except that, in any case in 

3 which the benefit referred to in subparagraph (A) 

4 consists of medical care (as defined in section 

5 812(a)(2)), two or more trades or businesses, wheth6 er or not incorporated, shall be deemed a single em7 ployer for any plan year of such plan, or any fiscal 

8 year of such other arrangement, if such trades or 

9 businesses are within the same control group during 

10 such year or at any time during the preceding 1-year 

11 period,’’; 

12 (2) in clause (iii), by striking ‘‘(iii) the deter13 mination’’ and inserting the following: 

14 ‘‘(iii)(I) in any case in which the benefit re15 ferred to in subparagraph (A) consists of medical 

16 care (as defined in section 812(a)(2)), the deter17 mination of whether a trade or business is under 

18 ‘common control’ with another trade or business 

19 shall be determined under regulations of the Sec20 retary applying principles consistent and coextensive 

21 with the principles applied in determining whether 

22 employees of two or more trades or businesses are 

23 treated as employed by a single employer under sec24 tion 4001(b), except that, for purposes of this para25 graph, an interest of greater than 25 percent may 


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•S 3072 IS

1 not be required as the minimum interest necessary 

2 for common control, or 

3 ‘‘(II) in any other case, the determination’’; 

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

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

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

7 new clause: 

8 ‘‘(iv) in any case in which the benefit referred 

9 to in subparagraph (A) consists of medical care (as 

10 defined in section 812(a)(2)), in determining, after 

11 the application of clause (I), whether benefits are 

12 provided to employees of two or more employers, the 

13 arrangement shall be treated as having only one par14 ticipating employer if, after the application of clause 

15 (I), the number of individuals who are employees 

16 and former employees of any one participating em17 ployer and who are covered under the arrangement 

18 is greater than 75 percent of the aggregate number 

19 of all individuals who are employees or former em20 ployees of participating employers and who are cov21 ered under the arrangement,’’. 

22 SEC. 203. ENFORCEMENT PROVISIONS RELATING TO ASSO23 CIATION HEALTH PLANS. 

24 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

25 MISREPRESENTATIONS.—Section 501 of the Employee 


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

2 is amended— 

3 (1) by inserting ‘‘(a)’’ after ‘‘Sec. 501.’’; and 

4 (2) by adding at the end the following new sub5 section: 

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

7 any employee, any employee’s beneficiary, any employer, 

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

9 established or maintained for the purpose of offering or 

10 providing any benefit described in section 3(1) to employ11 ees or their beneficiaries as— 

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

13 been certified under part 8; 

14 ‘‘(2) having been established or maintained 

15 under or pursuant to one or more collective bar16 gaining agreements which are reached pursuant to 

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

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

19 paragraph Fourth of section 2 of the Railway Labor 

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

21 reached pursuant to labor-management negotiations 

22 under similar provisions of State public employee re23 lations laws; or 

24 ‘‘(3) being a plan or arrangement described in 

25 section 3(40)(A)(I), 


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

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

3 both.’’. 

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

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

6 end the following new subsection: 

7 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE8 SIST ORDERS.— 

9 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

10 upon application by the Secretary showing the oper11 ation, promotion, or marketing of an association 

12 health plan (or similar arrangement providing bene13 fits consisting of medical care (as defined in section 

14 733(a)(2))) that— 

15 ‘‘(A) is not certified under part 8, is sub16 ject under section 514(b)(6) to the insurance 

17 laws of any State in which the plan or arrange18 ment offers or provides benefits, and is not li19 censed, registered, or otherwise approved under 

20 the insurance laws of such State; or 

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

22 under part 8 and is not operating in accordance 

23 with the requirements under part 8 for such 

24 certification, 


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1 a district court of the United States shall enter an 

2 order requiring that the plan or arrangement cease 

3 activities. 

4 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

5 apply in the case of an association health plan or 

6 other arrangement if the plan or arrangement shows 

7 that— 

8 ‘‘(A) all benefits under it referred to in 

9 paragraph (1) consist of health insurance cov10 erage; and 

11 ‘‘(B) with respect to each State in which 

12 the plan or arrangement offers or provides ben13 efits, the plan or arrangement is operating in 

14 accordance with applicable State laws that are 

15 not superseded under section 514. 

16 ‘‘(3) ADDITIONAL EQUITABLE RELIEF.—The 

17 court may grant such additional equitable relief, in18 cluding any relief available under this title, as it 

19 deems necessary to protect the interests of the pub20 lic and of persons having claims for benefits against 

21 the plan.’’. 

22 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.— 

23 Section 503 of such Act (29 U.S.C. 1133) is amended by 

24 inserting ‘‘(a) IN GENERAL.—’’ before ‘‘In accordance’’, 

25 and by adding at the end the following new subsection: 


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1 ‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of 

2 each association health plan which is or has been certified 

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

4 named fiduciary (as applicable) to ensure that the require5 ments of this section are met in connection with claims 

6 filed under the plan.’’. 

7 SEC. 204. COOPERATION BETWEEN FEDERAL AND STATE 

8 AUTHORITIES. 

9 Section 506 of the Employee Retirement Income Se10 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

11 at the end the following new subsection: 

12 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

13 TO ASSOCIATION HEALTH PLANS.— 

14 ‘‘(1) AGREEMENTS WITH STATES.—The Sec15 retary shall consult with the State recognized under 

16 paragraph (2) with respect to an association health 

17 plan regarding the exercise of— 

18 ‘‘(A) the Secretary’s authority under sec19 tions 502 and 504 to enforce the requirements 

20 for certification under part 8; and 

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

22 association health plans under part 8 in accord23 ance with regulations of the Secretary applica24 ble to certification under part 8. 


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1 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

2 STATE.—In carrying out paragraph (1), the Sec3 retary shall ensure that only one State will be recog4 nized, with respect to any particular association 

5 health plan, as the State with which consultation is 

6 required. In carrying out this paragraph— 

7 ‘‘(A) in the case of a plan which provides 

8 health insurance coverage (as defined in section 

9 812(a)(3)), such State shall be the State with 

10 which filing and approval of a policy type of11 fered by the plan was initially obtained, and 

12 ‘‘(B) in any other case, the Secretary shall 

13 take into account the places of residence of the 

14 participants and beneficiaries under the plan 

15 and the State in which the trust is main16 tained.’’. 

17 SEC. 205. EFFECTIVE DATE AND TRANSITIONAL AND 

18 OTHER RULES. 

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

20 this title shall take effect 1 year after the date of the en21 actment of this Act. The Secretary of Labor shall first 

22 issue all regulations necessary to carry out the amend23 ments made by this title within 1 year after the date of 

24 the enactment of this Act. 


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1 (b) TREATMENT OF CERTAIN EXISTING HEALTH

2 BENEFITS PROGRAMS.— 

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

4 the date of the enactment of this Act, an arrange5 ment is maintained in a State for the purpose of 

6 providing benefits consisting of medical care for the 

7 employees and beneficiaries of its participating em8 ployers, at least 200 participating employers make 

9 contributions to such arrangement, such arrange10 ment has been in existence for at least 10 years, and 

11 such arrangement is licensed under the laws of one 

12 or more States to provide such benefits to its par13 ticipating employers, upon the filing with the appli14 cable authority (as defined in section 812(a)(5) of 

15 the Employee Retirement Income Security Act of 

16 1974 (as amended by this subtitle)) by the arrange17 ment of an application for certification of the ar18 rangement under part 8 of subtitle B of title I of 

19 such Act— 

20 (A) such arrangement shall be deemed to 

21 be a group health plan for purposes of title I 

22 of such Act; 

23 (B) the requirements of sections 801(a) 

24 and 803(a) of the Employee Retirement Income 


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•S 3072 IS

1 Security Act of 1974 shall be deemed met with 

2 respect to such arrangement; 

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

4 such Act shall be deemed met, if the arrange5 ment is operated by a board of directors 

6 which— 

7 (i) is elected by the participating em8 ployers, with each employer having one 

9 vote; and 

10 (ii) has complete fiscal control over 

11 the arrangement and which is responsible 

12 for all operations of the arrangement; 

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

14 such Act shall be deemed met with respect to 

15 such arrangement; and 

16 (E) the arrangement may be certified by 

17 any applicable authority with respect to its op18 erations in any State only if it operates in such 

19 State on the date of certification. 

20 The provisions of this subsection shall cease to apply 

21 with respect to any such arrangement at such time 

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

23 applicable requirements of this subsection are not 

24 met with respect to such arrangement. 


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1 (2) DEFINITIONS.—For purposes of this sub2 section, the terms ‘‘group health plan’’, ‘‘medical 

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

4 meanings provided in section 812 of the Employee 

5 Retirement Income Security Act of 1974, except 

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

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

8 reference to an arrangement referred to in this sub9 section. 

10 TITLE III—PURCHASE HEALTH 

11 INSURANCE ACROSS STATE 

12 LINES 

13 SEC. 301. COOPERATIVE GOVERNING OF INDIVIDUAL 

14 HEALTH INSURANCE COVERAGE. 

15 (a) IN GENERAL.—Title XXVII of the Public Health 

16 Service Act (42 U.S.C. 300gg et seq.) is amended by add17 ing at the end the following new part: 

18 ‘‘PART D—COOPERATIVE GOVERNING OF INDIVIDUAL

19 HEALTH INSURANCE COVERAGE

20 ‘‘DEFINITIONS

21 ‘‘SEC. 2795. 

22 ‘‘In this part: 

23 ‘‘(1) PRIMARY STATE.—The term ‘primary 

24 State’ means, with respect to individual health insur25 ance coverage offered by a health insurance issuer, 


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•S 3072 IS

1 the State designated by the issuer as the State 

2 whose covered laws shall govern the health insurance 

3 issuer in the sale of such coverage under this part. 

4 An issuer, with respect to a particular policy, may 

5 only designate one such State as its primary State 

6 with respect to all such coverage it offers. Such an 

7 issuer may not change the designated primary State 

8 with respect to individual health insurance coverage 

9 once the policy is issued, except that such a change 

10 may be made upon renewal of the policy. With re11 spect to such designated State, the issuer is deemed 

12 to be doing business in that State. 

13 ‘‘(2) SECONDARY STATE.—The term ‘secondary 

14 State’ means, with respect to individual health insur15 ance coverage offered by a health insurance issuer, 

16 any State that is not the primary State. In the case 

17 of a health insurance issuer that is selling a policy 

18 in, or to a resident of, a secondary State, the issuer 

19 is deemed to be doing business in that secondary 

20 State. 

21 ‘‘(3) HEALTH INSURANCE ISSUER.—The term 

22 ‘health insurance issuer’ has the meaning given such 

23 term in section 2791(b)(2), except that such an 

24 issuer must be licensed in the primary State and be 


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•S 3072 IS

1 qualified to sell individual health insurance coverage 

2 in that State. 

3 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV4 ERAGE.—The term ‘individual health insurance cov5 erage’ means health insurance coverage offered in 

6 the individual market, as defined in section 

7 2791(e)(1). 

8 ‘‘(5) APPLICABLE STATE AUTHORITY.—The 

9 term ‘applicable State authority’ means, with respect 

10 to a health insurance issuer in a State, the State in11 surance commissioner or official or officials des12 ignated by the State to enforce the requirements of 

13 this title for the State with respect to the issuer. 

14 ‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 

15 term ‘hazardous financial condition’ means that, 

16 based on its present or reasonably anticipated finan17 cial condition, a health insurance issuer is unlikely 

18 to be able— 

19 ‘‘(A) to meet obligations to policyholders 

20 with respect to known claims and reasonably 

21 anticipated claims; or 

22 ‘‘(B) to pay other obligations in the normal 

23 course of business. 

24 ‘‘(7) COVERED LAWS.— 


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1 ‘‘(A) IN GENERAL.—The term ‘covered 

2 laws’ means the laws, rules, regulations, agree3 ments, and orders governing the insurance busi4 ness pertaining to— 

5 ‘‘(i) individual health insurance cov6 erage issued by a health insurance issuer; 

7 ‘‘(ii) the offer, sale, rating (including 

8 medical underwriting), renewal, and 

9 issuance of individual health insurance cov10 erage to an individual; 

11 ‘‘(iii) the provision to an individual in 

12 relation to individual health insurance cov13 erage of health care and insurance related 

14 services; 

15 ‘‘(iv) the provision to an individual in 

16 relation to individual health insurance cov17 erage of management, operations, and in18 vestment activities of a health insurance 

19 issuer; and 

20 ‘‘(v) the provision to an individual in 

21 relation to individual health insurance cov22 erage of loss control and claims adminis23 tration for a health insurance issuer with 

24 respect to liability for which the issuer pro25 vides insurance. 


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•S 3072 IS

1 ‘‘(B) EXCEPTION.—Such term does not in2 clude any law, rule, regulation, agreement, or 

3 order governing the use of care or cost manage4 ment techniques, including any requirement re5 lated to provider contracting, network access or 

6 adequacy, health care data collection, or quality 

7 assurance. 

8 ‘‘(8) STATE.—The term ‘State’ means the 50 

9 States and includes the District of Columbia, Puerto 

10 Rico, the Virgin Islands, Guam, American Samoa, 

11 and the Northern Mariana Islands. 

12 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC13 TICES.—The term ‘unfair claims settlement prac14 tices’ means only the following practices: 

15 ‘‘(A) Knowingly misrepresenting to claim16 ants and insured individuals relevant facts or 

17 policy provisions relating to coverage at issue. 

18 ‘‘(B) Failing to acknowledge with reason19 able promptness pertinent communications with 

20 respect to claims arising under policies. 

21 ‘‘(C) Failing to adopt and implement rea22 sonable standards for the prompt investigation 

23 and settlement of claims arising under policies. 


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1 ‘‘(D) Failing to effectuate prompt, fair, 

2 and equitable settlement of claims submitted in 

3 which liability has become reasonably clear. 

4 ‘‘(E) Refusing to pay claims without con5 ducting a reasonable investigation. 

6 ‘‘(F) Failing to affirm or deny coverage of 

7 claims within a reasonable period of time after 

8 having completed an investigation related to 

9 those claims. 

10 ‘‘(G) A pattern or practice of compelling 

11 insured individuals or their beneficiaries to in12 stitute suits to recover amounts due under its 

13 policies by offering substantially less than the 

14 amounts ultimately recovered in suits brought 

15 by them. 

16 ‘‘(H) A pattern or practice of attempting 

17 to settle or settling claims for less than the 

18 amount that a reasonable person would believe 

19 the insured individual or his or her beneficiary 

20 was entitled by reference to written or printed 

21 advertising material accompanying or made 

22 part of an application. 

23 ‘‘(I) Attempting to settle or settling claims 

24 on the basis of an application that was materiVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00084 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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•S 3072 IS

1 ally altered without notice to, or knowledge or 

2 consent of, the insured. 

3 ‘‘(J) Failing to provide forms necessary to 

4 present claims within 15 calendar days of a re5 quests with reasonable explanations regarding 

6 their use. 

7 ‘‘(K) Attempting to cancel a policy in less 

8 time than that prescribed in the policy or by the 

9 law of the primary State. 

10 ‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 

11 and abuse’ means an act or omission committed by 

12 a person who, knowingly and with intent to defraud, 

13 commits, or conceals any material information con14 cerning, one or more of the following: 

15 ‘‘(A) Presenting, causing to be presented 

16 or preparing with knowledge or belief that it 

17 will be presented to or by an insurer, a rein18 surer, broker or its agent, false information as 

19 part of, in support of or concerning a fact ma20 terial to one or more of the following: 

21 ‘‘(i) An application for the issuance or 

22 renewal of an insurance policy or reinsur23 ance contract. 

24 ‘‘(ii) The rating of an insurance policy 

25 or reinsurance contract. 


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•S 3072 IS

1 ‘‘(iii) A claim for payment or benefit 

2 pursuant to an insurance policy or reinsur3 ance contract. 

4 ‘‘(iv) Premiums paid on an insurance 

5 policy or reinsurance contract. 

6 ‘‘(v) Payments made in accordance 

7 with the terms of an insurance policy or 

8 reinsurance contract. 

9 ‘‘(vi) A document filed with the com10 missioner or the chief insurance regulatory 

11 official of another jurisdiction. 

12 ‘‘(vii) The financial condition of an in13 surer or reinsurer. 

14 ‘‘(viii) The formation, acquisition, 

15 merger, reconsolidation, dissolution or 

16 withdrawal from one or more lines of in17 surance or reinsurance in all or part of a 

18 State by an insurer or reinsurer. 

19 ‘‘(ix) The issuance of written evidence 

20 of insurance. 

21 ‘‘(x) The reinstatement of an insur22 ance policy. 

23 ‘‘(B) Solicitation or acceptance of new or 

24 renewal insurance risks on behalf of an insurer 

25 reinsurer or other person engaged in the busiVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00086 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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•S 3072 IS

1 ness of insurance by a person who knows or 

2 should know that the insurer or other person 

3 responsible for the risk is insolvent at the time 

4 of the transaction. 

5 ‘‘(C) Transaction of the business of insur6 ance in violation of laws requiring a license, cer7 tificate of authority or other legal authority for 

8 the transaction of the business of insurance. 

9 ‘‘(D) Attempt to commit, aiding or abet10 ting in the commission of, or conspiracy to com11 mit the acts or omissions specified in this para12 graph. 

13 ‘‘APPLICATION OF LAW

14 ‘‘SEC. 2796. 

15 ‘‘(a) IN GENERAL.—The covered laws of the primary 

16 State shall apply to individual health insurance coverage 

17 offered by a health insurance issuer in the primary State 

18 and in any secondary State, but only if the coverage and 

19 issuer comply with the conditions of this section with re20 spect to the offering of coverage in any secondary State. 

21 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC22 ONDARY STATE.—Except as provided in this section, a 

23 health insurance issuer with respect to its offer, sale, rat24 ing (including medical underwriting), renewal, and 

25 issuance of individual health insurance coverage in any 

26 secondary State is exempt from any covered laws of the 


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•S 3072 IS

1 secondary State (and any rules, regulations, agreements, 

2 or orders sought or issued by such State under or related 

3 to such covered laws) to the extent that such laws would— 

4 ‘‘(1) make unlawful, or regulate, directly or in5 directly, the operation of the health insurance issuer 

6 operating in the secondary State, except that any 

7 secondary State may require such an issuer— 

8 ‘‘(A) to pay, on a nondiscriminatory basis, 

9 applicable premium and other taxes (including 

10 high risk pool assessments) which are levied on 

11 insurers and surplus lines insurers, brokers, or 

12 policyholders under the laws of the State; 

13 ‘‘(B) to register with and designate the 

14 State insurance commissioner as its agent solely 

15 for the purpose of receiving service of legal doc16 uments or process; 

17 ‘‘(C) to submit to an examination of its fi18 nancial condition by the State insurance com19 missioner in any State in which the issuer is 

20 doing business to determine the issuer’s finan21 cial condition, if— 

22 ‘‘(i) the State insurance commissioner 

23 of the primary State has not done an ex24 amination within the period recommended 


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•S 3072 IS

1 by the National Association of Insurance 

2 Commissioners; and 

3 ‘‘(ii) any such examination is con4 ducted in accordance with the examiners’ 

5 handbook of the National Association of 

6 Insurance Commissioners and is coordi7 nated to avoid unjustified duplication and 

8 unjustified repetition; 

9 ‘‘(D) to comply with a lawful order 

10 issued— 

11 ‘‘(i) in a delinquency proceeding com12 menced by the State insurance commis13 sioner if there has been a finding of finan14 cial impairment under subparagraph (C); 

15 or 

16 ‘‘(ii) in a voluntary dissolution pro17 ceeding; 

18 ‘‘(E) to comply with an injunction issued 

19 by a court of competent jurisdiction, upon a pe20 tition by the State insurance commissioner al21 leging that the issuer is in hazardous financial 

22 condition; 

23 ‘‘(F) to participate, on a nondiscriminatory 

24 basis, in any insurance insolvency guaranty as25 sociation or similar association to which a 


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•S 3072 IS

1 health insurance issuer in the State is required 

2 to belong; 

3 ‘‘(G) to comply with any State law regard4 ing fraud and abuse (as defined in section 

5 2795(10)), except that if the State seeks an in6 junction regarding the conduct described in this 

7 subparagraph, such injunction must be obtained 

8 from a court of competent jurisdiction; 

9 ‘‘(H) to comply with any State law regard10 ing unfair claims settlement practices (as de11 fined in section 2795(9)); or 

12 ‘‘(I) to comply with the applicable require13 ments for independent review under section 

14 2798 with respect to coverage offered in the 

15 State; 

16 ‘‘(2) require any individual health insurance 

17 coverage issued by the issuer to be countersigned by 

18 an insurance agent or broker residing in that Sec19 ondary State; or 

20 ‘‘(3) otherwise discriminate against the issuer 

21 issuing insurance in both the primary State and in 

22 any secondary State. 

23 ‘‘(c) CLEAR AND CONSPICUOUS DISCLOSURE.—A 

24 health insurance issuer shall provide the following notice, 

25 in 12-point bold type, in any insurance coverage offered 


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•S 3072 IS

1 in a secondary State under this part by such a health in2 surance issuer and at renewal of the policy, with the 5 

3 blank spaces therein being appropriately filled with the 

4 name of the health insurance issuer, the name of primary 

5 State, the name of the secondary State, the name of the 

6 secondary State, and the name of the secondary State, re7 spectively, for the coverage concerned: ‘Notice: This policy 

8 is issued by llllllllllll and is governed 

9 by the laws and regulations of the State of 

10 llllllllllll, and it has met all the laws 

11 of that State as determined by that State’s Department 

12 of Insurance. This policy may be less expensive than oth13 ers because it is not subject to all of the insurance laws 

14 and regulations of the State of 

15 llllllllllll, including coverage of some 

16 services or benefits mandated by the law of the State of 

17 llllllllllll. Additionally, this policy is 

18 not subject to all of the consumer protection laws or re19 strictions on rate changes of the State of 

20 llllllllllll. As with all insurance prod21 ucts, before purchasing this policy, you should carefully 

22 review the policy and determine what health care services 

23 the policy covers and what benefits it provides, including 

24 any exclusions, limitations, or conditions for such services 

25 or benefits.’ 


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•S 3072 IS

1 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

2 AND PREMIUM INCREASES.— 

3 ‘‘(1) IN GENERAL.—For purposes of this sec4 tion, a health insurance issuer that provides indi5 vidual health insurance coverage to an individual 

6 under this part in a primary or secondary State may 

7 not upon renewal— 

8 ‘‘(A) move or reclassify the individual in9 sured under the health insurance coverage from 

10 the class such individual is in at the time of 

11 issue of the contract based on the health-status 

12 related factors of the individual; or 

13 ‘‘(B) increase the premiums assessed the 

14 individual for such coverage based on a health 

15 status-related factor or change of a health sta16 tus-related factor or the past or prospective 

17 claim experience of the insured individual. 

18 ‘‘(2) CONSTRUCTION.—Nothing in paragraph 

19 (1) shall be construed to prohibit a health insurance 

20 issuer— 

21 ‘‘(A) from terminating or discontinuing 

22 coverage or a class of coverage in accordance 

23 with subsections (b) and (c) of section 2742; 


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•S 3072 IS

1 ‘‘(B) from raising premium rates for all 

2 policy holders within a class based on claims ex3 perience; 

4 ‘‘(C) from changing premiums or offering 

5 discounted premiums to individuals who engage 

6 in wellness activities at intervals prescribed by 

7 the issuer, if such premium changes or incen8 tives— 

9 ‘‘(i) are disclosed to the consumer in 

10 the insurance contract; 

11 ‘‘(ii) are based on specific wellness ac12 tivities that are not applicable to all indi13 viduals; and 

14 ‘‘(iii) are not obtainable by all individ15 uals to whom coverage is offered; 

16 ‘‘(D) from reinstating lapsed coverage; or 

17 ‘‘(E) from retroactively adjusting the rates 

18 charged an insured individual if the initial rates 

19 were set based on material misrepresentation by 

20 the individual at the time of issue. 

21 ‘‘(e) PRIOR OFFERING OF POLICY IN PRIMARY

22 STATE.—A health insurance issuer may not offer for sale 

23 individual health insurance coverage in a secondary State 

24 unless that coverage is currently offered for sale in the 

25 primary State. 


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•S 3072 IS

1 ‘‘(f) LICENSING OF AGENTS OR BROKERS FOR

2 HEALTH INSURANCE ISSUERS.—Any State may require 

3 that a person acting, or offering to act, as an agent or 

4 broker for a health insurance issuer with respect to the 

5 offering of individual health insurance coverage obtain a 

6 license from that State, with commissions or other com7 pensation subject to the provisions of the laws of that 

8 State, except that a State may not impose any qualifica9 tion or requirement which discriminates against a non10 resident agent or broker. 

11 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN12 SURANCE COMMISSIONER.—Each health insurance issuer 

13 issuing individual health insurance coverage in both pri14 mary and secondary States shall submit— 

15 ‘‘(1) to the insurance commissioner of each 

16 State in which it intends to offer such coverage, be17 fore it may offer individual health insurance cov18 erage in such State— 

19 ‘‘(A) a copy of the plan of operation or fea20 sibility study or any similar statement of the 

21 policy being offered and its coverage (which 

22 shall include the name of its primary State and 

23 its principal place of business); 

24 ‘‘(B) written notice of any change in its 

25 designation of its primary State; and 


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1 ‘‘(C) written notice from the issuer of the 

2 issuer’s compliance with all the laws of the pri3 mary State; and 

4 ‘‘(2) to the insurance commissioner of each sec5 ondary State in which it offers individual health in6 surance coverage, a copy of the issuer’s quarterly fi7 nancial statement submitted to the primary State, 

8 which statement shall be certified by an independent 

9 public accountant and contain a statement of opin10 ion on loss and loss adjustment expense reserves 

11 made by— 

12 ‘‘(A) a member of the American Academy 

13 of Actuaries; or 

14 ‘‘(B) a qualified loss reserve specialist. 

15 ‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.— 

16 Nothing in this section shall be construed to affect the 

17 authority of any Federal or State court to enjoin— 

18 ‘‘(1) the solicitation or sale of individual health 

19 insurance coverage by a health insurance issuer to 

20 any person or group who is not eligible for such in21 surance; or 

22 ‘‘(2) the solicitation or sale of individual health 

23 insurance coverage that violates the requirements of 

24 the law of a secondary State which are described in 


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1 subparagraphs (A) through (H) of section 

2 2796(b)(1). 

3 ‘‘(i) POWER OF SECONDARY STATES TO TAKE AD4 MINISTRATIVE ACTION.—Nothing in this section shall be 

5 construed to affect the authority of any State to enjoin 

6 conduct in violation of that State’s laws described in sec7 tion 2796(b)(1). 

8 ‘‘(j) STATE POWERS TO ENFORCE STATE LAWS.— 

9 ‘‘(1) IN GENERAL.—Subject to the provisions of 

10 subsection (b)(1)(G) (relating to injunctions) and 

11 paragraph (2), nothing in this section shall be con12 strued to affect the authority of any State to make 

13 use of any of its powers to enforce the laws of such 

14 State with respect to which a health insurance issuer 

15 is not exempt under subsection (b). 

16 ‘‘(2) COURTS OF COMPETENT JURISDICTION.— 

17 If a State seeks an injunction regarding the conduct 

18 described in paragraphs (1) and (2) of subsection 

19 (h), such injunction must be obtained from a Fed20 eral or State court of competent jurisdiction. 

21 ‘‘(k) STATES’ AUTHORITY TO SUE.—Nothing in this 

22 section shall affect the authority of any State to bring ac23 tion in any Federal or State court. 

24 ‘‘(l) GENERALLY APPLICABLE LAWS.—Nothing in 

25 this section shall be construed to affect the applicability 


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1 of State laws generally applicable to persons or corpora2 tions. 

3 ‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO

4 HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 

5 health insurance issuer is offering coverage in a primary 

6 State that does not accommodate residents of secondary 

7 States or does not provide a working mechanism for resi8 dents of a secondary State, and the issuer is offering cov9 erage under this part in such secondary State which has 

10 not adopted a qualified high risk pool as its acceptable 

11 alternative mechanism (as defined in section 2744(c)(2)), 

12 the issuer shall, with respect to any individual health in13 surance coverage offered in a secondary State under this 

14 part, comply with the guaranteed availability requirements 

15 for eligible individuals in section 2741. 

16 ‘‘PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE

17 ISSUER MAY SELL INTO SECONDARY STATES

18 ‘‘SEC. 2797. 

19 ‘‘A health insurance issuer may not offer, sell, or 

20 issue individual health insurance coverage in a secondary 

21 State if the State insurance commissioner does not use 

22 a risk-based capital formula for the determination of cap23 ital and surplus requirements for all health insurance 

24 issuers. 

25 ‘‘INDEPENDENT EXTERNAL APPEALS PROCEDURES

26 ‘‘SEC. 2798. 


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1 ‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur2 ance issuer may not offer, sell, or issue individual health 

3 insurance coverage in a secondary State under the provi4 sions of this title unless— 

5 ‘‘(1) both the secondary State and the primary 

6 State have legislation or regulations in place estab7 lishing an independent review process for individuals 

8 who are covered by individual health insurance cov9 erage, or 

10 ‘‘(2) in any case in which the requirements of 

11 subparagraph (A) are not met with respect to the ei12 ther of such States, the issuer provides an inde13 pendent review mechanism substantially identical (as 

14 determined by the applicable State authority of such 

15 State) to that prescribed in the ‘Health Carrier Ex16 ternal Review Model Act’ of the National Association 

17 of Insurance Commissioners for all individuals who 

18 purchase insurance coverage under the terms of this 

19 part, except that, under such mechanism, the review 

20 is conducted by an independent medical reviewer, or 

21 a panel of such reviewers, with respect to whom the 

22 requirements of subsection (b) are met. 

23 ‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL

24 REVIEWERS.—In the case of any independent review 

25 mechanism referred to in subsection (a)(2)— 


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1 ‘‘(1) IN GENERAL.—In referring a denial of a 

2 claim to an independent medical reviewer, or to any 

3 panel of such reviewers, to conduct independent 

4 medical review, the issuer shall ensure that— 

5 ‘‘(A) each independent medical reviewer 

6 meets the qualifications described in paragraphs 

7 (2) and (3); 

8 ‘‘(B) with respect to each review, each re9 viewer meets the requirements of paragraph (4) 

10 and the reviewer, or at least 1 reviewer on the 

11 panel, meets the requirements described in 

12 paragraph (5); and 

13 ‘‘(C) compensation provided by the issuer 

14 to each reviewer is consistent with paragraph 

15 (6). 

16 ‘‘(2) LICENSURE AND EXPERTISE.—Each inde17 pendent medical reviewer shall be a physician 

18 (allopathic or osteopathic) or health care profes19 sional who— 

20 ‘‘(A) is appropriately credentialed or li21 censed in 1 or more States to deliver health 

22 care services; and 

23 ‘‘(B) typically treats the condition, makes 

24 the diagnosis, or provides the type of treatment 

25 under review. 


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1 ‘‘(3) INDEPENDENCE.— 

2 ‘‘(A) IN GENERAL.—Subject to subpara3 graph (B), each independent medical reviewer 

4 in a case shall— 

5 ‘‘(i) not be a related party (as defined 

6 in paragraph (7)); 

7 ‘‘(ii) not have a material familial, fi8 nancial, or professional relationship with 

9 such a party; and 

10 ‘‘(iii) not otherwise have a conflict of 

11 interest with such a party (as determined 

12 under regulations). 

13 ‘‘(B) EXCEPTION.—Nothing in subpara14 graph (A) shall be construed to— 

15 ‘‘(i) prohibit an individual, solely on 

16 the basis of affiliation with the issuer, 

17 from serving as an independent medical re18 viewer if— 

19 ‘‘(I) a non-affiliated individual is 

20 not reasonably available; 

21 ‘‘(II) the affiliated individual is 

22 not involved in the provision of items 

23 or services in the case under review; 

24 ‘‘(III) the fact of such an affili25 ation is disclosed to the issuer and the 


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1 enrollee (or authorized representative) 

2 and neither party objects; and 

3 ‘‘(IV) the affiliated individual is 

4 not an employee of the issuer and 

5 does not provide services exclusively or 

6 primarily to or on behalf of the issuer; 

7 ‘‘(ii) prohibit an individual who has 

8 staff privileges at the institution where the 

9 treatment involved takes place from serv10 ing as an independent medical reviewer 

11 merely on the basis of such affiliation if 

12 the affiliation is disclosed to the issuer and 

13 the enrollee (or authorized representative), 

14 and neither party objects; or 

15 ‘‘(iii) prohibit receipt of compensation 

16 by an independent medical reviewer from 

17 an entity if the compensation is provided 

18 consistent with paragraph (6). 

19 ‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL

20 IN SAME FIELD.— 

21 ‘‘(A) IN GENERAL.—In a case involving 

22 treatment, or the provision of items or serv23 ices— 

24 ‘‘(i) by a physician, a reviewer shall be 

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1 pathic) of the same or similar specialty, as 

2 a physician who, acting within the appro3 priate scope of practice within the State in 

4 which the service is provided or rendered, 

5 typically treats the condition, makes the 

6 diagnosis, or provides the type of treat7 ment under review; or 

8 ‘‘(ii) by a non-physician health care 

9 professional, the reviewer, or at least 1 

10 member of the review panel, shall be a 

11 practicing non-physician health care pro12 fessional of the same or similar specialty 

13 as the non-physician health care profes14 sional who, acting within the appropriate 

15 scope of practice within the State in which 

16 the service is provided or rendered, typi17 cally treats the condition, makes the diag18 nosis, or provides the type of treatment 

19 under review. 

20 ‘‘(B) PRACTICING DEFINED.—For pur21 poses of this paragraph, the term ‘practicing’ 

22 means, with respect to an individual who is a 

23 physician or other health care professional, that 

24 the individual provides health care services to 


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1 individual patients on average at least 2 days 

2 per week. 

3 ‘‘(5) PEDIATRIC EXPERTISE.—In the case of an 

4 external review relating to a child, a reviewer shall 

5 have expertise under paragraph (2) in pediatrics. 

6 ‘‘(6) LIMITATIONS ON REVIEWER COMPENSA7 TION.—Compensation provided by the issuer to an 

8 independent medical reviewer in connection with a 

9 review under this section shall— 

10 ‘‘(A) not exceed a reasonable level; and 

11 ‘‘(B) not be contingent on the decision ren12 dered by the reviewer. 

13 ‘‘(7) RELATED PARTY DEFINED.—For purposes 

14 of this section, the term ‘related party’ means, with 

15 respect to a denial of a claim under a coverage relat16 ing to an enrollee, any of the following: 

17 ‘‘(A) The issuer involved, or any fiduciary, 

18 officer, director, or employee of the issuer. 

19 ‘‘(B) The enrollee (or authorized represent20 ative). 

21 ‘‘(C) The health care professional that pro22 vides the items or services involved in the de23 nial. 


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1 ‘‘(D) The institution at which the items or 

2 services (or treatment) involved in the denial 

3 are provided. 

4 ‘‘(E) The manufacturer of any drug or 

5 other item that is included in the items or serv6 ices involved in the denial. 

7 ‘‘(F) Any other party determined under 

8 any regulations to have a substantial interest in 

9 the denial involved. 

10 ‘‘(8) DEFINITIONS.—For purposes of this sub11 section: 

12 ‘‘(A) ENROLLEE.—The term ‘enrollee’ 

13 means, with respect to health insurance cov14 erage offered by a health insurance issuer, an 

15 individual enrolled with the issuer to receive 

16 such coverage. 

17 ‘‘(B) HEALTH CARE PROFESSIONAL.—The 

18 term ‘health care professional’ means an indi19 vidual who is licensed, accredited, or certified 

20 under State law to provide specified health care 

21 services and who is operating within the scope 

22 of such licensure, accreditation, or certification. 

23 ‘‘ENFORCEMENT

24 ‘‘SEC. 2799. 

25 ‘‘(a) IN GENERAL.—Subject to subsection (b), with 

26 respect to specific individual health insurance coverage the 


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1 primary State for such coverage has sole jurisdiction to 

2 enforce the primary State’s covered laws in the primary 

3 State and any secondary State. 

4 ‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 

5 subsection (a) shall be construed to affect the authority 

6 of a secondary State to enforce its laws as set forth in 

7 the exception specified in section 2796(b)(1). 

8 ‘‘(c) COURT INTERPRETATION.—In reviewing action 

9 initiated by the applicable secondary State authority, the 

10 court of competent jurisdiction shall apply the covered 

11 laws of the primary State. 

12 ‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 

13 of individual health insurance coverage offered in a sec14 ondary State that fails to comply with the covered laws 

15 of the primary State, the applicable State authority of the 

16 secondary State may notify the applicable State authority 

17 of the primary State.’’. 

18 (b) EFFECTIVE DATE.—The amendment made by 

19 subsection (a) shall apply to individual health insurance 

20 coverage offered, issued, or sold after the date that is one 

21 year after the date of the enactment of this Act. 

22 (c) GAO ONGOING STUDY AND REPORTS.— 

23 (1) STUDY.—The Comptroller General of the 

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1 cerning the effect of the amendment made by sub2 section (a) on— 

3 (A) the number of uninsured and under-in4 sured; 

5 (B) the availability and cost of health in6 surance policies for individuals with pre-existing 

7 medical conditions; 

8 (C) the availability and cost of health in9 surance policies generally; 

10 (D) the elimination or reduction of dif11 ferent types of benefits under health insurance 

12 policies offered in different States; and 

13 (E) cases of fraud or abuse relating to 

14 health insurance coverage offered under such 

15 amendment and the resolution of such cases. 

16 (2) ANNUAL REPORTS.—The Comptroller Gen17 eral shall submit to Congress an annual report, after 

18 the end of each of the 5 years following the effective 

19 date of the amendment made by subsection (a), on 

20 the ongoing study conducted under paragraph (1). 

21 SEC. 302. SEVERABILITY. 

22 If any provision of the Act or the application of such 

23 provision to any person or circumstance is held to be un24 constitutional, the remainder of this Act and the applicaVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00106 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 tion of the provisions of such to any other person or cir2 cumstance shall not be affected. 

3 TITLE IV—EXPANSION OF 

4 HEALTH SAVINGS ACCOUNTS 

5 Subtitle A—Promoting Health for 

6 Future Generations 

7 SEC. 401. SHORT TITLE. 

8 This subtitle may be cited as the ‘‘Promoting Health 

9 for Future Generations Act of 2008’’. 

10 SEC. 402. INCREASE IN HSA CONTRIBUTION LIMITATION. 

11 (a) IN GENERAL.—Subsection (b) of section 223 of 

12 the Internal Revenue Code of 1986 (relating to monthly 

13 limitation) is amended— 

14 (1) by striking ‘‘$2,250’’ in paragraph (2)(A) 

15 and inserting ‘‘the amount in effect under subsection 

16 (c)(2)(A)(ii)(I)’’, and 

17 (2) by striking ‘‘$4,500’’ in paragraph (2)(B) 

18 and inserting ‘‘the amount in effect under subsection 

19 (c)(2)(A)(ii)(II)’’. 

20 (b) CONFORMING AMENDMENT.—Paragraph (1) of 

21 section 223(g) of such Code is amended by striking ‘‘sub22 sections (b)(2)’’ and inserting ‘‘subsection’’. 

23 (c) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to contributions in taxable years 

25 beginning after December 31, 2008. 


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1 SEC. 403. MEDICARE AND VA HEALTHCARE ENROLLEES EL2 IGIBLE TO CONTRIBUTE TO HSA. 

3 (a) IN GENERAL.—(1) Subsection (b) of section 223 

4 of the Internal Revenue Code of 1986 is amended by strik5 ing paragraph (7). 

6 (2) Subsection (c) of section 223 of such Code (relat7 ing to definitions and special rules) is amended by adding 

8 at the end to following new paragraph: 

9 ‘‘(6) SPECIAL RULE FOR INDIVIDUALS ENTI10 TLED TO BENEFITS UNDER MEDICARE OR EN11 ROLLED FOR HEALTH BENEFITS FROM VA.—In the 

12 case of an individual— 

13 ‘‘(A)(i) who is entitled to benefits under 

14 title XVIII of the Social Security Act, and 

15 ‘‘(ii) with respect to whom a health savings 

16 account is established in a month before the 

17 first month such individual is entitled to such 

18 benefits, or 

19 ‘‘(B)(i) who is enrolled in the patient en20 rollment system established by the Secretary of 

21 Veterans Affairs pursuant to section 1705 of 

22 title 38, United States Code, and 

23 ‘‘(ii) with respect to whom a health savings 

24 account is established in a month before the 

25 first month such individual is enrolled in such 

26 system, 


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1 such individual shall be deemed to be an eligible in2 dividual.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2008. 

6 SEC. 404. EXPANDING ADDITIONAL CONTRIBUTIONS LIMI7 TATION. 

8 (a) IN GENERAL.— 

9 (1) AGE LIMITATION.—Subparagraph (A) of 

10 section 223(b)(3) of the Internal Revenue Code of 

11 1986 (relating to additional contributions for indi12 viduals 55 or older) is amended by striking ‘‘age 55’’ 

13 and inserting ‘‘age 50’’. 

14 (2) CONTRIBUTION LIMITATION.—The table 

15 contained in section 223(b)(3) of such Code is 

16 amended by striking ‘‘$1,000’’ and inserting 

17 ‘‘$2,000’’. 

18 (3) CONFORMING AMENDMENT.—Paragraph (3) 

19 of section 223(b) of such Code is amended in the 

20 heading by striking ‘‘55’’ and inserting ‘‘50’’. 

21 (b) EFFECTIVE DATE.—The amendment made by 

22 this section shall apply to taxable years beginning after 

23 December 31, 2008. 


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1 SEC. 405. ELIGIBILITY TO CONTRIBUTE TO HSA. 

2 (a) INDIVIDUALS ELIGIBLE FOR REIMBURSEMENT

3 UNDER SPOUSE’S FLEXIBLE SPENDING ARRANGE4 MENT.—Section 223(c)(1) of the Internal Revenue Code 

5 of 1986 (defining eligible individual) is amended by adding 

6 at the end the following new subparagraph: 

7 ‘‘(C) SPECIAL RULE FOR CERTAIN FLEXI8 BLE SPENDING ARRANGEMENTS.—For purposes 

9 of subparagraph (A)(ii), an individual shall not 

10 be treated as covered under a health plan de11 scribed in such subparagraph merely because 

12 the individual is covered under a flexible spend13 ing arrangement (within the meaning of section 

14 106(c)(2)) which is maintained by an employer 

15 of the spouse of the individual, but only if— 

16 ‘‘(i) the employer is not also the em17 ployer of the individual, and 

18 ‘‘(ii) the individual certifies to the em19 ployer and to the Secretary (in such form 

20 and manner as the Secretary may pre21 scribe) that the individual and the individ22 ual’s spouse will not accept reimbursement 

23 under the arrangement for any expenses 

24 for medical care provided to the indi25 vidual.’’. 


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1 (b) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2008. 

4 SEC. 406. DEDUCTION OF PREMIUMS FOR HIGH DEDUCT5 IBLE HEALTH PLANS. 

6 (a) IN GENERAL.—Part VII of subchapter B of chap7 ter 1 of the Internal Revenue Code of 1986 (relating to 

8 additional itemized deductions for individuals) is amended 

9 by redesignating section 224 as section 225 and by insert10 ing after section 223 the following new section: 

11 ‘‘SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH 

12 PLANS. 

13 ‘‘(a) DEDUCTION ALLOWED.—In the case of an indi14 vidual, there shall be allowed as a deduction for the tax15 able year the aggregate amount paid by the taxpayer as 

16 premiums under a high deductible health plan with respect 

17 to months during such year for which such individual is 

18 an eligible individual with respect to such health plan. 

19 ‘‘(b) DEFINITIONS.—For purposes of this section— 

20 ‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible 

21 individual’ means an individual who— 

22 ‘‘(A) is described in section 223(c)(1), and 

23 ‘‘(B) is the taxpayer or the taxpayer’s 

24 spouse and dependents. 


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1 ‘‘(2) HIGH DEDUCTIBLE HEALTH PLAN.—The 

2 term ‘high deductible health plan’ has the meaning 

3 given such term by section 223(c)(2). 

4 ‘‘(c) SPECIAL RULES.— 

5 ‘‘(1) DEDUCTION LIMITS.— 

6 ‘‘(A) DEDUCTION ALLOWABLE FOR ONLY 1

7 PLAN.—For purposes of this section, in the 

8 case of an individual covered by more than 1 

9 high deductible health plan for any month, the 

10 individual may only take into account amounts 

11 paid for such month for the plan with the low12 est premium. 

13 ‘‘(B) PLANS COVERING INELIGIBLE INDI14 VIDUALS.—If 2 or more individuals are covered 

15 by a high deductible health plan for any month 

16 but only 1 of such individuals is an eligible indi17 vidual for such month, only 50 percent of the 

18 aggregate amount paid by such eligible indi19 vidual as premiums under the plan with respect 

20 to such month shall be taken into account for 

21 purposes of this section. 

22 ‘‘(2) GROUP HEALTH PLAN COVERAGE.— 

23 ‘‘(A) IN GENERAL.—No deduction shall be 

24 allowed for an individual under subsection (a) 

25 for any amount paid for coverage under a high 


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1 deductible health plan for a month if that indi2 vidual participates in any coverage under a 

3 group health plan (within the meaning of sec4 tion 5000 without regard to section 5000(d)). 

5 For purposes of the preceding sentence, an ar6 rangement which constitutes individual health 

7 insurance shall not be treated as a group health 

8 plan if such arrangement is a high deductible 

9 health plan (as defined in section 223(c)(2)), or 

10 is a payment by an employer or employee orga11 nization with respect to such high deductible 

12 health plan, notwithstanding that an employer 

13 or employee organization negotiates the cost or 

14 benefits of such arrangement. 

15 ‘‘(B) EXCEPTION FOR PLANS ONLY PRO16 VIDING CONTRIBUTIONS TO HEALTH SAVINGS

17 ACCOUNTS.—Subparagraph (A) shall not apply 

18 to an individual if the individual’s only coverage 

19 under a group health plan for a month consists 

20 of contributions by an employer to a health sav21 ings account with respect to which the indi22 vidual is the account beneficiary. 

23 ‘‘(C) EXCEPTION FOR CERTAIN PER24 MITTED COVERAGE.—Subparagraph (A) shall 

25 not apply to an individual if the individual’s 


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1 only coverage under a group health plan for a 

2 month is coverage described in clause (i) or (ii) 

3 of section 223(c)(1)(B). 

4 ‘‘(3) MEDICAL AND HEALTH SAVINGS AC5 COUNTS.—Subsection (a) shall not apply with re6 spect to any amount which is paid or distributed out 

7 of an Archer MSA or a health savings account which 

8 is not included in gross income under section 220(f) 

9 or 223(f), as the case may be. 

10 ‘‘(4) COORDINATION WITH DEDUCTION FOR

11 HEALTH INSURANCE OF SELF-EMPLOYED INDIVID12 UALS.—Any amount taken into account by the tax13 payer in computing the deduction under section 

14 162(l) shall not be taken into account under this 

15 section. 

16 ‘‘(5) COORDINATION WITH MEDICAL EXPENSE

17 DEDUCTION.—Any amount taken into account by 

18 the taxpayer in computing the deduction under this 

19 section shall not be taken into account under section 

20 213.’’. 

21 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI22 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 

23 of section 62 of such Code is amended by inserting before 

24 the last sentence at the end the following new paragraph: 


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1 ‘‘(22) PREMIUMS FOR HIGH DEDUCTIBLE

2 HEALTH PLANS.—The deduction allowed by section 

3 224.’’. 

4 (c) COORDINATION WITH SECTION 35 HEALTH IN5 SURANCE COSTS CREDIT.—Section 35(g)(2) of such Code 

6 (relating to coordination with other deductions) is amend7 ed by striking ‘‘or 213’’ and inserting ‘‘, 213, or 224’’. 

8 (d) CLERICAL AMENDMENT.—The table of sections 

9 for part VII of subchapter B of chapter 1 of such Code 

10 is amended by redesignating the item relating to section 

11 224 as an item relating to section 225 and by inserting 

12 before such item the following new item: 

‘‘Sec. 224. Premiums for high deductible health plans.’’. 

13 (e) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to taxable years beginning after 

15 December 31, 2008. 

16 SEC. 407. MSA PLAN DEDUCTIBLE EXCEPTION FOR PRE17 VENTIVE CARE. 

18 (a) IN GENERAL.—Paragraph (3) of section 1859(b) 

19 of the Social Security Act (42 U.S.C. 1359w–28(b)) is 

20 amended by adding at the end the following new subpara21 graph: 

22 ‘‘(C) EXCEPTION FOR ABSENCE OF PRE23 VENTIVE CARE DEDUCTIBLE.—A plan shall not 

24 fail to be treated as a MSA plan by reason of 

25 failing to have a deductible for preventive care 


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1 (within the meaning of such term as applied for 

2 purposes of section 223(c)(2)(C) of the Internal 

3 Revenue Code of 1986).’’. 

4 (b) EFFECTIVE DATE.—The amendment made by 

5 this section shall take effect on January 1, 2009. 

6 SEC. 408. PERMITTING INDIVIDUAL CONTRIBUTIONS TO 

7 MEDICARE ADVANTAGE MSA. 

8 (a) IN GENERAL.—Paragraph (2) of section 138(b) 

9 of the Internal Revenue Code of 1986 (defining Medicare 

10 Advantage MSA) is amended by striking ‘‘or’’ at the end 

11 of subparagraph (A), by inserting ‘‘or’’ at the end of sub12 paragraph (B), and by adding at the end the following 

13 new subparagraph: 

14 ‘‘(C) any contributions by or for the ben15 efit of the account holder (other than a con16 tribution described in subparagraph (A)) for 

17 the taxable year, the sum of which do not ex18 ceed the difference of— 

19 ‘‘(i) the amount of the annual deduct20 ible (described in section 1859(b)(3)(B) of 

21 the Social Security Act) for the MSA plan 

22 in which the individual is enrolled, over 

23 ‘‘(ii) the amount of contributions de24 scribed in subparagraph (A) for the tax25 able year,’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2008. 

4 SEC. 409. ALLOWING MSA AND HSA ROLLOVER TO ADULT 

5 CHILD OF ACCOUNT HOLDER. 

6 (a) MSAS.—(1) Subparagraph (A) of section 

7 220(f)(8) of the Internal Revenue Code of 1986 (relating 

8 to treatment after death of account holder) is amended— 

9 (A) by inserting ‘‘or adult child’’ after ‘‘sur10 viving spouse’’, 

11 (B) by inserting ‘‘or adult child, as the case 

12 may be,’’ after ‘‘the spouse’’, and 

13 (C) by inserting ‘‘OR ADULT CHILD’’ after 

14 ‘‘SPOUSE’’ in the heading thereof. 

15 (2) Paragraph (8) of section 220(f) of such Code is 

16 amended by adding at the end the following new subpara17 graph: 

18 ‘‘(C) ADULT CHILD.—For purposes of this 

19 paragraph, the term ‘adult child’ means an in20 dividual— 

21 ‘‘(i) who is a child of the deceased in22 dividual, and 

23 ‘‘(ii) with respect to whom a deduc24 tion under section 151 would not be allow25 able to another taxpayer for a taxable year 


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1 beginning in the calendar year in which 

2 such individual’s taxable year begins.’’. 

3 (b) HSAS.—(1) Subparagraph (A) of section 

4 223(f)(8) of such Code (relating to treatment after death 

5 of account beneficiary) is amended— 

6 (A) by inserting ‘‘or adult child’’ after ‘‘sur7 viving spouse’’, 

8 (B) by inserting ‘‘or adult child, as the case 

9 may be,’’ after ‘‘the spouse’’, and 

10 (C) by inserting ‘‘OR ADULT CHILD’’ after 

11 ‘‘SPOUSE’’ in the heading thereof. 

12 (2) Paragraph (8) of section 223(f) of such Code is 

13 amended by adding at the end the following new subpara14 graph: 

15 ‘‘(C) ADULT CHILD.—For purposes of this 

16 paragraph, the term ‘adult child’ has the mean17 ing given to such term by section 

18 220(f)(8)(C).’’. 

19 (c) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to taxable years beginning after 

21 December 31, 2008. 


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1 SEC. 410. PERMITTING MEDICARE ADVANTAGE MSA FUNDS 

2 TO BE USED FOR WELLNESS AND FITNESS 

3 PROGRAMS. 

4 (a) IN GENERAL.—Paragraph (1) of section 138(c) 

5 of the Internal Revenue Code of 1986 (relating to special 

6 rules for distributions) is amended by striking ‘‘and’’ at 

7 the end of subparagraph (A), by striking the period at 

8 the end of subparagraph (B) and inserting ‘‘, and’’, and 

9 by adding at the end the following new subparagraph: 

10 ‘‘(C) qualified medical expenses shall in11 clude amounts paid to a gym for enrollment in 

12 a wellness or fitness program.’’. 

13 (b) EFFECTIVE DATE.—The amendment made by 

14 this section shall apply to taxable years beginning after 

15 December 31, 2008. 

16 SEC. 411. HEALTH REIMBURSEMENT ARRANGEMENTS AND 

17 SPENDING ARRANGEMENTS IN COMBINATION 

18 WITH HEALTH SAVINGS ACCOUNTS. 

19 (a) IN GENERAL.—Subparagraph (B) of section 

20 223(c)(1) of the Internal Revenue Code of 1986 (relating 

21 to certain coverage disregarded) is amended by striking 

22 ‘‘and’’ at the end of clause (ii), by striking the period at 

23 the end of clause (iii) and inserting ‘‘, and’’, and by insert24 ing after clause (iii) the following new clause: 

25 ‘‘(iv) coverage under a flexible spend26 ing arrangement or a health reimburseVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00119 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 ment arrangement, or both, which meets 

2 the requirements of paragraph (7).’’. 

3 (b) COMBINATION HEALTH REIMBURSEMENT, SAV4 INGS, AND SPENDING ARRANGEMENTS.—Subsection (c) of 

5 section 223 of such Code (relating to definitions and spe6 cial rules), as amended by this Act, is amended by adding 

7 at the end the following new paragraph: 

8 ‘‘(7) COMBINED LIMIT FOR CONTRIBUTIONS OR

9 CREDITS TO HEALTH REIMBURSEMENT, ARRANGE10 MENTS AND SPENDING ARRANGEMENTS.— 

11 ‘‘(A) IN GENERAL.—In the case of cov12 erage under a flexible spending arrangement or 

13 a health reimbursement arrangement, or both, 

14 such coverage meets the requirements of this 

15 paragraph if, with respect to an individual— 

16 ‘‘(i) the sum of— 

17 ‘‘(I) the amount allowable as a 

18 deduction under subsection (a), 

19 ‘‘(II) the salary reduction 

20 amount elected by the individual and, 

21 if applicable, the employer contribu22 tion or credit allocated to the indi23 vidual for the taxable year under the 

24 flexible spending arrangement (as de25 fined in section 106(c)(2)), plus 


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1 ‘‘(III) the amounts that the indi2 vidual is permitted, under the terms 

3 of the plan, to receive in reimburse4 ments for the taxable year under the 

5 health reimbursement arrangement, 

6 does not exceed 

7 ‘‘(ii) the sum of the annual deductible 

8 and the other annual out-of-pocket ex9 penses (other than for premiums) required 

10 to be paid under the plan by the eligible 

11 individual for covered benefits. 

12 ‘‘(B) EXCEPTIONS FOR DISREGARDED COV13 ERAGE.—For purposes of subparagraph (A)— 

14 ‘‘(i) CERTAIN FLEXIBLE SPENDING

15 ARRANGEMENTS.—Any flexible spending 

16 arrangement salary reduction amounts or 

17 employer contributions or credits that are 

18 restricted by the employer to use for cov19 erage described in paragraph (1)(B) shall 

20 not be taken into account under subpara21 graph (A)(i)(II). 

22 ‘‘(ii) CERTAIN HEALTH REIMBURSE23 MENT ARRANGEMENTS.—Any reimburse24 ments from a health reimbursement ar25 rangement for coverage described in paraVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00121 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 graph (1)(B) shall not be taken into ac2 count under subparagraph (A)(i)(III). 

3 ‘‘(iii) QUALIFIED HSA DISTRIBUTIONS

4 FROM FSA AND HRA TERMINATIONS.—Any 

5 qualified HSA distribution (as defined in 

6 section 106(e)) shall not be taken into ac7 count under subparagraph (A)(i). 

8 ‘‘(C) TERMINATION.—Coverage shall not 

9 be treated as meeting the requirements of this 

10 paragraph for any taxable year beginning after 

11 December 31, 2012.’’. 

12 (c) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2008. 

15 SEC. 412. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 

16 INCURRED BEFORE ESTABLISHMENT OF AC17 COUNT. 

18 (a) IN GENERAL.—Subsection (d) of section 223 of 

19 the Internal Revenue Code of 1986 is amended by redesig20 nating paragraph (4) as paragraph (5) and by inserting 

21 after paragraph (3) the following new paragraph: 

22 ‘‘(4) CERTAIN MEDICAL EXPENSES INCURRED

23 BEFORE ESTABLISHMENT OF ACCOUNT TREATED AS

24 QUALIFIED.— 


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1 ‘‘(A) IN GENERAL.—For purposes of para2 graph (2), an expense shall not fail to be treat3 ed as a qualified medical expense solely because 

4 such expense was incurred before the establish5 ment of the health savings account if such ex6 pense was incurred during the 60-day period 

7 beginning on the date on which the high de8 ductible health plan is first effective. 

9 ‘‘(B) SPECIAL RULES.—For purposes of 

10 subparagraph (A)— 

11 ‘‘(i) an individual shall be treated as 

12 an eligible individual for any portion of a 

13 month for which the individual is described 

14 in subsection (c)(1), determined without 

15 regard to whether the individual is covered 

16 under a high deductible health plan on the 

17 1st day of such month, and 

18 ‘‘(ii) the effective date of the health 

19 savings account is deemed to be the date 

20 on which the high deductible health plan is 

21 first effective after the date of the enact22 ment of this paragraph.’’. 

23 (b) EFFECTIVE DATE.—The amendment made by 

24 this section shall apply with respect to insurance purVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00123 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 chased after December 31, 2008, in taxable years begin2 ning after such date. 

3 SEC. 413. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CON4 TRIBUTIONS TO THE SAME HSA ACCOUNT. 

5 (a) IN GENERAL.—Paragraph (3) of section 223(b) 

6 of the Internal Revenue Code of 1986 is amended by add7 ing at the end the following new subparagraph: 

8 ‘‘(C) SPECIAL RULE WHERE BOTH

9 SPOUSES ARE ELIGIBLE INDIVIDUALS WITH 1

10 ACCOUNT.—If— 

11 ‘‘(i) an individual and the individual’s 

12 spouse have both attained age 55 before 

13 the close of the taxable year, and 

14 ‘‘(ii) the spouse is not an account ben15 eficiary of a health savings account as of 

16 the close of such year, 

17 the additional contribution amount shall be 200 

18 percent of the amount otherwise determined 

19 under subparagraph (B).’’. 

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2008. 

23 SEC. 414. FSA AND HRA TERMINATION TO FUND HSAS. 

24 (a) GRACE PERIOD NOT REQUIRED.—Section 

25 106(e)(2) of the Internal Revenue Code of 1986 is amendVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00124 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 ed by adding at the end the following new sentence: ‘‘A 

2 distribution shall not fail to be treated as a qualified HSA 

3 distribution merely because the balance in such arrange4 ment is determined without regard to the requirement that 

5 unused amounts remaining at the end of a plan year must 

6 be forfeited in the absence of a grace period.’’. 

7 (b) DEPOSIT IN LIMITED FSA OR HRA OF FUNDS

8 IN EXCESS FSA OR HRA TERMINATION DISTRIBU9 TION.—Paragraph (1) of section 106(e) of such Code is 

10 amended by inserting before the period at the end thereof 

11 the following: ‘‘and the deposit of funds in excess of a 

12 qualified HSA distribution amount into a health flexible 

13 spending account or health reimbursement arrangement 

14 which is compatible with a health savings account and 

15 which, on the date of such distribution, is a part of the 

16 employer’s plan’’. 

17 (c) DISCLAIMER OF DISQUALIFYING COVERAGE.— 

18 Subparagraph (B) of section 223(c)(1) of such Code, as 

19 amended by this Act, is amended by striking ‘‘and’’ at the 

20 end of clause (iii), by striking the period at the end of 

21 clause (iv) and inserting ‘‘, and’’, and by inserting after 

22 clause (iv) the following new clause: 

23 ‘‘(v) any coverage (whether actual or 

24 prospective) otherwise described in sub25 paragraph (A)(ii) which is disclaimed at 


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1 the time of the creation or organization of 

2 the health savings account.’’. 

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

4 this section shall apply to taxable years beginning after 

5 December 31, 2008. 

6 Subtitle B—Increased Access to 

7 Health Insurance Through HSAs 

8 SEC. 421. SHORT TITLE. 

9 This subtitle may be cited as the ‘‘Increased Access 

10 to Health Insurance Act of 2008’’. 

11 SEC. 422. PURCHASE OF HEALTH INSURANCE FROM 

12 HEALTH SAVINGS ACCOUNTS. 

13 (a) IN GENERAL.—Paragraph (2) of section 223(d) 

14 of the Internal Revenue Code of 1986 (defining qualified 

15 medical expenses) is amended to read as follows: 

16 ‘‘(2) QUALIFIED MEDICAL EXPENSES.—The 

17 term ‘qualified medical expenses’ means, with re18 spect to an account beneficiary, amounts paid by 

19 such beneficiary for medical care (as defined in sec20 tion 213(d)) for such individual, the spouse of such 

21 individual, and any dependent (as defined in section 

22 152, determined without regard to subsections 

23 (b)(1), (b)(2), and (d)(1)(B) thereof) of such indi24 vidual, but only to the extent such amounts are not 

25 compensated for by insurance or otherwise.’’. 


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1 (b) EFFECTIVE DATE.—The amendment made by 

2 this section shall apply with respect to insurance pur3 chased after the date of the enactment of this Act in tax4 able years beginning after such date. 

5 TITLE V—HEALTH CARE TORT 

6 REFORM 

7 SEC. 501. FINDINGS AND PURPOSE. 

8 (a) FINDINGS.— 

9 (1) EFFECT ON HEALTH CARE ACCESS AND

10 COSTS.—Congress finds that our current civil justice 

11 system is adversely affecting patient access to health 

12 care services, better patient care, and cost-efficient 

13 health care, in that the health care liability system 

14 is a costly and ineffective mechanism for resolving 

15 claims of health care liability and compensating in16 jured patients, and is a deterrent to the sharing of 

17 information among health care professionals which 

18 impedes efforts to improve patient safety and quality 

19 of care. 

20 (2) EFFECT ON INTERSTATE COMMERCE.— 

21 Congress finds that the health care and insurance 

22 industries are industries affecting interstate com23 merce and the health care liability litigation systems 

24 existing throughout the United States are activities 

25 that affect interstate commerce by contributing to 


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1 the high costs of health care and premiums for 

2 health care liability insurance purchased by health 

3 care system providers. 

4 (3) EFFECT ON FEDERAL SPENDING.—Con5 gress finds that the health care liability litigation 

6 systems existing throughout the United States have 

7 a significant effect on the amount, distribution, and 

8 use of Federal funds because of— 

9 (A) the large number of individuals who 

10 receive health care benefits under programs op11 erated or financed by the Federal Government; 

12 (B) the large number of individuals who 

13 benefit because of the exclusion from Federal 

14 taxes of the amounts spent to provide them 

15 with health insurance benefits; and 

16 (C) the large number of health care pro17 viders who provide items or services for which 

18 the Federal Government makes payments. 

19 (b) PURPOSE.—It is the purpose of this title to imple20 ment reasonable, comprehensive, and effective health care 

21 liability reforms designed to— 

22 (1) improve the availability of health care serv23 ices in cases in which health care liability actions 

24 have been shown to be a factor in the decreased 

25 availability of services; 


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1 (2) reduce the incidence of ‘‘defensive medi2 cine’’ and lower the cost of health care liability in3 surance, all of which contribute to the escalation of 

4 health care costs; 

5 (3) ensure that persons with meritorious health 

6 care injury claims receive fair and adequate com7 pensation, including reasonable noneconomic dam8 ages; 

9 (4) improve the fairness and cost-effectiveness 

10 of our current health care liability system to resolve 

11 disputes over, and provide compensation for, health 

12 care liability by reducing uncertainty in the amount 

13 of compensation provided to injured individuals; and 

14 (5) provide an increased sharing of information 

15 in the health care system which will reduce unin16 tended injury and improve patient care. 

17 SEC. 502. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS. 

18 The time for the commencement of a health care law19 suit shall be 3 years after the date of manifestation of 

20 injury or 1 year after the claimant discovers, or through 

21 the use of reasonable diligence should have discovered, the 

22 injury, whichever occurs first. In no event shall the time 

23 for commencement of a health care lawsuit exceed 3 years 

24 after the date of manifestation of injury unless tolled for 

25 any of the following— 


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1 (1) upon proof of fraud; 

2 (2) intentional concealment; or 

3 (3) the presence of a foreign body, which has no 

4 therapeutic or diagnostic purpose or effect, in the 

5 person of the injured person. 

6 Actions by a minor shall be commenced within 3 years 

7 from the date of the alleged manifestation of injury except 

8 that actions by a minor under the full age of 6 years shall 

9 be commenced within 3 years of manifestation of injury 

10 or prior to the minor’s 8th birthday, whichever provides 

11 a longer period. Such time limitation shall be tolled for 

12 minors for any period during which a parent or guardian 

13 and a health care provider or health care organization 

14 have committed fraud or collusion in the failure to bring 

15 an action on behalf of the injured minor. 

16 SEC. 503. COMPENSATING PATIENT INJURY. 

17 (a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL

18 ECONOMIC LOSSES IN HEALTH CARE LAWSUITS.—In any 

19 health care lawsuit, nothing in this title shall limit a claim20 ant’s recovery of the full amount of the available economic 

21 damages, notwithstanding the limitation in subsection (b). 

22 (b) ADDITIONAL NONECONOMIC DAMAGES.—In any 

23 health care lawsuit, the amount of noneconomic damages, 

24 if available, may be as much as $250,000, regardless of 

25 the number of parties against whom the action is brought 


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1 or the number of separate claims or actions brought with 

2 respect to the same injury. 

3 (c) NO DISCOUNT OF AWARD FOR NONECONOMIC

4 DAMAGES.—For purposes of applying the limitation in 

5 subsection (b), future noneconomic damages shall not be 

6 discounted to present value. The jury shall not be in7 formed about the maximum award for noneconomic dam8 ages. An award for noneconomic damages in excess of 

9 $250,000 shall be reduced either before the entry of judg10 ment, or by amendment of the judgment after entry of 

11 judgment, and such reduction shall be made before ac12 counting for any other reduction in damages required by 

13 law. If separate awards are rendered for past and future 

14 noneconomic damages and the combined awards exceed 

15 $250,000, the future noneconomic damages shall be re16 duced first. 

17 (d) FAIR SHARE RULE.—In any health care lawsuit, 

18 each party shall be liable for that party’s several share 

19 of any damages only and not for the share of any other 

20 person. Each party shall be liable only for the amount of 

21 damages allocated to such party in direct proportion to 

22 such party’s percentage of responsibility. Whenever a 

23 judgment of liability is rendered as to any party, a sepa24 rate judgment shall be rendered against each such party 

25 for the amount allocated to such party. For purposes of 


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1 this section, the trier of fact shall determine the propor2 tion of responsibility of each party for the claimant’s 

3 harm. 

4 SEC. 504. MAXIMIZING PATIENT RECOVERY. 

5 (a) COURT SUPERVISION OF SHARE OF DAMAGES

6 ACTUALLY PAID TO CLAIMANTS.—In any health care law7 suit, the court shall supervise the arrangements for pay8 ment of damages to protect against conflicts of interest 

9 that may have the effect of reducing the amount of dam10 ages awarded that are actually paid to claimants. In par11 ticular, in any health care lawsuit in which the attorney 

12 for a party claims a financial stake in the outcome by vir13 tue of a contingent fee, the court shall have the power 

14 to restrict the payment of a claimant’s damage recovery 

15 to such attorney, and to redirect such damages to the 

16 claimant based upon the interests of justice and principles 

17 of equity. In no event shall the total of all contingent fees 

18 for representing all claimants in a health care lawsuit ex19 ceed the following limits: 

20 (1) 40 percent of the first $50,000 recovered by 

21 the claimant(s). 

(2) 331 22 ⁄3 percent of the next $50,000 recovered 

23 by the claimant(s). 

24 (3) 25 percent of the next $500,000 recovered 

25 by the claimant(s). 


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1 (4) 15 percent of any amount by which the re2 covery by the claimant(s) is in excess of $600,000. 

3 (b) APPLICABILITY.—The limitations in this section 

4 shall apply whether the recovery is by judgment, settle5 ment, mediation, arbitration, or any other form of alter6 native dispute resolution. In a health care lawsuit involv7 ing a minor or incompetent person, a court retains the 

8 authority to authorize or approve a fee that is less than 

9 the maximum permitted under this section. The require10 ment for court supervision in the first two sentences of 

11 subsection (a) applies only in civil actions. 

12 SEC. 505. ADDITIONAL HEALTH TORT REFORM BENEFITS. 

13 In any health care lawsuit involving injury or wrong14 ful death, any party may introduce evidence of collateral 

15 source benefits. If a party elects to introduce such evi16 dence, any opposing party may introduce evidence of any 

17 amount paid or contributed or reasonably likely to be paid 

18 or contributed in the future by or on behalf of the oppos19 ing party to secure the right to such collateral source bene20 fits. No provider of collateral source benefits shall recover 

21 any amount against the claimant or receive any lien or 

22 credit against the claimant’s recovery or be equitably or 

23 legally subrogated to the right of the claimant in a health 

24 care lawsuit involving injury or wrongful death. This sec25 tion shall apply to any health care lawsuit that is settled 


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1 as well as a health care lawsuit that is resolved by a fact 

2 finder. This section shall not apply to section 1862(b) (42 

3 U.S.C. 1395y(b)) or section 1902(a)(25) (42 U.S.C. 

4 1396a(a)(25)) of the Social Security Act. 

5 SEC. 506. PUNITIVE DAMAGES. 

6 (a) IN GENERAL.—Punitive damages may, if other7 wise permitted by applicable State or Federal law, be 

8 awarded against any person in a health care lawsuit only 

9 if it is proven by clear and convincing evidence that such 

10 person acted with malicious intent to injure the claimant, 

11 or that such person deliberately failed to avoid unneces12 sary injury that such person knew the claimant was sub13 stantially certain to suffer. In any health care lawsuit 

14 where no judgment for compensatory damages is rendered 

15 against such person, no punitive damages may be awarded 

16 with respect to the claim in such lawsuit. No demand for 

17 punitive damages shall be included in a health care lawsuit 

18 as initially filed. A court may allow a claimant to file an 

19 amended pleading for punitive damages only upon a mo20 tion by the claimant and after a finding by the court, upon 

21 review of supporting and opposing affidavits or after a 

22 hearing, after weighing the evidence, that the claimant has 

23 established by a substantial probability that the claimant 

24 will prevail on the claim for punitive damages. At the reVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00134 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 quest of any party in a health care lawsuit, the trier of 

2 fact shall consider in a separate proceeding— 

3 (1) whether punitive damages are to be award4 ed and the amount of such award; and 

5 (2) the amount of punitive damages following a 

6 determination of punitive liability. 

7 If a separate proceeding is requested, evidence relevant 

8 only to the claim for punitive damages, as determined by 

9 applicable State law, shall be inadmissible in any pro10 ceeding to determine whether compensatory damages are 

11 to be awarded. 

12 (b) DETERMINING AMOUNT OF PUNITIVE DAM13 AGES.— 

14 (1) FACTORS CONSIDERED.—In determining 

15 the amount of punitive damages, if awarded, in a 

16 health care lawsuit, the trier of fact shall consider 

17 only the following— 

18 (A) the severity of the harm caused by the 

19 conduct of such party; 

20 (B) the duration of the conduct or any 

21 concealment of it by such party; 

22 (C) the profitability of the conduct to such 

23 party; 

24 (D) the number of products sold or med25 ical procedures rendered for compensation, as 


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1 the case may be, by such party, of the kind 

2 causing the harm complained of by the claim3 ant; 

4 (E) any criminal penalties imposed on such 

5 party, as a result of the conduct complained of 

6 by the claimant; and 

7 (F) the amount of any civil fines assessed 

8 against such party as a result of the conduct 

9 complained of by the claimant. 

10 (2) MAXIMUM AWARD.—The amount of punitive 

11 damages, if awarded, in a health care lawsuit may 

12 be as much as $250,000 or as much as two times 

13 the amount of economic damages awarded, which14 ever is greater. The jury shall not be informed of 

15 this limitation. 

16 (c) NO PUNITIVE DAMAGES FOR PRODUCTS THAT

17 COMPLY WITH FDA STANDARDS.— 

18 (1) IN GENERAL.— 

19 (A) No punitive damages may be awarded 

20 against the manufacturer or distributor of a 

21 medical product, or a supplier of any compo22 nent or raw material of such medical product, 

23 based on a claim that such product caused the 

24 claimant’s harm where— 


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1 (i)(I) such medical product was sub2 ject to premarket approval, clearance, or li3 censure by the Food and Drug Administra4 tion with respect to the safety of the for5 mulation or performance of the aspect of 

6 such medical product which caused the 

7 claimant’s harm or the adequacy of the 

8 packaging or labeling of such medical 

9 product; and 

10 (II) such medical product was so ap11 proved, cleared, or licensed; or 

12 (ii) such medical product is generally 

13 recognized among qualified experts as safe 

14 and effective pursuant to conditions estab15 lished by the Food and Drug Administra16 tion and applicable Food and Drug Admin17 istration regulations, including without 

18 limitation those related to packaging and 

19 labeling, unless the Food and Drug Admin20 istration has determined that such medical 

21 product was not manufactured or distrib22 uted in substantial compliance with appli23 cable Food and Drug Administration stat24 utes and regulations. 


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1 (B) RULE OF CONSTRUCTION.—Subpara2 graph (A) may not be construed as establishing 

3 the obligation of the Food and Drug Adminis4 tration to demonstrate affirmatively that a 

5 manufacturer, distributor, or supplier referred 

6 to in such subparagraph meets any of the con7 ditions described in such subparagraph. 

8 (2) LIABILITY OF HEALTH CARE PROVIDERS.— 

9 A health care provider who prescribes, or who dis10 penses pursuant to a prescription, a medical product 

11 approved, licensed, or cleared by the Food and Drug 

12 Administration shall not be named as a party to a 

13 product liability lawsuit involving such product and 

14 shall not be liable to a claimant in a class action 

15 lawsuit against the manufacturer, distributor, or 

16 seller of such product. Nothing in this paragraph 

17 prevents a court from consolidating cases involving 

18 health care providers and cases involving products li19 ability claims against the manufacturer, distributor, 

20 or product seller of such medical product. 

21 (3) PACKAGING.—In a health care lawsuit for 

22 harm which is alleged to relate to the adequacy of 

23 the packaging or labeling of a drug which is required 

24 to have tamper-resistant packaging under regula25 tions of the Secretary of Health and Human ServVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00138 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 ices (including labeling regulations related to such 

2 packaging), the manufacturer or product seller of 

3 the drug shall not be held liable for punitive dam4 ages unless such packaging or labeling is found by 

5 the trier of fact by clear and convincing evidence to 

6 be substantially out of compliance with such regula7 tions. 

8 (4) EXCEPTION.—Paragraph (1) shall not 

9 apply in any health care lawsuit in which— 

10 (A) a person, before or after premarket ap11 proval, clearance, or licensure of such medical 

12 product, knowingly misrepresented to or with13 held from the Food and Drug Administration 

14 information that is required to be submitted 

15 under the Federal Food, Drug, and Cosmetic 

16 Act (21 U.S.C. 301 et seq.) or section 351 of 

17 the Public Health Service Act (42 U.S.C. 262) 

18 that is material and is causally related to the 

19 harm which the claimant allegedly suffered; or 

20 (B) a person made an illegal payment to 

21 an official of the Food and Drug Administra22 tion for the purpose of either securing or main23 taining approval, clearance, or licensure of such 

24 medical product. 


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1 SEC. 507. AUTHORIZATION OF PAYMENT OF FUTURE DAM2 AGES TO CLAIMANTS IN HEALTH CARE LAW3 SUITS. 

4 (a) IN GENERAL.—In any health care lawsuit, if an 

5 award of future damages, without reduction to present 

6 value, equaling or exceeding $50,000 is made against a 

7 party with sufficient insurance or other assets to fund a 

8 periodic payment of such a judgment, the court shall, at 

9 the request of any party, enter a judgment ordering that 

10 the future damages be paid by periodic payments. In any 

11 health care lawsuit, the court may be guided by the Uni12 form Periodic Payment of Judgments Act promulgated by 

13 the National Conference of Commissioners on Uniform 

14 State Laws. 

15 (b) APPLICABILITY.—This section applies to all ac16 tions which have not been first set for trial or retrial be17 fore the effective date of this title. 

18 SEC. 508. DEFINITIONS. 

19 In this title: 

20 (1) ALTERNATIVE DISPUTE RESOLUTION SYS21 TEM; ADR.—The term ‘‘alternative dispute resolution 

22 system’’ or ‘‘ADR’’ means a system that provides 

23 for the resolution of health care lawsuits in a man24 ner other than through a civil action brought in a 

25 State or Federal court. 


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1 (2) CLAIMANT.—The term ‘‘claimant’’ means 

2 any person who brings a health care lawsuit, includ3 ing a person who asserts or claims a right to legal 

4 or equitable contribution, indemnity, or subrogation, 

5 arising out of a health care liability claim or action, 

6 and any person on whose behalf such a claim is as7 serted or such an action is brought, whether de8 ceased, incompetent, or a minor. 

9 (3) COLLATERAL SOURCE BENEFITS.—The 

10 term ‘‘collateral source benefits’’ means any amount 

11 paid or reasonably likely to be paid in the future to 

12 or on behalf of the claimant, or any service, product, 

13 or other benefit provided or reasonably likely to be 

14 provided in the future to or on behalf of the claim15 ant, as a result of the injury or wrongful death, pur16 suant to— 

17 (A) any State or Federal health, sickness, 

18 income-disability, accident, or workers’ com19 pensation law; 

20 (B) any health, sickness, income-disability, 

21 or accident insurance that provides health bene22 fits or income-disability coverage; 

23 (C) any contract or agreement of any 

24 group, organization, partnership, or corporation 

25 to provide, pay for, or reimburse the cost of 


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1 medical, hospital, dental, or income-disability 

2 benefits; and 

3 (D) any other publicly or privately funded 

4 program. 

5 (4) COMPENSATORY DAMAGES.—The term 

6 ‘‘compensatory damages’’ means objectively 

7 verifiable monetary losses incurred as a result of the 

8 provision of, use of, or payment for (or failure to 

9 provide, use, or pay for) health care services or med10 ical products, such as past and future medical ex11 penses, loss of past and future earnings, cost of ob12 taining domestic services, loss of employment, and 

13 loss of business or employment opportunities, dam14 ages for physical and emotional pain, suffering, in15 convenience, physical impairment, mental anguish, 

16 disfigurement, loss of enjoyment of life, loss of soci17 ety and companionship, loss of consortium (other 

18 than loss of domestic service), hedonic damages, in19 jury to reputation, and all other nonpecuniary losses 

20 of any kind or nature. The term ‘‘compensatory 

21 damages’’ includes economic damages and non22 economic damages, as such terms are defined in this 

23 section. 

24 (5) CONTINGENT FEE.—The term ‘‘contingent 

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1 sons which is payable only if a recovery is effected 

2 on behalf of one or more claimants. 

3 (6) ECONOMIC DAMAGES.—The term ‘‘economic 

4 damages’’ means objectively verifiable monetary 

5 losses incurred as a result of the provision of, use 

6 of, or payment for (or failure to provide, use, or pay 

7 for) health care services or medical products, such as 

8 past and future medical expenses, loss of past and 

9 future earnings, cost of obtaining domestic services, 

10 loss of employment, and loss of business or employ11 ment opportunities. 

12 (7) HEALTH CARE LAWSUIT.—The term 

13 ‘‘health care lawsuit’’ means any health care liability 

14 claim concerning the provision of health care goods 

15 or services or any medical product affecting inter16 state commerce, or any health care liability action 

17 concerning the provision of health care goods or 

18 services or any medical product affecting interstate 

19 commerce, brought in a State or Federal court or 

20 pursuant to an alternative dispute resolution system, 

21 against a health care provider, a health care organi22 zation, or the manufacturer, distributor, supplier, 

23 marketer, promoter, or seller of a medical product, 

24 regardless of the theory of liability on which the 

25 claim is based, or the number of claimants, plainVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00143 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 tiffs, defendants, or other parties, or the number of 

2 claims or causes of action, in which the claimant al3 leges a health care liability claim. Such term does 

4 not include a claim or action which is based on 

5 criminal liability; which seeks civil fines or penalties 

6 paid to Federal, State, or local government; or which 

7 is grounded in antitrust. 

8 (8) HEALTH CARE LIABILITY ACTION.—The 

9 term ‘‘health care liability action’’ means a civil ac10 tion brought in a State or Federal court or pursuant 

11 to an alternative dispute resolution system, against 

12 a health care provider, a health care organization, or 

13 the manufacturer, distributor, supplier, marketer, 

14 promoter, or seller of a medical product, regardless 

15 of the theory of liability on which the claim is based, 

16 or the number of plaintiffs, defendants, or other par17 ties, or the number of causes of action, in which the 

18 claimant alleges a health care liability claim. 

19 (9) HEALTH CARE LIABILITY CLAIM.—The 

20 term ‘‘health care liability claim’’ means a demand 

21 by any person, whether or not pursuant to ADR, 

22 against a health care provider, health care organiza23 tion, or the manufacturer, distributor, supplier, mar24 keter, promoter, or seller of a medical product, in25 cluding, but not limited to, third-party claims, crossVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00144 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 claims, counter-claims, or contribution claims, which 

2 are based upon the provision of, use of, or payment 

3 for (or the failure to provide, use, or pay for) health 

4 care services or medical products, regardless of the 

5 theory of liability on which the claim is based, or the 

6 number of plaintiffs, defendants, or other parties, or 

7 the number of causes of action. 

8 (10) HEALTH CARE ORGANIZATION.—The term 

9 ‘‘health care organization’’ means any person or en10 tity which is obligated to provide or pay for health 

11 benefits under any health plan, including any person 

12 or entity acting under a contract or arrangement 

13 with a health care organization to provide or admin14 ister any health benefit. 

15 (11) HEALTH CARE PROVIDER.—The term 

16 ‘‘health care provider’’ means any person or entity 

17 required by State or Federal laws or regulations to 

18 be licensed, registered, or certified to provide health 

19 care services, and being either so licensed, reg20 istered, or certified, or exempted from such require21 ment by other statute or regulation. 

22 (12) HEALTH CARE GOODS OR SERVICES.—The 

23 term ‘‘health care goods or services’’ means any 

24 goods or services provided by a health care organiza25 tion, provider, or by any individual working under 


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1 the supervision of a health care provider, that relates 

2 to the diagnosis, prevention, or treatment of any 

3 human disease or impairment, or the assessment or 

4 care of the health of human beings. 

5 (13) MALICIOUS INTENT TO INJURE.—The 

6 term ‘‘malicious intent to injure’’ means inten7 tionally causing or attempting to cause physical in8 jury other than providing health care goods or serv9 ices. 

10 (14) MEDICAL PRODUCT.—The term ‘‘medical 

11 product’’ means a drug, device, or biological product 

12 intended for humans, and the terms ‘‘drug’’, ‘‘de13 vice’’, and ‘‘biological product’’ have the meanings 

14 given such terms in sections 201(g)(1) and 201(h) 

15 of the Federal Food, Drug and Cosmetic Act (21 

16 U.S.C. 321(g)(1) and (h)) and section 351(a) of the 

17 Public Health Service Act (42 U.S.C. 262(a)), re18 spectively, including any component or raw material 

19 used therein, but excluding health care services. 

20 (15) NONECONOMIC DAMAGES.—The term 

21 ‘‘noneconomic damages’’ means damages for phys22 ical and emotional pain, suffering, inconvenience, 

23 physical impairment, mental anguish, disfigurement, 

24 loss of enjoyment of life, loss of society and compan25 ionship, loss of consortium (other than loss of doVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00146 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 mestic service), hedonic damages, injury to reputa2 tion, and all other nonpecuniary losses of any kind 

3 or nature. 

4 (16) PUNITIVE DAMAGES.—The term ‘‘punitive 

5 damages’’ means damages awarded, for the purpose 

6 of punishment or deterrence, and not solely for com7 pensatory purposes, against a health care provider, 

8 health care organization, or a manufacturer, dis9 tributor, or supplier of a medical product. Punitive 

10 damages are neither economic nor noneconomic 

11 damages. 

12 (17) RECOVERY.—The term ‘‘recovery’’ means 

13 the net sum recovered after deducting any disburse14 ments or costs incurred in connection with prosecu15 tion or settlement of the claim, including all costs 

16 paid or advanced by any person. Costs of health care 

17 incurred by the plaintiff and the attorneys’ office 

18 overhead costs or charges for legal services are not 

19 deductible disbursements or costs for such purpose. 

20 (18) STATE.—The term ‘‘State’’ means each of 

21 the several States, the District of Columbia, the 

22 Commonwealth of Puerto Rico, the Virgin Islands, 

23 Guam, American Samoa, the Northern Mariana Is24 lands, the Trust Territory of the Pacific Islands, and 


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1 any other territory or possession of the United 

2 States, or any political subdivision thereof. 

3 SEC. 509. EFFECT ON OTHER LAWS. 

4 (a) VACCINE INJURY.— 

5 (1) To the extent that title XXI of the Public 

6 Health Service Act establishes a Federal rule of law 

7 applicable to a civil action brought for a vaccine-re8 lated injury or death— 

9 (A) this title does not affect the application 

10 of the rule of law to such an action; and 

11 (B) any rule of law prescribed by this title 

12 in conflict with a rule of law of such title XXI 

13 shall not apply to such action. 

14 (2) If there is an aspect of a civil action 

15 brought for a vaccine-related injury or death to 

16 which a Federal rule of law under title XXI of the 

17 Public Health Service Act does not apply, then this 

18 title or otherwise applicable law (as determined 

19 under this title) will apply to such aspect of such ac20 tion. 

21 (b) OTHER FEDERAL LAW.—Except as provided in 

22 this section, nothing in this title shall be deemed to affect 

23 any defense available to a defendant in a health care law24 suit or action under any other provision of Federal law. 


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1 SEC. 510. STATE FLEXIBILITY AND PROTECTION OF 

2 STATES’ RIGHTS. 

3 (a) HEALTH CARE LAWSUITS.—The provisions gov4 erning health care lawsuits set forth in this title preempt, 

5 subject to subsections (b) and (c), State law to the extent 

6 that State law prevents the application of any provisions 

7 of law established by or under this title. The provisions 

8 governing health care lawsuits set forth in this title super9 sede chapter 171 of title 28, United States Code, to the 

10 extent that such chapter— 

11 (1) provides for a greater amount of damages 

12 or contingent fees, a longer period in which a health 

13 care lawsuit may be commenced, or a reduced appli14 cability or scope of periodic payment of future dam15 ages, than provided in this title; or 

16 (2) prohibits the introduction of evidence re17 garding collateral source benefits, or mandates or 

18 permits subrogation or a lien on collateral source 

19 benefits. 

20 (b) PROTECTION OF STATES’ RIGHTS AND OTHER

21 LAWS.—(1) Any issue that is not governed by any provi22 sion of law established by or under this title (including 

23 State standards of negligence) shall be governed by other24 wise applicable State or Federal law. 

25 (2) This title shall not preempt or supersede any 

26 State or Federal law that imposes greater procedural or 


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1 substantive protections for health care providers and 

2 health care organizations from liability, loss, or damages 

3 than those provided by this title or create a cause of ac4 tion. 

5 (c) STATE FLEXIBILITY.—No provision of this title 

6 shall be construed to preempt— 

7 (1) any State law (whether effective before, on, 

8 or after the date of the enactment of this Act) that 

9 specifies a particular monetary amount of compen10 satory or punitive damages (or the total amount of 

11 damages) that may be awarded in a health care law12 suit, regardless of whether such monetary amount is 

13 greater or lesser than is provided for under this title, 

14 notwithstanding section 4(a); or 

15 (2) any defense available to a party in a health 

16 care lawsuit under any other provision of State or 

17 Federal law. 

18 SEC. 511. APPLICABILITY; EFFECTIVE DATE. 

19 This title shall apply to any health care lawsuit 

20 brought in a Federal or State court, or subject to an alter21 native dispute resolution system, that is initiated on or 

22 after the date of the enactment of this Act, except that 

23 any health care lawsuit arising from an injury occurring 

24 prior to the date of the enactment of this Act shall be 


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1 governed by the applicable statute of limitations provisions 

2 in effect at the time the injury occurred. 

3 SEC. 512. SENSE OF CONGRESS. 

4 It is the sense of Congress that a health insurer 

5 should be liable for damages for harm caused when it 

6 makes a decision as to what care is medically necessary 

7 and appropriate. 

8 TITLE VI—HEALTH 

9 INFORMATION TECHNOLOGY 

10 Subtitle A—Assisting the Develop11 ment of Health Information 

12 Technology 

13 SEC. 601. PURPOSE. 

14 It is the purpose of this subtitle to promote the utili15 zation of health record banking by improving the coordina16 tion of health information through an infrastructure for 

17 the secure and authorized exchange and use of healthcare 

18 information. 

19 SEC. 602. HEALTH RECORD BANKING. 

20 (a) ESTABLISHMENT.—Not later than 1 year after 

21 the date of enactment of this Act, the Secretary of Health 

22 and Human Services shall promulgate regulations to pro23 vide for the certification and auditing of the banking of 

24 electronic medical records. 


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1 (b) GENERAL RIGHTS.—An individual who has a 

2 health record contained in a health record bank shall 

3 maintain ownership over the health record and shall have 

4 the right to review the contents of the record. 

5 SEC. 603. APPLICATION OF FEDERAL AND STATE SECURITY 

6 AND CONFIDENTIALITY STANDARDS. 

7 (a) IN GENERAL.—Current Federal security and con8 fidentiality standards and State security and confiden9 tiality laws shall apply to this subtitle until such time as 

10 Congress acts to amend such standards. 

11 (b) DEFINITIONS.—In this section: 

12 (1) CURRENT FEDERAL SECURITY AND CON13 FIDENTIALITY STANDARDS.—The term ‘‘current 

14 Federal security and confidentiality standards’’ 

15 means the Federal privacy standards established 

16 pursuant to section 264(c) of the Health Insurance 

17 Portability and Accountability Act of 1996 (42 

18 U.S.C. 1320d–2 note) and security standards estab19 lished under section 1173(d) of the Social Security 

20 Act (42 U.S.C. 1320d–2(d)). 

21 (2) STATE SECURITY AND CONFIDENTIALITY

22 LAWS.—The term ‘‘State security and confidentiality 

23 laws’’ means State laws and regulations relating to 

24 the privacy and confidentiality of individually identiVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00152 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 fiable health information or to the security of such 

2 information. 

3 (3) STATE.—The term ‘‘State’’ has the mean4 ing given such term for purposes of title XI of the 

5 Social Security Act, as provided under section 

6 1101(a) of such Act (42 U.S.C. 1301(a)). 

7 Subtitle B—Promoting the Use of 

8 Health Information Technology 

9 to Better Coordinate Health 

10 Care 

11 SEC. 611. SAFE HARBORS TO ANTIKICKBACK CIVIL PEN12 ALTIES AND CRIMINAL PENALTIES FOR PRO13 VISION OF HEALTH INFORMATION TECH14 NOLOGY AND TRAINING SERVICES. 

15 (a) FOR CIVIL PENALTIES.—Section 1128A of the 

16 Social Security Act (42 U.S.C. 1320a–7a) is amended— 

17 (1) in subsection (b), by adding at the end the 

18 following new paragraph: 

19 ‘‘(4) For purposes of this subsection, inducements to 

20 reduce or limit services described in paragraph (1) shall 

21 not include the practical or other advantages resulting 

22 from health information technology or related installation, 

23 maintenance, support, or training services.’’; and 

24 (2) in subsection (i), by adding at the end the 

25 following new paragraph: 


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1 ‘‘(8) The term ‘health information technology’ 

2 means hardware, software, license, right, intellectual 

3 property, equipment, or other information tech4 nology (including new versions, upgrades, and 

5 connectivity) designed or provided primarily for the 

6 electronic creation, maintenance, or exchange of 

7 health information to better coordinate care or im8 prove health care quality, efficiency, or research.’’. 

9 (b) FOR CRIMINAL PENALTIES.—Section 1128B of 

10 such Act (42 U.S.C. 1320a–7b) is amended— 

11 (1) in subsection (b)(3)— 

12 (A) in subparagraph (G), by striking 

13 ‘‘and’’ at the end; 

14 (B) in the subparagraph (H) added by sec15 tion 237(d) of the Medicare Prescription Drug, 

16 Improvement, and Modernization Act of 2003 

17 (Public Law 108–173; 117 Stat. 2213)— 

18 (i) by moving such subparagraph 2 

19 ems to the left; and 

20 (ii) by striking the period at the end 

21 and inserting a semicolon; 

22 (C) in the subparagraph (H) added by sec23 tion 431(a) of such Act (117 Stat. 2287)— 

24 (i) by redesignating such subpara25 graph as subparagraph (I); 


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1 (ii) by moving such subparagraph 2 

2 ems to the left; and 

3 (iii) by striking the period at the end 

4 and inserting ‘‘; and’’; and 

5 (D) by adding at the end the following new 

6 subparagraph: 

7 ‘‘(J) any nonmonetary remuneration (in the 

8 form of health information technology, as defined in 

9 section 1128A(i)(8), or related installation, mainte10 nance, support or training services) made to a per11 son by a specified entity (as defined in subsection 

12 (g)) if— 

13 ‘‘(i) the provision of such remuneration is 

14 without an agreement between the parties or 

15 legal condition that— 

16 ‘‘(I) limits or restricts the use of the 

17 health information technology to services 

18 provided by the physician to individuals re19 ceiving services at the specified entity; 

20 ‘‘(II) limits or restricts the use of the 

21 health information technology in conjunc22 tion with other health information tech23 nology; or 


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1 ‘‘(III) conditions the provision of such 

2 remuneration on the referral of patients or 

3 business to the specified entity; 

4 ‘‘(ii) such remuneration is arranged for in 

5 a written agreement that is signed by the par6 ties involved (or their representatives) and that 

7 specifies the remuneration solicited or received 

8 (or offered or paid) and states that the provi9 sion of such remuneration is made for the pri10 mary purpose of better coordination of care or 

11 improvement of health quality, efficiency, or re12 search; and 

13 ‘‘(iii) the specified entity providing the re14 muneration (or a representative of such entity) 

15 has not taken any action to disable any basic 

16 feature of any hardware or software component 

17 of such remuneration that would permit inter18 operability.’’; and 

19 (2) by adding at the end the following new sub20 section: 

21 ‘‘(g) SPECIFIED ENTITY DEFINED.—For purposes of 

22 subsection (b)(3)(J), the term ‘specified entity’ means an 

23 entity that is a hospital, group practice, prescription drug 

24 plan sponsor, a Medicare Advantage organization, or any 

25 other such entity specified by the Secretary, considering 


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1 the goals and objectives of this section, as well as the goals 

2 to better coordinate the delivery of health care and to pro3 mote the adoption and use of health information tech4 nology.’’. 

5 (c) EFFECTIVE DATE AND EFFECT ON STATE

6 LAWS.— 

7 (1) EFFECTIVE DATE.—The amendments made 

8 by subsections (a) and (b) shall take effect on the 

9 date that is 120 days after the date of the enact10 ment of this Act. 

11 (2) PREEMPTION OF STATE LAWS.—No State 

12 (as defined in section 1101(a) of the Social Security 

13 Act (42 U.S.C. 1301(a)) for purposes of title XI of 

14 such Act) shall have in effect a State law that im15 poses a criminal or civil penalty for a transaction de16 scribed in section 1128A(b)(4) or section 

17 1128B(b)(3)(J) of such Act, as added by subsections 

18 (a)(1) and (b), respectively, if the conditions de19 scribed in the respective provision, with respect to 

20 such transaction, are met. 

21 (d) STUDY AND REPORT TO ASSESS EFFECT OF

22 SAFE HARBORS ON HEALTH SYSTEM.— 

23 (1) IN GENERAL.—The Secretary of Health and 

24 Human Services shall conduct a study to determine 

25 the impact of each of the safe harbors described in 


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1 paragraph (3). In particular, the study shall examine 

2 the following: 

3 (A) The effectiveness of each safe harbor 

4 in increasing the adoption of health information 

5 technology. 

6 (B) The types of health information tech7 nology provided under each safe harbor. 

8 (C) The extent to which the financial or 

9 other business relationships between providers 

10 under each safe harbor have changed as a re11 sult of the safe harbor in a way that adversely 

12 affects or benefits the health care system or 

13 choices available to consumers. 

14 (D) The impact of the adoption of health 

15 information technology on health care quality, 

16 cost, and access under each safe harbor. 

17 (2) REPORT.—Not later than 3 years after the 

18 effective date described in subsection (c)(1), the Sec19 retary of Health and Human Services shall submit 

20 to Congress a report on the study under paragraph 

21 (1). 

22 (3) SAFE HARBORS DESCRIBED.—For purposes 

23 of paragraphs (1) and (2), the safe harbors de24 scribed in this paragraph are— 


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1 (A) the safe harbor under section 

2 1128A(b)(4) of such Act (42 U.S.C. 1320a– 

3 7a(b)(4)), as added by subsection (a)(1); and 

4 (B) the safe harbor under section 

5 1128B(b)(3)(J) of such Act (42 U.S.C. 1320a– 

6 7b(b)(3)(J)), as added by subsection (b). 

7 SEC. 612. EXCEPTION TO LIMITATION ON CERTAIN PHYSI8 CIAN REFERRALS (UNDER STARK) FOR PRO9 VISION OF HEALTH INFORMATION TECH10 NOLOGY AND TRAINING SERVICES TO 

11 HEALTH CARE PROFESSIONALS. 

12 (a) IN GENERAL.—Section 1877(b) of the Social Se13 curity Act (42 U.S.C. 1395nn(b)) is amended by adding 

14 at the end the following new paragraph: 

15 ‘‘(6) INFORMATION TECHNOLOGY AND TRAIN16 ING SERVICES.— 

17 ‘‘(A) IN GENERAL.—Any nonmonetary re18 muneration (in the form of health information 

19 technology or related installation, maintenance, 

20 support or training services) made by a speci21 fied entity to a physician if— 

22 ‘‘(i) the provision of such remunera23 tion is without an agreement between the 

24 parties or legal condition that— 


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1 ‘‘(I) limits or restricts the use of 

2 the health information technology to 

3 services provided by the physician to 

4 individuals receiving services at the 

5 specified entity; 

6 ‘‘(II) limits or restricts the use of 

7 the health information technology in 

8 conjunction with other health informa9 tion technology; or 

10 ‘‘(III) conditions the provision of 

11 such remuneration on the referral of 

12 patients or business to the specified 

13 entity; 

14 ‘‘(ii) such remuneration is arranged 

15 for in a written agreement that is signed 

16 by the parties involved (or their represent17 atives) and that specifies the remuneration 

18 made and states that the provision of such 

19 remuneration is made for the primary pur20 pose of better coordination of care or im21 provement of health quality, efficiency, or 

22 research; and 

23 ‘‘(iii) the specified entity (or a rep24 resentative of such entity) has not taken 

25 any action to disable any basic feature of 


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1 any hardware or software component of 

2 such remuneration that would permit 

3 interoperability. 

4 ‘‘(B) HEALTH INFORMATION TECHNOLOGY

5 DEFINED.—For purposes of this paragraph, the 

6 term ‘health information technology’ means 

7 hardware, software, license, right, intellectual 

8 property, equipment, or other information tech9 nology (including new versions, upgrades, and 

10 connectivity) designed or provided primarily for 

11 the electronic creation, maintenance, or ex12 change of health information to better coordi13 nate care or improve health care quality, effi14 ciency, or research. 

15 ‘‘(C) SPECIFIED ENTITY DEFINED.—For 

16 purposes of this paragraph, the term ‘specified 

17 entity’ means an entity that is a hospital, group 

18 practice, prescription drug plan sponsor, a 

19 Medicare Advantage organization, or any other 

20 such entity specified by the Secretary, consid21 ering the goals and objectives of this section, as 

22 well as the goals to better coordinate the deliv23 ery of health care and to promote the adoption 

24 and use of health information technology.’’. 

25 (b) EFFECTIVE DATE; EFFECT ON STATE LAWS.— 


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1 (1) EFFECTIVE DATE.—The amendment made 

2 by subsection (a) shall take effect on the date that 

3 is 120 days after the date of the enactment of this 

4 Act. 

5 (2) PREEMPTION OF STATE LAWS.—No State 

6 (as defined in section 1101(a) of the Social Security 

7 Act (42 U.S.C. 1301(a)) for purposes of title XI of 

8 such Act) shall have in effect a State law that im9 poses a criminal or civil penalty for a transaction de10 scribed in section 1877(b)(6) of such Act, as added 

11 by subsection (a), if the conditions described in such 

12 section, with respect to such transaction, are met. 

13 (c) STUDY AND REPORT TO ASSESS EFFECT OF EX14 CEPTION ON HEALTH SYSTEM.— 

15 (1) IN GENERAL.—The Secretary of Health and 

16 Human Services shall conduct a study to determine 

17 the impact of the exception under section 1877(b)(6) 

18 of such Act (42 U.S.C. 1395nn(b)(6)), as added by 

19 subsection (a). In particular, the study shall examine 

20 the following: 

21 (A) The effectiveness of the exception in 

22 increasing the adoption of health information 

23 technology. 

24 (B) The types of health information tech25 nology provided under the exception. 


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1 (C) The extent to which the financial or 

2 other business relationships between providers 

3 under the exception have changed as a result of 

4 the exception in a way that adversely affects or 

5 benefits the health care system or choices avail6 able to consumers. 

7 (D) The impact of the adoption of health 

8 information technology on health care quality, 

9 cost, and access under the exception. 

10 (2) REPORT.—Not later than 3 years after the 

11 effective date described in subsection (b)(1), the Sec12 retary of Health and Human Services shall submit 

13 to Congress a report on the study under paragraph 

14 (1). 

15 SEC. 613. RULES OF CONSTRUCTION REGARDING USE OF 

16 CONSORTIA. 

17 (a) APPLICATION TO SAFE HARBOR FROM CRIMINAL

18 PENALTIES.—Section 1128B(b)(3) of the Social Security 

19 Act (42 U.S.C. 1320a–7b(b)(3)) is amended by adding 

20 after and below subparagraph (J), as added by section 

21 611(b)(1), the following: ‘‘For purposes of subparagraph 

22 (J), nothing in such subparagraph shall be construed as 

23 preventing a specified entity, consistent with the specific 

24 requirements of such subparagraph, from forming a con25 sortium composed of health care providers, payers, emVerDate Aug 31 2005 21:36 May 24, 2008 Jkt 069200 PO 00000 Frm 00163 Fmt 6652 Sfmt 6201 E:\BILLS\S3072.IS S3072

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1 ployers, and other interested entities to collectively pur2 chase and donate health information technology, or from 

3 offering health care providers a choice of health informa4 tion technology products in order to take into account the 

5 varying needs of such providers receiving such products.’’. 

6 (b) APPLICATION TO STARK EXCEPTION.—Para7 graph (6) of section 1877(b) of the Social Security Act 

8 (42 U.S.C. 1395nn(b)), as added by section 612(a), is 

9 amended by adding at the end the following new subpara10 graph: 

11 ‘‘(D) RULE OF CONSTRUCTION.—For pur12 poses of subparagraph (A), nothing in such 

13 subparagraph shall be construed as preventing 

14 a specified entity, consistent with the specific 

15 requirements of such subparagraph, from— 

16 ‘‘(i) forming a consortium composed 

17 of health care providers, payers, employers, 

18 and other interested entities to collectively 

19 purchase and donate health information 

20 technology; or 

21 ‘‘(ii) offering health care providers a 

22 choice of health information technology 

23 products in order to take into account the 


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165 

•S 3072 IS

1 varying needs of such providers receiving 

2 such products.’’. 

Æ 


sroberts on PROD1PC70 with BILLS