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[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 3072 Introduced in Senate (IS)]

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.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Making Health Care 
More Affordable Act of 2008''.
    (b) Table of Contents.--The table of contents of 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.
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

 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.

                  TITLE I--HEALTH INSURANCE TAX CREDIT

SEC. 101. REFUNDABLE CREDIT FOR HEALTH INSURANCE COVERAGE.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. QUALIFIED HEALTH INSURANCE TAX CREDIT.

    ``(a) In General.--In the case of an individual, there shall be 
allowed as a credit against the tax imposed by this subtitle an amount 
equal to the amount paid during the taxable year for qualified health 
insurance for the taxpayer and the taxpayer's spouse or dependent.
    ``(b) Limitations.--
            ``(1) In general.--The amount allowed as a credit under 
        subsection (a) to the taxpayer for the taxable year shall not 
        exceed the sum of the monthly limitations for coverage months 
        during such taxable year for the individual referred to in 
        subsection (a) for whom the taxpayer paid during the taxable 
        year any amount for coverage under qualified health insurance.
            ``(2) Monthly limitation.--
                    ``(A) In general.--The monthly limitation for an 
                individual for each coverage month of such individual 
                during the taxable year is the amount equal to \1/12\ 
                of the qualified health insurance amount.
                    ``(B) Qualified health insurance amount.--For 
                purposes of this paragraph, the qualified health 
                insurance amount is--
                            ``(i) $2,500 if such individual is the 
                        taxpayer,
                            ``(ii) $2,500 if such individual is the 
                        spouse of the taxpayer, the taxpayer and such 
                        spouse are married as of the first day of such 
                        month, and the taxpayer files a joint return 
                        for the taxable year, or
                            ``(iii) $500 if such individual is an 
                        individual for whom a deduction under section 
                        151(c) is allowable to the taxpayer for such 
                        taxable year.
                    ``(C) Limitation on dependents.--Not more than 2 
                individuals may be taken into account by the taxpayer 
                under subparagraph (B)(iii).
            ``(3) Coverage month.--For purposes of this subsection--
                    ``(A) In general.--The term `coverage month' means, 
                with respect to an individual, any month if--
                            ``(i) as of the first day of such month 
                        such individual is covered by qualified health 
                        insurance, and
                            ``(ii) the premium for coverage under such 
                        insurance for such month is paid by the 
                        taxpayer.
                    ``(B) Medicare.--Such term shall not include any 
                month with respect to an individual if, as of the first 
                day of such month, such individual has not made an 
                election to establish and maintain a Medical Retirement 
                Account under section 252(a)(2) of the Social Security 
                Act and is entitled to benefits under title XVIII of 
                the Social Security Act.
                    ``(C) Certain other coverage.--Such term shall not 
                include any month during a taxable year with respect to 
                an individual if, at any time during such year, any 
                benefit is provided to such individual under--
                            ``(i) chapter 55 of title 10, United States 
                        Code,
                            ``(ii) chapter 17 of title 38, United 
                        States Code, or
                            ``(iii) any medical care program under the 
                        Indian Health Care Improvement Act.
                    ``(D) Prisoners.--Such term shall not include any 
                month with respect to an individual if, as of the first 
                day of such month, such individual is imprisoned under 
                Federal, State, or local authority.
                    ``(E) Insufficient presence in united states.--Such 
                term shall not include any month during a taxable year 
                with respect to an individual if such individual is 
                present in the United States on fewer than 183 days 
                during such year (determined in accordance with section 
                7701(b)(7)).
    ``(c) Qualified Health Insurance.--For purposes of this section--
            ``(1) In general.--The term `qualified health insurance' 
        means any health plan (within the meaning of section 223(c)(2)) 
        determined without regard to any annual deductible requirement.
            ``(2) Annual wellness exam.--Such term shall include an 
        annual wellness exam fee not to exceed $150 ($100 in the case 
        of an annual child wellness exam) if such exam is not covered 
        by the insurance.
    ``(d) Archer MSA and Health Savings Account Contributions.--
            ``(1) In general.--If a deduction would (but for paragraph 
        (2)) be allowed under section 220 or 223 to the taxpayer for a 
        payment for the taxable year to the Archer MSA or health 
        savings account of an individual, subsection (a) shall be 
        applied by treating such payment as a payment for qualified 
        health insurance for such individual.
            ``(2) Denial of double benefit.--No deduction shall be 
        allowed under section 220 or 223 for that portion of the 
        payments otherwise allowable as a deduction under section 220 
        or 223 for the taxable year which is equal to the amount of 
        credit allowed for such taxable year by reason of this 
        subsection.
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Married couples must file joint return.--If the 
        taxpayer is married at the close of the taxable year, the 
        credit shall be allowed under subsection (a) only if the 
        taxpayer and the taxpayer's spouse file a joint return for the 
        taxable year.
            ``(2) Denial of credit to dependents.--No credit shall be 
        allowed under this section to any individual with respect to 
        whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins.
            ``(3) Denial of double benefit.--No credit shall be allowed 
        under subsection (a) if the credit under section 35 is allowed 
        and no credit shall be allowed under 35 if a credit is allowed 
        under this section.
            ``(4) Coordination with deduction for health insurance 
        costs.--In the case of a taxpayer who is eligible to deduct any 
        amount under section 162(l) or 213 for the taxable year, this 
        section shall apply only if the taxpayer elects not to claim 
        any amount as a deduction under such section for such year.
            ``(5) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.
            ``(6) Inflation adjustment.--
                    ``(A) In general.--In the case of any taxable year 
                beginning in a calendar year after 2008, each dollar 
                amount contained in subsection (b)(2)(B) shall be 
                increased by an amount equal to--
                            ``(i) such dollar amount, multiplied by
                            ``(ii) the cost-of-living adjustment 
                        determined under subparagraph (B) for the 
                        calendar year in which such taxable year 
                        begins.
                    ``(B) Cost-of-living adjustment.--For purposes of 
                subparagraph (A), the cost-of-living adjustment for any 
                calendar year is the percentage (if any) by which--
                            ``(i) the GDP for the preceding calendar 
                        year, exceeds
                            ``(ii) the GDP for calendar year 2007.
                    ``(C) GDP for any calendar year.--For purposes of 
                subparagraph (B), the GDP for any calendar year is the 
                average of the chain-weighted price index for the gross 
                domestic product as of the close of the 12-month period 
                ending on March 31 of such calendar year.
                    ``(D) Chain-weighted price index for the gross 
                domestic product.--For purposes of subparagraph (C), 
                the term `chain-weighted price index for the gross 
                domestic product' means the last chain-weighted price 
                index for the gross domestic product published by the 
                Department of Commerce.
                    ``(E) Rounding.--Any increase determined under 
                subparagraph (A) shall be rounded to the nearest 
                multiple of $50.''.
    (b) Information Reporting.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61 of the Internal Revenue Code of 1986 (relating to 
        information concerning transactions with other persons) is 
        amended by inserting after section 6050V the following new 
        section:

``SEC. 6050W. RETURNS RELATING TO PAYMENTS FOR QUALIFIED HEALTH 
              INSURANCE.

    ``(a) In General.--Any person who, in connection with a trade or 
business conducted by such person, receives payments during any 
calendar year from any individual for coverage of such individual or 
any other individual under creditable health insurance, shall make the 
return described in subsection (b) (at such time as the Secretary may 
by regulations prescribe) with respect to each individual from whom 
such payments were received.
    ``(b) Form and Manner of Returns.--A return is described in this 
subsection if such return--
            ``(1) is in such form as the Secretary may prescribe, and
            ``(2) contains--
                    ``(A) the name, address, and TIN of the individual 
                from whom payments described in subsection (a) were 
                received,
                    ``(B) the name, address, and TIN of each individual 
                who was provided by such person with coverage under 
                creditable health insurance by reason of such payments 
                and the period of such coverage, and
                    ``(C) such other information as the Secretary may 
                reasonably prescribe.
    ``(c) Creditable Health Insurance.--For purposes of this section, 
the term `creditable health insurance' means qualified health insurance 
(as defined in section 36(c)) other than, to the extent provided in 
regulations prescribed by the Secretary, any insurance covering an 
individual if no credit is allowable under section 36 with respect to 
such coverage.
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Required.--Every person required to make a return 
under subsection (a) shall furnish to each individual whose name is 
required under subsection (b)(2)(A) to be set forth in such return a 
written statement showing--
            ``(1) the name and address of the person required to make 
        such return and the phone number of the information contact for 
        such person,
            ``(2) the aggregate amount of payments described in 
        subsection (a) received by the person required to make such 
        return from the individual to whom the statement is required to 
        be furnished, and
            ``(3) the information required under subsection (b)(2)(B) 
        with respect to such payments.
The written statement required under the preceding sentence shall be 
furnished on or before January 31 of the year following the calendar 
year for which the return under subsection (a) is required to be made.
    ``(e) Returns Which Would Be Required To Be Made by 2 or More 
Persons.--Except to the extent provided in regulations prescribed by 
the Secretary, in the case of any amount received by any person on 
behalf of another person, only the person first receiving such amount 
shall be required to make the return under subsection (a).''.
            (2) Assessable penalties.--
                    (A) Subparagraph (B) of section 6724(d)(1) of such 
                Code (relating to definitions) is amended by 
                redesignating clauses (xv) through (xx) as clauses 
                (xvi) through (xxi), respectively, and by inserting 
                after clause (xi) the following new clause:
                            ``(xv) section 6050W (relating to returns 
                        relating to payments for qualified health 
                        insurance),''.
                    (B) Paragraph (2) of section 6724(d) of such Code 
                is amended by striking the period at the end of 
                subparagraph (CC) and inserting ``, or'' and by adding 
                at the end the following new subparagraph:
                    ``(DD) section 6050W(d) (relating to returns 
                relating to payments for qualified health 
                insurance).''.
            (3) Clerical amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61 of such Code is 
        amended by inserting after the item relating to section 6050V 
        the following new item:

``Sec. 6050W. Returns relating to payments for qualified health 
                            insurance.''.
    (c) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``, or 
        from section 36 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the last item and inserting the 
        following new items:

``Sec. 36. Qualified health insurance tax credit.
``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 102. ADVANCE PAYMENT OF CREDIT FOR PURCHASERS OF QUALIFIED HEALTH 
              INSURANCE.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 
(relating to miscellaneous provisions) is amended by adding at the end 
the following new section:

``SEC. 7529. ADVANCE PAYMENT OF QUALIFIED HEALTH INSURANCE TAX CREDIT.

    ``(a) General Rule.--In the case of an eligible individual, the 
Secretary shall make payments to the provider of such individual's 
qualified health insurance equal to such individual's qualified health 
insurance credit advance amount with respect to such provider.
    ``(b) Eligible Individual.--For purposes of this section, the term 
`eligible individual' means any individual--
            ``(1) who purchases qualified health insurance (as defined 
        in section 36(c)), and
            ``(2) for whom a qualified health insurance credit 
        eligibility certificate is in effect.
    ``(c) Qualified Health Insurance Credit Eligibility Certificate.--
For purposes of this section, a qualified health insurance credit 
eligibility certificate is a statement furnished by an individual to 
the Secretary which--
            ``(1) certifies that the individual will be eligible to 
        receive the credit provided by section 36 for the taxable year,
            ``(2) estimates the amount of such credit for such taxable 
        year, and
            ``(3) provides such other information as the Secretary may 
        require for purposes of this section.
    ``(d) Qualified Health Insurance Credit Advance Amount.--For 
purposes of this section, the term `qualified health insurance credit 
advance amount' means, with respect to any provider of qualified health 
insurance, the Secretary's estimate of the amount of credit allowable 
under section 36 to the individual for the taxable year which is 
attributable to the insurance provided to the individual by such 
provider.
    ``(e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the purposes of this section.''.
    (b) Clerical Amendment.--The table of sections for chapter 77 of 
the Internal Revenue Code of 1986 is amended by adding at the end the 
following new item:

``Sec. 7529. Advance payment of qualified health insurance tax 
                            credit.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

                 TITLE II--SMALL BUSINESS HEALTH PLANS

SEC. 201. RULES GOVERNING ASSOCIATION HEALTH PLANS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding after part 7 the 
following new part:

           ``PART 8--RULES GOVERNING ASSOCIATION HEALTH PLANS

``SEC. 801. ASSOCIATION HEALTH PLANS.

    ``(a) In General.--For purposes of this part, the term `association 
health plan' means a group health plan whose sponsor is (or is deemed 
under this part to be) described in subsection (b).
    ``(b) Sponsorship.--The sponsor of a group health plan is described 
in this subsection if such sponsor--
            ``(1) is organized and maintained in good faith, with a 
        constitution and bylaws specifically stating its purpose and 
        providing for periodic meetings on at least an annual basis, as 
        a bona fide trade association, a bona fide industry association 
        (including a rural electric cooperative association or a rural 
        telephone cooperative association), a bona fide professional 
        association, or a bona fide chamber of commerce (or similar 
        bona fide business association, including a corporation or 
        similar organization that operates on a cooperative basis 
        (within the meaning of section 1381 of the Internal Revenue 
        Code of 1986)), for substantial purposes other than that of 
        obtaining or providing medical care;
            ``(2) is established as a permanent entity which receives 
        the active support of its members and requires for membership 
        payment on a periodic basis of dues or payments necessary to 
        maintain eligibility for membership in the sponsor; and
            ``(3) does not condition membership, such dues or payments, 
        or coverage under the plan on the basis of health status-
        related factors with respect to the employees of its members 
        (or affiliated members), or the dependents of such employees, 
        and does not condition such dues or payments on the basis of 
        group health plan participation.
Any sponsor consisting of an association of entities which meet the 
requirements of paragraphs (1), (2), and (3) shall be deemed to be a 
sponsor described in this subsection.

``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.

    ``(a) In General.--The applicable authority shall prescribe by 
regulation a procedure under which, subject to subsection (b), the 
applicable authority shall certify association health plans which apply 
for certification as meeting the requirements of this part.
    ``(b) Standards.--Under the procedure prescribed pursuant to 
subsection (a), in the case of an association health plan that provides 
at least one benefit option which does not consist of health insurance 
coverage, the applicable authority shall certify such plan as meeting 
the requirements of this part only if the applicable authority is 
satisfied that the applicable requirements of this part are met (or, 
upon the date on which the plan is to commence operations, will be met) 
with respect to the plan.
    ``(c) Requirements Applicable to Certified Plans.--An association 
health plan with respect to which certification under this part is in 
effect shall meet the applicable requirements of this part, effective 
on the date of certification (or, if later, on the date on which the 
plan is to commence operations).
    ``(d) Requirements for Continued Certification.--The applicable 
authority may provide by regulation for continued certification of 
association health plans under this part.
    ``(e) Class Certification for Fully Insured Plans.--The applicable 
authority shall establish a class certification procedure for 
association health plans under which all benefits consist of health 
insurance coverage. Under such procedure, the applicable authority 
shall provide for the granting of certification under this part to the 
plans in each class of such association health plans upon appropriate 
filing under such procedure in connection with plans in such class and 
payment of the prescribed fee under section 807(a).
    ``(f) Certification of Self-Insured Association Health Plans.--An 
association health plan which offers one or more benefit options which 
do not consist of health insurance coverage may be certified under this 
part only if such plan consists of any of the following:
            ``(1) a plan which offered such coverage on the date of the 
        enactment of the Making Health Care More Affordable Act of 
        2008,
            ``(2) a plan under which the sponsor does not restrict 
        membership to one or more trades and businesses or industries 
        and whose eligible participating employers represent a broad 
        cross-section of trades and businesses or industries, or
            ``(3) a plan whose eligible participating employers 
        represent one or more trades or businesses, or one or more 
        industries, consisting of any of the following: agriculture; 
        equipment and automobile dealerships; barbering and 
        cosmetology; certified public accounting practices; child care; 
        construction; dance, theatrical and orchestra productions; 
        disinfecting and pest control; financial services; fishing; 
        food service establishments; hospitals; labor organizations; 
        logging; manufacturing (metals); mining; medical and dental 
        practices; medical laboratories; professional consulting 
        services; sanitary services; transportation (local and 
        freight); warehousing; wholesaling/distributing; or any other 
        trade or business or industry which has been indicated as 
        having average or above-average risk or health claims 
        experience by reason of State rate filings, denials of 
        coverage, proposed premium rate levels, or other means 
        demonstrated by such plan in accordance with regulations.

``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES.

    ``(a) Sponsor.--The requirements of this subsection are met with 
respect to an association health plan if the sponsor has met (or is 
deemed under this part to have met) the requirements of section 801(b) 
for a continuous period of not less than 3 years ending with the date 
of the application for certification under this part.
    ``(b) Board of Trustees.--The requirements of this subsection are 
met with respect to an association health plan if the following 
requirements are met:
            ``(1) Fiscal control.--The plan is operated, pursuant to a 
        trust agreement, by a board of trustees which has complete 
        fiscal control over the plan and which is responsible for all 
        operations of the plan.
            ``(2) Rules of operation and financial controls.--The board 
        of trustees has in effect rules of operation and financial 
        controls, based on a 3-year plan of operation, adequate to 
        carry out the terms of the plan and to meet all requirements of 
        this title applicable to the plan.
            ``(3) Rules governing relationship to participating 
        employers and to contractors.--
                    ``(A) Board membership.--
                            ``(i) In general.--Except as provided in 
                        clauses (ii) and (iii), the members of the 
                        board of trustees are individuals selected from 
                        individuals who are the owners, officers, 
                        directors, or employees of the participating 
                        employers or who are partners in the 
                        participating employers and actively 
                        participate in the business.
                            ``(ii) Limitation.--
                                    ``(I) General rule.--Except as 
                                provided in subclauses (II) and (III), 
                                no such member is an owner, officer, 
                                director, or employee of, or partner 
                                in, a contract administrator or other 
                                service provider to the plan.
                                    ``(II) Limited exception for 
                                providers of services solely on behalf 
                                of the sponsor.--Officers or employees 
                                of a sponsor which is a service 
                                provider (other than a contract 
                                administrator) to the plan may be 
                                members of the board if they constitute 
                                not more than 25 percent of the 
                                membership of the board and they do not 
                                provide services to the plan other than 
                                on behalf of the sponsor.
                                    ``(III) Treatment of providers of 
                                medical care.--In the case of a sponsor 
                                which is an association whose 
                                membership consists primarily of 
                                providers of medical care, subclause 
                                (I) shall not apply in the case of any 
                                service provider described in subclause 
                                (I) who is a provider of medical care 
                                under the plan.
                            ``(iii) Certain plans excluded.--Clause (I) 
                        shall not apply to an association health plan 
                        which is in existence on the date of the 
                        enactment of the Making Health Care More 
                        Affordable Act of 2008.
                    ``(B) Sole authority.--The board has sole authority 
                under the plan to approve applications for 
                participation in the plan and to contract with a 
                service provider to administer the day-to-day affairs 
                of the plan.
    ``(c) Treatment of Franchise Networks.--In the case of a group 
health plan which is established and maintained by a franchiser for a 
franchise network consisting of its franchisees--
            ``(1) the requirements of subsection (a) and section 801(a) 
        shall be deemed met if such requirements would otherwise be met 
        if the franchiser were deemed to be the sponsor referred to in 
        section 801(b), such network were deemed to be an association 
        described in section 801(b), and each franchisee were deemed to 
        be a member (of the association and the sponsor) referred to in 
        section 801(b); and
            ``(2) the requirements of section 804(a)(1) shall be deemed 
        met.
The Secretary may by regulation define for purposes of this subsection 
the terms `franchiser', `franchise network', and `franchisee'.

``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

    ``(a) Covered Employers and Individuals.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan--
            ``(1) each participating employer must be--
                    ``(A) a member of the sponsor,
                    ``(B) the sponsor, or
                    ``(C) an affiliated member of the sponsor with 
                respect to which the requirements of subsection (b) are 
                met,
        except that, in the case of a sponsor which is a professional 
        association or other individual-based association, if at least 
        one of the officers, directors, or employees of an employer, or 
        at least one of the individuals who are partners in an employer 
        and who actively participates in the business, is a member or 
        such an affiliated member of the sponsor, participating 
        employers may also include such employer; and
            ``(2) all individuals commencing coverage under the plan 
        after certification under this part must be--
                    ``(A) active or retired owners (including self-
                employed individuals), officers, directors, or 
                employees of, or partners in, participating employers; 
                or
                    ``(B) the beneficiaries of individuals described in 
                subparagraph (A).
    ``(b) Coverage of Previously Uninsured Employees.--In the case of 
an association health plan in existence on the date of the enactment of 
the Making Health Care More Affordable Act of 2008, an affiliated 
member of the sponsor of the plan may be offered coverage under the 
plan as a participating employer only if--
            ``(1) the affiliated member was an affiliated member on the 
        date of certification under this part; or
            ``(2) during the 12-month period preceding the date of the 
        offering of such coverage, the affiliated member has not 
        maintained or contributed to a group health plan with respect 
        to any of its employees who would otherwise be eligible to 
        participate in such association health plan.
    ``(c) Individual Market Unaffected.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan, no participating employer may provide health 
insurance coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer under the plan, 
if such exclusion of the employee from coverage under the plan is based 
on a health status-related factor with respect to the employee and such 
employee would, but for such exclusion on such basis, be eligible for 
coverage under the plan.
    ``(d) Prohibition of Discrimination Against Employers and Employees 
Eligible To Participate.--The requirements of this subsection are met 
with respect to an association health plan if--
            ``(1) under the terms of the plan, all employers meeting 
        the preceding requirements of this section are eligible to 
        qualify as participating employers for all geographically 
        available coverage options, unless, in the case of any such 
        employer, participation or contribution requirements of the 
        type referred to in section 2711 of the Public Health Service 
        Act are not met;
            ``(2) upon request, any employer eligible to participate is 
        furnished information regarding all coverage options available 
        under the plan; and
            ``(3) the applicable requirements of sections 701, 702, and 
        703 are met with respect to the plan.

``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION 
              RATES, AND BENEFIT OPTIONS.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if the following requirements are 
met:
            ``(1) Contents of governing instruments.--The instruments 
        governing the plan include a written instrument, meeting the 
        requirements of an instrument required under section 402(a)(1), 
        which--
                    ``(A) provides that the board of trustees serves as 
                the named fiduciary required for plans under section 
                402(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A));
                    ``(B) provides that the sponsor of the plan is to 
                serve as plan sponsor (referred to in section 
                3(16)(B)); and
                    ``(C) incorporates the requirements of section 806.
            ``(2) Contribution rates must be nondiscriminatory.--
                    ``(A) The contribution rates for any participating 
                small employer do not vary on the basis of any health 
                status-related factor in relation to employees of such 
                employer or their beneficiaries and do not vary on the 
                basis of the type of business or industry in which such 
                employer is engaged.
                    ``(B) Nothing in this title or any other provision 
                of law shall be construed to preclude an association 
                health plan, or a health insurance issuer offering 
                health insurance coverage in connection with an 
                association health plan, from--
                            ``(i) setting contribution rates based on 
                        the claims experience of the plan; or
                            ``(ii) varying contribution rates for small 
                        employers in a State to the extent that such 
                        rates could vary using the same methodology 
                        employed in such State for regulating premium 
                        rates in the small group market with respect to 
                        health insurance coverage offered in connection 
                        with bona fide associations (within the meaning 
                        of section 2791(d)(3) of the Public Health 
                        Service Act),
                subject to the requirements of section 702(b) relating 
                to contribution rates.
            ``(3) Floor for number of covered individuals with respect 
        to certain plans.--If any benefit option under the plan does 
        not consist of health insurance coverage, the plan has as of 
        the beginning of the plan year not fewer than 1,000 
        participants and beneficiaries.
            ``(4) Marketing requirements.--
                    ``(A) In general.--If a benefit option which 
                consists of health insurance coverage is offered under 
                the plan, State-licensed insurance agents shall be used 
                to distribute to small employers coverage which does 
                not consist of health insurance coverage in a manner 
                comparable to the manner in which such agents are used 
                to distribute health insurance coverage.
                    ``(B) State-licensed insurance agents.--For 
                purposes of subparagraph (A), the term `State-licensed 
                insurance agents' means one or more agents who are 
                licensed in a State and are subject to the laws of such 
                State relating to licensure, qualification, testing, 
                examination, and continuing education of persons 
                authorized to offer, sell, or solicit health insurance 
                coverage in such State.
            ``(5) Regulatory requirements.--Such other requirements as 
        the applicable authority determines are necessary to carry out 
        the purposes of this part, which shall be prescribed by the 
        applicable authority by regulation.
    ``(b) Ability of Association Health Plans To Design Benefit 
Options.--Subject to section 514(d), nothing in this part or any 
provision of State law (as defined in section 514(c)(1)) shall be 
construed to preclude an association health plan, or a health insurance 
issuer offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion in 
selecting the specific items and services consisting of medical care to 
be included as benefits under such plan or coverage, except (subject to 
section 514) in the case of (1) any law to the extent that it is not 
preempted under section 731(a)(1) with respect to matters governed by 
section 711, 712, or 713, or (2) any law of the State with which filing 
and approval of a policy type offered by the plan was initially 
obtained to the extent that such law prohibits an exclusion of a 
specific disease from such coverage.

``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR 
              PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH 
              INSURANCE COVERAGE.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if--
            ``(1) the benefits under the plan consist solely of health 
        insurance coverage; or
            ``(2) if the plan provides any additional benefit options 
        which do not consist of health insurance coverage, the plan--
                    ``(A) establishes and maintains reserves with 
                respect to such additional benefit options, in amounts 
                recommended by the qualified actuary, consisting of--
                            ``(i) a reserve sufficient for unearned 
                        contributions;
                            ``(ii) a reserve sufficient for benefit 
                        liabilities which have been incurred, which 
                        have not been satisfied, and for which risk of 
                        loss has not yet been transferred, and for 
                        expected administrative costs with respect to 
                        such benefit liabilities;
                            ``(iii) a reserve sufficient for any other 
                        obligations of the plan; and
                            ``(iv) a reserve sufficient for a margin of 
                        error and other fluctuations, taking into 
                        account the specific circumstances of the plan; 
                        and
                    ``(B) establishes and maintains aggregate and 
                specific excess/stop loss insurance and solvency 
                indemnification, with respect to such additional 
                benefit options for which risk of loss has not yet been 
                transferred, as follows:
                            ``(i) The plan shall secure aggregate 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is not greater than 125 
                        percent of expected gross annual claims. The 
                        applicable authority may by regulation provide 
                        for upward adjustments in the amount of such 
                        percentage in specified circumstances in which 
                        the plan specifically provides for and 
                        maintains reserves in excess of the amounts 
                        required under subparagraph (A).
                            ``(ii) The plan shall secure specific 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is at least equal to an 
                        amount recommended by the plan's qualified 
                        actuary. The applicable authority may by 
                        regulation provide for adjustments in the 
                        amount of such insurance in specified 
                        circumstances in which the plan specifically 
                        provides for and maintains reserves in excess 
                        of the amounts required under subparagraph (A).
                            ``(iii) The plan shall secure 
                        indemnification insurance for any claims which 
                        the plan is unable to satisfy by reason of a 
                        plan termination.
Any person issuing to a plan insurance described in clause (I), (ii), 
or (iii) of subparagraph (B) shall notify the Secretary of any failure 
of premium payment meriting cancellation of the policy prior to 
undertaking such a cancellation. Any regulations prescribed by the 
applicable authority pursuant to clause (I) or (ii) of subparagraph (B) 
may allow for such adjustments in the required levels of excess/stop 
loss insurance as the qualified actuary may recommend, taking into 
account the specific circumstances of the plan.
    ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case 
of any association health plan described in subsection (a)(2), the 
requirements of this subsection are met if the plan establishes and 
maintains surplus in an amount at least equal to--
            ``(1) $500,000, or
            ``(2) such greater amount (but not greater than $2,000,000) 
        as may be set forth in regulations prescribed by the applicable 
        authority, considering the level of aggregate and specific 
        excess/stop loss insurance provided with respect to such plan 
        and other factors related to solvency risk, such as the plan's 
        projected levels of participation or claims, the nature of the 
        plan's liabilities, and the types of assets available to assure 
        that such liabilities are met.
    ``(c) Additional Requirements.--In the case of any association 
health plan described in subsection (a)(2), the applicable authority 
may provide such additional requirements relating to reserves, excess/
stop loss insurance, and indemnification insurance as the applicable 
authority considers appropriate. Such requirements may be provided by 
regulation with respect to any such plan or any class of such plans.
    ``(d) Adjustments for Excess/Stop Loss Insurance.--The applicable 
authority may provide for adjustments to the levels of reserves 
otherwise required under subsections (a) and (b) with respect to any 
plan or class of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans.
    ``(e) Alternative Means of Compliance.--The applicable authority 
may permit an association health plan described in subsection (a)(2) to 
substitute, for all or part of the requirements of this section (except 
subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless 
arrangement, or other financial arrangement as the applicable authority 
determines to be adequate to enable the plan to fully meet all its 
financial obligations on a timely basis and is otherwise no less 
protective of the interests of participants and beneficiaries than the 
requirements for which it is substituted. The applicable authority may 
take into account, for purposes of this subsection, evidence provided 
by the plan or sponsor which demonstrates an assumption of liability 
with respect to the plan. Such evidence may be in the form of a 
contract of indemnification, lien, bonding, insurance, letter of 
credit, recourse under applicable terms of the plan in the form of 
assessments of participating employers, security, or other financial 
arrangement.
    ``(f) Measures To Ensure Continued Payment of Benefits by Certain 
Plans in Distress.--
            ``(1) Payments by certain plans to association health plan 
        fund.--
                    ``(A) In general.--In the case of an association 
                health plan described in subsection (a)(2), the 
                requirements of this subsection are met if the plan 
                makes payments into the Association Health Plan Fund 
                under this subparagraph when they are due. Such 
                payments shall consist of annual payments in the amount 
                of $5,000, and, in addition to such annual payments, 
                such supplemental payments as the Secretary may 
                determine to be necessary under paragraph (2). Payments 
                under this paragraph are payable to the Fund at the 
                time determined by the Secretary. Initial payments are 
                due in advance of certification under this part. 
                Payments shall continue to accrue until a plan's assets 
                are distributed pursuant to a termination procedure.
                    ``(B) Penalties for failure to make payments.--If 
                any payment is not made by a plan when it is due, a 
                late payment charge of not more than 100 percent of the 
                payment which was not timely paid shall be payable by 
                the plan to the Fund.
                    ``(C) Continued duty of the secretary.--The 
                Secretary shall not cease to carry out the provisions 
                of paragraph (2) on account of the failure of a plan to 
                pay any payment when due.
            ``(2) Payments by secretary to continue excess/stop loss 
        insurance coverage and indemnification insurance coverage for 
        certain plans.--In any case in which the applicable authority 
        determines that there is, or that there is reason to believe 
        that there will be: (A) a failure to take necessary corrective 
        actions under section 809(a) with respect to an association 
        health plan described in subsection (a)(2); or (B) a 
        termination of such a plan under section 809(b) or 810(b)(8) 
        (and, if the applicable authority is not the Secretary, 
        certifies such determination to the Secretary), the Secretary 
        shall determine the amounts necessary to make payments to an 
        insurer (designated by the Secretary) to maintain in force 
        excess/stop loss insurance coverage or indemnification 
        insurance coverage for such plan, if the Secretary determines 
        that there is a reasonable expectation that, without such 
        payments, claims would not be satisfied by reason of 
        termination of such coverage. The Secretary shall, to the 
        extent provided in advance in appropriation Acts, pay such 
        amounts so determined to the insurer designated by the 
        Secretary.
            ``(3) Association health plan fund.--
                    ``(A) In general.--There is established on the 
                books of the Treasury a fund to be known as the 
                `Association Health Plan Fund'. The Fund shall be 
                available for making payments pursuant to paragraph 
                (2). The Fund shall be credited with payments received 
                pursuant to paragraph (1)(A), penalties received 
                pursuant to paragraph (1)(B); and earnings on 
                investments of amounts of the Fund under subparagraph 
                (B).
                    ``(B) Investment.--Whenever the Secretary 
                determines that the moneys of the fund are in excess of 
                current needs, the Secretary may request the investment 
                of such amounts as the Secretary determines advisable 
                by the Secretary of the Treasury in obligations issued 
                or guaranteed by the United States.
    ``(g) Excess/Stop Loss Insurance.--For purposes of this section--
            ``(1) Aggregate excess/stop loss insurance.--The term 
        `aggregate excess/stop loss insurance' means, in connection 
        with an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to aggregate claims under the plan in excess of 
                an amount or amounts specified in such contract;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
            ``(2) Specific excess/stop loss insurance.--The term 
        `specific excess/stop loss insurance' means, in connection with 
        an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to claims under the plan in connection with a 
                covered individual in excess of an amount or amounts 
                specified in such contract in connection with such 
                covered individual;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
    ``(h) Indemnification Insurance.--For purposes of this section, the 
term `indemnification insurance' means, in connection with an 
association health plan, a contract--
            ``(1) under which an insurer (meeting such minimum 
        standards as the applicable authority may prescribe by 
        regulation) provides for payment to the plan with respect to 
        claims under the plan which the plan is unable to satisfy by 
        reason of a termination pursuant to section 809(b) (relating to 
        mandatory termination);
            ``(2) which is guaranteed renewable and noncancellable for 
        any reason (except as the applicable authority may prescribe by 
        regulation); and
            ``(3) which allows for payment of premiums by any third 
        party on behalf of the insured plan.
    ``(i) Reserves.--For purposes of this section, the term `reserves' 
means, in connection with an association health plan, plan assets which 
meet the fiduciary standards under part 4 and such additional 
requirements regarding liquidity as the applicable authority may 
prescribe by regulation.
    ``(j) Solvency Standards Working Group.--
            ``(1) In general.--Within 90 days after the date of the 
        enactment of the Making Health Care More Affordable Act of 
        2008, the applicable authority shall establish a Solvency 
        Standards Working Group. In prescribing the initial regulations 
        under this section, the applicable authority shall take into 
        account the recommendations of such Working Group.
            ``(2) Membership.--The Working Group shall consist of not 
        more than 15 members appointed by the applicable authority. The 
        applicable authority shall include among persons invited to 
        membership on the Working Group at least one of each of the 
        following:
                    ``(A) a representative of the National Association 
                of Insurance Commissioners;
                    ``(B) a representative of the American Academy of 
                Actuaries;
                    ``(C) a representative of the State governments, or 
                their interests;
                    ``(D) a representative of existing self-insured 
                arrangements, or their interests;
                    ``(E) a representative of associations of the type 
                referred to in section 801(b)(1), or their interests; 
                and
                    ``(F) a representative of multiemployer plans that 
                are group health plans, or their interests.

``SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS.

    ``(a) Filing Fee.--Under the procedure prescribed pursuant to 
section 802(a), an association health plan shall pay to the applicable 
authority at the time of filing an application for certification under 
this part a filing fee in the amount of $5,000, which shall be 
available in the case of the Secretary, to the extent provided in 
appropriation Acts, for the sole purpose of administering the 
certification procedures applicable with respect to association health 
plans.
    ``(b) Information To Be Included in Application for 
Certification.--An application for certification under this part meets 
the requirements of this section only if it includes, in a manner and 
form which shall be prescribed by the applicable authority by 
regulation, at least the following information:
            ``(1) Identifying information.--The names and addresses 
        of--
                    ``(A) the sponsor; and
                    ``(B) the members of the board of trustees of the 
                plan.
            ``(2) States in which plan intends to do business.--The 
        States in which participants and beneficiaries under the plan 
        are to be located and the number of them expected to be located 
        in each such State.
            ``(3) Bonding requirements.--Evidence provided by the board 
        of trustees that the bonding requirements of section 412 will 
        be met as of the date of the application or (if later) 
        commencement of operations.
            ``(4) Plan documents.--A copy of the documents governing 
        the plan (including any bylaws and trust agreements), the 
        summary plan description, and other material describing the 
        benefits that will be provided to participants and 
        beneficiaries under the plan.
            ``(5) Agreements with service providers.--A copy of any 
        agreements between the plan and contract administrators and 
        other service providers.
            ``(6) Funding report.--In the case of association health 
        plans providing benefits options in addition to health 
        insurance coverage, a report setting forth information with 
        respect to such additional benefit options determined as of a 
        date within the 120-day period ending with the date of the 
        application, including the following:
                    ``(A) Reserves.--A statement, certified by the 
                board of trustees of the plan, and a statement of 
                actuarial opinion, signed by a qualified actuary, that 
                all applicable requirements of section 806 are or will 
                be met in accordance with regulations which the 
                applicable authority shall prescribe.
                    ``(B) Adequacy of contribution rates.--A statement 
                of actuarial opinion, signed by a qualified actuary, 
                which sets forth a description of the extent to which 
                contribution rates are adequate to provide for the 
                payment of all obligations and the maintenance of 
                required reserves under the plan for the 12-month 
                period beginning with such date within such 120-day 
                period, taking into account the expected coverage and 
                experience of the plan. If the contribution rates are 
                not fully adequate, the statement of actuarial opinion 
                shall indicate the extent to which the rates are 
                inadequate and the changes needed to ensure adequacy.
                    ``(C) Current and projected value of assets and 
                liabilities.--A statement of actuarial opinion signed 
                by a qualified actuary, which sets forth the current 
                value of the assets and liabilities accumulated under 
                the plan and a projection of the assets, liabilities, 
                income, and expenses of the plan for the 12-month 
                period referred to in subparagraph (B). The income 
                statement shall identify separately the plan's 
                administrative expenses and claims.
                    ``(D) Costs of coverage to be charged and other 
                expenses.--A statement of the costs of coverage to be 
                charged, including an itemization of amounts for 
                administration, reserves, and other expenses associated 
                with the operation of the plan.
                    ``(E) Other information.--Any other information as 
                may be determined by the applicable authority, by 
                regulation, as necessary to carry out the purposes of 
                this part.
    ``(c) Filing Notice of Certification With States.--A certification 
granted under this part to an association health plan shall not be 
effective unless written notice of such certification is filed with the 
applicable State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are located. For 
purposes of this subsection, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed.
    ``(d) Notice of Material Changes.--In the case of any association 
health plan certified under this part, descriptions of material changes 
in any information which was required to be submitted with the 
application for the certification under this part shall be filed in 
such form and manner as shall be prescribed by the applicable authority 
by regulation. The applicable authority may require by regulation prior 
notice of material changes with respect to specified matters which 
might serve as the basis for suspension or revocation of the 
certification.
    ``(e) Reporting Requirements for Certain Association Health 
Plans.--An association health plan certified under this part which 
provides benefit options in addition to health insurance coverage for 
such plan year shall meet the requirements of section 103 by filing an 
annual report under such section which shall include information 
described in subsection (b)(6) with respect to the plan year and, 
notwithstanding section 104(a)(1)(A), shall be filed with the 
applicable authority not later than 90 days after the close of the plan 
year (or on such later date as may be prescribed by the applicable 
authority). The applicable authority may require by regulation such 
interim reports as it considers appropriate.
    ``(f) Engagement of Qualified Actuary.--The board of trustees of 
each association health plan which provides benefits options in 
addition to health insurance coverage and which is applying for 
certification under this part or is certified under this part shall 
engage, on behalf of all participants and beneficiaries, a qualified 
actuary who shall be responsible for the preparation of the materials 
comprising information necessary to be submitted by a qualified actuary 
under this part. The qualified actuary shall utilize such assumptions 
and techniques as are necessary to enable such actuary to form an 
opinion as to whether the contents of the matters reported under this 
part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the plan and to reasonable expectations; and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the plan.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.

``SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

    ``Except as provided in section 809(b), an association health plan 
which is or has been certified under this part may terminate (upon or 
at any time after cessation of accruals in benefit liabilities) only if 
the board of trustees, not less than 60 days before the proposed 
termination date--
            ``(1) provides to the participants and beneficiaries a 
        written notice of intent to terminate stating that such 
        termination is intended and the proposed termination date;
            ``(2) develops a plan for winding up the affairs of the 
        plan in connection with such termination in a manner which will 
        result in timely payment of all benefits for which the plan is 
        obligated; and
            ``(3) submits such plan in writing to the applicable 
        authority.
Actions required under this section shall be taken in such form and 
manner as may be prescribed by the applicable authority by regulation.

``SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

    ``(a) Actions To Avoid Depletion of Reserves.--An association 
health plan which is certified under this part and which provides 
benefits other than health insurance coverage shall continue to meet 
the requirements of section 806, irrespective of whether such 
certification continues in effect. The board of trustees of such plan 
shall determine quarterly whether the requirements of section 806 are 
met. In any case in which the board determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the applicable authority makes such a determination and so notifies 
the board, the board shall immediately notify the qualified actuary 
engaged by the plan, and such actuary shall, not later than the end of 
the next following month, make such recommendations to the board for 
corrective action as the actuary determines necessary to ensure 
compliance with section 806. Not later than 30 days after receiving 
from the actuary recommendations for corrective actions, the board 
shall notify the applicable authority (in such form and manner as the 
applicable authority may prescribe by regulation) of such 
recommendations of the actuary for corrective action, together with a 
description of the actions (if any) that the board has taken or plans 
to take in response to such recommendations. The board shall thereafter 
report to the applicable authority, in such form and frequency as the 
applicable authority may specify to the board, regarding corrective 
action taken by the board until the requirements of section 806 are 
met.
    ``(b) Mandatory Termination.--In any case in which--
            ``(1) the applicable authority has been notified under 
        subsection (a) (or by an issuer of excess/stop loss insurance 
        or indemnity insurance pursuant to section 806(a)) of a failure 
        of an association health plan which is or has been certified 
        under this part and is described in section 806(a)(2) to meet 
        the requirements of section 806 and has not been notified by 
        the board of trustees of the plan that corrective action has 
        restored compliance with such requirements; and
            ``(2) the applicable authority determines that there is a 
        reasonable expectation that the plan will continue to fail to 
        meet the requirements of section 806,
the board of trustees of the plan shall, at the direction of the 
applicable authority, terminate the plan and, in the course of the 
termination, take such actions as the applicable authority may require, 
including satisfying any claims referred to in section 
806(a)(2)(B)(iii) and recovering for the plan any liability under 
subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 
that the affairs of the plan will be, to the maximum extent possible, 
wound up in a manner which will result in timely provision of all 
benefits for which the plan is obligated.

``SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION 
              HEALTH PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO 
              HEALTH INSURANCE COVERAGE.

    ``(a) Appointment of Secretary as Trustee for Insolvent Plans.--
Whenever the Secretary determines that an association health plan which 
is or has been certified under this part and which is described in 
section 806(a)(2) will be unable to provide benefits when due or is 
otherwise in a financially hazardous condition, as shall be defined by 
the Secretary by regulation, the Secretary shall, upon notice to the 
plan, apply to the appropriate United States district court for 
appointment of the Secretary as trustee to administer the plan for the 
duration of the insolvency. The plan may appear as a party and other 
interested persons may intervene in the proceedings at the discretion 
of the court. The court shall appoint such Secretary trustee if the 
court determines that the trusteeship is necessary to protect the 
interests of the participants and beneficiaries or providers of medical 
care or to avoid any unreasonable deterioration of the financial 
condition of the plan. The trusteeship of such Secretary shall continue 
until the conditions described in the first sentence of this subsection 
are remedied or the plan is terminated.
    ``(b) Powers as Trustee.--The Secretary, upon appointment as 
trustee under subsection (a), shall have the power--
            ``(1) to do any act authorized by the plan, this title, or 
        other applicable provisions of law to be done by the plan 
        administrator or any trustee of the plan;
            ``(2) to require the transfer of all (or any part) of the 
        assets and records of the plan to the Secretary as trustee;
            ``(3) to invest any assets of the plan which the Secretary 
        holds in accordance with the provisions of the plan, 
        regulations prescribed by the Secretary, and applicable 
        provisions of law;
            ``(4) to require the sponsor, the plan administrator, any 
        participating employer, and any employee organization 
        representing plan participants to furnish any information with 
        respect to the plan which the Secretary as trustee may 
        reasonably need in order to administer the plan;
            ``(5) to collect for the plan any amounts due the plan and 
        to recover reasonable expenses of the trusteeship;
            ``(6) to commence, prosecute, or defend on behalf of the 
        plan any suit or proceeding involving the plan;
            ``(7) to issue, publish, or file such notices, statements, 
        and reports as may be required by the Secretary by regulation 
        or required by any order of the court;
            ``(8) to terminate the plan (or provide for its termination 
        in accordance with section 809(b)) and liquidate the plan 
        assets, to restore the plan to the responsibility of the 
        sponsor, or to continue the trusteeship;
            ``(9) to provide for the enrollment of plan participants 
        and beneficiaries under appropriate coverage options; and
            ``(10) to do such other acts as may be necessary to comply 
        with this title or any order of the court and to protect the 
        interests of plan participants and beneficiaries and providers 
        of medical care.
    ``(c) Notice of Appointment.--As soon as practicable after the 
Secretary's appointment as trustee, the Secretary shall give notice of 
such appointment to--
            ``(1) the sponsor and plan administrator;
            ``(2) each participant;
            ``(3) each participating employer; and
            ``(4) if applicable, each employee organization which, for 
        purposes of collective bargaining, represents plan 
        participants.
    ``(d) Additional Duties.--Except to the extent inconsistent with 
the provisions of this title, or as may be otherwise ordered by the 
court, the Secretary, upon appointment as trustee under this section, 
shall be subject to the same duties as those of a trustee under section 
704 of title 11, United States Code, and shall have the duties of a 
fiduciary for purposes of this title.
    ``(e) Other Proceedings.--An application by the Secretary under 
this subsection may be filed notwithstanding the pendency in the same 
or any other court of any bankruptcy, mortgage foreclosure, or equity 
receivership proceeding, or any proceeding to reorganize, conserve, or 
liquidate such plan or its property, or any proceeding to enforce a 
lien against property of the plan.
    ``(f) Jurisdiction of Court.--
            ``(1) In general.--Upon the filing of an application for 
        the appointment as trustee or the issuance of a decree under 
        this section, the court to which the application is made shall 
        have exclusive jurisdiction of the plan involved and its 
        property wherever located with the powers, to the extent 
        consistent with the purposes of this section, of a court of the 
        United States having jurisdiction over cases under chapter 11 
        of title 11, United States Code. Pending an adjudication under 
        this section such court shall stay, and upon appointment by it 
        of the Secretary as trustee, such court shall continue the stay 
        of, any pending mortgage foreclosure, equity receivership, or 
        other proceeding to reorganize, conserve, or liquidate the 
        plan, the sponsor, or property of such plan or sponsor, and any 
        other suit against any receiver, conservator, or trustee of the 
        plan, the sponsor, or property of the plan or sponsor. Pending 
        such adjudication and upon the appointment by it of the 
        Secretary as trustee, the court may stay any proceeding to 
        enforce a lien against property of the plan or the sponsor or 
        any other suit against the plan or the sponsor.
            ``(2) Venue.--An action under this section may be brought 
        in the judicial district where the sponsor or the plan 
        administrator resides or does business or where any asset of 
        the plan is situated. A district court in which such action is 
        brought may issue process with respect to such action in any 
        other judicial district.
    ``(g) Personnel.--In accordance with regulations which shall be 
prescribed by the Secretary, the Secretary shall appoint, retain, and 
compensate accountants, actuaries, and other professional service 
personnel as may be necessary in connection with the Secretary's 
service as trustee under this section.

``SEC. 811. STATE ASSESSMENT AUTHORITY.

    ``(a) In General.--Notwithstanding section 514, a State may impose 
by law a contribution tax on an association health plan described in 
section 806(a)(2), if the plan commenced operations in such State after 
the date of the enactment of the Making Health Care More Affordable Act 
of 2008.
    ``(b) Contribution Tax.--For purposes of this section, the term 
`contribution tax' imposed by a State on an association health plan 
means any tax imposed by such State if--
            ``(1) such tax is computed by applying a rate to the amount 
        of premiums or contributions, with respect to individuals 
        covered under the plan who are residents of such State, which 
        are received by the plan from participating employers located 
        in such State or from such individuals;
            ``(2) the rate of such tax does not exceed the rate of any 
        tax imposed by such State on premiums or contributions received 
        by insurers or health maintenance organizations for health 
        insurance coverage offered in such State in connection with a 
        group health plan;
            ``(3) such tax is otherwise nondiscriminatory; and
            ``(4) the amount of any such tax assessed on the plan is 
        reduced by the amount of any tax or assessment otherwise 
        imposed by the State on premiums, contributions, or both 
        received by insurers or health maintenance organizations for 
        health insurance coverage, aggregate excess/stop loss insurance 
        (as defined in section 806(g)(1)), specific excess/stop loss 
        insurance (as defined in section 806(g)(2)), other insurance 
        related to the provision of medical care under the plan, or any 
        combination thereof provided by such insurers or health 
        maintenance organizations in such State in connection with such 
        plan.

``SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION.

    ``(a) Definitions.--For purposes of this part--
            ``(1) Group health plan.--The term `group health plan' has 
        the meaning provided in section 733(a)(1) (after applying 
        subsection (b) of this section).
            ``(2) Medical care.--The term `medical care' has the 
        meaning provided in section 733(a)(2).
            ``(3) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning provided in section 
        733(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning provided in section 733(b)(2).
            ``(5) Applicable authority.--The term `applicable 
        authority' means the Secretary, except that, in connection with 
        any exercise of the Secretary's authority regarding which the 
        Secretary is required under section 506(d) to consult with a 
        State, such term means the Secretary, in consultation with such 
        State.
            ``(6) Health status-related factor.--The term `health 
        status-related factor' has the meaning provided in section 
        733(d)(2).
            ``(7) Individual market.--
                    ``(A) In general.--The term `individual market' 
                means the market for health insurance coverage offered 
                to individuals other than in connection with a group 
                health plan.
                    ``(B) Treatment of very small groups.--
                            ``(i) In general.--Subject to clause (ii), 
                        such term includes coverage offered in 
                        connection with a group health plan that has 
                        fewer than 2 participants as current employees 
                        or participants described in section 732(d)(3) 
                        on the first day of the plan year.
                            ``(ii) State exception.--Clause (I) shall 
                        not apply in the case of health insurance 
                        coverage offered in a State if such State 
                        regulates the coverage described in such clause 
                        in the same manner and to the same extent as 
                        coverage in the small group market (as defined 
                        in section 2791(e)(5) of the Public Health 
                        Service Act) is regulated by such State.
            ``(8) Participating employer.--The term `participating 
        employer' means, in connection with an association health plan, 
        any employer, if any individual who is an employee of such 
        employer, a partner in such employer, or a self-employed 
        individual who is such employer (or any dependent, as defined 
        under the terms of the plan, of such individual) is or was 
        covered under such plan in connection with the status of such 
        individual as such an employee, partner, or self-employed 
        individual in relation to the plan.
            ``(9) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of title XXVII of the Public Health Service Act 
        for the State involved with respect to such issuer.
            ``(10) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries.
            ``(11) Affiliated member.--The term `affiliated member' 
        means, in connection with a sponsor--
                    ``(A) a person who is otherwise eligible to be a 
                member of the sponsor but who elects an affiliated 
                status with the sponsor,
                    ``(B) in the case of a sponsor with members which 
                consist of associations, a person who is a member of 
                any such association and elects an affiliated status 
                with the sponsor, or
                    ``(C) in the case of an association health plan in 
                existence on the date of the enactment of the Making 
                Health Care More Affordable Act of 2008, a person 
                eligible to be a member of the sponsor or one of its 
                member associations.
            ``(12) Large employer.--The term `large employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who employed an average of at least 51 
        employees on business days during the preceding calendar year 
        and who employs at least 2 employees on the first day of the 
        plan year.
            ``(13) Small employer.--The term `small employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who is not a large employer.
    ``(b) Rules of Construction.--
            ``(1) Employers and employees.--For purposes of determining 
        whether a plan, fund, or program is an employee welfare benefit 
        plan which is an association health plan, and for purposes of 
        applying this title in connection with such plan, fund, or 
        program so determined to be such an employee welfare benefit 
        plan--
                    ``(A) in the case of a partnership, the term 
                `employer' (as defined in section 3(5)) includes the 
                partnership in relation to the partners, and the term 
                `employee' (as defined in section 3(6)) includes any 
                partner in relation to the partnership; and
                    ``(B) in the case of a self-employed individual, 
                the term `employer' (as defined in section 3(5)) and 
                the term `employee' (as defined in section 3(6)) shall 
                include such individual.
            ``(2) Plans, funds, and programs treated as employee 
        welfare benefit plans.--In the case of any plan, fund, or 
        program which was established or is maintained for the purpose 
        of providing medical care (through the purchase of insurance or 
        otherwise) for employees (or their dependents) covered 
        thereunder and which demonstrates to the Secretary that all 
        requirements for certification under this part would be met 
        with respect to such plan, fund, or program if such plan, fund, 
        or program were a group health plan, such plan, fund, or 
        program shall be treated for purposes of this title as an 
        employee welfare benefit plan on and after the date of such 
        demonstration.''.
    (b) Conforming Amendments to Preemption Rules.--
            (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is 
        amended by adding at the end the following new subparagraph:
    ``(E) The preceding subparagraphs of this paragraph do not apply 
with respect to any State law in the case of an association health plan 
which is certified under part 8.''.
            (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
                    (A) in subsection (b)(4), by striking ``Subsection 
                (a)'' and inserting ``Subsections (a) and (d)'';
                    (B) in subsection (b)(5), by striking ``subsection 
                (a)'' in subparagraph (A) and inserting ``subsection 
                (a) of this section and subsections (a)(2)(B) and (b) 
                of section 805'', and by striking ``subsection (a)'' in 
                subparagraph (B) and inserting ``subsection (a) of this 
                section or subsection (a)(2)(B) or (b) of section 
                805'';
                    (C) by redesignating subsection (d) as subsection 
                (e); and
                    (D) by inserting after subsection (c) the following 
                new subsection:
    ``(d)(1) Except as provided in subsection (b)(4), the provisions of 
this title shall supersede any and all State laws insofar as they may 
now or hereafter preclude, or have the effect of precluding, a health 
insurance issuer from offering health insurance coverage in connection 
with an association health plan which is certified under part 8.
    ``(2) Except as provided in paragraphs (4) and (5) of subsection 
(b) of this section--
            ``(A) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan 
        certified under part 8 to a participating employer operating in 
        such State, the provisions of this title shall supersede any 
        and all laws of such State insofar as they may preclude a 
        health insurance issuer from offering health insurance coverage 
        of the same policy type to other employers operating in the 
        State which are eligible for coverage under such association 
        health plan, whether or not such other employers are 
        participating employers in such plan.
            ``(B) In any case in which health insurance coverage of any 
        policy type is offered in a State under an association health 
        plan certified under part 8 and the filing, with the applicable 
        State authority (as defined in section 812(a)(9)), of the 
        policy form in connection with such policy type is approved by 
        such State authority, the provisions of this title shall 
        supersede any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as they may 
        preclude, upon the filing in the same form and manner of such 
        policy form with the applicable State authority in such other 
        State, the approval of the filing in such other State.
    ``(3) Nothing in subsection (b)(6)(E) or the preceding provisions 
of this subsection shall be construed, with respect to health insurance 
issuers or health insurance coverage, to supersede or impair the law of 
any State--
            ``(A) providing solvency standards or similar standards 
        regarding the adequacy of insurer capital, surplus, reserves, 
        or contributions, or
            ``(B) relating to prompt payment of claims.
    ``(4) For additional provisions relating to association health 
plans, see subsections (a)(2)(B) and (b) of section 805.
    ``(5) For purposes of this subsection, the term `association health 
plan' has the meaning provided in section 801(a), and the terms `health 
insurance coverage', `participating employer', and `health insurance 
issuer' have the meanings provided such terms in section 812, 
respectively.''.
            (3) Section 514(b)(6)(A) of such Act (29 U.S.C. 
        1144(b)(6)(A)) is amended--
                    (A) in clause (I)(II), by striking ``and'' at the 
                end;
                    (B) in clause (ii), by inserting ``and which does 
                not provide medical care (within the meaning of section 
                733(a)(2)),'' after ``arrangement,'', and by striking 
                ``title.'' and inserting ``title, and''; and
                    (C) by adding at the end the following new clause:
            ``(iii) subject to subparagraph (E), in the case of any 
        other employee welfare benefit plan which is a multiple 
        employer welfare arrangement and which provides medical care 
        (within the meaning of section 733(a)(2)), any law of any State 
        which regulates insurance may apply.''.
            (4) Section 514(e) of such Act (as redesignated by 
        paragraph (2)(C)) is amended--
                    (A) by striking ``Nothing'' and inserting ``(1) 
                Except as provided in paragraph (2), nothing''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(2) Nothing in any other provision of law enacted on or after the 
date of the enactment of the Making Health Care More Affordable Act of 
2008 shall be construed to alter, amend, modify, invalidate, impair, or 
supersede any provision of this title, except by specific cross-
reference to the affected section.''.
    (c) Plan Sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
102(16)(B)) is amended by adding at the end the following new sentence: 
``Such term also includes a person serving as the sponsor of an 
association health plan under part 8.''.
    (d) Disclosure of Solvency Protections Related to Self-Insured and 
Fully Insured Options Under Association Health Plans.--Section 102(b) 
of such Act (29 U.S.C. 102(b)) is amended by adding at the end the 
following: ``An association health plan shall include in its summary 
plan description, in connection with each benefit option, a description 
of the form of solvency or guarantee fund protection secured pursuant 
to this Act or applicable State law, if any.''.
    (e) Savings Clause.--Section 731(c) of such Act is amended by 
inserting ``or part 8'' after ``this part''.
    (f) Report to the Congress Regarding Certification of Self-Insured 
Association Health Plans.--Not later than January 1, 2012, the 
Secretary of Labor shall report to the Committee on Education and the 
Workforce of the House of Representatives and the Committee on Health, 
Education, Labor, and Pensions of the Senate the effect association 
health plans have had, if any, on reducing the number of uninsured 
individuals.
    (g) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating 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.''.

SEC. 202. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (I), by inserting after ``control group,'' 
        the following: ``except that, in any case in which the benefit 
        referred to in subparagraph (A) consists of medical care (as 
        defined in section 812(a)(2)), two or more trades or 
        businesses, whether or not incorporated, shall be deemed a 
        single employer for any plan year of such plan, or any fiscal 
        year of such other arrangement, if such trades or businesses 
        are within the same control group during such year or at any 
        time during the preceding 1-year period,'';
            (2) in clause (iii), by striking ``(iii) the 
        determination'' and inserting the following:
            ``(iii)(I) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), the determination of whether a trade or 
        business is under `common control' with another trade or 
        business shall be determined under regulations of the Secretary 
        applying principles consistent and coextensive with the 
        principles applied in determining whether employees of two or 
        more trades or businesses are treated as employed by a single 
        employer under section 4001(b), except that, for purposes of 
        this paragraph, an interest of greater than 25 percent may not 
        be required as the minimum interest necessary for common 
        control, or
            ``(II) in any other case, the determination'';
            (3) by redesignating clauses (iv) and (v) as clauses (v) 
        and (vi), respectively; and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), in determining, after the application of 
        clause (I), whether benefits are provided to employees of two 
        or more employers, the arrangement shall be treated as having 
        only one participating employer if, after the application of 
        clause (I), the number of individuals who are employees and 
        former employees of any one participating employer and who are 
        covered under the arrangement is greater than 75 percent of the 
        aggregate number of all individuals who are employees or former 
        employees of participating employers and who are covered under 
        the arrangement,''.

SEC. 203. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION HEALTH PLANS.

    (a) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1131) is amended--
            (1) by inserting ``(a)'' after ``Sec. 501.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Any person who willfully falsely represents, to any employee, 
any employee's beneficiary, any employer, the Secretary, or any State, 
a plan or other arrangement established or maintained for the purpose 
of offering or providing any benefit described in section 3(1) to 
employees or their beneficiaries as--
            ``(1) being an association health plan which has been 
        certified under part 8;
            ``(2) having been established or maintained under or 
        pursuant to one or more collective bargaining agreements which 
        are reached pursuant to collective bargaining described in 
        section 8(d) of the National Labor Relations Act (29 U.S.C. 
        158(d)) or paragraph Fourth of section 2 of the Railway Labor 
        Act (45 U.S.C. 152, paragraph Fourth) or which are reached 
        pursuant to labor-management negotiations under similar 
        provisions of State public employee relations laws; or
            ``(3) being a plan or arrangement described in section 
        3(40)(A)(I),
shall, upon conviction, be imprisoned not more than 5 years, be fined 
under title 18, United States Code, or both.''.
    (b) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(n) Association Health Plan Cease and Desist Orders.--
            ``(1) In general.--Subject to paragraph (2), upon 
        application by the Secretary showing the operation, promotion, 
        or marketing of an association health plan (or similar 
        arrangement providing benefits consisting of medical care (as 
        defined in section 733(a)(2))) that--
                    ``(A) is not certified under part 8, is subject 
                under section 514(b)(6) to the insurance laws of any 
                State in which the plan or arrangement offers or 
                provides benefits, and is not licensed, registered, or 
                otherwise approved under the insurance laws of such 
                State; or
                    ``(B) is an association health plan certified under 
                part 8 and is not operating in accordance with the 
                requirements under part 8 for such certification,
        a district court of the United States shall enter an order 
        requiring that the plan or arrangement cease activities.
            ``(2) Exception.--Paragraph (1) shall not apply in the case 
        of an association health plan or other arrangement if the plan 
        or arrangement shows that--
                    ``(A) all benefits under it referred to in 
                paragraph (1) consist of health insurance coverage; and
                    ``(B) with respect to each State in which the plan 
                or arrangement offers or provides benefits, the plan or 
                arrangement is operating in accordance with applicable 
                State laws that are not superseded under section 514.
            ``(3) Additional equitable relief.--The court may grant 
        such additional equitable relief, including any relief 
        available under this title, as it deems necessary to protect 
        the interests of the public and of persons having claims for 
        benefits against the plan.''.
    (c) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended by inserting ``(a) In General.--'' before 
``In accordance'', and by adding at the end the following new 
subsection:
    ``(b) Association Health Plans.--The terms of each association 
health plan which is or has been certified under part 8 shall require 
the board of trustees or the named fiduciary (as applicable) to ensure 
that the requirements of this section are met in connection with claims 
filed under the plan.''.

SEC. 204. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(d) Consultation With States With Respect to Association Health 
Plans.--
            ``(1) Agreements with states.--The Secretary shall consult 
        with the State recognized under paragraph (2) with respect to 
        an association health plan regarding the exercise of--
                    ``(A) the Secretary's authority under sections 502 
                and 504 to enforce the requirements for certification 
                under part 8; and
                    ``(B) the Secretary's authority to certify 
                association health plans under part 8 in accordance 
                with regulations of the Secretary applicable to 
                certification under part 8.
            ``(2) Recognition of primary domicile state.--In carrying 
        out paragraph (1), the Secretary shall ensure that only one 
        State will be recognized, with respect to any particular 
        association health plan, as the State with which consultation 
        is required. In carrying out this paragraph--
                    ``(A) in the case of a plan which provides health 
                insurance coverage (as defined in section 812(a)(3)), 
                such State shall be the State with which filing and 
                approval of a policy type offered by the plan was 
                initially obtained, and
                    ``(B) in any other case, the Secretary shall take 
                into account the places of residence of the 
                participants and beneficiaries under the plan and the 
                State in which the trust is maintained.''.

SEC. 205. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES.

    (a) Effective Date.--The amendments made by this title shall take 
effect 1 year after the date of the enactment of this Act. The 
Secretary of Labor shall first issue all regulations necessary to carry 
out the amendments made by this title within 1 year after the date of 
the enactment of this Act.
    (b) Treatment of Certain Existing Health Benefits Programs.--
            (1) In general.--In any case in which, as of the date of 
        the enactment of this Act, an arrangement is maintained in a 
        State for the purpose of providing benefits consisting of 
        medical care for the employees and beneficiaries of its 
        participating employers, at least 200 participating employers 
        make contributions to such arrangement, such arrangement has 
        been in existence for at least 10 years, and such arrangement 
        is licensed under the laws of one or more States to provide 
        such benefits to its participating employers, upon the filing 
        with the applicable authority (as defined in section 812(a)(5) 
        of the Employee Retirement Income Security Act of 1974 (as 
        amended by this subtitle)) by the arrangement of an application 
        for certification of the arrangement under part 8 of subtitle B 
        of title I of such Act--
                    (A) such arrangement shall be deemed to be a group 
                health plan for purposes of title I of such Act;
                    (B) the requirements of sections 801(a) and 803(a) 
                of the Employee Retirement Income Security Act of 1974 
                shall be deemed met with respect to such arrangement;
                    (C) the requirements of section 803(b) of such Act 
                shall be deemed met, if the arrangement is operated by 
                a board of directors which--
                            (i) is elected by the participating 
                        employers, with each employer having one vote; 
                        and
                            (ii) has complete fiscal control over the 
                        arrangement and which is responsible for all 
                        operations of the arrangement;
                    (D) the requirements of section 804(a) of such Act 
                shall be deemed met with respect to such arrangement; 
                and
                    (E) the arrangement may be certified by any 
                applicable authority with respect to its operations in 
                any State only if it operates in such State on the date 
                of certification.
        The provisions of this subsection shall cease to apply with 
        respect to any such arrangement at such time after the date of 
        the enactment of this Act as the applicable requirements of 
        this subsection are not met with respect to such arrangement.
            (2) Definitions.--For purposes of this subsection, the 
        terms ``group health plan'', ``medical care'', and 
        ``participating employer'' shall have the meanings provided in 
        section 812 of the Employee Retirement Income Security Act of 
        1974, except that the reference in paragraph (7) of such 
        section to an ``association health plan'' shall be deemed a 
        reference to an arrangement referred to in this subsection.

        TITLE III--PURCHASE HEALTH INSURANCE ACROSS STATE LINES

SEC. 301. COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE 
              COVERAGE.

    (a) In General.--Title XXVII of the Public Health Service Act (42 
U.S.C. 300gg et seq.) is amended by adding at the end the following new 
part:

``Part D--Cooperative Governing of Individual Health Insurance Coverage

                             ``definitions

    ``Sec. 2795. 
    ``In this part:
            ``(1) Primary state.--The term `primary State' means, with 
        respect to individual health insurance coverage offered by a 
        health insurance issuer, the State designated by the issuer as 
        the State whose covered laws shall govern the health insurance 
        issuer in the sale of such coverage under this part. An issuer, 
        with respect to a particular policy, may only designate one 
        such State as its primary State with respect to all such 
        coverage it offers. Such an issuer may not change the 
        designated primary State with respect to individual health 
        insurance coverage once the policy is issued, except that such 
        a change may be made upon renewal of the policy. With respect 
        to such designated State, the issuer is deemed to be doing 
        business in that State.
            ``(2) Secondary state.--The term `secondary State' means, 
        with respect to individual health insurance coverage offered by 
        a health insurance issuer, any State that is not the primary 
        State. In the case of a health insurance issuer that is selling 
        a policy in, or to a resident of, a secondary State, the issuer 
        is deemed to be doing business in that secondary State.
            ``(3) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2), 
        except that such an issuer must be licensed in the primary 
        State and be qualified to sell individual health insurance 
        coverage in that State.
            ``(4) Individual health insurance coverage.--The term 
        `individual health insurance coverage' means health insurance 
        coverage offered in the individual market, as defined in 
        section 2791(e)(1).
            ``(5) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of this title for the State with respect to the 
        issuer.
            ``(6) Hazardous financial condition.--The term `hazardous 
        financial condition' means that, based on its present or 
        reasonably anticipated financial condition, a health insurance 
        issuer is unlikely to be able--
                    ``(A) to meet obligations to policyholders with 
                respect to known claims and reasonably anticipated 
                claims; or
                    ``(B) to pay other obligations in the normal course 
                of business.
            ``(7) Covered laws.--
                    ``(A) In general.--The term `covered laws' means 
                the laws, rules, regulations, agreements, and orders 
                governing the insurance business pertaining to--
                            ``(i) individual health insurance coverage 
                        issued by a health insurance issuer;
                            ``(ii) the offer, sale, rating (including 
                        medical underwriting), renewal, and issuance of 
                        individual health insurance coverage to an 
                        individual;
                            ``(iii) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of health care and insurance related 
                        services;
                            ``(iv) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of management, operations, and 
                        investment activities of a health insurance 
                        issuer; and
                            ``(v) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of loss control and claims 
                        administration for a health insurance issuer 
                        with respect to liability for which the issuer 
                        provides insurance.
                    ``(B) Exception.--Such term does not include any 
                law, rule, regulation, agreement, or order governing 
                the use of care or cost management techniques, 
                including any requirement related to provider 
                contracting, network access or adequacy, health care 
                data collection, or quality assurance.
            ``(8) State.--The term `State' means the 50 States and 
        includes the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and the Northern Mariana 
        Islands.
            ``(9) Unfair claims settlement practices.--The term `unfair 
        claims settlement practices' means only the following 
        practices:
                    ``(A) Knowingly misrepresenting to claimants and 
                insured individuals relevant facts or policy provisions 
                relating to coverage at issue.
                    ``(B) Failing to acknowledge with reasonable 
                promptness pertinent communications with respect to 
                claims arising under policies.
                    ``(C) Failing to adopt and implement reasonable 
                standards for the prompt investigation and settlement 
                of claims arising under policies.
                    ``(D) Failing to effectuate prompt, fair, and 
                equitable settlement of claims submitted in which 
                liability has become reasonably clear.
                    ``(E) Refusing to pay claims without conducting a 
                reasonable investigation.
                    ``(F) Failing to affirm or deny coverage of claims 
                within a reasonable period of time after having 
                completed an investigation related to those claims.
                    ``(G) A pattern or practice of compelling insured 
                individuals or their beneficiaries to institute suits 
                to recover amounts due under its policies by offering 
                substantially less than the amounts ultimately 
                recovered in suits brought by them.
                    ``(H) A pattern or practice of attempting to settle 
                or settling claims for less than the amount that a 
                reasonable person would believe the insured individual 
                or his or her beneficiary was entitled by reference to 
                written or printed advertising material accompanying or 
                made part of an application.
                    ``(I) Attempting to settle or settling claims on 
                the basis of an application that was materially altered 
                without notice to, or knowledge or consent of, the 
                insured.
                    ``(J) Failing to provide forms necessary to present 
                claims within 15 calendar days of a requests with 
                reasonable explanations regarding their use.
                    ``(K) Attempting to cancel a policy in less time 
                than that prescribed in the policy or by the law of the 
                primary State.
            ``(10) Fraud and abuse.--The term `fraud and abuse' means 
        an act or omission committed by a person who, knowingly and 
        with intent to defraud, commits, or conceals any material 
        information concerning, one or more of the following:
                    ``(A) Presenting, causing to be presented or 
                preparing with knowledge or belief that it will be 
                presented to or by an insurer, a reinsurer, broker or 
                its agent, false information as part of, in support of 
                or concerning a fact material to one or more of the 
                following:
                            ``(i) An application for the issuance or 
                        renewal of an insurance policy or reinsurance 
                        contract.
                            ``(ii) The rating of an insurance policy or 
                        reinsurance contract.
                            ``(iii) A claim for payment or benefit 
                        pursuant to an insurance policy or reinsurance 
                        contract.
                            ``(iv) Premiums paid on an insurance policy 
                        or reinsurance contract.
                            ``(v) Payments made in accordance with the 
                        terms of an insurance policy or reinsurance 
                        contract.
                            ``(vi) A document filed with the 
                        commissioner or the chief insurance regulatory 
                        official of another jurisdiction.
                            ``(vii) The financial condition of an 
                        insurer or reinsurer.
                            ``(viii) The formation, acquisition, 
                        merger, reconsolidation, dissolution or 
                        withdrawal from one or more lines of insurance 
                        or reinsurance in all or part of a State by an 
                        insurer or reinsurer.
                            ``(ix) The issuance of written evidence of 
                        insurance.
                            ``(x) The reinstatement of an insurance 
                        policy.
                    ``(B) Solicitation or acceptance of new or renewal 
                insurance risks on behalf of an insurer reinsurer or 
                other person engaged in the business of insurance by a 
                person who knows or should know that the insurer or 
                other person responsible for the risk is insolvent at 
                the time of the transaction.
                    ``(C) Transaction of the business of insurance in 
                violation of laws requiring a license, certificate of 
                authority or other legal authority for the transaction 
                of the business of insurance.
                    ``(D) Attempt to commit, aiding or abetting in the 
                commission of, or conspiracy to commit the acts or 
                omissions specified in this paragraph.

                          ``application of law

    ``Sec. 2796. 
    ``(a) In General.--The covered laws of the primary State shall 
apply to individual health insurance coverage offered by a health 
insurance issuer in the primary State and in any secondary State, but 
only if the coverage and issuer comply with the conditions of this 
section with respect to the offering of coverage in any secondary 
State.
    ``(b) Exemptions From Covered Laws in a Secondary State.--Except as 
provided in this section, a health insurance issuer with respect to its 
offer, sale, rating (including medical underwriting), renewal, and 
issuance of individual health insurance coverage in any secondary State 
is exempt from any covered laws of the secondary State (and any rules, 
regulations, agreements, or orders sought or issued by such State under 
or related to such covered laws) to the extent that such laws would--
            ``(1) make unlawful, or regulate, directly or indirectly, 
        the operation of the health insurance issuer operating in the 
        secondary State, except that any secondary State may require 
        such an issuer--
                    ``(A) to pay, on a nondiscriminatory basis, 
                applicable premium and other taxes (including high risk 
                pool assessments) which are levied on insurers and 
                surplus lines insurers, brokers, or policyholders under 
                the laws of the State;
                    ``(B) to register with and designate the State 
                insurance commissioner as its agent solely for the 
                purpose of receiving service of legal documents or 
                process;
                    ``(C) to submit to an examination of its financial 
                condition by the State insurance commissioner in any 
                State in which the issuer is doing business to 
                determine the issuer's financial condition, if--
                            ``(i) the State insurance commissioner of 
                        the primary State has not done an examination 
                        within the period recommended by the National 
                        Association of Insurance Commissioners; and
                            ``(ii) any such examination is conducted in 
                        accordance with the examiners' handbook of the 
                        National Association of Insurance Commissioners 
                        and is coordinated to avoid unjustified 
                        duplication and unjustified repetition;
                    ``(D) to comply with a lawful order issued--
                            ``(i) in a delinquency proceeding commenced 
                        by the State insurance commissioner if there 
                        has been a finding of financial impairment 
                        under subparagraph (C); or
                            ``(ii) in a voluntary dissolution 
                        proceeding;
                    ``(E) to comply with an injunction issued by a 
                court of competent jurisdiction, upon a petition by the 
                State insurance commissioner alleging that the issuer 
                is in hazardous financial condition;
                    ``(F) to participate, on a nondiscriminatory basis, 
                in any insurance insolvency guaranty association or 
                similar association to which a health insurance issuer 
                in the State is required to belong;
                    ``(G) to comply with any State law regarding fraud 
                and abuse (as defined in section 2795(10)), except that 
                if the State seeks an injunction regarding the conduct 
                described in this subparagraph, such injunction must be 
                obtained from a court of competent jurisdiction;
                    ``(H) to comply with any State law regarding unfair 
                claims settlement practices (as defined in section 
                2795(9)); or
                    ``(I) to comply with the applicable requirements 
                for independent review under section 2798 with respect 
                to coverage offered in the State;
            ``(2) require any individual health insurance coverage 
        issued by the issuer to be countersigned by an insurance agent 
        or broker residing in that Secondary State; or
            ``(3) otherwise discriminate against the issuer issuing 
        insurance in both the primary State and in any secondary State.
    ``(c) Clear and Conspicuous Disclosure.--A health insurance issuer 
shall provide the following notice, in 12-point bold type, in any 
insurance coverage offered in a secondary State under this part by such 
a health insurance issuer and at renewal of the policy, with the 5 
blank spaces therein being appropriately filled with the name of the 
health insurance issuer, the name of primary State, the name of the 
secondary State, the name of the secondary State, and the name of the 
secondary State, respectively, for the coverage concerned: `Notice: 
This policy is issued by ____________ and is governed by the laws and 
regulations of the State of ____________, and it has met all the laws 
of that State as determined by that State's Department of Insurance. 
This policy may be less expensive than others because it is not subject 
to all of the insurance laws and regulations of the State of 
____________, including coverage of some services or benefits mandated 
by the law of the State of ____________. Additionally, this policy is 
not subject to all of the consumer protection laws or restrictions on 
rate changes of the State of ____________. As with all insurance 
products, before purchasing this policy, you should carefully review 
the policy and determine what health care services the policy covers 
and what benefits it provides, including any exclusions, limitations, 
or conditions for such services or benefits.'
    ``(d) Prohibition on Certain Reclassifications and Premium 
Increases.--
            ``(1) In general.--For purposes of this section, a health 
        insurance issuer that provides individual health insurance 
        coverage to an individual under this part in a primary or 
        secondary State may not upon renewal--
                    ``(A) move or reclassify the individual insured 
                under the health insurance coverage from the class such 
                individual is in at the time of issue of the contract 
                based on the health-status related factors of the 
                individual; or
                    ``(B) increase the premiums assessed the individual 
                for such coverage based on a health status-related 
                factor or change of a health status-related factor or 
                the past or prospective claim experience of the insured 
                individual.
            ``(2) Construction.--Nothing in paragraph (1) shall be 
        construed to prohibit a health insurance issuer--
                    ``(A) from terminating or discontinuing coverage or 
                a class of coverage in accordance with subsections (b) 
                and (c) of section 2742;
                    ``(B) from raising premium rates for all policy 
                holders within a class based on claims experience;
                    ``(C) from changing premiums or offering discounted 
                premiums to individuals who engage in wellness 
                activities at intervals prescribed by the issuer, if 
                such premium changes or incentives--
                            ``(i) are disclosed to the consumer in the 
                        insurance contract;
                            ``(ii) are based on specific wellness 
                        activities that are not applicable to all 
                        individuals; and
                            ``(iii) are not obtainable by all 
                        individuals to whom coverage is offered;
                    ``(D) from reinstating lapsed coverage; or
                    ``(E) from retroactively adjusting the rates 
                charged an insured individual if the initial rates were 
                set based on material misrepresentation by the 
                individual at the time of issue.
    ``(e) Prior Offering of Policy in Primary State.--A health 
insurance issuer may not offer for sale individual health insurance 
coverage in a secondary State unless that coverage is currently offered 
for sale in the primary State.
    ``(f) Licensing of Agents or Brokers for Health Insurance 
Issuers.--Any State may require that a person acting, or offering to 
act, as an agent or broker for a health insurance issuer with respect 
to the offering of individual health insurance coverage obtain a 
license from that State, with commissions or other compensation subject 
to the provisions of the laws of that State, except that a State may 
not impose any qualification or requirement which discriminates against 
a nonresident agent or broker.
    ``(g) Documents for Submission to State Insurance Commissioner.--
Each health insurance issuer issuing individual health insurance 
coverage in both primary and secondary States shall submit--
            ``(1) to the insurance commissioner of each State in which 
        it intends to offer such coverage, before it may offer 
        individual health insurance coverage in such State--
                    ``(A) a copy of the plan of operation or 
                feasibility study or any similar statement of the 
                policy being offered and its coverage (which shall 
                include the name of its primary State and its principal 
                place of business);
                    ``(B) written notice of any change in its 
                designation of its primary State; and
                    ``(C) written notice from the issuer of the 
                issuer's compliance with all the laws of the primary 
                State; and
            ``(2) to the insurance commissioner of each secondary State 
        in which it offers individual health insurance coverage, a copy 
        of the issuer's quarterly financial statement submitted to the 
        primary State, which statement shall be certified by an 
        independent public accountant and contain a statement of 
        opinion on loss and loss adjustment expense reserves made by--
                    ``(A) a member of the American Academy of 
                Actuaries; or
                    ``(B) a qualified loss reserve specialist.
    ``(h) Power of Courts To Enjoin Conduct.--Nothing in this section 
shall be construed to affect the authority of any Federal or State 
court to enjoin--
            ``(1) the solicitation or sale of individual health 
        insurance coverage by a health insurance issuer to any person 
        or group who is not eligible for such insurance; or
            ``(2) the solicitation or sale of individual health 
        insurance coverage that violates the requirements of the law of 
        a secondary State which are described in subparagraphs (A) 
        through (H) of section 2796(b)(1).
    ``(i) Power of Secondary States To Take Administrative Action.--
Nothing in this section shall be construed to affect the authority of 
any State to enjoin conduct in violation of that State's laws described 
in section 2796(b)(1).
    ``(j) State Powers To Enforce State Laws.--
            ``(1) In general.--Subject to the provisions of subsection 
        (b)(1)(G) (relating to injunctions) and paragraph (2), nothing 
        in this section shall be construed to affect the authority of 
        any State to make use of any of its powers to enforce the laws 
        of such State with respect to which a health insurance issuer 
        is not exempt under subsection (b).
            ``(2) Courts of competent jurisdiction.--If a State seeks 
        an injunction regarding the conduct described in paragraphs (1) 
        and (2) of subsection (h), such injunction must be obtained 
        from a Federal or State court of competent jurisdiction.
    ``(k) States' Authority To Sue.--Nothing in this section shall 
affect the authority of any State to bring action in any Federal or 
State court.
    ``(l) Generally Applicable Laws.--Nothing in this section shall be 
construed to affect the applicability of State laws generally 
applicable to persons or corporations.
    ``(m) Guaranteed Availability of Coverage to HIPAA Eligible 
Individuals.--To the extent that a health insurance issuer is offering 
coverage in a primary State that does not accommodate residents of 
secondary States or does not provide a working mechanism for residents 
of a secondary State, and the issuer is offering coverage under this 
part in such secondary State which has not adopted a qualified high 
risk pool as its acceptable alternative mechanism (as defined in 
section 2744(c)(2)), the issuer shall, with respect to any individual 
health insurance coverage offered in a secondary State under this part, 
comply with the guaranteed availability requirements for eligible 
individuals in section 2741.

  ``primary state must meet federal floor before issuer may sell into 
                            secondary states

    ``Sec. 2797. 
    ``A health insurance issuer may not offer, sell, or issue 
individual health insurance coverage in a secondary State if the State 
insurance commissioner does not use a risk-based capital formula for 
the determination of capital and surplus requirements for all health 
insurance issuers.

               ``independent external appeals procedures

    ``Sec. 2798. 
    ``(a) Right to External Appeal.--A health insurance issuer may not 
offer, sell, or issue individual health insurance coverage in a 
secondary State under the provisions of this title unless--
            ``(1) both the secondary State and the primary State have 
        legislation or regulations in place establishing an independent 
        review process for individuals who are covered by individual 
        health insurance coverage, or
            ``(2) in any case in which the requirements of subparagraph 
        (A) are not met with respect to the either of such States, the 
        issuer provides an independent review mechanism substantially 
        identical (as determined by the applicable State authority of 
        such State) to that prescribed in the `Health Carrier External 
        Review Model Act' of the National Association of Insurance 
        Commissioners for all individuals who purchase insurance 
        coverage under the terms of this part, except that, under such 
        mechanism, the review is conducted by an independent medical 
        reviewer, or a panel of such reviewers, with respect to whom 
        the requirements of subsection (b) are met.
    ``(b) Qualifications of Independent Medical Reviewers.--In the case 
of any independent review mechanism referred to in subsection (a)(2)--
            ``(1) In general.--In referring a denial of a claim to an 
        independent medical reviewer, or to any panel of such 
        reviewers, to conduct independent medical review, the issuer 
        shall ensure that--
                    ``(A) each independent medical reviewer meets the 
                qualifications described in paragraphs (2) and (3);
                    ``(B) with respect to each review, each reviewer 
                meets the requirements of paragraph (4) and the 
                reviewer, or at least 1 reviewer on the panel, meets 
                the requirements described in paragraph (5); and
                    ``(C) compensation provided by the issuer to each 
                reviewer is consistent with paragraph (6).
            ``(2) Licensure and expertise.--Each independent medical 
        reviewer shall be a physician (allopathic or osteopathic) or 
        health care professional who--
                    ``(A) is appropriately credentialed or licensed in 
                1 or more States to deliver health care services; and
                    ``(B) typically treats the condition, makes the 
                diagnosis, or provides the type of treatment under 
                review.
            ``(3) Independence.--
                    ``(A) In general.--Subject to subparagraph (B), 
                each independent medical reviewer in a case shall--
                            ``(i) not be a related party (as defined in 
                        paragraph (7));
                            ``(ii) not have a material familial, 
                        financial, or professional relationship with 
                        such a party; and
                            ``(iii) not otherwise have a conflict of 
                        interest with such a party (as determined under 
                        regulations).
                    ``(B) Exception.--Nothing in subparagraph (A) shall 
                be construed to--
                            ``(i) prohibit an individual, solely on the 
                        basis of affiliation with the issuer, from 
                        serving as an independent medical reviewer if--
                                    ``(I) a non-affiliated individual 
                                is not reasonably available;
                                    ``(II) the affiliated individual is 
                                not involved in the provision of items 
                                or services in the case under review;
                                    ``(III) the fact of such an 
                                affiliation is disclosed to the issuer 
                                and the enrollee (or authorized 
                                representative) and neither party 
                                objects; and
                                    ``(IV) the affiliated individual is 
                                not an employee of the issuer and does 
                                not provide services exclusively or 
                                primarily to or on behalf of the 
                                issuer;
                            ``(ii) prohibit an individual who has staff 
                        privileges at the institution where the 
                        treatment involved takes place from serving as 
                        an independent medical reviewer merely on the 
                        basis of such affiliation if the affiliation is 
                        disclosed to the issuer and the enrollee (or 
                        authorized representative), and neither party 
                        objects; or
                            ``(iii) prohibit receipt of compensation by 
                        an independent medical reviewer from an entity 
                        if the compensation is provided consistent with 
                        paragraph (6).
            ``(4) Practicing health care professional in same field.--
                    ``(A) In general.--In a case involving treatment, 
                or the provision of items or services--
                            ``(i) by a physician, a reviewer shall be a 
                        practicing physician (allopathic or 
                        osteopathic) of the same or similar specialty, 
                        as a physician who, acting within the 
                        appropriate scope of practice within the State 
                        in which the service is provided or rendered, 
                        typically treats the condition, makes the 
                        diagnosis, or provides the type of treatment 
                        under review; or
                            ``(ii) by a non-physician health care 
                        professional, the reviewer, or at least 1 
                        member of the review panel, shall be a 
                        practicing non-physician health care 
                        professional of the same or similar specialty 
                        as the non-physician health care professional 
                        who, acting within the appropriate scope of 
                        practice within the State in which the service 
                        is provided or rendered, typically treats the 
                        condition, makes the diagnosis, or provides the 
                        type of treatment under review.
                    ``(B) Practicing defined.--For purposes of this 
                paragraph, the term `practicing' means, with respect to 
                an individual who is a physician or other health care 
                professional, that the individual provides health care 
                services to individual patients on average at least 2 
                days per week.
            ``(5) Pediatric expertise.--In the case of an external 
        review relating to a child, a reviewer shall have expertise 
        under paragraph (2) in pediatrics.
            ``(6) Limitations on reviewer compensation.--Compensation 
        provided by the issuer to an independent medical reviewer in 
        connection with a review under this section shall--
                    ``(A) not exceed a reasonable level; and
                    ``(B) not be contingent on the decision rendered by 
                the reviewer.
            ``(7) Related party defined.--For purposes of this section, 
        the term `related party' means, with respect to a denial of a 
        claim under a coverage relating to an enrollee, any of the 
        following:
                    ``(A) The issuer involved, or any fiduciary, 
                officer, director, or employee of the issuer.
                    ``(B) The enrollee (or authorized representative).
                    ``(C) The health care professional that provides 
                the items or services involved in the denial.
                    ``(D) The institution at which the items or 
                services (or treatment) involved in the denial are 
                provided.
                    ``(E) The manufacturer of any drug or other item 
                that is included in the items or services involved in 
                the denial.
                    ``(F) Any other party determined under any 
                regulations to have a substantial interest in the 
                denial involved.
            ``(8) Definitions.--For purposes of this subsection:
                    ``(A) Enrollee.--The term `enrollee' means, with 
                respect to health insurance coverage offered by a 
                health insurance issuer, an individual enrolled with 
                the issuer to receive such coverage.
                    ``(B) Health care professional.--The term `health 
                care professional' means an individual who is licensed, 
                accredited, or certified under State law to provide 
                specified health care services and who is operating 
                within the scope of such licensure, accreditation, or 
                certification.

                             ``enforcement

    ``Sec. 2799. 
    ``(a) In General.--Subject to subsection (b), with respect to 
specific individual health insurance coverage the primary State for 
such coverage has sole jurisdiction to enforce the primary State's 
covered laws in the primary State and any secondary State.
    ``(b) Secondary State's Authority.--Nothing in subsection (a) shall 
be construed to affect the authority of a secondary State to enforce 
its laws as set forth in the exception specified in section 2796(b)(1).
    ``(c) Court Interpretation.--In reviewing action initiated by the 
applicable secondary State authority, the court of competent 
jurisdiction shall apply the covered laws of the primary State.
    ``(d) Notice of Compliance Failure.--In the case of individual 
health insurance coverage offered in a secondary State that fails to 
comply with the covered laws of the primary State, the applicable State 
authority of the secondary State may notify the applicable State 
authority of the primary State.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to individual health insurance coverage offered, issued, or sold 
after the date that is one year after the date of the enactment of this 
Act.
    (c) GAO Ongoing Study and Reports.--
            (1) Study.--The Comptroller General of the United States 
        shall conduct an ongoing study concerning the effect of the 
        amendment made by subsection (a) on--
                    (A) the number of uninsured and under-insured;
                    (B) the availability and cost of health insurance 
                policies for individuals with pre-existing medical 
                conditions;
                    (C) the availability and cost of health insurance 
                policies generally;
                    (D) the elimination or reduction of different types 
                of benefits under health insurance policies offered in 
                different States; and
                    (E) cases of fraud or abuse relating to health 
                insurance coverage offered under such amendment and the 
                resolution of such cases.
            (2) Annual reports.--The Comptroller General shall submit 
        to Congress an annual report, after the end of each of the 5 
        years following the effective date of the amendment made by 
        subsection (a), on the ongoing study conducted under paragraph 
        (1).

SEC. 302. SEVERABILITY.

    If any provision of the Act or the application of such provision to 
any person or circumstance is held to be unconstitutional, the 
remainder of this Act and the application of the provisions of such to 
any other person or circumstance shall not be affected.

             TITLE IV--EXPANSION OF HEALTH SAVINGS ACCOUNTS

          Subtitle A--Promoting Health for Future Generations

SEC. 401. SHORT TITLE.

    This subtitle may be cited as the ``Promoting Health for Future 
Generations Act of 2008''.

SEC. 402. INCREASE IN HSA CONTRIBUTION LIMITATION.

    (a) In General.--Subsection (b) of section 223 of the Internal 
Revenue Code of 1986 (relating to monthly limitation) is amended--
            (1) by striking ``$2,250'' in paragraph (2)(A) and 
        inserting ``the amount in effect under subsection 
        (c)(2)(A)(ii)(I)'', and
            (2) by striking ``$4,500'' in paragraph (2)(B) and 
        inserting ``the amount in effect under subsection 
        (c)(2)(A)(ii)(II)''.
    (b) Conforming Amendment.--Paragraph (1) of section 223(g) of such 
Code is amended by striking ``subsections (b)(2)'' and inserting 
``subsection''.
    (c) Effective Date.--The amendments made by this section shall 
apply to contributions in taxable years beginning after December 31, 
2008.

SEC. 403. MEDICARE AND VA HEALTHCARE ENROLLEES ELIGIBLE TO CONTRIBUTE 
              TO HSA.

    (a) In General.--(1) Subsection (b) of section 223 of the Internal 
Revenue Code of 1986 is amended by striking paragraph (7).
    (2) Subsection (c) of section 223 of such Code (relating to 
definitions and special rules) is amended by adding at the end to 
following new paragraph:
            ``(6) Special rule for individuals entitled to benefits 
        under medicare or enrolled for health benefits from va.--In the 
        case of an individual--
                    ``(A)(i) who is entitled to benefits under title 
                XVIII of the Social Security Act, and
                    ``(ii) with respect to whom a health savings 
                account is established in a month before the first 
                month such individual is entitled to such benefits, or
                    ``(B)(i) who is enrolled in the patient enrollment 
                system established by the Secretary of Veterans Affairs 
                pursuant to section 1705 of title 38, United States 
                Code, and
                    ``(ii) with respect to whom a health savings 
                account is established in a month before the first 
                month such individual is enrolled in such system,
        such individual shall be deemed to be an eligible 
        individual.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 404. EXPANDING ADDITIONAL CONTRIBUTIONS LIMITATION.

    (a) In General.--
            (1) Age limitation.--Subparagraph (A) of section 223(b)(3) 
        of the Internal Revenue Code of 1986 (relating to additional 
        contributions for individuals 55 or older) is amended by 
        striking ``age 55'' and inserting ``age 50''.
            (2) Contribution limitation.--The table contained in 
        section 223(b)(3) of such Code is amended by striking 
        ``$1,000'' and inserting ``$2,000''.
            (3) Conforming amendment.--Paragraph (3) of section 223(b) 
        of such Code is amended in the heading by striking ``55'' and 
        inserting ``50''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2008.

SEC. 405. ELIGIBILITY TO CONTRIBUTE TO HSA.

    (a) Individuals Eligible for Reimbursement Under Spouse's Flexible 
Spending Arrangement.--Section 223(c)(1) of the Internal Revenue Code 
of 1986 (defining eligible individual) is amended by adding at the end 
the following new subparagraph:
                    ``(C) Special rule for certain flexible spending 
                arrangements.--For purposes of subparagraph (A)(ii), an 
                individual shall not be treated as covered under a 
                health plan described in such subparagraph merely 
                because the individual is covered under a flexible 
                spending arrangement (within the meaning of section 
                106(c)(2)) which is maintained by an employer of the 
                spouse of the individual, but only if--
                            ``(i) the employer is not also the employer 
                        of the individual, and
                            ``(ii) the individual certifies to the 
                        employer and to the Secretary (in such form and 
                        manner as the Secretary may prescribe) that the 
                        individual and the individual's spouse will not 
                        accept reimbursement under the arrangement for 
                        any expenses for medical care provided to the 
                        individual.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 406. DEDUCTION OF PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 224 as 
section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. PREMIUMS FOR HIGH DEDUCTIBLE HEALTH PLANS.

    ``(a) Deduction Allowed.--In the case of an individual, there shall 
be allowed as a deduction for the taxable year the aggregate amount 
paid by the taxpayer as premiums under a high deductible health plan 
with respect to months during such year for which such individual is an 
eligible individual with respect to such health plan.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--The term `eligible individual' 
        means an individual who--
                    ``(A) is described in section 223(c)(1), and
                    ``(B) is the taxpayer or the taxpayer's spouse and 
                dependents.
            ``(2) High deductible health plan.--The term `high 
        deductible health plan' has the meaning given such term by 
        section 223(c)(2).
    ``(c) Special Rules.--
            ``(1) Deduction limits.--
                    ``(A) Deduction allowable for only 1 plan.--For 
                purposes of this section, in the case of an individual 
                covered by more than 1 high deductible health plan for 
                any month, the individual may only take into account 
                amounts paid for such month for the plan with the 
                lowest premium.
                    ``(B) Plans covering ineligible individuals.--If 2 
                or more individuals are covered by a high deductible 
                health plan for any month but only 1 of such 
                individuals is an eligible individual for such month, 
                only 50 percent of the aggregate amount paid by such 
                eligible individual as premiums under the plan with 
                respect to such month shall be taken into account for 
                purposes of this section.
            ``(2) Group health plan coverage.--
                    ``(A) In general.--No deduction shall be allowed 
                for an individual under subsection (a) for any amount 
                paid for coverage under a high deductible health plan 
                for a month if that individual participates in any 
                coverage under a group health plan (within the meaning 
                of section 5000 without regard to section 5000(d)). For 
                purposes of the preceding sentence, an arrangement 
                which constitutes individual health insurance shall not 
                be treated as a group health plan if such arrangement 
                is a high deductible health plan (as defined in section 
                223(c)(2)), or is a payment by an employer or employee 
                organization with respect to such high deductible 
                health plan, notwithstanding that an employer or 
                employee organization negotiates the cost or benefits 
                of such arrangement.
                    ``(B) Exception for plans only providing 
                contributions to health savings accounts.--Subparagraph 
                (A) shall not apply to an individual if the 
                individual's only coverage under a group health plan 
                for a month consists of contributions by an employer to 
                a health savings account with respect to which the 
                individual is the account beneficiary.
                    ``(C) Exception for certain permitted coverage.--
                Subparagraph (A) shall not apply to an individual if 
                the individual's only coverage under a group health 
                plan for a month is coverage described in clause (i) or 
                (ii) of section 223(c)(1)(B).
            ``(3) Medical and health savings accounts.--Subsection (a) 
        shall not apply with respect to any amount which is paid or 
        distributed out of an Archer MSA or a health savings account 
        which is not included in gross income under section 220(f) or 
        223(f), as the case may be.
            ``(4) Coordination with deduction for health insurance of 
        self-employed individuals.--Any amount taken into account by 
        the taxpayer in computing the deduction under section 162(l) 
        shall not be taken into account under this section.
            ``(5) Coordination with medical expense deduction.--Any 
        amount taken into account by the taxpayer in computing the 
        deduction under this section shall not be taken into account 
        under section 213.''.
    (b) Deduction Allowed Whether or Not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting before the last sentence at the end the following new 
paragraph:
            ``(22) Premiums for high deductible health plans.--The 
        deduction allowed by section 224.''.
    (c) Coordination With Section 35 Health Insurance Costs Credit.--
Section 35(g)(2) of such Code (relating to coordination with other 
deductions) is amended by striking ``or 213'' and inserting ``, 213, or 
224''.
    (d) Clerical Amendment.--The table of sections for part VII of 
subchapter B of chapter 1 of such Code is amended by redesignating the 
item relating to section 224 as an item relating to section 225 and by 
inserting before such item the following new item:

``Sec. 224. Premiums for high deductible health plans.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 407. MSA PLAN DEDUCTIBLE EXCEPTION FOR PREVENTIVE CARE.

    (a) In General.--Paragraph (3) of section 1859(b) of the Social 
Security Act (42 U.S.C. 1359w-28(b)) is amended by adding at the end 
the following new subparagraph:
                    ``(C) Exception for absence of preventive care 
                deductible.--A plan shall not fail to be treated as a 
                MSA plan by reason of failing to have a deductible for 
                preventive care (within the meaning of such term as 
                applied for purposes of section 223(c)(2)(C) of the 
                Internal Revenue Code of 1986).''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on January 1, 2009.

SEC. 408. PERMITTING INDIVIDUAL CONTRIBUTIONS TO MEDICARE ADVANTAGE 
              MSA.

    (a) In General.--Paragraph (2) of section 138(b) of the Internal 
Revenue Code of 1986 (defining Medicare Advantage MSA) is amended by 
striking ``or'' at the end of subparagraph (A), by inserting ``or'' at 
the end of subparagraph (B), and by adding at the end the following new 
subparagraph:
                    ``(C) any contributions by or for the benefit of 
                the account holder (other than a contribution described 
                in subparagraph (A)) for the taxable year, the sum of 
                which do not exceed the difference of--
                            ``(i) the amount of the annual deductible 
                        (described in section 1859(b)(3)(B) of the 
                        Social Security Act) for the MSA plan in which 
                        the individual is enrolled, over
                            ``(ii) the amount of contributions 
                        described in subparagraph (A) for the taxable 
                        year,''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2008.

SEC. 409. ALLOWING MSA AND HSA ROLLOVER TO ADULT CHILD OF ACCOUNT 
              HOLDER.

    (a) MSAs.--(1) Subparagraph (A) of section 220(f)(8) of the 
Internal Revenue Code of 1986 (relating to treatment after death of 
account holder) is amended--
            (A) by inserting ``or adult child'' after ``surviving 
        spouse'',
            (B) by inserting ``or adult child, as the case may be,'' 
        after ``the spouse'', and
            (C) by inserting ``or adult child'' after ``spouse'' in the 
        heading thereof.
    (2) Paragraph (8) of section 220(f) of such Code is amended by 
adding at the end the following new subparagraph:
                    ``(C) Adult child.--For purposes of this paragraph, 
                the term `adult child' means an individual--
                            ``(i) who is a child of the deceased 
                        individual, and
                            ``(ii) with respect to whom a deduction 
                        under section 151 would not be allowable to 
                        another taxpayer for a taxable year beginning 
                        in the calendar year in which such individual's 
                        taxable year begins.''.
    (b) HSAs.--(1) Subparagraph (A) of section 223(f)(8) of such Code 
(relating to treatment after death of account beneficiary) is amended--
            (A) by inserting ``or adult child'' after ``surviving 
        spouse'',
            (B) by inserting ``or adult child, as the case may be,'' 
        after ``the spouse'', and
            (C) by inserting ``or adult child'' after ``spouse'' in the 
        heading thereof.
    (2) Paragraph (8) of section 223(f) of such Code is amended by 
adding at the end the following new subparagraph:
                    ``(C) Adult child.--For purposes of this paragraph, 
                the term `adult child' has the meaning given to such 
                term by section 220(f)(8)(C).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 410. PERMITTING MEDICARE ADVANTAGE MSA FUNDS TO BE USED FOR 
              WELLNESS AND FITNESS PROGRAMS.

    (a) In General.--Paragraph (1) of section 138(c) of the Internal 
Revenue Code of 1986 (relating to special rules for distributions) is 
amended by striking ``and'' at the end of subparagraph (A), by striking 
the period at the end of subparagraph (B) and inserting ``, and'', and 
by adding at the end the following new subparagraph:
                    ``(C) qualified medical expenses shall include 
                amounts paid to a gym for enrollment in a wellness or 
                fitness program.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2008.

SEC. 411. HEALTH REIMBURSEMENT ARRANGEMENTS AND SPENDING ARRANGEMENTS 
              IN COMBINATION WITH HEALTH SAVINGS ACCOUNTS.

    (a) In General.--Subparagraph (B) of section 223(c)(1) of the 
Internal Revenue Code of 1986 (relating to certain coverage 
disregarded) is amended by striking ``and'' at the end of clause (ii), 
by striking the period at the end of clause (iii) and inserting ``, 
and'', and by inserting after clause (iii) the following new clause:
                            ``(iv) coverage under a flexible spending 
                        arrangement or a health reimbursement 
                        arrangement, or both, which meets the 
                        requirements of paragraph (7).''.
    (b) Combination Health Reimbursement, Savings, and Spending 
Arrangements.--Subsection (c) of section 223 of such Code (relating to 
definitions and special rules), as amended by this Act, is amended by 
adding at the end the following new paragraph:
            ``(7) Combined limit for contributions or credits to health 
        reimbursement, arrangements and spending arrangements.--
                    ``(A) In general.--In the case of coverage under a 
                flexible spending arrangement or a health reimbursement 
                arrangement, or both, such coverage meets the 
                requirements of this paragraph if, with respect to an 
                individual--
                            ``(i) the sum of--
                                    ``(I) the amount allowable as a 
                                deduction under subsection (a),
                                    ``(II) the salary reduction amount 
                                elected by the individual and, if 
                                applicable, the employer contribution 
                                or credit allocated to the individual 
                                for the taxable year under the flexible 
                                spending arrangement (as defined in 
                                section 106(c)(2)), plus
                                    ``(III) the amounts that the 
                                individual is permitted, under the 
                                terms of the plan, to receive in 
                                reimbursements for the taxable year 
                                under the health reimbursement 
                                arrangement, does not exceed
                            ``(ii) the sum of the annual deductible and 
                        the other annual out-of-pocket expenses (other 
                        than for premiums) required to be paid under 
                        the plan by the eligible individual for covered 
                        benefits.
                    ``(B) Exceptions for disregarded coverage.--For 
                purposes of subparagraph (A)--
                            ``(i) Certain flexible spending 
                        arrangements.--Any flexible spending 
                        arrangement salary reduction amounts or 
                        employer contributions or credits that are 
                        restricted by the employer to use for coverage 
                        described in paragraph (1)(B) shall not be 
                        taken into account under subparagraph 
                        (A)(i)(II).
                            ``(ii) Certain health reimbursement 
                        arrangements.--Any reimbursements from a health 
                        reimbursement arrangement for coverage 
                        described in paragraph (1)(B) shall not be 
                        taken into account under subparagraph 
                        (A)(i)(III).
                            ``(iii) Qualified hsa distributions from 
                        fsa and hra terminations.--Any qualified HSA 
                        distribution (as defined in section 106(e)) 
                        shall not be taken into account under 
                        subparagraph (A)(i).
                    ``(C) Termination.--Coverage shall not be treated 
                as meeting the requirements of this paragraph for any 
                taxable year beginning after December 31, 2012.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 412. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE 
              ESTABLISHMENT OF ACCOUNT.

    (a) In General.--Subsection (d) of section 223 of the Internal 
Revenue Code of 1986 is amended by redesignating paragraph (4) as 
paragraph (5) and by inserting after paragraph (3) the following new 
paragraph:
            ``(4) Certain medical expenses incurred before 
        establishment of account treated as qualified.--
                    ``(A) In general.--For purposes of paragraph (2), 
                an expense shall not fail to be treated as a qualified 
                medical expense solely because such expense was 
                incurred before the establishment of the health savings 
                account if such expense was incurred during the 60-day 
                period beginning on the date on which the high 
                deductible health plan is first effective.
                    ``(B) Special rules.--For purposes of subparagraph 
                (A)--
                            ``(i) an individual shall be treated as an 
                        eligible individual for any portion of a month 
                        for which the individual is described in 
                        subsection (c)(1), determined without regard to 
                        whether the individual is covered under a high 
                        deductible health plan on the 1st day of such 
                        month, and
                            ``(ii) the effective date of the health 
                        savings account is deemed to be the date on 
                        which the high deductible health plan is first 
                        effective after the date of the enactment of 
                        this paragraph.''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to insurance purchased after December 31, 2008, in taxable 
years beginning after such date.

SEC. 413. ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS TO THE SAME 
              HSA ACCOUNT.

    (a) In General.--Paragraph (3) of section 223(b) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(C) Special rule where both spouses are eligible 
                individuals with 1 account.--If--
                            ``(i) an individual and the individual's 
                        spouse have both attained age 55 before the 
                        close of the taxable year, and
                            ``(ii) the spouse is not an account 
                        beneficiary of a health savings account as of 
                        the close of such year,
                the additional contribution amount shall be 200 percent 
                of the amount otherwise determined under subparagraph 
                (B).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

SEC. 414. FSA AND HRA TERMINATION TO FUND HSAS.

    (a) Grace Period Not Required.--Section 106(e)(2) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
sentence: ``A distribution shall not fail to be treated as a qualified 
HSA distribution merely because the balance in such arrangement is 
determined without regard to the requirement that unused amounts 
remaining at the end of a plan year must be forfeited in the absence of 
a grace period.''.
    (b) Deposit in Limited FSA or HRA of Funds in Excess FSA or HRA 
Termination Distribution.--Paragraph (1) of section 106(e) of such Code 
is amended by inserting before the period at the end thereof the 
following: ``and the deposit of funds in excess of a qualified HSA 
distribution amount into a health flexible spending account or health 
reimbursement arrangement which is compatible with a health savings 
account and which, on the date of such distribution, is a part of the 
employer's plan''.
    (c) Disclaimer of Disqualifying Coverage.--Subparagraph (B) of 
section 223(c)(1) of such Code, as amended by this Act, is amended by 
striking ``and'' at the end of clause (iii), by striking the period at 
the end of clause (iv) and inserting ``, and'', and by inserting after 
clause (iv) the following new clause:
                            ``(v) any coverage (whether actual or 
                        prospective) otherwise described in 
                        subparagraph (A)(ii) which is disclaimed at the 
                        time of the creation or organization of the 
                        health savings account.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.

     Subtitle B--Increased Access to Health Insurance Through HSAs

SEC. 421. SHORT TITLE.

    This subtitle may be cited as the ``Increased Access to Health 
Insurance Act of 2008''.

SEC. 422. PURCHASE OF HEALTH INSURANCE FROM HEALTH SAVINGS ACCOUNTS.

    (a) In General.--Paragraph (2) of section 223(d) of the Internal 
Revenue Code of 1986 (defining qualified medical expenses) is amended 
to read as follows:
            ``(2) Qualified medical expenses.--The term `qualified 
        medical expenses' means, with respect to an account 
        beneficiary, amounts paid by such beneficiary for medical care 
        (as defined in section 213(d)) for such individual, the spouse 
        of such individual, and any dependent (as defined in section 
        152, determined without regard to subsections (b)(1), (b)(2), 
        and (d)(1)(B) thereof) of such individual, but only to the 
        extent such amounts are not compensated for by insurance or 
        otherwise.''.
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to insurance purchased after the date of the enactment of 
this Act in taxable years beginning after such date.

                    TITLE V--HEALTH CARE TORT REFORM

SEC. 501. FINDINGS AND PURPOSE.

    (a) Findings.--
            (1) Effect on health care access and costs.--Congress finds 
        that our current civil justice system is adversely affecting 
        patient access to health care services, better patient care, 
        and cost-efficient health care, in that the health care 
        liability system is a costly and ineffective mechanism for 
        resolving claims of health care liability and compensating 
        injured patients, and is a deterrent to the sharing of 
        information among health care professionals which impedes 
        efforts to improve patient safety and quality of care.
            (2) Effect on interstate commerce.--Congress finds that the 
        health care and insurance industries are industries affecting 
        interstate commerce and the health care liability litigation 
        systems existing throughout the United States are activities 
        that affect interstate commerce by contributing to the high 
        costs of health care and premiums for health care liability 
        insurance purchased by health care system providers.
            (3) Effect on federal spending.--Congress finds that the 
        health care liability litigation systems existing throughout 
        the United States have a significant effect on the amount, 
        distribution, and use of Federal funds because of--
                    (A) the large number of individuals who receive 
                health care benefits under programs operated or 
                financed by the Federal Government;
                    (B) the large number of individuals who benefit 
                because of the exclusion from Federal taxes of the 
                amounts spent to provide them with health insurance 
                benefits; and
                    (C) the large number of health care providers who 
                provide items or services for which the Federal 
                Government makes payments.
    (b) Purpose.--It is the purpose of this title to implement 
reasonable, comprehensive, and effective health care liability reforms 
designed to--
            (1) improve the availability of health care services in 
        cases in which health care liability actions have been shown to 
        be a factor in the decreased availability of services;
            (2) reduce the incidence of ``defensive medicine'' and 
        lower the cost of health care liability insurance, all of which 
        contribute to the escalation of health care costs;
            (3) ensure that persons with meritorious health care injury 
        claims receive fair and adequate compensation, including 
        reasonable noneconomic damages;
            (4) improve the fairness and cost-effectiveness of our 
        current health care liability system to resolve disputes over, 
        and provide compensation for, health care liability by reducing 
        uncertainty in the amount of compensation provided to injured 
        individuals; and
            (5) provide an increased sharing of information in the 
        health care system which will reduce unintended injury and 
        improve patient care.

SEC. 502. ENCOURAGING SPEEDY RESOLUTION OF CLAIMS.

    The time for the commencement of a health care lawsuit shall be 3 
years after the date of manifestation of injury or 1 year after the 
claimant discovers, or through the use of reasonable diligence should 
have discovered, the injury, whichever occurs first. In no event shall 
the time for commencement of a health care lawsuit exceed 3 years after 
the date of manifestation of injury unless tolled for any of the 
following--
            (1) upon proof of fraud;
            (2) intentional concealment; or
            (3) the presence of a foreign body, which has no 
        therapeutic or diagnostic purpose or effect, in the person of 
        the injured person.
Actions by a minor shall be commenced within 3 years from the date of 
the alleged manifestation of injury except that actions by a minor 
under the full age of 6 years shall be commenced within 3 years of 
manifestation of injury or prior to the minor's 8th birthday, whichever 
provides a longer period. Such time limitation shall be tolled for 
minors for any period during which a parent or guardian and a health 
care provider or health care organization have committed fraud or 
collusion in the failure to bring an action on behalf of the injured 
minor.

SEC. 503. COMPENSATING PATIENT INJURY.

    (a) Unlimited Amount of Damages for Actual Economic Losses in 
Health Care Lawsuits.--In any health care lawsuit, nothing in this 
title shall limit a claimant's recovery of the full amount of the 
available economic damages, notwithstanding the limitation in 
subsection (b).
    (b) Additional Noneconomic Damages.--In any health care lawsuit, 
the amount of noneconomic damages, if available, may be as much as 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of separate claims or actions brought with 
respect to the same injury.
    (c) No Discount of Award for Noneconomic Damages.--For purposes of 
applying the limitation in subsection (b), future noneconomic damages 
shall not be discounted to present value. The jury shall not be 
informed about the maximum award for noneconomic damages. An award for 
noneconomic damages in excess of $250,000 shall be reduced either 
before the entry of judgment, or by amendment of the judgment after 
entry of judgment, and such reduction shall be made before accounting 
for any other reduction in damages required by law. If separate awards 
are rendered for past and future noneconomic damages and the combined 
awards exceed $250,000, the future noneconomic damages shall be reduced 
first.
    (d) Fair Share Rule.--In any health care lawsuit, each party shall 
be liable for that party's several share of any damages only and not 
for the share of any other person. Each party shall be liable only for 
the amount of damages allocated to such party in direct proportion to 
such party's percentage of responsibility. Whenever a judgment of 
liability is rendered as to any party, a separate judgment shall be 
rendered against each such party for the amount allocated to such 
party. For purposes of this section, the trier of fact shall determine 
the proportion of responsibility of each party for the claimant's harm.

SEC. 504. MAXIMIZING PATIENT RECOVERY.

    (a) Court Supervision of Share of Damages Actually Paid to 
Claimants.--In any health care lawsuit, the court shall supervise the 
arrangements for payment of damages to protect against conflicts of 
interest that may have the effect of reducing the amount of damages 
awarded that are actually paid to claimants. In particular, in any 
health care lawsuit in which the attorney for a party claims a 
financial stake in the outcome by virtue of a contingent fee, the court 
shall have the power to restrict the payment of a claimant's damage 
recovery to such attorney, and to redirect such damages to the claimant 
based upon the interests of justice and principles of equity. In no 
event shall the total of all contingent fees for representing all 
claimants in a health care lawsuit exceed the following limits:
            (1) 40 percent of the first $50,000 recovered by the 
        claimant(s).
            (2) 33\1/3\ percent of the next $50,000 recovered by the 
        claimant(s).
            (3) 25 percent of the next $500,000 recovered by the 
        claimant(s).
            (4) 15 percent of any amount by which the recovery by the 
        claimant(s) is in excess of $600,000.
    (b) Applicability.--The limitations in this section shall apply 
whether the recovery is by judgment, settlement, mediation, 
arbitration, or any other form of alternative dispute resolution. In a 
health care lawsuit involving a minor or incompetent person, a court 
retains the authority to authorize or approve a fee that is less than 
the maximum permitted under this section. The requirement for court 
supervision in the first two sentences of subsection (a) applies only 
in civil actions.

SEC. 505. ADDITIONAL HEALTH TORT REFORM BENEFITS.

    In any health care lawsuit involving injury or wrongful death, any 
party may introduce evidence of collateral source benefits. If a party 
elects to introduce such evidence, any opposing party may introduce 
evidence of any amount paid or contributed or reasonably likely to be 
paid or contributed in the future by or on behalf of the opposing party 
to secure the right to such collateral source benefits. No provider of 
collateral source benefits shall recover any amount against the 
claimant or receive any lien or credit against the claimant's recovery 
or be equitably or legally subrogated to the right of the claimant in a 
health care lawsuit involving injury or wrongful death. This section 
shall apply to any health care lawsuit that is settled as well as a 
health care lawsuit that is resolved by a fact finder. This section 
shall not apply to section 1862(b) (42 U.S.C. 1395y(b)) or section 
1902(a)(25) (42 U.S.C. 1396a(a)(25)) of the Social Security Act.

SEC. 506. PUNITIVE DAMAGES.

    (a) In General.--Punitive damages may, if otherwise permitted by 
applicable State or Federal law, be awarded against any person in a 
health care lawsuit only if it is proven by clear and convincing 
evidence that such person acted with malicious intent to injure the 
claimant, or that such person deliberately failed to avoid unnecessary 
injury that such person knew the claimant was substantially certain to 
suffer. In any health care lawsuit where no judgment for compensatory 
damages is rendered against such person, no punitive damages may be 
awarded with respect to the claim in such lawsuit. No demand for 
punitive damages shall be included in a health care lawsuit as 
initially filed. A court may allow a claimant to file an amended 
pleading for punitive damages only upon a motion by the claimant and 
after a finding by the court, upon review of supporting and opposing 
affidavits or after a hearing, after weighing the evidence, that the 
claimant has established by a substantial probability that the claimant 
will prevail on the claim for punitive damages. At the request of any 
party in a health care lawsuit, the trier of fact shall consider in a 
separate proceeding--
            (1) whether punitive damages are to be awarded and the 
        amount of such award; and
            (2) the amount of punitive damages following a 
        determination of punitive liability.
If a separate proceeding is requested, evidence relevant only to the 
claim for punitive damages, as determined by applicable State law, 
shall be inadmissible in any proceeding to determine whether 
compensatory damages are to be awarded.
    (b) Determining Amount of Punitive Damages.--
            (1) Factors considered.--In determining the amount of 
        punitive damages, if awarded, in a health care lawsuit, the 
        trier of fact shall consider only the following--
                    (A) the severity of the harm caused by the conduct 
                of such party;
                    (B) the duration of the conduct or any concealment 
                of it by such party;
                    (C) the profitability of the conduct to such party;
                    (D) the number of products sold or medical 
                procedures rendered for compensation, as the case may 
                be, by such party, of the kind causing the harm 
                complained of by the claimant;
                    (E) any criminal penalties imposed on such party, 
                as a result of the conduct complained of by the 
                claimant; and
                    (F) the amount of any civil fines assessed against 
                such party as a result of the conduct complained of by 
                the claimant.
            (2) Maximum award.--The amount of punitive damages, if 
        awarded, in a health care lawsuit may be as much as $250,000 or 
        as much as two times the amount of economic damages awarded, 
        whichever is greater. The jury shall not be informed of this 
        limitation.
    (c) No Punitive Damages for Products That Comply With FDA 
Standards.--
            (1) In general.--
                    (A) No punitive damages may be awarded against the 
                manufacturer or distributor of a medical product, or a 
                supplier of any component or raw material of such 
                medical product, based on a claim that such product 
                caused the claimant's harm where--
                            (i)(I) such medical product was subject to 
                        premarket approval, clearance, or licensure by 
                        the Food and Drug Administration with respect 
                        to the safety of the formulation or performance 
                        of the aspect of such medical product which 
                        caused the claimant's harm or the adequacy of 
                        the packaging or labeling of such medical 
                        product; and
                            (II) such medical product was so approved, 
                        cleared, or licensed; or
                            (ii) such medical product is generally 
                        recognized among qualified experts as safe and 
                        effective pursuant to conditions established by 
                        the Food and Drug Administration and applicable 
                        Food and Drug Administration regulations, 
                        including without limitation those related to 
                        packaging and labeling, unless the Food and 
                        Drug Administration has determined that such 
                        medical product was not manufactured or 
                        distributed in substantial compliance with 
                        applicable Food and Drug Administration 
                        statutes and regulations.
                    (B) Rule of construction.--Subparagraph (A) may not 
                be construed as establishing the obligation of the Food 
                and Drug Administration to demonstrate affirmatively 
                that a manufacturer, distributor, or supplier referred 
                to in such subparagraph meets any of the conditions 
                described in such subparagraph.
            (2) Liability of health care providers.--A health care 
        provider who prescribes, or who dispenses pursuant to a 
        prescription, a medical product approved, licensed, or cleared 
        by the Food and Drug Administration shall not be named as a 
        party to a product liability lawsuit involving such product and 
        shall not be liable to a claimant in a class action lawsuit 
        against the manufacturer, distributor, or seller of such 
        product. Nothing in this paragraph prevents a court from 
        consolidating cases involving health care providers and cases 
        involving products liability claims against the manufacturer, 
        distributor, or product seller of such medical product.
            (3) Packaging.--In a health care lawsuit for harm which is 
        alleged to relate to the adequacy of the packaging or labeling 
        of a drug which is required to have tamper-resistant packaging 
        under regulations of the Secretary of Health and Human Services 
        (including labeling regulations related to such packaging), the 
        manufacturer or product seller of the drug shall not be held 
        liable for punitive damages unless such packaging or labeling 
        is found by the trier of fact by clear and convincing evidence 
        to be substantially out of compliance with such regulations.
            (4) Exception.--Paragraph (1) shall not apply in any health 
        care lawsuit in which--
                    (A) a person, before or after premarket approval, 
                clearance, or licensure of such medical product, 
                knowingly misrepresented to or withheld from the Food 
                and Drug Administration information that is required to 
                be submitted under the Federal Food, Drug, and Cosmetic 
                Act (21 U.S.C. 301 et seq.) or section 351 of the 
                Public Health Service Act (42 U.S.C. 262) that is 
                material and is causally related to the harm which the 
                claimant allegedly suffered; or
                    (B) a person made an illegal payment to an official 
                of the Food and Drug Administration for the purpose of 
                either securing or maintaining approval, clearance, or 
                licensure of such medical product.

SEC. 507. AUTHORIZATION OF PAYMENT OF FUTURE DAMAGES TO CLAIMANTS IN 
              HEALTH CARE LAWSUITS.

    (a) In General.--In any health care lawsuit, if an award of future 
damages, without reduction to present value, equaling or exceeding 
$50,000 is made against a party with sufficient insurance or other 
assets to fund a periodic payment of such a judgment, the court shall, 
at the request of any party, enter a judgment ordering that the future 
damages be paid by periodic payments. In any health care lawsuit, the 
court may be guided by the Uniform Periodic Payment of Judgments Act 
promulgated by the National Conference of Commissioners on Uniform 
State Laws.
    (b) Applicability.--This section applies to all actions which have 
not been first set for trial or retrial before the effective date of 
this title.

SEC. 508. DEFINITIONS.

    In this title:
            (1) Alternative dispute resolution system; adr.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system that provides for the resolution of health care lawsuits 
        in a manner other than through a civil action brought in a 
        State or Federal court.
            (2) Claimant.--The term ``claimant'' means any person who 
        brings a health care lawsuit, including a person who asserts or 
        claims a right to legal or equitable contribution, indemnity, 
        or subrogation, arising out of a health care liability claim or 
        action, and any person on whose behalf such a claim is asserted 
        or such an action is brought, whether deceased, incompetent, or 
        a minor.
            (3) Collateral source benefits.--The term ``collateral 
        source benefits'' means any amount paid or reasonably likely to 
        be paid in the future to or on behalf of the claimant, or any 
        service, product, or other benefit provided or reasonably 
        likely to be provided in the future to or on behalf of the 
        claimant, as a result of the injury or wrongful death, pursuant 
        to--
                    (A) any State or Federal health, sickness, income-
                disability, accident, or workers' compensation law;
                    (B) any health, sickness, income-disability, or 
                accident insurance that provides health benefits or 
                income-disability coverage;
                    (C) any contract or agreement of any group, 
                organization, partnership, or corporation to provide, 
                pay for, or reimburse the cost of medical, hospital, 
                dental, or income-disability benefits; and
                    (D) any other publicly or privately funded program.
            (4) Compensatory damages.--The term ``compensatory 
        damages'' means objectively verifiable monetary losses incurred 
        as a result of the provision of, use of, or payment for (or 
        failure to provide, use, or pay for) health care services or 
        medical products, such as past and future medical expenses, 
        loss of past and future earnings, cost of obtaining domestic 
        services, loss of employment, and loss of business or 
        employment opportunities, damages for physical and emotional 
        pain, suffering, inconvenience, physical impairment, mental 
        anguish, disfigurement, loss of enjoyment of life, loss of 
        society and companionship, loss of consortium (other than loss 
        of domestic service), hedonic damages, injury to reputation, 
        and all other nonpecuniary losses of any kind or nature. The 
        term ``compensatory damages'' includes economic damages and 
        noneconomic damages, as such terms are defined in this section.
            (5) Contingent fee.--The term ``contingent fee'' includes 
        all compensation to any person or persons which is payable only 
        if a recovery is effected on behalf of one or more claimants.
            (6) Economic damages.--The term ``economic damages'' means 
        objectively verifiable monetary losses incurred as a result of 
        the provision of, use of, or payment for (or failure to 
        provide, use, or pay for) health care services or medical 
        products, such as past and future medical expenses, loss of 
        past and future earnings, cost of obtaining domestic services, 
        loss of employment, and loss of business or employment 
        opportunities.
            (7) Health care lawsuit.--The term ``health care lawsuit'' 
        means any health care liability claim concerning the provision 
        of health care goods or services or any medical product 
        affecting interstate commerce, or any health care liability 
        action concerning the provision of health care goods or 
        services or any medical product affecting interstate commerce, 
        brought in a State or Federal court or pursuant to an 
        alternative dispute resolution system, against a health care 
        provider, a health care organization, or the manufacturer, 
        distributor, supplier, marketer, promoter, or seller of a 
        medical product, regardless of the theory of liability on which 
        the claim is based, or the number of claimants, plaintiffs, 
        defendants, or other parties, or the number of claims or causes 
        of action, in which the claimant alleges a health care 
        liability claim. Such term does not include a claim or action 
        which is based on criminal liability; which seeks civil fines 
        or penalties paid to Federal, State, or local government; or 
        which is grounded in antitrust.
            (8) Health care liability action.--The term ``health care 
        liability action'' means a civil action brought in a State or 
        Federal court or pursuant to an alternative dispute resolution 
        system, against a health care provider, a health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, regardless 
        of the theory of liability on which the claim is based, or the 
        number of plaintiffs, defendants, or other parties, or the 
        number of causes of action, in which the claimant alleges a 
        health care liability claim.
            (9) Health care liability claim.--The term ``health care 
        liability claim'' means a demand by any person, whether or not 
        pursuant to ADR, against a health care provider, health care 
        organization, or the manufacturer, distributor, supplier, 
        marketer, promoter, or seller of a medical product, including, 
        but not limited to, third-party claims, cross-claims, counter-
        claims, or contribution claims, which are based upon the 
        provision of, use of, or payment for (or the failure to 
        provide, use, or pay for) health care services or medical 
        products, regardless of the theory of liability on which the 
        claim is based, or the number of plaintiffs, defendants, or 
        other parties, or the number of causes of action.
            (10) Health care organization.--The term ``health care 
        organization'' means any person or entity which is obligated to 
        provide or pay for health benefits under any health plan, 
        including any person or entity acting under a contract or 
        arrangement with a health care organization to provide or 
        administer any health benefit.
            (11) Health care provider.--The term ``health care 
        provider'' means any person or entity required by State or 
        Federal laws or regulations to be licensed, registered, or 
        certified to provide health care services, and being either so 
        licensed, registered, or certified, or exempted from such 
        requirement by other statute or regulation.
            (12) Health care goods or services.--The term ``health care 
        goods or services'' means any goods or services provided by a 
        health care organization, provider, or by any individual 
        working under the supervision of a health care provider, that 
        relates to the diagnosis, prevention, or treatment of any human 
        disease or impairment, or the assessment or care of the health 
        of human beings.
            (13) Malicious intent to injure.--The term ``malicious 
        intent to injure'' means intentionally causing or attempting to 
        cause physical injury other than providing health care goods or 
        services.
            (14) Medical product.--The term ``medical product'' means a 
        drug, device, or biological product intended for humans, and 
        the terms ``drug'', ``device'', and ``biological product'' have 
        the meanings given such terms in sections 201(g)(1) and 201(h) 
        of the Federal Food, Drug and Cosmetic Act (21 U.S.C. 321(g)(1) 
        and (h)) and section 351(a) of the Public Health Service Act 
        (42 U.S.C. 262(a)), respectively, including any component or 
        raw material used therein, but excluding health care services.
            (15) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages for physical and emotional pain, suffering, 
        inconvenience, physical impairment, mental anguish, 
        disfigurement, loss of enjoyment of life, loss of society and 
        companionship, loss of consortium (other than loss of domestic 
        service), hedonic damages, injury to reputation, and all other 
        nonpecuniary losses of any kind or nature.
            (16) Punitive damages.--The term ``punitive damages'' means 
        damages awarded, for the purpose of punishment or deterrence, 
        and not solely for compensatory purposes, against a health care 
        provider, health care organization, or a manufacturer, 
        distributor, or supplier of a medical product. Punitive damages 
        are neither economic nor noneconomic damages.
            (17) Recovery.--The term ``recovery'' means the net sum 
        recovered after deducting any disbursements or costs incurred 
        in connection with prosecution or settlement of the claim, 
        including all costs paid or advanced by any person. Costs of 
        health care incurred by the plaintiff and the attorneys' office 
        overhead costs or charges for legal services are not deductible 
        disbursements or costs for such purpose.
            (18) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, the Northern 
        Mariana Islands, the Trust Territory of the Pacific Islands, 
        and any other territory or possession of the United States, or 
        any political subdivision thereof.

SEC. 509. EFFECT ON OTHER LAWS.

    (a) Vaccine Injury.--
            (1) To the extent that title XXI of the Public Health 
        Service Act establishes a Federal rule of law applicable to a 
        civil action brought for a vaccine-related injury or death--
                    (A) this title does not affect the application of 
                the rule of law to such an action; and
                    (B) any rule of law prescribed by this title in 
                conflict with a rule of law of such title XXI shall not 
                apply to such action.
            (2) If there is an aspect of a civil action brought for a 
        vaccine-related injury or death to which a Federal rule of law 
        under title XXI of the Public Health Service Act does not 
        apply, then this title or otherwise applicable law (as 
        determined under this title) will apply to such aspect of such 
        action.
    (b) Other Federal Law.--Except as provided in this section, nothing 
in this title shall be deemed to affect any defense available to a 
defendant in a health care lawsuit or action under any other provision 
of Federal law.

SEC. 510. STATE FLEXIBILITY AND PROTECTION OF STATES' RIGHTS.

    (a) Health Care Lawsuits.--The provisions governing health care 
lawsuits set forth in this title preempt, subject to subsections (b) 
and (c), State law to the extent that State law prevents the 
application of any provisions of law established by or under this 
title. The provisions governing health care lawsuits set forth in this 
title supersede chapter 171 of title 28, United States Code, to the 
extent that such chapter--
            (1) provides for a greater amount of damages or contingent 
        fees, a longer period in which a health care lawsuit may be 
        commenced, or a reduced applicability or scope of periodic 
        payment of future damages, than provided in this title; or
            (2) prohibits the introduction of evidence regarding 
        collateral source benefits, or mandates or permits subrogation 
        or a lien on collateral source benefits.
    (b) Protection of States' Rights and Other Laws.--(1) Any issue 
that is not governed by any provision of law established by or under 
this title (including State standards of negligence) shall be governed 
by otherwise applicable State or Federal law.
    (2) This title shall not preempt or supersede any State or Federal 
law that imposes greater procedural or substantive protections for 
health care providers and health care organizations from liability, 
loss, or damages than those provided by this title or create a cause of 
action.
    (c) State Flexibility.--No provision of this title shall be 
construed to preempt--
            (1) any State law (whether effective before, on, or after 
        the date of the enactment of this Act) that specifies a 
        particular monetary amount of compensatory or punitive damages 
        (or the total amount of damages) that may be awarded in a 
        health care lawsuit, regardless of whether such monetary amount 
        is greater or lesser than is provided for under this title, 
        notwithstanding section 4(a); or
            (2) any defense available to a party in a health care 
        lawsuit under any other provision of State or Federal law.

SEC. 511. APPLICABILITY; EFFECTIVE DATE.

    This title shall apply to any health care lawsuit brought in a 
Federal or State court, or subject to an alternative dispute resolution 
system, that is initiated on or after the date of the enactment of this 
Act, except that any health care lawsuit arising from an injury 
occurring prior to the date of the enactment of this Act shall be 
governed by the applicable statute of limitations provisions in effect 
at the time the injury occurred.

SEC. 512. SENSE OF CONGRESS.

    It is the sense of Congress that a health insurer should be liable 
for damages for harm caused when it makes a decision as to what care is 
medically necessary and appropriate.

                TITLE VI--HEALTH INFORMATION TECHNOLOGY

 Subtitle A--Assisting the Development of Health Information Technology

SEC. 601. PURPOSE.

    It is the purpose of this subtitle to promote the utilization of 
health record banking by improving the coordination of health 
information through an infrastructure for the secure and authorized 
exchange and use of healthcare information.

SEC. 602. HEALTH RECORD BANKING.

    (a) Establishment.--Not later than 1 year after the date of 
enactment of this Act, the Secretary of Health and Human Services shall 
promulgate regulations to provide for the certification and auditing of 
the banking of electronic medical records.
    (b) General Rights.--An individual who has a health record 
contained in a health record bank shall maintain ownership over the 
health record and shall have the right to review the contents of the 
record.

SEC. 603. APPLICATION OF FEDERAL AND STATE SECURITY AND CONFIDENTIALITY 
              STANDARDS.

    (a) In General.--Current Federal security and confidentiality 
standards and State security and confidentiality laws shall apply to 
this subtitle until such time as Congress acts to amend such standards.
    (b) Definitions.--In this section:
            (1) Current federal security and confidentiality 
        standards.--The term ``current Federal security and 
        confidentiality standards'' means the Federal privacy standards 
        established pursuant to section 264(c) of the Health Insurance 
        Portability and Accountability Act of 1996 (42 U.S.C. 1320d-2 
        note) and security standards established under section 1173(d) 
        of the Social Security Act (42 U.S.C. 1320d-2(d)).
            (2) State security and confidentiality laws.--The term 
        ``State security and confidentiality laws'' means State laws 
        and regulations relating to the privacy and confidentiality of 
        individually identifiable health information or to the security 
        of such information.
            (3) State.--The term ``State'' has the meaning given such 
        term for purposes of title XI of the Social Security Act, as 
        provided under section 1101(a) of such Act (42 U.S.C. 1301(a)).

   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.

    (a) For Civil Penalties.--Section 1128A of the Social Security Act 
(42 U.S.C. 1320a-7a) is amended--
            (1) in subsection (b), by adding at the end the following 
        new paragraph:
    ``(4) For purposes of this subsection, inducements to reduce or 
limit services described in paragraph (1) shall not include the 
practical or other advantages resulting from health information 
technology or related installation, maintenance, support, or training 
services.''; and
            (2) in subsection (i), by adding at the end the following 
        new paragraph:
            ``(8) The term `health information technology' means 
        hardware, software, license, right, intellectual property, 
        equipment, or other information technology (including new 
        versions, upgrades, and connectivity) designed or provided 
        primarily for the electronic creation, maintenance, or exchange 
        of health information to better coordinate care or improve 
        health care quality, efficiency, or research.''.
    (b) For Criminal Penalties.--Section 1128B of such Act (42 U.S.C. 
1320a-7b) is amended--
            (1) in subsection (b)(3)--
                    (A) in subparagraph (G), by striking ``and'' at the 
                end;
                    (B) in the subparagraph (H) added by section 237(d) 
                of the Medicare Prescription Drug, Improvement, and 
                Modernization Act of 2003 (Public Law 108-173; 117 
                Stat. 2213)--
                            (i) by moving such subparagraph 2 ems to 
                        the left; and
                            (ii) by striking the period at the end and 
                        inserting a semicolon;
                    (C) in the subparagraph (H) added by section 431(a) 
                of such Act (117 Stat. 2287)--
                            (i) by redesignating such subparagraph as 
                        subparagraph (I);
                            (ii) by moving such subparagraph 2 ems to 
                        the left; and
                            (iii) by striking the period at the end and 
                        inserting ``; and''; and
                    (D) by adding at the end the following new 
                subparagraph:
            ``(J) any nonmonetary remuneration (in the form of health 
        information technology, as defined in section 1128A(i)(8), or 
        related installation, maintenance, support or training 
        services) made to a person by a specified entity (as defined in 
        subsection (g)) if--
                    ``(i) the provision of such remuneration is without 
                an agreement between the parties or legal condition 
                that--
                            ``(I) limits or restricts the use of the 
                        health information technology to services 
                        provided by the physician to individuals 
                        receiving services at the specified entity;
                            ``(II) limits or restricts the use of the 
                        health information technology in conjunction 
                        with other health information technology; or
                            ``(III) conditions the provision of such 
                        remuneration on the referral of patients or 
                        business to the specified entity;
                    ``(ii) such remuneration is arranged for in a 
                written agreement that is signed by the parties 
                involved (or their representatives) and that specifies 
                the remuneration solicited or received (or offered or 
                paid) and states that the provision of such 
                remuneration is made for the primary purpose of better 
                coordination of care or improvement of health quality, 
                efficiency, or research; and
                    ``(iii) the specified entity providing the 
                remuneration (or a representative of such entity) has 
                not taken any action to disable any basic feature of 
                any hardware or software component of such remuneration 
                that would permit interoperability.''; and
            (2) by adding at the end the following new subsection:
    ``(g) Specified Entity Defined.--For purposes of subsection 
(b)(3)(J), the term `specified entity' means an entity that is a 
hospital, group practice, prescription drug plan sponsor, a Medicare 
Advantage organization, or any other such entity specified by the 
Secretary, considering the goals and objectives of this section, as 
well as the goals to better coordinate the delivery of health care and 
to promote the adoption and use of health information technology.''.
    (c) Effective Date and Effect on State Laws.--
            (1) Effective date.--The amendments made by subsections (a) 
        and (b) shall take effect on the date that is 120 days after 
        the date of the enactment of this Act.
            (2) Preemption of state laws.--No State (as defined in 
        section 1101(a) of the Social Security Act (42 U.S.C. 1301(a)) 
        for purposes of title XI of such Act) shall have in effect a 
        State law that imposes a criminal or civil penalty for a 
        transaction described in section 1128A(b)(4) or section 
        1128B(b)(3)(J) of such Act, as added by subsections (a)(1) and 
        (b), respectively, if the conditions described in the 
        respective provision, with respect to such transaction, are 
        met.
    (d) Study and Report To Assess Effect of Safe Harbors on Health 
System.--
            (1) In general.--The Secretary of Health and Human Services 
        shall conduct a study to determine the impact of each of the 
        safe harbors described in paragraph (3). In particular, the 
        study shall examine the following:
                    (A) The effectiveness of each safe harbor in 
                increasing the adoption of health information 
                technology.
                    (B) The types of health information technology 
                provided under each safe harbor.
                    (C) The extent to which the financial or other 
                business relationships between providers under each 
                safe harbor have changed as a result of the safe harbor 
                in a way that adversely affects or benefits the health 
                care system or choices available to consumers.
                    (D) The impact of the adoption of health 
                information technology on health care quality, cost, 
                and access under each safe harbor.
            (2) Report.--Not later than 3 years after the effective 
        date described in subsection (c)(1), the Secretary of Health 
        and Human Services shall submit to Congress a report on the 
        study under paragraph (1).
            (3) Safe harbors described.--For purposes of paragraphs (1) 
        and (2), the safe harbors described in this paragraph are--
                    (A) the safe harbor under section 1128A(b)(4) of 
                such Act (42 U.S.C. 1320a-7a(b)(4)), as added by 
                subsection (a)(1); and
                    (B) the safe harbor under section 1128B(b)(3)(J) of 
                such Act (42 U.S.C. 1320a-7b(b)(3)(J)), as added by 
                subsection (b).

SEC. 612. EXCEPTION TO LIMITATION ON CERTAIN PHYSICIAN REFERRALS (UNDER 
              STARK) FOR PROVISION OF HEALTH INFORMATION TECHNOLOGY AND 
              TRAINING SERVICES TO HEALTH CARE PROFESSIONALS.

    (a) In General.--Section 1877(b) of the Social Security Act (42 
U.S.C. 1395nn(b)) is amended by adding at the end the following new 
paragraph:
            ``(6) Information technology and training services.--
                    ``(A) In general.--Any nonmonetary remuneration (in 
                the form of health information technology or related 
                installation, maintenance, support or training 
                services) made by a specified entity to a physician 
                if--
                            ``(i) the provision of such remuneration is 
                        without an agreement between the parties or 
                        legal condition that--
                                    ``(I) limits or restricts the use 
                                of the health information technology to 
                                services provided by the physician to 
                                individuals receiving services at the 
                                specified entity;
                                    ``(II) limits or restricts the use 
                                of the health information technology in 
                                conjunction with other health 
                                information technology; or
                                    ``(III) conditions the provision of 
                                such remuneration on the referral of 
                                patients or business to the specified 
                                entity;
                            ``(ii) such remuneration is arranged for in 
                        a written agreement that is signed by the 
                        parties involved (or their representatives) and 
                        that specifies the remuneration made and states 
                        that the provision of such remuneration is made 
                        for the primary purpose of better coordination 
                        of care or improvement of health quality, 
                        efficiency, or research; and
                            ``(iii) the specified entity (or a 
                        representative of such entity) has not taken 
                        any action to disable any basic feature of any 
                        hardware or software component of such 
                        remuneration that would permit 
                        interoperability.
                    ``(B) Health information technology defined.--For 
                purposes of this paragraph, the term `health 
                information technology' means hardware, software, 
                license, right, intellectual property, equipment, or 
                other information technology (including new versions, 
                upgrades, and connectivity) designed or provided 
                primarily for the electronic creation, maintenance, or 
                exchange of health information to better coordinate 
                care or improve health care quality, efficiency, or 
                research.
                    ``(C) Specified entity defined.--For purposes of 
                this paragraph, the term `specified entity' means an 
                entity that is a hospital, group practice, prescription 
                drug plan sponsor, a Medicare Advantage organization, 
                or any other such entity specified by the Secretary, 
                considering the goals and objectives of this section, 
                as well as the goals to better coordinate the delivery 
                of health care and to promote the adoption and use of 
                health information technology.''.
    (b) Effective Date; Effect on State Laws.--
            (1) Effective date.--The amendment made by subsection (a) 
        shall take effect on the date that is 120 days after the date 
        of the enactment of this Act.
            (2) Preemption of state laws.--No State (as defined in 
        section 1101(a) of the Social Security Act (42 U.S.C. 1301(a)) 
        for purposes of title XI of such Act) shall have in effect a 
        State law that imposes a criminal or civil penalty for a 
        transaction described in section 1877(b)(6) of such Act, as 
        added by subsection (a), if the conditions described in such 
        section, with respect to such transaction, are met.
    (c) Study and Report To Assess Effect of Exception on Health 
System.--
            (1) In general.--The Secretary of Health and Human Services 
        shall conduct a study to determine the impact of the exception 
        under section 1877(b)(6) of such Act (42 U.S.C. 1395nn(b)(6)), 
        as added by subsection (a). In particular, the study shall 
        examine the following:
                    (A) The effectiveness of the exception in 
                increasing the adoption of health information 
                technology.
                    (B) The types of health information technology 
                provided under the exception.
                    (C) The extent to which the financial or other 
                business relationships between providers under the 
                exception have changed as a result of the exception in 
                a way that adversely affects or benefits the health 
                care system or choices available to consumers.
                    (D) The impact of the adoption of health 
                information technology on health care quality, cost, 
                and access under the exception.
            (2) Report.--Not later than 3 years after the effective 
        date described in subsection (b)(1), the Secretary of Health 
        and Human Services shall submit to Congress a report on the 
        study under paragraph (1).

SEC. 613. RULES OF CONSTRUCTION REGARDING USE OF CONSORTIA.

    (a) Application to Safe Harbor From Criminal Penalties.--Section 
1128B(b)(3) of the Social Security Act (42 U.S.C. 1320a-7b(b)(3)) is 
amended by adding after and below subparagraph (J), as added by section 
611(b)(1), the following: ``For purposes of subparagraph (J), nothing 
in such subparagraph shall be construed as preventing a specified 
entity, consistent with the specific requirements of such subparagraph, 
from forming a consortium composed of health care providers, payers, 
employers, and other interested entities to collectively purchase and 
donate health information technology, or from offering health care 
providers a choice of health information technology products in order 
to take into account the varying needs of such providers receiving such 
products.''.
    (b) Application to Stark Exception.--Paragraph (6) of section 
1877(b) of the Social Security Act (42 U.S.C. 1395nn(b)), as added by 
section 612(a), is amended by adding at the end the following new 
subparagraph:
                    ``(D) Rule of construction.--For purposes of 
                subparagraph (A), nothing in such subparagraph shall be 
                construed as preventing a specified entity, consistent 
                with the specific requirements of such subparagraph, 
                from--
                            ``(i) forming a consortium composed of 
                        health care providers, payers, employers, and 
                        other interested entities to collectively 
                        purchase and donate health information 
                        technology; or
                            ``(ii) offering health care providers a 
                        choice of health information technology 
                        products in order to take into account the 
                        varying needs of such providers receiving such 
                        products.''.
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