I

107TH CONGRESS

1ST SESSION H. R. 1774

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

to improve access and choice for entrepreneurs with small businesses

with respect to medical care for their employees.

IN THE HOUSE OF REPRESENTATIVES

MAY 9, 2001

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

ARMEY, Ms. VELA ́ZQUEZ, Mr. FROST, Mr. BAKER, Mr. BALLENGER, Mr.

BRYANT, Mr. CALVERT, Mr. CANTOR, Mr. COLLINS, Mr. COOKSEY, Mr.

CUNNINGHAM, Mr. DEAL of Georgia, Mr. EHLERS, Mrs. EMERSON, Mr.

GONZALEZ, Mr. GOSS, Mr. GREENWOOD, Ms. HART, Mr. HERGER, Mr.

HILLEARY, Mrs. KELLY, Mr. KOLBE, Mr. LIPINSKI, Mr. LUCAS of Kentucky, Mr. MCHUGH, Mr. MALONEY of Connecticut, Mr. MANZULLO, Mr.

GARY G. MILLER of California, Mr. MORAN of Virginia, Mrs. NORTHUP,

Mr. OSE, Mr. PENCE, Mr. PETRI, Ms. PRYCE of Ohio, Mr. REHBERG,

Ms. SANCHEZ, Mr. SCHAFFER, Mr. SESSIONS, Mr. SHAYS, Mr. SMITH of

Washington, Mr. UPTON, Mr. WAMP, Mr. WATKINS, Mr. WELDON of

Florida, and Mr. WYNN) introduced the following bill; which was referred

to the Committee on Education and the Workforce

A BILL

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

care for their employees.

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

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

3 Fairness Act of 2001’’.

4 SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS.

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

8 ‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH

9 PLANS

10 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS.

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

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

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

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

16 plan is described in this subsection if such sponsor—

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

18 with a constitution and bylaws specifically stating its

19 purpose and providing for periodic meetings on at

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

22 rural electric cooperative association or a rural tele23 phone cooperative association), a bona fide profes24 sional association, or a bona fide chamber of com25 merce (or similar bona fide business association, in26 cluding a corporation or similar organization that
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1 operates on a cooperative basis (within the meaning

2 of section 1381 of the Internal Revenue Code of

3 1986)), for substantial purposes other than that of

4 obtaining or providing medical care;

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

6 receives the active support of its members and col7 lects from its members on a periodic basis dues or

8 payments necessary to maintain eligibility for mem9 bership in the sponsor; and

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

11 or payments, or coverage under the plan on the

12 basis of health status-related factors with respect to

13 the employees of its members (or affiliated mem14 bers), or the dependents of such employees, and does

15 not condition such dues or payments on the basis of

16 group health plan participation.

17 Any sponsor consisting of an association of entities which

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

19 shall be deemed to be a sponsor described in this sub20 section.

21 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH

22 PLANS.

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

24 prescribe by regulation, through negotiated rulemaking, a

25 procedure under which, subject to subsection (b), the ap-
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1 plicable authority shall certify association health plans

2 which apply for certification as meeting the requirements

3 of this part.

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

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

6 health plan that provides at least one benefit option which

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

10 satisfied that the applicable requirements of this part are

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

12 operations, will be met) with respect to the plan.

13 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

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

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

18 is to commence operations).

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

23 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

24 PLANS.—The applicable authority shall establish a class

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

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

4 the plans in each class of such association health plans

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

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

9 HEALTH PLANS.—An association health plan which offers

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

11 insurance coverage may be certified under this part only

12 if such plan consists of any of the following:

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

14 date of the enactment of the Small Business Access

15 and Choice for Entrepreneurs Act of 2001,

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

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

19 employers represent a broad cross-section of trades

20 and businesses or industries, or

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

23 one or more industries, which have been indicated as

24 having average or above-average health insurance

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

2 rate levels, and other means demonstrated by such

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

6 agriculture; equipment and automobile dealerships;

7 barbering and cosmetology; beverage wholesaling/dis8 tributing; certified public accounting practices; child

9 care; construction; dance, theatrical, and orchestra

10 productions; disinfecting and pest control; eating

11 and drinking establishments; fishing; hospitals; labor

12 organizations; logging; manufacturing (metals); min13 ing; medical and dental practices; medical labora14 tories; sanitary services; transportation (local and

15 freight); and warehousing.

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

17 BOARDS OF TRUSTEES.

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

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

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

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

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

23 the application for certification under this part.
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1 ‘‘(b) BOARD OF TRUSTEES.—The requirements of

2 this subsection are met with respect to an association

3 health plan if the following requirements are met:

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

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

7 and which is responsible for all operations of the

8 plan.

9 ‘‘(2) RULES OF OPERATION AND FINANCIAL

10 CONTROLS.—The board of trustees has in effect

11 rules of operation and financial controls, based on a

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

13 terms of the plan and to meet all requirements of

14 this title applicable to the plan.

15 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

16 PARTICIPATING EMPLOYERS AND TO CONTRAC17 TORS.—

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

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

20 board of trustees are individuals selected from

21 individuals who are the owners, officers, direc22 tors, or employees of the participating employ23 ers or who are partners in the participating em24 ployers and actively participate in the business.

25 ‘‘(B) LIMITATION.—
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1 ‘‘(i) GENERAL RULE.—Except as pro2 vided in clauses (ii) and (iii), no such

3 member is an owner, officer, director, or

4 employee of, or partner in, a contract ad5 ministrator or other service provider to the

6 plan.

7 ‘‘(ii) LIMITED EXCEPTION FOR PRO8 VIDERS OF SERVICES SOLELY ON BEHALF

9 OF THE SPONSOR.—Officers or employees

10 of a sponsor which is a service provider

11 (other than a contract administrator) to

12 the plan may be members of the board if

13 they constitute not more than 25 percent

14 of the membership of the board and they

15 do not provide services to the plan other

16 than on behalf of the sponsor.

17 ‘‘(iii) TREATMENT OF PROVIDERS OF

18 MEDICAL CARE.—In the case of a sponsor

19 which is an association whose membership

20 consists primarily of providers of medical

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

22 of any service provider described in sub23 paragraph (A) who is a provider of medical

24 care under the plan.
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1 ‘‘(C) CERTAIN PLANS EXCLUDED.—Sub2 paragraph (A) shall not apply to an association

3 health plan which is in existence on the date of

4 the enactment of the Small Business Access

5 and Choice for Entrepreneurs Act of 2001.

6 ‘‘(D) SOLE AUTHORITY.—The board has

7 sole authority under the plan to approve appli8 cations for participation in the plan and to con9 tract with a service provider to administer the

10 day-to-day affairs of the plan.

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

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

13 maintained by a franchiser for a franchise network con14 sisting of its franchisees—

15 ‘‘(1) the requirements of subsection (a) and sec16 tion 801(a)(1) shall be deemed met if such require17 ments would otherwise be met if the franchiser were

18 deemed to be the sponsor referred to in section

19 801(b), such network were deemed to be an associa20 tion described in section 801(b), and each franchisee

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

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

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

24 be deemed met.
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1 The Secretary may by regulation, through negotiated rule2 making, define for purposes of this subsection the terms

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

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

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

6 health plan described in paragraph (2)—

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

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

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

10 deemed a board of trustees with respect to

11 which the requirements of subsection (b) are

12 met; and

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

14 be deemed met.

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

16 described in this paragraph if—

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

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

19 2001, and would be described in section

20 3(40)(A)(i) but solely for the failure to meet

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

22 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE23 MENTS.

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

25 requirements of this subsection are met with respect to
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1 an association health plan if, under the terms of the

2 plan—

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

4 ‘‘(A) a member of the sponsor,

5 ‘‘(B) the sponsor, or

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

7 with respect to which the requirements of sub8 section (b) are met,

9 except that, in the case of a sponsor which is a pro10 fessional association or other individual-based asso11 ciation, if at least one of the officers, directors, or

12 employees of an employer, or at least one of the in13 dividuals who are partners in an employer and who

14 actively participates in the business, is a member or

15 such an affiliated member of the sponsor, partici16 pating employers may also include such employer;

17 and

18 ‘‘(2) all individuals commencing coverage under

19 the plan after certification under this part must

20 be—

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

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

23 employees of, or partners in, participating em24 ployers; or
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1 ‘‘(B) the beneficiaries of individuals de2 scribed in subparagraph (A).

3 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM4 PLOYEES.—In the case of an association health plan in

5 existence on the date of the enactment of the Small Busi6 ness Access and Choice for Entrepreneurs Act of 2001,

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

8 offered coverage under the plan as a participating em9 ployer only if—

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

11 member on the date of certification under this part;

12 or

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

14 date of the offering of such coverage, the affiliated

15 member has not maintained or contributed to a

16 group health plan with respect to any of its employ17 ees who would otherwise be eligible to participate in

18 such association health plan.

19 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re20 quirements of this subsection are met with respect to an

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

22 no participating employer may provide health insurance

23 coverage in the individual market for any employee not

24 covered under the plan which is similar to the coverage

25 contemporaneously provided to employees of the employer
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1 under the plan, if such exclusion of the employee from cov2 erage under the plan is based on a health status-related

3 factor with respect to the employee and such employee

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

5 for coverage under the plan.

6 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

7 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI8 PATE.—The requirements of this subsection are met with

9 respect to an association health plan if—

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

11 meeting the preceding requirements of this section

12 are eligible to qualify as participating employers for

13 all geographically available coverage options, unless,

14 in the case of any such employer, participation or

15 contribution requirements of the type referred to in

16 section 2711 of the Public Health Service Act are

17 not met;

18 ‘‘(2) upon request, any employer eligible to par19 ticipate is furnished information regarding all cov20 erage options available under the plan; and

21 ‘‘(3) the applicable requirements of sections

22 701, 702, and 703 are met with respect to the plan.
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1 ‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN

2 DOCUMENTS, CONTRIBUTION RATES, AND

3 BENEFIT OPTIONS.

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

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

6 following requirements are met:

7 ‘‘(1) CONTENTS OF GOVERNING INSTRU8 MENTS.—The instruments governing the plan in9 clude a written instrument, meeting the require10 ments of an instrument required under section

11 402(a)(1), which—

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

13 serves as the named fiduciary required for plans

14 under section 402(a)(1) and serves in the ca15 pacity of a plan administrator (referred to in

16 section 3(16)(A));

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

18 is to serve as plan sponsor (referred to in sec19 tion 3(16)(B)); and

20 ‘‘(C) incorporates the requirements of sec21 tion 806.

22 ‘‘(2) CONTRIBUTION RATES MUST BE NON23 DISCRIMINATORY.—

24 ‘‘(A) The contribution rates for any par25 ticipating small employer do not vary on the

26 basis of the claims experience of such employer
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1 and do not vary on the basis of the type of

2 business or industry in which such employer is

3 engaged.

4 ‘‘(B) Nothing in this title or any other pro5 vision of law shall be construed to preclude an

6 association health plan, or a health insurance

7 issuer offering health insurance coverage in

8 connection with an association health plan,

9 from—

10 ‘‘(i) setting contribution rates based

11 on the claims experience of the plan; or

12 ‘‘(ii) varying contribution rates for

13 small employers in a State to the extent

14 that such rates could vary using the same

15 methodology employed in such State for

16 regulating premium rates in the small

17 group market with respect to health insur18 ance coverage offered in connection with

19 bona fide associations (within the meaning

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

21 Service Act),

22 subject to the requirements of section 702(b)

23 relating to contribution rates.

24 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI25 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If
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1 any benefit option under the plan does not consist

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

3 beginning of the plan year not fewer than 1,000 par4 ticipants and beneficiaries.

5 ‘‘(4) MARKETING REQUIREMENTS.—

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

7 which consists of health insurance coverage is

8 offered under the plan, State-licensed insurance

9 agents shall be used to distribute to small em10 ployers coverage which does not consist of

11 health insurance coverage in a manner com12 parable to the manner in which such agents are

13 used to distribute health insurance coverage.

14 ‘‘(B) STATE-LICENSED INSURANCE

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

16 the term ‘State-licensed insurance agents’

17 means one or more agents who are licensed in

18 a State and are subject to the laws of such

19 State relating to licensure, qualification, test20 ing, examination, and continuing education of

21 persons authorized to offer, sell, or solicit

22 health insurance coverage in such State.

23 ‘‘(5) REGULATORY REQUIREMENTS.—Such

24 other requirements as the applicable authority deter25 mines are necessary to carry out the purposes of this
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1 part, which shall be prescribed by the applicable au2 thority by regulation through negotiated rulemaking.

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

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

5 nothing in this part or any provision of State law (as de6 fined in section 514(c)(1)) shall be construed to preclude

7 an association health plan, or a health insurance issuer

8 offering health insurance coverage in connection with an

9 association health plan, from exercising its sole discretion

10 in selecting the specific items and services consisting of

11 medical care to be included as benefits under such plan

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

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

14 of a specific disease from such coverage, or (2) is not pre15 empted under section 731(a)(1) with respect to matters

16 governed by section 711 or 712.

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

18 FOR SOLVENCY FOR PLANS PROVIDING

19 HEALTH BENEFITS IN ADDITION TO HEALTH

20 INSURANCE COVERAGE.

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

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

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

24 of health insurance coverage; or
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1 ‘‘(2) if the plan provides any additional benefit

2 options which do not consist of health insurance cov3 erage, the plan—

4 ‘‘(A) establishes and maintains reserves

5 with respect to such additional benefit options,

6 in amounts recommended by the qualified actu7 ary, consisting of—

8 ‘‘(i) a reserve sufficient for unearned

9 contributions;

10 ‘‘(ii) a reserve sufficient for benefit li11 abilities which have been incurred, which

12 have not been satisfied, and for which risk

13 of loss has not yet been transferred, and

14 for expected administrative costs with re15 spect to such benefit liabilities;

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

17 obligations of the plan; and

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

19 of error and other fluctuations, taking into

20 account the specific circumstances of the

21 plan; and

22 ‘‘(B) establishes and maintains aggregate

23 and specific excess /stop loss insurance and sol24 vency indemnification, with respect to such ad-
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1 ditional benefit options for which risk of loss

2 has not yet been transferred, as follows:

3 ‘‘(i) The plan shall secure aggregate

4 excess /stop loss insurance for the plan

5 with an attachment point which is not

6 greater than 125 percent of expected gross

7 annual claims. The applicable authority

8 may by regulation, through negotiated

9 rulemaking, provide for upward adjust10 ments in the amount of such percentage in

11 specified circumstances in which the plan

12 specifically provides for and maintains re13 serves in excess of the amounts required

14 under subparagraph (A).

15 ‘‘(ii) The plan shall secure specific ex16 cess /stop loss insurance for the plan with

17 an attachment point which is at least equal

18 to an amount recommended by the plan’s

19 qualified actuary. The applicable authority

20 may by regulation, through negotiated

21 rulemaking, provide for adjustments in the

22 amount of such insurance in specified cir23 cumstances in which the plan specifically

24 provides for and maintains reserves in ex-
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1 cess of the amounts required under sub2 paragraph (A).

3 ‘‘(iii) The plan shall secure indem4 nification insurance for any claims which

5 the plan is unable to satisfy by reason of

6 a plan termination.

7 Any regulations prescribed by the applicable authority

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

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

10 stop loss insurance as the qualified actuary may rec11 ommend, taking into account the specific circumstances

12 of the plan.

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

14 RESERVES.—In the case of any association health plan de15 scribed in subsection (a)(2), the requirements of this sub16 section are met if the plan establishes and maintains sur17 plus in an amount at least equal to—

18 ‘‘(1) $500,000, or

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

20 $2,000,000) as may be set forth in regulations pre21 scribed by the applicable authority through nego22 tiated rulemaking, based on the level of aggregate

23 and specific excess /stop loss insurance provided with

24 respect to such plan.
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1 ‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of

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

3 the applicable authority may provide such additional re4 quirements relating to reserves and excess /stop loss insur5 ance as the applicable authority considers appropriate.

6 Such requirements may be provided by regulation, through

7 negotiated rulemaking, with respect to any such plan or

8 any class of such plans.

9 ‘‘(d) ADJUSTMENTS FOR EXCESS /STOP LOSS INSUR10 ANCE.—The applicable authority may provide for adjust11 ments to the levels of reserves otherwise required under

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

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

14 provided with respect to such plan or plans.

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

16 applicable authority may permit an association health plan

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

18 of the requirements of this section (except subsection

19 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar20 rangement, or other financial arrangement as the applica21 ble authority determines to be adequate to enable the plan

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

23 and is otherwise no less protective of the interests of par24 ticipants and beneficiaries than the requirements for

25 which it is substituted. The applicable authority may take
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1 into account, for purposes of this subsection, evidence pro2 vided by the plan or sponsor which demonstrates an as3 sumption of liability with respect to the plan. Such evi4 dence may be in the form of a contract of indemnification,

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

6 applicable terms of the plan in the form of assessments

7 of participating employers, security, or other financial ar8 rangement.

9 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

10 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.—

11 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO12 CIATION HEALTH PLAN FUND.—

13 ‘‘(A) IN GENERAL.—In the case of an as14 sociation health plan described in subsection

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

16 met if the plan makes payments into the Asso17 ciation Health Plan Fund under this subpara18 graph when they are due. Such payments shall

19 consist of annual payments in the amount of

20 $5,000, and, in addition to such annual pay21 ments, such supplemental payments as the Sec22 retary may determine to be necessary under

23 paragraph (2). Payments under this paragraph

24 are payable to the Fund at the time determined

25 by the Secretary. Initial payments are due in
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1 advance of certification under this part. Pay2 ments shall continue to accrue until a plan’s as3 sets are distributed pursuant to a termination

4 procedure.

5 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

8 not more than 100 percent of the payment

9 which was not timely paid shall be payable by

10 the plan to the Fund.

11 ‘‘(C) CONTINUED DUTY OF THE SEC12 RETARY.—The Secretary shall not cease to

13 carry out the provisions of paragraph (2) on ac14 count of the failure of a plan to pay any pay15 ment when due.

16 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

17 EXCESS /STOP LOSS INSURANCE COVERAGE AND IN18 DEMNIFICATION INSURANCE COVERAGE FOR CER19 TAIN PLANS.—In any case in which the applicable

20 authority determines that there is, or that there is

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

22 take necessary corrective actions under section

23 809(a) with respect to an association health plan de24 scribed in subsection (a)(2); or (B) a termination of

25 such a plan under section 809(b) or 810(b)(8) (and,
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1 if the applicable authority is not the Secretary, cer2 tifies such determination to the Secretary), the Sec3 retary shall determine the amounts necessary to

4 make payments to an insurer (designated by the

5 Secretary) to maintain in force excess /stop loss in6 surance coverage or indemnification insurance cov7 erage for such plan, if the Secretary determines that

8 there is a reasonable expectation that, without such

9 payments, claims would not be satisfied by reason of

10 termination of such coverage. The Secretary shall, to

11 the extent provided in advance in appropriation

12 Acts, pay such amounts so determined to the insurer

13 designated by the Secretary.

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

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

16 on the books of the Treasury a fund to be

17 known as the ‘Association Health Plan Fund’.

18 The Fund shall be available for making pay19 ments pursuant to paragraph (2). The Fund

20 shall be credited with payments received pursu21 ant to paragraph (1)(A), penalties received pur22 suant to paragraph (1)(B); and earnings on in23 vestments of amounts of the Fund under sub24 paragraph (B).
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1 ‘‘(B) INVESTMENT.—Whenever the Sec2 retary determines that the moneys of the fund

3 are in excess of current needs, the Secretary

4 may request the investment of such amounts as

5 the Secretary determines advisable by the Sec6 retary of the Treasury in obligations issued or

7 guaranteed by the United States.

8 ‘‘(g) EXCESS /STOP LOSS INSURANCE.—For pur9 poses of this section—

10 ‘‘(1) AGGREGATE EXCESS /STOP LOSS INSUR11 ANCE.—The term ‘aggregate excess /stop loss insur12 ance’ means, in connection with an association

13 health plan, a contract—

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

15 minimum standards as the applicable authority

16 may prescribe by regulation through negotiated

17 rulemaking) provides for payment to the plan

18 with respect to aggregate claims under the plan

19 in excess of an amount or amounts specified in

20 such contract;

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

22 ‘‘(C) which allows for payment of pre23 miums by any third party on behalf of the in24 sured plan.
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1 ‘‘(2) SPECIFIC EXCESS /STOP LOSS INSUR2 ANCE.—The term ‘specific excess /stop loss insur3 ance’ means, in connection with an association

4 health plan, a contract—

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

6 minimum standards as the applicable authority

7 may prescribe by regulation through negotiated

8 rulemaking) provides for payment to the plan

9 with respect to claims under the plan in connec10 tion with a covered individual in excess of an

11 amount or amounts specified in such contract

12 in connection with such covered individual;

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

14 ‘‘(C) which allows for payment of pre15 miums by any third party on behalf of the in16 sured plan.

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

18 of this section, the term ‘indemnification insurance’

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

20 contract—

21 ‘‘(1) under which an insurer (meeting such min22 imum standards as the applicable authority may pre23 scribe through negotiated rulemaking) provides for

24 payment to the plan with respect to claims under the

25 plan which the plan is unable to satisfy by reason
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•HR 1774 IH

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

2 to mandatory termination);

3 ‘‘(2) which is guaranteed renewable and

4 noncancellable for any reason (except as the applica5 ble authority may prescribe by regulation through

6 negotiated rulemaking); and

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

8 any third party on behalf of the insured plan.

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

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

11 health plan, plan assets which meet the fiduciary stand12 ards under part 4 and such additional requirements re13 garding liquidity as the applicable authority may prescribe

14 through negotiated rulemaking.

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

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

17 date of the enactment of the Small Business Access

18 and Choice for Entrepreneurs Act of 2001, the ap19 plicable authority shall establish a Solvency Stand20 ards Working Group. In prescribing the initial regu21 lations under this section, the applicable authority

22 shall take into account the recommendations of such

23 Working Group.

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

25 consist of not more than 15 members appointed by
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•HR 1774 IH

1 the applicable authority. The applicable authority

2 shall include among persons invited to membership

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

4 following:

5 ‘‘(A) a representative of the National Asso6 ciation of Insurance Commissioners;

7 ‘‘(B) a representative of the American

8 Academy of Actuaries;

9 ‘‘(C) a representative of the State govern10 ments, or their interests;

11 ‘‘(D) a representative of existing self-in12 sured arrangements, or their interests;

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

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

15 interests; and

16 ‘‘(F) a representative of multiemployer

17 plans that are group health plans, or their in18 terests.

19 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE20 LATED REQUIREMENTS.

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

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

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

24 an application for certification under this part a filing fee

25 in the amount of $5,000, which shall be available in the
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•HR 1774 IH

1 case of the Secretary, to the extent provided in appropria2 tion Acts, for the sole purpose of administering the certifi3 cation procedures applicable with respect to association

4 health plans.

5 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA6 TION FOR CERTIFICATION.—An application for certifi7 cation under this part meets the requirements of this sec8 tion only if it includes, in a manner and form which shall

9 be prescribed by the applicable authority through nego10 tiated rulemaking, at least the following information:

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

12 and addresses of—

13 ‘‘(A) the sponsor; and

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

15 of the plan.

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

17 BUSINESS.—The States in which participants and

18 beneficiaries under the plan are to be located and

19 the number of them expected to be located in each

20 such State.

21 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro22 vided by the board of trustees that the bonding re23 quirements of section 412 will be met as of the date

24 of the application or (if later) commencement of op25 erations.
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1 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu2 ments governing the plan (including any bylaws and

3 trust agreements), the summary plan description,

4 and other material describing the benefits that will

5 be provided to participants and beneficiaries under

6 the plan.

7 ‘‘(5) AGREEMENTS WITH SERVICE PRO8 VIDERS.—A copy of any agreements between the

9 plan and contract administrators and other service

10 providers.

11 ‘‘(6) FUNDING REPORT.—In the case of asso12 ciation health plans providing benefits options in ad13 dition to health insurance coverage, a report setting

14 forth information with respect to such additional

15 benefit options determined as of a date within the

16 120-day period ending with the date of the applica17 tion, including the following:

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

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

20 statement of actuarial opinion, signed by a

21 qualified actuary, that all applicable require22 ments of section 806 are or will be met in ac23 cordance with regulations which the applicable

24 authority shall prescribe through negotiated

25 rulemaking.
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•HR 1774 IH

1 ‘‘(B) ADEQUACY OF CONTRIBUTION

2 RATES.—A statement of actuarial opinion,

3 signed by a qualified actuary, which sets forth

4 a description of the extent to which contribution

5 rates are adequate to provide for the payment

6 of all obligations and the maintenance of re7 quired reserves under the plan for the 12-

8 month period beginning with such date within

9 such 120-day period, taking into account the

10 expected coverage and experience of the plan. If

11 the contribution rates are not fully adequate,

12 the statement of actuarial opinion shall indicate

13 the extent to which the rates are inadequate

14 and the changes needed to ensure adequacy.

15 ‘‘(C) CURRENT AND PROJECTED VALUE OF

16 ASSETS AND LIABILITIES.—A statement of ac17 tuarial opinion signed by a qualified actuary,

18 which sets forth the current value of the assets

19 and liabilities accumulated under the plan and

20 a projection of the assets, liabilities, income,

21 and expenses of the plan for the 12-month pe22 riod referred to in subparagraph (B). The in23 come statement shall identify separately the

24 plan’s administrative expenses and claims.
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•HR 1774 IH

1 ‘‘(D) COSTS OF COVERAGE TO BE

2 CHARGED AND OTHER EXPENSES.—A state3 ment of the costs of coverage to be charged, in4 cluding an itemization of amounts for adminis5 tration, reserves, and other expenses associated

6 with the operation of the plan.

7 ‘‘(E) OTHER INFORMATION.—Any other

8 information as may be determined by the appli9 cable authority, by regulation through nego10 tiated rulemaking, as necessary to carry out the

11 purposes of this part.

12 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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

14 association health plan shall not be effective unless written

15 notice of such certification is filed with the applicable

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

17 of the participants and beneficiaries under the plan are

18 located. For purposes of this subsection, an individual

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

20 known address of such individual is located or in which

21 such individual is employed.

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

23 of any association health plan certified under this part,

24 descriptions of material changes in any information which

25 was required to be submitted with the application for the
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•HR 1774 IH

1 certification under this part shall be filed in such form

2 and manner as shall be prescribed by the applicable au3 thority by regulation through negotiated rulemaking. The

4 applicable authority may require by regulation, through

5 negotiated rulemaking, prior notice of material changes

6 with respect to specified matters which might serve as the

7 basis for suspension or revocation of the certification.

8 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS9 SOCIATION HEALTH PLANS.—An association health plan

10 certified under this part which provides benefit options in

11 addition to health insurance coverage for such plan year

12 shall meet the requirements of section 103 by filing an

13 annual report under such section which shall include infor14 mation described in subsection (b)(6) with respect to the

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

16 be filed with the applicable authority not later than 90

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

18 as may be prescribed by the applicable authority). The ap19 plicable authority may require by regulation through nego20 tiated rulemaking such interim reports as it considers ap21 propriate.

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

23 board of trustees of each association health plan which

24 provides benefits options in addition to health insurance

25 coverage and which is applying for certification under this
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•HR 1774 IH

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

2 of all participants and beneficiaries, a qualified actuary

3 who shall be responsible for the preparation of the mate4 rials comprising information necessary to be submitted by

5 a qualified actuary under this part. The qualified actuary

6 shall utilize such assumptions and techniques as are nec7 essary to enable such actuary to form an opinion as to

8 whether the contents of the matters reported under this

9 part—

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

11 the experience of the plan and to reasonable expecta12 tions; and

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

14 anticipated experience under the plan.

15 The opinion by the qualified actuary shall be made with

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

17 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER18 MINATION.

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

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

21 may terminate (upon or at any time after cessation of ac22 cruals in benefit liabilities) only if the board of trustees—

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

24 termination date, provides to the participants and

25 beneficiaries a written notice of intent to terminate
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1 stating that such termination is intended and the

2 proposed termination date;

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

4 of the plan in connection with such termination in

5 a manner which will result in timely payment of all

6 benefits for which the plan is obligated; and

7 ‘‘(3) submits such plan in writing to the appli8 cable authority.

9 Actions required under this section shall be taken in such

10 form and manner as may be prescribed by the applicable

11 authority by regulation through negotiated rulemaking.

12 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI13 NATION.

14 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE15 SERVES.—An association health plan which is certified

16 under this part and which provides benefits other than

17 health insurance coverage shall continue to meet the re18 quirements of section 806, irrespective of whether such

19 certification continues in effect. The board of trustees of

20 such plan shall determine quarterly whether the require21 ments of section 806 are met. In any case in which the

22 board determines that there is reason to believe that there

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

24 applicable authority makes such a determination and so

25 notifies the board, the board shall immediately notify the
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•HR 1774 IH

1 qualified actuary engaged by the plan, and such actuary

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

3 make such recommendations to the board for corrective

4 action as the actuary determines necessary to ensure com5 pliance with section 806. Not later than 30 days after re6 ceiving from the actuary recommendations for corrective

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

8 such form and manner as the applicable authority may

9 prescribe by regulation through negotiated rulemaking) of

10 such recommendations of the actuary for corrective action,

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

12 board has taken or plans to take in response to such rec13 ommendations. The board shall thereafter report to the

14 applicable authority, in such form and frequency as the

15 applicable authority may specify to the board, regarding

16 corrective action taken by the board until the requirements

17 of section 806 are met.

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

19 which—

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

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

22 health plan which is or has been certified under this

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

24 the requirements of section 806 and has not been

25 notified by the board of trustees of the plan that
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•HR 1774 IH

1 corrective action has restored compliance with such

2 requirements; and

3 ‘‘(2) the applicable authority determines that

4 there is a reasonable expectation that the plan will

5 continue to fail to meet the requirements of section

6 806,

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

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

9 course of the termination, take such actions as the appli10 cable authority may require, including satisfying any

11 claims referred to in section 806(a)(2)(B)(iii) and recov12 ering for the plan any liability under subsection

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

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

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

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

17 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL18 VENT ASSOCIATION HEALTH PLANS PRO19 VIDING HEALTH BENEFITS IN ADDITION TO

20 HEALTH INSURANCE COVERAGE.

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

22 INSOLVENT PLANS.—Whenever the Secretary determines

23 that an association health plan which is or has been cer24 tified under this part and which is described in section

25 806(a)(2) will be unable to provide benefits when due or
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•HR 1774 IH

1 is otherwise in a financially hazardous condition, as shall

2 be defined by the Secretary by regulation through nego3 tiated rulemaking, the Secretary shall, upon notice to the

4 plan, apply to the appropriate United States district court

5 for appointment of the Secretary as trustee to administer

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

7 appear as a party and other interested persons may inter8 vene in the proceedings at the discretion of the court. The

9 court shall appoint such Secretary trustee if the court de10 termines that the trusteeship is necessary to protect the

11 interests of the participants and beneficiaries or providers

12 of medical care or to avoid any unreasonable deterioration

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

14 such Secretary shall continue until the conditions de15 scribed in the first sentence of this subsection are rem16 edied or the plan is terminated.

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

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

19 the power—

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

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

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

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

24 of the assets and records of the plan to the Sec25 retary as trustee;
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•HR 1774 IH

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

2 Secretary holds in accordance with the provisions of

3 the plan, regulations prescribed by the Secretary

4 through negotiated rulemaking, and applicable provi5 sions of law;

6 ‘‘(4) to require the sponsor, the plan adminis7 trator, any participating employer, and any employee

8 organization representing plan participants to fur9 nish any information with respect to the plan which

10 the Secretary as trustee may reasonably need in

11 order to administer the plan;

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

13 plan and to recover reasonable expenses of the trust14 eeship;

15 ‘‘(6) to commence, prosecute, or defend on be16 half of the plan any suit or proceeding involving the

17 plan;

18 ‘‘(7) to issue, publish, or file such notices, state19 ments, and reports as may be required by the Sec20 retary by regulation through negotiated rulemaking

21 or required by any order of the court;

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

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

24 liquidate the plan assets, to restore the plan to the
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1 responsibility of the sponsor, or to continue the

2 trusteeship;

3 ‘‘(9) to provide for the enrollment of plan par4 ticipants and beneficiaries under appropriate cov5 erage options; and

6 ‘‘(10) to do such other acts as may be nec7 essary to comply with this title or any order of the

8 court and to protect the interests of plan partici9 pants and beneficiaries and providers of medical

10 care.

11 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac12 ticable after the Secretary’s appointment as trustee, the

13 Secretary shall give notice of such appointment to—

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

15 ‘‘(2) each participant;

16 ‘‘(3) each participating employer; and

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

18 which, for purposes of collective bargaining, rep19 resents plan participants.

20 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in21 consistent with the provisions of this title, or as may be

22 otherwise ordered by the court, the Secretary, upon ap23 pointment as trustee under this section, shall be subject

24 to the same duties as those of a trustee under section 704
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1 of title 11, United States Code, and shall have the duties

2 of a fiduciary for purposes of this title.

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

4 Secretary under this subsection may be filed notwith5 standing the pendency in the same or any other court of

6 any bankruptcy, mortgage foreclosure, or equity receiver7 ship proceeding, or any proceeding to reorganize, conserve,

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

9 to enforce a lien against property of the plan.

10 ‘‘(f) JURISDICTION OF COURT.—

11 ‘‘(1) IN GENERAL.—Upon the filing of an appli12 cation for the appointment as trustee or the issuance

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

14 application is made shall have exclusive jurisdiction

15 of the plan involved and its property wherever lo16 cated with the powers, to the extent consistent with

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

18 States having jurisdiction over cases under chapter

19 11 of title 11, United States Code. Pending an adju20 dication under this section such court shall stay, and

21 upon appointment by it of the Secretary as trustee,

22 such court shall continue the stay of, any pending

23 mortgage foreclosure, equity receivership, or other

24 proceeding to reorganize, conserve, or liquidate the

25 plan, the sponsor, or property of such plan or spon-
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1 sor, and any other suit against any receiver, conser2 vator, or trustee of the plan, the sponsor, or prop3 erty of the plan or sponsor. Pending such adjudica4 tion and upon the appointment by it of the Sec5 retary as trustee, the court may stay any proceeding

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

7 sponsor or any other suit against the plan or the

8 sponsor.

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

10 may be brought in the judicial district where the

11 sponsor or the plan administrator resides or does

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

13 A district court in which such action is brought may

14 issue process with respect to such action in any

15 other judicial district.

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

17 which shall be prescribed by the Secretary through nego18 tiated rulemaking, the Secretary shall appoint, retain, and

19 compensate accountants, actuaries, and other professional

20 service personnel as may be necessary in connection with

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

22 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY.

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

24 State may impose by law a contribution tax on an associa25 tion health plan described in section 806(a)(2), if the plan
43

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1 commenced operations in such State after the date of the

2 enactment of the Small Business Access and Choice for

3 Entrepreneurs Act of 2001.

4 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec5 tion, the term ‘contribution tax’ imposed by a State on

6 an association health plan means any tax imposed by such

7 State if—

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

9 the amount of premiums or contributions, with re10 spect to individuals covered under the plan who are

11 residents of such State, which are received by the

12 plan from participating employers located in such

13 State or from such individuals;

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

15 rate of any tax imposed by such State on premiums

16 or contributions received by insurers or health main17 tenance organizations for health insurance coverage

18 offered in such State in connection with a group

19 health plan;

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

21 and

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

23 the plan is reduced by the amount of any tax or as24 sessment otherwise imposed by the State on pre25 miums, contributions, or both received by insurers or
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1 health maintenance organizations for health insur2 ance coverage, aggregate excess /stop loss insurance

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

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

5 other insurance related to the provision of medical

6 care under the plan, or any combination thereof pro7 vided by such insurers or health maintenance organi8 zations in such State in connection with such plan.

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

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

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

12 health plan’ has the meaning provided in section

13 733(a)(1) (after applying subsection (b) of this sec14 tion).

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

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

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

18 term ‘health insurance coverage’ has the meaning

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

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

21 ‘health insurance issuer’ has the meaning provided

22 in section 733(b)(2).

23 ‘‘(5) APPLICABLE AUTHORITY.—

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

25 subparagraph (B), the term ‘applicable author-
45

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1 ity’ means, in connection with an association

2 health plan—

3 ‘‘(i) the State recognized pursuant to

4 subsection (c) of section 506 as the State

5 to which authority has been delegated in

6 connection with such plan; or

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

8 clause (i), the Secretary.

9 ‘‘(B) EXCEPTIONS.—

10 ‘‘(i) JOINT AUTHORITIES.—Where

11 such term appears in section 808(3), sec12 tion 807(e) (in the first instance), section

13 809(a) (in the second instance), section

14 809(a) (in the fourth instance), and sec15 tion 809(b)(1), such term means, in con16 nection with an association health plan, the

17 Secretary and the State referred to in sub18 paragraph (A)(i) (if any) in connection

19 with such plan.

20 ‘‘(ii) REGULATORY AUTHORITIES.—

21 Where such term appears in section 802(a)

22 (in the first instance), section 802(d), sec23 tion 802(e), section 803(d), section

24 805(a)(5), section 806(a)(2), section

25 806(b), section 806(c), section 806(d),
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1 paragraphs (1)(A) and (2)(A) of section

2 806(g), section 806(h), section 806(i), sec3 tion 806(j), section 807(a) (in the second

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

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

6 section 808 (in the matter after paragraph

7 (3)), and section 809(a) (in the third in8 stance), such term means, in connection

9 with an association health plan, the Sec10 retary.

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

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

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

14 ‘‘(7) INDIVIDUAL MARKET.—

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

16 market’ means the market for health insurance

17 coverage offered to individuals other than in

18 connection with a group health plan.

19 ‘‘(B) TREATMENT OF VERY SMALL

20 GROUPS.—

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

22 (ii), such term includes coverage offered in

23 connection with a group health plan that

24 has fewer than 2 participants as current

25 employees or participants described in sec-
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1 tion 732(d)(3) on the first day of the plan

2 year.

3 ‘‘(ii) STATE EXCEPTION.—Clause (i)

4 shall not apply in the case of health insur5 ance coverage offered in a State if such

6 State regulates the coverage described in

7 such clause in the same manner and to the

8 same extent as coverage in the small group

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

10 the Public Health Service Act) is regulated

11 by such State.

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

13 ‘participating employer’ means, in connection with

14 an association health plan, any employer, if any indi15 vidual who is an employee of such employer, a part16 ner in such employer, or a self-employed individual

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

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

19 or was covered under such plan in connection with

20 the status of such individual as such an employee,

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

22 plan.

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

24 term ‘applicable State authority’ means, with respect

25 to a health insurance issuer in a State, the State in-
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1 surance commissioner or official or officials des2 ignated by the State to enforce the requirements of

3 title XXVII of the Public Health Service Act for the

4 State involved with respect to such issuer.

5 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali6 fied actuary’ means an individual who is a member

7 of the American Academy of Actuaries or meets

8 such reasonable standards and qualifications as the

9 Secretary may provide by regulation through nego10 tiated rulemaking.

11 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili12 ated member’ means, in connection with a sponsor—

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

14 be a member of the sponsor but who elects an

15 affiliated status with the sponsor,

16 ‘‘(B) in the case of a sponsor with mem17 bers which consist of associations, a person who

18 is a member of any such association and elects

19 an affiliated status with the sponsor, or

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

21 plan in existence on the date of the enactment

22 of the Small Business Access and Choice for

23 Entrepreneurs Act of 2001, a person eligible to

24 be a member of the sponsor or one of its mem25 ber associations.
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1 ‘‘(12) LARGE EMPLOYER.—The term ‘large em2 ployer’ means, in connection with a group health

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

4 employed an average of at least 51 employees on

5 business days during the preceding calendar year

6 and who employs at least 2 employees on the first

7 day of the plan year.

8 ‘‘(13) SMALL EMPLOYER.—The term ‘small em9 ployer’ means, in connection with a group health

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

11 is not a large employer.

12 ‘‘(b) RULES OF CONSTRUCTION.—

13 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur14 poses of determining whether a plan, fund, or pro15 gram is an employee welfare benefit plan which is an

16 association health plan, and for purposes of applying

17 this title in connection with such plan, fund, or pro18 gram so determined to be such an employee welfare

19 benefit plan—

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

21 ‘employer’ (as defined in section (3)(5)) in22 cludes the partnership in relation to the part23 ners, and the term ‘employee’ (as defined in

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

25 to the partnership; and
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1 ‘‘(B) in the case of a self-employed indi2 vidual, the term ‘employer’ (as defined in sec3 tion 3(5)) and the term ‘employee’ (as defined

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

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

6 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the

7 case of any plan, fund, or program which was estab8 lished or is maintained for the purpose of providing

9 medical care (through the purchase of insurance or

10 otherwise) for employees (or their dependents) cov11 ered thereunder and which demonstrates to the Sec12 retary that all requirements for certification under

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

14 fund, or program if such plan, fund, or program

15 were a group health plan, such plan, fund, or pro16 gram shall be treated for purposes of this title as an

17 employee welfare benefit plan on and after the date

18 of such demonstration.’’.

19 (b) CONFORMING AMENDMENTS TO PREEMPTION

20 RULES.—

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

22 1144(b)(6)) is amended by adding at the end the

23 following new subparagraph:

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

25 do not apply with respect to any State law in the case
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1 of an association health plan which is certified under part

2 8.’’.

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

4 is amended—

5 (A) in subsection (b)(4), by striking ‘‘Sub6 section (a)’’ and inserting ‘‘Subsections (a) and

7 (d)’’;

8 (B) in subsection (b)(5), by striking ‘‘sub9 section (a)’’ in subparagraph (A) and inserting

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

11 (a)(2)(B) and (b) of section 805’’, and by strik12 ing ‘‘subsection (a)’’ in subparagraph (B) and

13 inserting ‘‘subsection (a) of this section or sub14 section (a)(2)(B) or (b) of section 805’’;

15 (C) by redesignating subsection (d) as sub16 section (e); and

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

18 following new subsection:

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

20 provisions of this title shall supersede any and all State

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

22 have the effect of precluding, a health insurance issuer

23 from offering health insurance coverage in connection with

24 an association health plan which is certified under part

25 8.
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1 ‘‘(2) Except as provided in paragraphs (4) and (5)

2 of subsection (b) of this section—

3 ‘‘(A) In any case in which health insurance cov4 erage of any policy type is offered under an associa5 tion health plan certified under part 8 to a partici6 pating employer operating in such State, the provi7 sions of this title shall supersede any and all laws

8 of such State insofar as they may preclude a health

9 insurance issuer from offering health insurance cov10 erage of the same policy type to other employers op11 erating in the State which are eligible for coverage

12 under such association health plan, whether or not

13 such other employers are participating employers in

14 such plan.

15 ‘‘(B) In any case in which health insurance cov16 erage of any policy type is offered under an associa17 tion health plan in a State and the filing, with the

18 applicable State authority, of the policy form in con19 nection with such policy type is approved by such

20 State authority, the provisions of this title shall su21 persede any and all laws of any other State in which

22 health insurance coverage of such type is offered, in23 sofar as they may preclude, upon the filing in the

24 same form and manner of such policy form with the
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1 applicable State authority in such other State, the

2 approval of the filing in such other State.

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

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

5 805.

6 ‘‘(4) For purposes of this subsection, the term ‘asso7 ciation health plan’ has the meaning provided in section

8 801(a), and the terms ‘health insurance coverage’, ‘par9 ticipating employer’, and ‘health insurance issuer’ have

10 the meanings provided such terms in section 811, respec11 tively.’’.

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

13 U.S.C. 1144(b)(6)(A)) is amended—

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

15 the end;

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

17 does not provide medical care (within the mean18 ing of section 733(a)(2)),’’ after ‘‘arrange19 ment,’’, and by striking ‘‘title.’’ and inserting

20 ‘‘title, and’’; and

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

22 clause:

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

24 of any other employee welfare benefit plan which is

25 a multiple employer welfare arrangement and which
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1 provides medical care (within the meaning of section

2 733(a)(2)), any law of any State which regulates in3 surance may apply.’’.

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

5 by paragraph (2)(C)) is amended—

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

7 ‘‘(1) Except as provided in paragraph (2), noth8 ing’’; and

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

10 paragraph:

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

12 on or after the date of the enactment of the Small Busi13 ness Access and Choice for Entrepreneurs Act of 2001

14 shall be construed to alter, amend, modify, invalidate, im15 pair, or supersede any provision of this title, except by

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

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

18 (29 U.S.C. 102(16)(B)) is amended by adding at the end

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

20 person serving as the sponsor of an association health plan

21 under part 8.’’.

22 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE23 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

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

25 of such Act (29 U.S.C. 102(b)) is amended by adding at
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1 the end the following: ‘‘An association health plan shall

2 include in its summary plan description, in connection

3 with each benefit option, a description of the form of sol4 vency or guarantee fund protection secured pursuant to

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

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

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

8 (f) REPORT TO THE CONGRESS REGARDING CERTIFI9 CATION OF SELF-INSURED ASSOCIATION HEALTH

10 PLANS.—Not later than January 1, 2006, the Secretary

11 of Labor shall report to the Committee on Education and

12 the Workforce of the House of Representatives and the

13 Committee on Health, Education, Labor, and Pensions of

14 the Senate the effect association health plans have had,

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

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

17 in section 1 of the Employee Retirement Income Security

18 Act of 1974 is amended by inserting after the item relat19 ing to section 734 the following new items:

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘Sec. 801. Association health plans.

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

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

‘‘Sec. 804. Participation and coverage requirements.

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

and benefit options.

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

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

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

‘‘Sec. 809. Corrective actions and mandatory termination.
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‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health plans

providing health benefits in addition to health insurance coverage.

‘‘Sec. 811. State assessment authority.

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

1 SEC. 3. CLARIFICATION OF TREATMENT OF SINGLE EM2 PLOYER ARRANGEMENTS.

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

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

5 amended—

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

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

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

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

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

11 (2) in clause (iii)—

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

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

14 and inserting ‘‘an interest of greater than 25

15 percent may not be required as the minimum

16 interest necessary for common control’’; and

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

18 ‘‘consistent and coextensive with’’;

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

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

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

22 new clause:
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1 ‘‘(iv) in determining, after the application of

2 clause (i), whether benefits are provided to employ3 ees of two or more employers, the arrangement shall

4 be treated as having only one participating employer

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

6 individuals who are employees and former employees

7 of any one participating employer and who are cov8 ered under the arrangement is greater than 75 per9 cent of the aggregate number of all individuals who

10 are employees or former employees of participating

11 employers and who are covered under the arrange12 ment;’’.

13 SEC. 4. CLARIFICATION OF TREATMENT OF CERTAIN COL14 LECTIVELY BARGAINED ARRANGEMENTS.

15 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em16 ployee Retirement Income Security Act of 1974 (29

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

18 ‘‘(i)(I) under or pursuant to one or more collec19 tive bargaining agreements which are reached pursu20 ant to collective bargaining described in section 8(d)

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

22 158(d)) or paragraph Fourth of section 2 of the

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

24 Fourth) or which are reached pursuant to labor25 management negotiations under similar provisions of
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1 State public employee relations laws, and (II) in ac2 cordance with subparagraphs (C), (D), and (E);’’.

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

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

5 following new subparagraphs:

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

7 or other arrangement shall be treated as established or

8 maintained in accordance with this subparagraph only if

9 the following requirements are met:

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

11 employee organization or any other entity sponsoring

12 the plan or other arrangement, do not—

13 ‘‘(I) utilize the services of any licensed in14 surance agent or broker for soliciting or enroll15 ing employers or individuals as participating

16 employers or covered individuals under the plan

17 or other arrangement; or

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

19 person, other than a full time employee of the

20 employee organization (or a member of the or21 ganization to the extent provided in regulations

22 prescribed by the Secretary through negotiated

23 rulemaking), that is related either to the volume

24 or number of employers or individuals solicited

25 or enrolled as participating employers or cov-
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1 ered individuals under the plan or other ar2 rangement, or to the dollar amount or size of

3 the contributions made by participating employ4 ers or covered individuals to the plan or other

5 arrangement;

6 except to the extent that the services used by the

7 plan, arrangement, organization, or other entity con8 sist solely of preparation of documents necessary for

9 compliance with the reporting and disclosure re10 quirements of part 1 or administrative, investment,

11 or consulting services unrelated to solicitation or en12 rollment of covered individuals.

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

14 the number of covered individuals under the plan or

15 other arrangement who are neither—

16 ‘‘(I) employed within a bargaining unit

17 covered by any of the collective bargaining

18 agreements with a participating employer (nor

19 covered on the basis of an individual’s employ20 ment in such a bargaining unit); nor

21 ‘‘(II) present employees (or former employ22 ees who were covered while employed) of the

23 sponsoring employee organization, of an em24 ployer who is or was a party to any of the col25 lective bargaining agreements, or of the plan or
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1 other arrangement or a related plan or arrange2 ment (nor covered on the basis of such present

3 or former employment);

4 does not exceed 15 percent of the total number of

5 individuals who are covered under the plan or ar6 rangement and who are present or former employees

7 who are or were covered under the plan or arrange8 ment pursuant to a collective bargaining agreement

9 with a participating employer. The requirements of

10 the preceding provisions of this clause shall be treat11 ed as satisfied if, as of the end of the preceding plan

12 year, such covered individuals are comprised solely

13 of individuals who were covered individuals under

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

15 enactment of the Small Business Access and Choice

16 for Entrepreneurs Act of 2001 and, as of the end of

17 the preceding plan year, the number of such covered

18 individuals does not exceed 25 percent of the total

19 number of present and former employees enrolled

20 under the plan or other arrangement.

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

22 sponsoring the plan or other arrangement certifies

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

24 which shall be prescribed by the Secretary through

25 negotiated rulemaking that the plan or other ar-
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1 rangement meets the requirements of clauses (i) and

2 (ii).

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

4 or arrangement shall be treated as established or main5 tained in accordance with this subparagraph only if—

6 ‘‘(i) all of the benefits provided under the plan

7 or arrangement consist of health insurance coverage;

8 or

9 ‘‘(ii)(I) the plan or arrangement is a multiem10 ployer plan; and

11 ‘‘(II) the requirements of clause (B) of the pro12 viso to clause (5) of section 302(c) of the Labor

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

14 186(c)) are met with respect to such plan or other

15 arrangement.

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

17 or arrangement shall be treated as established or main18 tained in accordance with this subparagraph only if—

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

20 the date of the enactment of the Small Business Ac21 cess and Choice for Entrepreneurs Act of 2001; or

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

23 sponsoring the plan or arrangement—

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

25 years; or
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1 ‘‘(II) demonstrates to the satisfaction of

2 the Secretary that the requirements of subpara3 graphs (C) and (D) are met with respect to the

4 plan or other arrangement.’’.

5 (c) CONFORMING AMENDMENTS TO DEFINITIONS OF

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

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

8 the following new sentence: ‘‘Such term includes an indi9 vidual who is a covered individual described in paragraph

10 (40)(C)(ii).’’.

11 SEC. 5. ENFORCEMENT PROVISIONS RELATING TO ASSO12 CIATION HEALTH PLANS.

13 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

14 MISREPRESENTATIONS.—Section 501 of the Employee

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

16 is amended—

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

18 (2) by adding at the end the following new sub19 section:

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

21 any employee, any employee’s beneficiary, any employer,

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

23 established or maintained for the purpose of offering or

24 providing any benefit described in section 3(1) to employ25 ees or their beneficiaries as—
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1 ‘‘(1) being an association health plan which has

2 been certified under part 8;

3 ‘‘(2) having been established or maintained

4 under or pursuant to one or more collective bar5 gaining agreements which are reached pursuant to

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

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

8 paragraph Fourth of section 2 of the Railway Labor

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

10 reached pursuant to labor-management negotiations

11 under similar provisions of State public employee re12 lations laws; or

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

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

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

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

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

18 both.’’.

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

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

21 end the following new subsection:

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

23 by the Secretary showing the operation, promotion, or

24 marketing of an association health plan (or similar ar-
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1 rangement providing benefits consisting of medical care

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

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

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

5 State in which the plan or arrangement offers or

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

7 otherwise approved under the insurance laws of such

8 State; or

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

10 under part 8 and is not operating in accordance with

11 the requirements under part 8 for such certification,

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

13 requiring that the plan or arrangement cease activities.

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

15 association health plan or other arrangement if the plan

16 or arrangement shows that—

17 ‘‘(A) all benefits under it referred to in para18 graph (1) consist of health insurance coverage; and

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

20 plan or arrangement offers or provides benefits, the

21 plan or arrangement is operating in accordance with

22 applicable State laws that are not superseded under

23 section 514.

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

25 relief, including any relief available under this title, as it
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1 deems necessary to protect the interests of the public and

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

3 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

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

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

6 new subsection:

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

8 each association health plan which is or has been certified

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

10 named fiduciary (as applicable) to ensure that the require11 ments of this section are met in connection with claims

12 filed under the plan.’’.

13 SEC. 6. COOPERATION BETWEEN FEDERAL AND STATE AU14 THORITIES.

15 Section 506 of the Employee Retirement Income Se16 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

17 at the end the following new subsection:

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

19 ASSOCIATION HEALTH PLANS.—

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

21 may enter into an agreement with the Secretary for

22 delegation to the State of some or all of—

23 ‘‘(A) the Secretary’s authority under sec24 tions 502 and 504 to enforce the requirements

25 for certification under part 8;
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1 ‘‘(B) the Secretary’s authority to certify

2 association health plans under part 8 in accord3 ance with regulations of the Secretary applica4 ble to certification under part 8; or

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

6 authority authorized to be delegated under sub7 paragraphs (A) and (B).

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

9 or instrumentality of a State to which authority is

10 delegated pursuant to an agreement entered into

11 under this paragraph may, if authorized under State

12 law and to the extent consistent with such agree13 ment, exercise the powers of the Secretary under

14 this title which relate to such authority.

15 ‘‘(3) RECOGNITION OF PRIMARY DOMICILE

16 STATE.—In entering into any agreement with a

17 State under subparagraph (A), the Secretary shall

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

19 other agreements entered into under subparagraph

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

21 to any particular association health plan, as the

22 State to which all authority has been delegated pur23 suant to such agreements in connection with such

24 plan. In carrying out this paragraph, the Secretary

25 shall take into account the places of residence of the
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1 participants and beneficiaries under the plan and the

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

3 SEC. 7. EFFECTIVE DATE AND TRANSITIONAL AND OTHER

4 RULES.

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

6 sections 2, 5, and 6 shall take effect one year from the

7 date of enactment. The amendments made by sections 3

8 and 4 shall take effect on the date of the enactment of

9 this Act. The Secretary of Labor shall first issue all regu10 lations necessary to carry out the amendments made by

11 this subtitle within one year from the date of enactment.

12 Such regulations shall be issued through negotiated rule13 making.

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

15 Retirement Income Security Act of 1974 (added by section

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

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

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

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

20 enactment of this Act consist of health insurance coverage

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

22 (c) TREATMENT OF CERTAIN EXISTING HEALTH

23 BENEFITS PROGRAMS.—

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

25 the date of the enactment of this Act, an arrange-
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1 ment is maintained in a State for the purpose of

2 providing benefits consisting of medical care for the

3 employees and beneficiaries of its participating em4 ployers, at least 200 participating employers make

5 contributions to such arrangement, such arrange6 ment has been in existence for at least 10 years, and

7 such arrangement is licensed under the laws of one

8 or more States to provide such benefits to its par9 ticipating employers, upon the filing with the appli10 cable authority (as defined in section 812(a)(5) of

11 the Employee Retirement Income Security Act of

12 1974 (as amended by this Act)) by the arrangement

13 of an application for certification of the arrangement

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

15 (A) such arrangement shall be deemed to

16 be a group health plan for purposes of title I

17 of such Act;

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

19 and 803(a)(1) of the Employee Retirement In20 come Security Act of 1974 shall be deemed met

21 with respect to such arrangement;

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

23 such Act shall be deemed met, if the arrange24 ment is operated by a board of directors

25 which—
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1 (i) is elected by the participating em2 ployers, with each employer having one

3 vote; and

4 (ii) has complete fiscal control over

5 the arrangement and which is responsible

6 for all operations of the arrangement;

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

8 such Act shall be deemed met with respect to

9 such arrangement; and

10 (E) the arrangement may be certified by

11 any applicable authority with respect to its op12 erations in any State only if it operates in such

13 State on the date of certification.

14 The provisions of this subsection shall cease to apply

15 with respect to any such arrangement at such time

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

17 applicable requirements of this subsection are not

18 met with respect to such arrangement.

19 (2) DEFINITIONS.—For purposes of this sub20 section, the terms ‘‘group health plan’’, ‘‘medical

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

22 meanings provided in section 812 of the Employee

23 Retirement Income Security Act of 1974, except

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

25 to an ‘‘association health plan’’ shall be deemed a
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1 reference to an arrangement referred to in this sub2 section.

Æ