II 

108TH CONGRESS 

2D SESSION S. 2570 

Entitled the ‘‘Health Care Assurance Act of 2004’’. 

IN THE SENATE OF THE UNITED STATES 

JUNE 23 (legislative day, JUNE 22), 2004 

Mr. SPECTER (for himself and Mr. HARKIN) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

Entitled the ‘‘Health Care Assurance Act of 2004’’. 

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

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

5 ‘‘Health Care Assurance Act of 2004’’. 

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—HEALTH CARE INSURANCE COVERAGE FOR THE 

UNINSURED 

Subtitle A—Small Employer and Individual Purchasing Groups 

CHAPTER 1—GENERAL PROVISIONS

Sec. 101. Amendments to the Employee Retirement Income Security Act of 

1974. 
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Sec. 102. Amendments to the Public Health Service Act relating to the group 

market. 

Sec. 103. Amendment to the Public Health Service Act relating to the individual market. 

Sec. 104. Effective date. 

CHAPTER 2—TAX PROVISIONS

Sec. 111. Enforcement with respect to health insurance issuers. 

Sec. 112. Enforcement with respect to small employers. 

Sec. 113. Enforcement by excise tax on qualified associations. 

Subtitle B—COBRA Portability Reform 

Sec. 121. Amendments to COBRA. 

Subtitle C—Providing Coverage for Young Adults 

Sec. 131. Grants for young adults health insurance coverage. 

Subtitle D—Low Income Coverage Outreach Program 

Sec. 141. Low income coverage outreach program. 

TITLE II—EXPANSION OF THE STATE CHILDREN’S HEALTH 

INSURANCE PROGRAM AND FAMILY COVERAGE 

Sec. 201. Increase in income eligibility. 

Sec. 202. State option to expand coverage to parents and pregnant women. 

TITLE III—MEDICARE PROGRAM INTEGRITY ACTIVITIES 

Sec. 301. Increased funding for the medicare integrity program. 

TITLE IV—REDUCING MEDICAL ERRORS AND INCREASING THE 

USE OF MEDICAL TECHNOLOGY 

Sec. 401. Medical errors reduction. 

Sec. 402. Enhancing investment in cost-effective methods of health care. 

Sec. 403. Increasing the use of medical technology 

TITLE V—IMPROVING HEALTH CARE QUALITY, EFFICIENCY, AND 

CONSUMER EDUCATION 

Sec. 501. Grants for demonstration projects. 

TITLE VI—PRIMARY AND PREVENTIVE CARE PROVIDERS 

Sec. 601. Increased medicare reimbursement for physician assistants, nurse 

practitioners, and clinical nurse specialists. 

Sec. 602. Requiring coverage of certain nonphysician providers under the medicaid program. 

Sec. 603. Medical student tutorial program grants. 

Sec. 604. General medical practice grants. 
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1 TITLE I—HEALTH CARE INSUR2 ANCE COVERAGE FOR THE 

3 UNINSURED 

4 Subtitle A—Small Employer and 

5 Individual Purchasing Groups 

6 CHAPTER 1—GENERAL PROVISIONS 

7 SEC. 101. AMENDMENTS TO THE EMPLOYEE RETIREMENT 

8 INCOME SECURITY ACT OF 1974. 

9 (a) IN GENERAL.—Part 7 of subtitle B of title I of 

10 the Employee Retirement Income Security Act of 1974 

11 (29 U.S.C. 1181 et seq.) is amended— 

12 (1) by redesignating subpart C as subpart D; 

13 and 

14 (2) by inserting after subpart B, the following: 

15 ‘‘SUBPART C—GENERAL INSURANCE COVERAGE

16 REFORMS

17 ‘‘CHAPTER 1—INCREASED AVAILABILITY AND 

18 CONTINUITY OF HEALTH COVERAGE 

19 ‘‘SEC. 721. DEFINITION. 

20 ‘‘As used in this subpart, the term ‘qualified group 

21 health plan’ means a group health plan, and a health in22 surance issuer offering group health insurance coverage, 

23 that is designed to provide standard coverage (consistent 

24 with section 721A(b)). 
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1 ‘‘SEC. 721A. ACTUARIAL EQUIVALENCE IN BENEFITS PER2 MITTED. 

3 ‘‘(a) SET OF RULES OF ACTUARIAL EQUIVALENCE.— 

4 ‘‘(1) INITIAL DETERMINATION.—The NAIC is 

5 requested to submit to the Secretary, within 6 

6 months after the date of the enactment of this sub7 part, a set of rules which the NAIC determines is 

8 sufficient for determining, in the case of any group 

9 health plan, or a health insurance issuer offering 

10 group health insurance coverage, and for purposes of 

11 this section, the actuarial value of the coverage of12 fered by the plan or coverage. 

13 ‘‘(2) CERTIFICATION.—If the Secretary deter14 mines that the NAIC has submitted a set of rules 

15 that comply with the requirements of paragraph (1), 

16 the Secretary shall certify such set of rules for use 

17 under this subpart. If the Secretary determines that 

18 such a set of rules has not been submitted or does 

19 not comply with such requirements, the Secretary 

20 shall promptly establish a set of rules that meets 

21 such requirements. 

22 ‘‘(b) STANDARD COVERAGE.— 

23 ‘‘(1) IN GENERAL.—A group health plan, and a 

24 health insurance issuer offering group health insur25 ance coverage, shall be considered to provide stand26 ard coverage consistent with this subsection if the 
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1 benefits are determined, in accordance with the set 

2 of actuarial equivalence rules certified under sub3 section (a), to have a value that is within 5 percent4 age points of the target actuarial value for standard 

5 coverage established under paragraph (2). 

6 ‘‘(2) INITIAL DETERMINATION OF TARGET AC7 TUARIAL VALUE FOR STANDARD COVERAGE.— 

8 ‘‘(A) INITIAL DETERMINATION.— 

9 ‘‘(i) IN GENERAL.—The NAIC is re10 quested to submit to the Secretary, within 

11 6 months after the date of the enactment 

12 of this subpart, a target actuarial value for 

13 standard coverage equal to the average ac14 tuarial value of the coverage described in 

15 clause (ii). No specific procedure or treat16 ment, or classes thereof, is required to be 

17 considered in such determination by this 

18 subpart or through regulations. The deter19 mination of such value shall be based on a 

20 representative distribution of the popu21 lation of eligible employees offered such 

22 coverage and a single set of standardized 

23 utilization and cost factors. 

24 ‘‘(ii) COVERAGE DESCRIBED.—The 

25 coverage described in this clause is cov-
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1 erage for medically necessary and appro2 priate services consisting of medical and 

3 surgical services, medical equipment, pre4 ventive services, and emergency transpor5 tation in frontier areas. No specific proce6 dure or treatment, or classes thereof, is re7 quired to be covered in such a plan, by this 

8 subpart or through regulations. 

9 ‘‘(B) CERTIFICATION.—If the Secretary 

10 determines that the NAIC has submitted a tar11 get actuarial value for standard coverage that 

12 complies with the requirements of subparagraph 

13 (A), the Secretary shall certify such value for 

14 use under this chapter. If the Secretary deter15 mines that a target actuarial value has not been 

16 submitted or does not comply with the require17 ments of subparagraph (A), the Secretary shall 

18 promptly determine a target actuarial value that 

19 meets such requirements. 

20 ‘‘(c) SUBSEQUENT REVISIONS.— 

21 ‘‘(1) NAIC.—The NAIC may submit from time 

22 to time to the Secretary revisions of the set of rules 

23 of actuarial equivalence and target actuarial values 

24 previously established or determined under this sec25 tion if the NAIC determines that revisions are nec-
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1 essary to take into account changes in the relevant 

2 types of health benefits provisions or in demographic 

3 conditions which form the basis for the set of rules 

4 of actuarial equivalence or the target actuarial val5 ues. The provisions of subsection (a)(2) shall apply 

6 to such a revision in the same manner as they apply 

7 to the initial determination of the set of rules. 

8 ‘‘(2) SECRETARY.—The Secretary may by regu9 lation revise the set of rules of actuarial equivalence 

10 and target actuarial values from time to time if the 

11 Secretary determines such revisions are necessary to 

12 take into account changes described in paragraph 

13 (1). 

14 ‘‘SEC. 721B. ESTABLISHMENT OF PLAN STANDARDS. 

15 ‘‘(a) ESTABLISHMENT OF GENERAL STANDARDS.— 

16 ‘‘(1) ROLE OF NAIC.—The NAIC is requested 

17 to submit to the Secretary, within 9 months after 

18 the date of the enactment of this subpart, model 

19 regulations that specify standards for making quali20 fied group health plans available to small employers. 

21 If the NAIC develops recommended regulations 

22 specifying such standards within such period, the 

23 Secretary shall review the standards. Such review 

24 shall be completed within 60 days after the date the 

25 regulations are developed. Such standards shall 
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1 serve as the standards under this section, with such 

2 amendments as the Secretary deems necessary. Such 

3 standards shall be nonbinding (except as provided in 

4 chapter 4). 

5 ‘‘(2) CONTINGENCY.—If the NAIC does not de6 velop such model regulations within the period de7 scribed in paragraph (1), the Secretary shall specify, 

8 within 15 months after the date of the enactment of 

9 this subpart, model regulations that specify stand10 ards for insurers with regard to making qualified 

11 group health plans available to small employers. 

12 Such standards shall be nonbinding (except as pro13 vided in chapter 4). 

14 ‘‘(3) EFFECTIVE DATE.—The standards speci15 fied in the model regulations shall apply to group 

16 health plans and health insurance issuers offering 

17 group health insurance coverage in a State on or 

18 after the respective date the standards are imple19 mented in the State. 

20 ‘‘(b) NO PREEMPTION OF STATE LAW.—A State may 

21 implement standards for group health plans available, and 

22 health insurance issuers offering group health insurance 

23 coverage offered, to small employers that are more strin24 gent than the standards under this section, except that 

25 a State may not implement standards that prevent the of-
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1 fering of at least one group health plan that provides 

2 standard coverage (as described in section 721A(b)). 

3 ‘‘SEC. 721C. RATING LIMITATIONS FOR COMMUNITY-RATED 

4 MARKET. 

5 ‘‘(a) STANDARD PREMIUMS WITH RESPECT TO COM6 MUNITY-RATED ELIGIBLE EMPLOYEES AND ELIGIBLE IN7 DIVIDUALS.— 

8 ‘‘(1) IN GENERAL.—Each group health plan of9 fered, and each health insurance issuer offering 

10 group health insurance coverage, to a small em11 ployer shall establish within each community rating 

12 area in which the plan is to be offered, a standard 

13 premium for enrollment of eligible employees and eli14 gible individuals for the standard coverage (as de15 fined under section 721A(b)). 

16 ‘‘(2) ESTABLISHMENT OF COMMUNITY RATING

17 AREA.— 

18 ‘‘(A) IN GENERAL.—Not later than Janu19 ary 1, 2005, each State shall, in accordance 

20 with subparagraph (B), provide for the division 

21 of the State into 1 or more community rating 

22 areas. The State may revise the boundaries of 

23 such areas from time to time consistent with 

24 this paragraph. 
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1 ‘‘(B) GEOGRAPHIC AREA VARIATIONS.— 

2 For purposes of subparagraph (A), a State— 

3 ‘‘(i) may not identify an area that di4 vides a 3-digit zip code, a county, or all 

5 portions of a metropolitan statistical area; 

6 ‘‘(ii) shall not permit premium rates 

7 for coverage offered in a portion of an 

8 interstate metropolitan statistical area to 

9 vary based on the State in which the cov10 erage is offered; and 

11 ‘‘(iii) may, upon agreement with one 

12 or more adjacent States, identify multi13 State geographic areas consistent with 

14 clauses (i) and (ii). 

15 ‘‘(3) ELIGIBLE INDIVIDUALS.—For purposes of 

16 this section, the term ‘eligible individuals’ includes 

17 certain uninsured individuals (as described in section 

18 721G). 

19 ‘‘(b) UNIFORM PREMIUMS WITHIN COMMUNITY RAT20 ING AREAS.— 

21 ‘‘(1) IN GENERAL.—Subject to paragraphs (2) 

22 and (3), the standard premium for each group 

23 health plan to which this section applies shall be the 

24 same, but shall not include the costs of premium 

25 processing and enrollment that may vary depending 
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1 on whether the method of enrollment is through a 

2 qualified small employer purchasing group, through 

3 a small employer, or through a broker. 

4 ‘‘(2) APPLICATION TO ENROLLEES.— 

5 ‘‘(A) IN GENERAL.—The premium charged 

6 for coverage in a group health plan which cov7 ers eligible employees and eligible individuals 

8 shall be the product of— 

9 ‘‘(i) the standard premium (estab10 lished under paragraph (1)); 

11 ‘‘(ii) in the case of enrollment other 

12 than individual enrollment, the family ad13 justment factor specified under subpara14 graph (B); and 

15 ‘‘(iii) the age adjustment factor (spec16 ified under subparagraph (C)). 

17 ‘‘(B) FAMILY ADJUSTMENT FACTOR.— 

18 ‘‘(i) IN GENERAL.—The standards es19 tablished under section 721B shall specify 

20 family adjustment factors that reflect the 

21 relative actuarial costs of benefit packages 

22 based on family classes of enrollment (as 

23 compared with such costs for individual en24 rollment). 
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1 ‘‘(ii) CLASSES OF ENROLLMENT.—For 

2 purposes of this subpart, there are 4 class3 es of enrollment: 

4 ‘‘(I) Coverage only of an indi5 vidual (referred to in this subpart as 

6 the ‘individual’ enrollment or class of 

7 enrollment). 

8 ‘‘(II) Coverage of a married cou9 ple without children (referred to in 

10 this subpart as the ‘couple-only’ en11 rollment or class of enrollment). 

12 ‘‘(III) Coverage of an individual 

13 and one or more children (referred to 

14 in this subpart as the ‘single parent’ 

15 enrollment or class of enrollment). 

16 ‘‘(IV) Coverage of a married cou17 ple and one or more children (referred 

18 to in this subpart as the ‘dual parent’ 

19 enrollment or class of enrollment). 

20 ‘‘(iii) REFERENCES TO FAMILY AND

21 COUPLE CLASSES OF ENROLLMENT.—In 

22 this subpart: 

23 ‘‘(I) FAMILY.—The terms ‘family 

24 enrollment’ and ‘family class of enroll25 ment’ refer to enrollment in a class of 
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1 enrollment described in any subclause 

2 of clause (ii) (other than subclause 

3 (I)). 

4 ‘‘(II) COUPLE.—The term ‘couple 

5 class of enrollment’ refers to enroll6 ment in a class of enrollment de7 scribed in subclause (II) or (IV) of 

8 clause (ii). 

9 ‘‘(iv) SPOUSE; MARRIED; COUPLE.— 

10 ‘‘(I) IN GENERAL.—In this sub11 part, the terms ‘spouse’ and ‘married’ 

12 mean, with respect to an individual, 

13 another individual who is the spouse 

14 of, or is married to, the individual, as 

15 determined under applicable State 

16 law. 

17 ‘‘(II) COUPLE.—The term ‘cou18 ple’ means an individual and the indi19 vidual’s spouse. 

20 ‘‘(C) AGE ADJUSTMENT FACTOR.—The 

21 Secretary, in consultation with the NAIC, shall 

22 specify uniform age categories and maximum 

23 rating increments for age adjustment factors 

24 that reflect the relative actuarial costs of ben25 efit packages among enrollees. For individuals 
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1 who have attained age 18 but not age 65, the 

2 highest age adjustment factor may not exceed 3 

3 times the lowest age adjustment factor. 

4 ‘‘(3) ADMINISTRATIVE CHARGES.— 

5 ‘‘(A) IN GENERAL.—In accordance with 

6 the standards established under section 721B, a 

7 group health plan which covers eligible employ8 ees and eligible individuals may add a sepa9 rately-stated administrative charge which is 

10 based on identifiable differences in legitimate 

11 administrative costs and which is applied uni12 formly for individuals enrolling through the 

13 same method of enrollment. Nothing in this 

14 subparagraph may be construed as preventing a 

15 qualified small employer purchasing group from 

16 negotiating a unique administrative charge with 

17 an insurer for a group health plan. 

18 ‘‘(B) ENROLLMENT THROUGH A QUALI19 FIED SMALL EMPLOYER PURCHASING GROUP.— 

20 In the case of an administrative charge under 

21 subparagraph (A) for enrollment through a 

22 qualified small employer purchasing group, such 

23 charge may not exceed the lowest charge of 

24 such plan for enrollment other than through a 
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1 qualified small employer purchasing group in 

2 such area. 

3 ‘‘(c) TREATMENT OF NEGOTIATED RATE AS COMMU4 NITY RATE.—Notwithstanding any other provision of this 

5 section, a group health plan and a health insurance issuer 

6 offering health insurance coverage that negotiates a pre7 mium rate (exclusive of any administrative charge de8 scribed in subsection (b)(3)) with a qualified small em9 ployer purchasing group in a community rating area shall 

10 charge the same premium rate to all eligible employees 

11 and eligible individuals. 

12 ‘‘SEC. 721D. RATING PRACTICES AND PAYMENT OF PRE13 MIUMS. 

14 ‘‘(a) FULL DISCLOSURE OF RATING PRACTICES.— 

15 ‘‘(1) IN GENERAL.—A group health plan and a 

16 health insurance issuer offering health insurance 

17 coverage shall fully disclose rating practices for the 

18 plan to the appropriate certifying authority. 

19 ‘‘(2) NOTICE ON EXPIRATION.—A group health 

20 plan and a health insurance issuer offering health 

21 insurance coverage shall provide for notice of the 

22 terms for renewal of a plan at the time of the offer23 ing of the plan and at least 90 days before the date 

24 of expiration of the plan. 
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1 ‘‘(3) ACTUARIAL CERTIFICATION.—Each group 

2 health plan and health insurance issuer offering 

3 health insurance coverage shall file annually with the 

4 appropriate certifying authority a written statement 

5 by a member of the American Academy of Actuaries 

6 (or other individual acceptable to such authority) 

7 who is not an employee of the group health plan or 

8 issuer certifying that, based upon an examination by 

9 the individual which includes a review of the appro10 priate records and of the actuarial assumptions of 

11 such plan or insurer and methods used by the plan 

12 or insurer in establishing premium rates and admin13 istrative charges for group health plans— 

14 ‘‘(A) such plan or insurer is in compliance 

15 with the applicable provisions of this subpart; 

16 and 

17 ‘‘(B) the rating methods are actuarially 

18 sound. 

19 Each plan and insurer shall retain a copy of such 

20 statement at its principal place of business for exam21 ination by any individual. 

22 ‘‘(b) PAYMENT OF PREMIUMS.— 

23 ‘‘(1) IN GENERAL.—With respect to a new en24 rollee in a group health plan, the plan may require 

25 advanced payment of an amount equal to the month-
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1 ly applicable premium for the plan at the time such 

2 individual is enrolled. 

3 ‘‘(2) NOTIFICATION OF FAILURE TO RECEIVE

4 PREMIUM.—If a group health plan or a health insur5 ance issuer offering health insurance coverage fails 

6 to receive payment on a premium due with respect 

7 to an eligible employee or eligible individual covered 

8 under the plan involved, the plan or issuer shall pro9 vide notice of such failure to the employee or indi10 vidual within the 20-day period after the date on 

11 which such premium payment was due. A plan or 

12 issuer may not terminate the enrollment of an eligi13 ble employee or eligible individual unless such em14 ployee or individual has been notified of any overdue 

15 premiums and has been provided a reasonable op16 portunity to respond to such notice. 

17 ‘‘SEC. 721E. QUALIFIED SMALL EMPLOYER PURCHASING 

18 GROUPS. 

19 ‘‘(a) QUALIFIED SMALL EMPLOYER PURCHASING

20 GROUPS DESCRIBED.— 

21 ‘‘(1) IN GENERAL.—A qualified small employer 

22 purchasing group is an entity that— 

23 ‘‘(A) is a nonprofit entity certified under 

24 State law; 
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1 ‘‘(B) has a membership consisting solely of 

2 small employers; 

3 ‘‘(C) is administered solely under the au4 thority and control of its member employers; 

5 ‘‘(D) with respect to each State in which 

6 its members are located, consists of not fewer 

7 than the number of small employers established 

8 by the State as appropriate for such a group; 

9 ‘‘(E) offers a program under which quali10 fied group health plans are offered to eligible 

11 employees and eligible individuals through its 

12 member employers and to certain uninsured in13 dividuals in accordance with section 721D; and 

14 ‘‘(F) an insurer, agent, broker, or any 

15 other individual or entity engaged in the sale of 

16 insurance— 

17 ‘‘(i) does not form or underwrite; and 

18 ‘‘(ii) does not hold or control any 

19 right to vote with respect to. 

20 ‘‘(2) STATE CERTIFICATION.—A qualified small 

21 employer purchasing group formed under this sec22 tion shall submit an application to the State for cer23 tification. The State shall determine whether to 

24 issue a certification and otherwise ensure compliance 

25 with the requirements of this subpart. 
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1 ‘‘(3) SPECIAL RULE.—Notwithstanding para2 graph (1)(B), an employer member of a small em3 ployer purchasing group that has been certified by 

4 the State as meeting the requirements of paragraph 

5 (1) may retain its membership in the group if the 

6 number of employees of the employer increases such 

7 that the employer is no longer a small employer. 

8 ‘‘(b) BOARD OF DIRECTORS.—Each qualified small 

9 employer purchasing group established under this section 

10 shall be governed by a board of directors or have active 

11 input from an advisory board consisting of individuals and 

12 businesses participating in the group. 

13 ‘‘(c) DOMICILIARY STATE.—For purposes of this sec14 tion, a qualified small employer purchasing group oper15 ating in more than one State shall be certified by the State 

16 in which the group is domiciled. 

17 ‘‘(d) MEMBERSHIP.— 

18 ‘‘(1) IN GENERAL.—A qualified small employer 

19 purchasing group shall accept all small employers 

20 and certain uninsured individuals residing within the 

21 area served by the group as members if such em22 ployers or individuals request such membership. 

23 ‘‘(2) VOTING.—Members of a qualified small 

24 employer purchasing group shall have voting rights 

25 consistent with the rules established by the State. 
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1 ‘‘(e) DUTIES OF QUALIFIED SMALL EMPLOYER PUR2 CHASING GROUPS.—Each qualified small employer pur3 chasing group shall— 

4 ‘‘(1) enter into agreements with insurers offer5 ing qualified group health plans; 

6 ‘‘(2) enter into agreements with small employ7 ers under section 721F; 

8 ‘‘(3) enroll only eligible employees, eligible indi9 viduals, and certain uninsured individuals in quali10 fied group health plans, in accordance with section 

11 721G; 

12 ‘‘(4) provide enrollee information to the State; 

13 ‘‘(5) meet the marketing requirements under 

14 section 721I; and 

15 ‘‘(6) carry out other functions provided for 

16 under this subpart. 

17 ‘‘(f) LIMITATION ON ACTIVITIES.—A qualified small 

18 employer purchasing group shall not— 

19 ‘‘(1) perform any activity involving approval or 

20 enforcement of payment rates for providers; 

21 ‘‘(2) perform any activity (other than the re22 porting of noncompliance) relating to compliance of 

23 qualified group health plans with the requirements 

24 of this subpart; 
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1 ‘‘(3) assume financial risk in relation to any 

2 such health plan; or 

3 ‘‘(4) perform other activities identified by the 

4 State as being inconsistent with the performance of 

5 its duties under this subpart. 

6 ‘‘(g) RULES OF CONSTRUCTION.— 

7 ‘‘(1) ESTABLISHMENT NOT REQUIRED.—Noth8 ing in this section shall be construed as requiring— 

9 ‘‘(A) that a State organize, operate or oth10 erwise establish a qualified small employer pur11 chasing group, or otherwise require the estab12 lishment of purchasing groups; and 

13 ‘‘(B) that there be only one qualified small 

14 employer purchasing group established with re15 spect to a community rating area. 

16 ‘‘(2) SINGLE ORGANIZATION SERVING MUL17 TIPLE AREAS AND STATES.—Nothing in this section 

18 shall be construed as preventing a single entity from 

19 being a qualified small employer purchasing group in 

20 more than one community rating area or in more 

21 than one State. 

22 ‘‘(3) VOLUNTARY PARTICIPATION.—Nothing in 

23 this section shall be construed as requiring any indi24 vidual or small employer to purchase a qualified 
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1 group health plan exclusively through a qualified 

2 small employer purchasing group. 

3 ‘‘SEC. 721F. AGREEMENTS WITH SMALL EMPLOYERS. 

4 ‘‘(a) IN GENERAL.—A qualified small employer pur5 chasing group shall offer to enter into an agreement under 

6 this section with each small employer that employs eligible 

7 employees in the area served by the group. 

8 ‘‘(b) PAYROLL DEDUCTION.— 

9 ‘‘(1) IN GENERAL.—Under an agreement under 

10 this section between a small employer and a quali11 fied small employer purchasing group, the small em12 ployer shall deduct premiums from an eligible em13 ployee’s wages. 

14 ‘‘(2) ADDITIONAL PREMIUMS.—If the amount 

15 withheld under paragraph (1) is not sufficient to 

16 cover the entire cost of the premiums, the eligible 

17 employee shall be responsible for paying directly to 

18 the qualified small employer purchasing group the 

19 difference between the amount of such premiums 

20 and the amount withheld. 
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1 ‘‘SEC. 721G. ENROLLING ELIGIBLE EMPLOYEES, ELIGIBLE 

2 INDIVIDUALS, AND CERTAIN UNINSURED IN3 DIVIDUALS IN QUALIFIED GROUP HEALTH 

4 PLANS. 

5 ‘‘(a) IN GENERAL.—Each qualified small employer 

6 purchasing group shall offer— 

7 ‘‘(1) eligible employees, 

8 ‘‘(2) eligible individuals, and 

9 ‘‘(3) certain uninsured individuals, 

10 the opportunity to enroll in any qualified group health 

11 plan which has an agreement with the qualified small em12 ployer purchasing group for the community rating area 

13 in which such employees and individuals reside. 

14 ‘‘(b) UNINSURED INDIVIDUALS.—For purposes of 

15 this section, an individual is described in subsection (a)(3) 

16 if such individual is an uninsured individual who is not 

17 an eligible employee of a small employer that is a member 

18 of a qualified small employer purchasing group or a de19 pendent of such individual. 

20 ‘‘SEC. 721H. RECEIPT OF PREMIUMS. 

21 ‘‘(a) ENROLLMENT CHARGE.—The amount charged 

22 by a qualified small employer purchasing group for cov23 erage under a qualified group health plan shall be equal 

24 to the sum of— 

25 ‘‘(1) the premium rate offered by such health 

26 plan; 
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1 ‘‘(2) the administrative charge for such health 

2 plan; and 

3 ‘‘(3) the purchasing group administrative 

4 charge for enrollment of eligible employees, eligible 

5 individuals and certain uninsured individuals 

6 through the group. 

7 ‘‘(b) DISCLOSURE OF PREMIUM RATES AND ADMIN8 ISTRATIVE CHARGES.—Each qualified small employer 

9 purchasing group shall, prior to the time of enrollment, 

10 disclose to enrollees and other interested parties the pre11 mium rate for a qualified group health plan, the adminis12 trative charge for such plan, and the administrative charge 

13 of the group, separately. 

14 ‘‘SEC. 721I. MARKETING ACTIVITIES. 

15 ‘‘Each qualified small employer purchasing group 

16 shall market qualified group health plans to members 

17 through the entire community rating area served by the 

18 purchasing group. 

19 ‘‘SEC. 721J. GRANTS TO STATES AND QUALIFIED SMALL EM20 PLOYER PURCHASING GROUPS. 

21 ‘‘(a) IN GENERAL.—The Secretary shall award 

22 grants to States and small employer purchasing groups 

23 to assist such States and groups in planning, developing, 

24 and operating qualified small employer purchasing groups. 
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1 ‘‘(b) APPLICATION REQUIREMENTS.—To be eligible 

2 to receive a grant under this section, a State or small em3 ployer purchasing group shall prepare and submit to the 

4 Secretary an application in such form, at such time, and 

5 containing such information, certifications, and assur6 ances as the Secretary shall reasonably require. 

7 ‘‘(c) USE OF FUNDS.—Amounts awarded under this 

8 section may be used to finance the costs associated with 

9 planning, developing, and operating a qualified small em10 ployer purchasing group. Such costs may include the costs 

11 associated with— 

12 ‘‘(1) engaging in education and outreach efforts 

13 to inform small employers, insurers, and the public 

14 about the small employer purchasing group; 

15 ‘‘(2) soliciting bids and negotiating with insur16 ers to make available group health plans; 

17 ‘‘(3) preparing the documentation required to 

18 receive certification by the Secretary as a qualified 

19 small employer purchasing group; and 

20 ‘‘(4) such other activities determined appro21 priate by the Secretary. 

22 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There 

23 are authorized to be appropriated for awarding grants 

24 under this section such sums as may be necessary. 
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1 ‘‘SEC. 721K. QUALIFIED SMALL EMPLOYER PURCHASING 

2 GROUPS ESTABLISHED BY A STATE. 

3 ‘‘A State may establish a system in all or part of the 

4 State under which qualified small employer purchasing 

5 groups are the sole mechanism through which health care 

6 coverage for the eligible employees of small employers shall 

7 be purchased or provided. 

8 ‘‘SEC. 721L. EFFECTIVE DATES. 

9 ‘‘(a) IN GENERAL.—Except as provided in this chap10 ter, the provisions of this chapter are effective on the date 

11 of the enactment of this subpart. 

12 ‘‘(b) EXCEPTION.—The provisions of section 721C(b) 

13 shall apply to contracts which are issued, or renewed, after 

14 the date which is 18 months after the date of the enact15 ment of this subpart. 

16 ‘‘CHAPTER 2—REQUIRED COVERAGE OPTIONS 

17 FOR ELIGIBLE EMPLOYEES AND DEPEND18 ENTS OF SMALL EMPLOYERS 

19 ‘‘SEC. 722. REQUIRING SMALL EMPLOYERS TO OFFER COV20 ERAGE FOR ELIGIBLE INDIVIDUALS. 

21 ‘‘(a) REQUIREMENT TO OFFER.—Each small em22 ployer shall make available with respect to each eligible 

23 employee a group health plan under which— 

24 ‘‘(1) coverage of each eligible individual with re25 spect to such an eligible employee may be elected on 

26 an annual basis for each plan year; 
27 

•S 2570 IS 

1 ‘‘(2) coverage is provided for at least the stand2 ard coverage specified in section 721A(b); and 

3 ‘‘(3) each eligible employee electing such cov4 erage may elect to have any premiums owed by the 

5 employee collected through payroll deduction. 

6 ‘‘(b) NO EMPLOYER CONTRIBUTION REQUIRED.—An 

7 employer is not required under subsection (a) to make any 

8 contribution to the cost of coverage under a group health 

9 plan described in such subsection. 

10 ‘‘(c) SPECIAL RULES.— 

11 ‘‘(1) EXCLUSION OF NEW EMPLOYERS AND

12 CERTAIN VERY SMALL EMPLOYERS.—Subsection (a) 

13 shall not apply to any small employer for any plan 

14 year if, as of the beginning of such plan year— 

15 ‘‘(A) such employer (including any prede16 cessor thereof) has been an employer for less 

17 than 2 years; 

18 ‘‘(B) such employer has no more than 2 el19 igible employees; or 

20 ‘‘(C) no more than 2 eligible employees are 

21 not covered under any group health plan. 

22 ‘‘(2) EXCLUSION OF FAMILY MEMBERS.—Under 

23 such procedures as the Secretary may prescribe, any 

24 relative of a small employer may be, at the election 

25 of the employer, excluded from consideration as an 
28 

•S 2570 IS 

1 eligible employee for purposes of applying the re2 quirements of subsection (a). In the case of a small 

3 employer that is not an individual, an employee who 

4 is a relative of a key employee (as defined in section 

5 416(i)(1) of the Internal Revenue Code of 1986) of 

6 the employer may, at the election of the key em7 ployee, be considered a relative excludable under this 

8 paragraph. 

9 ‘‘(3) OPTIONAL APPLICATION OF WAITING PE10 RIOD.—A group health plan and a health insurance 

11 issuer offering group health insurance coverage shall 

12 not be treated as failing to meet the requirements of 

13 subsection (a) solely because a period of service by 

14 an eligible employee of not more than 60 days is re15 quired under the plan for coverage under the plan 

16 of eligible individuals with respect to such employee. 

17 ‘‘(d) CONSTRUCTION.—Nothing in this section shall 

18 be construed as limiting the group health plans, or types 

19 of coverage under such a plan, that an employer may offer 

20 to an employee. 

21 ‘‘SEC. 722A. COMPLIANCE WITH APPLICABLE REQUIRE22 MENTS THROUGH MULTIPLE EMPLOYER 

23 HEALTH ARRANGEMENTS. 

24 ‘‘(a) IN GENERAL.—In any case in which an eligible 

25 employee is, for any plan year, a participant in a group 
29 

•S 2570 IS 

1 health plan which is a multiemployer plan, the require2 ments of section 722(a) shall be deemed to be met with 

3 respect to such employee for such plan year if the em4 ployer requirements of subsection (b) are met with respect 

5 to the eligible employee, irrespective of whether, or to what 

6 extent, the employer makes employer contributions on be7 half of the eligible employee. 

8 ‘‘(b) EMPLOYER REQUIREMENTS.—The employer re9 quirements of this subsection are met under a group 

10 health plan with respect to an eligible employee if— 

11 ‘‘(1) the employee is eligible under the plan to 

12 elect coverage on an annual basis and is provided a 

13 reasonable opportunity to make the election in such 

14 form and manner and at such times as are provided 

15 by the plan; 

16 ‘‘(2) coverage is provided for at least the stand17 ard coverage specified in section 721A(b); 

18 ‘‘(3) the employer facilitates collection of any 

19 employee contributions under the plan and permits 

20 the employee to elect to have employee contributions 

21 under the plan collected through payroll deduction; 

22 and 

23 ‘‘(4) in the case of a plan to which part 1 does 

24 not otherwise apply, the employer provides to the 

25 employee a summary plan description described in 
30 

•S 2570 IS 

1 section 102(a)(1) in the form and manner and at 

2 such times as are required under such part 1 with 

3 respect to employee welfare benefit plans. 

4 ‘‘CHAPTER 3—REQUIRED COVERAGE OPTIONS 

5 FOR INDIVIDUALS INSURED THROUGH ASSO6 CIATION PLANS 

7 ‘‘Subchapter A—Qualified Association Plans 

8 ‘‘SEC. 723. TREATMENT OF QUALIFIED ASSOCIATION 

9 PLANS. 

10 ‘‘(a) GENERAL RULE.—For purposes of this chapter, 

11 in the case of a qualified association plan— 

12 ‘‘(1) except as otherwise provided in this sub13 chapter, the plan shall meet all applicable require14 ments of chapter 1 and chapter 2 for group health 

15 plans offered to and by small employers; 

16 ‘‘(2) if such plan is certified as meeting such 

17 requirements and the requirements of this sub18 chapter, such plan shall be treated as a plan estab19 lished and maintained by a small employer, and indi20 viduals enrolled in such plan shall be treated as eli21 gible employees; and 

22 ‘‘(3) any individual who is a member of the as23 sociation not enrolling in the plan shall not be treat24 ed as an eligible employee solely by reason of mem25 bership in such association. 
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1 ‘‘(b) ELECTION TO BE TREATED AS PURCHASING

2 COOPERATIVE.—Subsection (a) shall not apply to a quali3 fied association plan if— 

4 ‘‘(1) the health insurance issuer makes an irrev5 ocable election to be treated as a qualified small em6 ployer purchasing group for purposes of section 

7 721D; and 

8 ‘‘(2) such sponsor meets all requirements of 

9 this subpart applicable to a purchasing cooperative. 

10 ‘‘SEC. 723A. QUALIFIED ASSOCIATION PLAN DEFINED. 

11 ‘‘(a) GENERAL RULE.—For purposes of this chapter, 

12 a plan is a qualified association plan if the plan is a mul13 tiple employer welfare arrangement or similar arrange14 ment— 

15 ‘‘(1) which is maintained by a qualified associa16 tion; 

17 ‘‘(2) which has at least 500 participants in the 

18 United States; 

19 ‘‘(3) under which the benefits provided consist 

20 solely of medical care (as defined in section 213(d) 

21 of the Internal Revenue Code of 1986); 

22 ‘‘(4) which may not condition participation in 

23 the plan, or terminate coverage under the plan, on 

24 the basis of the health status or health claims expe-
32 

•S 2570 IS 

1 rience of any employee or member or dependent of 

2 either; 

3 ‘‘(5) which provides for bonding, in accordance 

4 with regulations providing rules similar to the rules 

5 under section 412, of all persons operating or ad6 ministering the plan or involved in the financial af7 fairs of the plan; and 

8 ‘‘(6) which notifies each participant or provider 

9 that it is certified as meeting the requirements of 

10 this chapter applicable to it. 

11 ‘‘(b) SELF-INSURED PLANS.—In the case of a plan 

12 which is not fully insured (within the meaning of section 

13 514(b)(6)(D)), the plan shall be treated as a qualified as14 sociation plan only if— 

15 ‘‘(1) the plan meets minimum financial solvency 

16 and cash reserve requirements for claims which are 

17 established by the Secretary and which shall be in 

18 lieu of any other such requirements under this chap19 ter; 

20 ‘‘(2) the plan provides an annual funding report 

21 (certified by an independent actuary) and annual fi22 nancial statements to the Secretary and other inter23 ested parties; and 
33 

•S 2570 IS 

1 ‘‘(3) the plan appoints a plan sponsor who is 

2 responsible for operating the plan and ensuring com3 pliance with applicable Federal and State laws. 

4 ‘‘(c) CERTIFICATION.— 

5 ‘‘(1) IN GENERAL.—A plan shall not be treated 

6 as a qualified association plan for any period unless 

7 there is in effect a certification by the Secretary that 

8 the plan meets the requirements of this subchapter. 

9 For purposes of this chapter, the Secretary shall be 

10 the appropriate certifying authority with respect to 

11 the plan. 

12 ‘‘(2) FEE.—The Secretary shall require a 

13 $5,000 fee for the original certification under para14 graph (1) and may charge a reasonable annual fee 

15 to cover the costs of processing and reviewing the 

16 annual statements of the plan. 

17 ‘‘(3) EXPEDITED PROCEDURES.—The Secretary 

18 may by regulation provide for expedited registration, 

19 certification, and comment procedures. 

20 ‘‘(4) AGREEMENTS.—The Secretary of Labor 

21 may enter into agreements with the States to carry 

22 out the Secretary’s responsibilities under this sub23 chapter. 

24 ‘‘(d) AVAILABILITY.—Notwithstanding any other 

25 provision of this chapter, a qualified association plan may 
34 

•S 2570 IS 

1 limit coverage to individuals who are members of the 

2 qualified association establishing or maintaining the plan, 

3 an employee of such member, or a dependent of either. 

4 ‘‘(e) SPECIAL RULES FOR EXISTING PLANS.—In the 

5 case of a plan in existence on January 1, 2005— 

6 ‘‘(1) the requirements of subsection (a) (other 

7 than paragraphs (4), (5), and (6) thereof) shall not 

8 apply; 

9 ‘‘(2) no original certification shall be required 

10 under this subchapter; and 

11 ‘‘(3) no annual report or funding statement 

12 shall be required before January 1, 2006, but the 

13 plan shall file with the Secretary a description of the 

14 plan and the name of the health insurance issuer. 

15 ‘‘SEC. 723B. DEFINITIONS AND SPECIAL RULES. 

16 ‘‘(a) QUALIFIED ASSOCIATION.—For purposes of this 

17 subchapter, the term ‘qualified association’ means any or18 ganization which— 

19 ‘‘(1) is organized and maintained in good faith 

20 by a trade association, an industry association, a 

21 professional association, a chamber of commerce, a 

22 religious organization, a public entity association, or 

23 other business association serving a common or simi24 lar industry; 
35 

•S 2570 IS 

1 ‘‘(2) is organized and maintained for substan2 tial purposes other than to provide a health plan; 

3 ‘‘(3) has a constitution, bylaws, or other similar 

4 governing document which states its purpose; and 

5 ‘‘(4) receives a substantial portion of its finan6 cial support from its active, affiliated, or federation 

7 members. 

8 ‘‘(b) COORDINATION.—The term ‘qualified associa9 tion plan’ shall not include a plan to which subchapter 

10 B applies. 

11 ‘‘Subchapter B—Special Rule for Church, 

12 Multiemployer, and Cooperative Plans 

13 ‘‘SEC. 723F. SPECIAL RULE FOR CHURCH, MULTIEM14 PLOYER, AND COOPERATIVE PLANS. 

15 ‘‘(a) GENERAL RULE.—For purposes of this chapter, 

16 in the case of a group health plan to which this section 

17 applies— 

18 ‘‘(1) except as otherwise provided in this sub19 chapter, the plan shall be required to meet all appli20 cable requirements of chapter 1 and chapter 2 for 

21 group health plans offered to and by small employ22 ers; 

23 ‘‘(2) if such plan is certified as meeting such 

24 requirements, such plan shall be treated as a plan 

25 established and maintained by a small employer and 
36 

•S 2570 IS 

1 individuals enrolled in such plan shall be treated as 

2 eligible employees; and 

3 ‘‘(3) any individual eligible to enroll in the plan 

4 who does not enroll in the plan shall not be treated 

5 as an eligible employee solely by reason of being eli6 gible to enroll in the plan. 

7 ‘‘(b) MODIFIED STANDARDS.— 

8 ‘‘(1) CERTIFYING AUTHORITY.—For purposes 

9 of this chapter, the Secretary shall be the appro10 priate certifying authority with respect to a plan to 

11 which this section applies. 

12 ‘‘(2) AVAILABILITY.—Rules similar to the rules 

13 of subsection (e) of section 723A shall apply to a 

14 plan to which this section applies. 

15 ‘‘(3) ACCESS.—An employer which, pursuant to 

16 a collective bargaining agreement, offers an em17 ployee the opportunity to enroll in a plan described 

18 in subsection (c)(2) shall not be required to make 

19 any other plan available to the employee. 

20 ‘‘(4) TREATMENT UNDER STATE LAWS.—A 

21 church plan described in subsection (c)(1) which is 

22 certified as meeting the requirements of this section 

23 shall not be deemed to be a multiple employer wel24 fare arrangement or an insurance company or other 

25 insurer, or to be engaged in the business of insur-
37 

•S 2570 IS 

1 ance, for purposes of any State law purporting to 

2 regulate insurance companies or insurance contracts. 

3 ‘‘(c) PLANS TO WHICH SECTION APPLIES.—This sec4 tion shall apply to a health plan which— 

5 ‘‘(1) is a church plan (as defined in section 

6 414(e) of the Internal Revenue Code of 1986) which 

7 has at least 100 participants in the United States; 

8 ‘‘(2) is a multiemployer plan which is main9 tained by a health plan sponsor described in section 

10 3(16)(B)(iii) and which has at least 500 participants 

11 in the United States; or 

12 ‘‘(3) is a plan which is maintained by a rural 

13 electric cooperative or a rural telephone cooperative 

14 association and which has at least 500 participants 

15 in the United States.’’. 

16 (b) CONFORMING AMENDMENTS.—Section 731(d) of 

17 the Employee Retirement Income Security Act of 1974 

18 (29 U.S.C. 1186(d)) is amended by adding at the end the 

19 following: 

20 ‘‘(3) ELIGIBLE EMPLOYEE.—The term ‘eligible 

21 employee’ means, with respect to an employer, an 

22 employee who normally performs on a monthly basis 

23 at least 30 hours of service per week for that em24 ployer. 
38 

•S 2570 IS 

1 ‘‘(4) ELIGIBLE INDIVIDUAL.—The term ‘eligible 

2 individual’ means, with respect to an eligible em3 ployee, such employee, and any dependent of such 

4 employee. 

5 ‘‘(5) NAIC.—The term ‘NAIC’ means the Na6 tional Association of Insurance Commissioners. 

7 ‘‘(6) QUALIFIED GROUP HEALTH PLAN.—The 

8 term ‘qualified group health plan’ shall have the 

9 meaning given the term in section 721.’’. 

10 SEC. 102. AMENDMENTS TO THE PUBLIC HEALTH SERVICE 

11 ACT RELATING TO THE GROUP MARKET. 

12 (a) IN GENERAL.—Subpart 2 of part A of title 

13 XXVII of the Public Health Service Act (42 U.S.C. 

14 300gg–4 et seq.) is amended— 

15 (1) by inserting after the subpart heading the 

16 following: 

17 ‘‘CHAPTER 1—MISCELLANEOUS REQUIREMENTS’’; 

18 and 

19 (2) by adding at the end the following: 
39 

•S 2570 IS 

1 ‘‘CHAPTER 2—GENERAL INSURANCE COVERAGE 

2 REFORMS 

3 ‘‘Subchapter A—Increased Availability and 

4 Continuity of Health Coverage 

5 ‘‘SEC. 2707. DEFINITION. 

6 ‘‘As used in this chapter, the term ‘qualified group 

7 health plan’ means a group health plan, and a health in8 surance issuer offering group health insurance coverage, 

9 that is designed to provide standard coverage (consistent 

10 with section 2707A(b)). 

11 ‘‘SEC. 2707A. ACTUARIAL EQUIVALENCE IN BENEFITS PER12 MITTED. 

13 ‘‘(a) SET OF RULES OF ACTUARIAL EQUIVALENCE.— 

14 ‘‘(1) INITIAL DETERMINATION.—The NAIC is 

15 requested to submit to the Secretary, within 6 

16 months after the date of the enactment of this chap17 ter, a set of rules which the NAIC determines is suf18 ficient for determining, in the case of any group 

19 health plan, or a health insurance issuer offering 

20 group health insurance coverage, and for purposes of 

21 this section, the actuarial value of the coverage of22 fered by the plan or coverage. 

23 ‘‘(2) CERTIFICATION.—If the Secretary deter24 mines that the NAIC has submitted a set of rules 

25 that comply with the requirements of paragraph (1), 

26 the Secretary shall certify such set of rules for use 
40 

•S 2570 IS 

1 under this chapter. If the Secretary determines that 

2 such a set of rules has not been submitted or does 

3 not comply with such requirements, the Secretary 

4 shall promptly establish a set of rules that meets 

5 such requirements. 

6 ‘‘(b) STANDARD COVERAGE.— 

7 ‘‘(1) IN GENERAL.—A group health plan, and a 

8 health insurance issuer offering group health insur9 ance coverage, shall be considered to provide stand10 ard coverage consistent with this subsection if the 

11 benefits are determined, in accordance with the set 

12 of actuarial equivalence rules certified under sub13 section (a), to have a value that is within 5 percent14 age points of the target actuarial value for standard 

15 coverage established under paragraph (2). 

16 ‘‘(2) INITIAL DETERMINATION OF TARGET AC17 TUARIAL VALUE FOR STANDARD COVERAGE.— 

18 ‘‘(A) INITIAL DETERMINATION.— 

19 ‘‘(i) IN GENERAL.—The NAIC is re20 quested to submit to the Secretary, within 

21 6 months after the date of the enactment 

22 of this chapter, a target actuarial value for 

23 standard coverage equal to the average ac24 tuarial value of the coverage described in 

25 clause (ii). No specific procedure or treat-
41 

•S 2570 IS 

1 ment, or classes thereof, is required to be 

2 considered in such determination by this 

3 chapter or through regulations. The deter4 mination of such value shall be based on a 

5 representative distribution of the popu6 lation of eligible employees offered such 

7 coverage and a single set of standardized 

8 utilization and cost factors. 

9 ‘‘(ii) COVERAGE DESCRIBED.—The 

10 coverage described in this clause is cov11 erage for medically necessary and appro12 priate services consisting of medical and 

13 surgical services, medical equipment, pre14 ventive services, and emergency transpor15 tation in frontier areas. No specific proce16 dure or treatment, or classes thereof, is re17 quired to be covered in such a plan, by this 

18 chapter or through regulations. 

19 ‘‘(B) CERTIFICATION.—If the Secretary 

20 determines that the NAIC has submitted a tar21 get actuarial value for standard coverage that 

22 complies with the requirements of subparagraph 

23 (A), the Secretary shall certify such value for 

24 use under this chapter. If the Secretary deter25 mines that a target actuarial value has not been 
42 

•S 2570 IS 

1 submitted or does not comply with the require2 ments of subparagraph (A), the Secretary shall 

3 promptly determine a target actuarial value that 

4 meets such requirements. 

5 ‘‘(c) SUBSEQUENT REVISIONS.— 

6 ‘‘(1) NAIC.—The NAIC may submit from time 

7 to time to the Secretary revisions of the set of rules 

8 of actuarial equivalence and target actuarial values 

9 previously established or determined under this sec10 tion if the NAIC determines that revisions are nec11 essary to take into account changes in the relevant 

12 types of health benefits provisions or in demographic 

13 conditions which form the basis for the set of rules 

14 of actuarial equivalence or the target actuarial val15 ues. The provisions of subsection (a)(2) shall apply 

16 to such a revision in the same manner as they apply 

17 to the initial determination of the set of rules. 

18 ‘‘(2) SECRETARY.—The Secretary may by regu19 lation revise the set of rules of actuarial equivalence 

20 and target actuarial values from time to time if the 

21 Secretary determines such revisions are necessary to 

22 take into account changes described in paragraph 

23 (1). 

24 ‘‘SEC. 2707B. ESTABLISHMENT OF PLAN STANDARDS. 

25 ‘‘(a) ESTABLISHMENT OF GENERAL STANDARDS.— 
43 

•S 2570 IS 

1 ‘‘(1) ROLE OF NAIC.—The NAIC is requested 

2 to submit to the Secretary, within 9 months after 

3 the date of the enactment of this chapter, model reg4 ulations that specify standards for making qualified 

5 group health plans available to small employers. If 

6 the NAIC develops recommended regulations speci7 fying such standards within such period, the Sec8 retary shall review the standards. Such review shall 

9 be completed within 60 days after the date the regu10 lations are developed. Such standards shall serve as 

11 the standards under this section, with such amend12 ments as the Secretary deems necessary. Such 

13 standards shall be nonbinding (except as provided in 

14 chapter 4). 

15 ‘‘(2) CONTINGENCY.—If the NAIC does not de16 velop such model regulations within the period de17 scribed in paragraph (1), the Secretary shall specify, 

18 within 15 months after the date of the enactment of 

19 this chapter, model regulations that specify stand20 ards for insurers with regard to making qualified 

21 group health plans available to small employers. 

22 Such standards shall be nonbinding (except as pro23 vided in chapter 4). 

24 ‘‘(3) EFFECTIVE DATE.—The standards speci25 fied in the model regulations shall apply to group 
44 

•S 2570 IS 

1 health plans and health insurance issuers offering 

2 group health insurance coverage in a State on or 

3 after the respective date the standards are imple4 mented in the State. 

5 ‘‘(b) NO PREEMPTION OF STATE LAW.—A State may 

6 implement standards for group health plans available, and 

7 health insurance issuers offering group health insurance 

8 coverage offered, to small employers that are more strin9 gent than the standards under this section, except that 

10 a State may not implement standards that prevent the of11 fering of at least one group health plan that provides 

12 standard coverage (as described in section 2707A(b)). 

13 ‘‘SEC. 2707C. RATING LIMITATIONS FOR COMMUNITY14 RATED MARKET. 

15 ‘‘(a) STANDARD PREMIUMS WITH RESPECT TO COM16 MUNITY-RATED ELIGIBLE EMPLOYEES AND ELIGIBLE IN17 DIVIDUALS.— 

18 ‘‘(1) IN GENERAL.—Each group health plan of19 fered, and each health insurance issuer offering 

20 group health insurance coverage, to a small em21 ployer shall establish within each community rating 

22 area in which the plan is to be offered, a standard 

23 premium for enrollment of eligible employees and eli24 gible individuals for the standard coverage (as de25 fined under section 2707A(b)). 
45 

•S 2570 IS 

1 ‘‘(2) ESTABLISHMENT OF COMMUNITY RATING

2 AREA.— 

3 ‘‘(A) IN GENERAL.—Not later than Janu4 ary 1, 2005, each State shall, in accordance 

5 with subparagraph (B), provide for the division 

6 of the State into 1 or more community rating 

7 areas. The State may revise the boundaries of 

8 such areas from time to time consistent with 

9 this paragraph. 

10 ‘‘(B) GEOGRAPHIC AREA VARIATIONS.— 

11 For purposes of subparagraph (A), a State— 

12 ‘‘(i) may not identify an area that di13 vides a 3-digit zip code, a county, or all 

14 portions of a metropolitan statistical area; 

15 ‘‘(ii) shall not permit premium rates 

16 for coverage offered in a portion of an 

17 interstate metropolitan statistical area to 

18 vary based on the State in which the cov19 erage is offered; and 

20 ‘‘(iii) may, upon agreement with one 

21 or more adjacent States, identify multi22 State geographic areas consistent with 

23 clauses (i) and (ii). 

24 ‘‘(3) ELIGIBLE INDIVIDUALS.—For purposes of 

25 this section, the term ‘eligible individuals’ includes 
46 

•S 2570 IS 

1 certain uninsured individuals (as described in section 

2 2707G). 

3 ‘‘(b) UNIFORM PREMIUMS WITHIN COMMUNITY RAT4 ING AREAS.— 

5 ‘‘(1) IN GENERAL.—Subject to paragraphs (2) 

6 and (3), the standard premium for each group 

7 health plan to which this section applies shall be the 

8 same, but shall not include the costs of premium 

9 processing and enrollment that may vary depending 

10 on whether the method of enrollment is through a 

11 qualified small employer purchasing group, through 

12 a small employer, or through a broker. 

13 ‘‘(2) APPLICATION TO ENROLLEES.— 

14 ‘‘(A) IN GENERAL.—The premium charged 

15 for coverage in a group health plan which cov16 ers eligible employees and eligible individuals 

17 shall be the product of— 

18 ‘‘(i) the standard premium (estab19 lished under paragraph (1)); 

20 ‘‘(ii) in the case of enrollment other 

21 than individual enrollment, the family ad22 justment factor specified under subpara23 graph (B); and 

24 ‘‘(iii) the age adjustment factor (spec25 ified under subparagraph (C)). 
47 

•S 2570 IS 

1 ‘‘(B) FAMILY ADJUSTMENT FACTOR.— 

2 ‘‘(i) IN GENERAL.—The standards es3 tablished under section 2707B shall specify 

4 family adjustment factors that reflect the 

5 relative actuarial costs of benefit packages 

6 based on family classes of enrollment (as 

7 compared with such costs for individual en8 rollment). 

9 ‘‘(ii) CLASSES OF ENROLLMENT.—For 

10 purposes of this chapter, there are 4 class11 es of enrollment: 

12 ‘‘(I) Coverage only of an indi13 vidual (referred to in this chapter as 

14 the ‘individual’ enrollment or class of 

15 enrollment). 

16 ‘‘(II) Coverage of a married cou17 ple without children (referred to in 

18 this chapter as the ‘couple-only’ en19 rollment or class of enrollment). 

20 ‘‘(III) Coverage of an individual 

21 and one or more children (referred to 

22 in this chapter as the ‘single parent’ 

23 enrollment or class of enrollment). 

24 ‘‘(IV) Coverage of a married cou25 ple and one or more children (referred 
48 

•S 2570 IS 

1 to in this chapter as the ‘dual parent’ 

2 enrollment or class of enrollment). 

3 ‘‘(iii) REFERENCES TO FAMILY AND

4 COUPLE CLASSES OF ENROLLMENT.—In 

5 this chapter: 

6 ‘‘(I) FAMILY.—The terms ‘family 

7 enrollment’ and ‘family class of enroll8 ment’ refer to enrollment in a class of 

9 enrollment described in any subclause 

10 of clause (ii) (other than subclause 

11 (I)). 

12 ‘‘(II) COUPLE.—The term ‘couple 

13 class of enrollment’ refers to enroll14 ment in a class of enrollment de15 scribed in subclause (II) or (IV) of 

16 clause (ii). 

17 ‘‘(iv) SPOUSE; MARRIED; COUPLE.— 

18 ‘‘(I) IN GENERAL.—In this chap19 ter, the terms ‘spouse’ and ‘married’ 

20 mean, with respect to an individual, 

21 another individual who is the spouse 

22 of, or is married to, the individual, as 

23 determined under applicable State 

24 law. 
49 

•S 2570 IS 

1 ‘‘(II) COUPLE.—The term ‘cou2 ple’ means an individual and the indi3 vidual’s spouse. 

4 ‘‘(C) AGE ADJUSTMENT FACTOR.—The 

5 Secretary, in consultation with the NAIC, shall 

6 specify uniform age categories and maximum 

7 rating increments for age adjustment factors 

8 that reflect the relative actuarial costs of ben9 efit packages among enrollees. For individuals 

10 who have attained age 18 but not age 65, the 

11 highest age adjustment factor may not exceed 3 

12 times the lowest age adjustment factor. 

13 ‘‘(3) ADMINISTRATIVE CHARGES.— 

14 ‘‘(A) IN GENERAL.—In accordance with 

15 the standards established under section 2707B, 

16 a group health plan which covers eligible em17 ployees and eligible individuals may add a sepa18 rately-stated administrative charge which is 

19 based on identifiable differences in legitimate 

20 administrative costs and which is applied uni21 formly for individuals enrolling through the 

22 same method of enrollment. Nothing in this 

23 subparagraph may be construed as preventing a 

24 qualified small employer purchasing group from 
50 

•S 2570 IS 

1 negotiating a unique administrative charge with 

2 an insurer for a group health plan. 

3 ‘‘(B) ENROLLMENT THROUGH A QUALI4 FIED SMALL EMPLOYER PURCHASING GROUP.— 

5 In the case of an administrative charge under 

6 subparagraph (A) for enrollment through a 

7 qualified small employer purchasing group, such 

8 charge may not exceed the lowest charge of 

9 such plan for enrollment other than through a 

10 qualified small employer purchasing group in 

11 such area. 

12 ‘‘(c) TREATMENT OF NEGOTIATED RATE AS COMMU13 NITY RATE.—Notwithstanding any other provision of this 

14 section, a group health plan and a health insurance issuer 

15 offering health insurance coverage that negotiates a pre16 mium rate (exclusive of any administrative charge de17 scribed in subsection (b)(3)) with a qualified small em18 ployer purchasing group in a community rating area shall 

19 charge the same premium rate to all eligible employees 

20 and eligible individuals. 

21 ‘‘SEC. 2707D. RATING PRACTICES AND PAYMENT OF PRE22 MIUMS. 

23 ‘‘(a) FULL DISCLOSURE OF RATING PRACTICES.— 

24 ‘‘(1) IN GENERAL.—A group health plan and a 

25 health insurance issuer offering health insurance 
51 

•S 2570 IS 

1 coverage shall fully disclose rating practices for the 

2 plan to the appropriate certifying authority. 

3 ‘‘(2) NOTICE ON EXPIRATION.—A group health 

4 plan and a health insurance issuer offering health 

5 insurance coverage shall provide for notice of the 

6 terms for renewal of a plan at the time of the offer7 ing of the plan and at least 90 days before the date 

8 of expiration of the plan. 

9 ‘‘(3) ACTUARIAL CERTIFICATION.—Each group 

10 health plan and health insurance issuer offering 

11 health insurance coverage shall file annually with the 

12 appropriate certifying authority a written statement 

13 by a member of the American Academy of Actuaries 

14 (or other individual acceptable to such authority) 

15 who is not an employee of the group health plan or 

16 issuer certifying that, based upon an examination by 

17 the individual which includes a review of the appro18 priate records and of the actuarial assumptions of 

19 such plan or insurer and methods used by the plan 

20 or insurer in establishing premium rates and admin21 istrative charges for group health plans— 

22 ‘‘(A) such plan or insurer is in compliance 

23 with the applicable provisions of this chapter; 

24 and 
52 

•S 2570 IS 

1 ‘‘(B) the rating methods are actuarially 

2 sound. 

3 Each plan and insurer shall retain a copy of such 

4 statement at its principal place of business for exam5 ination by any individual. 

6 ‘‘(b) PAYMENT OF PREMIUMS.— 

7 ‘‘(1) IN GENERAL.—With respect to a new en8 rollee in a group health plan, the plan may require 

9 advanced payment of an amount equal to the month10 ly applicable premium for the plan at the time such 

11 individual is enrolled. 

12 ‘‘(2) NOTIFICATION OF FAILURE TO RECEIVE

13 PREMIUM.—If a group health plan or a health insur14 ance issuer offering health insurance coverage fails 

15 to receive payment on a premium due with respect 

16 to an eligible employee or eligible individual covered 

17 under the plan involved, the plan or issuer shall pro18 vide notice of such failure to the employee or indi19 vidual within the 20-day period after the date on 

20 which such premium payment was due. A plan or 

21 issuer may not terminate the enrollment of an eligi22 ble employee or eligible individual unless such em23 ployee or individual has been notified of any overdue 

24 premiums and has been provided a reasonable op25 portunity to respond to such notice. 
53 

•S 2570 IS 

1 ‘‘SEC. 2707E. QUALIFIED SMALL EMPLOYER PURCHASING 

2 GROUPS. 

3 ‘‘(a) QUALIFIED SMALL EMPLOYER PURCHASING

4 GROUPS DESCRIBED.— 

5 ‘‘(1) IN GENERAL.—A qualified small employer 

6 purchasing group is an entity that— 

7 ‘‘(A) is a nonprofit entity certified under 

8 State law; 

9 ‘‘(B) has a membership consisting solely of 

10 small employers; 

11 ‘‘(C) is administered solely under the au12 thority and control of its member employers; 

13 ‘‘(D) with respect to each State in which 

14 its members are located, consists of not fewer 

15 than the number of small employers established 

16 by the State as appropriate for such a group; 

17 ‘‘(E) offers a program under which quali18 fied group health plans are offered to eligible 

19 employees and eligible individuals through its 

20 member employers and to certain uninsured in21 dividuals in accordance with section 2707D; 

22 and 

23 ‘‘(F) an insurer, agent, broker, or any 

24 other individual or entity engaged in the sale of 

25 insurance— 

26 ‘‘(i) does not form or underwrite; and 
54 

•S 2570 IS 

1 ‘‘(ii) does not hold or control any 

2 right to vote with respect to. 

3 ‘‘(2) STATE CERTIFICATION.—A qualified small 

4 employer purchasing group formed under this sec5 tion shall submit an application to the State for cer6 tification. The State shall determine whether to 

7 issue a certification and otherwise ensure compliance 

8 with the requirements of this chapter. 

9 ‘‘(3) SPECIAL RULE.—Notwithstanding para10 graph (1)(B), an employer member of a small em11 ployer purchasing group that has been certified by 

12 the State as meeting the requirements of paragraph 

13 (1) may retain its membership in the group if the 

14 number of employees of the employer increases such 

15 that the employer is no longer a small employer. 

16 ‘‘(b) BOARD OF DIRECTORS.—Each qualified small 

17 employer purchasing group established under this section 

18 shall be governed by a board of directors or have active 

19 input from an advisory board consisting of individuals and 

20 businesses participating in the group. 

21 ‘‘(c) DOMICILIARY STATE.—For purposes of this sec22 tion, a qualified small employer purchasing group oper23 ating in more than one State shall be certified by the State 

24 in which the group is domiciled. 

25 ‘‘(d) MEMBERSHIP.— 
55 

•S 2570 IS 

1 ‘‘(1) IN GENERAL.—A qualified small employer 

2 purchasing group shall accept all small employers 

3 and certain uninsured individuals residing within the 

4 area served by the group as members if such em5 ployers or individuals request such membership. 

6 ‘‘(2) VOTING.—Members of a qualified small 

7 employer purchasing group shall have voting rights 

8 consistent with the rules established by the State. 

9 ‘‘(e) DUTIES OF QUALIFIED SMALL EMPLOYER PUR10 CHASING GROUPS.—Each qualified small employer pur11 chasing group shall— 

12 ‘‘(1) enter into agreements with insurers offer13 ing qualified group health plans; 

14 ‘‘(2) enter into agreements with small employ15 ers under section 2707F; 

16 ‘‘(3) enroll only eligible employees, eligible indi17 viduals, and certain uninsured individuals in quali18 fied group health plans, in accordance with section 

19 2707G; 

20 ‘‘(4) provide enrollee information to the State; 

21 ‘‘(5) meet the marketing requirements under 

22 section 2707I; and 

23 ‘‘(6) carry out other functions provided for 

24 under this chapter. 
56 

•S 2570 IS 

1 ‘‘(f) LIMITATION ON ACTIVITIES.—A qualified small 

2 employer purchasing group shall not— 

3 ‘‘(1) perform any activity involving approval or 

4 enforcement of payment rates for providers; 

5 ‘‘(2) perform any activity (other than the re6 porting of noncompliance) relating to compliance of 

7 qualified group health plans with the requirements of 

8 this chapter; 

9 ‘‘(3) assume financial risk in relation to any 

10 such health plan; or 

11 ‘‘(4) perform other activities identified by the 

12 State as being inconsistent with the performance of 

13 its duties under this chapter. 

14 ‘‘(g) RULES OF CONSTRUCTION.— 

15 ‘‘(1) ESTABLISHMENT NOT REQUIRED.—Noth16 ing in this section shall be construed as requiring— 

17 ‘‘(A) that a State organize, operate or oth18 erwise establish a qualified small employer pur19 chasing group, or otherwise require the estab20 lishment of purchasing groups; and 

21 ‘‘(B) that there be only one qualified small 

22 employer purchasing group established with re23 spect to a community rating area. 

24 ‘‘(2) SINGLE ORGANIZATION SERVING MUL25 TIPLE AREAS AND STATES.—Nothing in this section 
57 

•S 2570 IS 

1 shall be construed as preventing a single entity from 

2 being a qualified small employer purchasing group in 

3 more than one community rating area or in more 

4 than one State. 

5 ‘‘(3) VOLUNTARY PARTICIPATION.—Nothing in 

6 this section shall be construed as requiring any indi7 vidual or small employer to purchase a qualified 

8 group health plan exclusively through a qualified 

9 small employer purchasing group. 

10 ‘‘SEC. 2707F. AGREEMENTS WITH SMALL EMPLOYERS. 

11 ‘‘(a) IN GENERAL.—A qualified small employer pur12 chasing group shall offer to enter into an agreement under 

13 this section with each small employer that employs eligible 

14 employees in the area served by the group. 

15 ‘‘(b) PAYROLL DEDUCTION.— 

16 ‘‘(1) IN GENERAL.—Under an agreement under 

17 this section between a small employer and a quali18 fied small employer purchasing group, the small em19 ployer shall deduct premiums from an eligible em20 ployee’s wages. 

21 ‘‘(2) ADDITIONAL PREMIUMS.—If the amount 

22 withheld under paragraph (1) is not sufficient to 

23 cover the entire cost of the premiums, the eligible 

24 employee shall be responsible for paying directly to 

25 the qualified small employer purchasing group the 
58 

•S 2570 IS 

1 difference between the amount of such premiums and 

2 the amount withheld. 

3 ‘‘SEC. 2707G. ENROLLING ELIGIBLE EMPLOYEES, ELIGIBLE 

4 INDIVIDUALS, AND CERTAIN UNINSURED IN5 DIVIDUALS IN QUALIFIED GROUP HEALTH 

6 PLANS. 

7 ‘‘(a) IN GENERAL.—Each qualified small employer 

8 purchasing group shall offer— 

9 ‘‘(1) eligible employees, 

10 ‘‘(2) eligible individuals, and 

11 ‘‘(3) certain uninsured individuals, 

12 the opportunity to enroll in any qualified group health 

13 plan which has an agreement with the qualified small em14 ployer purchasing group for the community rating area 

15 in which such employees and individuals reside. 

16 ‘‘(b) UNINSURED INDIVIDUALS.—For purposes of 

17 this section, an individual is described in subsection (a)(3) 

18 if such individual is an uninsured individual who is not 

19 an eligible employee of a small employer that is a member 

20 of a qualified small employer purchasing group or a de21 pendent of such individual. 

22 ‘‘SEC. 2707H. RECEIPT OF PREMIUMS. 

23 ‘‘(a) ENROLLMENT CHARGE.—The amount charged 

24 by a qualified small employer purchasing group for cov-
59 

•S 2570 IS 

1 erage under a qualified group health plan shall be equal 

2 to the sum of— 

3 ‘‘(1) the premium rate offered by such health 

4 plan; 

5 ‘‘(2) the administrative charge for such health 

6 plan; and 

7 ‘‘(3) the purchasing group administrative 

8 charge for enrollment of eligible employees, eligible 

9 individuals and certain uninsured individuals 

10 through the group. 

11 ‘‘(b) DISCLOSURE OF PREMIUM RATES AND ADMIN12 ISTRATIVE CHARGES.—Each qualified small employer 

13 purchasing group shall, prior to the time of enrollment, 

14 disclose to enrollees and other interested parties the pre15 mium rate for a qualified group health plan, the adminis16 trative charge for such plan, and the administrative charge 

17 of the group, separately. 

18 ‘‘SEC. 2707I. MARKETING ACTIVITIES. 

19 ‘‘Each qualified small employer purchasing group 

20 shall market qualified group health plans to members 

21 through the entire community rating area served by the 

22 purchasing group. 
60 

•S 2570 IS 

1 ‘‘SEC. 2707J. GRANTS TO STATES AND QUALIFIED SMALL 

2 EMPLOYER PURCHASING GROUPS. 

3 ‘‘(a) IN GENERAL.—The Secretary shall award 

4 grants to States and small employer purchasing groups 

5 to assist such States and groups in planning, developing, 

6 and operating qualified small employer purchasing groups. 

7 ‘‘(b) APPLICATION REQUIREMENTS.—To be eligible 

8 to receive a grant under this section, a State or small em9 ployer purchasing group shall prepare and submit to the 

10 Secretary an application in such form, at such time, and 

11 containing such information, certifications, and assur12 ances as the Secretary shall reasonably require. 

13 ‘‘(c) USE OF FUNDS.—Amounts awarded under this 

14 section may be used to finance the costs associated with 

15 planning, developing, and operating a qualified small em16 ployer purchasing group. Such costs may include the costs 

17 associated with— 

18 ‘‘(1) engaging in education and outreach efforts 

19 to inform small employers, insurers, and the public 

20 about the small employer purchasing group; 

21 ‘‘(2) soliciting bids and negotiating with insur22 ers to make available group health plans; 

23 ‘‘(3) preparing the documentation required to 

24 receive certification by the Secretary as a qualified 

25 small employer purchasing group; and 
61 

•S 2570 IS 

1 ‘‘(4) such other activities determined appro2 priate by the Secretary. 

3 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There 

4 are authorized to be appropriated for awarding grants 

5 under this section such sums as may be necessary. 

6 ‘‘SEC. 2707K. QUALIFIED SMALL EMPLOYER PURCHASING 

7 GROUPS ESTABLISHED BY A STATE. 

8 ‘‘A State may establish a system in all or part of the 

9 State under which qualified small employer purchasing 

10 groups are the sole mechanism through which health care 

11 coverage for the eligible employees of small employers shall 

12 be purchased or provided. 

13 ‘‘SEC. 2707L. EFFECTIVE DATES. 

14 ‘‘(a) IN GENERAL.—Except as provided in this chap15 ter, the provisions of this chapter are effective on the date 

16 of the enactment of this chapter. 

17 ‘‘(b) EXCEPTION.—The provisions of section 

18 2707C(b) shall apply to contracts which are issued, or re19 newed, after the date which is 18 months after the date 

20 of the enactment of this chapter. 
62 

•S 2570 IS 

1 ‘‘Subchapter B—Required Coverage Options for Eli2 gible Employees and Dependents of Small Em3 ployers 

4 ‘‘SEC. 2708. REQUIRING SMALL EMPLOYERS TO OFFER COV5 ERAGE FOR ELIGIBLE INDIVIDUALS. 

6 ‘‘(a) REQUIREMENT TO OFFER.—Each small em7 ployer shall make available with respect to each eligible 

8 employee a group health plan under which— 

9 ‘‘(1) coverage of each eligible individual with re10 spect to such an eligible employee may be elected on 

11 an annual basis for each plan year; 

12 ‘‘(2) coverage is provided for at least the stand13 ard coverage specified in section 2707A(b); and 

14 ‘‘(3) each eligible employee electing such cov15 erage may elect to have any premiums owed by the 

16 employee collected through payroll deduction. 

17 ‘‘(b) NO EMPLOYER CONTRIBUTION REQUIRED.—An 

18 employer is not required under subsection (a) to make any 

19 contribution to the cost of coverage under a group health 

20 plan described in such subsection. 

21 ‘‘(c) SPECIAL RULES.— 

22 ‘‘(1) EXCLUSION OF NEW EMPLOYERS AND

23 CERTAIN VERY SMALL EMPLOYERS.—Subsection (a) 

24 shall not apply to any small employer for any plan 

25 year if, as of the beginning of such plan year— 
63 

•S 2570 IS 

1 ‘‘(A) such employer (including any prede2 cessor thereof) has been an employer for less 

3 than 2 years; 

4 ‘‘(B) such employer has no more than 2 el5 igible employees; or 

6 ‘‘(C) no more than 2 eligible employees are 

7 not covered under any group health plan. 

8 ‘‘(2) EXCLUSION OF FAMILY MEMBERS.—Under 

9 such procedures as the Secretary may prescribe, any 

10 relative of a small employer may be, at the election 

11 of the employer, excluded from consideration as an 

12 eligible employee for purposes of applying the re13 quirements of subsection (a). In the case of a small 

14 employer that is not an individual, an employee who 

15 is a relative of a key employee (as defined in section 

16 416(i)(1) of the Internal Revenue Code of 1986) of 

17 the employer may, at the election of the key em18 ployee, be considered a relative excludable under this 

19 paragraph. 

20 ‘‘(3) OPTIONAL APPLICATION OF WAITING PE21 RIOD.—A group health plan and a health insurance 

22 issuer offering group health insurance coverage shall 

23 not be treated as failing to meet the requirements of 

24 subsection (a) solely because a period of service by 

25 an eligible employee of not more than 60 days is re-
64 

•S 2570 IS 

1 quired under the plan for coverage under the plan 

2 of eligible individuals with respect to such employee. 

3 ‘‘(d) CONSTRUCTION.—Nothing in this section shall 

4 be construed as limiting the group health plans, or types 

5 of coverage under such a plan, that an employer may offer 

6 to an employee. 

7 ‘‘SEC. 2708A. COMPLIANCE WITH APPLICABLE REQUIRE8 MENTS THROUGH MULTIPLE EMPLOYER 

9 HEALTH ARRANGEMENTS. 

10 ‘‘(a) IN GENERAL.—In any case in which an eligible 

11 employee is, for any plan year, a participant in a group 

12 health plan which is a multiemployer plan, the require13 ments of section 2722(a) shall be deemed to be met with 

14 respect to such employee for such plan year if the em15 ployer requirements of subsection (b) are met with respect 

16 to the eligible employee, irrespective of whether, or to what 

17 extent, the employer makes employer contributions on be18 half of the eligible employee. 

19 ‘‘(b) EMPLOYER REQUIREMENTS.—The employer re20 quirements of this subsection are met under a group 

21 health plan with respect to an eligible employee if— 

22 ‘‘(1) the employee is eligible under the plan to 

23 elect coverage on an annual basis and is provided a 

24 reasonable opportunity to make the election in such 
65 

•S 2570 IS 

1 form and manner and at such times as are provided 

2 by the plan; 

3 ‘‘(2) coverage is provided for at least the stand4 ard coverage specified in section 2707A(b); 

5 ‘‘(3) the employer facilitates collection of any 

6 employee contributions under the plan and permits 

7 the employee to elect to have employee contributions 

8 under the plan collected through payroll deduction; 

9 and 

10 ‘‘(4) in the case of a plan to which subchapter 

11 A does not otherwise apply, the employer provides to 

12 the employee a summary plan description described 

13 in section 102(a)(1) of the Employee Retirement In14 come Security Act of 1974 in the form and manner 

15 and at such times as are required under such sub16 chapter A with respect to employee welfare benefit 

17 plans. 

18 ‘‘Subchapter C—Required Coverage Options for 

19 Individuals Insured Through Association Plans 

20 ‘‘SEC. 2709. TREATMENT OF QUALIFIED ASSOCIATION 

21 PLANS. 

22 ‘‘(a) GENERAL RULE.—For purposes of this chapter, 

23 in the case of a qualified association plan— 

24 ‘‘(1) except as otherwise provided in this sub25 chapter, the plan shall meet all applicable require-
66 

•S 2570 IS 

1 ments of chapter 1 and chapter 2 for group health 

2 plans offered to and by small employers; 

3 ‘‘(2) if such plan is certified as meeting such 

4 requirements and the requirements of this sub5 chapter, such plan shall be treated as a plan estab6 lished and maintained by a small employer, and indi7 viduals enrolled in such plan shall be treated as eli8 gible employees; and 

9 ‘‘(3) any individual who is a member of the as10 sociation not enrolling in the plan shall not be treat11 ed as an eligible employee solely by reason of mem12 bership in such association. 

13 ‘‘(b) ELECTION TO BE TREATED AS PURCHASING

14 COOPERATIVE.—Subsection (a) shall not apply to a quali15 fied association plan if— 

16 ‘‘(1) the health insurance issuer makes an irrev17 ocable election to be treated as a qualified small em18 ployer purchasing group for purposes of section 

19 2707D; and 

20 ‘‘(2) such sponsor meets all requirements of 

21 this chapter applicable to a purchasing cooperative. 

22 ‘‘SEC. 2709A. QUALIFIED ASSOCIATION PLAN DEFINED. 

23 ‘‘(a) GENERAL RULE.—For purposes of this chapter, 

24 a plan is a qualified association plan if the plan is a mul-
67 

•S 2570 IS 

1 tiple employer welfare arrangement or similar arrange2 ment— 

3 ‘‘(1) which is maintained by a qualified associa4 tion; 

5 ‘‘(2) which has at least 500 participants in the 

6 United States; 

7 ‘‘(3) under which the benefits provided consist 

8 solely of medical care (as defined in section 213(d) 

9 of the Internal Revenue Code of 1986); 

10 ‘‘(4) which may not condition participation in 

11 the plan, or terminate coverage under the plan, on 

12 the basis of the health status or health claims expe13 rience of any employee or member or dependent of 

14 either; 

15 ‘‘(5) which provides for bonding, in accordance 

16 with regulations providing rules similar to the rules 

17 under section 412, of all persons operating or ad18 ministering the plan or involved in the financial af19 fairs of the plan; and 

20 ‘‘(6) which notifies each participant or provider 

21 that it is certified as meeting the requirements of 

22 this chapter applicable to it. 

23 ‘‘(b) SELF-INSURED PLANS.—In the case of a plan 

24 which is not fully insured (within the meaning of section 
68 

•S 2570 IS 

1 514(b)(6)(D)), the plan shall be treated as a qualified as2 sociation plan only if— 

3 ‘‘(1) the plan meets minimum financial solvency 

4 and cash reserve requirements for claims which are 

5 established by the Secretary and which shall be in 

6 lieu of any other such requirements under this chap7 ter; 

8 ‘‘(2) the plan provides an annual funding report 

9 (certified by an independent actuary) and annual fi10 nancial statements to the Secretary and other inter11 ested parties; and 

12 ‘‘(3) the plan appoints a plan sponsor who is 

13 responsible for operating the plan and ensuring com14 pliance with applicable Federal and State laws. 

15 ‘‘(c) CERTIFICATION.— 

16 ‘‘(1) IN GENERAL.—A plan shall not be treated 

17 as a qualified association plan for any period unless 

18 there is in effect a certification by the Secretary that 

19 the plan meets the requirements of this subchapter. 

20 For purposes of this chapter, the Secretary shall be 

21 the appropriate certifying authority with respect to 

22 the plan. 

23 ‘‘(2) FEE.—The Secretary shall require a 

24 $5,000 fee for the original certification under para25 graph (1) and may charge a reasonable annual fee 
69 

•S 2570 IS 

1 to cover the costs of processing and reviewing the 

2 annual statements of the plan. 

3 ‘‘(3) EXPEDITED PROCEDURES.—The Secretary 

4 may by regulation provide for expedited registration, 

5 certification, and comment procedures. 

6 ‘‘(4) AGREEMENTS.—The Secretary of Labor 

7 may enter into agreements with the States to carry 

8 out the Secretary’s responsibilities under this sub9 chapter. 

10 ‘‘(d) AVAILABILITY.—Notwithstanding any other 

11 provision of this chapter, a qualified association plan may 

12 limit coverage to individuals who are members of the 

13 qualified association establishing or maintaining the plan, 

14 an employee of such member, or a dependent of either. 

15 ‘‘(e) SPECIAL RULES FOR EXISTING PLANS.—In the 

16 case of a plan in existence on January 1, 2005— 

17 ‘‘(1) the requirements of subsection (a) (other 

18 than paragraphs (4), (5), and (6) thereof) shall not 

19 apply; 

20 ‘‘(2) no original certification shall be required 

21 under this subchapter; and 

22 ‘‘(3) no annual report or funding statement 

23 shall be required before January 1, 2006, but the 

24 plan shall file with the Secretary a description of the 

25 plan and the name of the health insurance issuer. 
70 

•S 2570 IS 

1 ‘‘SEC. 2709B. DEFINITIONS AND SPECIAL RULES. 

2 ‘‘(a) QUALIFIED ASSOCIATION.—For purposes of this 

3 subchapter, the term ‘qualified association’ means any or4 ganization which— 

5 ‘‘(1) is organized and maintained in good faith 

6 by a trade association, an industry association, a 

7 professional association, a chamber of commerce, a 

8 religious organization, a public entity association, or 

9 other business association serving a common or simi10 lar industry; 

11 ‘‘(2) is organized and maintained for substan12 tial purposes other than to provide a health plan; 

13 ‘‘(3) has a constitution, bylaws, or other similar 

14 governing document which states its purpose; and 

15 ‘‘(4) receives a substantial portion of its finan16 cial support from its active, affiliated, or federation 

17 members. 

18 ‘‘(b) COORDINATION.—The term ‘qualified associa19 tion plan’ shall not include a plan to which subchapter 

20 B applies. 

21 ‘‘SEC. 2709C. SPECIAL RULE FOR CHURCH, MULTIEM22 PLOYER, AND COOPERATIVE PLANS. 

23 ‘‘(a) GENERAL RULE.—For purposes of this chapter, 

24 in the case of a group health plan to which this section 

25 applies— 
71 

•S 2570 IS 

1 ‘‘(1) except as otherwise provided in this sub2 chapter, the plan shall be required to meet all appli3 cable requirements of subchapter A and subchapter 

4 B for group health plans offered to and by small em5 ployers; 

6 ‘‘(2) if such plan is certified as meeting such 

7 requirements, such plan shall be treated as a plan 

8 established and maintained by a small employer and 

9 individuals enrolled in such plan shall be treated as 

10 eligible employees; and 

11 ‘‘(3) any individual eligible to enroll in the plan 

12 who does not enroll in the plan shall not be treated 

13 as an eligible employee solely by reason of being eli14 gible to enroll in the plan. 

15 ‘‘(b) MODIFIED STANDARDS.— 

16 ‘‘(1) CERTIFYING AUTHORITY.—For purposes 

17 of this chapter, the Secretary shall be the appro18 priate certifying authority with respect to a plan to 

19 which this section applies. 

20 ‘‘(2) AVAILABILITY.—Rules similar to the rules 

21 of subsection (e) of section 2709A shall apply to a 

22 plan to which this section applies. 

23 ‘‘(3) ACCESS.—An employer which, pursuant to 

24 a collective bargaining agreement, offers an em25 ployee the opportunity to enroll in a plan described 
72 

•S 2570 IS 

1 in subsection (c)(2) shall not be required to make 

2 any other plan available to the employee. 

3 ‘‘(4) TREATMENT UNDER STATE LAWS.—A 

4 church plan described in subsection (c)(1) which is 

5 certified as meeting the requirements of this section 

6 shall not be deemed to be a multiple employer wel7 fare arrangement or an insurance company or other 

8 insurer, or to be engaged in the business of insur9 ance, for purposes of any State law purporting to 

10 regulate insurance companies or insurance contracts. 

11 ‘‘(c) PLANS TO WHICH SECTION APPLIES.—This sec12 tion shall apply to a health plan which— 

13 ‘‘(1) is a church plan (as defined in section 

14 414(e) of the Internal Revenue Code of 1986) which 

15 has at least 100 participants in the United States; 

16 ‘‘(2) is a multiemployer plan which is main17 tained by a health plan sponsor described in section 

18 3(16)(B)(iii) of the Employee Retirement Income 

19 Security Act of 1974 and which has at least 500 

20 participants in the United States; or 

21 ‘‘(3) is a plan which is maintained by a rural 

22 electric cooperative or a rural telephone cooperative 

23 association and which has at least 500 participants 

24 in the United States.’’. 
73 

•S 2570 IS 

1 (b) CONFORMING AMENDMENTS.—Section 2791(d) 

2 of the Public Health Service Act (42 U.S.C. 300gg–91(d)) 

3 is amended by adding at the end the following: 

4 ‘‘(15) ELIGIBLE EMPLOYEE.—The term ‘eligible 

5 employee’ means, with respect to an employer, an 

6 employee who normally performs on a monthly basis 

7 at least 30 hours of service per week for that em8 ployer. 

9 ‘‘(16) ELIGIBLE INDIVIDUAL.—The term ‘eligi10 ble individual’ means, with respect to an eligible em11 ployee, such employee, and any dependent of such 

12 employee. 

13 ‘‘(17) NAIC.—The term ‘NAIC’ means the Na14 tional Association of Insurance Commissioners. 

15 ‘‘(18) QUALIFIED GROUP HEALTH PLAN.—The 

16 term ‘qualified group health plan’ shall have the 

17 meaning given the term in section 2707.’’. 

18 SEC. 103. AMENDMENT TO THE PUBLIC HEALTH SERVICE 

19 ACT RELATING TO THE INDIVIDUAL MARKET. 

20 The first subpart 3 of part B of title XXVII of the 

21 Public Health Service Act (42 U.S.C. 300gg-51 et seq.) 

22 is amended— 

23 (1) by redesignating such subpart as subpart 2; 

24 and 

25 (2) by adding at the end the following: 
74 

•S 2570 IS 

1 ‘‘SEC. 2753. APPLICABILITY OF GENERAL INSURANCE MAR2 KET REFORMS. 

3 ‘‘The provisions of chapter 2 of subpart 2 of part A 

4 shall apply to health insurance coverage offered by a 

5 health insurance issuer in the individual market in the 

6 same manner as they apply to health insurance coverage 

7 offered by a health insurance issuer in connection with a 

8 group health plan in the small or large group market.’’. 

9 SEC. 104. EFFECTIVE DATE. 

10 The amendments made by this subtitle shall apply 

11 with respect to health insurance coverage offered, sold, 

12 issued, renewed, in effect, or operated on or after January 

13 1, 2005. 

14 CHAPTER 2—TAX PROVISIONS 

15 SEC. 111. ENFORCEMENT WITH RESPECT TO HEALTH IN16 SURANCE ISSUERS. 

17 (a) IN GENERAL.—Chapter 43 of the Internal Rev18 enue Code of 1986 (relating to qualified pension, etc., 

19 plans) is amended by adding at the end the following: 

20 ‘‘SEC. 4980H. FAILURE OF INSURER TO COMPLY WITH CER21 TAIN STANDARDS FOR HEALTH INSURANCE 

22 COVERAGE. 

23 ‘‘(a) IMPOSITION OF TAX.— 

24 ‘‘(1) IN GENERAL.—There is hereby imposed a 

25 tax on the failure of a health insurance issuer to 
75 

•S 2570 IS 

1 comply with the requirements applicable to such 

2 issuer under— 

3 ‘‘(A) chapter 2 of subpart 2 of part A of 

4 title XXVII of the Public Health Service Act; 

5 ‘‘(B) section 2753 of the Public Health 

6 Service Act; and 

7 ‘‘(C) subpart C of part 7 of subtitle B of 

8 title I of the Employee Retirement Income Se9 curity Act of 1974. 

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

11 apply to a failure by a health insurance issuer in a 

12 State if the Secretary of Health and Human Serv13 ices determines that the State has in effect a regu14 latory enforcement mechanism that provides ade15 quate sanctions with respect to such a failure by 

16 such an issuer. 

17 ‘‘(b) AMOUNT OF TAX.— 

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

19 the amount of the tax imposed by subsection (a) 

20 shall be $100 for each day during which such failure 

21 persists for each person to which such failure re22 lates. A rule similar to the rule of section 

23 4980D(b)(3) shall apply for purposes of this section. 

24 ‘‘(2) LIMITATION.—The amount of the tax im25 posed by subsection (a) for a health insurance issuer 
76 

•S 2570 IS 

1 with respect to health insurance coverage shall not 

2 exceed 25 percent of the amounts received under the 

3 coverage for coverage during the period such failure 

4 persists. 

5 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this 

6 section shall be paid by the health insurance issuer. 

7 ‘‘(d) LIMITATIONS ON AMOUNT OF TAX.— 

8 ‘‘(1) TAX NOT TO APPLY TO FAILURES COR9 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

10 by subsection (a) on any failure if— 

11 ‘‘(A) such failure was due to reasonable 

12 cause and not to willful neglect, and 

13 ‘‘(B) such failure is corrected during the 

14 30-day period (or such period as the Secretary 

15 may determine appropriate) beginning on the 

16 first date the health insurance issuer knows, or 

17 exercising reasonable diligence could have 

18 known, that such failure existed. 

19 ‘‘(2) WAIVER BY SECRETARY.—In the case of a 

20 failure which is due to reasonable cause and not to 

21 willful neglect, the Secretary may waive part or all 

22 of the tax imposed by subsection (a) to the extent 

23 that the payment of such tax would be excessive rel24 ative to the failure involved. 
77 

•S 2570 IS 

1 ‘‘(e) DEFINITIONS.—For purposes of this section, the 

2 terms ‘health insurance coverage’ and ‘health insurance 

3 issuer’ have the meanings given such terms in section 

4 2791 of the Public Health Service Act and section 733 

5 of the Employee Retirement Income Security Act of 

6 1974.’’. 

7 (b) CONFORMING AMENDMENT.—The table of sec8 tions for such chapter 43 is amended by adding at the 

9 end the following new item: 

‘‘Sec. 4980H. Failure of insurer to comply with certain standards 

for health insurance coverage.’’. 

10 SEC. 112. ENFORCEMENT WITH RESPECT TO SMALL EM11 PLOYERS. 

12 (a) IN GENERAL.—Chapter 47 of the Internal Rev13 enue Code of 1986 (relating to excise taxes on certain 

14 group health plans) is amended by inserting after section 

15 5000 the following new section: 

16 ‘‘SEC. 5000A. SMALL EMPLOYER REQUIREMENTS. 

17 ‘‘(a) GENERAL RULE.—There is hereby imposed a 

18 tax on the failure of any small employer to comply with 

19 the requirements applicable to such employer under— 

20 ‘‘(1) subchapter C of chapter 2 of subpart 2 of 

21 part A of title XXVII of the Public Health Service 

22 Act; 

23 ‘‘(2) section 2753 of the Public Health Service 

24 Act; and 
78 

•S 2570 IS 

1 ‘‘(3) chapter 2 of subpart C of part 7 of sub2 title B of title I of the Employee Retirement Income 

3 Security Act of 1974. 

4 ‘‘(b) AMOUNT OF TAX.—The amount of tax imposed 

5 by subsection (a) shall be equal to $100 for each day for 

6 each individual for which such a failure occurs. 

7 ‘‘(c) LIMITATION ON TAX.— 

8 ‘‘(1) TAX NOT TO APPLY WHERE FAILURES

9 CORRECTED WITHIN 30 DAYS.—No tax shall be im10 posed by subsection (a) with respect to any failure 

11 if— 

12 ‘‘(A) such failure was due to reasonable 

13 cause and not to willful neglect, and 

14 ‘‘(B) such failure is corrected during the 

15 30-day period (or such period as the Secretary 

16 may determine appropriate) beginning on the 

17 1st date any of the individuals on whom the tax 

18 is imposed knew, or exercising reasonable dili19 gence would have known, that such failure ex20 isted. 

21 ‘‘(2) WAIVER BY SECRETARY.—In the case of a 

22 failure which is due to reasonable cause and not to 

23 willful neglect, the Secretary may waive part or all 

24 of the tax imposed by subsection (a) to the extent 
79 

•S 2570 IS 

1 that the payment of such tax would be excessive rel2 ative to the failure involved.’’. 

3 (b) CONFORMING AMENDMENT.—The table of sec4 tions for such chapter 47 is amended by adding at the 

5 end the following new item: 

‘‘Sec. 5000A. Small employer requirements.’’. 

6 SEC. 113. ENFORCEMENT BY EXCISE TAX ON QUALIFIED AS7 SOCIATIONS. 

8 (a) IN GENERAL.—Chapter 43 of the Internal Rev9 enue Code of 1986 (relating to qualified pension, etc., 

10 plans), as amended by section 111, is amended by adding 

11 at the end the following new section: 

12 ‘‘SEC. 4980I. FAILURE OF QUALIFIED ASSOCIATIONS, ETC., 

13 TO COMPLY WITH CERTAIN STANDARDS FOR 

14 HEALTH INSURANCE COVERAGE. 

15 ‘‘(a) IMPOSITION OF TAX.— 

16 ‘‘(1) IN GENERAL.—There is hereby imposed a 

17 tax on the failure of a qualified association (as de18 fined in section 2709A of the Public Health Service 

19 Act and section 723A of the Employee Retirement 

20 Income Security Act of 1974), church plan (as de21 fined in section 414(e)), multiemployer plan, or plan 

22 maintained by a rural electric cooperative or a rural 

23 telephone cooperative association (within the mean24 ing of section 3(40) of the Employee Retirement In25 come Security Act of 1974) to comply with the re-
80 

•S 2570 IS 

1 quirements applicable to such association or plans 

2 under— 

3 ‘‘(A) subchapter C of chapter 2 of subpart 

4 2 of part A of title XXVII of the Public Health 

5 Service Act; 

6 ‘‘(B) section 2753 of the Public Health 

7 Service Act; and 

8 ‘‘(C) subchapters A and B of chapter 3 of 

9 subpart C of part 7 of the Employee Retire10 ment Income Security Act of 1974. 

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

12 apply to a failure by a qualified association, church 

13 plan, multiemployer plan, or plan maintained by a 

14 rural electric cooperative or a rural telephone coop15 erative association in a State if the Secretary of 

16 Health and Human Services determines that the 

17 State has in effect a regulatory enforcement mecha18 nism that provides adequate sanctions with respect 

19 to such a failure by such a qualified association or 

20 plan. 

21 ‘‘(b) AMOUNT OF TAX.—The amount of the tax im22 posed by subsection (a) shall be $100 for each day during 

23 which such failure persists for each person to which such 

24 failure relates. A rule similar to the rule of section 

25 4980D(b)(3) shall apply for purposes of this section. 
81 

•S 2570 IS 

1 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this 

2 section shall be paid by the qualified association or plan. 

3 ‘‘(d) LIMITATIONS ON AMOUNT OF TAX.— 

4 ‘‘(1) TAX NOT TO APPLY TO FAILURES COR5 RECTED WITHIN 30 DAYS.—No tax shall be imposed 

6 by subsection (a) on any failure if— 

7 ‘‘(A) such failure was due to reasonable 

8 cause and not to willful neglect, and 

9 ‘‘(B) such failure is corrected during the 

10 30-day period (or such period as the Secretary 

11 may determine appropriate) beginning on the 

12 first date the qualified association, church plan, 

13 multiemployer plan, or plan maintained by a 

14 rural electric cooperative or a rural telephone 

15 cooperative association knows, or exercising rea16 sonable diligence could have known, that such 

17 failure existed. 

18 ‘‘(2) WAIVER BY SECRETARY.—In the case of a 

19 failure which is due to reasonable cause and not to 

20 willful neglect, the Secretary may waive part or all 

21 of the tax imposed by subsection (a) to the extent 

22 that the payment of such tax would be excessive rel23 ative to the failure involved.’’. 
82 

•S 2570 IS 

1 (b) CONFORMING AMENDMENT.—The table of sec2 tions for such chapter 43, as amended by section 111, is 

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

‘‘Sec. 4980I. Failure of qualified associations, etc., to comply with 

certain standards for health insurance plans.’’. 

4 Subtitle B—COBRA Portability 

5 Reform 

6 SEC. 121. AMENDMENTS TO COBRA. 

7 (a) AMENDMENTS TO INTERNAL REVENUE CODE OF

8 1986.— 

9 (1) LOWER COST COVERAGE OPTIONS.—Sub10 paragraph (A) of section 4980B(f)(2) of the Internal 

11 Revenue Code of 1986 (relating to continuation cov12 erage requirements of group health plans) is amend13 ed to read as follows: 

14 ‘‘(A) TYPE OF BENEFIT COVERAGE.—The 

15 coverage must consist of coverage which, as of 

16 the time the coverage is being provided— 

17 ‘‘(i) is identical to the coverage pro18 vided under the plan to similarly situated 

19 beneficiaries under the plan with respect to 

20 whom a qualifying event has not occurred, 

21 ‘‘(ii) is so identical, except such cov22 erage is offered with an annual $1,000 de23 ductible, and 
83 

•S 2570 IS 

1 ‘‘(iii) is so identical, except such cov2 erage is offered with an annual $3,000 de3 ductible. 

4 If coverage under the plan is modified for any 

5 group of similarly situated beneficiaries, the 

6 coverage shall also be modified in the same 

7 manner for all individuals who are qualified 

8 beneficiaries under the plan pursuant to this 

9 subsection in connection with such group.’’. 

10 (2) TERMINATION OF COBRA COVERAGE AFTER

11 ELIGIBLE FOR EMPLOYER-BASED COVERAGE FOR 90

12 DAYS.—Clause (iv) of section 4980B(f)(2)(B) of the 

13 Internal Revenue Code of 1986 (relating to period of 

14 coverage) is amended— 

15 (A) by striking ‘‘or’’ at the end of sub16 clause (I); 

17 (B) by redesignating subclause (II) as sub18 clause (III); and 

19 (C) by inserting after subclause (I) the fol20 lowing: 

21 ‘‘(II) eligible for such employer22 based coverage for more than 90 days, 

23 or’’. 

24 (3) INCREASE IN PERIOD OF COVERAGE.— 

25 Clause (i) of section 4980B(f)(2)(B) of the Internal 
84 

•S 2570 IS 

1 Revenue Code of 1986 (relating to period of cov2 erage) is amended by striking ‘‘18 months’’ each 

3 place it appears and inserting ‘‘24 months’’. 

4 (4) CONTINUATION COVERAGE FOR DEPENDENT

5 CHILD.—Clause (i) of section 4980B(f)(2)(B) of the 

6 Internal Revenue Code of 1986 is amended by add7 ing at the end the following: 

8 ‘‘(VI) SPECIAL RULE FOR DE9 PENDENT CHILD.—In the case of a 

10 qualifying event described in para11 graph (3)(E), the date that is 36 

12 months after the date on which the 

13 dependent child of the covered em14 ployee ceases to be a dependent child 

15 under the plan.’’. 

16 (b) AMENDMENTS TO EMPLOYEE RETIREMENT IN17 COME SECURITY ACT OF 1974.— 

18 (1) LOWER COST COVERAGE OPTIONS.—Para19 graph (1) of section 602 of the Employee Retire20 ment Income Security Act of 1974 (29 U.S.C. 

21 1162(1)) (relating to continuation coverage require22 ments of group health plans) is amended to read as 

23 follows: 
85 

•S 2570 IS 

1 ‘‘(1) TYPE OF BENEFIT COVERAGE.—The cov2 erage must consist of coverage which, as of the time 

3 the coverage is being provided— 

4 ‘‘(A) is identical to the coverage provided 

5 under the plan to similarly situated bene6 ficiaries under the plan with respect to whom a 

7 qualifying event has not occurred, 

8 ‘‘(B) is so identical, except such coverage 

9 is offered with an annual $1,000 deductible, 

10 and 

11 ‘‘(C) is so identical, except such coverage is 

12 offered with an annual $3,000 deductible. 

13 If coverage under the plan is modified for any group 

14 of similarly situated beneficiaries, the coverage shall 

15 also be modified in the same manner for all individ16 uals who are qualified beneficiaries under the plan 

17 pursuant to this subsection in connection with such 

18 group.’’. 

19 (2) TERMINATION OF COBRA COVERAGE AFTER

20 ELIGIBLE FOR EMPLOYER-BASED COVERAGE FOR 90

21 DAYS.—Subparagraph (D) of section 602(2) of the 

22 Employee Retirement Income Security Act of 1974 

23 (29 U.S.C. 1162(2)(D)) (relating to period of cov24 erage) is amended— 
86 

•S 2570 IS 

1 (A) by striking ‘‘or’’ at the end of clause 

2 (i); 

3 (B) by redesignating clause (ii) as clause 

4 (iii); and 

5 (C) by inserting after clause (i) the fol6 lowing: 

7 ‘‘(ii) eligible for such employer-based 

8 coverage for more than 90 days, or’’. 

9 (3) INCREASE OF PERIOD OF COVERAGE.—Sub10 paragraph (A) of section 602(2) of the Employee 

11 Retirement Income Security Act of 1974 (29 U.S.C. 

12 1162(2)(A)) (relating to period of coverage) is 

13 amended by striking ‘‘18 months’’ each place it ap14 pears and inserting ‘‘24 months’’. 

15 (4) CONTINUATION COVERAGE FOR DEPENDENT

16 CHILD.—Subparagraph (A) of section 602(2) of the 

17 Employee Retirement Income Security Act of 1974 

18 (29 U.S.C. 1162(2)(A)) is amended by adding at the 

19 end the following: 

20 ‘‘(vi) SPECIAL RULE FOR DEPENDENT

21 CHILD.—In the case of a qualifying event 

22 described in section 603(5), the date that 

23 is 36 months after the date on which the 

24 dependent child of the covered employee 
87 

•S 2570 IS 

1 ceases to be a dependent child under the 

2 plan.’’. 

3 (c) AMENDMENTS TO PUBLIC HEALTH SERVICE

4 ACT.— 

5 (1) LOWER COST COVERAGE OPTIONS.—Para6 graph (1) of section 2202 of the Public Health Serv7 ice Act (42 U.S.C. 300bb-2(1)) (relating to continu8 ation coverage requirements of group health plans) 

9 is amended to read as follows: 

10 ‘‘(1) TYPE OF BENEFIT COVERAGE.—The cov11 erage must consist of coverage which, as of the time 

12 the coverage is being provided— 

13 ‘‘(A) is identical to the coverage provided 

14 under the plan to similarly situated bene15 ficiaries under the plan with respect to whom a 

16 qualifying event has not occurred, 

17 ‘‘(B) is so identical, except such coverage 

18 is offered with an annual $1,000 deductible, 

19 and 

20 ‘‘(C) is so identical, except such coverage is 

21 offered with an annual $3,000 deductible. 

22 If coverage under the plan is modified for any group 

23 of similarly situated beneficiaries, the coverage shall 

24 also be modified in the same manner for all individ25 uals who are qualified beneficiaries under the plan 
88 

•S 2570 IS 

1 pursuant to this subsection in connection with such 

2 group.’’. 

3 (2) TERMINATION OF COBRA COVERAGE AFTER

4 ELIGIBLE FOR EMPLOYER-BASED COVERAGE FOR 90

5 DAYS.—Subparagraph (D) of section 2202(2) of the 

6 Public Health Service Act (42 U.S.C. 300bb7 2(2)(D)) (relating to period of coverage) is amend8 ed— 

9 (A) by striking ‘‘or’’ at the end of clause 

10 (i); 

11 (B) by redesignating clause (ii) as clause 

12 (iii); and 

13 (C) by inserting after clause (i) the fol14 lowing: 

15 ‘‘(ii) eligible for such employer-based 

16 coverage for more than 90 days, or’’. 

17 (3) INCREASE OF PERIOD OF COVERAGE.—Sub18 paragraph (A) of section 2202(2) of the Public 

19 Health Service Act (42 U.S.C. 300bb-2(2)(A)) (re20 lating to period of coverage) is amended by striking 

21 ‘‘18 months’’ each place it appears and inserting 

22 ‘‘24 months’’. 

23 (4) CONTINUATION COVERAGE FOR DEPENDENT

24 CHILD.—Subparagraph (A) of section 2202(2) of the 

25 Public Health Service Act (42 U.S.C. 300bb- 
89 

•S 2570 IS 

1 2(2)(A)) is amended by adding at the end the fol2 lowing: 

3 ‘‘(v) SPECIAL RULE FOR DEPENDENT

4 CHILD.—In the case of a qualifying event 

5 described in section 2203(5), the date that 

6 is 36 months after the date on which the 

7 dependent child of the covered employee 

8 ceases to be a dependent child under the 

9 plan.’’. 

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

11 this section shall apply to qualifying events occurring after 

12 the date of the enactment of this Act. 

13 Subtitle C—Providing Coverage for 

14 Young Adults 

15 SEC. 131. GRANTS FOR YOUNG ADULTS HEALTH INSUR16 ANCE COVERAGE. 

17 (a) IN GENERAL.—The Secretary of Health and 

18 Human Services (referred to in this section as the ‘‘Sec19 retary’’) shall award grants to State for the establishment 

20 and demonstration of programs to provide incentives to 

21 eligible young adults for the acquisition of health insur22 ance coverage. 

23 (b) APPLICATION.—To be eligible to receive a grant 

24 under subsection (a) a State shall prepare and submit to 

25 the Secretary an application at such time, in such manner, 
90 

•S 2570 IS 

1 and containing such information as the Secretary may re2 quire, including a description of the program to be carried 

3 out by the State with amounts received under the grant. 

4 (c) USE OF FUNDS.—A State shall use amounts re5 ceived under a grant under this section to carry out pro6 gram to provide financial incentives to full-time or part7 time college students, recent college graduates, and other 

8 young adults (as defined by the State program) without 

9 health insurance coverage to enable such individuals to 

10 purchase such coverage. 

11 (d) REQUIREMENT.—A State shall carry out a pro12 gram under this section through an existing State pro13 gram such as a State high risk pool. 

14 (e) TERMINATION OF INCENTIVE.—A State shall en15 sure that under the program established by the State 

16 under this section, the incentive provided to an individual 

17 shall terminate upon the individual being provided with 

18 the opportunity to purchase health insurance coverage 

19 through an employer. 

20 (f) AUTHORIZATION OF APPROPRIATIONS.—There is 

21 authorized to be appropriated to carry out this section, 

22 $4,000,000,000 for fiscal year 2005, and such sums as 

23 may be necessary for each fiscal year thereafter. 
91 

•S 2570 IS 

1 Subtitle D—Low Income Coverage 

2 Outreach Program 

3 SEC. 141. LOW INCOME COVERAGE OUTREACH PROGRAM. 

4 (a) ESTABLISHMENT.—The Secretary of Health and 

5 Human Services, in conjunction with the Secretary of Ag6 riculture, the Administrator of the Social Security Admin7 istration, and other appropriate Federal officials, shall es8 tablish a program to provide outreach to improve the 

9 public’s knowledge concerning— 

10 (1) health insurance coverage and health serv11 ices available through Federal programs; and 

12 (2) the public health benefits of health insur13 ance coverage, including the advantages of receiving 

14 preventive and wellness items and services. 

15 (b) TARGET POPULATIONS.—Outreach efforts under 

16 the program under subsection (a) shall be targeted at pop17 ulations who may be eligible for assistance under pro18 grams described in subsection (a), as determined by the 

19 Federal officials involved in administering the outreach 

20 program, including recent immigrants and migrant and 

21 seasonal farmworkers. 

22 (c) CULTURALLY APPROPRIATE MESSAGE.—Infor23 mational and other materials provided through the pro24 gram established under subsection (a), shall be designed 

25 in a culturally appropriate manner. 
92 

•S 2570 IS 

1 TITLE II—EXPANSION OF THE 

2 STATE CHILDREN’S HEALTH 

3 INSURANCE PROGRAM AND 

4 FAMILY COVERAGE 

5 SEC. 201. INCREASE IN INCOME ELIGIBILITY. 

6 (a) DEFINITION OF LOW-INCOME CHILD.—Section 

7 2110(c)(4) of the Social Security Act (42 U.S.C. 42 

8 U.S.C. 1397jj(c)(4)) is amended by striking ‘‘200’’ and 

9 inserting ‘‘235’’. 

10 (b) EFFECTIVE DATE.—The amendment made by 

11 subsection (a) takes effect on October 1, 2004. 

12 SEC. 202. STATE OPTION TO EXPAND COVERAGE TO PAR13 ENTS AND PREGNANT WOMEN. 

14 (a) IN GENERAL.—Title XXI of the Social Security 

15 Act (42 U.S.C. 1397aa et seq.) is amended by adding at 

16 the end the following: 

17 ‘‘SEC. 2111. OPTIONAL COVERAGE OF PARENTS OF TAR18 GETED LOW-INCOME CHILDREN AND PREG19 NANT WOMEN. 

20 ‘‘(a) OPTIONAL COVERAGE.—Notwithstanding any 

21 other provision of this title, a State may provide for cov22 erage, through an amendment to its State child health 

23 plan under section 2102, of parent health assistance for 

24 targeted low-income parents, health care assistance for 
93 

•S 2570 IS 

1 targeted low-income pregnant women, or both, in accord2 ance with this section. 

3 ‘‘(b) DEFINITIONS.—For purposes of this title: 

4 ‘‘(1) PARENT HEALTH ASSISTANCE.—The term 

5 ‘parent health assistance’ has the meaning given the 

6 term child health assistance in section 2110(a) as if 

7 any reference to targeted low-income children were 

8 a reference to targeted low-income parents. 

9 ‘‘(2) PARENT.—The term ‘parent’ has the 

10 meaning given the term ‘caretaker relative’ for pur11 poses of carrying out section 1931. 

12 ‘‘(3) HEALTH CARE ASSISTANCE FOR PREG13 NANT WOMEN.—The term ‘health care assistance for 

14 pregnant women’ has the meaning given the term 

15 child health assistance in section 2110(a) as if any 

16 reference to targeted low-income children were a ref17 erence to targeted low-income pregnant women. 

18 ‘‘(4) TARGETED LOW-INCOME PARENT.—The 

19 term ‘targeted low-income parent’ has the meaning 

20 given the term targeted low-income child in section 

21 2110(b) as if the reference to a child were deemed 

22 a reference to a parent (as defined in paragraph (3)) 

23 of the child; except that in applying such section— 

24 ‘‘(A) there shall be substituted for the in25 come level described in paragraph (1)(B)(ii)(I) 
94 

•S 2570 IS 

1 the applicable income level in effect for a tar2 geted low-income child; 

3 ‘‘(B) in paragraph (3), January 1, 2005, 

4 shall be substituted for July 1, 1997; and 

5 ‘‘(C) in paragraph (4), January 1, 2005, 

6 shall be substituted for March 31, 1997. 

7 ‘‘(5) TARGETED LOW-INCOME PREGNANT

8 WOMAN.—The term ‘targeted low-income pregnant 

9 woman’ has the meaning given the term targeted 

10 low-income child in section 2110(b) as if any ref11 erence to a child were a reference to a woman dur12 ing pregnancy and through the end of the month in 

13 which the 60-day period beginning on the last day 

14 of her pregnancy ends; except that in applying such 

15 section— 

16 ‘‘(A) there shall be substituted for the in17 come level described in paragraph (1)(B)(ii)(I) 

18 the applicable income level in effect for a tar19 geted low-income child; 

20 ‘‘(B) in paragraph (3), January 1, 2005, 

21 shall be substituted for July 1, 1997; and 

22 ‘‘(C) in paragraph (4), January 1, 2005, 

23 shall be substituted for March 31, 1997. 

24 ‘‘(c) REFERENCES TO TERMS AND SPECIAL

25 RULES.—In the case of, and with respect to, a State pro-
95 

•S 2570 IS 

1 viding for coverage of parent health assistance to targeted 

2 low-income parents or health care assistance to targeted 

3 low-income pregnant women under subsection (a), the fol4 lowing special rules apply: 

5 ‘‘(1) Any reference in this title (other than in 

6 subsection (b)) to a targeted low-income child is 

7 deemed to include a reference to a targeted low-in8 come parent or a targeted low-income pregnant 

9 woman (as applicable). 

10 ‘‘(2) Any such reference to child health assist11 ance— 

12 ‘‘(A) with respect to such parents is 

13 deemed a reference to parent health assistance; 

14 and 

15 ‘‘(B) with respect to such pregnant women, 

16 is deemed a reference to health care assistance 

17 for pregnant women. 

18 ‘‘(3) In applying section 2103(e)(3)(B) in the 

19 case of a family (consisting of a parent and one or 

20 more children) provided coverage under this section 

21 or a pregnant woman provided coverage under this 

22 section without covering other family members, the 

23 limitation on total annual aggregate cost-sharing 

24 shall be applied to such entire family or such preg25 nant woman, respectively. 
96 

•S 2570 IS 

1 ‘‘(4) In applying section 2110(b)(4), any ref2 erence to ‘section 1902(l)(2) or 1905(n)(2) (as se3 lected by a State)’ is deemed a reference to the ef4 fective income level applicable to parents under sec5 tion 1931 or under a waiver approved under section 

6 1115, or, in the case of a pregnant woman, the in7 come level established under section 1902(l)(2)(A). 

8 ‘‘(5) In applying section 2102(b)(3)(B), any 

9 reference to children found through screening to be 

10 eligible for medical assistance under the State med11 icaid plan under title XIX is deemed a reference to 

12 parents and pregnant women.’’. 

13 (b) EFFECTIVE DATE.—The amendments made by 

14 this subsection apply to items and services furnished on 

15 or after October 1, 2004, whether or not regulations im16 plementing such amendments have been issued. 

17 TITLE III—MEDICARE PROGRAM 

18 INTEGRITY ACTIVITIES 

19 SEC. 301. INCREASED FUNDING FOR THE MEDICARE INTEG20 RITY PROGRAM. 

21 Section 1817(k)(4)(B) of the Social Security Act (42 

22 U.S.C. 1395i(k)(4)(B)) is amended by striking clause (vii) 

23 and inserting the following: 

24 ‘‘(vi) For each of fiscal years 2002, 

25 2003, and 2004, such amount shall be not 
97 

•S 2570 IS 

1 less than $710,000,000 and not more than 

2 $720,000,000. 

3 ‘‘(vii) For fiscal year 2005, such 

4 amount shall be not less than 

5 $760,000,000 and not more than 

6 $770,000,000. 

7 ‘‘(viii) For fiscal year 2006, such 

8 amount shall be not less than 

9 $810,000,000 and not more than 

10 $820,000,000. 

11 ‘‘(ix) For fiscal year 2007, such 

12 amount shall be not less than 

13 $860,000,000 and not more than 

14 $870,000,000. 

15 ‘‘(x) For fiscal year 2008, such 

16 amount shall be not less than 

17 $920,000,000 and not more than 

18 $930,000,000. 

19 ‘‘(xi) For each fiscal year after fiscal 

20 year 2008, such amount shall be not less 

21 than $990,000,000 and not more than 

22 $1,000,000,000.’’. 

23
98 

•S 2570 IS 

1 TITLE IV—REDUCING MEDICAL 

2 ERRORS AND INCREASING 

3 THE USE OF MEDICAL TECH4 NOLOGY 

5 SEC. 401. MEDICAL ERRORS REDUCTION. 

6 Title IX of the Public Health Service Act (42 U.S.C. 

7 299 et seq.) is amended— 

8 (1) by redesignating part C as part D; 

9 (2) by redesignating sections 921 through 928, 

10 as sections 931 through 938, respectively; 

11 (3) in section 938(1) (as so redesignated), by 

12 striking ‘‘921’’ and inserting ‘‘931’’; and 

13 (4) by inserting after part B the following: 

14 ‘‘PART C—REDUCING ERRORS IN HEALTH CARE 

15 ‘‘SEC. 921. DEFINITIONS. 

16 ‘‘In this part: 

17 ‘‘(1) ADVERSE EVENT.—The term ‘adverse 

18 event’ means an injury resulting from medical man19 agement rather than the underlying condition of the 

20 patient. 

21 ‘‘(2) ERROR.—The term ‘error’ means the fail22 ure of a planned action to be completed as intended 

23 or the use of a wrong plan to achieve the desired 

24 outcome. 
99 

•S 2570 IS 

1 ‘‘(3) HEALTH CARE PROVIDER.—The term 

2 ‘health care provider’ means an individual or entity 

3 that provides medical services and is a participant in 

4 a demonstration program under this part. 

5 ‘‘(4) HEALTH CARE-RELATED ERROR.—The 

6 term ‘‘health care-related error’’ means a prevent7 able adverse event related to a health care interven8 tion or a failure to intervene appropriately. 

9 ‘‘(5) MEDICATION-RELATED ERROR.—The term 

10 ‘medication-related error’ means a preventable ad11 verse event related to the administration of a medi12 cation. 

13 ‘‘(6) SAFETY.—The term ‘safety’ with respect 

14 to an individual means that such individual has a 

15 right to be free from preventable serious injury. 

16 ‘‘(7) SENTINEL EVENT.—The term ‘sentinel 

17 event’ means an unexpected occurrence involving an 

18 individual that results in death or serious physical 

19 injury that is unrelated to the natural course of the 

20 individual’s illness or underlying condition. 

21 ‘‘SEC. 922. ESTABLISHMENT OF STATE-BASED MEDICAL 

22 ERROR REPORTING SYSTEMS. 

23 ‘‘(a) IN GENERAL.—The Secretary shall make grants 

24 available to States to enable such States to establish re-
100 

•S 2570 IS 

1 porting systems designed to reduce medical errors and im2 prove health care quality. 

3 ‘‘(b) REQUIREMENT.— 

4 ‘‘(1) IN GENERAL.—To be eligible to receive a 

5 grant under subsection (a), the State involved shall 

6 provide assurances to the Secretary that amounts re7 ceived under the grant will be used to establish and 

8 implement a medical error reporting system using 

9 guidelines (including guidelines relating to the con10 fidentiality of the reporting system) developed by the 

11 Agency for Healthcare Research and Quality with 

12 input from interested, non-governmental parties in13 cluding patient, consumer and health care provider 

14 groups. 

15 ‘‘(2) GUIDELINES.—Not later than 90 days 

16 after the date of enactment of this part, the Agency 

17 for Healthcare Research and Quality shall develop 

18 and publish the guidelines described in paragraph 

19 (1). 

20 ‘‘(c) DATA.— 

21 ‘‘(1) AVAILABILITY.—A State that receives a 

22 grant under subsection (a) shall make the data pro23 vided to the medical error reporting system involved 

24 available only to the Agency for Healthcare Research 
101 

•S 2570 IS 

1 and Quality and may not otherwise disclose such in2 formation. 

3 ‘‘(2) CONFIDENTIALITY.—Nothing in this part 

4 shall be construed to supersede any State law that 

5 is inconsistent with this part. 

6 ‘‘(d) APPLICATION.—To be eligible for a grant under 

7 this section, a State shall prepare and submit to the Sec8 retary an application at such time, in such manner and 

9 containing, such information as the Secretary shall re10 quire. 

11 ‘‘SEC. 923. DEMONSTRATION PROJECTS TO REDUCE MED12 ICAL ERRORS, IMPROVE PATIENT SAFETY, 

13 AND EVALUATE REPORTING. 

14 ‘‘(a) ESTABLISHMENT.—The Secretary, acting 

15 through the Director of the Agency for Healthcare Re16 search and Quality and in conjunction with the Adminis17 trator of the Health Care Financing Administration, may 

18 establish a program under which funding will be provided 

19 for not less than 15 demonstration projects, to be competi20 tively awarded, in health care facilities and organizations 

21 in geographically diverse locations, including rural and 

22 urban areas (as determined by the Secretary), to deter23 mine the causes of medical errors and to— 

24 ‘‘(1) use technology, staff training, and other 

25 methods to reduce such errors; 
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1 ‘‘(2) develop replicable models that minimize 

2 the frequency and severity of medical errors; 

3 ‘‘(3) develop mechanisms that encourage report4 ing, prompt review, and corrective action with re5 spect to medical errors; and 

6 ‘‘(4) develop methods to minimize any addi7 tional paperwork burden on health care profes8 sionals. 

9 ‘‘(b) ACTIVITIES.— 

10 ‘‘(1) IN GENERAL.—A health care provider par11 ticipating in a demonstration project under sub12 section (a) shall— 

13 ‘‘(A) utilize all available and appropriate 

14 technologies to reduce the probability of future 

15 medical errors; and 

16 ‘‘(B) carry out other activities consistent 

17 with subsection (a). 

18 ‘‘(2) REPORTING TO PATIENTS.—In carrying 

19 out this section, the Secretary shall ensure that— 

20 ‘‘(A) 5 of the demonstration projects per21 mit the voluntary reporting by participating 

22 health care providers of any adverse events, 

23 sentinel events, health care-related errors, or 

24 medication-related errors to the Secretary; 
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1 ‘‘(B) 5 of the demonstration projects re2 quire participating health care providers to re3 port any adverse events, sentinel events, health 

4 care-related errors, or medication-related errors 

5 to the Secretary; and 

6 ‘‘(C) 5 of the demonstration projects re7 quire participating health care providers to re8 port any adverse events, sentinel events, health 

9 care-related errors, or medication-related errors 

10 to the Secretary and to the patient involved and 

11 a family member or guardian of the patient. 

12 ‘‘(3) CONFIDENTIALITY.— 

13 ‘‘(A) IN GENERAL.—The Secretary and the 

14 participating grantee organization shall ensure 

15 that information reported under this section re16 mains confidential. 

17 ‘‘(B) USE.—The Secretary may use the in18 formation reported under this section only for 

19 the purpose of evaluating the ability to reduce 

20 errors in the delivery of care. Such information 

21 shall not be used for enforcement purposes. 

22 ‘‘(C) DISCLOSURE.—The Secretary may 

23 not disclose the information reported under this 

24 section. 
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1 ‘‘(D) NONADMISSIBILITY.—Information re2 ported under this section shall be privileged, 

3 confidential, shall not be admissible as evidence 

4 or discoverable in any civil or criminal action or 

5 proceeding or subject to disclosure, and shall 

6 not be subject to the Freedom of Information 

7 Act (5 U.S.C. App). This paragraph shall apply 

8 to all information maintained by the reporting 

9 entity and the entities who receive such reports. 

10 ‘‘(c) USE OF TECHNOLOGIES.—The Secretary shall 

11 encourage, as part of the demonstration projects con12 ducted under subsection (a), the use of appropriate tech13 nologies to reduce medical errors, such as hand-held elec14 tronic prescription pads, training simulators for medical 

15 education, and bar-coding of prescription drugs and pa16 tient bracelets. 

17 ‘‘(d) DATABASE.—The Secretary shall provide for the 

18 establishment and operation of a national database of 

19 medical errors to be used as provided for by the Secretary. 

20 The information provided to the Secretary under sub21 section (b)(2) shall be contained in the database. 

22 ‘‘(e) EVALUATION.—The Secretary shall evaluate the 

23 progress of each demonstration project established under 

24 this section in reducing the incidence of medical errors and 
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1 submit the results of such evaluations as part of the re2 ports under section 926(b). 

3 ‘‘(f) REPORTING.—Prior to October 1, of the third 

4 fiscal year for which funds are made available under this 

5 section, the Secretary shall prepare and submit to the ap6 propriate committees of Congress an interim report con7 cerning the results of such demonstration projects. 

8 ‘‘SEC. 924. PATIENT SAFETY IMPROVEMENT. 

9 ‘‘(a) IN GENERAL.—The Secretary shall provide in10 formation to educate patients and family members about 

11 their role in reducing medical errors. Such information 

12 shall be provided to all individuals who participate in Fed13 erally-funded health care programs. 

14 ‘‘(b) DEVELOPMENT OF PROGRAMS.—The Secretary 

15 shall develop programs that encourage patients to take a 

16 more active role in their medical treatment, including en17 couraging patients to provide information to health care 

18 providers concerning pre-existing conditions and medica19 tions. 

20 ‘‘SEC. 925. PRIVATE, NONPROFIT EFFORTS TO REDUCE 

21 MEDICAL ERRORS. 

22 ‘‘(a) IN GENERAL.—The Secretary shall make grants 

23 to health professional associations and other organizations 

24 to provide training in ways to reduce medical errors, in-
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1 cluding curriculum development, technology training, and 

2 continuing medical education. 

3 ‘‘(b) APPLICATION.—To be eligible for a grant under 

4 this section, an entity shall prepare and submit to the Sec5 retary an application at such time, in such manner and 

6 containing, such information as the Secretary shall re7 quire. 

8 ‘‘SEC. 926. REPORT TO CONGRESS. 

9 ‘‘(a) INITIAL REPORT.—Not later than 180 days 

10 after the date of enactment of this part, the Secretary 

11 shall prepare and submit to the appropriate committees 

12 of Congress a report concerning the costs associated with 

13 implementing a program that identifies factors that con14 tribute to errors and which includes upgrading the health 

15 care computer systems and other technologies in the 

16 United States in order to reduce medical errors, including 

17 computerizing hospital systems for the coordination of 

18 prescription drugs and handling of laboratory specimens, 

19 and contains recommendations on ways in which to reduce 

20 those factors. 

21 ‘‘(b) OTHER REPORTS.—Not later than 180 days 

22 after the completion of all demonstration projects under 

23 section 923, the Secretary shall prepare and submit to the 

24 appropriate committees of Congress a report concerning— 
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1 ‘‘(1) how successful each demonstration project 

2 was in reducing medical errors; 

3 ‘‘(2) the data submitted by States under section 

4 922(c); 

5 ‘‘(3) the best methods for reducing medical er6 rors; 

7 ‘‘(4) the costs associated with applying such 

8 best methods on a nationwide basis; and 

9 ‘‘(5) the manner in which other Federal agen10 cies can share information on best practices in order 

11 to reduce medical errors in all Federal health care 

12 programs. 

13 ‘‘SEC. 927. AUTHORIZATION OF APPROPRIATIONS. 

14 ‘‘There is authorized to be appropriated such sums 

15 as may be necessary to carry out this part.’’. 

16 SEC. 402. ENHANCING INVESTMENT IN COST-EFFECTIVE 

17 METHODS OF HEALTH CARE. 

18 (a) IN GENERAL.—Subchapter A of chapter 98 of the 

19 Internal Revenue Code of 1986 (relating to trust fund 

20 code) is amended by adding at the end the following: 

21 ‘‘SEC. 9511. TRUST FUND FOR MEDICAL TREATMENT OUT22 COMES RESEARCH. 

23 ‘‘(a) CREATION OF TRUST FUND.—There is estab24 lished in the Treasury of the United States a trust fund 

25 to be known as the ‘Trust Fund for Medical Treatment 
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1 Outcomes Research’ (referred to in this section as the 

2 ‘Trust Fund’), consisting of such amounts as may be ap3 propriated or credited to the Trust Fund as provided in 

4 this section or section 9602(b). 

5 ‘‘(b) TRANSFERS TO TRUST FUND.—There is hereby 

6 appropriated to the Trust Fund an amount equivalent to 

7 the taxes received in the Treasury under section 4491 (re8 lating to tax on health insurance policies). 

9 ‘‘(c) DISTRIBUTION OF AMOUNTS IN TRUST FUND.— 

10 On an annual basis and without further appropriation the 

11 Secretary shall distribute the amounts in the Trust Fund 

12 to the Secretary of Health and Human Services for use 

13 by the Agency for Healthcare Research and Quality. Such 

14 amounts shall be available to pay for research activities 

15 related to medical treatment outcomes and shall be in ad16 dition to any other amounts appropriated for such pur17 poses.’’. 

18 (b) CONFORMING AMENDMENT.—The table of sec19 tions for subchapter A of chapter 98 of such Code is 

20 amended by adding at the end the following: 

‘‘Sec. 9511. Trust Fund for Medical Treatment Outcomes Research.’’. 

21 SEC. 403. INCREASING THE USE OF MEDICAL TECHNOLOGY 

22 The Secretary of Health and Human Services shall— 
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1 (1) provide grants and contracts to enhance the 

2 development of information technology standards by 

3 the private sector; 

4 (2) carry out activities to examine how the use 

5 of information technology can be encouraged; and 

6 (3) coordinate information technology-related 

7 activities taken by the Federal Government and en8 sure that such activities will further national health 

9 information and infrastructure. 

10 TITLE V—IMPROVING HEALTH 

11 CARE QUALITY, EFFICIENCY, 

12 AND CONSUMER EDUCATION 

13 SEC. 501. GRANTS FOR DEMONSTRATION PROJECTS. 

14 (a) IN GENERAL.—The Secretary of Health and 

15 Human Services (referred to in this section as the ‘‘Sec16 retary’’) shall award grants to eligible entities for the es17 tablishment of demonstration projects to educate the pub18 lic concerning their health care choices. 

19 (b) ELIGIBILITY.—To be eligible to receive a grant 

20 under subsection (a), an entity shall be a public or non21 profit private entity and prepare and submit to the Sec22 retary an application at such time, in such manner, and 

23 containing such information as the Secretary may require. 

24 (c) USE OF FUNDS.—An entity shall use amounts re25 ceived under a grant under this section to conduct activi-
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1 ties to provide educational materials to individuals to in2 form such individuals about— 

3 (1) health care choices; 

4 (2) health care costs; 

5 (3) health care quality control; and 

6 (4) other matter determined appropriate by the 

7 Secretary. 

8 (d) PUBLIC SERVICE ANNOUNCEMENTS.— the Sec9 retary shall provide for the development of public service 

10 announcements to educate the public about their health 

11 care choices. 

12 (e) ADVANCE DIRECTIVES.—In carrying out this sec13 tion, the Secretary shall develop ways to improve the effec14 tiveness and portability of advance directives and living 

15 wills. 

16 (f) AUTHORIZATION OF APPROPRIATIONS.—There is 

17 authorized to be appropriated, such sums as may be nec18 essary to carry out this section. 
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1 TITLE VI—PRIMARY AND 

2 PREVENTIVE CARE PROVIDERS 

3 SEC. 601. INCREASED MEDICARE REIMBURSEMENT FOR 

4 PHYSICIAN ASSISTANTS, NURSE PRACTI5 TIONERS, AND CLINICAL NURSE SPECIAL6 ISTS. 

7 (a) FEE SCHEDULE AMOUNT.—Section 

8 1833(a)(1)(O) of the Social Security Act (42 U.S.C. 

9 1395l(a)(1)(O)) is amended by striking ‘‘85 percent’’ and 

10 inserting ‘‘90 percent’’ each place it appears. 

11 (b) TECHNICAL AMENDMENT.—Section 

12 1833(a)(1)(O) of the Social Security Act (42 U.S.C. 

13 1395l(a)(1)(O)) is amended by striking ‘‘clinic’’ and in14 serting ‘‘clinical’’. 

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

16 this section shall apply to items and services furnished on 

17 and after January 1, 2005. 

18 SEC. 602. REQUIRING COVERAGE OF CERTAIN NONPHYSI19 CIAN PROVIDERS UNDER THE MEDICAID 

20 PROGRAM. 

21 (a) IN GENERAL.—Section 1905(a) of the Social Se22 curity Act (42 U.S.C. 1396d(a)), as amended by section 

23 301(c)(1), is amended— 

24 (1) in paragraph (27), by striking ‘‘and’’ at the 

25 end; 
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1 (2) by redesignating paragraph (28) as para2 graph (29); and 

3 (3) by inserting after paragraph (27) the fol4 lowing: 

5 ‘‘(28) services furnished by a physician assist6 ant, nurse practitioner, clinical nurse specialist (as 

7 defined in section 1861(aa)(5)), or certified reg8 istered nurse anesthetist (as defined in section 

9 1861(bb)(2)); and’’. 

10 (b) CONFORMING AMENDMENT.—Section 

11 1902(a)(10)(C)(iv) of the Social Security Act (42 U.S.C. 

12 1396a(a)(10)(C)(iv)), as amended by section 301(c)(3), is 

13 amended by striking ‘‘and (27)’’ and inserting ‘‘, (27), and 

14 (28)’’. 

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

16 this section shall apply to medical assistance furnished 

17 under title XIX of the Social Security Act (42 U.S.C. 

18 1396 et seq.) beginning with the first fiscal year quarter 

19 that begins after the date of enactment of this Act. 

20 SEC. 603. MEDICAL STUDENT TUTORIAL PROGRAM 

21 GRANTS. 

22 Part C of title VII of the Public Health Service Act 

23 (42 U.S.C. 293j et seq.) is amended by adding at the end 

24 the following: 
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1 ‘‘SEC. 749. MEDICAL STUDENT TUTORIAL PROGRAM 

2 GRANTS. 

3 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab4 lish a program to award grants to eligible schools of medi5 cine or osteopathic medicine to enable such schools to pro6 vide medical students for tutorial programs or as partici7 pants in clinics designed to interest high school or college 

8 students in careers in general medical practice. 

9 ‘‘(b) APPLICATION.—To be eligible to receive a grant 

10 under this section, a school of medicine or osteopathic 

11 medicine shall prepare and submit to the Secretary an ap12 plication at such time, in such manner, and containing 

13 such information as the Secretary may require, including 

14 assurances that the school will use amounts received under 

15 the grant in accordance with subsection (c). 

16 ‘‘(c) USE OF FUNDS.— 

17 ‘‘(1) IN GENERAL.—Amounts received under a 

18 grant awarded under this section shall be used to— 

19 ‘‘(A) fund programs under which students 

20 of the grantee are provided as tutors for high 

21 school and college students in the areas of 

22 mathematics, science, health promotion and 

23 prevention, first aid, nutrition and prenatal 

24 care; 

25 ‘‘(B) fund programs under which students 

26 of the grantee are provided as participants in 
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1 clinics and seminars in the areas described in 

2 paragraph (1); and 

3 ‘‘(C) conduct summer institutes for high 

4 school and college students to promote careers 

5 in medicine. 

6 ‘‘(2) DESIGN OF PROGRAMS.—The programs, 

7 institutes, and other activities conducted by grantees 

8 under paragraph (1) shall be designed to— 

9 ‘‘(A) give medical students desiring to 

10 practice general medicine access to the local 

11 community; 

12 ‘‘(B) provide information to high school 

13 and college students concerning medical school 

14 and the general practice of medicine; and 

15 ‘‘(C) promote careers in general medicine. 

16 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There 

17 are authorized to be appropriated to carry out this section, 

18 $5,000,000 for fiscal year 2005, and such sums as may 

19 be necessary for fiscal year 2006.’’. 

20 SEC. 604. GENERAL MEDICAL PRACTICE GRANTS. 

21 Part C of title VII of the Public Health Service Act 

22 (as amended by section 703) is further amended by adding 

23 at the end the following: 
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1 ‘‘SEC. 749A. GENERAL MEDICAL PRACTICE GRANTS. 

2 ‘‘(a) ESTABLISHMENT.—The Secretary shall estab3 lish a program to award grants to eligible public or private 

4 nonprofit schools of medicine or osteopathic medicine, hos5 pitals, residency programs in family medicine or pediat6 rics, or to a consortium of such entities, to enable such 

7 entities to develop effective strategies for recruiting med8 ical students interested in the practice of general medicine 

9 and placing such students into general practice positions 

10 upon graduation. 

11 ‘‘(b) APPLICATION.—To be eligible to receive a grant 

12 under this section, an entity of the type described in sub13 section (a) shall prepare and submit to the Secretary an 

14 application at such time, in such manner, and containing 

15 such information as the Secretary may require, including 

16 assurances that the entity will use amounts received under 

17 the grant in accordance with subsection (c). 

18 ‘‘(c) USE OF FUNDS.—Amounts received under a 

19 grant awarded under this section shall be used to fund 

20 programs under which effective strategies are developed 

21 and implemented for recruiting medical students inter22 ested in the practice of general medicine and placing such 

23 students into general practice positions upon graduation. 

24 ‘‘(d) AUTHORIZATION OF APPROPRIATIONS.—There 

25 are authorized to be appropriated to carry out this section, 

26 $25,000,000 for each of the fiscal years 2005 through 
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1 2007, and such sums as may be necessary for fiscal years 

2 thereafter.’’. 

Æ