II 

Calendar No. 539 

108TH CONGRESS 

2D SESSION H. R. 4279 

IN THE SENATE OF THE UNITED STATES 

MAY 17, 2004 

Received 

MAY 20, 2004 

Read the first time 

MAY 21, 2004 

Read the second time and placed on the calendar 

AN ACT 

To amend the Internal Revenue Code of 1986 to provide 

for the disposition of unused health benefits in cafeteria 

plans and flexible spending arrangements, to improve 

patient access to health care services and provide improved medical care by reducing the excessive burden 

the liability system places on the health care delivery 

system, and to amend title I of the Employee Retirement 

Income Security Act of 1974 to improve access and 

choice for entrepreneurs with small businesses with respect to medical care for their employees. 

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

2 The table of contents for this Act is as follows: 

Sec. 1. Table of contents. 

Sec. 2. Disposition of unused health benefits in cafeteria plans and flexible 

spending arrangements. 

TITLE I—HELP EFFICIENT, ACCESSIBLE, LOW-COST, TIMELY 

HEALTHCARE (HEALTH) ACT OF 2004 

Sec. 1001. Short title. 

Sec. 1002. Findings and purpose. 

Sec. 1003. Encouraging speedy resolution of claims. 

Sec. 1004. Compensating patient injury. 

Sec. 1005. Maximizing patient recovery. 

Sec. 1006. Additional health benefits. 

Sec. 1007. Punitive damages. 

Sec. 1008. Authorization of payment of future damages to claimants in health 

care lawsuits. 

Sec. 1009. Definitions. 

Sec. 1010. Effect on other laws. 

Sec. 1011. State flexibility and protection of States’ rights. 

Sec. 1012. Applicability; effective date. 

Sec. 1013. Sense of Congress. 

TITLE II—SMALL BUSINESS HEALTH FAIRNESS ACT OF 2004 

Sec. 2001. Short title. 

Sec. 2002. Rules governing association health plans. 

Sec. 2003. Clarification of treatment of single employer arrangements. 

Sec. 2004. Enforcement provisions relating to association health plans. 

Sec. 2005. Cooperation between Federal and State authorities. 

Sec. 2006. Effective date and transitional and other rules. 

3 SEC. 2. DISPOSITION OF UNUSED HEALTH BENEFITS IN 

4 CAFETERIA PLANS AND FLEXIBLE SPENDING 

5 ARRANGEMENTS. 

6 (a) IN GENERAL.—Section 125 of the Internal Rev7 enue Code of 1986 (relating to cafeteria plans) is amended 

8 by redesignating subsections (h) and (i) as subsections (i) 

9 and (j), respectively, and by inserting after subsection (g) 

10 the following: 

11 ‘‘(h) CONTRIBUTIONS OF CERTAIN UNUSED HEALTH

12 BENEFITS.— 
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1 ‘‘(1) IN GENERAL.—For purposes of this title, 

2 a plan or other arrangement shall not fail to be 

3 treated as a cafeteria plan solely because qualified 

4 benefits under such plan include a health flexible 

5 spending arrangement under which not more than 

6 $500 of unused health benefits may be— 

7 ‘‘(A) carried forward to the succeeding 

8 plan year of such health flexible spending ar9 rangement, or 

10 ‘‘(B) to the extent permitted by section 

11 106(d), contributed by the employer to a health 

12 savings account (as defined in section 223(d)) 

13 maintained for the benefit of the employee. 

14 ‘‘(2) HEALTH FLEXIBLE SPENDING ARRANGE15 MENT.—For purposes of this subsection, the term 

16 ‘health flexible spending arrangement’ means a flexi17 ble spending arrangement (as defined in section 

18 106(c)) that is a qualified benefit and only permits 

19 reimbursement for expenses for medical care (as de20 fined in section 213(d)(1), without regard to sub21 paragraphs (C) and (D) thereof). 

22 ‘‘(3) UNUSED HEALTH BENEFITS.—For pur23 poses of this subsection, with respect to an em24 ployee, the term ‘unused health benefits’ means the 

25 excess of— 
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1 ‘‘(A) the maximum amount of reimburse2 ment allowable to the employee for a plan year 

3 under a health flexible spending arrangement, 

4 over 

5 ‘‘(B) the actual amount of reimbursement 

6 for such year under such arrangement.’’. 

7 (b) EFFECTIVE DATE.—The amendments made by 

8 subsection (a) shall apply to taxable years beginning after 

9 December 31, 2003. 

10 TITLE I—HELP EFFICIENT, AC11 CESSIBLE, LOW-COST, TIMELY 

12 HEALTHCARE (HEALTH) ACT 

13 OF 2004 

14 SEC. 1001. SHORT TITLE. 

15 This title may be cited as the ‘‘Help Efficient, Acces16 sible, Low-cost, Timely Healthcare (HEALTH) Act of 

17 2004’’. 

18 SEC. 1002. FINDINGS AND PURPOSE. 

19 (a) FINDINGS.— 

20 (1) EFFECT ON HEALTH CARE ACCESS AND

21 COSTS.—Congress finds that our current civil justice 

22 system is adversely affecting patient access to health 

23 care services, better patient care, and cost-efficient 

24 health care, in that the health care liability system 

25 is a costly and ineffective mechanism for resolving 
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1 claims of health care liability and compensating in2 jured patients, and is a deterrent to the sharing of 

3 information among health care professionals which 

4 impedes efforts to improve patient safety and quality 

5 of care. 

6 (2) EFFECT ON INTERSTATE COMMERCE.— 

7 Congress finds that the health care and insurance 

8 industries are industries affecting interstate com9 merce and the health care liability litigation systems 

10 existing throughout the United States are activities 

11 that affect interstate commerce by contributing to 

12 the high costs of health care and premiums for 

13 health care liability insurance purchased by health 

14 care system providers. 

15 (3) EFFECT ON FEDERAL SPENDING.—Con16 gress finds that the health care liability litigation 

17 systems existing throughout the United States have 

18 a significant effect on the amount, distribution, and 

19 use of Federal funds because of— 

20 (A) the large number of individuals who 

21 receive health care benefits under programs op22 erated or financed by the Federal Government; 

23 (B) the large number of individuals who 

24 benefit because of the exclusion from Federal 
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1 taxes of the amounts spent to provide them 

2 with health insurance benefits; and 

3 (C) the large number of health care pro4 viders who provide items or services for which 

5 the Federal Government makes payments. 

6 (b) PURPOSE.—It is the purpose of this Act to imple7 ment reasonable, comprehensive, and effective health care 

8 liability reforms designed to— 

9 (1) improve the availability of health care serv10 ices in cases in which health care liability actions 

11 have been shown to be a factor in the decreased 

12 availability of services; 

13 (2) reduce the incidence of ‘‘defensive medi14 cine’’ and lower the cost of health care liability in15 surance, all of which contribute to the escalation of 

16 health care costs; 

17 (3) ensure that persons with meritorious health 

18 care injury claims receive fair and adequate com19 pensation, including reasonable noneconomic dam20 ages; 

21 (4) improve the fairness and cost-effectiveness 

22 of our current health care liability system to resolve 

23 disputes over, and provide compensation for, health 

24 care liability by reducing uncertainty in the amount 

25 of compensation provided to injured individuals; and 
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1 (5) provide an increased sharing of information 

2 in the health care system which will reduce unin3 tended injury and improve patient care. 

4 SEC. 1003. ENCOURAGING SPEEDY RESOLUTION OF 

5 CLAIMS. 

6 The time for the commencement of a health care law7 suit shall be 3 years after the date of manifestation of 

8 injury or 1 year after the claimant discovers, or through 

9 the use of reasonable diligence should have discovered, the 

10 injury, whichever occurs first. In no event shall the time 

11 for commencement of a health care lawsuit exceed 3 years 

12 after the date of manifestation of injury unless tolled for 

13 any of the following— 

14 (1) upon proof of fraud; 

15 (2) intentional concealment; or 

16 (3) the presence of a foreign body, which has no 

17 therapeutic or diagnostic purpose or effect, in the 

18 person of the injured person. 

19 Actions by a minor shall be commenced within 3 years 

20 from the date of the alleged manifestation of injury except 

21 that actions by a minor under the full age of 6 years shall 

22 be commenced within 3 years of manifestation of injury 

23 or prior to the minor’s 8th birthday, whichever provides 

24 a longer period. Such time limitation shall be tolled for 

25 minors for any period during which a parent or guardian 
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1 and a health care provider or health care organization 

2 have committed fraud or collusion in the failure to bring 

3 an action on behalf of the injured minor. 

4 SEC. 1004. COMPENSATING PATIENT INJURY. 

5 (a) UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL

6 ECONOMIC LOSSES IN HEALTH CARE LAWSUITS.—In any 

7 health care lawsuit, nothing in this title shall limit a claim8 ant’s recovery of the full amount of the available economic 

9 damages, notwithstanding the limitation in subsection (b). 

10 (b) ADDITIONAL NONECONOMIC DAMAGES.—In any 

11 health care lawsuit, the amount of noneconomic damages, 

12 if available, may be as much as $250,000, regardless of 

13 the number of parties against whom the action is brought 

14 or the number of separate claims or actions brought with 

15 respect to the same injury. 

16 (c) NO DISCOUNT OF AWARD FOR NONECONOMIC

17 DAMAGES.—For purposes of applying the limitation in 

18 subsection (b), future noneconomic damages shall not be 

19 discounted to present value. The jury shall not be in20 formed about the maximum award for noneconomic dam21 ages. An award for noneconomic damages in excess of 

22 $250,000 shall be reduced either before the entry of judg23 ment, or by amendment of the judgment after entry of 

24 judgment, and such reduction shall be made before ac25 counting for any other reduction in damages required by 
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1 law. If separate awards are rendered for past and future 

2 noneconomic damages and the combined awards exceed 

3 $250,000, the future noneconomic damages shall be re4 duced first. 

5 (d) FAIR SHARE RULE.—In any health care lawsuit, 

6 each party shall be liable for that party’s several share 

7 of any damages only and not for the share of any other 

8 person. Each party shall be liable only for the amount of 

9 damages allocated to such party in direct proportion to 

10 such party’s percentage of responsibility. Whenever a 

11 judgment of liability is rendered as to any party, a sepa12 rate judgment shall be rendered against each such party 

13 for the amount allocated to such party. For purposes of 

14 this section, the trier of fact shall determine the propor15 tion of responsibility of each party for the claimant’s 

16 harm. 

17 SEC. 1005. MAXIMIZING PATIENT RECOVERY. 

18 (a) COURT SUPERVISION OF SHARE OF DAMAGES

19 ACTUALLY PAID TO CLAIMANTS.—In any health care law20 suit, the court shall supervise the arrangements for pay21 ment of damages to protect against conflicts of interest 

22 that may have the effect of reducing the amount of dam23 ages awarded that are actually paid to claimants. In par24 ticular, in any health care lawsuit in which the attorney 

25 for a party claims a financial stake in the outcome by vir-
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1 tue of a contingent fee, the court shall have the power 

2 to restrict the payment of a claimant’s damage recovery 

3 to such attorney, and to redirect such damages to the 

4 claimant based upon the interests of justice and principles 

5 of equity. In no event shall the total of all contingent fees 

6 for representing all claimants in a health care lawsuit ex7 ceed the following limits: 

8 (1) 40 percent of the first $50,000 recovered by 

9 the claimant(s). 

(2) 331 10 ⁄3 percent of the next $50,000 recovered 

11 by the claimant(s). 

12 (3) 25 percent of the next $500,000 recovered 

13 by the claimant(s). 

14 (4) 15 percent of any amount by which the re15 covery by the claimant(s) is in excess of $600,000. 

16 (b) APPLICABILITY.—The limitations in this section 

17 shall apply whether the recovery is by judgment, settle18 ment, mediation, arbitration, or any other form of alter19 native dispute resolution. In a health care lawsuit involv20 ing a minor or incompetent person, a court retains the 

21 authority to authorize or approve a fee that is less than 

22 the maximum permitted under this section. The require23 ment for court supervision in the first two sentences of 

24 subsection (a) applies only in civil actions. 
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1 SEC. 1006. ADDITIONAL HEALTH BENEFITS. 

2 In any health care lawsuit involving injury or wrong3 ful death, any party may introduce evidence of collateral 

4 source benefits. If a party elects to introduce such evi5 dence, any opposing party may introduce evidence of any 

6 amount paid or contributed or reasonably likely to be paid 

7 or contributed in the future by or on behalf of the oppos8 ing party to secure the right to such collateral source bene9 fits. No provider of collateral source benefits shall recover 

10 any amount against the claimant or receive any lien or 

11 credit against the claimant’s recovery or be equitably or 

12 legally subrogated to the right of the claimant in a health 

13 care lawsuit involving injury or wrongful death. This sec14 tion shall apply to any health care lawsuit that is settled 

15 as well as a health care lawsuit that is resolved by a fact 

16 finder. This section shall not apply to section 1862(b) (42 

17 U.S.C. 1395y(b)) or section 1902(a)(25) (42 U.S.C. 

18 1396a(a)(25)) of the Social Security Act. 

19 SEC. 1007. PUNITIVE DAMAGES. 

20 (a) IN GENERAL.—Punitive damages may, if other21 wise permitted by applicable State or Federal law, be 

22 awarded against any person in a health care lawsuit only 

23 if it is proven by clear and convincing evidence that such 

24 person acted with malicious intent to injure the claimant, 

25 or that such person deliberately failed to avoid unneces26 sary injury that such person knew the claimant was sub-
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1 stantially certain to suffer. In any health care lawsuit 

2 where no judgment for compensatory damages is rendered 

3 against such person, no punitive damages may be awarded 

4 with respect to the claim in such lawsuit. No demand for 

5 punitive damages shall be included in a health care lawsuit 

6 as initially filed. A court may allow a claimant to file an 

7 amended pleading for punitive damages only upon a mo8 tion by the claimant and after a finding by the court, upon 

9 review of supporting and opposing affidavits or after a 

10 hearing, after weighing the evidence, that the claimant has 

11 established by a substantial probability that the claimant 

12 will prevail on the claim for punitive damages. At the re13 quest of any party in a health care lawsuit, the trier of 

14 fact shall consider in a separate proceeding— 

15 (1) whether punitive damages are to be award16 ed and the amount of such award; and 

17 (2) the amount of punitive damages following a 

18 determination of punitive liability. 

19 If a separate proceeding is requested, evidence relevant 

20 only to the claim for punitive damages, as determined by 

21 applicable State law, shall be inadmissible in any pro22 ceeding to determine whether compensatory damages are 

23 to be awarded. 

24 (b) DETERMINING AMOUNT OF PUNITIVE DAM25 AGES.— 
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1 (1) FACTORS CONSIDERED.—In determining 

2 the amount of punitive damages, if awarded, in a 

3 health care lawsuit, the trier of fact shall consider 

4 only the following— 

5 (A) the severity of the harm caused by the 

6 conduct of such party; 

7 (B) the duration of the conduct or any 

8 concealment of it by such party; 

9 (C) the profitability of the conduct to such 

10 party; 

11 (D) the number of products sold or med12 ical procedures rendered for compensation, as 

13 the case may be, by such party, of the kind 

14 causing the harm complained of by the claim15 ant; 

16 (E) any criminal penalties imposed on such 

17 party, as a result of the conduct complained of 

18 by the claimant; and 

19 (F) the amount of any civil fines assessed 

20 against such party as a result of the conduct 

21 complained of by the claimant. 

22 (2) MAXIMUM AWARD.—The amount of punitive 

23 damages, if awarded, in a health care lawsuit may 

24 be as much as $250,000 or as much as two times 

25 the amount of economic damages awarded, which-
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1 ever is greater. The jury shall not be informed of 

2 this limitation. 

3 (c) NO PUNITIVE DAMAGES FOR PRODUCTS THAT

4 COMPLY WITH FDA STANDARDS.— 

5 (1) IN GENERAL.— 

6 (A) No punitive damages may be awarded 

7 against the manufacturer or distributor of a 

8 medical product, or a supplier of any compo9 nent or raw material of such medical product, 

10 based on a claim that such product caused the 

11 claimant’s harm where— 

12 (i)(I) such medical product was sub13 ject to premarket approval, clearance, or li14 censure by the Food and Drug Administra15 tion with respect to the safety of the for16 mulation or performance of the aspect of 

17 such medical product which caused the 

18 claimant’s harm or the adequacy of the 

19 packaging or labeling of such medical 

20 product; and 

21 (II) such medical product was so ap22 proved, cleared, or licensed; or 

23 (ii) such medical product is generally 

24 recognized among qualified experts as safe 

25 and effective pursuant to conditions estab-
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1 lished by the Food and Drug Administra2 tion and applicable Food and Drug Admin3 istration regulations, including without 

4 limitation those related to packaging and 

5 labeling, unless the Food and Drug Admin6 istration has determined that such medical 

7 product was not manufactured or distrib8 uted in substantial compliance with appli9 cable Food and Drug Administration stat10 utes and regulations. 

11 (B) RULE OF CONSTRUCTION.—Subpara12 graph (A) may not be construed as establishing 

13 the obligation of the Food and Drug Adminis14 tration to demonstrate affirmatively that a 

15 manufacturer, distributor, or supplier referred 

16 to in such subparagraph meets any of the con17 ditions described in such subparagraph. 

18 (2) LIABILITY OF HEALTH CARE PROVIDERS.— 

19 A health care provider who prescribes, or who dis20 penses pursuant to a prescription, a medical product 

21 approved, licensed, or cleared by the Food and Drug 

22 Administration shall not be named as a party to a 

23 product liability lawsuit involving such product and 

24 shall not be liable to a claimant in a class action 

25 lawsuit against the manufacturer, distributor, or 
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1 seller of such product. Nothing in this paragraph 

2 prevents a court from consolidating cases involving 

3 health care providers and cases involving products li4 ability claims against the manufacturer, distributor, 

5 or product seller of such medical product. 

6 (3) PACKAGING.—In a health care lawsuit for 

7 harm which is alleged to relate to the adequacy of 

8 the packaging or labeling of a drug which is required 

9 to have tamper-resistant packaging under regula10 tions of the Secretary of Health and Human Serv11 ices (including labeling regulations related to such 

12 packaging), the manufacturer or product seller of 

13 the drug shall not be held liable for punitive dam14 ages unless such packaging or labeling is found by 

15 the trier of fact by clear and convincing evidence to 

16 be substantially out of compliance with such regula17 tions. 

18 (4) EXCEPTION.—Paragraph (1) shall not 

19 apply in any health care lawsuit in which— 

20 (A) a person, before or after premarket ap21 proval, clearance, or licensure of such medical 

22 product, knowingly misrepresented to or with23 held from the Food and Drug Administration 

24 information that is required to be submitted 

25 under the Federal Food, Drug, and Cosmetic 
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1 Act (21 U.S.C. 301 et seq.) or section 351 of 

2 the Public Health Service Act (42 U.S.C. 262) 

3 that is material and is causally related to the 

4 harm which the claimant allegedly suffered; or 

5 (B) a person made an illegal payment to 

6 an official of the Food and Drug Administra7 tion for the purpose of either securing or main8 taining approval, clearance, or licensure of such 

9 medical product. 

10 SEC. 1008. AUTHORIZATION OF PAYMENT OF FUTURE DAM11 AGES TO CLAIMANTS IN HEALTH CARE LAW12 SUITS. 

13 (a) IN GENERAL.—In any health care lawsuit, if an 

14 award of future damages, without reduction to present 

15 value, equaling or exceeding $50,000 is made against a 

16 party with sufficient insurance or other assets to fund a 

17 periodic payment of such a judgment, the court shall, at 

18 the request of any party, enter a judgment ordering that 

19 the future damages be paid by periodic payments. In any 

20 health care lawsuit, the court may be guided by the Uni21 form Periodic Payment of Judgments Act promulgated by 

22 the National Conference of Commissioners on Uniform 

23 State Laws. 
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1 (b) APPLICABILITY.—This section applies to all ac2 tions that have not been first set for trial or retrial before 

3 the effective date of this title. 

4 SEC. 1009. DEFINITIONS. 

5 In this title: 

6 (1) ALTERNATIVE DISPUTE RESOLUTION SYS7 TEM; ADR.—The term ‘‘alternative dispute resolution 

8 system’’ or ‘‘ADR’’ means a system that provides 

9 for the resolution of health care lawsuits in a man10 ner other than through a civil action brought in a 

11 State or Federal court. 

12 (2) CLAIMANT.—The term ‘‘claimant’’ means 

13 any person who brings a health care lawsuit, includ14 ing a person who asserts or claims a right to legal 

15 or equitable contribution, indemnity or subrogation, 

16 arising out of a health care liability claim or action, 

17 and any person on whose behalf such a claim is as18 serted or such an action is brought, whether de19 ceased, incompetent, or a minor. 

20 (3) COLLATERAL SOURCE BENEFITS.—The 

21 term ‘‘collateral source benefits’’ means any amount 

22 paid or reasonably likely to be paid in the future to 

23 or on behalf of the claimant, or any service, product 

24 or other benefit provided or reasonably likely to be 

25 provided in the future to or on behalf of the claim-
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1 ant, as a result of the injury or wrongful death, pur2 suant to— 

3 (A) any State or Federal health, sickness, 

4 income-disability, accident, or workers’ com5 pensation law; 

6 (B) any health, sickness, income-disability, 

7 or accident insurance that provides health bene8 fits or income-disability coverage; 

9 (C) any contract or agreement of any 

10 group, organization, partnership, or corporation 

11 to provide, pay for, or reimburse the cost of 

12 medical, hospital, dental, or income disability 

13 benefits; and 

14 (D) any other publicly or privately funded 

15 program. 

16 (4) COMPENSATORY DAMAGES.—The term 

17 ‘‘compensatory damages’’ means objectively 

18 verifiable monetary losses incurred as a result of the 

19 provision of, use of, or payment for (or failure to 

20 provide, use, or pay for) health care services or med21 ical products, such as past and future medical ex22 penses, loss of past and future earnings, cost of ob23 taining domestic services, loss of employment, and 

24 loss of business or employment opportunities, dam25 ages for physical and emotional pain, suffering, in-
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1 convenience, physical impairment, mental anguish, 

2 disfigurement, loss of enjoyment of life, loss of soci3 ety and companionship, loss of consortium (other 

4 than loss of domestic service), hedonic damages, in5 jury to reputation, and all other nonpecuniary losses 

6 of any kind or nature. The term ‘‘compensatory 

7 damages’’ includes economic damages and non8 economic damages, as such terms are defined in this 

9 section. 

10 (5) CONTINGENT FEE.—The term ‘‘contingent 

11 fee’’ includes all compensation to any person or per12 sons which is payable only if a recovery is effected 

13 on behalf of one or more claimants. 

14 (6) ECONOMIC DAMAGES.—The term ‘‘economic 

15 damages’’ means objectively verifiable monetary 

16 losses incurred as a result of the provision of, use 

17 of, or payment for (or failure to provide, use, or pay 

18 for) health care services or medical products, such as 

19 past and future medical expenses, loss of past and 

20 future earnings, cost of obtaining domestic services, 

21 loss of employment, and loss of business or employ22 ment opportunities. 

23 (7) HEALTH CARE LAWSUIT.—The term 

24 ‘‘health care lawsuit’’ means any health care liability 

25 claim concerning the provision of health care goods 
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1 or services or any medical product affecting inter2 state commerce, or any health care liability action 

3 concerning the provision of health care goods or 

4 services or any medical product affecting interstate 

5 commerce, brought in a State or Federal court or 

6 pursuant to an alternative dispute resolution system, 

7 against a health care provider, a health care organi8 zation, or the manufacturer, distributor, supplier, 

9 marketer, promoter, or seller of a medical product, 

10 regardless of the theory of liability on which the 

11 claim is based, or the number of claimants, plain12 tiffs, defendants, or other parties, or the number of 

13 claims or causes of action, in which the claimant al14 leges a health care liability claim. Such term does 

15 not include a claim or action which is based on 

16 criminal liability; which seeks civil fines or penalties 

17 paid to Federal, State, or local government; or which 

18 is grounded in antitrust. 

19 (8) HEALTH CARE LIABILITY ACTION.—The 

20 term ‘‘health care liability action’’ means a civil ac21 tion brought in a State or Federal Court or pursu22 ant to an alternative dispute resolution system, 

23 against a health care provider, a health care organi24 zation, or the manufacturer, distributor, supplier, 

25 marketer, promoter, or seller of a medical product, 
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1 regardless of the theory of liability on which the 

2 claim is based, or the number of plaintiffs, defend3 ants, or other parties, or the number of causes of ac4 tion, in which the claimant alleges a health care li5 ability claim. 

6 (9) HEALTH CARE LIABILITY CLAIM.—The 

7 term ‘‘health care liability claim’’ means a demand 

8 by any person, whether or not pursuant to ADR, 

9 against a health care provider, health care organiza10 tion, or the manufacturer, distributor, supplier, mar11 keter, promoter, or seller of a medical product, in12 cluding, but not limited to, third-party claims, cross13 claims, counter-claims, or contribution claims, which 

14 are based upon the provision of, use of, or payment 

15 for (or the failure to provide, use, or pay for) health 

16 care services or medical products, regardless of the 

17 theory of liability on which the claim is based, or the 

18 number of plaintiffs, defendants, or other parties, or 

19 the number of causes of action. 

20 (10) HEALTH CARE ORGANIZATION.—The term 

21 ‘‘health care organization’’ means any person or en22 tity which is obligated to provide or pay for health 

23 benefits under any health plan, including any person 

24 or entity acting under a contract or arrangement 
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1 with a health care organization to provide or admin2 ister any health benefit. 

3 (11) HEALTH CARE PROVIDER.—The term 

4 ‘‘health care provider’’ means any person or entity 

5 required by State or Federal laws or regulations to 

6 be licensed, registered, or certified to provide health 

7 care services, and being either so licensed, reg8 istered, or certified, or exempted from such require9 ment by other statute or regulation. 

10 (12) HEALTH CARE GOODS OR SERVICES.—The 

11 term ‘‘health care goods or services’’ means any 

12 goods or services provided by a health care organiza13 tion, provider, or by any individual working under 

14 the supervision of a health care provider, that relates 

15 to the diagnosis, prevention, or treatment of any 

16 human disease or impairment, or the assessment or 

17 care of the health of human beings. 

18 (13) MALICIOUS INTENT TO INJURE.—The 

19 term ‘‘malicious intent to injure’’ means inten20 tionally causing or attempting to cause physical in21 jury other than providing health care goods or serv22 ices. 

23 (14) MEDICAL PRODUCT.—The term ‘‘medical 

24 product’’ means a drug, device, or biological product 

25 intended for humans, and the terms ‘‘drug’’, ‘‘de-
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1 vice’’, and ‘‘biological product’’ have the meanings 

2 given such terms in sections 201(g)(1) and 201(h) 

3 of the Federal Food, Drug and Cosmetic Act (21 

4 U.S.C. 321) and section 351(a) of the Public Health 

5 Service Act (42 U.S.C. 262(a)), respectively, includ6 ing any component or raw material used therein, but 

7 excluding health care services. 

8 (15) NONECONOMIC DAMAGES.—The term 

9 ‘‘noneconomic damages’’ means damages for phys10 ical and emotional pain, suffering, inconvenience, 

11 physical impairment, mental anguish, disfigurement, 

12 loss of enjoyment of life, loss of society and compan13 ionship, loss of consortium (other than loss of do14 mestic service), hedonic damages, injury to reputa15 tion, and all other nonpecuniary losses of any kind 

16 or nature. 

17 (16) PUNITIVE DAMAGES.—The term ‘‘punitive 

18 damages’’ means damages awarded, for the purpose 

19 of punishment or deterrence, and not solely for com20 pensatory purposes, against a health care provider, 

21 health care organization, or a manufacturer, dis22 tributor, or supplier of a medical product. Punitive 

23 damages are neither economic nor noneconomic 

24 damages. 
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1 (17) RECOVERY.—The term ‘‘recovery’’ means 

2 the net sum recovered after deducting any disburse3 ments or costs incurred in connection with prosecu4 tion or settlement of the claim, including all costs 

5 paid or advanced by any person. Costs of health care 

6 incurred by the plaintiff and the attorneys’ office 

7 overhead costs or charges for legal services are not 

8 deductible disbursements or costs for such purpose. 

9 (18) STATE.—The term ‘‘State’’ means each of 

10 the several States, the District of Columbia, the 

11 Commonwealth of Puerto Rico, the Virgin Islands, 

12 Guam, American Samoa, the Northern Mariana Is13 lands, the Trust Territory of the Pacific Islands, and 

14 any other territory or possession of the United 

15 States, or any political subdivision thereof. 

16 SEC. 1010. EFFECT ON OTHER LAWS. 

17 (a) VACCINE INJURY.— 

18 (1) To the extent that title XXI of the Public 

19 Health Service Act establishes a Federal rule of law 

20 applicable to a civil action brought for a vaccine-re21 lated injury or death— 

22 (A) this title does not affect the application 

23 of the rule of law to such an action; and 
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1 (B) any rule of law prescribed by this title 

2 in conflict with a rule of law of such title XXI 

3 shall not apply to such action. 

4 (2) If there is an aspect of a civil action 

5 brought for a vaccine-related injury or death to 

6 which a Federal rule of law under title XXI of the 

7 Public Health Service Act does not apply, then this 

8 title or otherwise applicable law (as determined 

9 under this title) will apply to such aspect of such ac10 tion. 

11 (b) OTHER FEDERAL LAW.—Except as provided in 

12 this section, nothing in this title shall be deemed to affect 

13 any defense available to a defendant in a health care law14 suit or action under any other provision of Federal law. 

15 SEC. 1011. STATE FLEXIBILITY AND PROTECTION OF 

16 STATES’ RIGHTS. 

17 (a) HEALTH CARE LAWSUITS.—The provisions gov18 erning health care lawsuits set forth in this title preempt, 

19 subject to subsections (b) and (c), State law to the extent 

20 that State law prevents the application of any provisions 

21 of law established by or under this title. The provisions 

22 governing health care lawsuits set forth in this title super23 sede chapter 171 of title 28, United States Code, to the 

24 extent that such chapter— 
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1 (1) provides for a greater amount of damages 

2 or contingent fees, a longer period in which a health 

3 care lawsuit may be commenced, or a reduced appli4 cability or scope of periodic payment of future dam5 ages, than provided in this title; or 

6 (2) prohibits the introduction of evidence re7 garding collateral source benefits, or mandates or 

8 permits subrogation or a lien on collateral source 

9 benefits. 

10 (b) PROTECTION OF STATES’ RIGHTS AND OTHER

11 LAWS.—(1) Any issue that is not governed by any provi12 sion of law established by or under this title (including 

13 State standards of negligence) shall be governed by other14 wise applicable State or Federal law. 

15 (2) This title shall not preempt or supersede any 

16 State or Federal law that imposes greater procedural or 

17 substantive protections for health care providers and 

18 health care organizations from liability, loss, or damages 

19 than those provided by this title or create a cause of ac20 tion. 

21 (c) STATE FLEXIBILITY.—No provision of this title 

22 shall be construed to preempt— 

23 (1) any State law (whether effective before, on, 

24 or after the date of the enactment of this title) that 

25 specifies a particular monetary amount of compen-
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1 satory or punitive damages (or the total amount of 

2 damages) that may be awarded in a health care law3 suit, regardless of whether such monetary amount is 

4 greater or lesser than is provided for under this title, 

5 notwithstanding section 4(a); or 

6 (2) any defense available to a party in a health 

7 care lawsuit under any other provision of State or 

8 Federal law. 

9 SEC. 1012. APPLICABILITY; EFFECTIVE DATE. 

10 This title shall apply to any health care lawsuit 

11 brought in a Federal or State court, or subject to an alter12 native dispute resolution system, that is initiated on or 

13 after the date of the enactment of this title, except that 

14 any health care lawsuit arising from an injury occurring 

15 prior to the date of the enactment of this title shall be 

16 governed by the applicable statute of limitations provisions 

17 in effect at the time the injury occurred. 

18 SEC. 1013. SENSE OF CONGRESS. 

19 It is the sense of Congress that a health insurer 

20 should be liable for damages for harm caused when it 

21 makes a decision as to what care is medically necessary 

22 and appropriate. 
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1 TITLE II—SMALL BUSINESS 

2 HEALTH FAIRNESS ACT OF 2004 

3 SEC. 2001. SHORT TITLE. 

4 This title may be cited as the ‘‘Small Business Health 

5 Fairness Act of 2004’’. 

6 SEC. 2002. RULES GOVERNING ASSOCIATION HEALTH 

7 PLANS. 

8 (a) IN GENERAL.—Subtitle B of title I of the Em9 ployee Retirement Income Security Act of 1974 is amend10 ed by adding after part 7 the following new part: 

11 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

12 HEALTH PLANS 

13 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

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

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

16 whose sponsor is (or is deemed under this part to be) de17 scribed in subsection (b). 

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

19 plan is described in this subsection if such sponsor— 

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

21 with a constitution and bylaws specifically stating its 

22 purpose and providing for periodic meetings on at 

23 least an annual basis, as a bona fide trade associa24 tion, a bona fide industry association (including a 

25 rural electric cooperative association or a rural tele-
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1 phone cooperative association), a bona fide profes2 sional association, or a bona fide chamber of com3 merce (or similar bona fide business association, in4 cluding a corporation or similar organization that 

5 operates on a cooperative basis (within the meaning 

6 of section 1381 of the Internal Revenue Code of 

7 1986)), for substantial purposes other than that of 

8 obtaining or providing medical care; 

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

10 receives the active support of its members and re11 quires for membership payment on a periodic basis 

12 of dues or payments necessary to maintain eligibility 

13 for membership in the sponsor; and 

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

15 or payments, or coverage under the plan on the 

16 basis of health status-related factors with respect to 

17 the employees of its members (or affiliated mem18 bers), or the dependents of such employees, and does 

19 not condition such dues or payments on the basis of 

20 group health plan participation. 

21 Any sponsor consisting of an association of entities which 

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

23 shall be deemed to be a sponsor described in this sub24 section. 
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1 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

2 PLANS. 

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

4 prescribe by regulation a procedure under which, subject 

5 to subsection (b), the applicable authority shall certify as6 sociation health plans which apply for certification as 

7 meeting the requirements of this part. 

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

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

10 health plan that provides at least one benefit option which 

11 does not consist of health insurance coverage, the applica12 ble authority shall certify such plan as meeting the re13 quirements of this part only if the applicable authority is 

14 satisfied that the applicable requirements of this part are 

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

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

17 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

19 certification under this part is in effect shall meet the ap20 plicable requirements of this part, effective on the date 

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

22 is to commence operations). 

23 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI24 CATION.—The applicable authority may provide by regula25 tion for continued certification of association health plans 

26 under this part. 
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1 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

2 PLANS.—The applicable authority shall establish a class 

3 certification procedure for association health plans under 

4 which all benefits consist of health insurance coverage. 

5 Under such procedure, the applicable authority shall pro6 vide for the granting of certification under this part to 

7 the plans in each class of such association health plans 

8 upon appropriate filing under such procedure in connec9 tion with plans in such class and payment of the pre10 scribed fee under section 807(a). 

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

12 HEALTH PLANS.—An association health plan which offers 

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

14 insurance coverage may be certified under this part only 

15 if such plan consists of any of the following: 

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

17 date of the enactment of the Small Business Health 

18 Fairness Act of 2004, 

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

20 restrict membership to one or more trades and busi21 nesses or industries and whose eligible participating 

22 employers represent a broad cross-section of trades 

23 and businesses or industries, or 

24 ‘‘(3) a plan whose eligible participating employ25 ers represent one or more trades or businesses, or 
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1 one or more industries, consisting of any of the fol2 lowing: agriculture; equipment and automobile deal3 erships; barbering and cosmetology; certified public 

4 accounting practices; child care; construction; dance, 

5 theatrical and orchestra productions; disinfecting 

6 and pest control; financial services; fishing; 

7 foodservice establishments; hospitals; labor organiza8 tions; logging; manufacturing (metals); mining; med9 ical and dental practices; medical laboratories; pro10 fessional consulting services; sanitary services; trans11 portation (local and freight); warehousing; whole12 saling/distributing; or any other trade or business or 

13 industry which has been indicated as having average 

14 or above-average risk or health claims experience by 

15 reason of State rate filings, denials of coverage, pro16 posed premium rate levels, or other means dem17 onstrated by such plan in accordance with regula18 tions. 

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

20 BOARDS OF TRUSTEES. 

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

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

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

24 met) the requirements of section 801(b) for a continuous 
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1 period of not less than 3 years ending with the date of 

2 the application for certification under this part. 

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

4 this subsection are met with respect to an association 

5 health plan if the following requirements are met: 

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

7 pursuant to a trust agreement, by a board of trust8 ees which has complete fiscal control over the plan 

9 and which is responsible for all operations of the 

10 plan. 

11 ‘‘(2) RULES OF OPERATION AND FINANCIAL

12 CONTROLS.—The board of trustees has in effect 

13 rules of operation and financial controls, based on a 

14 3-year plan of operation, adequate to carry out the 

15 terms of the plan and to meet all requirements of 

16 this title applicable to the plan. 

17 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

18 PARTICIPATING EMPLOYERS AND TO CONTRAC19 TORS.— 

20 ‘‘(A) BOARD MEMBERSHIP.— 

21 ‘‘(i) IN GENERAL.—Except as pro22 vided in clauses (ii) and (iii), the members 

23 of the board of trustees are individuals se24 lected from individuals who are the owners, 

25 officers, directors, or employees of the par-
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1 ticipating employers or who are partners in 

2 the participating employers and actively 

3 participate in the business. 

4 ‘‘(ii) LIMITATION.— 

5 ‘‘(I) GENERAL RULE.—Except as 

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

7 no such member is an owner, officer, 

8 director, or employee of, or partner in, 

9 a contract administrator or other 

10 service provider to the plan. 

11 ‘‘(II) LIMITED EXCEPTION FOR

12 PROVIDERS OF SERVICES SOLELY ON

13 BEHALF OF THE SPONSOR.—Officers 

14 or employees of a sponsor which is a 

15 service provider (other than a contract 

16 administrator) to the plan may be 

17 members of the board if they con18 stitute not more than 25 percent of 

19 the membership of the board and they 

20 do not provide services to the plan 

21 other than on behalf of the sponsor. 

22 ‘‘(III) TREATMENT OF PRO23 VIDERS OF MEDICAL CARE.—In the 

24 case of a sponsor which is an associa25 tion whose membership consists pri-
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1 marily of providers of medical care, 

2 subclause (I) shall not apply in the 

3 case of any service provider described 

4 in subclause (I) who is a provider of 

5 medical care under the plan. 

6 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

7 Clause (i) shall not apply to an association 

8 health plan which is in existence on the 

9 date of the enactment of the Small Busi10 ness Health Fairness Act of 2004. 

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

12 sole authority under the plan to approve appli13 cations for participation in the plan and to con14 tract with a service provider to administer the 

15 day-to-day affairs of the plan. 

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

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

18 maintained by a franchiser for a franchise network con19 sisting of its franchisees— 

20 ‘‘(1) the requirements of subsection (a) and sec21 tion 801(a) shall be deemed met if such require22 ments would otherwise be met if the franchiser were 

23 deemed to be the sponsor referred to in section 

24 801(b), such network were deemed to be an associa25 tion described in section 801(b), and each franchisee 
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1 were deemed to be a member (of the association and 

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

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

4 be deemed met. 

5 The Secretary may by regulation define for purposes of 

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

7 and ‘franchisee’. 

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

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

11 requirements of this subsection are met with respect to 

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

13 plan— 

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

15 ‘‘(A) a member of the sponsor, 

16 ‘‘(B) the sponsor, or 

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

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

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

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

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

3 and 

4 ‘‘(2) all individuals commencing coverage under 

5 the plan after certification under this part must 

6 be— 

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

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

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

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

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

15 existence on the date of the enactment of the Small Busi16 ness Health Fairness Act of 2004, an affiliated member 

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

18 the plan as a participating employer only if— 

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

20 member on the date of certification under this part; 

21 or 

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

23 date of the offering of such coverage, the affiliated 

24 member has not maintained or contributed to a 

25 group health plan with respect to any of its employ-
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1 ees who would otherwise be eligible to participate in 

2 such association health plan. 

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

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

6 no participating employer may provide health insurance 

7 coverage in the individual market for any employee not 

8 covered under the plan which is similar to the coverage 

9 contemporaneously provided to employees of the employer 

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

12 factor with respect to the employee and such employee 

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

14 for coverage under the plan. 

15 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

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

18 respect to an association health plan if— 

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

20 meeting the preceding requirements of this section 

21 are eligible to qualify as participating employers for 

22 all geographically available coverage options, unless, 

23 in the case of any such employer, participation or 

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

2 not met; 

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

6 ‘‘(3) the applicable requirements of sections 

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

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

9 DOCUMENTS, CONTRIBUTION RATES, AND 

10 BENEFIT OPTIONS. 

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

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

13 following requirements are met: 

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

18 402(a)(1), which— 

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

20 serves as the named fiduciary required for plans 

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

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

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

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

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

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

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

12 beneficiaries and do not vary on the basis of the 

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

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

17 association health plan, or a health insurance 

18 issuer offering health insurance coverage in 

19 connection with an association health plan, 

20 from— 

21 ‘‘(i) setting contribution rates based 

22 on the claims experience of the plan; or 

23 ‘‘(ii) varying contribution rates for 

24 small employers in a State to the extent 

25 that such rates could vary using the same 
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1 methodology employed in such State for 

2 regulating premium rates in the small 

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

5 bona fide associations (within the meaning 

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

7 Service Act), 

8 subject to the requirements of section 702(b) 

9 relating to contribution rates. 

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

12 any benefit option under the plan does not consist 

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

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

16 ‘‘(4) MARKETING REQUIREMENTS.— 

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

18 which consists of health insurance coverage is 

19 offered under the plan, State-licensed insurance 

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

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

24 used to distribute health insurance coverage. 
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1 ‘‘(B) STATE-LICENSED INSURANCE

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

3 the term ‘State-licensed insurance agents’ 

4 means one or more agents who are licensed in 

5 a State and are subject to the laws of such 

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

8 persons authorized to offer, sell, or solicit 

9 health insurance coverage in such State. 

10 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

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

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

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

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

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

19 an association health plan, or a health insurance issuer 

20 offering health insurance coverage in connection with an 

21 association health plan, from exercising its sole discretion 

22 in selecting the specific items and services consisting of 

23 medical care to be included as benefits under such plan 

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

25 of (1) any law to the extent that it is not preempted under 
44 

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

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

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

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

8 FOR SOLVENCY FOR PLANS PROVIDING 

9 HEALTH BENEFITS IN ADDITION TO HEALTH 

10 INSURANCE COVERAGE. 

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

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

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

14 of health insurance coverage; or 

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

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

18 ‘‘(A) establishes and maintains reserves 

19 with respect to such additional benefit options, 

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

22 ‘‘(i) a reserve sufficient for unearned 

23 contributions; 

24 ‘‘(ii) a reserve sufficient for benefit li25 abilities which have been incurred, which 
45 

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1 have not been satisfied, and for which risk 

2 of loss has not yet been transferred, and 

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

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

6 obligations of the plan; and 

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

8 of error and other fluctuations, taking into 

9 account the specific circumstances of the 

10 plan; and 

11 ‘‘(B) establishes and maintains aggregate 

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

15 has not yet been transferred, as follows: 

16 ‘‘(i) The plan shall secure aggregate 

17 excess /stop loss insurance for the plan 

18 with an attachment point which is not 

19 greater than 125 percent of expected gross 

20 annual claims. The applicable authority 

21 may by regulation provide for upward ad22 justments in the amount of such percent23 age in specified circumstances in which the 

24 plan specifically provides for and maintains 
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1 reserves in excess of the amounts required 

2 under subparagraph (A). 

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

5 an attachment point which is at least equal 

6 to an amount recommended by the plan’s 

7 qualified actuary. The applicable authority 

8 may by regulation provide for adjustments 

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

13 under subparagraph (A). 

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

16 the plan is unable to satisfy by reason of 

17 a plan termination. 

18 Any person issuing to a plan insurance described in clause 

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

24 allow for such adjustments in the required levels of excess 

25 /stop loss insurance as the qualified actuary may rec-
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1 ommend, taking into account the specific circumstances 

2 of the plan. 

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

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

8 ‘‘(1) $500,000, or 

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

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

12 level of aggregate and specific excess /stop loss in13 surance provided with respect to such plan and other 

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

15 projected levels of participation or claims, the nature 

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

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

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

20 the applicable authority may provide such additional re21 quirements relating to reserves, excess /stop loss insur22 ance, and indemnification insurance as the applicable au23 thority considers appropriate. Such requirements may be 

24 provided by regulation with respect to any such plan or 

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

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

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

6 provided with respect to such plan or plans. 

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

8 applicable authority may permit an association health plan 

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

10 of the requirements of this section (except subsection 

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

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

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

17 which it is substituted. The applicable authority may take 

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

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

23 applicable terms of the plan in the form of assessments 

24 of participating employers, security, or other financial ar25 rangement. 
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1 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

2 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

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

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

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

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

11 consist of annual payments in the amount of 

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

15 paragraph (2). Payments under this paragraph 

16 are payable to the Fund at the time determined 

17 by the Secretary. Initial payments are due in 

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

21 procedure. 

22 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

25 not more than 100 percent of the payment 
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1 which was not timely paid shall be payable by 

2 the plan to the Fund. 

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

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

8 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

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

12 authority determines that there is, or that there is 

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

14 take necessary corrective actions under section 

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

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

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

21 make payments to an insurer (designated by the 

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

25 there is a reasonable expectation that, without such 
51 

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1 payments, claims would not be satisfied by reason of 

2 termination of such coverage. The Secretary shall, to 

3 the extent provided in advance in appropriation 

4 Acts, pay such amounts so determined to the insurer 

5 designated by the Secretary. 

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

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

8 on the books of the Treasury a fund to be 

9 known as the ‘Association Health Plan Fund’. 

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

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

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

19 are in excess of current needs, the Secretary 

20 may request the investment of such amounts as 

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

23 guaranteed by the United States. 

24 ‘‘(g) EXCESS /STOP LOSS INSURANCE.—For pur25 poses of this section: 
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1 ‘‘(1) AGGREGATE EXCESS /STOP LOSS INSUR2 ANCE.—The term ‘aggregate excess /stop loss insur3 ance’ means, in connection with an association 

4 health plan, a contract— 

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

6 minimum standards as the applicable authority 

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

9 claims under the plan in excess of an amount 

10 or amounts specified in such contract; 

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

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

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

18 health plan, a contract— 

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

20 minimum standards as the applicable authority 

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

23 the plan in connection with a covered individual 

24 in excess of an amount or amounts specified in 
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1 such contract in connection with such covered 

2 individual; 

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

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

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

8 of this section, the term ‘indemnification insurance’ 

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

10 contract— 

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

14 plan with respect to claims under the plan which the 

15 plan is unable to satisfy by reason of a termination 

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

17 termination); 

18 ‘‘(2) which is guaranteed renewable and 

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

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

22 any third party on behalf of the insured plan. 

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

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

25 health plan, plan assets which meet the fiduciary stand-
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1 ards under part 4 and such additional requirements re2 garding liquidity as the applicable authority may prescribe 

3 by regulation. 

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

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

6 date of the enactment of the Small Business Health 

7 Fairness Act of 2004, the applicable authority shall 

8 establish a Solvency Standards Working Group. In 

9 prescribing the initial regulations under this section, 

10 the applicable authority shall take into account the 

11 recommendations of such Working Group. 

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

13 consist of not more than 15 members appointed by 

14 the applicable authority. The applicable authority 

15 shall include among persons invited to membership 

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

17 following: 

18 ‘‘(A) A representative of the National As19 sociation of Insurance Commissioners. 

20 ‘‘(B) A representative of the American 

21 Academy of Actuaries. 

22 ‘‘(C) A representative of the State govern23 ments, or their interests. 

24 ‘‘(D) A representative of existing self-in25 sured arrangements, or their interests. 
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1 ‘‘(E) A representative of associations of 

2 the type referred to in section 801(b)(1), or 

3 their interests. 

4 ‘‘(F) A representative of multiemployer 

5 plans that are group health plans, or their in6 terests. 

7 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE8 LATED REQUIREMENTS. 

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

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

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

12 an application for certification under this part a filing fee 

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

14 case of the Secretary, to the extent provided in appropria15 tion Acts, for the sole purpose of administering the certifi16 cation procedures applicable with respect to association 

17 health plans. 

18 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA19 TION FOR CERTIFICATION.—An application for certifi20 cation under this part meets the requirements of this sec21 tion only if it includes, in a manner and form which shall 

22 be prescribed by the applicable authority by regulation, at 

23 least the following information: 

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

25 and addresses of— 
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1 ‘‘(A) the sponsor; and 

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

3 of the plan. 

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

5 BUSINESS.—The States in which participants and 

6 beneficiaries under the plan are to be located and 

7 the number of them expected to be located in each 

8 such State. 

9 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro10 vided by the board of trustees that the bonding re11 quirements of section 412 will be met as of the date 

12 of the application or (if later) commencement of op13 erations. 

14 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu15 ments governing the plan (including any bylaws and 

16 trust agreements), the summary plan description, 

17 and other material describing the benefits that will 

18 be provided to participants and beneficiaries under 

19 the plan. 

20 ‘‘(5) AGREEMENTS WITH SERVICE PRO21 VIDERS.—A copy of any agreements between the 

22 plan and contract administrators and other service 

23 providers. 

24 ‘‘(6) FUNDING REPORT.—In the case of asso25 ciation health plans providing benefits options in ad-
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1 dition to health insurance coverage, a report setting 

2 forth information with respect to such additional 

3 benefit options determined as of a date within the 

4 120-day period ending with the date of the applica5 tion, including the following: 

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

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

8 statement of actuarial opinion, signed by a 

9 qualified actuary, that all applicable require10 ments of section 806 are or will be met in ac11 cordance with regulations which the applicable 

12 authority shall prescribe. 

13 ‘‘(B) ADEQUACY OF CONTRIBUTION

14 RATES.—A statement of actuarial opinion, 

15 signed by a qualified actuary, which sets forth 

16 a description of the extent to which contribution 

17 rates are adequate to provide for the payment 

18 of all obligations and the maintenance of re19 quired reserves under the plan for the 12- 

20 month period beginning with such date within 

21 such 120-day period, taking into account the 

22 expected coverage and experience of the plan. If 

23 the contribution rates are not fully adequate, 

24 the statement of actuarial opinion shall indicate 
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1 the extent to which the rates are inadequate 

2 and the changes needed to ensure adequacy. 

3 ‘‘(C) CURRENT AND PROJECTED VALUE OF

4 ASSETS AND LIABILITIES.—A statement of ac5 tuarial opinion signed by a qualified actuary, 

6 which sets forth the current value of the assets 

7 and liabilities accumulated under the plan and 

8 a projection of the assets, liabilities, income, 

9 and expenses of the plan for the 12-month pe10 riod referred to in subparagraph (B). The in11 come statement shall identify separately the 

12 plan’s administrative expenses and claims. 

13 ‘‘(D) COSTS OF COVERAGE TO BE

14 CHARGED AND OTHER EXPENSES.—A state15 ment of the costs of coverage to be charged, in16 cluding an itemization of amounts for adminis17 tration, reserves, and other expenses associated 

18 with the operation of the plan. 

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

20 information as may be determined by the appli21 cable authority, by regulation, as necessary to 

22 carry out the purposes of this part. 

23 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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

25 association health plan shall not be effective unless written 
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1 notice of such certification is filed with the applicable 

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

3 of the participants and beneficiaries under the plan are 

4 located. For purposes of this subsection, an individual 

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

6 known address of such individual is located or in which 

7 such individual is employed. 

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

9 of any association health plan certified under this part, 

10 descriptions of material changes in any information which 

11 was required to be submitted with the application for the 

12 certification under this part shall be filed in such form 

13 and manner as shall be prescribed by the applicable au14 thority by regulation. The applicable authority may re15 quire by regulation prior notice of material changes with 

16 respect to specified matters which might serve as the basis 

17 for suspension or revocation of the certification. 

18 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS19 SOCIATION HEALTH PLANS.—An association health plan 

20 certified under this part which provides benefit options in 

21 addition to health insurance coverage for such plan year 

22 shall meet the requirements of section 103 by filing an 

23 annual report under such section which shall include infor24 mation described in subsection (b)(6) with respect to the 

25 plan year and, notwithstanding section 104(a)(1)(A), shall 
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1 be filed with the applicable authority not later than 90 

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

3 as may be prescribed by the applicable authority). The ap4 plicable authority may require by regulation such interim 

5 reports as it considers appropriate. 

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

7 board of trustees of each association health plan which 

8 provides benefits options in addition to health insurance 

9 coverage and which is applying for certification under this 

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

11 of all participants and beneficiaries, a qualified actuary 

12 who shall be responsible for the preparation of the mate13 rials comprising information necessary to be submitted by 

14 a qualified actuary under this part. The qualified actuary 

15 shall utilize such assumptions and techniques as are nec16 essary to enable such actuary to form an opinion as to 

17 whether the contents of the matters reported under this 

18 part— 

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

20 the experience of the plan and to reasonable expecta21 tions; and 

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

23 anticipated experience under the plan. 

24 The opinion by the qualified actuary shall be made with 

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

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

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

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

7 not less than 60 days before the proposed termination 

8 date— 

9 ‘‘(1) provides to the participants and bene10 ficiaries a written notice of intent to terminate stat11 ing that such termination is intended and the pro12 posed termination date; 

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

14 of the plan in connection with such termination in 

15 a manner which will result in timely payment of all 

16 benefits for which the plan is obligated; and 

17 ‘‘(3) submits such plan in writing to the appli18 cable authority. 

19 Actions required under this section shall be taken in such 

20 form and manner as may be prescribed by the applicable 

21 authority by regulation. 

22 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI23 NATION. 

24 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE25 SERVES.—An association health plan which is certified 

26 under this part and which provides benefits other than 
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1 health insurance coverage shall continue to meet the re2 quirements of section 806, irrespective of whether such 

3 certification continues in effect. The board of trustees of 

4 such plan shall determine quarterly whether the require5 ments of section 806 are met. In any case in which the 

6 board determines that there is reason to believe that there 

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

8 applicable authority makes such a determination and so 

9 notifies the board, the board shall immediately notify the 

10 qualified actuary engaged by the plan, and such actuary 

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

12 make such recommendations to the board for corrective 

13 action as the actuary determines necessary to ensure com14 pliance with section 806. Not later than 30 days after re15 ceiving from the actuary recommendations for corrective 

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

17 such form and manner as the applicable authority may 

18 prescribe by regulation) of such recommendations of the 

19 actuary for corrective action, together with a description 

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

21 to take in response to such recommendations. The board 

22 shall thereafter report to the applicable authority, in such 

23 form and frequency as the applicable authority may speci24 fy to the board, regarding corrective action taken by the 

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

2 which— 

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

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

5 loss insurance or indemnity insurance pursuant to 

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

7 plan which is or has been certified under this part 

8 and is described in section 806(a)(2) to meet the re9 quirements of section 806 and has not been notified 

10 by the board of trustees of the plan that corrective 

11 action has restored compliance with such require12 ments; and 

13 ‘‘(2) the applicable authority determines that 

14 there is a reasonable expectation that the plan will 

15 continue to fail to meet the requirements of section 

16 806, 

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

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

19 course of the termination, take such actions as the appli20 cable authority may require, including satisfying any 

21 claims referred to in section 806(a)(2)(B)(iii) and recov22 ering for the plan any liability under subsection 

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

24 that the affairs of the plan will be, to the maximum extent 
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1 possible, wound up in a manner which will result in timely 

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

3 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL4 VENT ASSOCIATION HEALTH PLANS PRO5 VIDING HEALTH BENEFITS IN ADDITION TO 

6 HEALTH INSURANCE COVERAGE. 

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

8 INSOLVENT PLANS.—Whenever the Secretary determines 

9 that an association health plan which is or has been cer10 tified under this part and which is described in section 

11 806(a)(2) will be unable to provide benefits when due or 

12 is otherwise in a financially hazardous condition, as shall 

13 be defined by the Secretary by regulation, the Secretary 

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

15 United States district court for appointment of the Sec16 retary as trustee to administer the plan for the duration 

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

18 other interested persons may intervene in the proceedings 

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

20 Secretary trustee if the court determines that the trustee21 ship is necessary to protect the interests of the partici22 pants and beneficiaries or providers of medical care or to 

23 avoid any unreasonable deterioration of the financial con24 dition of the plan. The trusteeship of such Secretary shall 

25 continue until the conditions described in the first sen-
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1 tence of this subsection are remedied or the plan is termi2 nated. 

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

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

5 the power— 

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

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

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

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

10 of the assets and records of the plan to the Sec11 retary as trustee; 

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

13 Secretary holds in accordance with the provisions of 

14 the plan, regulations prescribed by the Secretary, 

15 and applicable provisions of law; 

16 ‘‘(4) to require the sponsor, the plan adminis17 trator, any participating employer, and any employee 

18 organization representing plan participants to fur19 nish any information with respect to the plan which 

20 the Secretary as trustee may reasonably need in 

21 order to administer the plan; 

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

23 plan and to recover reasonable expenses of the trust24 eeship; 
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1 ‘‘(6) to commence, prosecute, or defend on be2 half of the plan any suit or proceeding involving the 

3 plan; 

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

7 court; 

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

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

10 liquidate the plan assets, to restore the plan to the 

11 responsibility of the sponsor, or to continue the 

12 trusteeship; 

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

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

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

20 care. 

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

23 Secretary shall give notice of such appointment to— 

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

25 ‘‘(2) each participant; 
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1 ‘‘(3) each participating employer; and 

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

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

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

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

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

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

11 of a fiduciary for purposes of this title. 

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

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

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

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

18 to enforce a lien against property of the plan. 

19 ‘‘(f) JURISDICTION OF COURT.— 

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

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

23 application is made shall have exclusive jurisdiction 

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

2 States having jurisdiction over cases under chapter 

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

5 upon appointment by it of the Secretary as trustee, 

6 such court shall continue the stay of, any pending 

7 mortgage foreclosure, equity receivership, or other 

8 proceeding to reorganize, conserve, or liquidate the 

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

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

16 sponsor or any other suit against the plan or the 

17 sponsor. 

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

19 may be brought in the judicial district where the 

20 sponsor or the plan administrator resides or does 

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

22 A district court in which such action is brought may 

23 issue process with respect to such action in any 

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

2 which shall be prescribed by the Secretary, the Secretary 

3 shall appoint, retain, and compensate accountants, actu4 aries, and other professional service personnel as may be 

5 necessary in connection with the Secretary’s service as 

6 trustee under this section. 

7 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

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

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

11 commenced operations in such State after the date of the 

12 enactment of the Small Business Health Fairness Act of 

13 2004. 

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

16 an association health plan means any tax imposed by such 

17 State if— 

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

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

21 residents of such State, which are received by the 

22 plan from participating employers located in such 

23 State or from such individuals; 

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

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

3 offered in such State in connection with a group 

4 health plan; 

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

6 and 

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

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

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

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

14 /stop loss insurance (as defined in section 

15 806(g)(2)), other insurance related to the provision 

16 of medical care under the plan, or any combination 

17 thereof provided by such insurers or health mainte18 nance organizations in such State in connection with 

19 such plan. 

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

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

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

23 health plan’ has the meaning provided in section 

24 733(a)(1) (after applying subsection (b) of this sec25 tion). 
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1 ‘‘(2) MEDICAL CARE.—The term ‘medical care’ 

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

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

4 term ‘health insurance coverage’ has the meaning 

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

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

7 ‘health insurance issuer’ has the meaning provided 

8 in section 733(b)(2). 

9 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap10 plicable authority’ means the Secretary, except that, 

11 in connection with any exercise of the Secretary’s 

12 authority regarding which the Secretary is required 

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

14 term means the Secretary, in consultation with such 

15 State. 

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

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

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

19 ‘‘(7) INDIVIDUAL MARKET.— 

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

21 market’ means the market for health insurance 

22 coverage offered to individuals other than in 

23 connection with a group health plan. 

24 ‘‘(B) TREATMENT OF VERY SMALL

25 GROUPS.— 
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1 ‘‘(i) IN GENERAL.—Subject to clause 

2 (ii), such term includes coverage offered in 

3 connection with a group health plan that 

4 has fewer than 2 participants as current 

5 employees or participants described in sec6 tion 732(d)(3) on the first day of the plan 

7 year. 

8 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

9 shall not apply in the case of health insur10 ance coverage offered in a State if such 

11 State regulates the coverage described in 

12 such clause in the same manner and to the 

13 same extent as coverage in the small group 

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

15 the Public Health Service Act) is regulated 

16 by such State. 

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

18 ‘participating employer’ means, in connection with 

19 an association health plan, any employer, if any indi20 vidual who is an employee of such employer, a part21 ner in such employer, or a self-employed individual 

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

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

24 or was covered under such plan in connection with 

25 the status of such individual as such an employee, 
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1 partner, or self-employed individual in relation to the 

2 plan. 

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

4 term ‘applicable State authority’ means, with respect 

5 to a health insurance issuer in a State, the State in6 surance commissioner or official or officials des7 ignated by the State to enforce the requirements of 

8 title XXVII of the Public Health Service Act for the 

9 State involved with respect to such issuer. 

10 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali11 fied actuary’ means an individual who is a member 

12 of the American Academy of Actuaries. 

13 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili14 ated member’ means, in connection with a sponsor— 

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

16 be a member of the sponsor but who elects an 

17 affiliated status with the sponsor, 

18 ‘‘(B) in the case of a sponsor with mem19 bers which consist of associations, a person who 

20 is a member of any such association and elects 

21 an affiliated status with the sponsor, or 

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

23 plan in existence on the date of the enactment 

24 of the Small Business Health Fairness Act of 
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1 2004, a person eligible to be a member of the 

2 sponsor or one of its member associations. 

3 ‘‘(12) LARGE EMPLOYER.—The term ‘large em4 ployer’ means, in connection with a group health 

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

6 employed an average of at least 51 employees on 

7 business days during the preceding calendar year 

8 and who employs at least 2 employees on the first 

9 day of the plan year. 

10 ‘‘(13) SMALL EMPLOYER.—The term ‘small em11 ployer’ means, in connection with a group health 

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

13 is not a large employer. 

14 ‘‘(b) RULES OF CONSTRUCTION.— 

15 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur16 poses of determining whether a plan, fund, or pro17 gram is an employee welfare benefit plan which is an 

18 association health plan, and for purposes of applying 

19 this title in connection with such plan, fund, or pro20 gram so determined to be such an employee welfare 

21 benefit plan— 

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

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

24 the partnership in relation to the partners, and 

25 the term ‘employee’ (as defined in section 3(6)) 
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1 includes any partner in relation to the partner2 ship; and 

3 ‘‘(B) in the case of a self-employed indi4 vidual, the term ‘employer’ (as defined in sec5 tion 3(5)) and the term ‘employee’ (as defined 

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

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

8 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

9 case of any plan, fund, or program which was estab10 lished or is maintained for the purpose of providing 

11 medical care (through the purchase of insurance or 

12 otherwise) for employees (or their dependents) cov13 ered thereunder and which demonstrates to the Sec14 retary that all requirements for certification under 

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

16 fund, or program if such plan, fund, or program 

17 were a group health plan, such plan, fund, or pro18 gram shall be treated for purposes of this title as an 

19 employee welfare benefit plan on and after the date 

20 of such demonstration.’’. 

21 (b) CONFORMING AMENDMENTS TO PREEMPTION

22 RULES.— 

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

24 1144(b)(6)) is amended by adding at the end the 

25 following new subparagraph: 
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1 ‘‘(E) The preceding subparagraphs of this paragraph 

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

3 of an association health plan which is certified under part 

4 8.’’. 

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

6 is amended— 

7 (A) in subsection (b)(4), by striking ‘‘Sub8 section (a)’’ and inserting ‘‘Subsections (a) and 

9 (d)’’; 

10 (B) in subsection (b)(5), by striking ‘‘sub11 section (a)’’ in subparagraph (A) and inserting 

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

13 (a)(2)(B) and (b) of section 805’’, and by strik14 ing ‘‘subsection (a)’’ in subparagraph (B) and 

15 inserting ‘‘subsection (a) of this section or sub16 section (a)(2)(B) or (b) of section 805’’; 

17 (C) by redesignating subsection (d) as sub18 section (e); and 

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

20 following new subsection: 

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

22 provisions of this title shall supersede any and all State 

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

24 have the effect of precluding, a health insurance issuer 

25 from offering health insurance coverage in connection with 
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1 an association health plan which is certified under part 

2 8. 

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

4 of subsection (b) of this section— 

5 ‘‘(A) In any case in which health insurance cov6 erage of any policy type is offered under an associa7 tion health plan certified under part 8 to a partici8 pating employer operating in such State, the provi9 sions of this title shall supersede any and all laws 

10 of such State insofar as they may preclude a health 

11 insurance issuer from offering health insurance cov12 erage of the same policy type to other employers op13 erating in the State which are eligible for coverage 

14 under such association health plan, whether or not 

15 such other employers are participating employers in 

16 such plan. 

17 ‘‘(B) In any case in which health insurance cov18 erage of any policy type is offered in a State under 

19 an association health plan certified under part 8 and 

20 the filing, with the applicable State authority (as de21 fined in section 812(a)(9)), of the policy form in 

22 connection with such policy type is approved by such 

23 State authority, the provisions of this title shall su24 persede any and all laws of any other State in which 

25 health insurance coverage of such type is offered, in-
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1 sofar as they may preclude, upon the filing in the 

2 same form and manner of such policy form with the 

3 applicable State authority in such other State, the 

4 approval of the filing in such other State. 

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

6 provisions of this subsection shall be construed, with re7 spect to health insurance issuers or health insurance cov8 erage, to supersede or impair the law of any State— 

9 ‘‘(A) providing solvency standards or similar 

10 standards regarding the adequacy of insurer capital, 

11 surplus, reserves, or contributions, or 

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

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

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

15 805. 

16 ‘‘(5) For purposes of this subsection, the term ‘asso17 ciation health plan’ has the meaning provided in section 

18 801(a), and the terms ‘health insurance coverage’, ‘par19 ticipating employer’, and ‘health insurance issuer’ have 

20 the meanings provided such terms in section 812, respec21 tively.’’. 

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

23 U.S.C. 1144(b)(6)(A)) is amended— 

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

25 the end; 
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1 (B) in clause (ii), by inserting ‘‘and which 

2 does not provide medical care (within the mean3 ing of section 733(a)(2)),’’ after ‘‘arrange4 ment,’’, and by striking ‘‘title.’’ and inserting 

5 ‘‘title, and’’; and 

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

7 clause: 

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

9 of any other employee welfare benefit plan which is 

10 a multiple employer welfare arrangement and which 

11 provides medical care (within the meaning of section 

12 733(a)(2)), any law of any State which regulates in13 surance may apply.’’. 

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

15 by paragraph (2)(C)) is amended— 

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

17 ‘‘(1) Except as provided in paragraph (2), noth18 ing’’; and 

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

20 paragraph: 

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

22 on or after the date of the enactment of the Small Busi23 ness Health Fairness Act of 2004 shall be construed to 

24 alter, amend, modify, invalidate, impair, or supersede any 
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1 provision of this title, except by specific cross-reference to 

2 the affected section.’’. 

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

4 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

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

6 person serving as the sponsor of an association health plan 

7 under part 8.’’. 

8 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE9 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

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

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

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

13 include in its summary plan description, in connection 

14 with each benefit option, a description of the form of sol15 vency or guarantee fund protection secured pursuant to 

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

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

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

19 (f) REPORT TO THE CONGRESS REGARDING CERTIFI20 CATION OF SELF-INSURED ASSOCIATION HEALTH

21 PLANS.—Not later than January 1, 2009, the Secretary 

22 of Labor shall report to the Committee on Education and 

23 the Workforce of the House of Representatives and the 

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

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

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

4 in section 1 of the Employee Retirement Income Security 

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

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘801. Association health plans. 

‘‘802. Certification of association health plans. 

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

‘‘804. Participation and coverage requirements. 

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

benefit options. 

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

health benefits in addition to health insurance coverage. 

‘‘807. Requirements for application and related requirements. 

‘‘808. Notice requirements for voluntary termination. 

‘‘809. Corrective actions and mandatory termination. 

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

‘‘811. State assessment authority. 

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

7 SEC. 2003. CLARIFICATION OF TREATMENT OF SINGLE EM8 PLOYER ARRANGEMENTS. 

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

10 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend11 ed— 

12 (1) in clause (i), by inserting after ‘‘control 

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

14 which the benefit referred to in subparagraph (A) 

15 consists of medical care (as defined in section 

16 812(a)(2)), two or more trades or businesses, wheth17 er or not incorporated, shall be deemed a single em-
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1 ployer for any plan year of such plan, or any fiscal 

2 year of such other arrangement, if such trades or 

3 businesses are within the same control group during 

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

5 period,’’; 

6 (2) in clause (iii), by striking ‘‘(iii) the deter7 mination’’ and inserting the following: 

8 ‘‘(iii)(I) in any case in which the benefit re9 ferred to in subparagraph (A) consists of medical 

10 care (as defined in section 812(a)(2)), the deter11 mination of whether a trade or business is under 

12 ‘common control’ with another trade or business 

13 shall be determined under regulations of the Sec14 retary applying principles consistent and coextensive 

15 with the principles applied in determining whether 

16 employees of two or more trades or businesses are 

17 treated as employed by a single employer under sec18 tion 4001(b), except that, for purposes of this para19 graph, an interest of greater than 25 percent may 

20 not be required as the minimum interest necessary 

21 for common control, or 

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

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

24 clauses (v) and (vi), respectively; and 
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1 (4) by inserting after clause (iii) the following 

2 new clause: 

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

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

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

6 the application of clause (i), whether benefits are 

7 provided to employees of two or more employers, the 

8 arrangement shall be treated as having only one par9 ticipating employer if, after the application of clause 

10 (i), the number of individuals who are employees and 

11 former employees of any one participating employer 

12 and who are covered under the arrangement is 

13 greater than 75 percent of the aggregate number of 

14 all individuals who are employees or former employ15 ees of participating employers and who are covered 

16 under the arrangement,’’. 

17 SEC. 2004. ENFORCEMENT PROVISIONS RELATING TO ASSO18 CIATION HEALTH PLANS. 

19 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

20 MISREPRESENTATIONS.—Section 501 of the Employee 

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

22 is amended— 

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

24 (2) by adding at the end the following new sub25 section: 
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1 ‘‘(b) Any person who willfully falsely represents, to 

2 any employee, any employee’s beneficiary, any employer, 

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

4 established or maintained for the purpose of offering or 

5 providing any benefit described in section 3(1) to employ6 ees or their beneficiaries as— 

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

8 been certified under part 8; 

9 ‘‘(2) having been established or maintained 

10 under or pursuant to one or more collective bar11 gaining agreements which are reached pursuant to 

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

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

14 paragraph Fourth of section 2 of the Railway Labor 

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

16 reached pursuant to labor-management negotiations 

17 under similar provisions of State public employee re18 lations laws; or 

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

20 section 3(40)(A)(i), 

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

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

23 both.’’. 
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1 (b) CEASE ACTIVITIES ORDERS.—Section 502 of 

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

3 end the following new subsection: 

4 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE5 SIST ORDERS.— 

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

7 upon application by the Secretary showing the oper8 ation, promotion, or marketing of an association 

9 health plan (or similar arrangement providing bene10 fits consisting of medical care (as defined in section 

11 733(a)(2))) that— 

12 ‘‘(A) is not certified under part 8, is sub13 ject under section 514(b)(6) to the insurance 

14 laws of any State in which the plan or arrange15 ment offers or provides benefits, and is not li16 censed, registered, or otherwise approved under 

17 the insurance laws of such State; or 

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

19 under part 8 and is not operating in accordance 

20 with the requirements under part 8 for such 

21 certification, 

22 a district court of the United States shall enter an 

23 order requiring that the plan or arrangement cease 

24 activities. 
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1 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

2 apply in the case of an association health plan or 

3 other arrangement if the plan or arrangement shows 

4 that— 

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

6 paragraph (1) consist of health insurance cov7 erage; and 

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

9 the plan or arrangement offers or provides ben10 efits, the plan or arrangement is operating in 

11 accordance with applicable State laws that are 

12 not superseded under section 514. 

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

14 court may grant such additional equitable relief, in15 cluding any relief available under this title, as it 

16 deems necessary to protect the interests of the pub17 lic and of persons having claims for benefits against 

18 the plan.’’. 

19 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.— 

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

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

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

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

24 each association health plan which is or has been certified 

25 under part 8 shall require the board of trustees or the 
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1 named fiduciary (as applicable) to ensure that the require2 ments of this section are met in connection with claims 

3 filed under the plan.’’. 

4 SEC. 2005. COOPERATION BETWEEN FEDERAL AND STATE 

5 AUTHORITIES. 

6 Section 506 of the Employee Retirement Income Se7 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

8 at the end the following new subsection: 

9 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

10 TO ASSOCIATION HEALTH PLANS.— 

11 ‘‘(1) AGREEMENTS WITH STATES.—The Sec12 retary shall consult with the State recognized under 

13 paragraph (2) with respect to an association health 

14 plan regarding the exercise of— 

15 ‘‘(A) the Secretary’s authority under sec16 tions 502 and 504 to enforce the requirements 

17 for certification under part 8; and 

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

19 association health plans under part 8 in accord20 ance with regulations of the Secretary applica21 ble to certification under part 8. 

22 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

23 STATE.—In carrying out paragraph (1), the Sec24 retary shall ensure that only one State will be recog25 nized, with respect to any particular association 
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1 health plan, as the State with which consultation is 

2 required. In carrying out this paragraph— 

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

4 health insurance coverage (as defined in section 

5 812(a)(3)), such State shall be the State with 

6 which filing and approval of a policy type of7 fered by the plan was initially obtained, and 

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

9 take into account the places of residence of the 

10 participants and beneficiaries under the plan 

11 and the State in which the trust is main12 tained.’’. 

13 SEC. 2006. EFFECTIVE DATE AND TRANSITIONAL AND 

14 OTHER RULES. 

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

16 this title shall take effect 1 year after the date of the en17 actment of this title. The Secretary of Labor shall first 

18 issue all regulations necessary to carry out the amend19 ments made by this title within 1 year after the date of 

20 the enactment of this title. 

21 (b) TREATMENT OF CERTAIN EXISTING HEALTH

22 BENEFITS PROGRAMS.— 

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

24 the date of the enactment of this title, an arrange25 ment is maintained in a State for the purpose of 
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1 providing benefits consisting of medical care for the 

2 employees and beneficiaries of its participating em3 ployers, at least 200 participating employers make 

4 contributions to such arrangement, such arrange5 ment has been in existence for at least 10 years, and 

6 such arrangement is licensed under the laws of one 

7 or more States to provide such benefits to its par8 ticipating employers, upon the filing with the appli9 cable authority (as defined in section 812(a)(5) of 

10 the Employee Retirement Income Security Act of 

11 1974 (as amended by this subtitle)) by the arrange12 ment of an application for certification of the ar13 rangement under part 8 of subtitle B of title I of 

14 such Act— 

15 (A) such arrangement shall be deemed to 

16 be a group health plan for purposes of title I 

17 of such title; 

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

19 and 803(a) of the Employee Retirement Income 

20 Security Act of 1974 shall be deemed met with 

21 respect to such arrangement; 

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

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

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

3 vote; and 

4 (ii) has complete fiscal control over 

5 the arrangement and which is responsible 

6 for all operations of the arrangement; 

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

8 such Act shall be deemed met with respect to 

9 such arrangement; and 

10 (E) the arrangement may be certified by 

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

13 State on the date of certification. 

14 The provisions of this subsection shall cease to apply 

15 with respect to any such arrangement at such time 

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

17 applicable requirements of this subsection are not 

18 met with respect to such arrangement. 

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

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

22 meanings provided in section 812 of the Employee 

23 Retirement Income Security Act of 1974, except 

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

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

Passed the House of Representatives May 12, 2004. 

Attest: JEFF TRANDAHL, 

Clerk. 
Calendar No. 539 

108TH CONGRESS 

2D SESSION H. R. 4279 

AN ACT 

To amend the Internal Revenue Code of 1986 to 

ployees. nesses with respect to medical care for their emand choice for entrepreneurs with small busiIncome Security Act of 1974 to improve access and to amend title I of the Employee Retirement tem places on the health care delivery system, by reducing the excessive burden the liability syscare services and provide improved medical care rangements, to improve patient access to health fits in cafeteria plans and flexible spending arprovide for the disposition of unused health beneMAY 21, 2004 

Read the second time and placed on the calendar