II 

109TH CONGRESS 

1ST SESSION S. 406 

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

improve access and choice for entrepreneurs with small businesses with 

respect to medical care for their employees. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 16, 2005 

Ms. SNOWE (for herself, Mr. TALENT, Mr. BOND, Mr. BYRD, Mrs. DOLE, Mr. 

MCCAIN, Mrs. HUTCHISON, Mr. COLEMAN, Mr. VITTER, and Mr. MARTINEZ) introduced the following bill; which was read twice and referred 

to the Committee on Health, Education, Labor, and Pensions 

A BILL

To amend title I of the Employee Retirement 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, 

3 SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 

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

5 ‘‘Small Business Health Fairness Act of 2005’’. 

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

7 as follows:
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Sec. 1. Short title and table of contents. 

Sec. 2. Rules governing association health plans. 

Sec. 3. Clarification of treatment of single employer arrangements. 

Sec. 4. Enforcement provisions relating to association health plans. 

Sec. 5. Cooperation between Federal and State authorities. 

Sec. 6. Effective date and transitional and other rules.

1 SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS. 

2 (a) IN GENERAL.—Subtitle B of title I of the Em3 ployee Retirement Income Security Act of 1974 is amend4 ed by adding after part 7 the following new part: 

5 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

6 HEALTH PLANS 

7 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

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

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

10 whose sponsor is (or is deemed under this part to be) de11 scribed in subsection (b). 

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

13 plan is described in this subsection if such sponsor— 

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

15 with a constitution and bylaws specifically stating its 

16 purpose and providing for periodic meetings on at 

17 least an annual basis, as a bona fide trade associa18 tion, a bona fide industry association (including a 

19 rural electric cooperative association or a rural tele20 phone cooperative association), a bona fide profes21 sional association, or a bona fide chamber of com22 merce (or similar bona fide business association, in-
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1 cluding a corporation or similar organization that 

2 operates on a cooperative basis (within the meaning 

3 of section 1381 of the Internal Revenue Code of 

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

5 obtaining or providing medical care; 

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

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

9 of dues or payments necessary to maintain eligibility 

10 for membership in the sponsor; and 

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

12 or payments, or coverage under the plan on the 

13 basis of health status-related factors with respect to 

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

16 not condition such dues or payments on the basis of 

17 group health plan participation. 

18 Any sponsor consisting of an association of entities which 

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

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

22 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

23 PLANS. 

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

25 prescribe by regulation a procedure under which, subject 
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1 to subsection (b), the applicable authority shall certify as2 sociation health plans which apply for certification as 

3 meeting the requirements of this part. 

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

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

6 health plan that provides at least one benefit option which 

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

10 satisfied that the applicable requirements of this part are 

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

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

13 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

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

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

18 is to commence operations). 

19 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI20 CATION.—The applicable authority may provide by regula21 tion for continued certification of association health plans 

22 under this part. 

23 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

24 PLANS.—The applicable authority shall establish a class 

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

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

4 the plans in each class of such association health plans 

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

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

9 HEALTH PLANS.—An association health plan which offers 

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

11 insurance coverage may be certified under this part only 

12 if such plan consists of any of the following: 

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

14 date of the enactment of the Small Business Health 

15 Fairness Act of 2005. 

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

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

19 employers represent a broad cross-section of trades 

20 and businesses or industries. 

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

23 one or more industries, consisting of any of the fol24 lowing: agriculture; equipment and automobile deal25 erships; barbering and cosmetology; certified public 
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1 accounting practices; child care; construction; dance, 

2 theatrical and orchestra productions; disinfecting 

3 and pest control; financial services; fishing; 

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

10 industry which has been indicated as having average 

11 or above-average risk or health claims experience by 

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

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

17 BOARDS OF TRUSTEES. 

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

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

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

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

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

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

2 this subsection are met with respect to an association 

3 health plan if the following requirements are met: 

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

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

7 and which is responsible for all operations of the 

8 plan. 

9 ‘‘(2) RULES OF OPERATION AND FINANCIAL

10 CONTROLS.—The board of trustees has in effect 

11 rules of operation and financial controls, based on a 

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

13 terms of the plan and to meet all requirements of 

14 this title applicable to the plan. 

15 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

16 PARTICIPATING EMPLOYERS AND TO CONTRAC17 TORS.— 

18 ‘‘(A) BOARD MEMBERSHIP.— 

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

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

23 officers, directors, or employees of the par24 ticipating employers or who are partners in 
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1 the participating employers and actively 

2 participate in the business. 

3 ‘‘(ii) LIMITATION.— 

4 ‘‘(I) GENERAL RULE.—Except as 

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

6 no such member is an owner, officer, 

7 director, or employee of, or partner in, 

8 a contract administrator or other 

9 service provider to the plan. 

10 ‘‘(II) LIMITED EXCEPTION FOR

11 PROVIDERS OF SERVICES SOLELY ON

12 BEHALF OF THE SPONSOR.—Officers 

13 or employees of a sponsor which is a 

14 service provider (other than a contract 

15 administrator) to the plan may be 

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

18 the membership of the board and they 

19 do not provide services to the plan 

20 other than on behalf of the sponsor. 

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

23 case of a sponsor which is an associa24 tion whose membership consists pri25 marily of providers of medical care, 
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1 subclause (I) shall not apply in the 

2 case of any service provider described 

3 in subclause (I) who is a provider of 

4 medical care under the plan. 

5 ‘‘(iii) CERTAIN PLANS EXCLUDED.—

6 Clause (i) shall not apply to an association 

7 health plan which is in existence on the 

8 date of the enactment of the Small Busi9 ness Health Fairness Act of 2005. 

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

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

14 day-to-day affairs of the plan. 

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

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

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

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

22 deemed to be the sponsor referred to in section 

23 801(b), such network were deemed to be an associa24 tion described in section 801(b), and each franchisee 
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1 were deemed to be a member (of the association and 

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

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

4 be deemed met. 

5 The Secretary may by regulation define for purposes of 

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

7 and ‘franchisee’. 

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

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

11 requirements of this subsection are met with respect to 

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

13 plan— 

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

15 ‘‘(A) a member of the sponsor; 

16 ‘‘(B) the sponsor; or 

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

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

20 a sponsor which is a professional association or 

21 other individual-based association, if at least 

22 one of the officers, directors, or employees of an 

23 employer, or at least one of the individuals who 

24 are partners in an employer and who actively 

25 participates in the business, is a member or 
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1 such an affiliated member of the sponsor, par2 ticipating employers may also include such em3 ployer; 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 2005, 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) IN GENERAL.—The contribution rates 

9 for any participating small employer shall not 

10 vary on the basis of any health status-related 

11 factor in relation to employees of such employer 

12 or their beneficiaries and shall not vary on the 

13 basis of the type of business or industry in 

14 which such employer is engaged. 

15 ‘‘(B) EFFECT OF TITLE.—Nothing in this 

16 title or any other provision of law shall be con17 strued to preclude an association health plan, or 

18 a health insurance issuer offering health insur19 ance coverage in connection with an association 

20 health plan, 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), subject to the requirements 

8 of section 702(b) relating to contribution 

9 rates. 

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

12 any benefit option under the plan does not consist 

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

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

16 ‘‘(4) MARKETING REQUIREMENTS.— 

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

18 which consists of health insurance coverage is 

19 offered under the plan, State-licensed insurance 

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

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

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

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

3 the term ‘State-licensed insurance agents’ 

4 means one or more agents who are licensed in 

5 a State and are subject to the laws of such 

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

8 persons authorized to offer, sell, or solicit 

9 health insurance coverage in such State. 

10 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

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

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

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

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

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

19 an association health plan, or a health insurance issuer 

20 offering health insurance coverage in connection with an 

21 association health plan, from exercising its sole discretion 

22 in selecting the specific items and services consisting of 

23 medical care to be included as benefits under such plan 

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

25 of (1) any law to the extent that it is not preempted under 
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1 section 731(a)(1) with respect to matters governed by sec2 tion 711, 712, or 713, or (2) any law of the State with 

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

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

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

8 FOR SOLVENCY FOR PLANS PROVIDING 

9 HEALTH BENEFITS IN ADDITION TO HEALTH 

10 INSURANCE COVERAGE. 

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

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

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

14 of health insurance coverage; or 

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

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

18 ‘‘(A) establishes and maintains reserves 

19 with respect to such additional benefit options, 

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

22 ‘‘(i) a reserve sufficient for unearned 

23 contributions; 

24 ‘‘(ii) a reserve sufficient for benefit li25 abilities which have been incurred, which 
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1 have not been satisfied, and for which risk 

2 of loss has not yet been transferred, and 

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

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

6 obligations of the plan; and 

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

8 of error and other fluctuations, taking into 

9 account the specific circumstances of the 

10 plan; and 

11 ‘‘(B) establishes and maintains aggregate 

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

15 has not yet been transferred, as follows: 

16 ‘‘(i) The plan shall secure aggregate 

17 excess/stop loss insurance for the plan with 

18 an attachment point which is not greater 

19 than 125 percent of expected gross annual 

20 claims. The applicable authority may by 

21 regulation provide for upward adjustments 

22 in the amount of such percentage in speci23 fied circumstances in which the plan spe24 cifically provides for and maintains re-
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1 serves in excess of the amounts required 

2 under subparagraph (A). 

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

5 an attachment point which is at least equal 

6 to an amount recommended by the plan’s 

7 qualified actuary. The applicable authority 

8 may by regulation provide for adjustments 

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

13 under subparagraph (A). 

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

16 the plan is unable to satisfy by reason of 

17 a plan termination. 

18 Any person issuing to a plan insurance described in clause 

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

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

25 stop loss insurance as the qualified actuary may 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 insur13 ance provided with respect to such plan and other 

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

15 projected levels of participation or claims, the nature 

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

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

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

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

22 and indemnification insurance as the applicable authority 

23 considers appropriate. Such requirements may be provided 

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

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

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

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

6 provided with respect to such plan or plans. 

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

8 applicable authority may permit an association health plan 

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

10 of the requirements of this section (except subsection 

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

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

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

17 which it is substituted. The applicable authority may take 

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

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

23 applicable terms of the plan in the form of assessments 

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

2 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

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

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

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

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

11 consist of annual payments in the amount of 

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

15 paragraph (2). Payments under this paragraph 

16 are payable to the Fund at the time determined 

17 by the Secretary. Initial payments are due in 

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

21 procedure. 

22 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

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

2 the plan to the Fund. 

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

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

8 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

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

12 authority determines that there is, or that there is 

13 reason to believe that there will be— 

14 ‘‘(A) a failure to take necessary corrective 

15 actions under section 809(a) with respect to an 

16 association health plan described in subsection 

17 (a)(2); or 

18 ‘‘(B) a termination of such a plan under 

19 section 809(b) or 810(b)(8) (and, if the applica20 ble authority is not the Secretary, certifies such 

21 determination to the Secretary), 

22 the Secretary shall determine the amounts necessary 

23 to make payments to an insurer (designated by the 

24 Secretary) to maintain in force excess/stop loss in25 surance coverage or indemnification insurance cov-
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1 erage for such plan, if the Secretary determines that 

2 there is a reasonable expectation that, without such 

3 payments, claims would not be satisfied by reason of 

4 termination of such coverage. The Secretary shall, to 

5 the extent provided in advance in appropriation 

6 Acts, pay such amounts so determined to the insurer 

7 designated by the Secretary. 

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

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

10 on the books of the Treasury a fund to be 

11 known as the ‘Association Health Plan Fund’. 

12 The Fund shall be available for making pay13 ments pursuant to paragraph (2). The Fund 

14 shall be credited with payments received pursu15 ant to paragraph (1)(A), penalties received pur16 suant to paragraph (1)(B); and earnings on in17 vestments of amounts of the Fund under sub18 paragraph (B). 

19 ‘‘(B) INVESTMENT.—Whenever the Sec20 retary determines that the moneys of the fund 

21 are in excess of current needs, the Secretary 

22 may request the investment of such amounts as 

23 the Secretary determines advisable by the Sec24 retary of the Treasury in obligations issued or 

25 guaranteed by the United States. 
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1 ‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 

2 of this section— 

3 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR4 ANCE.—The term ‘aggregate excess/stop loss insur5 ance’ means, in connection with an association 

6 health plan, a contract— 

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

8 minimum standards as the applicable authority 

9 may prescribe by regulation) provides for pay10 ment to the plan with respect to aggregate 

11 claims under the plan in excess of an amount 

12 or amounts specified in such contract; 

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

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

17 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR18 ANCE.—The term ‘specific excess/stop loss insur19 ance’ means, in connection with an association 

20 health plan, a contract— 

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

22 minimum standards as the applicable authority 

23 may prescribe by regulation) provides for pay24 ment to the plan with respect to claims under 

25 the plan in connection with a covered individual 
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1 in excess of an amount or amounts specified in 

2 such contract in connection with such covered 

3 individual; 

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

5 ‘‘(C) which allows for payment of pre6 miums by any third party on behalf of the in7 sured plan. 

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

9 of this section, the term ‘indemnification insurance’ 

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

11 contract— 

12 ‘‘(1) under which an insurer (meeting such min13 imum standards as the applicable authority may pre14 scribe by regulation) provides for payment to the 

15 plan with respect to claims under the plan which the 

16 plan is unable to satisfy by reason of a termination 

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

18 termination); 

19 ‘‘(2) which is guaranteed renewable and 

20 noncancellable for any reason (except as the applica21 ble authority may prescribe by regulation); and 

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

23 any third party on behalf of the insured plan. 

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

25 term ‘reserves’ means, in connection with an association 
27

•S 406 IS

1 health plan, plan assets which meet the fiduciary stand2 ards under part 4 and such additional requirements re3 garding liquidity as the applicable authority may prescribe 

4 by regulation. 

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

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

7 date of the enactment of the Small Business Health 

8 Fairness Act of 2005, the applicable authority shall 

9 establish a Solvency Standards Working Group. In 

10 prescribing the initial regulations under this section, 

11 the applicable authority shall take into account the 

12 recommendations of such Working Group. 

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

14 consist of not more than 15 members appointed by 

15 the applicable authority. The applicable authority 

16 shall include among persons invited to membership 

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

18 following: 

19 ‘‘(A) A representative of the National As20 sociation of Insurance Commissioners. 

21 ‘‘(B) A representative of the American 

22 Academy of Actuaries. 

23 ‘‘(C) A representative of the State govern24 ments, or their interests. 
28

•S 406 IS

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

3 ‘‘(E) A representative of associations of 

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

5 their interests. 

6 ‘‘(F) A representative of multiemployer 

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

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

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

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

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

14 an application for certification under this part a filing fee 

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

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

19 health plans. 

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

24 be prescribed by the applicable authority by regulation, at 

25 least the following information: 
29

•S 406 IS

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

2 and addresses of— 

3 ‘‘(A) the sponsor; and 

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

5 of the plan. 

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

7 BUSINESS.—The States in which participants and 

8 beneficiaries under the plan are to be located and 

9 the number of them expected to be located in each 

10 such State. 

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

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

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

18 trust agreements), the summary plan description, 

19 and other material describing the benefits that will 

20 be provided to participants and beneficiaries under 

21 the plan. 

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

24 plan and contract administrators and other service 

25 providers. 
30

•S 406 IS

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

4 forth information with respect to such additional 

5 benefit options determined as of a date within the 

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

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

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

10 statement of actuarial opinion, signed by a 

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

14 authority shall prescribe. 

15 ‘‘(B) ADEQUACY OF CONTRIBUTION

16 RATES.—A statement of actuarial opinion, 

17 signed by a qualified actuary, which sets forth 

18 a description of the extent to which contribution 

19 rates are adequate to provide for the payment 

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

22 month period beginning with such date within 

23 such 120-day period, taking into account the 

24 expected coverage and experience of the plan. If 

25 the contribution rates are not fully adequate, 
31

•S 406 IS

1 the statement of actuarial opinion shall indicate 

2 the extent to which the rates are inadequate 

3 and the changes needed to ensure adequacy. 

4 ‘‘(C) CURRENT AND PROJECTED VALUE OF

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

7 which sets forth the current value of the assets 

8 and liabilities accumulated under the plan and 

9 a projection of the assets, liabilities, income, 

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

13 plan’s administrative expenses and claims. 

14 ‘‘(D) COSTS OF COVERAGE TO BE

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

19 with the operation of the plan. 

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

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

23 carry out the purposes of this part. 

24 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

25 STATES.—A certification granted under this part to an 
32

•S 406 IS

1 association health plan shall not be effective unless written 

2 notice of such certification is filed with the applicable 

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

4 of the participants and beneficiaries under the plan are 

5 located. For purposes of this subsection, an individual 

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

7 known address of such individual is located or in which 

8 such individual is employed. 

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

10 of any association health plan certified under this part, 

11 descriptions of material changes in any information which 

12 was required to be submitted with the application for the 

13 certification under this part shall be filed in such form 

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

17 respect to specified matters which might serve as the basis 

18 for suspension or revocation of the certification. 

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

21 certified under this part which provides benefit options in 

22 addition to health insurance coverage for such plan year 

23 shall meet the requirements of section 103 by filing an 

24 annual report under such section which shall include infor25 mation described in subsection (b)(6) with respect to the 
33

•S 406 IS

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

2 be filed with the applicable authority not later than 90 

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

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

6 reports as it considers appropriate. 

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

8 board of trustees of each association health plan which 

9 provides benefits options in addition to health insurance 

10 coverage and which is applying for certification under this 

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

12 of all participants and beneficiaries, a qualified actuary 

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

15 a qualified actuary under this part. The qualified actuary 

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

18 whether the contents of the matters reported under this 

19 part— 

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

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

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

24 anticipated experience under the plan. 
34

•S 406 IS

1 The opinion by the qualified actuary shall be made with 

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

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

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

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

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

9 not less than 60 days before the proposed termination 

10 date— 

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

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

16 of the plan in connection with such termination in 

17 a manner which will result in timely payment of all 

18 benefits for which the plan is obligated; and 

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

21 Actions required under this section shall be taken in such 

22 form and manner as may be prescribed by the applicable 

23 authority by regulation. 
35

•S 406 IS

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

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

5 under this part and which provides benefits other than 

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

8 certification continues in effect. The board of trustees of 

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

11 board determines that there is reason to believe that there 

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

13 applicable authority makes such a determination and so 

14 notifies the board, the board shall immediately notify the 

15 qualified actuary engaged by the plan, and such actuary 

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

17 make such recommendations to the board for corrective 

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

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

22 such form and manner as the applicable authority may 

23 prescribe by regulation) of such recommendations of the 

24 actuary for corrective action, together with a description 

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

26 to take in response to such recommendations. The board 
36

•S 406 IS

1 shall thereafter report to the applicable authority, in such 

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

4 board until the requirements of section 806 are met. 

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

6 which— 

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

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

9 loss insurance or indemnity insurance pursuant to 

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

11 plan which is or has been certified under this part 

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

14 by the board of trustees of the plan that corrective 

15 action has restored compliance with such require16 ments; and 

17 ‘‘(2) the applicable authority determines that 

18 there is a reasonable expectation that the plan will 

19 continue to fail to meet the requirements of section 

20 806, the board of trustees of the plan shall, at the 

21 direction of the applicable authority, terminate the 

22 plan and, in the course of the termination, take such 

23 actions as the applicable authority may require, in24 cluding satisfying any claims referred to in section 

25 806(a)(2)(B)(iii) and recovering for the plan any li-
37

•S 406 IS

1 ability under subsection (a)(2)(B)(iii) or (e) of sec2 tion 806, as necessary to ensure that the affairs of 

3 the plan will be, to the maximum extent possible, 

4 wound up in a manner which will result in timely 

5 provision of all benefits for which the plan is obli6 gated. 

7 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL8 VENT ASSOCIATION HEALTH PLANS PRO9 VIDING HEALTH BENEFITS IN ADDITION TO 

10 HEALTH INSURANCE COVERAGE. 

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

12 INSOLVENT PLANS.—Whenever the Secretary determines 

13 that an association health plan which is or has been cer14 tified under this part and which is described in section 

15 806(a)(2) will be unable to provide benefits when due or 

16 is otherwise in a financially hazardous condition, as shall 

17 be defined by the Secretary by regulation, the Secretary 

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

19 United States district court for appointment of the Sec20 retary as trustee to administer the plan for the duration 

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

22 other interested persons may intervene in the proceedings 

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

24 Secretary trustee if the court determines that the trustee25 ship is necessary to protect the interests of the partici-
38

•S 406 IS

1 pants and beneficiaries or providers of medical care or to 

2 avoid any unreasonable deterioration of the financial con3 dition of the plan. The trusteeship of such Secretary shall 

4 continue until the conditions described in the first sen5 tence of this subsection are remedied or the plan is termi6 nated. 

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

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

9 the power— 

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

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

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

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

14 of the assets and records of the plan to the Sec15 retary as trustee; 

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

17 Secretary holds in accordance with the provisions of 

18 the plan, regulations prescribed by the Secretary, 

19 and applicable provisions of law; 

20 ‘‘(4) to require the sponsor, the plan adminis21 trator, any participating employer, and any employee 

22 organization representing plan participants to fur23 nish any information with respect to the plan which 

24 the Secretary as trustee may reasonably need in 

25 order to administer the plan; 
39

•S 406 IS

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

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

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

6 plan; 

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

10 court; 

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

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

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

14 responsibility of the sponsor, or to continue the 

15 trusteeship; 

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

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

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

23 care. 
40

•S 406 IS

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

3 Secretary shall give notice of such appointment to— 

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

5 ‘‘(2) each participant; 

6 ‘‘(3) each participating employer; and 

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

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

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

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

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

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

16 of a fiduciary for purposes of this title. 

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

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

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

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

23 to enforce a lien against property of the plan. 

24 ‘‘(f) JURISDICTION OF COURT.— 
41

•S 406 IS

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

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

4 application is made shall have exclusive jurisdiction 

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

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

8 States having jurisdiction over cases under chapter 

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

11 upon appointment by it of the Secretary as trustee, 

12 such court shall continue the stay of, any pending 

13 mortgage foreclosure, equity receivership, or other 

14 proceeding to reorganize, conserve, or liquidate the 

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

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

22 sponsor or any other suit against the plan or the 

23 sponsor. 

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

25 may be brought in the judicial district where the 
42

•S 406 IS

1 sponsor or the plan administrator resides or does 

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

3 A district court in which such action is brought may 

4 issue process with respect to such action in any 

5 other judicial district. 

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

7 which shall be prescribed by the Secretary, the Secretary 

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

10 necessary in connection with the Secretary’s service as 

11 trustee under this section. 

12 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

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

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

16 commenced operations in such State after the date of the 

17 enactment of the Small Business Health Fairness Act of 

18 2005. 

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

21 an association health plan means any tax imposed by such 

22 State if— 

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

24 the amount of premiums or contributions, with re25 spect to individuals covered under the plan who are 
43

•S 406 IS

1 residents of such State, which are received by the 

2 plan from participating employers located in such 

3 State or from such individuals; 

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

5 rate of any tax imposed by such State on premiums 

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

8 offered in such State in connection with a group 

9 health plan; 

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

11 and 

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

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

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

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

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

20 other insurance related to the provision of medical 

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

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

25 ‘‘(a) DEFINITIONS.—For purposes of this part— 
44

•S 406 IS

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

2 health plan’ has the meaning provided in section 

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

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

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

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

8 term ‘health insurance coverage’ has the meaning 

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

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

11 ‘health insurance issuer’ has the meaning provided 

12 in section 733(b)(2). 

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

15 in connection with any exercise of the Secretary’s 

16 authority regarding which the Secretary is required 

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

18 term means the Secretary, in consultation with such 

19 State. 

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

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

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

23 ‘‘(7) INDIVIDUAL MARKET.— 

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

25 market’ means the market for health insurance 
45

•S 406 IS

1 coverage offered to individuals other than in 

2 connection with a group health plan. 

3 ‘‘(B) TREATMENT OF VERY SMALL

4 GROUPS.— 

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

6 (ii), such term includes coverage offered in 

7 connection with a group health plan that 

8 has fewer than 2 participants as current 

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

11 year. 

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

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

15 State regulates the coverage described in 

16 such clause in the same manner and to the 

17 same extent as coverage in the small group 

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

19 the Public Health Service Act) is regulated 

20 by such State. 

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

22 ‘participating employer’ means, in connection with 

23 an association health plan, any employer, if any indi24 vidual who is an employee of such employer, a part25 ner in such employer, or a self-employed individual 
46

•S 406 IS

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

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

3 or was covered under such plan in connection with 

4 the status of such individual as such an employee, 

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

6 plan. 

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

8 term ‘applicable State authority’ means, with respect 

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

12 title XXVII of the Public Health Service Act for the 

13 State involved with respect to such issuer. 

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

16 of the American Academy of Actuaries. 

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

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

20 be a member of the sponsor but who elects an 

21 affiliated status with the sponsor, 

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

24 is a member of any such association and elects 

25 an affiliated status with the sponsor, or 
47

•S 406 IS

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

2 plan in existence on the date of the enactment 

3 of the Small Business Health Fairness Act of 

4 2005, a person eligible to be a member of the 

5 sponsor or one of its member associations. 

6 ‘‘(12) LARGE EMPLOYER.—The term ‘large em7 ployer’ means, in connection with a group health 

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

9 employed an average of at least 51 employees on 

10 business days during the preceding calendar year 

11 and who employs at least 2 employees on the first 

12 day of the plan year. 

13 ‘‘(13) SMALL EMPLOYER.—The term ‘small em14 ployer’ means, in connection with a group health 

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

16 is not a large employer. 

17 ‘‘(b) RULES OF CONSTRUCTION.— 

18 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur19 poses of determining whether a plan, fund, or pro20 gram is an employee welfare benefit plan which is an 

21 association health plan, and for purposes of applying 

22 this title in connection with such plan, fund, or pro23 gram so determined to be such an employee welfare 

24 benefit plan— 
48

•S 406 IS

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

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

3 the partnership in relation to the partners, and 

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

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

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

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

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

12 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

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

15 medical care (through the purchase of insurance or 

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

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

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

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

23 employee welfare benefit plan on and after the date 

24 of such demonstration.’’. 
49

•S 406 IS

1 (b) CONFORMING AMENDMENTS TO PREEMPTION

2 RULES.— 

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

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

5 following new subparagraph: 

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

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

8 of an association health plan which is certified under part 

9 8.’’. 

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

11 is amended— 

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

14 (d)’’; 

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

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

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

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

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

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

25 following new subsection: 
50

•S 406 IS

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

2 provisions of this title shall supersede any and all State 

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

4 have the effect of precluding, a health insurance issuer 

5 from offering health insurance coverage in connection with 

6 an association health plan which is certified under part 

7 8. 

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

9 of subsection (b) of this section— 

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

15 of such State insofar as they may preclude a health 

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

19 under such association health plan, whether or not 

20 such other employers are participating employers in 

21 such plan. 

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

24 an association health plan certified under part 8 and 

25 the filing, with the applicable State authority (as de-
51

•S 406 IS

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

2 connection with such policy type is approved by such 

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

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

7 same form and manner of such policy form with the 

8 applicable State authority in such other State, the 

9 approval of the filing in such other State. 

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

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

14 ‘‘(A) providing solvency standards or similar 

15 standards regarding the adequacy of insurer capital, 

16 surplus, reserves, or contributions, or 

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

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

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

20 805. 

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

23 801(a), and the terms ‘health insurance coverage’, ‘par24 ticipating employer’, and ‘health insurance issuer’ have 
52

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

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

4 U.S.C. 1144(b)(6)(A)) is amended— 

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

6 the end; 

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

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

11 ‘‘title, and’’; and 

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

13 clause: 

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

15 of any other employee welfare benefit plan which is 

16 a multiple employer welfare arrangement and which 

17 provides medical care (within the meaning of section 

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

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

21 by paragraph (2)(C)) is amended— 

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

23 ‘‘(1) Except as provided in paragraph (2), noth24 ing’’; and 
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1 (B) by adding at the end the following new 

2 paragraph: 

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

4 on or after the date of the enactment of the Small Busi5 ness Health Fairness Act of 2005 shall be construed to 

6 alter, amend, modify, invalidate, impair, or supersede any 

7 provision of this title, except by specific cross-reference to 

8 the affected section.’’. 

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

10 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

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

12 person serving as the sponsor of an association health plan 

13 under part 8.’’. 

14 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE15 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

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

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

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

19 include in its summary plan description, in connection 

20 with each benefit option, a description of the form of sol21 vency or guarantee fund protection secured pursuant to 

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

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

24 amended by inserting ‘‘or part 8’’ after ‘‘this part’’. 
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1 (f) REPORT TO CONGRESS REGARDING CERTIFI2 CATION OF SELF-INSURED ASSOCIATION HEALTH

3 PLANS.—Not later than January 1, 2010, the Secretary 

4 of Labor shall report to the Committee on Health, Edu5 cation, Labor, and Pensions of the Senate and the Com6 mittee on Education and the Workforce of the House of 

7 Representatives the effect association health plans have 

8 had, if any, on reducing the number of uninsured individ9 uals. 

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

11 in section 1 of the Employee Retirement Income Security 

12 Act of 1974 is amended by inserting after the item relat13 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.’’.
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1 SEC. 3. CLARIFICATION OF TREATMENT OF SINGLE EM2 PLOYER ARRANGEMENTS. 

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

4 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend5 ed— 

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

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

8 which the benefit referred to in subparagraph (A) 

9 consists of medical care (as defined in section 

10 812(a)(2)), 2 or more trades or businesses, whether 

11 or not incorporated, shall be deemed a single em12 ployer for any plan year of such plan, or any fiscal 

13 year of such other arrangement, if such trades or 

14 businesses are within the same control group during 

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

16 period,’’; 

17 (2) in clause (iii), by striking ‘‘(iii) the deter18 mination’’ and inserting the following: 

19 ‘‘(iii)(I) in any case in which the benefit re20 ferred to in subparagraph (A) consists of medical 

21 care (as defined in section 812(a)(2)), the deter22 mination of whether a trade or business is under 

23 ‘common control’ with another trade or business 

24 shall be determined under regulations of the Sec25 retary applying principles consistent and coextensive 

26 with the principles applied in determining whether 
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1 employees of 2 or more trades or businesses are 

2 treated as employed by a single employer under sec3 tion 4001(b), except that, for purposes of this para4 graph, an interest of greater than 25 percent may 

5 not be required as the minimum interest necessary 

6 for common control, or 

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

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

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

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

11 new clause: 

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

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

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

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

16 provided to employees of 2 or more employers, the 

17 arrangement shall be treated as having only one par18 ticipating employer if, after the application of clause 

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

20 former employees of any one participating employer 

21 and who are covered under the arrangement is 

22 greater than 75 percent of the aggregate number of 

23 all individuals who are employees or former employ24 ees of participating employers and who are covered 

25 under the arrangement,’’. 
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1 SEC. 4. ENFORCEMENT PROVISIONS RELATING TO ASSO2 CIATION HEALTH PLANS. 

3 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

4 MISREPRESENTATIONS.—Section 501 of the Employee 

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

6 is amended— 

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

8 (2) by adding at the end the following new sub9 section: 

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

11 any employee, any employee’s beneficiary, any employer, 

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

13 established or maintained for the purpose of offering or 

14 providing any benefit described in section 3(1) to employ15 ees or their beneficiaries as— 

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

17 been certified under part 8; 

18 ‘‘(2) having been established or maintained 

19 under or pursuant to one or more collective bar20 gaining agreements which are reached pursuant to 

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

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

23 paragraph Fourth of section 2 of the Railway Labor 

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

25 reached pursuant to labor-management negotiations 
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1 under similar provisions of State public employee re2 lations laws; or 

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

4 section 3(40)(A)(i), shall, upon conviction, be im5 prisoned not more than 5 years, be fined under title 

6 18, United States Code, or both.’’. 

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

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

9 end the following new subsection: 

10 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE11 SIST ORDERS.— 

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

13 upon application by the Secretary showing the oper14 ation, promotion, or marketing of an association 

15 health plan (or similar arrangement providing bene16 fits consisting of medical care (as defined in section 

17 733(a)(2))) that— 

18 ‘‘(A) is not certified under part 8, is sub19 ject under section 514(b)(6) to the insurance 

20 laws of any State in which the plan or arrange21 ment offers or provides benefits, and is not li22 censed, registered, or otherwise approved under 

23 the insurance laws of such State; or 

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

25 under part 8 and is not operating in accordance 
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1 with the requirements under part 8 for such 

2 certification, a district court of the United 

3 States shall enter an order requiring that the 

4 plan or arrangement cease activities. 

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

6 apply in the case of an association health plan or 

7 other arrangement if the plan or arrangement shows 

8 that— 

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

10 paragraph (1) consist of health insurance cov11 erage; and 

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

13 the plan or arrangement offers or provides ben14 efits, the plan or arrangement is operating in 

15 accordance with applicable State laws that are 

16 not superseded under section 514. 

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

18 court may grant such additional equitable relief, in19 cluding any relief available under this title, as it 

20 deems necessary to protect the interests of the pub21 lic and of persons having claims for benefits against 

22 the plan.’’. 

23 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

24 Section 503 of such Act (29 U.S.C. 1133) is amended by 
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1 inserting ‘‘(a) IN GENERAL.—’’ before ‘‘In accordance’’, 

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

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

4 each association health plan which is or has been certified 

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

6 named fiduciary (as applicable) to ensure that the require7 ments of this section are met in connection with claims 

8 filed under the plan.’’. 

9 SEC. 5. COOPERATION BETWEEN FEDERAL AND STATE AU10 THORITIES. 

11 Section 506 of the Employee Retirement Income Se12 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

13 at the end the following new subsection: 

14 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

15 TO ASSOCIATION HEALTH PLANS.— 

16 ‘‘(1) AGREEMENTS WITH STATES.—The Sec17 retary shall consult with the State recognized under 

18 paragraph (2) with respect to an association health 

19 plan regarding the exercise of— 

20 ‘‘(A) the Secretary’s authority under sec21 tions 502 and 504 to enforce the requirements 

22 for certification under part 8; and 

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

24 association health plans under part 8 in accord-
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1 ance with regulations of the Secretary applica2 ble to certification under part 8. 

3 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

4 STATE.—In carrying out paragraph (1), the Sec5 retary shall ensure that only one State will be recog6 nized, with respect to any particular association 

7 health plan, as the State with which consultation is 

8 required. In carrying out this paragraph— 

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

10 health insurance coverage (as defined in section 

11 812(a)(3)), such State shall be the State with 

12 which filing and approval of a policy type of13 fered by the plan was initially obtained, and 

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

15 take into account the places of residence of the 

16 participants and beneficiaries under the plan 

17 and the State in which the trust is main18 tained.’’. 

19 SEC. 6. EFFECTIVE DATE AND TRANSITIONAL AND OTHER 

20 RULES. 

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

22 this Act shall take effect one year after the date of the 

23 enactment of this Act. The Secretary of Labor shall first 

24 issue all regulations necessary to carry out the amend-
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1 ments made by this Act within one year after the date 

2 of the enactment of this Act. 

3 (b) TREATMENT OF CERTAIN EXISTING HEALTH

4 BENEFITS PROGRAMS.— 

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

6 the date of the enactment of this Act, an arrange7 ment is maintained in a State for the purpose of 

8 providing benefits consisting of medical care for the 

9 employees and beneficiaries of its participating em10 ployers, at least 200 participating employers make 

11 contributions to such arrangement, such arrange12 ment has been in existence for at least 10 years, and 

13 such arrangement is licensed under the laws of one 

14 or more States to provide such benefits to its par15 ticipating employers, upon the filing with the appli16 cable authority (as defined in section 812(a)(5) of 

17 the Employee Retirement Income Security Act of 

18 1974 (as amended by this subtitle)) by the arrange19 ment of an application for certification of the ar20 rangement under part 8 of subtitle B of title I of 

21 such Act— 

22 (A) such arrangement shall be deemed to 

23 be a group health plan for purposes of title I 

24 of such Act; 
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1 (B) the requirements of sections 801(a) 

2 and 803(a) of the Employee Retirement Income 

3 Security Act of 1974 shall be deemed met with 

4 respect to such arrangement; 

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

6 such Act shall be deemed met, if the arrange7 ment is operated by a board of directors 

8 which— 

9 (i) is elected by the participating em10 ployers, with each employer having one 

11 vote; and 

12 (ii) has complete fiscal control over 

13 the arrangement and which is responsible 

14 for all operations of the arrangement; 

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

16 such Act shall be deemed met with respect to 

17 such arrangement; and 

18 (E) the arrangement may be certified by 

19 any applicable authority with respect to its op20 erations in any State only if it operates in such 

21 State on the date of certification. 

22 The provisions of this subsection shall cease to apply 

23 with respect to any such arrangement at such time 

24 after the date of the enactment of this Act as the 
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1 applicable requirements of this subsection are not 

2 met with respect to such arrangement. 

3 (2) DEFINITIONS.—For purposes of this sub4 section, the terms ‘‘group health plan’’, ‘‘medical 

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

6 meanings provided in section 812 of the Employee 

7 Retirement Income Security Act of 1974, except 

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

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

10 reference to an arrangement referred to in this sub11 section.

Æ