I 

108TH CONGRESS 

1ST SESSION H. R. 660

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

to improve access and choice for entrepreneurs with small businesses 

with respect to medical care for their employees. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 11, 2003

Mr. FLETCHER (for himself, Mr. SAM JOHNSON of Texas, Mr. DOOLEY of 

California, Ms. VELA ́ZQUEZ, Mr. ACEVEDO-VILA ́, Mr. ADERHOLT, Mr. 

AKIN, Mr. BACA, Mr. BALLENGER, Mr. BEAUPREZ, Mrs. BIGGERT, Mr. 

BOEHNER, Mr. BURGESS, Mr. CALVERT, Mrs. CAPITO, Mr. CARTER, 

Mrs. CHRISTENSEN, Mr. COLLINS, Mr. COSTELLO, Mr. CRAMER, Mr. 

CUNNINGHAM, Mrs. JO ANN DAVIS of Virginia, Mr. DEMINT, Mr. MARIO

DIAZ-BALART of Florida, Mr. DUNCAN, Mr. EVERETT, Mr. FRANKS of 

Arizona, Mr. FOSSELLA, Mr. GILLMOR, Mr. GOODLATTE, Mr. GONZALEZ, 

Mr. GRAVES, Ms. GRANGER, Mr. GREENWOOD, Mr. GRIJALVA, Ms. 

HART, Mr. HASTERT, Mr. HERGER, Mr. HOUGHTON, Mr. ISAKSON, Mr. 

ISSA, Mr. JENKINS, Mr. JONES of North Carolina, Mr. KELLER, Mrs. 

KELLY, Mr. KENNEDY of Minnesota, Mr. KOLBE, Mr. LUCAS of Kentucky, Mr. MANZULLO, Mr. MCHUGH, Mr. MCINNIS, Mr. MCKEON, Mrs. 

MUSGRAVE, Mrs. NORTHUP, Mr. PETERSON of Pennsylvania, Mr. PETRI, 

Mr. PLATTS, Mr. RADANOVICH, Mr. REHBERG, Mr. RYAN of Wisconsin, 

Mr. SCHROCK, Mr. SENSENBRENNER, Mr. SESSIONS, Mr. SHAYS, Mr. 

SHIMKUS, Mr. SIMMONS, Mr. SMITH of Texas, Mr. SOUDER, Mr. 

TANCREDO, Mr. TIAHRT, Mr. TOOMEY, Mr. UPTON, Mr. WELDON of 

Florida, Mr. WHITFIELD, Mr. WILSON of South Carolina, and Mr. 

WOLF) introduced the following bill; which was referred to the Committee 

on Education and the Workforce 

A BILL

To amend title I of the Employee Retirement Income Security Act of 1974 to improve access and choice for entre-
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preneurs 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 2003’’. 

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

7 as follows:

Sec. 1. Short title and table of contents. 

Sec. 2. Rules governing association health plans. 

‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘Sec. 801. Association health plans. 

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

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

‘‘Sec. 804. Participation and coverage requirements. 

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

rates, and benefit options. 

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

providing health benefits in addition to health insurance 

coverage. 

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

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

‘‘Sec. 809. Corrective actions and mandatory termination. 

‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health 

plans providing health benefits in addition to health insurance coverage. 

‘‘Sec. 811. State assessment authority. 

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

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

Sec. 4. Clarification of treatment of certain collectively bargained arrangements. 

Sec. 5. Enforcement provisions relating to association health plans. 

Sec. 6. Cooperation between Federal and State authorities. 

Sec. 7. Effective date and transitional and other rules.
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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 HEALTH

6 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, in23 cluding a corporation or similar organization that 

24 operates on a cooperative basis (within the meaning 

25 of section 1381 of the Internal Revenue Code of 
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1 1986)), for substantial purposes other than that of 

2 obtaining or providing medical care; 

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

4 receives the active support of its members and re5 quires for membership payment on a periodic basis 

6 of dues or payments necessary to maintain eligibility 

7 for membership in the sponsor; and 

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

9 or payments, or coverage under the plan on the 

10 basis of health status-related factors with respect to 

11 the employees of its members (or affiliated mem12 bers), or the dependents of such employees, and does 

13 not condition such dues or payments on the basis of 

14 group health plan participation. 

15 Any sponsor consisting of an association of entities which 

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

17 shall be deemed to be a sponsor described in this sub18 section. 

19 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

20 PLANS. 

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

22 prescribe by regulation, through negotiated rulemaking, a 

23 procedure under which, subject to subsection (b), the ap24 plicable authority shall certify association health plans 
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1 which apply for certification as meeting the requirements 

2 of this part. 

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

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

5 health plan that provides at least one benefit option which 

6 does not consist of health insurance coverage, the applica7 ble authority shall certify such plan as meeting the re8 quirements of this part only if the applicable authority is 

9 satisfied that the applicable requirements of this part are 

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

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

12 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

14 certification under this part is in effect shall meet the ap15 plicable requirements of this part, effective on the date 

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

17 is to commence operations). 

18 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI19 CATION.—The applicable authority may provide by regula20 tion, through negotiated rulemaking, for continued certifi21 cation of association health plans under this part. 

22 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

23 PLANS.—The applicable authority shall establish a class 

24 certification procedure for association health plans under 

25 which all benefits consist of health insurance coverage. 
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1 Under such procedure, the applicable authority shall pro2 vide for the granting of certification under this part to 

3 the plans in each class of such association health plans 

4 upon appropriate filing under such procedure in connec5 tion with plans in such class and payment of the pre6 scribed fee under section 807(a). 

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

8 HEALTH PLANS.—An association health plan which offers 

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

10 insurance coverage may be certified under this part only 

11 if such plan consists of any of the following: 

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

13 date of the enactment of the Small Business Health 

14 Fairness Act of 2003, 

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

16 restrict membership to one or more trades and busi17 nesses or industries and whose eligible participating 

18 employers represent a broad cross-section of trades 

19 and businesses or industries, or 

20 ‘‘(3) a plan whose eligible participating employ21 ers represent one or more trades or businesses, or 

22 one or more industries, consisting of any of the fol23 lowing: agriculture; equipment and automobile deal24 erships; barbering and cosmetology; certified public 

25 accounting practices; child care; construction; dance, 
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1 theatrical and orchestra productions; disinfecting 

2 and pest control; financial services; fishing; 

3 foodservice establishments; hospitals; labor organiza4 tions; logging; manufacturing (metals); mining; med5 ical and dental practices; medical laboratories; pro6 fessional consulting services; sanitary services; trans7 portation (local and freight); warehousing; whole8 saling/distributing; or any other trade or business or 

9 industry which has been indicated as having average 

10 or above-average risk or health claims experience by 

11 reason of State rate filings, denials of coverage, pro12 posed premium rate levels, or other means dem13 onstrated by such plan in accordance with regula14 tions which the Secretary shall prescribe through ne15 gotiated rulemaking. 

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

17 BOARDS OF TRUSTEES. 

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

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

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

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

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

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

2 this subsection are met with respect to an association 

3 health plan if the following requirements are met: 

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

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

7 and which is responsible for all operations of the 

8 plan. 

9 ‘‘(2) RULES OF OPERATION AND FINANCIAL

10 CONTROLS.—The board of trustees has in effect 

11 rules of operation and financial controls, based on a 

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

13 terms of the plan and to meet all requirements of 

14 this title applicable to the plan. 

15 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

16 PARTICIPATING EMPLOYERS AND TO CONTRAC17 TORS.—

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

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

20 board of trustees are individuals selected from 

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

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

3 member is an owner, officer, director, or 

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

6 plan. 

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

9 OF THE SPONSOR.—Officers or employees 

10 of a sponsor which is a service provider 

11 (other than a contract administrator) to 

12 the plan may be members of the board if 

13 they constitute not more than 25 percent 

14 of the membership of the board and they 

15 do not provide services to the plan other 

16 than on behalf of the sponsor. 

17 ‘‘(iii) TREATMENT OF PROVIDERS OF

18 MEDICAL CARE.—In the case of a sponsor 

19 which is an association whose membership 

20 consists primarily of providers of medical 

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

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

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

3 health plan which is in existence on the date of 

4 the enactment of the Small Business Health 

5 Fairness Act of 2003. 

6 ‘‘(D) SOLE AUTHORITY.—The board has 

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

10 day-to-day affairs of the plan. 

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

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

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

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

18 deemed to be the sponsor referred to in section 

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

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

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

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

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

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

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

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

6 health plan described in paragraph (2)—

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

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

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

10 deemed a board of trustees with respect to 

11 which the requirements of subsection (b) are 

12 met; and

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

14 be deemed met. 

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

16 described in this paragraph if—

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

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

19 2003, and would be described in section 

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

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

22 ‘‘(3) CONSTRUCTION.—A group health plan de23 scribed in paragraph (2) shall only be treated as an 

24 association health plan under this part if the spon25 sor of the plan applies for, and obtains, certification 
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1 of the plan as an association health plan under this 

2 part. 

3 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE4 MENTS. 

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

6 requirements of this subsection are met with respect to 

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

8 plan—

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

10 ‘‘(A) a member of the sponsor, 

11 ‘‘(B) the sponsor, or 

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

13 with respect to which the requirements of sub14 section (b) are met, 

15 except that, in the case of a sponsor which is a pro16 fessional association or other individual-based asso17 ciation, if at least one of the officers, directors, or 

18 employees of an employer, or at least one of the in19 dividuals who are partners in an employer and who 

20 actively participates in the business, is a member or 

21 such an affiliated member of the sponsor, partici22 pating employers may also include such employer; 

23 and 
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1 ‘‘(2) all individuals commencing coverage under 

2 the plan after certification under this part must 

3 be—

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

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

6 employees of, or partners in, participating em7 ployers; or 

8 ‘‘(B) the beneficiaries of individuals de9 scribed in subparagraph (A). 

10 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM11 PLOYEES.—In the case of an association health plan in 

12 existence on the date of the enactment of the Small Busi13 ness Health Fairness Act of 2003, an affiliated member 

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

15 the plan as a participating employer only if—

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

17 member on the date of certification under this part; 

18 or 

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

20 date of the offering of such coverage, the affiliated 

21 member has not maintained or contributed to a 

22 group health plan with respect to any of its employ23 ees who would otherwise be eligible to participate in 

24 such association health plan. 
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1 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re2 quirements of this subsection are met with respect to an 

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

4 no participating employer may provide health insurance 

5 coverage in the individual market for any employee not 

6 covered under the plan which is similar to the coverage 

7 contemporaneously provided to employees of the employer 

8 under the plan, if such exclusion of the employee from cov9 erage under the plan is based on a health status-related 

10 factor with respect to the employee and such employee 

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

12 for coverage under the plan. 

13 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

14 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI15 PATE.—The requirements of this subsection are met with 

16 respect to an association health plan if—

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

18 meeting the preceding requirements of this section 

19 are eligible to qualify as participating employers for 

20 all geographically available coverage options, unless, 

21 in the case of any such employer, participation or 

22 contribution requirements of the type referred to in 

23 section 2711 of the Public Health Service Act are 

24 not met; 
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1 ‘‘(2) upon request, any employer eligible to par2 ticipate is furnished information regarding all cov3 erage options available under the plan; and 

4 ‘‘(3) the applicable requirements of sections 

5 701, 702, and 703 are met with respect to the plan. 

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

7 DOCUMENTS, CONTRIBUTION RATES, AND 

8 BENEFIT OPTIONS. 

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

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

11 following requirements are met: 

12 ‘‘(1) CONTENTS OF GOVERNING INSTRU13 MENTS.—The instruments governing the plan in14 clude a written instrument, meeting the require15 ments of an instrument required under section 

16 402(a)(1), which—

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

18 serves as the named fiduciary required for plans 

19 under section 402(a)(1) and serves in the ca20 pacity of a plan administrator (referred to in 

21 section 3(16)(A)); 

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

23 is to serve as plan sponsor (referred to in sec24 tion 3(16)(B)); and 
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1 ‘‘(C) incorporates the requirements of sec2 tion 806. 

3 ‘‘(2) CONTRIBUTION RATES MUST BE NON4 DISCRIMINATORY.—

5 ‘‘(A) The contribution rates for any par6 ticipating small employer do not vary on the 

7 basis of any health status-related factor in rela8 tion to employees of such employer or their 

9 beneficiaries and do not vary on the basis of the 

10 type of business or industry in which such em11 ployer is engaged. 

12 ‘‘(B) Nothing in this title or any other pro13 vision of law shall be construed to preclude an 

14 association health plan, or a health insurance 

15 issuer offering health insurance coverage in 

16 connection with an association health plan, 

17 from—

18 ‘‘(i) setting contribution rates based 

19 on the claims experience of the plan; or 

20 ‘‘(ii) varying contribution rates for 

21 small employers in a State to the extent 

22 that such rates could vary using the same 

23 methodology employed in such State for 

24 regulating premium rates in the small 

25 group market with respect to health insur-
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1 ance coverage offered in connection with 

2 bona fide associations (within the meaning 

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

4 Service Act), 

5 subject to the requirements of section 702(b) 

6 relating to contribution rates. 

7 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI8 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If 

9 any benefit option under the plan does not consist 

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

11 beginning of the plan year not fewer than 1,000 par12 ticipants and beneficiaries. 

13 ‘‘(4) MARKETING REQUIREMENTS.—

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

15 which consists of health insurance coverage is 

16 offered under the plan, State-licensed insurance 

17 agents shall be used to distribute to small em18 ployers coverage which does not consist of 

19 health insurance coverage in a manner com20 parable to the manner in which such agents are 

21 used to distribute health insurance coverage. 

22 ‘‘(B) STATE-LICENSED INSURANCE

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

24 the term ‘State-licensed insurance agents’ 

25 means one or more agents who are licensed in 
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1 a State and are subject to the laws of such 

2 State relating to licensure, qualification, test3 ing, examination, and continuing education of 

4 persons authorized to offer, sell, or solicit 

5 health insurance coverage in such State. 

6 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

7 other requirements as the applicable authority deter8 mines are necessary to carry out the purposes of this 

9 part, which shall be prescribed by the applicable au10 thority by regulation through negotiated rulemaking. 

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

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

13 nothing in this part or any provision of State law (as de14 fined in section 514(c)(1)) shall be construed to preclude 

15 an association health plan, or a health insurance issuer 

16 offering health insurance coverage in connection with an 

17 association health plan, from exercising its sole discretion 

18 in selecting the specific items and services consisting of 

19 medical care to be included as benefits under such plan 

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

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

22 of a specific disease from such coverage, or (2) is not pre23 empted under section 731(a)(1) with respect to matters 

24 governed by section 711 or 712. 
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1 ‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 

2 FOR SOLVENCY FOR PLANS PROVIDING 

3 HEALTH BENEFITS IN ADDITION TO HEALTH 

4 INSURANCE COVERAGE. 

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

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

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

8 of health insurance coverage; or 

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

10 options which do not consist of health insurance cov11 erage, the plan—

12 ‘‘(A) establishes and maintains reserves 

13 with respect to such additional benefit options, 

14 in amounts recommended by the qualified actu15 ary, consisting of—

16 ‘‘(i) a reserve sufficient for unearned 

17 contributions; 

18 ‘‘(ii) a reserve sufficient for benefit li19 abilities which have been incurred, which 

20 have not been satisfied, and for which risk 

21 of loss has not yet been transferred, and 

22 for expected administrative costs with re23 spect to such benefit liabilities; 

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

25 obligations of the plan; and 
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1 ‘‘(iv) a reserve sufficient for a margin 

2 of error and other fluctuations, taking into 

3 account the specific circumstances of the 

4 plan; and 

5 ‘‘(B) establishes and maintains aggregate 

6 and specific excess /stop loss insurance and sol7 vency indemnification, with respect to such ad8 ditional benefit options for which risk of loss 

9 has not yet been transferred, as follows: 

10 ‘‘(i) The plan shall secure aggregate 

11 excess /stop loss insurance for the plan 

12 with an attachment point which is not 

13 greater than 125 percent of expected gross 

14 annual claims. The applicable authority 

15 may by regulation, through negotiated 

16 rulemaking, provide for upward adjust17 ments in the amount of such percentage in 

18 specified circumstances in which the plan 

19 specifically provides for and maintains re20 serves in excess of the amounts required 

21 under subparagraph (A). 

22 ‘‘(ii) The plan shall secure specific ex23 cess /stop loss insurance for the plan with 

24 an attachment point which is at least equal 

25 to an amount recommended by the plan’s 
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1 qualified actuary. The applicable authority 

2 may by regulation, through negotiated 

3 rulemaking, provide for adjustments in the 

4 amount of such insurance in specified cir5 cumstances in which the plan specifically 

6 provides for and maintains reserves in ex7 cess of the amounts required under sub8 paragraph (A). 

9 ‘‘(iii) The plan shall secure indem10 nification insurance for any claims which 

11 the plan is unable to satisfy by reason of 

12 a plan termination. 

13 Any regulations prescribed by the applicable authority 

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

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

16 stop loss insurance as the qualified actuary may rec17 ommend, taking into account the specific circumstances 

18 of the plan. 

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

20 RESERVES.—In the case of any association health plan de21 scribed in subsection (a)(2), the requirements of this sub22 section are met if the plan establishes and maintains sur23 plus in an amount at least equal to—

24 ‘‘(1) $500,000, or 
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1 ‘‘(2) such greater amount (but not greater than 

2 $2,000,000) as may be set forth in regulations pre3 scribed by the applicable authority through nego4 tiated rulemaking, based on the level of aggregate 

5 and specific excess /stop loss insurance provided with 

6 respect to such plan. 

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

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

9 the applicable authority may provide such additional re10 quirements relating to reserves and excess /stop loss insur11 ance as the applicable authority considers appropriate. 

12 Such requirements may be provided by regulation, through 

13 negotiated rulemaking, with respect to any such plan or 

14 any class of such plans. 

15 ‘‘(d) ADJUSTMENTS FOR EXCESS /STOP LOSS INSUR16 ANCE.—The applicable authority may provide for adjust17 ments to the levels of reserves otherwise required under 

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

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

20 provided with respect to such plan or plans. 

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

22 applicable authority may permit an association health plan 

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

24 of the requirements of this section (except subsection 

25 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar-
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1 rangement, or other financial arrangement as the applica2 ble authority determines to be adequate to enable the plan 

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

4 and is otherwise no less protective of the interests of par5 ticipants and beneficiaries than the requirements for 

6 which it is substituted. The applicable authority may take 

7 into account, for purposes of this subsection, evidence pro8 vided by the plan or sponsor which demonstrates an as9 sumption of liability with respect to the plan. Such evi10 dence may be in the form of a contract of indemnification, 

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

12 applicable terms of the plan in the form of assessments 

13 of participating employers, security, or other financial ar14 rangement. 

15 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

16 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.—

17 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO18 CIATION HEALTH PLAN FUND.—

19 ‘‘(A) IN GENERAL.—In the case of an as20 sociation health plan described in subsection 

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

22 met if the plan makes payments into the Asso23 ciation Health Plan Fund under this subpara24 graph when they are due. Such payments shall 

25 consist of annual payments in the amount of 
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1 $5,000, and, in addition to such annual pay2 ments, such supplemental payments as the Sec3 retary may determine to be necessary under 

4 paragraph (2). Payments under this paragraph 

5 are payable to the Fund at the time determined 

6 by the Secretary. Initial payments are due in 

7 advance of certification under this part. Pay8 ments shall continue to accrue until a plan’s as9 sets are distributed pursuant to a termination 

10 procedure. 

11 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

14 not more than 100 percent of the payment 

15 which was not timely paid shall be payable by 

16 the plan to the Fund. 

17 ‘‘(C) CONTINUED DUTY OF THE SEC18 RETARY.—The Secretary shall not cease to 

19 carry out the provisions of paragraph (2) on ac20 count of the failure of a plan to pay any pay21 ment when due. 

22 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

23 EXCESS /STOP LOSS INSURANCE COVERAGE AND IN24 DEMNIFICATION INSURANCE COVERAGE FOR CER25 TAIN PLANS.—In any case in which the applicable 
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•HR 660 IH 

1 authority determines that there is, or that there is 

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

3 take necessary corrective actions under section 

4 809(a) with respect to an association health plan de5 scribed in subsection (a)(2); or (B) a termination of 

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

7 if the applicable authority is not the Secretary, cer8 tifies such determination to the Secretary), the Sec9 retary shall determine the amounts necessary to 

10 make payments to an insurer (designated by the 

11 Secretary) to maintain in force excess /stop loss in12 surance coverage or indemnification insurance cov13 erage for such plan, if the Secretary determines that 

14 there is a reasonable expectation that, without such 

15 payments, claims would not be satisfied by reason of 

16 termination of such coverage. The Secretary shall, to

17 the extent provided in advance in appropriation 

18 Acts, pay such amounts so determined to the insurer 

19 designated by the Secretary. 

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

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

22 on the books of the Treasury a fund to be 

23 known as the ‘Association Health Plan Fund’. 

24 The Fund shall be available for making pay25 ments pursuant to paragraph (2). The Fund 
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•HR 660 IH 

1 shall be credited with payments received pursu2 ant to paragraph (1)(A), penalties received pur3 suant to paragraph (1)(B); and earnings on in4 vestments of amounts of the Fund under sub5 paragraph (B). 

6 ‘‘(B) INVESTMENT.—Whenever the Sec7 retary determines that the moneys of the fund 

8 are in excess of current needs, the Secretary 

9 may request the investment of such amounts as 

10 the Secretary determines advisable by the Sec11 retary of the Treasury in obligations issued or 

12 guaranteed by the United States. 

13 ‘‘(g) EXCESS /STOP LOSS INSURANCE.—For pur14 poses of this section—

15 ‘‘(1) AGGREGATE EXCESS /STOP LOSS INSUR16 ANCE.—The term ‘aggregate 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 through negotiated 

22 rulemaking) provides for payment to the plan 

23 with respect to aggregate claims under the plan 

24 in excess of an amount or amounts specified in 

25 such contract; 
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•HR 660 IH 

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

2 ‘‘(C) which allows for payment of pre3 miums by any third party on behalf of the in4 sured plan. 

5 ‘‘(2) SPECIFIC EXCESS /STOP LOSS INSUR6 ANCE.—The term ‘specific excess /stop loss insur7 ance’ means, in connection with an association 

8 health plan, a contract—

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

10 minimum standards as the applicable authority 

11 may prescribe by regulation through negotiated 

12 rulemaking) provides for payment to the plan 

13 with respect to claims under the plan in connec14 tion with a covered individual in excess of an 

15 amount or amounts specified in such contract 

16 in connection with such covered individual; 

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

18 ‘‘(C) which allows for payment of pre19 miums by any third party on behalf of the in20 sured plan. 

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

22 of this section, the term ‘indemnification insurance’ 

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

24 contract—
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•HR 660 IH 

1 ‘‘(1) under which an insurer (meeting such min2 imum standards as the applicable authority may pre3 scribe through negotiated rulemaking) provides for 

4 payment to the plan with respect to claims under the 

5 plan which the plan is unable to satisfy by reason 

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

7 to mandatory termination); 

8 ‘‘(2) which is guaranteed renewable and 

9 noncancellable for any reason (except as the applica10 ble authority may prescribe by regulation through 

11 negotiated rulemaking); and 

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

13 any third party on behalf of the insured plan. 

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

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

16 health plan, plan assets which meet the fiduciary stand17 ards under part 4 and such additional requirements re18 garding liquidity as the applicable authority may prescribe 

19 through negotiated rulemaking. 

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

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

22 date of the enactment of the Small Business Health 

23 Fairness Act of 2003, the applicable authority shall 

24 establish a Solvency Standards Working Group. In 

25 prescribing the initial regulations under this section, 
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•HR 660 IH 

1 the applicable authority shall take into account the 

2 recommendations of such Working Group. 

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

4 consist of not more than 15 members appointed by 

5 the applicable authority. The applicable authority 

6 shall include among persons invited to membership 

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

8 following: 

9 ‘‘(A) a representative of the National Asso10 ciation of Insurance Commissioners; 

11 ‘‘(B) a representative of the American 

12 Academy of Actuaries; 

13 ‘‘(C) a representative of the State govern14 ments, or their interests; 

15 ‘‘(D) a representative of existing self-in16 sured arrangements, or their interests; 

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

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

19 interests; and 

20 ‘‘(F) a representative of multiemployer 

21 plans that are group health plans, or their in22 terests. 
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1 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE2 LATED REQUIREMENTS. 

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

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

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

6 an application for certification under this part a filing fee 

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

8 case of the Secretary, to the extent provided in appropria9 tion Acts, for the sole purpose of administering the certifi10 cation procedures applicable with respect to association 

11 health plans. 

12 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA13 TION FOR CERTIFICATION.—An application for certifi14 cation under this part meets the requirements of this sec15 tion only if it includes, in a manner and form which shall 

16 be prescribed by the applicable authority through nego17 tiated rulemaking, at least the following information: 

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

19 and addresses of—

20 ‘‘(A) the sponsor; and 

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

22 of the plan. 

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

24 BUSINESS.—The States in which participants and 

25 beneficiaries under the plan are to be located and 
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1 the number of them expected to be located in each 

2 such State. 

3 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro4 vided by the board of trustees that the bonding re5 quirements of section 412 will be met as of the date 

6 of the application or (if later) commencement of op7 erations.

8 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu9 ments governing the plan (including any bylaws and 

10 trust agreements), the summary plan description, 

11 and other material describing the benefits that will 

12 be provided to participants and beneficiaries under 

13 the plan. 

14 ‘‘(5) AGREEMENTS WITH SERVICE PRO15 VIDERS.—A copy of any agreements between the 

16 plan and contract administrators and other service 

17 providers. 

18 ‘‘(6) FUNDING REPORT.—In the case of asso19 ciation health plans providing benefits options in ad20 dition to health insurance coverage, a report setting 

21 forth information with respect to such additional 

22 benefit options determined as of a date within the 

23 120-day period ending with the date of the applica24 tion, including the following: 
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1 ‘‘(A) RESERVES.—A statement, certified 

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

3 statement of actuarial opinion, signed by a 

4 qualified actuary, that all applicable require5 ments of section 806 are or will be met in ac6 cordance with regulations which the applicable 

7 authority shall prescribe through negotiated 

8 rulemaking. 

9 ‘‘(B) ADEQUACY OF CONTRIBUTION

10 RATES.—A statement of actuarial opinion, 

11 signed by a qualified actuary, which sets forth 

12 a description of the extent to which contribution 

13 rates are adequate to provide for the payment 

14 of all obligations and the maintenance of re15 quired reserves under the plan for the 12-

16 month period beginning with such date within 

17 such 120-day period, taking into account the 

18 expected coverage and experience of the plan. If 

19 the contribution rates are not fully adequate, 

20 the statement of actuarial opinion shall indicate 

21 the extent to which the rates are inadequate 

22 and the changes needed to ensure adequacy. 

23 ‘‘(C) CURRENT AND PROJECTED VALUE OF

24 ASSETS AND LIABILITIES.—A statement of ac25 tuarial opinion signed by a qualified actuary, 
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•HR 660 IH 

1 which sets forth the current value of the assets 

2 and liabilities accumulated under the plan and 

3 a projection of the assets, liabilities, income, 

4 and expenses of the plan for the 12-month pe5 riod referred to in subparagraph (B). The in6 come statement shall identify separately the 

7 plan’s administrative expenses and claims. 

8 ‘‘(D) COSTS OF COVERAGE TO BE

9 CHARGED AND OTHER EXPENSES.—A state10 ment of the costs of coverage to be charged, in11 cluding an itemization of amounts for adminis12 tration, reserves, and other expenses associated 

13 with the operation of the plan. 

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

15 information as may be determined by the appli16 cable authority, by regulation through nego17 tiated rulemaking, as necessary to carry out the 

18 purposes of this part. 

19 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

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

21 association health plan shall not be effective unless written 

22 notice of such certification is filed with the applicable 

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

24 of the participants and beneficiaries under the plan are 

25 located. For purposes of this subsection, an individual 
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•HR 660 IH 

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

2 known address of such individual is located or in which 

3 such individual is employed. 

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

5 of any association health plan certified under this part, 

6 descriptions of material changes in any information which 

7 was required to be submitted with the application for the 

8 certification under this part shall be filed in such form 

9 and manner as shall be prescribed by the applicable au10 thority by regulation through negotiated rulemaking. The 

11 applicable authority may require by regulation, through 

12 negotiated rulemaking, prior notice of material changes 

13 with respect to specified matters which might serve as the 

14 basis for suspension or revocation of the certification. 

15 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS16 SOCIATION HEALTH PLANS.—An association health plan 

17 certified under this part which provides benefit options in 

18 addition to health insurance coverage for such plan year 

19 shall meet the requirements of section 503B by filing an 

20 annual report under such section which shall include infor21 mation described in subsection (b)(6) with respect to the 

22 plan year and, notwithstanding section 503C(a)(1)(A), 

23 shall be filed with the applicable authority not later than 

24 90 days after the close of the plan year (or on such later 

25 date as may be prescribed by the applicable authority). 
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•HR 660 IH 

1 The applicable authority may require by regulation 

2 through negotiated rulemaking such interim reports as it 

3 considers appropriate. 

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

5 board of trustees of each association health plan which 

6 provides benefits options in addition to health insurance 

7 coverage and which is applying for certification under this 

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

9 of all participants and beneficiaries, a qualified actuary 

10 who shall be responsible for the preparation of the mate11 rials comprising information necessary to be submitted by 

12 a qualified actuary under this part. The qualified actuary 

13 shall utilize such assumptions and techniques as are nec14 essary to enable such actuary to form an opinion as to 

15 whether the contents of the matters reported under this 

16 part—

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

18 the experience of the plan and to reasonable expecta19 tions; and

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

21 anticipated experience under the plan. 

22 The opinion by the qualified actuary shall be made with 

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

8 termination date, provides to the participants and 

9 beneficiaries a written notice of intent to terminate 

10 stating that such termination is intended and the 

11 proposed termination date; 

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

13 of the plan in connection with such termination in 

14 a manner which will result in timely payment of all 

15 benefits for which the plan is obligated; and 

16 ‘‘(3) submits such plan in writing to the appli17 cable authority. 

18 Actions required under this section shall be taken in such 

19 form and manner as may be prescribed by the applicable 

20 authority by regulation through negotiated rulemaking. 

21 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI22 NATION. 

23 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE24 SERVES.—An association health plan which is certified 

25 under this part and which provides benefits other than 

26 health insurance coverage shall continue to meet the re-
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•HR 660 IH 

1 quirements of section 806, irrespective of whether such 

2 certification continues in effect. The board of trustees of 

3 such plan shall determine quarterly whether the require4 ments of section 806 are met. In any case in which the 

5 board determines that there is reason to believe that there 

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

7 applicable authority makes such a determination and so 

8 notifies the board, the board shall immediately notify the 

9 qualified actuary engaged by the plan, and such actuary 

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

11 make such recommendations to the board for corrective 

12 action as the actuary determines necessary to ensure com13 pliance with section 806. Not later than 30 days after re14 ceiving from the actuary recommendations for corrective 

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

16 such form and manner as the applicable authority may 

17 prescribe by regulation through negotiated rulemaking) of 

18 such recommendations of the actuary for corrective action, 

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

20 board has taken or plans to take in response to such rec21 ommendations. The board shall thereafter report to the 

22 applicable authority, in such form and frequency as the 

23 applicable authority may specify to the board, regarding 

24 corrective action taken by the board until the requirements 

25 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) of a failure of an association 

5 health plan which is or has been certified under this 

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

7 the requirements of section 806 and has not been 

8 notified by the board of trustees of the plan that 

9 corrective action has restored compliance with such 

10 requirements; and 

11 ‘‘(2) the applicable authority determines that 

12 there is a reasonable expectation that the plan will 

13 continue to fail to meet the requirements of section 

14 806, 

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

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

17 course of the termination, take such actions as the appli18 cable authority may require, including satisfying any 

19 claims referred to in section 806(a)(2)(B)(iii) and recov20 ering for the plan any liability under subsection 

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

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

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

24 provision of all benefits for which the plan is obligated. 
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1 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL2 VENT ASSOCIATION HEALTH PLANS PRO3 VIDING HEALTH BENEFITS IN ADDITION TO 

4 HEALTH INSURANCE COVERAGE. 

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

6 INSOLVENT PLANS.—Whenever the Secretary determines 

7 that an association health plan which is or has been cer8 tified under this part and which is described in section 

9 806(a)(2) will be unable to provide benefits when due or 

10 is otherwise in a financially hazardous condition, as shall 

11 be defined by the Secretary by regulation through nego12 tiated rulemaking, the Secretary shall, upon notice to the 

13 plan, apply to the appropriate United States district court 

14 for appointment of the Secretary as trustee to administer 

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

16 appear as a party and other interested persons may inter17 vene in the proceedings at the discretion of the court. The 

18 court shall appoint such Secretary trustee if the court de19 termines that the trusteeship is necessary to protect the 

20 interests of the participants and beneficiaries or providers 

21 of medical care or to avoid any unreasonable deterioration 

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

23 such Secretary shall continue until the conditions de24 scribed in the first sentence of this subsection are rem25 edied or the plan is terminated. 
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1 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon 

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

3 the power—

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

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

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

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

8 of the assets and records of the plan to the Sec9 retary as trustee; 

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

11 Secretary holds in accordance with the provisions of 

12 the plan, regulations prescribed by the Secretary 

13 through negotiated rulemaking, and applicable provi14 sions of law; 

15 ‘‘(4) to require the sponsor, the plan adminis16 trator, any participating employer, and any employee 

17 organization representing plan participants to fur18 nish any information with respect to the plan which 

19 the Secretary as trustee may reasonably need in 

20 order to administer the plan;

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

22 plan and to recover reasonable expenses of the trust23 eeship; 
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•HR 660 IH 

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 through negotiated rulemaking 

7 or required by any order of the 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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•HR 660 IH 

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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•HR 660 IH 

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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•HR 660 IH 

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

2 which shall be prescribed by the Secretary through nego3 tiated rulemaking, the Secretary shall appoint, retain, and 

4 compensate accountants, actuaries, and other professional 

5 service personnel as may be necessary in connection with 

6 the Secretary’s service as 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 2003. 

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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•HR 660 IH 

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 806(g)(2)), 

15 other insurance related to the provision of medical 

16 care under the plan, or any combination thereof pro17 vided by such insurers or health maintenance organi18 zations in such State in connection with such plan. 

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

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

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

22 health plan’ has the meaning provided in section 

23 733(a)(1) (after applying subsection (b) of this sec24 tion). 
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•HR 660 IH 

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.—

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

11 subparagraph (B), the term ‘applicable author12 ity’ means, in connection with an association 

13 health plan—

14 ‘‘(i) the State recognized pursuant to 

15 subsection (c) of section 506 as the State 

16 to which authority has been delegated in 

17 connection with such plan; or 

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

19 clause (i), the Secretary. 

20 ‘‘(B) EXCEPTIONS.—

21 ‘‘(i) JOINT AUTHORITIES.—Where 

22 such term appears in section 808(3), sec23 tion 807(e) (in the first instance), section 

24 809(a) (in the second instance), section 

25 809(a) (in the fourth instance), and sec-
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•HR 660 IH 

1 tion 809(b)(1), such term means, in con2 nection with an association health plan, the 

3 Secretary and the State referred to in sub4 paragraph (A)(i) (if any) in connection 

5 with such plan. 

6 ‘‘(ii) REGULATORY AUTHORITIES.—

7 Where such term appears in section 802(a) 

8 (in the first instance), section 802(d), sec9 tion 802(e), section 803(d), section 

10 805(a)(5), section 806(a)(2), section 

11 806(b), section 806(c), section 806(d), 

12 paragraphs (1)(A) and (2)(A) of section 

13 806(g), section 806(h), section 806(i), sec14 tion 806(j), section 807(a) (in the second 

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

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

17 section 808 (in the matter after paragraph 

18 (3)), and section 809(a) (in the third in19 stance), such term means, in connection 

20 with an association health plan, the Sec21 retary. 

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

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

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

25 ‘‘(7) INDIVIDUAL MARKET.—
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1 ‘‘(A) IN GENERAL.—The term ‘individual 

2 market’ means the market for health insurance 

3 coverage offered to individuals other than in 

4 connection with a group health plan. 

5 ‘‘(B) TREATMENT OF VERY SMALL

6 GROUPS.—

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

8 (ii), such term includes coverage offered in 

9 connection with a group health plan that 

10 has fewer than 2 participants as current 

11 employees or participants described in sec12 tion 732(d)(3) on the first day of the plan 

13 year. 

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

15 shall not apply in the case of health insur16 ance coverage offered in a State if such 

17 State regulates the coverage described in 

18 such clause in the same manner and to the 

19 same extent as coverage in the small group 

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

21 the Public Health Service Act) is regulated 

22 by such State. 

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

24 ‘participating employer’ means, in connection with 

25 an association health plan, any employer, if any indi-
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•HR 660 IH 

1 vidual who is an employee of such employer, a part2 ner in such employer, or a self-employed individual 

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

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

5 or was covered under such plan in connection with 

6 the status of such individual as such an employee, 

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

8 plan. 

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

10 term ‘applicable State authority’ means, with respect 

11 to a health insurance issuer in a State, the State in12 surance commissioner or official or officials des13 ignated by the State to enforce the requirements of 

14 title XXVII of the Public Health Service Act for the 

15 State involved with respect to such issuer. 

16 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali17 fied actuary’ means an individual who is a member 

18 of the American Academy of Actuaries or meets 

19 such reasonable standards and qualifications as the 

20 Secretary may provide by regulation through nego21 tiated rulemaking. 

22 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili23 ated member’ means, in connection with a sponsor—
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1 ‘‘(A) a person who is otherwise eligible to 

2 be a member of the sponsor but who elects an 

3 affiliated status with the sponsor, 

4 ‘‘(B) in the case of a sponsor with mem5 bers which consist of associations, a person who 

6 is a member of any such association and elects 

7 an affiliated status with the sponsor, or 

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

9 plan in existence on the date of the enactment 

10 of the Small Business Health Fairness Act of 

11 2003, a person eligible to be a member of the 

12 sponsor or one of its member associations. 

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

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

16 employed an average of at least 51 employees on 

17 business days during the preceding calendar year 

18 and who employs at least 2 employees on the first 

19 day of the plan year. 

20 ‘‘(13) SMALL EMPLOYER.—The term ‘small em21 ployer’ means, in connection with a group health

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

23 is not a large employer. 

24 ‘‘(b) RULES OF CONSTRUCTION.—
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1 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur2 poses of determining whether a plan, fund, or pro3 gram is an employee welfare benefit plan which is an 

4 association health plan, and for purposes of applying 

5 this title in connection with such plan, fund, or pro6 gram so determined to be such an employee welfare 

7 benefit plan—

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

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

10 the partnership in relation to the partners, and 

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

12 includes any partner in relation to the partner13 ship; and 

14 ‘‘(B) in the case of a self-employed indi15 vidual, the term ‘employer’ (as defined in sec16 tion 3(5)) and the term ‘employee’ (as defined 

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

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

19 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

20 case of any plan, fund, or program which was estab21 lished or is maintained for the purpose of providing 

22 medical care (through the purchase of insurance or 

23 otherwise) for employees (or their dependents) cov24 ered thereunder and which demonstrates to the Sec25 retary that all requirements for certification under 
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•HR 660 IH 

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

2 fund, or program if such plan, fund, or program 

3 were a group health plan, such plan, fund, or pro4 gram shall be treated for purposes of this title as an 

5 employee welfare benefit plan on and after the date 

6 of such demonstration.’’. 

7 (b) CONFORMING AMENDMENTS TO PREEMPTION

8 RULES.—

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

10 1144(b)(6)) is amended by adding at the end the 

11 following new subparagraph: 

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

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

14 of an association health plan which is certified under part 

15 8.’’. 

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

17 is amended—

18 (A) in subsection (b)(4), by striking ‘‘Sub19 section (a)’’ and inserting ‘‘Subsections (a) and 

20 (e)’’; 

21 (B) in subsection (b)(5), by striking ‘‘sub22 section (a)’’ in subparagraph (A) and inserting 

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

24 (a)(2)(B) and (b) of section 805’’, and by strik25 ing ‘‘subsection (a)’’ in subparagraph (B) and 
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1 inserting ‘‘subsection (a) of this section or sub2 section (a)(2)(B) or (b) of section 805’’; 

3 (C) by redesignating subsection (d) as sub4 section (e); and 

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

6 following new subsection: 

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

8 provisions of this title shall supersede any and all State 

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

10 have the effect of precluding, a health insurance issuer 

11 from offering health insurance coverage in connection with 

12 an association health plan which is certified under part 

13 8. 

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

15 of subsection (b) of this section—

16 ‘‘(A) In any case in which health insurance cov17 erage of any policy type is offered under an associa18 tion health plan certified under part 8 to a partici19 pating employer operating in such State, the provi20 sions of this title shall supersede any and all laws 

21 of such State insofar as they may preclude a health 

22 insurance issuer from offering health insurance cov23 erage of the same policy type to other employers op24 erating in the State which are eligible for coverage 

25 under such association health plan, whether or not 
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1 such other employers are participating employers in 

2 such plan. 

3 ‘‘(B) In any case in which health insurance cov4 erage of any policy type is offered under an associa5 tion health plan in a State and the filing, with the 

6 applicable State authority, of the policy form in con7 nection with such policy type is approved by such 

8 State authority, the provisions of this title shall su9 persede any and all laws of any other State in which 

10 health insurance coverage of such type is offered, in11 sofar as they may preclude, upon the filing in the 

12 same form and manner of such policy form with the 

13 applicable State authority in such other State, the 

14 approval of the filing in such other State. 

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

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

17 805. 

18 ‘‘(4) For purposes of this subsection, the term ‘asso19 ciation health plan’ has the meaning provided in section 

20 801(a), and the terms ‘health insurance coverage’, ‘par21 ticipating employer’, and ‘health insurance issuer’ have 

22 the meanings provided such terms in section 811, respec23 tively.’’. 

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

25 U.S.C. 1144(b)(6)(A)) is amended—
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1 (A) in clause (i)(II), by striking ‘‘and’’ at 

2 the end; 

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

4 does not provide medical care (within the mean5 ing of section 733(a)(2)),’’ after ‘‘arrange6 ment,’’, and by striking ‘‘title.’’ and inserting 

7 ‘‘title, and’’; and 

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

9 clause: 

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

11 of any other employee welfare benefit plan which is 

12 a multiple employer welfare arrangement and which 

13 provides medical care (within the meaning of section 

14 733(a)(2)), any law of any State which regulates in15 surance may apply.’’. 

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

17 by paragraph (2)(C)) is amended—

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

19 ‘‘(1) Except as provided in paragraph (2), noth20 ing’’; and

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

22 paragraph: 

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

24 on or after the date of the enactment of the Small Busi25 ness Health Fairness Act of 2003 shall be construed to 
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1 alter, amend, modify, invalidate, impair, or supersede any 

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

3 the affected section.’’. 

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

5 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

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

7 person serving as the sponsor of an association health plan 

8 under part 8.’’. 

9 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE10 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

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

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

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

14 include in its summary plan description, in connection 

15 with each benefit option, a description of the form of sol16 vency or guarantee fund protection secured pursuant to 

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

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

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

20 (f) REPORT TO THE CONGRESS REGARDING CERTIFI21 CATION OF SELF-INSURED ASSOCIATION HEALTH

22 PLANS.—Not later than January 1, 2008, the Secretary 

23 of Labor shall report to the Committee on Education and 

24 the Workforce of the House of Representatives and the 

25 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

‘‘Sec. 801. Association health plans. 

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

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

‘‘Sec. 804. Participation and coverage requirements. 

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

and benefit options. 

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

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

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

‘‘Sec. 809. Corrective actions and mandatory termination. 

‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health plans 

providing health benefits in addition to health insurance coverage. 

‘‘Sec. 811. State assessment authority. 

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

7 SEC. 3. 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 ‘‘for any plan year 

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

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

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

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

17 (2) in clause (iii)—
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1 (A) by striking ‘‘common control shall not 

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

3 and inserting ‘‘an interest of greater than 25 

4 percent may not be required as the minimum 

5 interest necessary for common control’’; and 

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

7 ‘‘consistent and coextensive with’’; 

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 determining, after the application of 

13 clause (i), whether benefits are provided to employ14 ees of two or more employers, the arrangement shall 

15 be treated as having only one participating employer 

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

17 individuals who are employees and former employees 

18 of any one participating employer and who are cov19 ered under the arrangement is greater than 75 per20 cent of the aggregate number of all individuals who 

21 are employees or former employees of participating 

22 employers and who are covered under the arrange23 ment;’’. 
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1 SEC. 4. CLARIFICATION OF TREATMENT OF CERTAIN COL2 LECTIVELY BARGAINED ARRANGEMENTS. 

3 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em4 ployee Retirement Income Security Act of 1974 (29 

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

6 ‘‘(i)(I) under or pursuant to one or more collec7 tive bargaining agreements which are reached pursu8 ant to collective bargaining described in section 8(d) 

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

10 158(d)) or paragraph Fourth of section 2 of the 

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

12 Fourth) or which are reached pursuant to labor13 management negotiations under similar provisions of 

14 State public employee relations laws, and (II) in ac15 cordance with subparagraphs (C), (D), and (E);’’. 

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

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

18 following new subparagraphs: 

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

20 or other arrangement shall be treated as established or

21 maintained in accordance with this subparagraph only if 

22 the following requirements are met: 

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

24 employee organization or any other entity sponsoring 

25 the plan or other arrangement, do not—
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1 ‘‘(I) utilize the services of any licensed in2 surance agent or broker for soliciting or enroll3 ing employers or individuals as participating 

4 employers or covered individuals under the plan 

5 or other arrangement; or 

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

7 person, other than a full time employee of the 

8 employee organization (or a member of the or9 ganization to the extent provided in regulations 

10 prescribed by the Secretary through negotiated 

11 rulemaking), that is related either to the volume 

12 or number of employers or individuals solicited 

13 or enrolled as participating employers or cov14 ered individuals under the plan or other ar15 rangement, or to the dollar amount or size of 

16 the contributions made by participating employ17 ers or covered individuals to the plan or other 

18 arrangement; 

19 except to the extent that the services used by the 

20 plan, arrangement, organization, or other entity con21 sist solely of preparation of documents necessary for 

22 compliance with the reporting and disclosure re23 quirements of part 1 or administrative, investment, 

24 or consulting services unrelated to solicitation or en25 rollment of covered individuals. 
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1 ‘‘(ii) As of the end of the preceding plan year, 

2 the number of covered individuals under the plan or 

3 other arrangement who are neither—

4 ‘‘(I) employed within a bargaining unit 

5 covered by any of the collective bargaining 

6 agreements with a participating employer (nor 

7 covered on the basis of an individual’s employ8 ment in such a bargaining unit); nor 

9 ‘‘(II) present employees (or former employ10 ees who were covered while employed) of the 

11 sponsoring employee organization, of an em12 ployer who is or was a party to any of the col13 lective bargaining agreements, or of the plan or 

14 other arrangement or a related plan or arrange15 ment (nor covered on the basis of such present 

16 or former employment), 

17 does not exceed 15 percent of the total number of 

18 individuals who are covered under the plan or ar19 rangement and who are present or former employees 

20 who are or were covered under the plan or arrange21 ment pursuant to a collective bargaining agreement 

22 with a participating employer. The requirements of 

23 the preceding provisions of this clause shall be treat24 ed as satisfied if, as of the end of the preceding plan 

25 year, such covered individuals are comprised solely 
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1 of individuals who were covered individuals under 

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

3 enactment of the Small Business Health Fairness 

4 Act of 2003 and, as of the end of the preceding plan 

5 year, the number of such covered individuals does 

6 not exceed 25 percent of the total number of present 

7 and former employees enrolled under the plan or 

8 other arrangement. 

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

10 sponsoring the plan or other arrangement certifies 

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

12 which shall be prescribed by the Secretary through 

13 negotiated rulemaking that the plan or other ar14 rangement meets the requirements of clauses (i) and 

15 (ii). 

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

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

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

20 or arrangement consist of health insurance coverage; 

21 or 

22 ‘‘(ii)(I) the plan or arrangement is a multiem23 ployer plan; and 

24 ‘‘(II) the requirements of clause (B) of the pro25 viso to clause (5) of section 302(c) of the Labor 
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1 Management Relations Act, 1947 (29 U.S.C. 

2 186(c)) are met with respect to such plan or other 

3 arrangement. 

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

5 or arrangement shall be treated as established or main6 tained in accordance with this subparagraph only if—

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

8 the date of the enactment of the Small Business 

9 Health Fairness Act of 2003; or 

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

11 sponsoring the plan or arrangement—

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

13 years; or 

14 ‘‘(II) demonstrates to the satisfaction of 

15 the Secretary that the requirements of subpara16 graphs (C) and (D) are met with respect to the 

17 plan or other arrangement.’’.

18 (c) CONFORMING AMENDMENTS TO DEFINITIONS OF

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

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

21 the following new sentence: ‘‘Such term includes an indi22 vidual who is a covered individual described in paragraph 

23 (40)(C)(ii).’’. 
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1 SEC. 5. 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 with respect 

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

5 or (E) of section 3(40) are met, 

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

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

8 both.’’. 

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

10 such Act (29 U.S.C. 1132), as amended by sections 141 

11 and 143, is further amended by adding at the end the 

12 following new subsection: 

13 ‘‘(p) ASSOCIATION HEALTH PLAN CEASE AND DE14 SIST ORDERS.—

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

16 upon application by the Secretary showing the oper17 ation, promotion, or marketing of an association 

18 health plan (or similar arrangement providing bene19 fits consisting of medical care (as defined in section 

20 733(a)(2))) that—

21 ‘‘(A) is not certified under part 8, is sub22 ject under section 514(b)(6) to the insurance 

23 laws of any State in which the plan or arrange24 ment offers or provides benefits, and is not li-
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1 censed, registered, or otherwise approved under 

2 the insurance laws of such State; or 

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

4 under part 8 and is not operating in accordance 

5 with the requirements under part 8 for such 

6 certification, 

7 a district court of the United States shall enter an 

8 order requiring that the plan or arrangement cease 

9 activities. 

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

11 apply in the case of an association health plan or 

12 other arrangement if the plan or arrangement shows 

13 that—

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

15 paragraph (1) consist of health insurance cov16 erage; and 

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

18 the plan or arrangement offers or provides ben19 efits, the plan or arrangement is operating in 

20 accordance with applicable State laws that are 

21 not superseded under section 514. 

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

23 court may grant such additional equitable relief, in24 cluding any relief available under this title, as it 

25 deems necessary to protect the interests of the pub-
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1 lic and of persons having claims for benefits against 

2 the plan.’’. 

3 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

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

5 by section 301(b), is amended by adding at the end the 

6 following new subsection: 

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

8 each association health plan which is or has been certified 

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

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

12 filed under the plan.’’. 

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

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

17 at the end the following new subsection: 

18 ‘‘(c) CONSULTATION WITH STATES WITH RESPECT

19 TO ASSOCIATION HEALTH PLANS.—

20 ‘‘(1) AGREEMENTS WITH STATES.—The Sec21 retary shall consult with the State recognized under 

22 paragraph (2) with respect to an association health 

23 plan regarding the exercise of—
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1 ‘‘(A) the Secretary’s authority under sec2 tions 502 and 504 to enforce the requirements 

3 for certification under part 8; and 

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

5 association health plans under part 8 in accord6 ance with regulations of the Secretary applica7 ble to certification under part 8. 

8 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

9 STATE.—In carrying out paragraph (1), the Sec10 retary shall ensure that only one State will be recog11 nized, with respect to any particular association 

12 health plan, as the State to with which consultation 

13 is required. In carrying out this paragraph, the Sec14 retary shall take into account the places of residence 

15 of the participants and beneficiaries under the plan 

16 and the State in which the trust is maintained.’’. 

17 SEC. 7. EFFECTIVE DATE AND TRANSITIONAL AND OTHER 

18 RULES. 

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

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

21 date of the enactment. The amendments made by sections 

22 3 and 4 shall take effect on the date of the enactment 

23 of this Act. The Secretary of Labor shall first issue all 

24 regulations necessary to carry out the amendments made 

25 by this subtitle within one year from the date of the enact-
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1 ment. Such regulations shall be issued through negotiated 

2 rulemaking. 

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

4 Retirement Income Security Act of 1974 (added by section 

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

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

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

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

9 enactment of this Act consist of health insurance coverage 

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

11 (c) TREATMENT OF CERTAIN EXISTING HEALTH

12 BENEFITS PROGRAMS.—

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

14 the date of the enactment of this Act, an arrange15 ment is maintained in a State for the purpose of 

16 providing benefits consisting of medical care for the 

17 employees and beneficiaries of its participating em18 ployers, at least 200 participating employers make 

19 contributions to such arrangement, such arrange20 ment has been in existence for at least 10 years, and 

21 such arrangement is licensed under the laws of one 

22 or more States to provide such benefits to its par23 ticipating employers, upon the filing with the appli24 cable authority (as defined in section 812(a)(5) of 

25 the Employee Retirement Income Security Act of 
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1 1974 (as amended by this subtitle)) by the arrange2 ment of an application for certification of the ar3 rangement under part 8 of subtitle B of title I of 

4 such Act—

5 (A) such arrangement shall be deemed to 

6 be a group health plan for purposes of title I 

7 of such Act; 

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

9 and 803(a)(1) of the Employee Retirement In10 come Security Act of 1974 shall be deemed met 

11 with respect to such arrangement; 

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

13 such Act shall be deemed met, if the arrange14 ment is operated by a board of directors 

15 which—

16 (i) is elected by the participating em17 ployers, with each employer having one 

18 vote; and 

19 (ii) has complete fiscal control over 

20 the arrangement and which is responsible 

21 for all operations of the arrangement; 

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

23 such Act shall be deemed met with respect to 

24 such arrangement; and 
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1 (E) the arrangement may be certified by 

2 any applicable authority with respect to its op3 erations in any State only if it operates in such 

4 State on the date of certification. 

5 The provisions of this subsection shall cease to apply 

6 with respect to any such arrangement at such time 

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

8 applicable requirements of this subsection are not 

9 met with respect to such arrangement. 

10 (2) DEFINITIONS.—For purposes of this sub11 section, the terms ‘‘group health plan’’, ‘‘medical 

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

13 meanings provided in section 812 of the Employee 

14 Retirement Income Security Act of 1974, except 

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

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

17 reference to an arrangement referred to in this sub18 section.

Æ
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1 (E) the arrangement may be certified by 

2 any applicable authority with respect to its op3 erations in any State only if it operates in such 

4 State on the date of certification. 

5 The provisions of this subsection shall cease to apply 

6 with respect to any such arrangement at such time 

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

8 applicable requirements of this subsection are not 

9 met with respect to such arrangement. 

10 (2) DEFINITIONS.—For purposes of this sub11 section, the terms ‘‘group health plan’’, ‘‘medical 

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

13 meanings provided in section 812 of the Employee 

14 Retirement Income Security Act of 1974, except 

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

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

17 reference to an arrangement referred to in this sub18 section.

Æ