IB 

Union Calendar No. 78

108TH CONGRESS 

1ST SESSION H. R. 660

[Report No. 108–156] 

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 

JUNE 16, 2003

Additional sponsors: Mr. HOSTETTLER, Mrs. NAPOLITANO, Mr. CRANE, Mr. 

CHOCOLA, Mr. FOLEY, Mr. ROGERS of Michigan, Mr. CARSON of Oklahoma, Mr. COLE, Mr. ROGERS of Kentucky, Mr. WELLER, Mr. BARTLETT of Maryland, Mr. KING of Iowa, Mr. SHUSTER, Mr. CASE, Ms. LO-
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RETTA SANCHEZ of California, Ms. GINNY BROWN-WAITE of Florida, Mr. 

FALEOMAVAEGA, Mr. COX, Mrs. BLACKBURN, Mr. GINGREY, Mr. TIBERI, 

Mr. WELDON of Pennsylvania, Mr. BARRETT of South Carolina, Mr. 

GARY G. MILLER of California, Mr. DEAL of Georgia, Mrs. CUBIN, Mr. 

BONNER, Mr. MCINTYRE, Mr. LATHAM, Mr. BROWN of South Carolina, 

Mr. CANTOR, Mr. SHAW, Mr. KIRK, Mr. BURTON of Indiana, Mr. WICKER, Mr. WYNN, Mr. HEFLEY, Mr. ROGERS of Alabama, Mr. ENGLISH, 

Mr. EHLERS, Mr. DAVIS of Tennessee, Mr. STEARNS, Mr. PICKERING, 

Mr. BURNS, Mr. MORAN of Virginia, Mr. SULLIVAN, Ms. HARRIS, Mr. 

FEENEY, Mr. SMITH of Michigan, Mr. THOMPSON of Mississippi, Mr. 

LAHOOD, Mr. MILLER of Florida, Mr. BONILLA, Mr. PITTS, Mr. ISRAEL, 

Mr. NETHERCUTT, Mr. THOMAS, Mr. TURNER of Texas, Mr. TAYLOR of 

North Carolina, Mr. CRENSHAW, Mr. LIPINSKI, Mr. DOOLITTLE, Mr. 

HENSARLING, Mr. DELAY, Mr. BRADY of Texas, Mr. BARTON of Texas, 

Mr. THORNBERRY, Mr. CULBERSON, Mr. PAUL, Mr. RENZI, Ms. ROSLEHTINEN, Mrs. BONO, Mr. HOBSON, Mr. HYDE, Mr. HULSHOF, Mr. 

ISTOOK, Mr. SHADEGG, Mr. CHABOT, Mrs. MYRICK, Mr. GIBBONS, Mr. 

JANKLOW, Mr. COOPER, Mr. PEARCE, Mr. BLUNT, Mr. BRADLEY of New 

Hampshire, Mr. TURNER of Ohio, Ms. PRYCE of Ohio, Mr. MICA, Mr. 

NEUGEBAUER, Mr. NEY, and Mr. GUTKNECHT

Deleted sponsors: Mr. BACA (added February 11, 2003; deleted April 7, 2003) 

Mrs. CHRISTENSEN (added February 11, 2003; deleted April 2, 2003), 

Mr. GRIJALVA (added February 11, 2003; deleted June 10, 2003), Mr. 

SOUDER (added February 11, 2003; deleted May 13, 2003), Ms. EDDIE

BERNICE JOHNSON of Texas (added March 6, 2003; deleted June 11, 

2003), and Mr. PASTOR (added April 3, 2003; deleted June 10, 2003) 

JUNE 16, 2003 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on February 11, 2003] 

A BILL

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

care for their employees.

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

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

3 ‘‘Small Business Health Fairness Act of 2003’’. 

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

5 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. Enforcement provisions relating to association health plans. 

Sec. 5. Cooperation between Federal and State authorities. 

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

6 SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS. 

7 (a) IN GENERAL.—Subtitle B of title I of the Employee 

8 Retirement Income Security Act of 1974 is amended by 

9 adding after part 7 the following new part: 
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1 ‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH

2 PLANS

3 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

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

5 ‘association health plan’ means a group health plan whose 

6 sponsor is (or is deemed under this part to be) described 

7 in subsection (b). 

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

9 plan is described in this subsection if such sponsor—

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

11 with a constitution and bylaws specifically stating its 

12 purpose and providing for periodic meetings on at 

13 least an annual basis, as a bona fide trade associa14 tion, a bona fide industry association (including a 

15 rural electric cooperative association or a rural tele16 phone cooperative association), a bona fide profes17 sional association, or a bona fide chamber of com18 merce (or similar bona fide business association, in19 cluding a corporation or similar organization that 

20 operates on a cooperative basis (within the meaning 

21 of section 1381 of the Internal Revenue Code of 

22 1986)), for substantial purposes other than that of ob23 taining or providing medical care; 

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

25 receives the active support of its members and re-
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1 quires for membership payment on a periodic basis of 

2 dues or payments necessary to maintain eligibility 

3 for membership in the sponsor; and 

4 ‘‘(3) does not condition membership, such dues or 

5 payments, or coverage under the plan on the basis of 

6 health status-related factors with respect to the em7 ployees of its members (or affiliated members), or the 

8 dependents of such employees, and does not condition 

9 such dues or payments on the basis of group health 

10 plan participation. 

11 Any sponsor consisting of an association of entities which 

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

13 be deemed to be a sponsor described in this subsection. 

14 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

15 PLANS. 

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

17 prescribe by regulation a procedure under which, subject to 

18 subsection (b), the applicable authority shall certify associa19 tion health plans which apply for certification as meeting 

20 the requirements of this part. 

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

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

23 health plan that provides at least one benefit option which 

24 does not consist of health insurance coverage, the applicable 

25 authority shall certify such plan as meeting the require-
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1 ments of this part only if the applicable authority is satis2 fied that the applicable requirements of this part are met 

3 (or, upon the date on which the plan is to commence oper4 ations, will be met) with respect to the plan. 

5 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

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

7 certification under this part is in effect shall meet the appli8 cable requirements of this part, effective on the date of cer9 tification (or, if later, on the date on which the plan is 

10 to commence operations). 

11 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI12 CATION.—The applicable authority may provide by regula13 tion for continued certification of association health plans 

14 under this part. 

15 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

16 PLANS.—The applicable authority shall establish a class 

17 certification procedure for association health plans under 

18 which all benefits consist of health insurance coverage. 

19 Under such procedure, the applicable authority shall pro20 vide for the granting of certification under this part to the 

21 plans in each class of such association health plans upon 

22 appropriate filing under such procedure in connection with 

23 plans in such class and payment of the prescribed fee under 

24 section 807(a). 
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1 ‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION

2 HEALTH PLANS.—An association health plan which offers 

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

4 insurance coverage may be certified under this part only 

5 if such plan consists of any of the following: 

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

7 date of the enactment of the Small Business Health 

8 Fairness Act of 2003, 

9 ‘‘(2) a plan under which the sponsor does not re10 strict membership to one or more trades and busi11 nesses or industries and whose eligible participating 

12 employers represent a broad cross-section of trades 

13 and businesses or industries, or 

14 ‘‘(3) a plan whose eligible participating employ15 ers represent one or more trades or businesses, or one 

16 or more industries, consisting of any of the following: 

17 agriculture; equipment and automobile dealerships; 

18 barbering and cosmetology; certified public account19 ing practices; child care; construction; dance, theat20 rical and orchestra productions; disinfecting and pest 

21 control; financial services; fishing; foodservice estab22 lishments; hospitals; labor organizations; logging; 

23 manufacturing (metals); mining; medical and dental 

24 practices; medical laboratories; professional consulting 

25 services; sanitary services; transportation (local and 
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1 freight); warehousing; wholesaling/distributing; or 

2 any other trade or business or industry which has 

3 been indicated as having average or above-average 

4 risk or health claims experience by reason of State 

5 rate filings, denials of coverage, proposed premium 

6 rate levels, or other means demonstrated by such plan 

7 in accordance with regulations. 

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

9 BOARDS OF TRUSTEES. 

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

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

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

13 the requirements of section 801(b) for a continuous period 

14 of not less than 3 years ending with the date of the applica15 tion for certification under this part. 

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

17 subsection are met with respect to an association health 

18 plan if the following requirements are met:

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

20 pursuant to a trust agreement, by a board of trustees 

21 which has complete fiscal control over the plan and 

22 which is responsible for all operations of the plan. 

23 ‘‘(2) RULES OF OPERATION AND FINANCIAL CON24 TROLS.—The board of trustees has in effect rules of 

25 operation and financial controls, based on a 3-year 
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1 plan of operation, adequate to carry out the terms of 

2 the plan and to meet all requirements of this title ap3 plicable to the plan.

4 ‘‘(3) RULES GOVERNING RELATIONSHIP TO PAR5 TICIPATING EMPLOYERS AND TO CONTRACTORS.—

6 ‘‘(A) BOARD MEMBERSHIP.—

7 ‘‘(i) IN GENERAL.—Except as provided 

8 in clauses (ii) and (iii), the members of the 

9 board of trustees are individuals selected 

10 from individuals who are the owners, offi11 cers, directors, or employees of the partici12 pating employers or who are partners in the 

13 participating employers and actively par14 ticipate in the business. 

15 ‘‘(ii) LIMITATION.—

16 ‘‘(I) GENERAL RULE.—Except as 

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

18 no such member is an owner, officer, 

19 director, or employee of, or partner in, 

20 a contract administrator or other serv21 ice provider to the plan. 

22 ‘‘(II) LIMITED EXCEPTION FOR

23 PROVIDERS OF SERVICES SOLELY ON

24 BEHALF OF THE SPONSOR.—Officers or 

25 employees of a sponsor which is a serv-
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1 ice provider (other than a contract ad2 ministrator) to the plan may be mem3 bers of the board if they constitute not 

4 more than 25 percent of the member5 ship of the board and they do not pro6 vide services to the plan other than on 

7 behalf of the sponsor. 

8 ‘‘(III) TREATMENT OF PROVIDERS

9 OF MEDICAL CARE.—In the case of a 

10 sponsor which is an association whose 

11 membership consists primarily of pro12 viders of medical care, subclause (I) 

13 shall not apply in the case of any serv14 ice provider described in subclause (I) 

15 who is a provider of medical care 

16 under the plan. 

17 ‘‘(iii) CERTAIN PLANS EXCLUDED.—

18 Clause (i) shall not apply to an association 

19 health plan which is in existence on the 

20 date of the enactment of the Small Business 

21 Health Fairness Act of 2003. 

22 ‘‘(B) SOLE AUTHORITY.—The board has sole 

23 authority under the plan to approve applications 

24 for participation in the plan and to contract 
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1 with a service provider to administer the day-to2 day affairs of the plan. 

3 ‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In the 

4 case of a group health plan which is established and main5 tained by a franchiser for a franchise network consisting 

6 of its franchisees—

7 ‘‘(1) the requirements of subsection (a) and sec8 tion 801(a) shall be deemed met if such requirements 

9 would otherwise be met if the franchiser were deemed 

10 to be the sponsor referred to in section 801(b), such 

11 network were deemed to be an association described in 

12 section 801(b), and each franchisee were deemed to be 

13 a member (of the association and the sponsor) referred 

14 to in section 801(b); and 

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

16 be deemed met. 

17 The Secretary may by regulation define for purposes of this 

18 subsection the terms ‘franchiser’, ‘franchise network’, and 

19 ‘franchisee’.

20 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE21 MENTS. 

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

23 requirements of this subsection are met with respect to an 

24 association health plan if, under the terms of the plan—

25 ‘‘(1) each participating employer must be—
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1 ‘‘(A) a member of the sponsor, 

2 ‘‘(B) the sponsor, or 

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

4 with respect to which the requirements of sub5 section (b) are met, 

6 except that, in the case of a sponsor which is a profes7 sional association or other individual-based associa8 tion, if at least one of the officers, directors, or em9 ployees of an employer, or at least one of the individ10 uals who are partners in an employer and who ac11 tively participates in the business, is a member or 

12 such an affiliated member of the sponsor, partici13 pating employers may also include such employer; 

14 and 

15 ‘‘(2) all individuals commencing coverage under 

16 the plan after certification under this part must be—

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

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

19 employees of, or partners in, participating em20 ployers; or 

21 ‘‘(B) the beneficiaries of individuals de22 scribed in subparagraph (A). 

23 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EMPLOY24 EES.—In the case of an association health plan in existence 

25 on the date of the enactment of the Small Business Health 
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1 Fairness Act of 2003, an affiliated member of the sponsor 

2 of the plan may be offered coverage under the plan as a 

3 participating employer only if—

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

5 member on the date of certification under this part; 

6 or 

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

8 date of the offering of such coverage, the affiliated 

9 member has not maintained or contributed to a group 

10 health plan with respect to any of its employees who 

11 would otherwise be eligible to participate in such as12 sociation health plan. 

13 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re14 quirements of this subsection are met with respect to an 

15 association health plan if, under the terms of the plan, no 

16 participating employer may provide health insurance cov17 erage in the individual market for any employee not covered 

18 under the plan which is similar to the coverage contempora19 neously provided to employees of the employer under the 

20 plan, if such exclusion of the employee from coverage under

21 the plan is based on a health status-related factor with re22 spect to the employee and such employee would, but for such 

23 exclusion on such basis, be eligible for coverage under the 

24 plan. 
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1 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST EM2 PLOYERS AND EMPLOYEES ELIGIBLE TO PARTICIPATE.—

3 The requirements of this subsection are met with respect to 

4 an association health plan if—

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

6 meeting the preceding requirements of this section are 

7 eligible to qualify as participating employers for all 

8 geographically available coverage options, unless, in 

9 the case of any such employer, participation or con10 tribution requirements of the type referred to in sec11 tion 2711 of the Public Health Service Act are not 

12 met; 

13 ‘‘(2) upon request, any employer eligible to par14 ticipate is furnished information regarding all cov15 erage options available under the plan; and 

16 ‘‘(3) the applicable requirements of sections 701, 

17 702, and 703 are met with respect to the plan. 

18 ‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOC19 UMENTS, CONTRIBUTION RATES, AND BEN20 EFIT OPTIONS. 

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

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

23 following requirements are met: 

24 ‘‘(1) CONTENTS OF GOVERNING INSTRUMENTS.—

25 The instruments governing the plan include a written 
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1 instrument, meeting the requirements of an instru2 ment required under section 402(a)(1), which—

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

4 serves as the named fiduciary required for plans 

5 under section 402(a)(1) and serves in the capac6 ity of a plan administrator (referred to in sec7 tion 3(16)(A)); 

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

9 is to serve as plan sponsor (referred to in section 

10 3(16)(B)); and 

11 ‘‘(C) incorporates the requirements of sec12 tion 806. 

13 ‘‘(2) CONTRIBUTION RATES MUST BE NON14 DISCRIMINATORY.—

15 ‘‘(A) The contribution rates for any partici16 pating small employer do not vary on the basis 

17 of any health status-related factor in relation to 

18 employees of such employer or their beneficiaries 

19 and do not vary on the basis of the type of busi20 ness or industry in which such employer is en21 gaged. 

22 ‘‘(B) Nothing in this title or any other pro23 vision of law shall be construed to preclude an 

24 association health plan, or a health insurance 
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1 issuer offering health insurance coverage in con2 nection with an association health plan, from—

3 ‘‘(i) setting contribution rates based on 

4 the claims experience of the plan; or 

5 ‘‘(ii) varying contribution rates for 

6 small employers in a State to the extent 

7 that such rates could vary using the same 

8 methodology employed in such State for reg9 ulating premium rates in the small group 

10 market with respect to health insurance cov11 erage offered in connection with bona fide 

12 associations (within the meaning of section 

13 2791(d)(3) of the Public Health Service 

14 Act), 

15 subject to the requirements of section 702(b) re16 lating to contribution rates. 

17 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDIVID18 UALS WITH RESPECT TO CERTAIN PLANS.—If any 

19 benefit option under the plan does not consist of 

20 health insurance coverage, the plan has as of the be21 ginning of the plan year not fewer than 1,000 partici22 pants and beneficiaries. 

23 ‘‘(4) MARKETING REQUIREMENTS.—

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

25 which consists of health insurance coverage is of-
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1 fered under the plan, State-licensed insurance 

2 agents shall be used to distribute to small em3 ployers coverage which does not consist of health 

4 insurance coverage in a manner comparable to 

5 the manner in which such agents are used to dis6 tribute health insurance coverage. 

7 ‘‘(B) STATE-LICENSED INSURANCE

8 AGENTS.—For purposes of subparagraph (A), the 

9 term ‘State-licensed insurance agents’ means one 

10 or more agents who are licensed in a State and 

11 are subject to the laws of such State relating to 

12 licensure, qualification, testing, examination, 

13 and continuing education of persons authorized 

14 to offer, sell, or solicit health insurance coverage 

15 in such State. 

16 ‘‘(5) REGULATORY REQUIREMENTS.—Such other 

17 requirements as the applicable authority determines 

18 are necessary to carry out the purposes of this part, 

19 which shall be prescribed by the applicable authority 

20 by regulation. 

21 ‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO DE22 SIGN BENEFIT OPTIONS.—Subject to section 514(d), noth23 ing in this part or any provision of State law (as defined 

24 in section 514(c)(1)) shall be construed to preclude an asso25 ciation health plan, or a health insurance issuer offering 
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1 health insurance coverage in connection with an association 

2 health plan, from exercising its sole discretion in selecting 

3 the specific items and services consisting of medical care 

4 to be included as benefits under such plan or coverage, ex5 cept (subject to section 514) in the case of (1) any law to 

6 the extent that it is not preempted under section 731(a)(1) 

7 with respect to matters governed by section 711, 712, or 

8 713, or (2) any law of the State with which filing and ap9 proval of a policy type offered by the plan was initially 

10 obtained to the extent that such law prohibits an exclusion 

11 of a specific disease from such coverage. 

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

13 FOR SOLVENCY FOR PLANS PROVIDING 

14 HEALTH BENEFITS IN ADDITION TO HEALTH 

15 INSURANCE COVERAGE. 

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

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

18 ‘‘(1) the benefits under the plan consist solely of 

19 health insurance coverage; or 

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

21 options which do not consist of health insurance cov22 erage, the plan—

23 ‘‘(A) establishes and maintains reserves 

24 with respect to such additional benefit options, 
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1 in amounts recommended by the qualified actu2 ary, consisting of—

3 ‘‘(i) a reserve sufficient for unearned 

4 contributions; 

5 ‘‘(ii) a reserve sufficient for benefit li6 abilities which have been incurred, which 

7 have not been satisfied, and for which risk 

8 of loss has not yet been transferred, and for 

9 expected administrative costs with respect to 

10 such benefit liabilities; 

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

12 obligations of the plan; and 

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

14 of error and other fluctuations, taking into 

15 account the specific circumstances of the 

16 plan; and 

17 ‘‘(B) establishes and maintains aggregate 

18 and specific excess /stop loss insurance and sol19 vency indemnification, with respect to such addi20 tional benefit options for which risk of loss has 

21 not yet been transferred, as follows: 

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

24 an attachment point which is not greater 

25 than 125 percent of expected gross annual 
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1 claims. The applicable authority may by 

2 regulation provide for upward adjustments 

3 in the amount of such percentage in speci4 fied circumstances in which the plan spe5 cifically provides for and maintains re6 serves in excess of the amounts required 

7 under subparagraph (A). 

8 ‘‘(ii) The plan shall secure specific ex9 cess /stop loss insurance for the plan with 

10 an attachment point which is at least equal 

11 to an amount recommended by the plan’s 

12 qualified actuary. The applicable authority 

13 may by regulation provide for adjustments 

14 in the amount of such insurance in speci15 fied circumstances in which the plan spe16 cifically provides for and maintains re17 serves in excess of the amounts required 

18 under subparagraph (A). 

19 ‘‘(iii) The plan shall secure indem20 nification insurance for any claims which 

21 the plan is unable to satisfy by reason of a 

22 plan termination. 

23 Any person issuing to a plan insurance described in clause 

24 (i), (ii), or (iii) shall notify the Secretary of any failure 

25 of premium payment meriting cancellation of the policy 
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1 prior to undertaking such a cancellation. Any regulations 

2 prescribed by the applicable authority pursuant to clause 

3 (i) or (ii) of subparagraph (B) may allow for such adjust4 ments in the required levels of excess /stop loss insurance 

5 as the qualified actuary may recommend, taking into ac6 count the specific circumstances of the plan. 

7 ‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS RE8 SERVES.—In the case of any association health plan de9 scribed in subsection (a)(2), the requirements of this sub10 section are met if the plan establishes and maintains sur11 plus in an amount at least equal to—

12 ‘‘(1) $500,000, or 

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

14 $2,000,000) as may be set forth in regulations pre15 scribed by the applicable authority, considering the 

16 level of aggregate and specific excess /stop loss insur17 ance provided with respect to such plan and other 

18 factors related to solvency risk, such as the plan’s pro19 jected levels of participation or claims, the nature of 

20 the plan’s liabilities, and the types of assets available 

21 to assure that such liabilities are met. 

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

23 association health plan described in subsection (a)(2), the 

24 applicable authority may provide such additional require25 ments relating to reserves, excess /stop loss insurance, and 
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1 indemnification insurance as the applicable authority con2 siders appropriate. Such requirements may be provided by 

3 regulation with respect to any such plan or any class of 

4 such plans. 

5 ‘‘(d) ADJUSTMENTS FOR EXCESS /STOP LOSS INSUR6 ANCE.—The applicable authority may provide for adjust7 ments to the levels of reserves otherwise required under sub8 sections (a) and (b) with respect to any plan or class of 

9 plans to take into account excess /stop loss insurance pro10 vided with respect to such plan or plans. 

11 ‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The ap12 plicable authority may permit an association health plan 

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

14 of the requirements of this section (except subsection 

15 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar16 rangement, or other financial arrangement as the applica17 ble authority determines to be adequate to enable the plan 

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

19 and is otherwise no less protective of the interests of partici20 pants and beneficiaries than the requirements for which it 

21 is substituted. The applicable authority may take into ac22 count, for purposes of this subsection, evidence provided by 

23 the plan or sponsor which demonstrates an assumption of 

24 liability with respect to the plan. Such evidence may be 

25 in the form of a contract of indemnification, lien, bonding, 
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1 insurance, letter of credit, recourse under applicable terms 

2 of the plan in the form of assessments of participating em3 ployers, security, or other financial arrangement. 

4 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT OF

5 BENEFITS BY CERTAIN PLANS IN DISTRESS.—

6 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSOCIA7 TION HEALTH PLAN FUND.—

8 ‘‘(A) IN GENERAL.—In the case of an asso9 ciation health plan described in subsection 

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

11 met if the plan makes payments into the Asso12 ciation Health Plan Fund under this subpara13 graph when they are due. Such payments shall 

14 consist of annual payments in the amount of 

15 $5,000, and, in addition to such annual pay16 ments, such supplemental payments as the Sec17 retary may determine to be necessary under 

18 paragraph (2). Payments under this paragraph

19 are payable to the Fund at the time determined 

20 by the Secretary. Initial payments are due in 

21 advance of certification under this part. Pay22 ments shall continue to accrue until a plan’s as23 sets are distributed pursuant to a termination 

24 procedure. 
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1 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

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

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

4 not more than 100 percent of the payment which 

5 was not timely paid shall be payable by the plan 

6 to the Fund. 

7 ‘‘(C) CONTINUED DUTY OF THE SEC8 RETARY.—The Secretary shall not cease to carry 

9 out the provisions of paragraph (2) on account 

10 of the failure of a plan to pay any payment 

11 when due. 

12 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE EX13 CESS /STOP LOSS INSURANCE COVERAGE AND INDEM14 NIFICATION INSURANCE COVERAGE FOR CERTAIN

15 PLANS.—In any case in which the applicable author16 ity determines that there is, or that there is reason to 

17 believe that there will be: (A) a failure to take nec18 essary corrective actions under section 809(a) with re19 spect to an association health plan described in sub20 section (a)(2); or (B) a termination of such a plan 

21 under section 809(b) or 810(b)(8) (and, if the appli22 cable authority is not the Secretary, certifies such de23 termination to the Secretary), the Secretary shall de24 termine the amounts necessary to make payments to 

25 an insurer (designated by the Secretary) to maintain 
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1 in force excess /stop loss insurance coverage or indem2 nification insurance coverage for such plan, if the 

3 Secretary determines that there is a reasonable expec4 tation that, without such payments, claims would not 

5 be satisfied by reason of termination of such coverage. 

6 The Secretary shall, to the extent provided in advance 

7 in appropriation Acts, pay such amounts so deter8 mined to the insurer designated by the Secretary. 

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

10 ‘‘(A) IN GENERAL.—There is established on 

11 the books of the Treasury a fund to be known as 

12 the ‘Association Health Plan Fund’. The Fund 

13 shall be available for making payments pursuant 

14 to paragraph (2). The Fund shall be credited 

15 with payments received pursuant to paragraph 

16 (1)(A), penalties received pursuant to paragraph 

17 (1)(B); and earnings on investments of amounts 

18 of the Fund under subparagraph (B). 

19 ‘‘(B) INVESTMENT.—Whenever the Secretary 

20 determines that the moneys of the fund are in ex21 cess of current needs, the Secretary may request 

22 the investment of such amounts as the Secretary 

23 determines advisable by the Secretary of the 

24 Treasury in obligations issued or guaranteed by 

25 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 health 

6 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 claims 

11 under the plan in excess of an amount or 

12 amounts specified in such contract; 

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

14 ‘‘(C) which allows for payment of premiums 

15 by any third party on behalf of the insured plan. 

16 ‘‘(2) SPECIFIC EXCESS /STOP LOSS INSURANCE.—

17 The term ‘specific excess /stop loss insurance’ means, 

18 in connection with an association health plan, a con19 tract—

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

21 minimum standards as the applicable authority 

22 may prescribe by regulation) provides for pay23 ment to the plan with respect to claims under 

24 the plan in connection with a covered individual 

25 in excess of an amount or amounts specified in 
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1 such contract in connection with such covered in2 dividual; 

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

4 ‘‘(C) which allows for payment of premiums 

5 by any third party on behalf of the insured plan. 

6 ‘‘(h) INDEMNIFICATION INSURANCE.—For purposes of 

7 this section, the term ‘indemnification insurance’ means, in 

8 connection with an association health plan, a contract—

9 ‘‘(1) under which an insurer (meeting such min10 imum standards as the applicable authority may pre11 scribe by regulation) provides for payment to the plan 

12 with respect to claims under the plan which the plan 

13 is unable to satisfy by reason of a termination pursu14 ant to section 809(b) (relating to mandatory termi15 nation); 

16 ‘‘(2) which is guaranteed renewable and 

17 noncancellable for any reason (except as the applica18 ble authority may prescribe by regulation); and 

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

20 any third party on behalf of the insured plan. 

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

22 ‘reserves’ means, in connection with an association health 

23 plan, plan assets which meet the fiduciary standards under 

24 part 4 and such additional requirements regarding liquid25 ity as the applicable authority may prescribe by regulation. 
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1 ‘‘(j) SOLVENCY STANDARDS WORKING GROUP.—

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

3 date of the enactment of the Small Business Health 

4 Fairness Act of 2003, the applicable authority shall 

5 establish a Solvency Standards Working Group. In 

6 prescribing the initial regulations under this section, 

7 the applicable authority shall take into account the 

8 recommendations of such Working Group. 

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

10 consist of not more than 15 members appointed by the 

11 applicable authority. The applicable authority shall 

12 include among persons invited to membership on the 

13 Working Group at least one of each of the following: 

14 ‘‘(A) a representative of the National Asso15 ciation of Insurance Commissioners;

16 ‘‘(B) a representative of the American Acad17 emy of Actuaries; 

18 ‘‘(C) a representative of the State govern19 ments, or their interests; 

20 ‘‘(D) a representative of existing self-insured 

21 arrangements, or their interests; 

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

23 type referred to in section 801(b)(1), or their in24 terests; and 
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1 ‘‘(F) a representative of multiemployer 

2 plans that are group health plans, or their inter3 ests. 

4 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE5 LATED REQUIREMENTS. 

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

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

8 pay to the applicable authority at the time of filing an ap9 plication for certification under this part a filing fee in 

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

11 of the Secretary, to the extent provided in appropriation 

12 Acts, for the sole purpose of administering the certification 

13 procedures applicable with respect to association health 

14 plans. 

15 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICATION

16 FOR CERTIFICATION.—An application for certification 

17 under this part meets the requirements of this section only 

18 if it includes, in a manner and form which shall be pre19 scribed by the applicable authority by regulation, at least 

20 the following information: 

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

22 and addresses of—

23 ‘‘(A) the sponsor; and 

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

25 the plan. 
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1 ‘‘(2) STATES IN WHICH PLAN INTENDS TO DO

2 BUSINESS.—The States in which participants and 

3 beneficiaries under the plan are to be located and the 

4 number of them expected to be located in each such 

5 State. 

6 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro7 vided by the board of trustees that the bonding re8 quirements of section 412 will be met as of the date 

9 of the application or (if later) commencement of oper10 ations.

11 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu12 ments governing the plan (including any bylaws and 

13 trust agreements), the summary plan description, and 

14 other material describing the benefits that will be pro15 vided to participants and beneficiaries under the 

16 plan. 

17 ‘‘(5) AGREEMENTS WITH SERVICE PROVIDERS.—

18 A copy of any agreements between the plan and con19 tract administrators and other service providers. 

20 ‘‘(6) FUNDING REPORT.—In the case of associa21 tion health plans providing benefits options in addi22 tion to health insurance coverage, a report setting 

23 forth information with respect to such additional ben24 efit options determined as of a date within the 120-
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1 day period ending with the date of the application, 

2 including the following: 

3 ‘‘(A) RESERVES.—A statement, certified by 

4 the board of trustees of the plan, and a statement 

5 of actuarial opinion, signed by a qualified actu6 ary, that all applicable requirements of section 

7 806 are or will be met in accordance with regu8 lations which the applicable authority shall pre9 scribe. 

10 ‘‘(B) ADEQUACY OF CONTRIBUTION

11 RATES.—A statement of actuarial opinion, 

12 signed by a qualified actuary, which sets forth a 

13 description of the extent to which contribution 

14 rates are adequate to provide for the payment of 

15 all obligations and the maintenance of required 

16 reserves under the plan for the 12-month period 

17 beginning with such date within such 120-day 

18 period, taking into account the expected coverage 

19 and experience of the plan. If the contribution 

20 rates are not fully adequate, the statement of ac21 tuarial opinion shall indicate the extent to which 

22 the rates are inadequate and the changes needed 

23 to ensure adequacy. 

24 ‘‘(C) CURRENT AND PROJECTED VALUE OF

25 ASSETS AND LIABILITIES.—A statement of actu-
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1 arial opinion signed by a qualified actuary, 

2 which sets forth the current value of the assets 

3 and liabilities accumulated under the plan and 

4 a projection of the assets, liabilities, income, and 

5 expenses of the plan for the 12-month period re6 ferred to in subparagraph (B). The income state7 ment shall identify separately the plan’s admin8 istrative expenses and claims. 

9 ‘‘(D) COSTS OF COVERAGE TO BE CHARGED

10 AND OTHER EXPENSES.—A statement of the costs 

11 of coverage to be charged, including an 

12 itemization of amounts for administration, re13 serves, and other expenses associated with the op14 eration of the plan. 

15 ‘‘(E) OTHER INFORMATION.—Any other in16 formation as may be determined by the applica17 ble authority, by regulation, as necessary to 

18 carry out the purposes of this part. 

19 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

20 STATES.—A certification granted under this part to an as21 sociation health plan shall not be effective unless written 

22 notice of such certification is filed with the applicable State 

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

24 participants and beneficiaries under the plan are located. 

25 For purposes of this subsection, an individual shall be con-
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1 sidered to be located in the State in which a known address 

2 of such individual is located or in which such individual 

3 is employed. 

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

5 any association health plan certified under this part, de6 scriptions 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 and 

9 manner as shall be prescribed by the applicable authority 

10 by regulation. The applicable authority may require by reg11 ulation prior notice of material changes with respect to 

12 specified matters which might serve as the basis for suspen13 sion or revocation of the certification. 

14 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN ASSO15 CIATION HEALTH PLANS.—An association health plan cer16 tified under this part which provides benefit options in ad17 dition to health insurance coverage for such plan year shall 

18 meet the requirements of section 103 by filing an annual 

19 report under such section which shall include information 

20 described in subsection (b)(6) with respect to the plan year 

21 and, notwithstanding section 104(a)(1)(A), shall be filed 

22 with the applicable authority not later than 90 days after 

23 the close of the plan year (or on such later date as may 

24 be prescribed by the applicable authority). The applicable 
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1 authority may require by regulation such interim reports 

2 as it considers appropriate. 

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

4 board of trustees of each association health plan which pro5 vides benefits options in addition to health insurance cov6 erage and which is applying for certification under this 

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

8 of all participants and beneficiaries, a qualified actuary 

9 who shall be responsible for the preparation of the materials 

10 comprising information necessary to be submitted by a 

11 qualified actuary under this part. The qualified actuary 

12 shall utilize such assumptions and techniques as are nec13 essary to enable such actuary to form an opinion as to 

14 whether the contents of the matters reported under this 

15 part—

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

17 the experience of the plan and to reasonable expecta18 tions; and

19 ‘‘(2) represent such actuary’s best estimate of an20 ticipated experience under the plan. 

21 The opinion by the qualified actuary shall be made with 

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

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

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

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

7 not less than 60 days before the proposed termination 

8 date—

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

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

14 of the plan in connection with such termination in a 

15 manner which will result in timely payment of all 

16 benefits for which the plan is obligated; and 

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

19 Actions required under this section shall be taken in such 

20 form and manner as may be prescribed by the applicable 

21 authority by regulation. 

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

24 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RESERVES.—

25 An association health plan which is certified under this 

26 part and which provides benefits other than health insur-
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1 ance coverage shall continue to meet the requirements of sec2 tion 806, irrespective of whether such certification continues 

3 in effect. The board of trustees of such plan shall determine 

4 quarterly whether the requirements of section 806 are met. 

5 In any case in which the board determines that there is 

6 reason to believe that there is or will be a failure to meet 

7 such requirements, or the applicable authority makes such 

8 a determination and so notifies the board, the board shall 

9 immediately notify the qualified actuary engaged by the 

10 plan, and such actuary shall, not later than the end of the 

11 next following month, make such recommendations to the 

12 board for corrective action as the actuary determines nec13 essary to ensure compliance with section 806. Not later than 

14 30 days after receiving from the actuary recommendations 

15 for corrective actions, the board shall notify the applicable 

16 authority (in such form and manner as the applicable au17 thority may prescribe by regulation) of such recommenda18 tions of the actuary for corrective action, together with a 

19 description of the actions (if any) that the board has taken 

20 or plans to take in response to such recommendations. The 

21 board shall thereafter report to the applicable authority, in 

22 such form and frequency as the applicable authority may 

23 specify to the board, regarding corrective action taken by 

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

2 which—

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

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

5 loss insurance or indemnity insurance pursuant to 

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

7 plan which is or has been certified under this part 

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

10 by the board of trustees of the plan that corrective ac11 tion has restored compliance with such requirements; 

12 and 

13 ‘‘(2) the applicable authority determines that 

14 there is a reasonable expectation that the plan will 

15 continue to fail to meet the requirements of section 

16 806, 

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

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

19 course of the termination, take such actions as the applica20 ble authority may require, including satisfying any claims 

21 referred to in section 806(a)(2)(B)(iii) and recovering for 

22 the plan any liability under subsection (a)(2)(B)(iii) or (e) 

23 of section 806, as necessary to ensure that the affairs of the 

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

2 benefits for which the plan is obligated. 

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

6 HEALTH INSURANCE COVERAGE. 

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

8 INSOLVENT PLANS.—Whenever the Secretary determines 

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

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

12 is otherwise in a financially hazardous condition, as shall 

13 be defined by the Secretary by regulation, the Secretary 

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

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

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

18 other interested persons may intervene in the proceedings 

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

20 Secretary trustee if the court determines that the trusteeship 

21 is necessary to protect the interests of the participants and 

22 beneficiaries or providers of medical care or to avoid any 

23 unreasonable deterioration of the financial condition of the 

24 plan. The trusteeship of such Secretary shall continue until 
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1 the conditions described in the first sentence of this sub2 section are remedied or the plan is terminated. 

3 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon ap4 pointment as trustee under subsection (a), shall have the 

5 power—

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

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

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

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

10 of the assets and records of the plan to the Secretary 

11 as trustee; 

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

13 Secretary holds in accordance with the provisions of 

14 the plan, regulations prescribed by the Secretary, and 

15 applicable provisions of law; 

16 ‘‘(4) to require the sponsor, the plan adminis17 trator, any participating employer, and any em18 ployee organization representing plan participants to 

19 furnish any information with respect to the plan 

20 which the Secretary as trustee may reasonably need 

21 in order to administer the plan;

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

23 plan and to recover reasonable expenses of the trustee24 ship; 
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1 ‘‘(6) to commence, prosecute, or defend on behalf 

2 of the plan any suit or proceeding involving the plan; 

3 ‘‘(7) to issue, publish, or file such notices, state4 ments, and reports as may be required by the Sec5 retary by regulation or required by any order of the 

6 court; 

7 ‘‘(8) to terminate the plan (or provide for its ter8 mination in accordance with section 809(b)) and liq9 uidate the plan assets, to restore the plan to the re10 sponsibility of the sponsor, or to continue the trustee11 ship; 

12 ‘‘(9) to provide for the enrollment of plan par13 ticipants and beneficiaries under appropriate cov14 erage options; and 

15 ‘‘(10) to do such other acts as may be necessary 

16 to comply with this title or any order of the court and 

17 to protect the interests of plan participants and bene18 ficiaries and providers of medical care. 

19 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac20 ticable after the Secretary’s appointment as trustee, the Sec21 retary shall give notice of such appointment to—

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

23 ‘‘(2) each participant; 

24 ‘‘(3) each participating employer; and 
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1 ‘‘(4) if applicable, each employee organization 

2 which, for purposes of collective bargaining, rep3 resents plan participants. 

4 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in5 consistent with the provisions of this title, or as may be 

6 otherwise ordered by the court, the Secretary, upon appoint7 ment as trustee under this section, shall be subject to the 

8 same duties as those of a trustee under section 704 of title 

9 11, United States Code, and shall have the duties of a fidu10 ciary for purposes of this title. 

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

12 Secretary under this subsection may be filed notwith13 standing the pendency in the same or any other court of 

14 any bankruptcy, mortgage foreclosure, or equity receiver15 ship proceeding, or any proceeding to reorganize, conserve, 

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

17 to enforce a lien against property of the plan. 

18 ‘‘(f) JURISDICTION OF COURT.—

19 ‘‘(1) IN GENERAL.—Upon the filing of an appli20 cation for the appointment as trustee or the issuance 

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

22 application is made shall have exclusive jurisdiction 

23 of the plan involved and its property wherever located 

24 with the powers, to the extent consistent with the pur25 poses of this section, of a court of the United States 
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1 having jurisdiction over cases under chapter 11 of 

2 title 11, United States Code. Pending an adjudication 

3 under this section such court shall stay, and upon ap4 pointment by it of the Secretary as trustee, such court 

5 shall continue the stay of, any pending mortgage fore6 closure, equity receivership, or other proceeding to re7 organize, conserve, or liquidate the plan, the sponsor, 

8 or property of such plan or sponsor, and any other 

9 suit against any receiver, conservator, or trustee of 

10 the plan, the sponsor, or property of the plan or spon11 sor. Pending such adjudication and upon the ap12 pointment by it of the Secretary as trustee, the court 

13 may stay any proceeding to enforce a lien against 

14 property of the plan or the sponsor or any other suit 

15 against the plan or the sponsor. 

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

17 be brought in the judicial district where the sponsor 

18 or the plan administrator resides or does business or 

19 where any asset of the plan is situated. A district 

20 court in which such action is brought may issue proc21 ess with respect to such action in any other judicial 

22 district. 

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

24 which shall be prescribed by the Secretary, the Secretary 

25 shall appoint, retain, and compensate accountants, actu-
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1 aries, and other professional service personnel as may be 

2 necessary in connection with the Secretary’s service as 

3 trustee under this section. 

4 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

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

6 State may impose by law a contribution tax on an associa7 tion health plan described in section 806(a)(2), if the plan 

8 commenced operations in such State after the date of the 

9 enactment of the Small Business Health Fairness Act of 

10 2003. 

11 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec12 tion, the term ‘contribution tax’ imposed by a State on an 

13 association health plan means any tax imposed by such 

14 State if—

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

16 the amount of premiums or contributions, with re17 spect to individuals covered under the plan who are 

18 residents of such State, which are received by the plan

19 from participating employers located in such State or 

20 from such individuals; 

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

22 of any tax imposed by such State on premiums or 

23 contributions received by insurers or health mainte24 nance organizations for health insurance coverage of-
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1 fered in such State in connection with a group health 

2 plan; 

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

4 and 

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

6 plan is reduced by the amount of any tax or assess7 ment otherwise imposed by the State on premiums, 

8 contributions, or both received by insurers or health 

9 maintenance organizations for health insurance cov10 erage, aggregate excess /stop loss insurance (as defined 

11 in section 806(g)(1)), specific excess /stop loss insur12 ance (as defined in section 806(g)(2)), other insurance 

13 related to the provision of medical care under the 

14 plan, or any combination thereof provided by such in15 surers or health maintenance organizations in such 

16 State in connection with such plan. 

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

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

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

20 health plan’ has the meaning provided in section 

21 733(a)(1) (after applying subsection (b) of this sec22 tion). 

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

24 has the meaning provided in section 733(a)(2). 
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1 ‘‘(3) HEALTH INSURANCE COVERAGE.—The term 

2 ‘health insurance coverage’ has the meaning provided 

3 in section 733(b)(1). 

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

5 ‘health insurance issuer’ has the meaning provided in 

6 section 733(b)(2).

7 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘appli8 cable authority’ means the Secretary, except that, in 

9 connection with any exercise of the Secretary’s au10 thority regarding which the Secretary is required 

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

12 term means the Secretary, in consultation with such 

13 State.

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

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

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

17 ‘‘(7) INDIVIDUAL MARKET.—

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

19 market’ means the market for health insurance 

20 coverage offered to individuals other than in con21 nection with a group health plan. 

22 ‘‘(B) TREATMENT OF VERY SMALL

23 GROUPS.—

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

25 (ii), such term includes coverage offered in 
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1 connection with a group health plan that 

2 has fewer than 2 participants as current 

3 employees or participants described in sec4 tion 732(d)(3) on the first day of the plan 

5 year. 

6 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

7 shall not apply in the case of health insur8 ance coverage offered in a State if such 

9 State regulates the coverage described in 

10 such clause in the same manner and to the 

11 same extent as coverage in the small group 

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

13 the Public Health Service Act) is regulated 

14 by such State. 

15 ‘‘(8) PARTICIPATING EMPLOYER.—The term ‘par16 ticipating employer’ means, in connection with an as17 sociation health plan, any employer, if any indi18 vidual who is an employee of such employer, a part19 ner in such employer, or a self-employed individual 

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

21 under the terms of the plan, of such individual) is or 

22 was covered under such plan in connection with the 

23 status of such individual as such an employee, part24 ner, or self-employed individual in relation to the 

25 plan. 
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1 ‘‘(9) APPLICABLE STATE AUTHORITY.—The term 

2 ‘applicable State authority’ means, with respect to a 

3 health insurance issuer in a State, the State insur4 ance commissioner or official or officials designated 

5 by the State to enforce the requirements of title XXVII 

6 of the Public Health Service Act for the State involved 

7 with respect to such issuer.

8 ‘‘(10) QUALIFIED ACTUARY.—The term ‘qualified 

9 actuary’ means an individual who is a member of the 

10 American Academy of Actuaries. 

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

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

14 a member of the sponsor but who elects an affili15 ated status with the sponsor, 

16 ‘‘(B) in the case of a sponsor with members 

17 which consist of associations, a person who is a 

18 member of any such association and elects an af19 filiated status with the sponsor, or 

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

21 plan in existence on the date of the enactment of 

22 the Small Business Health Fairness Act of 2003, 

23 a person eligible to be a member of the sponsor 

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

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

4 employed an average of at least 51 employees on busi5 ness days during the preceding calendar year and 

6 who employs at least 2 employees on the first day of 

7 the plan year. 

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

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

11 is not a large employer. 

12 ‘‘(b) RULES OF CONSTRUCTION.—

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

16 association health plan, and for purposes of applying 

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

19 benefit plan—

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

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

22 the partnership in relation to the partners, and 

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

24 includes any partner in relation to the partner25 ship; and 
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1 ‘‘(B) in the case of a self-employed indi2 vidual, the term ‘employer’ (as defined in section 

3 3(5)) and the term ‘employee’ (as defined in sec4 tion 3(6)) shall include such individual. 

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

6 EMPLOYEE WELFARE BENEFIT PLANS.—In the case of 

7 any plan, fund, or program which was established or 

8 is maintained for the purpose of providing medical 

9 care (through the purchase of insurance or otherwise) 

10 for employees (or their dependents) covered thereunder 

11 and which demonstrates to the Secretary that all re12 quirements for certification under this part would be 

13 met with respect to such plan, fund, or program if 

14 such plan, fund, or program were a group health 

15 plan, such plan, fund, or program shall be treated for 

16 purposes of this title as an employee welfare benefit 

17 plan on and after the date of such demonstration.’’. 

18 (b) CONFORMING AMENDMENTS TO PREEMPTION

19 RULES.—

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

21 1144(b)(6)) is amended by adding at the end the fol22 lowing new subparagraph: 

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

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

25 an association health plan which is certified under part 8.’’. 
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1 (2) Section 514 of such Act (29 U.S.C. 1144) is 

2 amended—

3 (A) in subsection (b)(4), by striking ‘‘Sub4 section (a)’’ and inserting ‘‘Subsections (a) and 

5 (d)’’; 

6 (B) in subsection (b)(5), by striking ‘‘sub7 section (a)’’ in subparagraph (A) and inserting 

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

9 (a)(2)(B) and (b) of section 805’’, and by strik10 ing ‘‘subsection (a)’’ in subparagraph (B) and 

11 inserting ‘‘subsection (a) of this section or sub12 section (a)(2)(B) or (b) of section 805’’; 

13 (C) by redesignating subsection (d) as sub14 section (e); and 

15 (D) by inserting after subsection (c) the fol16 lowing new subsection: 

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

18 provisions of this title shall supersede any and all State 

19 laws insofar as they may now or hereafter preclude, or have 

20 the effect of precluding, a health insurance issuer from offer21 ing health insurance coverage in connection with an asso22 ciation health plan which is certified under part 8. 

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

24 subsection (b) of this section—
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1 ‘‘(A) In any case in which health insurance cov2 erage of any policy type is offered under an associa3 tion health plan certified under part 8 to a partici4 pating employer operating in such State, the provi5 sions of this title shall supersede any and all laws of 

6 such State insofar as they may preclude a health in7 surance issuer from offering health insurance coverage 

8 of the same policy type to other employers operating 

9 in the State which are eligible for coverage under such 

10 association health plan, whether or not such other em11 ployers are participating employers in such plan. 

12 ‘‘(B) In any case in which health insurance cov13 erage of any policy type is offered in a State under 

14 an association health plan certified under part 8 and 

15 the filing, with the applicable State authority (as de16 fined in section 812(a)(9)), of the policy form in con17 nection with such policy type is approved by such 

18 State authority, the provisions of this title shall su19 persede any and all laws of any other State in which 

20 health insurance coverage of such type is offered, inso21 far as they may preclude, upon the filing in the same 

22 form and manner of such policy form with the appli23 cable State authority in such other State, the ap24 proval of the filing in such other State.
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1 ‘‘(3) Nothing in subsection (b)(6)(E) or the preceding 

2 provisions of this subsection shall be construed, with respect 

3 to health insurance issuers or health insurance coverage, to 

4 supersede or impair the law of any State—

5 ‘‘(A) providing solvency standards or similar 

6 standards regarding the adequacy of insurer capital, 

7 surplus, reserves, or contributions, or 

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

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

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

11 805. 

12 ‘‘(5) For purposes of this subsection, the term ‘associa13 tion health plan’ has the meaning provided in section 

14 801(a), and the terms ‘health insurance coverage’, ‘partici15 pating employer’, and ‘health insurance issuer’ have the 

16 meanings provided such terms in section 812, respectively.’’. 

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

18 1144(b)(6)(A)) is amended—

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

20 the end;

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

22 does not provide medical care (within the mean23 ing of section 733(a)(2)),’’ after ‘‘arrangement,’’, 

24 and by striking ‘‘title.’’ and inserting ‘‘title, 

25 and’’; and 
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1 (C) by adding at the end the following new 

2 clause: 

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

4 any other employee welfare benefit plan which is a 

5 multiple employer welfare arrangement and which 

6 provides medical care (within the meaning of section 

7 733(a)(2)), any law of any State which regulates in8 surance may apply.’’. 

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

10 by paragraph (2)(C)) is amended—

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

12 ‘‘(1) Except as provided in paragraph (2), noth13 ing’’; and

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

15 paragraph: 

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

17 on or after the date of the enactment of the Small Business 

18 Health Fairness Act of 2003 shall be construed to alter, 

19 amend, modify, invalidate, impair, or supersede any provi20 sion of this title, except by specific cross-reference to the af21 fected section.’’. 

22 (c) PLAN SPONSOR.—Section 3(16)(B) of such Act (29 

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

24 following new sentence: ‘‘Such term also includes a person 
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1 serving as the sponsor of an association health plan under 

2 part 8.’’. 

3 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE4 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

5 UNDER ASSOCIATION HEALTH PLANS.—Section 102(b) of 

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

7 end the following: ‘‘An association health plan shall include 

8 in its summary plan description, in connection with each 

9 benefit option, a description of the form of solvency or guar10 antee fund protection secured pursuant to this Act or appli11 cable State law, if any.’’. 

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

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

14 (f) REPORT TO THE CONGRESS REGARDING CERTIFI15 CATION OF SELF-INSURED ASSOCIATION HEALTH PLANS.—

16 Not later than January 1, 2008, the Secretary of Labor 

17 shall report to the Committee on Education and the Work18 force of the House of Representatives and the Committee 

19 on Health, Education, Labor, and Pensions of the Senate 

20 the effect association health plans have had, if any, on re21 ducing the number of uninsured individuals. 

22 (g) CLERICAL AMENDMENT.—The table of contents in 

23 section 1 of the Employee Retirement Income Security Act 

24 of 1974 is amended by inserting after the item relating to 

25 section 734 the following new items:
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‘‘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.’’.

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 amended—

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

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

7 which the benefit referred to in subparagraph (A) con8 sists of medical care (as defined in section 812(a)(2)), 

9 two or more trades or businesses, whether or not in10 corporated, shall be deemed a single employer for any 

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

12 other arrangement, if such trades or businesses are 

13 within the same control group during such year or at 

14 any time during the preceding 1-year period,’’; 

15 (2) in clause (iii), by striking ‘‘(iii) the deter16 mination’’ and inserting the following: 
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1 ‘‘(iii)(I) in any case in which the benefit referred 

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

3 defined in section 812(a)(2)), the determination of 

4 whether a trade or business is under ‘common control’ 

5 with another trade or business shall be determined 

6 under regulations of the Secretary applying prin7 ciples consistent and coextensive with the principles 

8 applied in determining whether employees of two or 

9 more trades or businesses are treated as employed by 

10 a single employer under section 4001(b), except that, 

11 for purposes of this paragraph, an interest of greater 

12 than 25 percent may not be required as the minimum 

13 interest necessary for common control, or 

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

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

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

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

18 new clause: 

19 ‘‘(iv) in any case in which the benefit referred to 

20 in subparagraph (A) consists of medical care (as de21 fined in section 812(a)(2)), in determining, after the 

22 application of clause (i), whether benefits are pro23 vided to employees of two or more employers, the ar24 rangement shall be treated as having only one par25 ticipating employer if, after the application of clause 
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1 (i), the number of individuals who are employees and 

2 former employees of any one participating employer 

3 and who are covered under the arrangement is greater 

4 than 75 percent of the aggregate number of all indi5 viduals who are employees or former employees of 

6 participating employers and who are covered under 

7 the arrangement,’’.

8 SEC. 4. ENFORCEMENT PROVISIONS RELATING TO ASSO9 CIATION HEALTH PLANS. 

10 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

11 MISREPRESENTATIONS.—Section 501 of the Employee Re12 tirement Income Security Act of 1974 (29 U.S.C. 1131) is 

13 amended— 

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

15 (2) by adding at the end the following new sub16 section: 

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

18 any employee, any employee’s beneficiary, any employer, 

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

20 established or maintained for the purpose of offering or pro21 viding any benefit described in section 3(1) to employees 

22 or their beneficiaries as—

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

24 been certified under part 8;
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1 ‘‘(2) having been established or maintained 

2 under or pursuant to one or more collective bar3 gaining agreements which are reached pursuant to 

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

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

6 paragraph Fourth of section 2 of the Railway Labor 

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

8 reached pursuant to labor-management negotiations 

9 under similar provisions of State public employee re10 lations laws; or 

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

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

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

14 years, be fined under title 18, United States Code, or both.’’. 

15 (b) CEASE ACTIVITIES ORDERS.—Section 502 of such 

16 Act (29 U.S.C. 1132) is amended by adding at the end the 

17 following new subsection: 

18 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DESIST

19 ORDERS.—

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

21 upon application by the Secretary showing the oper22 ation, promotion, or marketing of an association 

23 health plan (or similar arrangement providing bene24 fits consisting of medical care (as defined in section 

25 733(a)(2))) that—
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1 ‘‘(A) is not certified under part 8, is subject 

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

3 any State in which the plan or arrangement of4 fers or provides benefits, and is not licensed, reg5 istered, or otherwise approved under the insur6 ance laws of such State; or 

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

8 under part 8 and is not operating in accordance 

9 with the requirements under part 8 for such cer10 tification, 

11 a district court of the United States shall enter an 

12 order requiring that the plan or arrangement cease 

13 activities. 

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

15 apply in the case of an association health plan or 

16 other arrangement if the plan or arrangement shows 

17 that—

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

19 paragraph (1) consist of health insurance cov20 erage; and 

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

22 plan or arrangement offers or provides benefits, 

23 the plan or arrangement is operating in accord24 ance with applicable State laws that are not su25 perseded under section 514. 
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1 ‘‘(3) ADDITIONAL EQUITABLE RELIEF.—The 

2 court may grant such additional equitable relief, in3 cluding any relief available under this title, as it 

4 deems necessary to protect the interests of the public 

5 and of persons having claims for benefits against the 

6 plan.’’. 

7 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—Sec8 tion 503 of such Act (29 U.S.C. 1133) is amended by insert9 ing ‘‘(a) IN GENERAL.—’’ before ‘‘In accordance’’, and by 

10 adding at the end the following new subsection: 

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

12 association health plan which is or has been certified under 

13 part 8 shall require the board of trustees or the named fidu14 ciary (as applicable) to ensure that the requirements of this 

15 section are met in connection with claims filed under the 

16 plan.’’. 

17 SEC. 5. COOPERATION BETWEEN FEDERAL AND STATE AU18 THORITIES. 

19 Section 506 of the Employee Retirement Income Secu20 rity Act of 1974 (29 U.S.C. 1136) is amended by adding 

21 at the end the following new subsection: 

22 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT TO

23 ASSOCIATION HEALTH PLANS.—

24 ‘‘(1) AGREEMENTS WITH STATES.—The Sec25 retary shall consult with the State recognized under 
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1 paragraph (2) with respect to an association health 

2 plan regarding the exercise of—

3 ‘‘(A) the Secretary’s authority under sec4 tions 502 and 504 to enforce the requirements for 

5 certification under part 8; and 

6 ‘‘(B) the Secretary’s authority to certify as7 sociation health plans under part 8 in accord8 ance with regulations of the Secretary applicable 

9 to certification under part 8. 

10 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

11 STATE.—In carrying out paragraph (1), the Sec12 retary shall ensure that only one State will be recog13 nized, with respect to any particular association 

14 health plan, as the State to with which consultation 

15 is required. In carrying out this paragraph—

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

17 health insurance coverage (as defined in section 

18 812(a)(3)), such State shall be the State with 

19 which filing and approval of a policy type of20 fered by the plan was initially obtained, and 

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

22 take into account the places of residence of the 

23 participants and beneficiaries under the plan 

24 and the State in which the trust is maintained.’’. 
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1 SEC. 6. EFFECTIVE DATE AND TRANSITIONAL AND OTHER 

2 RULES. 

3 (a) EFFECTIVE DATE.—The amendments made by this 

4 Act shall take effect one year from the date of the enactment. 

5 The Secretary of Labor shall first issue all regulations nec6 essary to carry out the amendments made by this Act with7 in one year after the date of the enactment of this Act.

8 (b) TREATMENT OF CERTAIN EXISTING HEALTH BEN9 EFITS PROGRAMS.—

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

11 the date of the enactment of this Act, an arrangement 

12 is maintained in a State for the purpose of providing 

13 benefits consisting of medical care for the employees 

14 and beneficiaries of its participating employers, at 

15 least 200 participating employers make contributions 

16 to such arrangement, such arrangement has been in 

17 existence for at least 10 years, and such arrangement 

18 is licensed under the laws of one or more States to

19 provide such benefits to its participating employers, 

20 upon the filing with the applicable authority (as de21 fined in section 812(a)(5) of the Employee Retirement 

22 Income Security Act of 1974 (as amended by this sub23 title)) by the arrangement of an application for cer24 tification of the arrangement under part 8 of subtitle 

25 B of title I of such Act—
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1 (A) such arrangement shall be deemed to be 

2 a group health plan for purposes of title I of 

3 such Act; 

4 (B) the requirements of sections 801(a) and 

5 803(a) of the Employee Retirement Income Secu6 rity Act of 1974 shall be deemed met with respect 

7 to such arrangement; 

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

9 such Act shall be deemed met, if the arrangement 

10 is operated by a board of directors which—

11 (i) is elected by the participating em12 ployers, with each employer having one 

13 vote; and 

14 (ii) has complete fiscal control over the 

15 arrangement and which is responsible for 

16 all operations of the arrangement; 

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

18 such Act shall be deemed met with respect to 

19 such arrangement; and 

20 (E) the arrangement may be certified by 

21 any applicable authority with respect to its oper22 ations in any State only if it operates in such 

23 State on the date of certification. 

24 The provisions of this subsection shall cease to apply 

25 with respect to any such arrangement at such time 
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1 after the date of the enactment of this Act as the ap2 plicable requirements of this subsection are not met 

3 with respect to such arrangement. 

4 (2) DEFINITIONS.—For purposes of this sub5 section, the terms ‘‘group health plan’’, ‘‘medical 

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

7 meanings provided in section 812 of the Employee 

8 Retirement Income Security Act of 1974, except that 

9 the reference in paragraph (7) of such section to an 

10 ‘‘association health plan’’ shall be deemed a reference 

11 to an arrangement referred to in this subsection.

Union Calendar No. 78

108TH CONGRESS 

1ST SESSION H. R. 660

[Report No. 108–156] 

A BILL

To amend title I of the Employee Retirement Income Security Act of 1974 to improve access and 

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

JUNE 16, 2003

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, 

and ordered to be printed