218
‘‘(1) 
PREEMPTION
OF
STATE
FICTITIOUS 
GROUP LAWS.—Requirements (commonly referred to 
as fictitious group laws) relating to grouping and 
similar requirements for health insurance coverage 
are preempted to the extent such requirements im-
pede the establishment and operation of qualified 
health benefit purchasing coalitions. 
‘‘(2) ALLOWING
SAVINGS
TO
BE
PASSED 
THROUGH.—Any State law that prohibits health in-
surance issuers from reducing premiums on health 
insurance coverage sold through a qualified health 
benefit purchasing coalition to reflect administrative 
savings is preempted. This paragraph shall not be 
construed to preempt State laws that impose restric-
tions on premiums based on health status, claims 
history, industry, age, gender, or other underwriting 
factors. 
‘‘(3) NO WAIVER OF HIPAA REQUIREMENTS.—
Nothing in this section shall be construed to change 
the obligation of health insurance issuers to comply 
with the requirements of title XXVII of the Public 
Health Service Act with respect to health insurance 
coverage offered to small employers in the small 
group market through a qualified health benefit pur-
chasing coalition.
219
‘‘(h) DEFINITION OF SMALL EMPLOYER.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘small employer’ 
means, with respect to any calendar year, any em-
ployer if such employer employed an average of at 
least 2 and not more than 50 qualified employees on 
business days during either of the 2 preceding cal-
endar years. For purposes of the preceding sentence, 
a preceding calendar year may be taken into account 
only if the employer was in existence throughout 
such year. 
‘‘(2) EMPLOYERS NOT IN EXISTENCE IN PRE-
CEDING YEAR.—In the case of an employer which 
was not in existence throughout the 1st preceding 
calendar year, the determination under paragraph 
(1) shall be based on the average number of quali-
fied employees that it is reasonably expected such 
employer will employ on business days in the current 
calendar year.’’. 
(2) CONFORMING AMENDMENT.—The table of 
subchapters for chapter 100 of such Code is amend-
ed by adding at the end the following item:
‘‘SUBCHAPTER D. QUALIFIED HEALTH BENEFIT PURCHASING COALITION’’.
(c) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2001.
220
SEC. 513. STATE GRANT PROGRAM FOR MARKET INNOVA-
TION. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the ‘‘Sec-
retary’’) shall establish a program (in this section referred 
to as the ‘‘program’’) to award demonstration grants 
under this section to States to allow States to demonstrate 
the effectiveness of innovative ways to increase access to 
health insurance through market reforms and other inno-
vative means. Such innovative means may include (and are 
not limited to) any of the following: 
(1) Alternative group purchasing or pooling ar-
rangements, such as purchasing cooperatives for 
small businesses, reinsurance pools, or high risk 
pools. 
(2) Individual or small group market reforms. 
(3) Consumer education and outreach. 
(4) Subsidies to individuals, employers, or both, 
in obtaining health insurance. 
(b) SCOPE; DURATION.—The program shall be lim-
ited to not more than 10 States and to a total period of 
5 years, beginning on the date the first demonstration 
grant is made. 
(c) CONDITIONS FOR DEMONSTRATION GRANTS.—
(1) IN GENERAL.—The Secretary may not pro-
vide for a demonstration grant to a State under the
221
program unless the Secretary finds that under the 
proposed demonstration grant—
(A) the State will provide for demonstrated 
increase of access for some portion of the exist-
ing uninsured population through a market in-
novation (other than merely through a financial 
expansion of a program initiated before the 
date of the enactment of this Act); 
(B) the State will comply with applicable 
Federal laws; 
(C) the State will not discriminate among 
participants on the basis of any health status-
related factor (as defined in section 2791(d)(9) 
of the Public Health Service Act), except to the 
extent a State wishes to focus on populations 
that otherwise would not obtain health insur-
ance because of such factors; and 
(D) the State will provide for such evalua-
tion, in coordination with the evaluation re-
quired under subsection (d), as the Secretary 
may specify. 
(2) APPLICATION.—The Secretary shall not 
provide a demonstration grant under the program to 
a State unless—
222
(A) the State submits to the Secretary 
such an application, in such a form and man-
ner, as the Secretary specifies; 
(B) the application includes information 
regarding how the demonstration grant will ad-
dress issues such as governance, targeted popu-
lation, expected cost, and the continuation after 
the completion of the demonstration grant pe-
riod; and 
(C) the Secretary determines that the dem-
onstration grant will be used consistent with 
this section. 
(3) FOCUS.—A demonstration grant proposal 
under section need not cover all uninsured individ-
uals in a State or all health care benefits with re-
spect to such individuals. 
(d) EVALUATION.—The Secretary shall enter into a 
contract with an appropriate entity outside the Depart-
ment of Health and Human Services to conduct an overall 
evaluation of the program at the end of the program pe-
riod. Such evaluation shall include an analysis of improve-
ments in access, costs, quality of care, or choice of cov-
erage, under different demonstration grants. 
(e) OPTION TO PROVIDE FOR INITIAL PLANNING 
GRANTS.—Notwithstanding the previous provisions of this
223
section, under the program the Secretary may provide for 
a portion of the amounts appropriated under subsection 
(f) (not to exceed $5,000,000) to be made available to any 
State for initial planning grants to permit States to de-
velop demonstration grant proposals under the previous 
provisions of this section. 
(f) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated $100,000,000 for each 
fiscal year to carry out this section. Amounts appropriated 
under this subsection shall remain available until ex-
pended. 
(g) STATE DEFINED.—For purposes of this section, 
the term ‘‘State’’ has the meaning given such term for 
purposes of title XIX of the Social Security Act. 
SEC. 514. GRANT PROGRAM TO FACILITATE HEALTH BENE-
FITS INFORMATION FOR SMALL EMPLOYERS. 
(a) IN GENERAL.—The Small Business Administra-
tion shall award grants to 1 or more States, local govern-
ments, and non-profit organizations for the purposes of—
(1) demonstrating new and effective ways to 
provide information about the benefits of health in-
surance to small employers, including tax benefits, 
increased productivity of employees, and decreased 
turnover of employees,
224
(2) making employers aware of their current 
rights in the marketplace under State and Federal 
health insurance reforms, and 
(3) making employers aware of the tax treat-
ment of insurance premiums. 
(b) AUTHORIZATION.—There is authorized to be ap-
propriated $10,000,000 for each of the first 5 fiscal years 
beginning after the date of the enactment of this Act for 
grants under subsection (a). 
SEC. 515. STATE GRANT PROGRAM FOR MARKET INNOVA-
TION. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the ‘‘Sec-
retary’’) shall establish a program (in this section referred 
to as the ‘‘program’’) to award demonstration grants 
under this section to States to allow States to demonstrate 
the effectiveness of innovative ways to increase access to 
health insurance through market reforms and other inno-
vative means. Such innovative means may include (and are 
not limited to) any of the following: 
(1) Alternative group purchasing or pooling ar-
rangements, such as purchasing cooperatives for 
small businesses, reinsurance pools, or high risk 
pools. 
(2) Individual or small group market reforms.
225
(3) Consumer education and outreach. 
(4) Subsidies to individuals, employers, or both, 
in obtaining health insurance. 
(b) SCOPE; DURATION.—The program shall be lim-
ited to not more than 10 States and to a total period of 
5 years, beginning on the date the first demonstration 
grant is made. 
(c) CONDITIONS FOR DEMONSTRATION GRANTS.—
(1) IN GENERAL.—The Secretary may not pro-
vide for a demonstration grant to a State under the 
program unless the Secretary finds that under the 
proposed demonstration grant—
(A) the State will provide for demonstrated 
increase of access for some portion of the exist-
ing uninsured population through a market in-
novation (other than merely through a financial 
expansion of a program initiated before the 
date of the enactment of this Act); 
(B) the State will comply with applicable 
Federal laws; 
(C) the State will not discriminate among 
participants on the basis of any health status-
related factor (as defined in section 2791(d)(9) 
of the Public Health Service Act), except to the 
extent a State wishes to focus on populations
226
that otherwise would not obtain health insur-
ance because of such factors; and 
(D) the State will provide for such evalua-
tion, in coordination with the evaluation re-
quired under subsection (d), as the Secretary 
may specify. 
(2) APPLICATION.—The Secretary shall not 
provide a demonstration grant under the program to 
a State unless—
(A) the State submits to the Secretary 
such an application, in such a form and man-
ner, as the Secretary specifies; 
(B) the application includes information 
regarding how the demonstration grant will ad-
dress issues such as governance, targeted popu-
lation, expected cost, and the continuation after 
the completion of the demonstration grant pe-
riod; and 
(C) the Secretary determines that the dem-
onstration grant will be used consistent with 
this section. 
(3) FOCUS.—A demonstration grant proposal 
under section need not cover all uninsured individ-
uals in a State or all health care benefits with re-
spect to such individuals.
227
(d) EVALUATION.—The Secretary shall enter into a 
contract with an appropriate entity outside the Depart-
ment of Health and Human Services to conduct an overall 
evaluation of the program at the end of the program pe-
riod. Such evaluation shall include an analysis of improve-
ments in access, costs, quality of care, or choice of cov-
erage, under different demonstration grants. 
(e) OPTION TO PROVIDE FOR INITIAL PLANNING 
GRANTS.—Notwithstanding the previous provisions of this 
section, under the program the Secretary may provide for 
a portion of the amounts appropriated under subsection 
(f) (not to exceed $5,000,000) to be made available to any 
State for initial planning grants to permit States to de-
velop demonstration grant proposals under the previous 
provisions of this section. 
(f) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated $100,000,000 for each 
fiscal year to carry out this section. Amounts appropriated 
under this subsection shall remain available until ex-
pended. 
(g) STATE DEFINED.—For purposes of this section, 
the term ‘‘State’’ has the meaning given such term for 
purposes of title XIX of the Social Security Act.
228
TITLE 
VI—EFFECTIVE 
DATES; 
COORDINATION 
IN 
IMPLE-
MENTATION 
SEC. 601. EFFECTIVE DATES. 
(a) GROUP HEALTH COVERAGE.—
(1) IN
GENERAL.—Subject to paragraph (2) 
and subsection (d), the amendments made by sec-
tions 201(a), 401, 501, and 502 (and title I insofar 
as it relates to such sections) shall apply with re-
spect to group health plans, and health insurance 
coverage offered in connection with group health 
plans, for plan years beginning on or after October 
1, 2005 (in this section referred to as the ‘‘general 
effective date’’). 
(2) TREATMENT OF COLLECTIVE BARGAINING 
AGREEMENTS.—In the case of a group health plan 
maintained pursuant to one or more collective bar-
gaining agreements between employee representa-
tives and one or more employers ratified before the 
date of the enactment of this Act, the amendments 
made by sections 201(a), 401, 501, and 502 (and 
title I insofar as it relates to such sections) shall not 
apply to plan years beginning before the later of—
(A) the date on which the last collective 
bargaining agreements relating to the plan ter-
229
minates (excluding any extension thereof agreed 
to after the date of the enactment of this Act); 
or 
(B) the general effective date; 
but shall apply not later than 1 year after the gen-
eral effective date. For purposes of subparagraph 
(A), any plan amendment made pursuant to a collec-
tive bargaining agreement relating to the plan which 
amends the plan solely to conform to any require-
ment added by this Act shall not be treated as a ter-
mination of such collective bargaining agreement. 
(b) INDIVIDUAL HEALTH INSURANCE COVERAGE.—
Subject to subsection (d), the amendments made by sec-
tion 202 shall apply with respect to individual health in-
surance coverage offered, sold, issued, renewed, in effect, 
or operated in the individual market on or after the gen-
eral effective date. 
(c) TREATMENT OF RELIGIOUS NONMEDICAL PRO-
VIDERS.—
(1) IN GENERAL.—Nothing in this Act (or the 
amendments made thereby) shall be construed to—
(A) restrict or limit the right of group 
health plans, and of health insurance issuers of-
fering health insurance coverage, to include as 
providers religious nonmedical providers;
230
(B) require such plans or issuers to—
(i) utilize medically based eligibility 
standards or criteria in deciding provider 
status of religious nonmedical providers; 
(ii) use medical professionals or cri-
teria to decide patient access to religious 
nonmedical providers; 
(iii) utilize medical professionals or 
criteria in making decisions in internal or 
external appeals regarding coverage for 
care by religious nonmedical providers; or 
(iv) compel a participant or bene-
ficiary to undergo a medical examination 
or test as a condition of receiving health 
insurance coverage for treatment by a reli-
gious nonmedical provider; or 
(C) require such plans or issuers to ex-
clude religious nonmedical providers because 
they do not provide medical or other required 
data, if such data is inconsistent with the reli-
gious nonmedical treatment or nursing care 
provided by the provider. 
(2) RELIGIOUS NONMEDICAL PROVIDER.—For 
purposes of this subsection, the term ‘‘religious non-
medical provider’’ means a provider who provides no
231
medical care but who provides only religious non-
medical treatment or religious nonmedical nursing 
care. 
(d) TRANSITION FOR NOTICE REQUIREMENT.—The 
disclosure of information required under section 121 of 
this Act shall first be provided pursuant to—
(1) subsection (a) with respect to a group 
health plan that is maintained as of the general ef-
fective date, not later than 30 days before the begin-
ning of the first plan year to which title I applies 
in connection with the plan under such subsection; 
or 
(2) subsection (b) with respect to an individual 
health insurance coverage that is in effect as of the 
general effective date, not later than 30 days before 
the first date as of which title I applies to the cov-
erage under such subsection. 
SEC. 602. COORDINATION IN IMPLEMENTATION. 
The Secretary of Labor and the Secretary of Health 
and Human Services shall ensure, through the execution 
of an interagency memorandum of understanding among 
such Secretaries, that—
(1) regulations, rulings, and interpretations 
issued by such Secretaries relating to the same mat-
ter over which such Secretaries have responsibility
232
under the provisions of this Act (and the amend-
ments made thereby) are administered so as to have 
the same effect at all times; and 
(2) coordination of policies relating to enforcing 
the same requirements through such Secretaries in 
order to have a coordinated enforcement strategy 
that avoids duplication of enforcement efforts and 
assigns priorities in enforcement. 
SEC. 603. SEVERABILITY. 
If any provision of this Act, an amendment made by 
this Act, or the application of such provision or amend-
ment to any person or circumstance is held to be unconsti-
tutional, the remainder of this Act, the amendments made 
by this Act, and the application of the provisions of such 
to any person or circumstance shall not be affected there-
by. 
TITLE VII—MISCELLANEOUS 
PROVISIONS 
SEC. 701. NO IMPACT ON SOCIAL SECURITY TRUST FUND. 
(a) IN GENERAL.—Nothing in this Act (or an amend-
ment made by this Act) shall be construed to alter or 
amend the Social Security Act (or any regulation promul-
gated under that Act). 
(b) TRANSFERS.—
233
(1) ESTIMATE OF SECRETARY.—The Secretary 
of the Treasury shall annually estimate the impact 
that the enactment of this Act has on the income 
and balances of the trust funds established under 
section 201 of the Social Security Act (42 U.S.C. 
401). 
(2) TRANSFER
OF
FUNDS.—If, under para-
graph (1), the Secretary of the Treasury estimates 
that the enactment of this Act has a negative impact 
on the income and balances of the trust funds estab-
lished under section 201 of the Social Security Act 
(42 U.S.C. 401), the Secretary shall transfer, not 
less frequently than quarterly, from the general reve-
nues of the Federal Government an amount suffi-
cient so as to ensure that the income and balances 
of such trust funds are not reduced as a result of 
the enactment of such Act.
Æ