I 
111TH CONGRESS 
1ST SESSION 
H. R. 850 
To encourage the development of small business cooperatives for healthcare 
options to improve coverage for employees (CHOICE) including through 
a small business CHOICE tax credit. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 4, 2009 
Ms. VELA´ZQUEZ (for herself, Mr. PITTS, Mr. GRAVES, Mr. SHULER, Mr. 
MORAN of Virginia, and Mr. FATTAH) introduced the following bill; which 
was referred to the Committee on Energy and Commerce, and in addition 
to the Committee on Ways and Means, for a period to be subsequently 
determined by the Speaker, in each case for consideration of such provi-
sions as fall within the jurisdiction of the committee concerned 
A BILL 
To encourage the development of small business cooperatives 
for healthcare options to improve coverage for employees 
(CHOICE) including through a small business CHOICE 
tax credit. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLES; TABLE OF CONTENTS. 
(a) SHORT TITLES.—This Act may be cited as the 
‘‘Small Business Cooperative for Healthcare Options to 
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Improve Coverage for Employees (CHOICE) Act of 2009’’ 
or as the ‘‘Small Business CHOICE Act of 2009’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows: 
Sec. 1. Short titles; table of contents. 
TITLE I—FULLY FUNDED SMALL BUSINESS HEALTH INSURANCE 
COOPERATIVES 
Sec. 101. Definitions. 
Sec. 102. Commission to promote Fully Funded Small Business Health Insur-
ance cooperatives. 
Sec. 103. Fully Funded Small Business Health Insurance cooperatives exempt-
ed from certain State laws. 
Sec. 104. Preservation of State benefit mandates. 
Sec. 105. Access to claims reporting data. 
TITLE II—SMALL BUSINESS CHOICE CREDIT 
Sec. 201. Small Business CHOICE credit. 
TITLE I—FULLY FUNDED SMALL 
BUSINESS 
HEALTH 
INSUR-
ANCE COOPERATIVES 
SEC. 101. DEFINITIONS. 
For purposes of this title: 
(1) FULLY FUNDED HEALTH INSURANCE.—The 
term ‘‘fully funded health insurance’’ means, with 
respect to a fully funded small business health insur-
ance cooperative, insurance provided to assume and 
spread a portion, of the risk of insuring the health 
liability exposure of the members of such coopera-
tive. 
(2) FULLY FUNDED SMALL BUSINESS HEALTH 
INSURANCE COOPERATIVE.—The term ‘‘Fully Fund-
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ed Small Business Health Insurance cooperative’’ 
means a bona fide association or financial coopera-
tive organization of persons with a common affili-
ation (such as employment, labor union membership, 
place of residence, industry, or line of business) that 
form a captive insurance company chartered in a 
State that has adopted laws and regulations for cap-
tive insurers that are materially identical to stand-
ards to be developed by the National Association of 
Insurance Commissioners by July 1, 2010, if each of 
the following conditions are met: 
(A) The cooperative— 
(i) has no fewer than 100 members 
and no fewer than 5,000 lives (or, begin-
ning as of 5 years after the date of the en-
actment of this Act, 15,000 lives); or 
(ii) meets such minimum capital re-
quirements as the Secretary shall specify, 
taking into account recommendations of 
the commission established under section 
102. 
(B) The cooperative administers the activi-
ties described in paragraph (1) separately from 
other activities of the cooperative. 
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(C) The cooperative is chartered or li-
censed as a captive insurance company under 
the laws of a State and is authorized to engage 
in the business of insurance under the laws of 
such State. 
(D) The cooperative does not vary the pre-
mium paid for a small business participating in 
the cooperative based on the health status of in-
dividuals for whom such small business pur-
chases health insurance, or the claims experi-
ence of such small business and does not ex-
clude such an individual from coverage based on 
the health status or claims experience of such 
individual. 
(E) The cooperative has as its owners only 
small businesses— 
(i) that comprise the membership of 
the cooperative; and 
(ii) that are provided excess claims 
coverage insurance by the cooperative. 
(F) Ownership, with respect to a member, 
is shared equitably among all participants in 
the cooperative. 
(G) Each owner of a small business par-
ticipating in the cooperative contracts with a 
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primary insurer to provide fully insured em-
ployee health insurance. 
(H) The cooperative provides excess claims 
coverage insurance that does not pay benefits in 
a year for an insured person until the annual 
maximum of the policy purchased from the in-
surer has been exceeded. The annual maximum 
of the primary insurance policy shall not be less 
than $10,000, and not be more than $250,000, 
per insured person in paid claims. The Sec-
retary shall provide for an annual increase in 
the dollar amounts specified in the previous 
sentence based on annual inflation in health 
care expenses per capita for such persons. 
(I) Benefits provided by excess claims cov-
erage insurers must meet the high deductible 
health 
plan 
requirements 
of 
section 
223(c)(2)(A)(ii) of the Internal Revenue Code 
of 1986 for a high deductible health plan pro-
vided under applicable State law. 
(J) The excess claims coverage insurance 
offered by the cooperative meets all require-
ments of State law for the State in which it is 
offered. 
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(K) The name of the cooperative includes 
the phrase ‘‘Fully Funded Small Business 
Health Insurance cooperative’’. 
Nothing in this paragraph shall be construed as pre-
venting such a cooperative from requiring a small 
business, as a condition of becoming a member of 
the cooperative, to have a written commitment to the 
cooperative for such membership for a period of 
time. 
(3) SMALL BUSINESS.—The term ‘‘small busi-
ness’’ means a business that— 
(A) has been classified as a small business 
concern by the Small Business Administration 
for purposes of the Small Business Act (15 
U.S.C. 631 et seq.) under size standards estab-
lished under section 3 of such Act (15 U.S.C. 
632); or 
(B) has no more than 500 employees, as 
calculated under section 121.106 of title 13, 
Code of Federal Regulations, as in effect as of 
January 1, 2008. 
(4) STATE.—The term ‘‘State’’ means each of 
the 50 States, the District of Columbia, and Puerto 
Rico. 
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SEC. 102. COMMISSION TO PROMOTE FULLY FUNDED 
SMALL BUSINESS HEALTH INSURANCE CO-
OPERATIVES. 
(a) ESTABLISHMENT.—Not later than January 1, 
2010, the Secretary of the Treasury, in consultation with 
the Administrator of the Small Business Administration, 
shall establish, and provide for the operation of, an inde-
pendent commission (in this section referred to as the 
‘‘commission’’) on Fully Funded Small Business Health 
Insurance Cooperatives consistent with this section. 
(b) COMPOSITION.— 
(1) IN
GENERAL.—Subject to subparagraph 
(B), the commission shall be comprised of one rep-
resentative from each of the following organizations, 
as nominated by the organization to the Secretary of 
the Treasury: 
(A) The American Academy of Actuaries. 
(B) The National Association of Insurance 
Commissioners. 
(C) The Captive Insurance Companies As-
sociation. 
(D) The Conference of Consulting Actu-
aries. 
(E) The Society of Actuaries. 
(F) The Actuarial Board for Counseling 
and Discipline. 
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(G) The Actuarial Standards Board. 
(2) LIMITATION.—No individual who has a 
business relationship with an active Fully Funded 
Small Business Health Insurance cooperative or who 
is employed by any State, Federal, or local entity 
may serve as a member of the commission. 
(3) COMPENSATION.— 
(A) IN
GENERAL.—The Secretary shall 
provide to members of the commission com-
pensation in an annual amount that does not 
exceed the amount specified in subparagraph 
(B). 
(B) LIMITATION.—The amount specified in 
this subparagraph is $50,000, or, for a year 
after 2010, the amount specified in this sub-
paragraph for the previous year increased by 
the annual percentage increase in the consumer 
price index for all urban consumers for the pre-
vious year. 
(c) FUNCTIONS.—The commission shall— 
(1) promote the development of Fully Funded 
Small Business Health Insurance cooperatives; 
(2) provide for technical assistance in such de-
velopment; 
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(3) make recommendations to the Secretary re-
garding minimum capital requirements referred to in 
section 102(2)(A)(ii); 
(4) conduct oversight of Fully Funded Small 
Business Health Insurance cooperatives; and 
(5) make quarterly reports to Congress regard-
ing the development, implementation, and mainte-
nance of such cooperatives, including the appropriate 
number of businesses and lives that should be re-
quired under section 101(2)(A) and the maximum 
amount of excess claims coverage insurance that 
should be provided per covered person. 
(d) COMMISSION STAFF.—The commission shall pro-
vide for such staff, including an executive director, as it 
determines necessary to carry out its functions. 
(e) COMMISSION HEADQUARTERS.—The commission 
shall be domiciled within the District of Columbia. 
(f) AUTHORIZATION OF APPROPRIATIONS.—There is 
authorized to be appropriated for purposes of carrying out 
subsection (a) $4,000,000 for fiscal year 2010 and 
$2,000,000 for each of fiscal years 2011 through 2014. 
(g) RELATION TO FACA.—The provisions of section 
14 of the Federal Advisory Committee Act shall not apply 
to the commission. 
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SEC. 103. FULLY FUNDED SMALL BUSINESS HEALTH INSUR-
ANCE COOPERATIVES EXEMPTED FROM CER-
TAIN STATE LAWS. 
(a) IN GENERAL.—Except as provided in this title, 
a Fully Funded Small Business Health Insurance coopera-
tive is exempt from any State law, rule, regulation, or 
order to the extent that such law, rule, regulation, or order 
would— 
(1) prohibit the establishment of a Fully Fund-
ed Small Business Health Insurance cooperative; 
(2) impose any material requirements, proce-
dures, or standards (other than solvency require-
ments) on a Fully Funded Small Business Health 
Insurance cooperative that are not generally applica-
ble to other entities engaged in a substantially simi-
lar business; 
(3) require that a Fully Funded Small Business 
Health Insurance cooperative must have a minimum 
number of members, common ownership or affili-
ation, or a certain legal structure; 
(4) require that any excess claims coverage in-
surance policy issued to a Fully Funded Small Busi-
ness Health Insurance cooperative or any members 
of the cooperative be countersigned by an insurance 
agent or broker residing in the State involved; or 
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(5) otherwise discriminate against a Fully 
Funded Small Business Health Insurance coopera-
tive or any of its members. 
(b) APPLICATION OF EXEMPTIONS.—The exemptions 
specified in subsection (a) apply to— 
(1) excess claims coverage insurance provided 
to— 
(A) a Fully Funded Small Business Health 
Insurance cooperative; or 
(B) any small business who is a member of 
a Fully Funded Small Business Health Insur-
ance cooperative; and 
(2) the provision of— 
(A) excess claims coverage insurance cov-
erage; 
(B) excess claims coverage insurance re-
lated services; 
(C) health management services such as— 
(i) third party administrators; 
(ii) disease management; 
(iii) managed care organizations; and 
(iv) data warehousing services; or 
(D) health information technology, includ-
ing electronic health records; 
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to a Fully Funded Small Business Health Insurance 
cooperative or member of the cooperative. 
(c) REQUIREMENT
FOR STATE LICENSURE PER-
MITTED.—A State may require that a person acting, or 
offering to act, as an agent or broker for a Fully Funded 
Small Business Health Insurance cooperative obtain a li-
cense from that State, except that a State may not impose 
any qualification or requirement which prohibits a licensed 
resident or nonresident agent or broker from selling within 
the State. 
(d) STATE AUTHORITY PRESERVED.— 
(1) Nothing in this section shall be construed to 
affect the authority of any State to make use of any 
of its powers to enforce the laws of such State with 
respect to which a Fully Funded Small Business 
Health Insurance cooperative is not exempt under 
this section. 
(2) Nothing in this section shall affect the au-
thority of any State to bring an action in any Fed-
eral or State court. 
(3) Nothing in this section shall affect any 
State law regarding prompt payment of benefits. 
(e) REQUIREMENTS
FOR
FINANCIAL
INFORMA-
TION.—Financial information submitted to the State in-
surance commissioner by a Fully Funded Small Business 
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Health Insurance cooperative must be certified by an inde-
pendent public accountant and must include a statement 
of opinion on loss and loss adjustment expense reserves 
made by a certified actuary. 
(f) FIDUCIARY RESPONSIBILITY.— 
(1) IN GENERAL.—Each fiduciary (as defined 
in paragraph (3)(A)) of a Fully Funded Small Busi-
ness Health Insurance cooperative shall exercise fi-
duciary responsibility (as defined in paragraph 
(3)(B)) in relation to activities of the cooperative. 
(2) STATE AND FEDERAL RIGHTS OF ACTION.— 
(A) LIMITATIONS
ON
LIABILITY
UNDER 
STATE OR FEDERAL LAW.—In the case of a 
bona fide association or financial cooperative 
organization of individuals with a common af-
filiation (such as employment, labor union 
membership, or place of residence) that forms 
a Fully Funded Small Business Health Insur-
ance cooperative in accordance with this Act, 
such association or organization shall not be lia-
ble in any action under State or Federal law for 
the actions of such cooperative except insofar as 
the association or organization is acting as a fi-
duciary with respect to the cooperative. 
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(B) EXCLUSIVE FEDERAL REMEDY FOR FI-
DUCIARY BREACHES.—To the extent that such 
association or organization exercises control 
over such cooperative and has breached a fidu-
ciary responsibility to its membership in the 
formation or operation of such cooperative, a 
member of the association or organization may 
seek a remedy for such breach only in Federal 
court. 
(C) LIMITATION
ON
VICARIOUS
LIABIL-
ITY.—A fiduciary shall not be vicariously liable 
for the actions (including a failure to act) of an 
agent of the fiduciary in the absence of— 
(i) actual knowledge of the fiduciary; 
and 
(ii) approval or acquiescence by the fi-
duciary in the action (or failure to act). 
(3) DEFINITIONS.—For purposes of this sub-
section: 
(A) FIDUCIARY.—The term ‘‘fiduciary’’, 
with respect to a Fully Funded Small Business 
Health Insurance cooperative— 
(i) means an officer, agent, or em-
ployee of the cooperative; and 
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(ii) includes any other person acting 
in concert with any such officer, agent, or 
employee with respect to the cooperative, if 
such other person has actual notice of such 
order. 
(B) 
FIDUCIARY
RESPONSIBILITY.—The 
term ‘‘fiduciary responsibility’’ means, with re-
spect to a fiduciary of a cooperative, acting pru-
dently and solely in the interest of the coopera-
tive participants, including in the case of ac-
tions with respect to the selection and moni-
toring of the cooperative’s relationship with a 
primary insurer and reinsurer. 
(g) EFFECTIVE DATE.—This section shall apply to 
Fully Funded Small Business Health Insurance coopera-
tive on and after the date of the enactment of this Act. 
SEC. 104. PRESERVATION OF STATE BENEFIT MANDATES. 
Notwithstanding any other provision of this title a 
primary health insurer to which this title applies shall not 
be exempted from benefit mandates under State law. 
SEC. 105. ACCESS TO CLAIMS REPORTING DATA. 
(a) FEDERAL PREEMPTION.—No law, regulation, or 
administrative action of a State or political subdivision 
thereof, or any decision or order rendered by a court under 
State law, shall have any effect if such law, regulation, 
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or decision conflicts with, hinders, poses an obstacle to or 
frustrates the purposes of this section. 
(b) REQUIREMENTS UPON RECEIPT AND REQUEST 
OF CLAIMS INFORMATION.— 
(1) IN GENERAL.—Not later than the 30th day 
after the date a health insurance issuer (as defined 
in section 2791(b)(2) of the Public Health Service 
Act), contracted to provide fully funded health insur-
ance to members of a Fully Funded Small Business 
Health Insurance cooperative (referred to in this 
section as a ‘‘Cooperative’’), receives a written re-
quest for a report of claim information from the fi-
duciary (as defined in section 103(f)(3)(A)) of the 
Cooperative, the health insurance issuer shall pro-
vide the report to such fiduciary in accordance with 
this subsection. 
(2) LIMITATION ON OBLIGATION.—The health 
insurance issuer is not obligated to provide a report 
under this subsection— 
(A) regarding a particular employer or 
group health plan more than twice in any 12- 
month period; or 
(B) unless the request is made not later 
than the second anniversary of the date of ter-
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mination of coverage under a group health plan 
issued by the health insurance issuer. 
(3) FORM
OF
REPORT.—A health insurance 
issuer shall provide the report of claim information 
under paragraph (1) through one of the following 
methods: 
(A) In written form. 
(B) Through an electronic file transmitted 
by secure electronic mail or a file transfer pro-
tocol site. 
(C) By making the required information 
available through a secure website or web portal 
accessible by the Cooperative fiduciary. 
(4) GENERAL CONTENTS OF REPORT.—A re-
port of claim information provided under paragraph 
(1) shall contain all information available to the 
health insurance issuer that is responsive to the re-
quest made under such paragraph, including, subject 
to paragraphs (6) through (8), protected health in-
formation, for the 36-month period preceding the 
date of the report, or for the entire period of cov-
erage, whichever period is shorter. 
(5) SPECIFIC
CONTENTS.—Subject to para-
graphs (6) through (8), a report under paragraph 
(1) shall include the following: 
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(A) Aggregate paid claims experience by 
month, including claims experience for medical, 
dental, and pharmacy benefits, as applicable. 
(B) Total premium paid by month. 
(C) Total number of covered employees on 
a monthly basis by coverage tier, including 
whether coverage was for— 
(i) an employee only; 
(ii) an employee with dependents only; 
(iii) an employee with a spouse only; 
or 
(iv) an employee with a spouse and 
dependents. 
(D) The total dollar amount of claims 
pending as of the date of the report. 
(E) A separate description and individual 
claims report for any individual whose total 
paid claims exceed $10,000 during the 12- 
month period preceding the date of the report, 
including the following information related to 
the claims for that individual: 
(i) A unique identifying number, char-
acteristic, or code for the individual. 
(ii) The amounts paid. 
(iii) Dates of service. 
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(iv) Applicable procedure codes and 
diagnosis codes. 
(F) A statement describing precertification 
requests for hospital stays of five days or longer 
that were made during the 30-day period pre-
ceding the date of the report for claims that are 
not part of the report described by subpara-
graphs (A) through (E). 
(6) PROTECTED
HEALTH
INFORMATION.—A 
health insurance issuer may not disclose, in a report 
of claim information provided under this section, 
protected health information if the health insurance 
issuer is prohibited from disclosing such information 
under the regulations promulgated under section 
264(c) of the Health Insurance Portability and Ac-
countability Act of 1996 (Public Law 104–191). To 
withhold information in accordance with this para-
graph, the health insurance issuer shall— 
(A) notify the requesting Cooperative fidu-
ciary that information is being withheld; and 
(B) provide to the Cooperative fiduciary a 
list of categories of claim information that the 
health insurance issuer has determined are sub-
ject to the more stringent privacy restrictions 
under such regulations. 
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(7) 
COOPERATIVE
FIDUCIARY
CERTIFI-
CATION.—A Cooperative fiduciary is entitled to re-
ceive protected health information under subpara-
graphs (E) and (F) of paragraph (5) only after the 
Cooperative fiduciary makes to the health insurance 
issuer a certification substantially similar to the fol-
lowing: ‘‘I hereby certify that the Cooperative will 
safeguard and limit the use and disclosure of pro-
tected health information that is received from the 
group health plan to perform the plan administra-
tion functions.’’. 
(8) INFORMATION
AS
OF
DATE
OF
TERMI-
NATION OF COVERAGE.—In the case of a request 
made under paragraph (1) after the date of termi-
nation of coverage, the report shall contain all infor-
mation available to the health insurance issuer as of 
the date of the report that is responsive to the re-
quest, including protected health information, and 
including the information described in subpara-
graphs (A) through (F) of paragraph (5) for the pe-
riod described in such paragraph preceding the date 
of termination of coverage or for the entire policy 
period, whichever period is shorter. Notwithstanding 
this paragraph, such a report may not include the 
protected health information described in subpara-
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graph (E) or (F) of paragraph (5) unless a certifi-
cation has been provided in accordance with para-
graph (7). 
(c) REQUEST FOR ADDITIONAL INFORMATION.— 
(1) IN GENERAL.—On receipt of a report re-
quired by subsection (b), the Cooperative fiduciary 
may review the report and, not later than the 10th 
day after the date the report is received, may make 
a written request to the health insurance issuer for 
additional information in accordance with this sub-
section for specified individuals. 
(2) PROVISION
OF
ADDITIONAL
INFORMA-
TION.—With respect to a request for additional in-
formation under paragraph (1) concerning specified 
individuals for whom claims information has been 
provided under subsection (b)(5)(E), the health in-
surance issuer shall provide additional information 
on the prognosis or recovery if available and, for in-
dividuals in active case management, the most re-
cent case management information, including any 
future expected costs and treatment plan, that relate 
to the claims for that individual. 
(3) TIMELY RESPONSE.—The health insurance 
issuer shall respond to the request for additional in-
formation under this subsection not later than the 
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15th day after the date of receiving the request un-
less the Cooperative fiduciary agrees to a request for 
additional time. 
(4) 
CERTIFICATION
REQUIREMENT.—The 
health insurance issuer is not required to produce 
the report described by this subsection unless a cer-
tification has been provided in accordance with sub-
section (b)(7). 
(d) LIMITATION ON LIABILITY FOR DISCLOSURE OF 
INFORMATION.—A health insurance issuer that releases 
information, including protected health information, in ac-
cordance with this section has not violated a standard of 
care and is not liable for civil damages resulting from, and 
is not subject to criminal prosecution for, releasing that 
information. 
(e) PENALTIES.—A health insurance issuer that does 
not comply with a request for information in accordance 
with this section is subject to administrative penalties in 
an amount not to exceed $25,000 per affected individual. 
TITLE II—SMALL BUSINESS 
CHOICE CREDIT 
SEC. 201. SMALL BUSINESS CHOICE CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
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1986 (relating to business related credits) is amended by 
adding at the end the following new section: 
‘‘SEC. 45R. SMALL BUSINESS CHOICE CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 38, the 
small business CHOICE credit determined under this sec-
tion for any taxable year is an amount equal to 65 percent 
of the amount paid or incurred by the employer for self 
only or family coverage of an employee under a qualified 
employer-subsidized health coverage for eligible coverage 
months beginning in the taxable year. 
‘‘(b) LIMITATIONS.— 
‘‘(1) SIZE
LIMITATION.—The credit allowed 
under subsection (a) shall not be allowed with re-
spect to more than 100 employees of the employer 
for any eligible coverage month beginning in any 
taxable year. 
‘‘(2) WELLNESS PROGRAM REQUIREMENT.— 
‘‘(A) IN
GENERAL.—The credit allowed 
under subsection (a) shall not be allowed with 
respect to coverage of an employee and family 
members of the employee unless the employer 
offers a qualified small business wellness pro-
gram with respect to such covered employees 
and such covered family members. 
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‘‘(B) EXEMPTION FOR SINGLE EMPLOYEE 
FIRMS.—Subparagraph (A) shall not apply to 
an employer that has only 1 employee. 
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section: 
‘‘(1) ELIGIBLE COVERAGE MONTH.—The term 
‘eligible coverage month’ means any month if— 
‘‘(A) as of the first day of such month, the 
employer is a member of a Fully Funded Small 
Business Health Insurance cooperative and pur-
chases excess coverage from such cooperative’s 
captive insurance company; and 
‘‘(B) for the month the employee with re-
spect to whom the credit is determined is cov-
ered under a qualified employer-subsidized 
health coverage of the employer. 
‘‘(2) FULLY FUNDED SMALL BUSINESS HEALTH 
INSURANCE COOPERATIVE.—The term ‘Fully Fund-
ed Small Business Health Insurance cooperative’ has 
the meaning given such term in section 101(2) of 
the Small Business CHOICE Act of 2009. 
‘‘(3) 
QUALIFIED
EMPLOYER-SUBSIDIZED 
HEALTH COVERAGE.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
employer-subsidized health coverage’ means any 
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insurance coverage which constitutes medical 
care under an insurance policy— 
‘‘(i) which is maintained in conjunc-
tion with excess coverage purchased from a 
fully funded small business captive com-
pany and coverage purchased from a li-
censed primary insurer; 
‘‘(ii) which is available to all full-time 
employees working a minimum of 35 hours 
per week or its monthly equivalent; 
‘‘(iii) under which at least the applica-
ble percentage of the cost of such coverage 
(determined under section 4980B) is paid 
or incurred by the employer; 
‘‘(iv) under which the percentage of 
the cost of such coverage paid or incurred 
by the employer with respect to highly 
compensated employees (as defined in sec-
tion 414(q)) does not exceed the percent-
age of such cost paid or incurred by the 
employer with respect to employees who 
are not highly compensated employees; and 
‘‘(v) the primary insurance and excess 
claims coverage plans are the only plans of 
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the employer to which the employer con-
tributes to the cost of coverage. 
‘‘(B) EXCEPTION
FOR
CERTAIN
COV-
ERAGE.—Such term does not include a health 
plan substantially all of the coverage of which 
is of excepted benefits described in section 
9832(c). 
‘‘(C) 
APPLICABLE
PERCENTAGE.—For 
purposes of subparagraph (A), the applicable 
percentage is— 
‘‘(i) 65 percent, with respect to self 
only coverage; and 
‘‘(ii) 35 percent, with respect to fam-
ily coverage. 
‘‘(4) QUALIFIED SMALL BUSINESS WELLNESS 
PROGRAM.—The term ‘qualified small business 
wellness program’ means a program which— 
‘‘(A) is established by an entity with exper-
tise in lifestyle management and wellness tools 
that enable employers and covered individuals
to lower health claims and costs while improv-
ing the health of such individuals; and 
‘‘(B) is certified by the Secretary of Health 
and Human Services, in consultation with per-
sons with expertise in employer health pro-
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motion and wellness programs, as a qualified 
small business wellness program under this sec-
tion. 
‘‘(5) SMALL EMPLOYER.— 
‘‘(A) IN GENERAL.—The term ‘small em-
ployer’ means, with respect to a taxable year, 
any employer or sole proprietor which employed 
an average of 100 or fewer employees on busi-
ness days during the preceding calendar year. 
For purposes of the preceding sentence, a pre-
ceding calendar year may be taken into account 
only if the employer or sole proprietor was in 
existence throughout such year. 
‘‘(B) EMPLOYERS AND SOLE PROPRIETORS 
NOT
IN
EXISTENCE
IN
PRECEDING
TAXABLE 
YEAR.—In the case of an employer or sole pro-
prietor which was not in existence throughout 
the preceding calendar year, the determination 
under subparagraph (A) shall be based on the 
average number of employees that it is reason-
ably expected such employer or sole proprietor 
will employ on business days in the current cal-
endar year. 
‘‘(6) SPECIAL RULE FOR FIRST YEAR OF PRO-
VIDING HEALTH BENEFITS COVERAGE.—In the case 
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of the first taxable year for which an employer or 
sole proprietor is allowed a credit under this section, 
if the employer or proprietor has not previous to 
such taxable year offered any health benefits cov-
erage to any employee, subsection (a) shall be ap-
plied by substituting ‘70 percent’ for ‘65 percent’. 
‘‘(7) TIME
WHEN
CONTRIBUTIONS
DEEMED 
MADE.—A rule similar to the rule of section 
219(f)(3) shall apply for purposes of this section. 
‘‘(8) 
CONTROLLED
GROUPS
AND
PREDE-
CESSORS.—For purposes of paragraphs (5) and 
(6)— 
‘‘(A) except as provided by the Secretary, 
all persons treated as a single employer under 
subsection (b), (c), (m), or (o) of section 414 
shall be treated as 1 employer; and 
‘‘(B) any reference to an employer shall in-
clude a reference to any predecessor of such 
employer. 
‘‘(9) ELECTION TO HAVE CREDIT APPLY.—This 
section shall apply with respect to a taxpayer for any 
taxable year only if there is an election in effect by 
such taxpayer (at such time and in such manner as 
the Secretary may by regulations prescribe) to have 
this section apply for such taxable year. No deduc-
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tion shall be allowed with respect to amounts paid 
by the taxpayer during the taxable year for insur-
ance which constitutes medical care for the taxpayer 
or any employee of the taxpayer if such election is 
in effect for such taxable year.’’. 
(b) CREDIT TO BE PART OF GENERAL BUSINESS 
CREDIT.—Subsection (b) of section 38 of such Code (re-
lating to general business credit) is amended by striking 
‘‘plus’’ at the end of paragraph (34), by striking the period 
at the end of paragraph (35) and inserting ‘‘plus’’, and 
by adding at the end the following new paragraph: 
‘‘(36) the Small Business CHOICE credit de-
termined under section 45R(a).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of such Code is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 45R. Small Business CHOICE credit.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid for eligible cov-
erage months beginning in taxable years beginning after 
December 31, 2009. 
Æ 
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