I 
108TH CONGRESS 
1ST SESSION 
H. R. 660
To amend title I of the Employee Retirement Income Security Act of 1974 
to improve access and choice for entrepreneurs with small businesses 
with respect to medical care for their employees. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 11, 2003
Mr. FLETCHER (for himself, Mr. SAM JOHNSON of Texas, Mr. DOOLEY of 
California, Ms. VELA´ZQUEZ, Mr. ACEVEDO-VILA´, Mr. ADERHOLT, Mr. 
AKIN, Mr. BACA, Mr. BALLENGER, Mr. BEAUPREZ, Mrs. BIGGERT, Mr. 
BOEHNER, Mr. BURGESS, Mr. CALVERT, Mrs. CAPITO, Mr. CARTER, 
Mrs. CHRISTENSEN, Mr. COLLINS, Mr. COSTELLO, Mr. CRAMER, Mr. 
CUNNINGHAM, Mrs. JO ANN DAVIS of Virginia, Mr. DEMINT, Mr. MARIO 
DIAZ-BALART of Florida, Mr. DUNCAN, Mr. EVERETT, Mr. FRANKS of 
Arizona, Mr. FOSSELLA, Mr. GILLMOR, Mr. GOODLATTE, Mr. GONZALEZ, 
Mr. GRAVES, Ms. GRANGER, Mr. GREENWOOD, Mr. GRIJALVA, Ms. 
HART, Mr. HASTERT, Mr. HERGER, Mr. HOUGHTON, Mr. ISAKSON, Mr. 
ISSA, Mr. JENKINS, Mr. JONES of North Carolina, Mr. KELLER, Mrs. 
KELLY, Mr. KENNEDY of Minnesota, Mr. KOLBE, Mr. LUCAS of Ken-
tucky, Mr. MANZULLO, Mr. MCHUGH, Mr. MCINNIS, Mr. MCKEON, Mrs. 
MUSGRAVE, Mrs. NORTHUP, Mr. PETERSON of Pennsylvania, Mr. PETRI, 
Mr. PLATTS, Mr. RADANOVICH, Mr. REHBERG, Mr. RYAN of Wisconsin, 
Mr. SCHROCK, Mr. SENSENBRENNER, Mr. SESSIONS, Mr. SHAYS, Mr. 
SHIMKUS, Mr. SIMMONS, Mr. SMITH of Texas, Mr. SOUDER, Mr. 
TANCREDO, Mr. TIAHRT, Mr. TOOMEY, Mr. UPTON, Mr. WELDON of 
Florida, Mr. WHITFIELD, Mr. WILSON of South Carolina, and Mr. 
WOLF) introduced the following bill; which was referred to the Committee 
on Education and the Workforce 
A BILL 
To amend title I of the Employee Retirement Income Secu-
rity Act of 1974 to improve access and choice for entre-
preneurs with small businesses with respect to medical 
care for their employees.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Small Business Health Fairness Act of 2003’’. 
(b) TABLE OF CONTENTS.—The table of contents is 
as follows:
Sec. 1. Short title and table of contents. 
Sec. 2. Rules governing association health plans. 
‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS 
‘‘Sec. 801. Association health plans. 
‘‘Sec. 802. Certification of association health plans. 
‘‘Sec. 803. Requirements relating to sponsors and boards of trustees. 
‘‘Sec. 804. Participation and coverage requirements. 
‘‘Sec. 805. Other requirements relating to plan documents, contribution 
rates, and benefit options. 
‘‘Sec. 806. Maintenance of reserves and provisions for solvency for plans 
providing health benefits in addition to health insurance 
coverage. 
‘‘Sec. 807. Requirements for application and related requirements. 
‘‘Sec. 808. Notice requirements for voluntary termination. 
‘‘Sec. 809. Corrective actions and mandatory termination. 
‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health 
plans providing health benefits in addition to health insur-
ance coverage. 
‘‘Sec. 811. State assessment authority. 
‘‘Sec. 812. Definitions and rules of construction. 
Sec. 3. Clarification of treatment of single employer arrangements. 
Sec. 4. Clarification of treatment of certain collectively bargained arrange-
ments. 
Sec. 5. Enforcement provisions relating to association health plans. 
Sec. 6. Cooperation between Federal and State authorities. 
Sec. 7. Effective date and transitional and other rules.
SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS. 
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 is amend-
ed by adding after part 7 the following new part: 
‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH 
PLANS 
‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 
‘‘(a) IN GENERAL.—For purposes of this part, the 
term ‘association health plan’ means a group health plan 
whose sponsor is (or is deemed under this part to be) de-
scribed in subsection (b). 
‘‘(b) SPONSORSHIP.—The sponsor of a group health 
plan is described in this subsection if such sponsor—
‘‘(1) is organized and maintained in good faith, 
with a constitution and bylaws specifically stating its 
purpose and providing for periodic meetings on at 
least an annual basis, as a bona fide trade associa-
tion, a bona fide industry association (including a 
rural electric cooperative association or a rural tele-
phone cooperative association), a bona fide profes-
sional association, or a bona fide chamber of com-
merce (or similar bona fide business association, in-
cluding a corporation or similar organization that 
operates on a cooperative basis (within the meaning 
of section 1381 of the Internal Revenue Code of
1986)), for substantial purposes other than that of 
obtaining or providing medical care; 
‘‘(2) is established as a permanent entity which 
receives the active support of its members and re-
quires for membership payment on a periodic basis 
of dues or payments necessary to maintain eligibility 
for membership in the sponsor; and 
‘‘(3) does not condition membership, such dues 
or payments, or coverage under the plan on the 
basis of health status-related factors with respect to 
the employees of its members (or affiliated mem-
bers), or the dependents of such employees, and does 
not condition such dues or payments on the basis of 
group health plan participation. 
Any sponsor consisting of an association of entities which 
meet the requirements of paragraphs (1), (2), and (3) 
shall be deemed to be a sponsor described in this sub-
section. 
‘‘SEC. 
802. 
CERTIFICATION 
OF 
ASSOCIATION 
HEALTH 
PLANS. 
‘‘(a) IN GENERAL.—The applicable authority shall 
prescribe by regulation, through negotiated rulemaking, a 
procedure under which, subject to subsection (b), the ap-
plicable authority shall certify association health plans
Under such procedure, the applicable authority shall pro-
vide for the granting of certification under this part to 
the plans in each class of such association health plans 
upon appropriate filing under such procedure in connec-
tion with plans in such class and payment of the pre-
scribed fee under section 807(a). 
‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION 
HEALTH PLANS.—An association health plan which offers 
one or more benefit options which do not consist of health
insurance coverage may be certified under this part only 
if such plan consists of any of the following: 
‘‘(1) a plan which offered such coverage on the 
date of the enactment of the Small Business Health 
Fairness Act of 2003, 
‘‘(2) a plan under which the sponsor does not 
restrict membership to one or more trades and busi-
nesses or industries and whose eligible participating 
employers represent a broad cross-section of trades 
and businesses or industries, or 
‘‘(3) a plan whose eligible participating employ-
ers represent one or more trades or businesses, or 
one or more industries, consisting of any of the fol-
lowing: agriculture; equipment and automobile deal-
erships; barbering and cosmetology; certified public 
accounting practices; child care; construction; dance,
theatrical and orchestra productions; disinfecting 
and 
pest 
control; 
financial 
services; 
fishing; 
foodservice establishments; hospitals; labor organiza-
tions; logging; manufacturing (metals); mining; med-
ical and dental practices; medical laboratories; pro-
fessional consulting services; sanitary services; trans-
portation (local and freight); warehousing; whole-
saling/distributing; or any other trade or business or 
industry which has been indicated as having average 
or above-average risk or health claims experience by 
reason of State rate filings, denials of coverage, pro-
posed premium rate levels, or other means dem-
onstrated by such plan in accordance with regula-
tions which the Secretary shall prescribe through ne-
gotiated rulemaking. 
‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 
BOARDS OF TRUSTEES. 
‘‘(a) SPONSOR.—The requirements of this subsection 
are met with respect to an association health plan if the 
sponsor has met (or is deemed under this part to have 
met) the requirements of section 801(b) for a continuous 
period of not less than 3 years ending with the date of 
the application for certification under this part.
‘‘(b) BOARD OF TRUSTEES.—The requirements of 
this subsection are met with respect to an association 
health plan if the following requirements are met: 
‘‘(1) FISCAL CONTROL.—The plan is operated, 
pursuant to a trust agreement, by a board of trust-
ees which has complete fiscal control over the plan 
and which is responsible for all operations of the 
plan. 
‘‘(2) RULES
OF
OPERATION
AND
FINANCIAL 
CONTROLS.—The board of trustees has in effect 
rules of operation and financial controls, based on a 
3-year plan of operation, adequate to carry out the 
terms of the plan and to meet all requirements of 
this title applicable to the plan. 
‘‘(3) RULES
GOVERNING
RELATIONSHIP
TO 
PARTICIPATING
EMPLOYERS
AND
TO
CONTRAC-
TORS.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraphs (B) and (C), the members of the 
board of trustees are individuals selected from 
individuals who are the owners, officers, direc-
tors, or employees of the participating employ-
ers or who are partners in the participating em-
ployers and actively participate in the business. 
‘‘(B) LIMITATION.—
‘‘(i) GENERAL RULE.—Except as pro-
vided in clauses (ii) and (iii), no such 
member is an owner, officer, director, or 
employee of, or partner in, a contract ad-
ministrator or other service provider to the 
plan. 
‘‘(ii) LIMITED EXCEPTION FOR PRO-
VIDERS OF SERVICES SOLELY ON BEHALF 
OF THE SPONSOR.—Officers or employees 
of a sponsor which is a service provider 
(other than a contract administrator) to 
the plan may be members of the board if 
they constitute not more than 25 percent 
of the membership of the board and they 
do not provide services to the plan other 
than on behalf of the sponsor. 
‘‘(iii) TREATMENT OF PROVIDERS OF 
MEDICAL CARE.—In the case of a sponsor 
which is an association whose membership 
consists primarily of providers of medical 
care, clause (i) shall not apply in the case 
of any service provider described in sub-
paragraph (A) who is a provider of medical 
care under the plan.
‘‘(C) CERTAIN
PLANS
EXCLUDED.—Sub-
paragraph (A) shall not apply to an association 
health plan which is in existence on the date of 
the enactment of the Small Business Health 
Fairness Act of 2003. 
‘‘(D) SOLE AUTHORITY.—The board has 
sole authority under the plan to approve appli-
cations for participation in the plan and to con-
tract with a service provider to administer the 
day-to-day affairs of the plan. 
‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 
the case of a group health plan which is established and 
maintained by a franchiser for a franchise network con-
sisting of its franchisees—
‘‘(1) the requirements of subsection (a) and sec-
tion 801(a)(1) shall be deemed met if such require-
ments would otherwise be met if the franchiser were 
deemed to be the sponsor referred to in section 
801(b), such network were deemed to be an associa-
tion described in section 801(b), and each franchisee 
were deemed to be a member (of the association and 
the sponsor) referred to in section 801(b); and 
‘‘(2) the requirements of section 804(a)(1) shall 
be deemed met.
The Secretary may by regulation, through negotiated rule-
making, define for purposes of this subsection the terms 
‘franchiser’, ‘franchise network’, and ‘franchisee’. 
‘‘(d) CERTAIN COLLECTIVELY BARGAINED PLANS.—
‘‘(1) IN
GENERAL.—In the case of a group 
health plan described in paragraph (2)—
‘‘(A) the requirements of subsection (a) 
and section 801(a)(1) shall be deemed met; 
‘‘(B) the joint board of trustees shall be 
deemed a board of trustees with respect to 
which the requirements of subsection (b) are 
met; and
‘‘(C) the requirements of section 804 shall 
be deemed met. 
‘‘(2) REQUIREMENTS.—A group health plan is 
described in this paragraph if—
‘‘(A) the plan is a multiemployer plan; or 
‘‘(B) the plan is in existence on April 1, 
2003, and would be described in section 
3(40)(A)(i) but solely for the failure to meet 
the requirements of section 3(40)(C)(ii). 
‘‘(3) CONSTRUCTION.—A group health plan de-
scribed in paragraph (2) shall only be treated as an 
association health plan under this part if the spon-
sor of the plan applies for, and obtains, certification
of the plan as an association health plan under this 
part. 
‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE-
MENTS. 
‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 
requirements of this subsection are met with respect to 
an association health plan if, under the terms of the 
plan—
‘‘(1) each participating employer must be—
‘‘(A) a member of the sponsor, 
‘‘(B) the sponsor, or 
‘‘(C) an affiliated member of the sponsor 
with respect to which the requirements of sub-
section (b) are met, 
except that, in the case of a sponsor which is a pro-
fessional association or other individual-based asso-
ciation, if at least one of the officers, directors, or 
employees of an employer, or at least one of the in-
dividuals who are partners in an employer and who 
actively participates in the business, is a member or 
such an affiliated member of the sponsor, partici-
pating employers may also include such employer; 
and
‘‘(2) all individuals commencing coverage under 
the plan after certification under this part must 
be—
‘‘(A) active or retired owners (including 
self-employed individuals), officers, directors, or 
employees of, or partners in, participating em-
ployers; or 
‘‘(B) the beneficiaries of individuals de-
scribed in subparagraph (A). 
‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM-
PLOYEES.—In the case of an association health plan in 
existence on the date of the enactment of the Small Busi-
ness Health Fairness Act of 2003, an affiliated member 
of the sponsor of the plan may be offered coverage under 
the plan as a participating employer only if—
‘‘(1) the affiliated member was an affiliated 
member on the date of certification under this part; 
or 
‘‘(2) during the 12-month period preceding the 
date of the offering of such coverage, the affiliated 
member has not maintained or contributed to a 
group health plan with respect to any of its employ-
ees who would otherwise be eligible to participate in 
such association health plan.
‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re-
quirements of this subsection are met with respect to an 
association health plan if, under the terms of the plan, 
no participating employer may provide health insurance 
coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer 
under the plan, if such exclusion of the employee from cov-
erage under the plan is based on a health status-related 
factor with respect to the employee and such employee 
would, but for such exclusion on such basis, be eligible 
for coverage under the plan. 
‘‘(d) PROHIBITION
OF DISCRIMINATION AGAINST 
EMPLOYERS
AND EMPLOYEES ELIGIBLE TO PARTICI-
PATE.—The requirements of this subsection are met with 
respect to an association health plan if—
‘‘(1) under the terms of the plan, all employers 
meeting the preceding requirements of this section 
are eligible to qualify as participating employers for 
all geographically available coverage options, unless, 
in the case of any such employer, participation or 
contribution requirements of the type referred to in 
section 2711 of the Public Health Service Act are 
not met;
‘‘(2) upon request, any employer eligible to par-
ticipate is furnished information regarding all cov-
erage options available under the plan; and 
‘‘(3) the applicable requirements of sections 
701, 702, and 703 are met with respect to the plan. 
‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 
DOCUMENTS, CONTRIBUTION RATES, AND 
BENEFIT OPTIONS. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if the 
following requirements are met: 
‘‘(1) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the plan in-
clude a written instrument, meeting the require-
ments of an instrument required under section 
402(a)(1), which—
‘‘(A) provides that the board of trustees 
serves as the named fiduciary required for plans 
under section 402(a)(1) and serves in the ca-
pacity of a plan administrator (referred to in 
section 3(16)(A)); 
‘‘(B) provides that the sponsor of the plan 
is to serve as plan sponsor (referred to in sec-
tion 3(16)(B)); and
‘‘(C) incorporates the requirements of sec-
tion 806. 
‘‘(2) CONTRIBUTION
RATES
MUST
BE
NON-
DISCRIMINATORY.—
‘‘(A) The contribution rates for any par-
ticipating small employer do not vary on the 
basis of any health status-related factor in rela-
tion to employees of such employer or their 
beneficiaries and do not vary on the basis of the 
type of business or industry in which such em-
ployer is engaged. 
‘‘(B) Nothing in this title or any other pro-
vision of law shall be construed to preclude an 
association health plan, or a health insurance 
issuer offering health insurance coverage in 
connection with an association health plan, 
from—
‘‘(i) setting contribution rates based 
on the claims experience of the plan; or 
‘‘(ii) varying contribution rates for 
small employers in a State to the extent 
that such rates could vary using the same 
methodology employed in such State for 
regulating premium rates in the small 
group market with respect to health insur-
ance coverage offered in connection with 
bona fide associations (within the meaning 
of section 2791(d)(3) of the Public Health 
Service Act), 
subject to the requirements of section 702(b) 
relating to contribution rates. 
‘‘(3) FLOOR FOR NUMBER OF COVERED INDI-
VIDUALS
WITH
RESPECT
TO
CERTAIN
PLANS.—If 
any benefit option under the plan does not consist 
of health insurance coverage, the plan has as of the 
beginning of the plan year not fewer than 1,000 par-
ticipants and beneficiaries. 
‘‘(4) MARKETING REQUIREMENTS.—
‘‘(A) IN
GENERAL.—If a benefit option 
which consists of health insurance coverage is 
offered under the plan, State-licensed insurance 
agents shall be used to distribute to small em-
ployers coverage which does not consist of 
health insurance coverage in a manner com-
parable to the manner in which such agents are 
used to distribute health insurance coverage. 
‘‘(B) 
STATE-LICENSED
INSURANCE 
AGENTS.—For purposes of subparagraph (A), 
the term ‘State-licensed insurance agents’ 
means one or more agents who are licensed in
a State and are subject to the laws of such 
State relating to licensure, qualification, test-
ing, examination, and continuing education of 
persons authorized to offer, sell, or solicit 
health insurance coverage in such State. 
‘‘(5) 
REGULATORY
REQUIREMENTS.—Such 
other requirements as the applicable authority deter-
mines are necessary to carry out the purposes of this 
part, which shall be prescribed by the applicable au-
thority by regulation through negotiated rulemaking. 
‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO 
DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 
nothing in this part or any provision of State law (as de-
fined in section 514(c)(1)) shall be construed to preclude 
an association health plan, or a health insurance issuer 
offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion 
in selecting the specific items and services consisting of 
medical care to be included as benefits under such plan 
or coverage, except (subject to section 514) in the case 
of any law to the extent that it (1) prohibits an exclusion 
of a specific disease from such coverage, or (2) is not pre-
empted under section 731(a)(1) with respect to matters 
governed by section 711 or 712.
‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 
FOR 
SOLVENCY 
FOR 
PLANS 
PROVIDING 
HEALTH BENEFITS IN ADDITION TO HEALTH 
INSURANCE COVERAGE. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if—
‘‘(1) the benefits under the plan consist solely 
of health insurance coverage; or 
‘‘(2) if the plan provides any additional benefit 
options which do not consist of health insurance cov-
erage, the plan—
‘‘(A) establishes and maintains reserves 
with respect to such additional benefit options, 
in amounts recommended by the qualified actu-
ary, consisting of—
‘‘(i) a reserve sufficient for unearned 
contributions; 
‘‘(ii) a reserve sufficient for benefit li-
abilities which have been incurred, which 
have not been satisfied, and for which risk 
of loss has not yet been transferred, and 
for expected administrative costs with re-
spect to such benefit liabilities; 
‘‘(iii) a reserve sufficient for any other 
obligations of the plan; and
‘‘(iv) a reserve sufficient for a margin 
of error and other fluctuations, taking into 
account the specific circumstances of the 
plan; and 
‘‘(B) establishes and maintains aggregate 
and specific excess /stop loss insurance and sol-
vency indemnification, with respect to such ad-
ditional benefit options for which risk of loss 
has not yet been transferred, as follows: 
‘‘(i) The plan shall secure aggregate 
excess /stop loss insurance for the plan 
with an attachment point which is not 
greater than 125 percent of expected gross 
annual claims. The applicable authority 
may by regulation, through negotiated 
rulemaking, provide for upward adjust-
ments in the amount of such percentage in 
specified circumstances in which the plan 
specifically provides for and maintains re-
serves in excess of the amounts required 
under subparagraph (A). 
‘‘(ii) The plan shall secure specific ex-
cess /stop loss insurance for the plan with 
an attachment point which is at least equal 
to an amount recommended by the plan’s
qualified actuary. The applicable authority 
may by regulation, through negotiated 
rulemaking, provide for adjustments in the 
amount of such insurance in specified cir-
cumstances in which the plan specifically 
provides for and maintains reserves in ex-
cess of the amounts required under sub-
paragraph (A). 
‘‘(iii) The plan shall secure indem-
nification insurance for any claims which 
the plan is unable to satisfy by reason of 
a plan termination. 
Any regulations prescribed by the applicable authority 
pursuant to clause (i) or (ii) of subparagraph (B) may 
allow for such adjustments in the required levels of excess /
stop loss insurance as the qualified actuary may rec-
ommend, taking into account the specific circumstances 
of the plan. 
‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS 
RESERVES.—In the case of any association health plan de-
scribed in subsection (a)(2), the requirements of this sub-
section are met if the plan establishes and maintains sur-
plus in an amount at least equal to—
‘‘(1) $500,000, or
‘‘(2) such greater amount (but not greater than 
$2,000,000) as may be set forth in regulations pre-
scribed by the applicable authority through nego-
tiated rulemaking, based on the level of aggregate 
and specific excess /stop loss insurance provided with 
respect to such plan. 
‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 
any association health plan described in subsection (a)(2), 
the applicable authority may provide such additional re-
quirements relating to reserves and excess /stop loss insur-
ance as the applicable authority considers appropriate. 
Such requirements may be provided by regulation, through 
negotiated rulemaking, with respect to any such plan or 
any class of such plans. 
‘‘(d) ADJUSTMENTS FOR EXCESS /STOP LOSS INSUR-
ANCE.—The applicable authority may provide for adjust-
ments to the levels of reserves otherwise required under 
subsections (a) and (b) with respect to any plan or class 
of plans to take into account excess /stop loss insurance 
provided with respect to such plan or plans. 
‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 
applicable authority may permit an association health plan 
described in subsection (a)(2) to substitute, for all or part 
of the requirements of this section (except subsection 
(a)(2)(B)(iii)), such security, guarantee, hold-harmless ar-
rangement, or other financial arrangement as the applica-
ble authority determines to be adequate to enable the plan 
to fully meet all its financial obligations on a timely basis 
and is otherwise no less protective of the interests of par-
ticipants and beneficiaries than the requirements for 
which it is substituted. The applicable authority may take 
into account, for purposes of this subsection, evidence pro-
vided by the plan or sponsor which demonstrates an as-
sumption of liability with respect to the plan. Such evi-
dence may be in the form of a contract of indemnification, 
lien, bonding, insurance, letter of credit, recourse under 
applicable terms of the plan in the form of assessments 
of participating employers, security, or other financial ar-
rangement. 
‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT 
OF BENEFITS BY CERTAIN PLANS IN DISTRESS.—
‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO-
CIATION HEALTH PLAN FUND.—
‘‘(A) IN GENERAL.—In the case of an as-
sociation health plan described in subsection 
(a)(2), the requirements of this subsection are 
met if the plan makes payments into the Asso-
ciation Health Plan Fund under this subpara-
graph when they are due. Such payments shall 
consist of annual payments in the amount of
$5,000, and, in addition to such annual pay-
ments, such supplemental payments as the Sec-
retary may determine to be necessary under 
paragraph (2). Payments under this paragraph 
are payable to the Fund at the time determined 
by the Secretary. Initial payments are due in 
advance of certification under this part. Pay-
ments shall continue to accrue until a plan’s as-
sets are distributed pursuant to a termination 
procedure. 
‘‘(B) PENALTIES FOR FAILURE TO MAKE 
PAYMENTS.—If any payment is not made by a 
plan when it is due, a late payment charge of 
not more than 100 percent of the payment 
which was not timely paid shall be payable by 
the plan to the Fund. 
‘‘(C) CONTINUED
DUTY
OF
THE
SEC-
RETARY.—The Secretary shall not cease to 
carry out the provisions of paragraph (2) on ac-
count of the failure of a plan to pay any pay-
ment when due. 
‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE 
EXCESS /STOP LOSS INSURANCE COVERAGE AND IN-
DEMNIFICATION
INSURANCE
COVERAGE
FOR
CER-
TAIN PLANS.—In any case in which the applicable
authority determines that there is, or that there is 
reason to believe that there will be: (A) a failure to 
take necessary corrective actions under section 
809(a) with respect to an association health plan de-
scribed in subsection (a)(2); or (B) a termination of 
such a plan under section 809(b) or 810(b)(8) (and, 
if the applicable authority is not the Secretary, cer-
tifies such determination to the Secretary), the Sec-
retary shall determine the amounts necessary to 
make payments to an insurer (designated by the 
Secretary) to maintain in force excess /stop loss in-
surance coverage or indemnification insurance cov-
erage for such plan, if the Secretary determines that 
there is a reasonable expectation that, without such 
payments, claims would not be satisfied by reason of 
termination of such coverage. The Secretary shall, to
the extent provided in advance in appropriation 
Acts, pay such amounts so determined to the insurer 
designated by the Secretary. 
‘‘(3) ASSOCIATION HEALTH PLAN FUND.—
‘‘(A) IN GENERAL.—There is established 
on the books of the Treasury a fund to be 
known as the ‘Association Health Plan Fund’. 
The Fund shall be available for making pay-
ments pursuant to paragraph (2). The Fund
shall be credited with payments received pursu-
ant to paragraph (1)(A), penalties received pur-
suant to paragraph (1)(B); and earnings on in-
vestments of amounts of the Fund under sub-
paragraph (B). 
‘‘(B) INVESTMENT.—Whenever the Sec-
retary determines that the moneys of the fund 
are in excess of current needs, the Secretary 
may request the investment of such amounts as 
the Secretary determines advisable by the Sec-
retary of the Treasury in obligations issued or 
guaranteed by the United States. 
‘‘(g) EXCESS /STOP LOSS INSURANCE.—For pur-
poses of this section—
‘‘(1) AGGREGATE
EXCESS /STOP
LOSS
INSUR-
ANCE.—The term ‘aggregate excess /stop loss insur-
ance’ means, in connection with an association 
health plan, a contract—
‘‘(A) under which an insurer (meeting such 
minimum standards as the applicable authority 
may prescribe by regulation through negotiated 
rulemaking) provides for payment to the plan 
with respect to aggregate claims under the plan 
in excess of an amount or amounts specified in 
such contract;
‘‘(B) which is guaranteed renewable; and 
‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan. 
‘‘(2) SPECIFIC
EXCESS /STOP
LOSS
INSUR-
ANCE.—The term ‘specific excess /stop loss insur-
ance’ means, in connection with an association 
health plan, a contract—
‘‘(A) under which an insurer (meeting such 
minimum standards as the applicable authority 
may prescribe by regulation through negotiated 
rulemaking) provides for payment to the plan 
with respect to claims under the plan in connec-
tion with a covered individual in excess of an 
amount or amounts specified in such contract 
in connection with such covered individual; 
‘‘(B) which is guaranteed renewable; and 
‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan. 
‘‘(h) INDEMNIFICATION INSURANCE.—For purposes 
of this section, the term ‘indemnification insurance’ 
means, in connection with an association health plan, a 
contract—
‘‘(1) under which an insurer (meeting such min-
imum standards as the applicable authority may pre-
scribe through negotiated rulemaking) provides for 
payment to the plan with respect to claims under the 
plan which the plan is unable to satisfy by reason 
of a termination pursuant to section 809(b) (relating 
to mandatory termination); 
‘‘(2) which is guaranteed renewable and 
noncancellable for any reason (except as the applica-
ble authority may prescribe by regulation through 
negotiated rulemaking); and 
‘‘(3) which allows for payment of premiums by 
any third party on behalf of the insured plan. 
‘‘(i) RESERVES.—For purposes of this section, the 
term ‘reserves’ means, in connection with an association 
health plan, plan assets which meet the fiduciary stand-
ards under part 4 and such additional requirements re-
garding liquidity as the applicable authority may prescribe 
through negotiated rulemaking. 
‘‘(j) SOLVENCY STANDARDS WORKING GROUP.—
‘‘(1) IN GENERAL.—Within 90 days after the 
date of the enactment of the Small Business Health 
Fairness Act of 2003, the applicable authority shall 
establish a Solvency Standards Working Group. In 
prescribing the initial regulations under this section,
the applicable authority shall take into account the 
recommendations of such Working Group. 
‘‘(2) MEMBERSHIP.—The Working Group shall 
consist of not more than 15 members appointed by 
the applicable authority. The applicable authority 
shall include among persons invited to membership 
on the Working Group at least one of each of the 
following: 
‘‘(A) a representative of the National Asso-
ciation of Insurance Commissioners; 
‘‘(B) a representative of the American 
Academy of Actuaries; 
‘‘(C) a representative of the State govern-
ments, or their interests; 
‘‘(D) a representative of existing self-in-
sured arrangements, or their interests; 
‘‘(E) a representative of associations of the 
type referred to in section 801(b)(1), or their 
interests; and 
‘‘(F) a representative of multiemployer 
plans that are group health plans, or their in-
terests.
‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE-
LATED REQUIREMENTS. 
‘‘(a) FILING FEE.—Under the procedure prescribed 
pursuant to section 802(a), an association health plan 
shall pay to the applicable authority at the time of filing 
an application for certification under this part a filing fee 
in the amount of $5,000, which shall be available in the 
case of the Secretary, to the extent provided in appropria-
tion Acts, for the sole purpose of administering the certifi-
cation procedures applicable with respect to association 
health plans. 
‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA-
TION FOR CERTIFICATION.—An application for certifi-
cation under this part meets the requirements of this sec-
tion only if it includes, in a manner and form which shall 
be prescribed by the applicable authority through nego-
tiated rulemaking, at least the following information: 
‘‘(1) IDENTIFYING INFORMATION.—The names 
and addresses of—
‘‘(A) the sponsor; and 
‘‘(B) the members of the board of trustees 
of the plan. 
‘‘(2) STATES IN WHICH PLAN INTENDS TO DO 
BUSINESS.—The States in which participants and 
beneficiaries under the plan are to be located and