(4) THIRD-PARTY
PAYMENT
SYSTEMS.—Pay-
ment by third-party payers (including commercial in-
surance companies and various levels of government)
for the preponderance of the health care delivered
each year insulates patients, as well as physicians,
hospitals, and other delivers of health care, from the
need to consider the cost of treatment in addition to
the medical benefit expected from it.
(5) REASONABLE COST REIMBURSEMENT.—Re-
imbursement of hospitals and other health care insti-
tutions by third-party payers on the basis of reason-
able costs of operation provides these institutions in-
sufficient incentives to introduce more efficient
methods of delivering care and at the same time di-
minishes the extent to which these institutions and
their patients are affected by the consequences of in-
efficiency and overexpansion.
(6) GOVERNMENT AND THIRD-PARTY PAYER.—
The present role of government as a third-party
payer poses a conflict of interest whereby the Gov-
ernment purchases or finances health care services
and unilaterally determines the amount the deliverer
will be paid for those services.
(7) LACK OF COMPETITION.—The present sys-
tem of financing and regulation prevents health care
deliverers from competing with each other on the
basis of efficiency and price as well as quality.
SEC. 3. PURPOSES.
The purposes of Act are—
(1) to make it possible for individuals, employ-
ees, and the self-employed to purchase and own their
own health insurance without suffering any negative
tax consequences;
(2) to enable individuals to make their own in-
formed choice of the method by which their health
care is provided, the persons who deliver it, and the
price they wish to pay for it;
(3) to assist individuals in obtaining and in
paying for basic health care services;
(4) to render patients and deliverers sensitive to
the cost of health care, giving them both the incen-
tive and the ability to restrain undesired increases in
health care costs;
(5) to simplify and rationalize the payment
mechanism for health care services;
(6) to foster the development of numerous, var-
ied, and innovative systems of providing health care
which will compete against each other in terms of
price, service, and quality, and thus allow the Amer-
ican people to benefit from competitive forces which
will reward efficient and effective deliverers and
eliminate those which provide unsatisfactory quality
of care or are inefficient;
(7) to replace governmental regulation of the
economic aspects of health care delivery with indi-
vidual choice, private initiative, and marketplace in-
centives and disciplines;
(8) to encourage the development of systems of
delivering health care which are capable of supplying
a broad range of health care services in a com-
prehensive and systematic manner, and
(9) to preserve the independence of health care
deliverers and encourage their close identification
with and their accountability to the individuals they
serve.
TITLE I—HEALTHMARTS
SEC. 101. EXPANSION OF CONSUMER CHOICE THROUGH
HEALTHMARTS.
The Public Health Service Act is amended by adding
at the end the following new title:
‘‘TITLE XXVIII—HEALTHMARTS
‘‘SEC. 2801. DEFINITION OF HEALTHMART.
‘‘(a) IN GENERAL.—For purposes of this title, the
term ‘HealthMart’ means a legal entity that meets the fol-
lowing requirements:
‘‘(1) ORGANIZATION.—The HealthMart is an
organization operated under the direction of a board
of directors which is composed of representatives of
not fewer than 2 from each of the following:
‘‘(A) Employers.
‘‘(B) Employees.
‘‘(C) Individuals (other than those de-
scribed in subparagraph (B)) who are eligible to
participate in the HealthMart.
‘‘(D) Health care providers, which may be
physicians, other health care professionals,
health care facilities, or any combination there-
of.
‘‘(E) Entities, such as insurance compa-
nies, health maintenance organizations, and li-
censed provider-sponsored organizations, that
underwrite or administer health benefits cov-
erage.
‘‘(2) 
OFFERING
HEALTH
BENEFITS
COV-
ERAGE.—
‘‘(A) 
DIFFERENT
GROUPS.—The
HealthMart, in conjunction with those health
insurance issuers that offer health benefits cov-
erage through the HealthMart, makes available
health benefits coverage in the manner de-
scribed in subsection (b) to all employers, eligi-
ble employees, and individuals in the manner
described in subsection (c)(2) at rates (includ-
ing employer’s and employee’s share, if applica-
ble) that are established by the health insurance
issuer on a policy or product specific basis and
that may vary only as permissible under State
law. A HealthMart is deemed to be a group
health plan for purposes of applying section 702
of the Employee Retirement Income Security
Act of 1974, section 2702 of this Act, and sec-
tion 9802(b) of the Internal Revenue Code of
1986 (which limit variation among similarly sit-
uated individuals of required premiums for
health benefits coverage on the basis of health
status-related factors).
‘‘(B) NONDISCRIMINATION
IN
COVERAGE
OFFERED.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the HealthMart may not offer health
benefits coverage to an eligible employee or
individual in a geographic area (as speci-
fied under paragraph (3)(A)) unless the
same coverage is offered to all such em-
ployees or individuals in the same geo-
graphic area. Section 2711(a)(1)(B) of this
Act limits denial of enrollment of certain
eligible individuals under health benefits
coverage in the small group market.
‘‘(ii) 
CONSTRUCTION.—Nothing 
in
this title shall be construed as requiring or
permitting a health insurance issuer to
provide coverage outside the service area of
the issuer, as approved under State law.
‘‘(C) NO FINANCIAL UNDERWRITING.—The
HealthMart provides health benefits coverage
only through contracts with health insurance
issuers and does not assume insurance risk with
respect to such coverage.
‘‘(D) MINIMUM COVERAGE.—By the end of
the first year of its operation and thereafter,
the HealthMart maintains not fewer than 10
purchasers and 100 members.
‘‘(3) GEOGRAPHIC AREAS.—
‘‘(A) 
SPECIFICATION
OF
GEOGRAPHIC
AREAS.—The HealthMart shall specify the geo-
graphic area (or areas) in which it makes avail-
able health benefits coverage offered by health
insurance issuers to employers, or individuals,
as the case may be. Any such area shall encom-
pass at least one entire county or equivalent
area.
‘‘(B) MULTISTATE AREAS.—In the case of
a HealthMart that serves more than one State,
such geographic areas may be areas that in-
clude portions of two or more contiguous
States.
‘‘(C) 
MULTIPLE
HEALTHMARTS
PER-
MITTED IN SINGLE GEOGRAPHIC AREA.—Noth-
ing in this title shall be construed as preventing
the establishment and operation of more than
one HealthMart in a geographic area or as lim-
iting the number of HealthMarts that may op-
erate in any area.
‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES
TO PURCHASERS.—
‘‘(A) IN GENERAL.—The HealthMart pro-
vides administrative services for purchasers.
Such services may include accounting, billing,
enrollment information, and employee coverage
status reports.
‘‘(B) CONSTRUCTION.—Nothing in this
subsection shall be construed as preventing a
HealthMart from serving as an administrative
service organization to any entity.
‘‘(5) DISSEMINATION
OF
INFORMATION.—The
HealthMart collects and disseminates (or arranges
for the collection and dissemination of) consumer-
oriented information on the scope, cost, and enrollee
satisfaction of all coverage options offered through
the HealthMart to its members and eligible individ-
uals. Such information shall be defined by the
HealthMart and shall be in a manner appropriate to
the type of coverage offered. To the extent prac-
ticable, such information shall include information
on provider performance, locations and hours of op-
eration of providers, outcomes, and similar matters.
Nothing in this section shall be construed as pre-
venting the dissemination of such information or
other information by the HealthMart or by health
insurance issuers through electronic or other means.
‘‘(6) 
FILING
INFORMATION.—The
HealthMart—
‘‘(A) files with the applicable Federal au-
thority information that demonstrates the
HealthMart’s compliance with the applicable re-
quirements of this title; or
‘‘(B) in accordance with rules established
under section 2803(a), files with a State such
information as the State may require to dem-
onstrate such compliance.
‘‘(b) HEALTH
BENEFITS
COVERAGE
REQUIRE-
MENTS.—
‘‘(1) COMPLIANCE
WITH
CONSUMER
PROTEC-
TION REQUIREMENTS.—Any health benefits coverage
offered through a HealthMart shall—
‘‘(A) be underwritten by a health insurance
issuer that—
‘‘(i) is licensed (or otherwise regu-
lated) under State law,
‘‘(ii) meets all applicable State stand-
ards relating to consumer protection, sub-
ject to section 2802(b), and
‘‘(iii) offers the coverage under a con-
tract with the HealthMart;
‘‘(B) subject to paragraph (2), be approved
or otherwise permitted to be offered under
State law; and
‘‘(C) provide full portability of creditable
coverage for individuals who remain members of
the same HealthMart notwithstanding that they
change the employer through which they are
members in accordance with the provisions of
the parts 6 and 7 of subtitle B of title I of the
Employee Retirement Income Security Act of
1974 and titles XXII and XXVII of this Act,
so long as both employers are purchasers in the
HealthMart, and notwithstanding that they ter-
minate such employment, if the HealthMart
permits enrollment directly by eligible individ-
uals.
‘‘(2) ALTERNATIVE PROCESS FOR APPROVAL OF
HEALTH BENEFITS COVERAGE IN CASE OF DISCRIMI-
NATION OR DELAY.—
‘‘(A) IN
GENERAL.—The requirement of
paragraph (1)(B) shall not apply to a policy or
product of health benefits coverage offered in a
State if the health insurance issuer seeking to
offer such policy or product files an application
to waive such requirement with the applicable
Federal authority, and the authority deter-
mines, based on the application and other evi-
dence presented to the authority, that—
‘‘(i) either (or both) of the grounds
described in subparagraph (B) for approval
of the application has been met; and
‘‘(ii) the coverage meets the applicable
State standards (other than those that
have been preempted under section 2802).
‘‘(B) GROUNDS.—The grounds described
in this subparagraph with respect to a policy or
product of health benefits coverage are as fol-
lows:
‘‘(i) FAILURE
TO
ACT
ON
POLICY,
PRODUCT, OR
RATE
APPLICATION
ON
A
TIMELY
BASIS.—The State has failed to
complete action on the policy or product
(or rates for the policy or product) within
90 days of the date of the State’s receipt
of a substantially complete application. No
period before the date of the enactment of
this section shall be included in deter-
mining such 90-day period.
‘‘(ii) DENIAL OF APPLICATION BASED
ON
DISCRIMINATORY
TREATMENT.—The
State has denied such an application
and—
‘‘(I) the standards or review
process imposed by the State as a
condition of approval of the policy or
product imposes either any material
requirements, procedures, or stand-
ards to such policy or product that
are not generally applicable to other
policies and products offered or any
requirements 
that 
are 
preempted
under section 2802; or
‘‘(II) the State requires the
issuer, as a condition of approval of
the policy or product, to offer any pol-
icy or product other than such policy
or product.
‘‘(C) ENFORCEMENT.—In the case of a
waiver granted under subparagraph (A) to an
issuer with respect to a State, the Secretary
may enter into an agreement with the State
under which the State agrees to provide for
monitoring and enforcement activities with re-
spect to compliance of such an issuer and its
health insurance coverage with the applicable
State standards described in subparagraph
(A)(ii). Such monitoring and enforcement shall
be conducted by the State in the same manner
as the State enforces such standards with re-
spect to other health insurance issuers and
plans, without discrimination based on the type
of issuer to which the standards apply. Such an
agreement shall specify or establish mechanisms
by which compliance activities are undertaken,
while not lengthening the time required to re-
view and process applications for waivers under
subparagraph (A).
‘‘(3) EXAMPLES OF TYPES OF COVERAGE.—The
benefits 
coverage 
made 
available 
through 
a
HealthMart may include, but is not limited to, any
of the following if it meets the other applicable re-
quirements of this title:
‘‘(A) Coverage through a health mainte-
nance organization.
‘‘(B) Coverage in connection with a pre-
ferred provider organization.
‘‘(C) Coverage in connection with a li-
censed provider-sponsored organization.
‘‘(D) Indemnity coverage through an insur-
ance company.
‘‘(E) Coverage offered in connection with a
contribution into a medical savings account or
flexible spending account.
‘‘(F) Coverage that includes a point-of-
service option.
‘‘(G) Any combination of such types of
coverage.
‘‘(4) WELLNESS BONUSES FOR HEALTH PRO-
MOTION.—Nothing in this title shall be construed as
precluding a health insurance issuer offering health
benefits coverage through a HealthMart from estab-
lishing premium discounts or rebates for members or
from modifying otherwise applicable copayments or
deductibles in return for adherence to programs of
health promotion and disease prevention so long as
such programs are agreed to in advance by the
HealthMart and comply with all other provisions of
this title and do not discriminate among similarly
situated members.
‘‘(c) PURCHASERS; MEMBERS; HEALTH INSURANCE
ISSUERS.—
‘‘(1) PURCHASERS.—
‘‘(A) IN GENERAL.—Subject to the provi-
sions of this title, a HealthMart shall permit
any employer or any individual described in
subsection (a)(1)(C) to contract with the
HealthMart for the purchase of health benefits
coverage for its employees and dependents of
those employees or for the individual (and the
individual’s dependents), respectively, and may
not vary conditions of eligibility (including pre-
mium rates and membership fees) of an em-
ployer or individual to be a purchaser.
‘‘(B) ROLE
OF
ASSOCIATIONS, BROKERS,
AND LICENSED HEALTH INSURANCE AGENTS.—
Nothing in this section shall be construed as
preventing an association, broker, licensed
health insurance agent, or other entity from as-
sisting or representing a HealthMart or employ-
ers or individuals from entering into appro-
priate arrangements to carry out this title.
‘‘(C) 
PERIOD
OF
CONTRACT.—The
HealthMart may not require a contract under
subparagraph (A) between a HealthMart and a
purchaser to be effective for a period of longer
than 24 months. The previous sentence shall
not be construed as preventing such a contract
from being extended for additional 24-month
periods or preventing the purchaser from volun-
tarily electing a contract period of longer than
24 months.
‘‘(D) 
EXCLUSIVE
NATURE
OF
CON-
TRACT.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), such a contract shall provide that the
purchaser agrees not to obtain or sponsor
health benefits coverage, on behalf of any
eligible employees (and their dependents),
other than through the HealthMart.
‘‘(ii) EXCEPTION IF NO COVERAGE OF-
FERED IN AREA OF RESIDENCES.—Clause
(i) shall not apply to an eligible individual
who resides in an area for which no cov-
erage is offered by any health insurance
issuer through the HealthMart.
‘‘(iii) NOTHING
PRECLUDING
INDI-
VIDUAL EMPLOYEE OPT-OUT.—Nothing in
this subparagraph shall be construed as re-
quiring an eligible employee of a large or
small employer that is a purchaser to ob-
tain health benefits coverage through the
HealthMart.
‘‘(2) MEMBERS.—
‘‘(A) IN GENERAL.—
‘‘(i) EMPLOYMENT
BASED
MEMBER-
SHIP.—Under rules established to carry
out this title, with respect to an employer
that has a purchaser contract with a
HealthMart, individuals who are employees
of the employer may enroll for health bene-
fits coverage (including coverage for de-
pendents of such enrolling employees) of-
fered by a health insurance issuer through
the HealthMart.
‘‘(ii) INDIVIDUALS.—Under rules es-
tablished to carry out this title, with re-
spect to an individual who has a purchaser
contract with a HealthMart for himself or
herself, the individual may enroll for health
benefits coverage (including coverage for
dependents of such individual) offered by a
health 
insurance 
issuer 
through 
the
HealthMart.
‘‘(B) NONDISCRIMINATION
IN
ENROLL-
MENT.—A HealthMart may not deny enroll-
ment as a member to an individual who is an
employee or individual (or dependent of such an
employee or individual) eligible to be so enrolled
based on health status-related factors, except as
may be permitted consistent with section
2742(b).
‘‘(C) ANNUAL
OPEN
ENROLLMENT
PE-
RIOD.—In the case of members enrolled in
health benefits coverage offered by a health in-
surance issuer through a HealthMart, subject
to subparagraph (D), the HealthMart shall pro-
vide for an annual open enrollment period of 30
days during which such members may change
the coverage option in which the members are
enrolled.
‘‘(D) RULES OF ELIGIBILITY.—Nothing in
this paragraph shall preclude a HealthMart
from establishing rules of employee or indi-
vidual eligibility for enrollment and reenroll-
ment of members during the annual open en-
rollment period under subparagraph (C). Such
rules shall be applied consistently to all pur-
chasers and members within the HealthMart
and shall not be based in any manner on health
status-related factors and may not conflict with
sections 2701 and 2702 of this Act.
‘‘(3) HEALTH INSURANCE ISSUERS.—
‘‘(A) PREMIUM
COLLECTION.—The con-
tract between a HealthMart and a health insur-
ance issuer shall provide, with respect to a
member enrolled with health benefits coverage
offered by the issuer through the HealthMart,
for the payment of the premiums collected by
the HealthMart (or the issuer) for such cov-
erage (less a pre-determined administrative
charge negotiated by the HealthMart and the
issuer) to the issuer.
‘‘(B) SCOPE OF SERVICE AREA.—Nothing
in this title shall be construed as requiring the
service area of a health insurance issuer with
respect to health insurance coverage to cover
the entire geographic area served by a
HealthMart.
‘‘(C) AVAILABILITY
OF
COVERAGE
OP-
TIONS.—
‘‘(i) IN
GENERAL.—A HealthMart
shall enter into contracts with one or more
health insurance issuers in a manner that
assures that at least 2 health insurance
coverage options are made available.
‘‘(ii) REQUIREMENT
OF
NON-NET-
WORK OPTION.—At least one of the health
insurance coverage options made available
under clause (i) shall be a non-network
coverage option under which enrollees may
obtain benefits for health care items and
services that are not provided under a con-
tract between the provider of the service
and the issuer involved.
‘‘(d) PREVENTION OF CONFLICTS OF INTEREST.—
‘‘(1) FOR BOARDS OF DIRECTORS.—A member
of a board of directors of a HealthMart may not
serve as an employee or paid consultant to the
HealthMart, but may receive reasonable reimburse-
ment for travel expenses for purposes of attending
meetings of the board or committees thereof.
‘‘(2) FOR BOARDS OF DIRECTORS OR EMPLOY-
EES.—An individual is not eligible to serve in a paid
or unpaid capacity on the board of directors of a
HealthMart or as an employee of the HealthMart, if
the individual is employed by, represents in any ca-
pacity, owns, or controls any ownership interest in
an organization from whom the HealthMart receives
contributions, grants, or other funds not connected
with 
a 
contract 
for 
coverage 
through 
the
HealthMart.
‘‘(3) 
EMPLOYMENT
AND
EMPLOYEE
REP-
RESENTATIVES.—
‘‘(A) IN GENERAL.—An individual who is
serving on a board of directors of a HealthMart
as a representative described in subparagraph
(A) or (B) of section 2801(a)(1) shall not be
employed by or affiliated with a health insur-
ance issuer or be licensed as or employed by or
affiliated with a health care provider.
‘‘(B) CONSTRUCTION.—For purposes of
subparagraph (A), the term ‘‘affiliated’’ does
not include membership in a health benefits
plan or the obtaining of health benefits cov-
erage offered by a health insurance issuer.
‘‘(e) CONSTRUCTION.—
‘‘(1) 
NETWORK
OF
AFFILIATED
HEALTHMARTS.—Nothing in this section shall be
construed as preventing one or more HealthMarts
serving different areas (whether or not contiguous)
from providing for some or all of the following
(through a single administrative organization or oth-
erwise):
‘‘(A) Coordinating the offering of the same
or similar health benefits coverage in different
areas served by the different HealthMarts.
‘‘(B) Providing for crediting of deductibles
and other cost-sharing for individuals who are
provided health benefits coverage through the
HealthMarts 
(or 
affiliated 
HealthMarts)
after—
‘‘(i) a change of employers through
which the coverage is provided, or
‘‘(ii) a change in place of employment
to an area not served by the previous
HealthMart.
‘‘(2) PERMITTING
HEALTHMARTS
TO
ADJUST
DISTRIBUTIONS AMONG ISSUERS TO REFLECT REL-
ATIVE RISK OF ENROLLEES.—Nothing in this sec-
tion shall be construed as precluding a HealthMart
from providing for adjustments in amounts distrib-
uted among the health insurance issuers offering
health benefits coverage through the HealthMart
based on factors such as the relative health care risk
of members enrolled under the coverage offered by
the different issuers.
‘‘SEC. 2802. APPLICATION OF CERTAIN LAWS AND REQUIRE-
MENTS.
‘‘(a) AUTHORITY OF STATES.—Nothing in this sec-
tion shall be construed as preempting State laws relating
to the following:
‘‘(1) The regulation of underwriters of health
coverage, including licensure and solvency require-
ments.
‘‘(2) The application of premium taxes and re-
quired payments for guaranty funds or for contribu-
tions to high-risk pools.
‘‘(3) The application of fair marketing require-
ments and other consumer protections (other than
those specifically relating to an item described in
subsection (b)).
‘‘(4) The application of requirements relating to
the adjustment of rates for health insurance cov-
erage.
‘‘(b) TREATMENT OF BENEFIT AND GROUPING RE-
QUIREMENTS.—State laws insofar as they relate to any
of the following are superseded and shall not apply to
health benefits coverage made available through a
HealthMart:
‘‘(1) Benefit requirements for health benefits
coverage offered through a HealthMart, including
(but not limited to) requirements relating to cov-
erage of specific providers, specific services or condi-
tions, or the amount, duration, or scope of benefits,
but not including requirements to the extent re-
quired to implement title XXVII or other Federal
law and to the extent the requirement prohibits an
exclusion of a specific disease from such coverage.
‘‘(2) Requirements (commonly referred to as
fictitious group laws) relating to grouping and simi-
lar requirements for such coverage to the extent
such requirements impede the establishment and op-
eration of HealthMarts pursuant to this title.
‘‘(3) Any other requirements (including limita-
tions on compensation arrangements) that, directly
or indirectly, preclude (or have the effect of pre-
cluding) the offering of such coverage through a
HealthMart, if the HealthMart meets the require-
ments of this title.
Any State law or regulation relating to the composition
or organization of a HealthMart is preempted to the ex-
tent the law or regulation is inconsistent with the provi-
sions of this title.
‘‘(c) APPLICATION OF ERISA FIDUCIARY AND DIS-
CLOSURE REQUIREMENTS.—The board of directors of a
HealthMart is deemed to be a plan administrator of an
employee welfare benefit plan which is a group health plan
for purposes of applying parts 1 and 4 of subtitle B of
title I of the Employee Retirement Income Security Act
of 1974 and those provisions of part 5 of such subtitle
which are applicable to enforcement of such parts 1 and
4, and the HealthMart shall be treated as such a plan
and the enrollees enrolled on the basis of employment shall
be treated as participants and beneficiaries for purposes
of applying such provisions pursuant to this subsection.
‘‘(d) APPLICATION OF ERISA RENEWABILITY PRO-
TECTION.—A HealthMart is deemed to be group health
plan that is a multiple employer welfare arrangement for
purposes of applying section 703 of the Employee Retire-
ment Income Security Act of 1974.
‘‘(e) APPLICATION OF RULES FOR NETWORK PLANS
AND
FINANCIAL
CAPACITY.—The provisions of sub-
sections (c) and (d) of section 2711 apply to health bene-
fits coverage offered by a health insurance issuer through
a HealthMart.
‘‘(f) CONSTRUCTION RELATING TO OFFERING RE-
QUIREMENT.—Nothing in section 2711(a) of this Act or
703 of the Employee Retirement Income Security Act of
1974 shall be construed as permitting the offering outside
the HealthMart of health benefits coverage that is only
made available through a HealthMart under this section
because of the application of subsection (b).
‘‘(g) APPLICATION TO GUARANTEED RENEWABILITY
REQUIREMENTS IN CASE OF DISCONTINUATION OF AN
ISSUER.—For purposes of applying section 2712 in the
case of health insurance coverage offered by a health in-
surance issuer through a HealthMart, if the contract be-
tween the HealthMart and the issuer is terminated and
the HealthMart continues to make available any health in-
surance coverage after the date of such termination, the
following rules apply:
‘‘(1) RENEWABILITY.—The HealthMart shall
fulfill the obligation under such section of the issuer
renewing and continuing in force coverage by offer-
ing purchasers (and members and their dependents)
all available health benefits coverage that would oth-
erwise be available to similarly-situated purchasers
and members from the remaining participating
health insurance issuers in the same manner as
would be required of issuers under section 2712(c).
‘‘(2) APPLICATION OF ASSOCIATION RULES.—
The HealthMart shall be considered an association
for purposes of applying section 2712(e).
‘‘(h) CONSTRUCTION
IN RELATION
TO CERTAIN
OTHER LAWS.—Nothing in this title shall be construed
as modifying or affecting the applicability to HealthMarts
or health benefits coverage offered by a health insurance
issuer through a HealthMart of parts 6 and 7 of subtitle
B of title I of the Employee Retirement Income Security
Act of 1974 or titles XXII and XXVII of this Act.
‘‘SEC. 2803. ADMINISTRATION.
‘‘(a) IN GENERAL.—The applicable Federal authority
shall administer this title and is authorized to issue such
regulations as may be required to carry out this title. Such
regulations shall be subject to Congressional review under
the provisions of chapter 8 of title 5, United States Code.
The applicable Federal authority shall incorporate the
process of ‘deemed file and use’ with respect to the infor-
mation filed under section 2801(a)(6)(A) and shall deter-
mine whether information filed by a HealthMart dem-
onstrates compliance with the applicable requirements of
this title. Such authority shall exercise its authority under
this title in a manner that fosters and promotes the devel-
opment of HealthMarts in order to improve access to
health care coverage and services.
‘‘(b) PERIODIC REPORTS.—The applicable Federal
authority shall submit to Congress a report every 30
months, during the 10-year period beginning on the effec-
tive date of the rules promulgated by the applicable Fed-
eral authority to carry out this title, on the effectiveness
of this title in promoting coverage of uninsured individ-
uals. Such authority may provide for the production of
such reports through one or more contracts with appro-
priate private entities.
‘‘SEC. 2804. DEFINITIONS.
‘‘For purposes of this title:
‘‘(1) APPLICABLE FEDERAL AUTHORITY.—The
term ‘applicable Federal authority’ means the Sec-
retary of Health and Human Services .
‘‘(2) ELIGIBLE
EMPLOYEE
OR
INDIVIDUAL.—
The term ‘eligible’ means, with respect to an em-
ployee or other individual and a HealthMart, an em-
ployee or individual who is eligible under section
2801(c)(2) to enroll or be enrolled in health benefits
coverage offered through the HealthMart.
‘‘(3) EMPLOYER; EMPLOYEE; DEPENDENT.—
Except as the applicable Federal authority may oth-
erwise provide, the terms ‘employer’, ‘employee’, and
‘dependent’, as applied to health insurance coverage
offered by a health insurance issuer licensed (or oth-
erwise regulated) in a State, shall have the meanings
applied to such terms with respect to such coverage
under the laws of the State relating to such coverage
and such an issuer. The term ‘dependent’ may in-
clude the spouse and children of the individual in-
volved.
‘‘(4) HEALTH BENEFITS COVERAGE.—The term
‘health benefits coverage’ has the meaning given the
term group health insurance coverage in section
2791(b)(4).
‘‘(5) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning given such
term in section 2791(b)(2).
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The
term ‘health status-related factor’ has the meaning
given such term in section 2791(d)(9).
‘‘(7) HEALTHMART.—The term ‘HealthMart’ is
defined in section 2801(a).
‘‘(8) MEMBER.—The term ‘member‘‘ means,
with respect to a HealthMart, an individual enrolled
for health benefits coverage through the HealthMart
under section 2801(c)(2).
‘‘(9) 
PURCHASER.—The 
term 
‘purchaser’
means, with respect to a HealthMart, an employer
or individual that has contracted under section
2801(c)(1)(A) with the HealthMart for the purchase
of health benefits coverage.’’.
TITLE II—HEALTH CARE ACCESS
AND CHOICE THROUGH INDI-
VIDUAL MEMBERSHIP ASSO-
CIATIONS (IMAs)
SEC. 201. EXPANSION OF ACCESS AND CHOICE THROUGH
INDIVIDUAL 
MEMBERSHIP 
ASSOCIATIONS
(IMAs).
The Public Health Service Act, as amended by sec-
tion 101, is further amended by adding at the end the
following new title:
‘‘TITLE XXIX—INDIVIDUAL MEMBERSHIP
ASSOCIATIONS
‘‘SEC. 2901. DEFINITION OF INDIVIDUAL MEMBERSHIP AS-
SOCIATION (IMA).
‘‘(a) IN GENERAL.—For purposes of this title, the
terms ‘individual membership association’ and ‘IMA’
mean a legal entity that meets the following requirements:
‘‘(1) ORGANIZATION.—The IMA is an organiza-
tion operated under the direction of an association
(as defined in section 2904(1)).
‘‘(2) 
OFFERING
HEALTH
BENEFITS
COV-
ERAGE.—
‘‘(A) DIFFERENT GROUPS.—The IMA, in
conjunction with those health insurance issuers
that offer health benefits coverage through the
IMA, makes available health benefits coverage
in the manner described in subsection (b) to all
members of the IMA and the dependents of
such members in the manner described in sub-
section (c)(2) at rates that are established by
the health insurance issuer on a policy or prod-
uct specific basis and that may vary only as
permissible under State law.
‘‘(B) NONDISCRIMINATION
IN
COVERAGE
OFFERED.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the IMA may not offer health benefits
coverage to a member of an IMA unless
the same coverage is offered to all such
members of the IMA.
‘‘(ii) 
CONSTRUCTION.—Nothing 
in
this title shall be construed as requiring or
permitting a health insurance issuer to
provide coverage outside the service area of
the issuer, as approved under State law, or
requiring a health insurance issuer from
excluding or limiting the coverage on any
individual, subject to the requirement of
section 2741.
‘‘(C) NO FINANCIAL UNDERWRITING.—The
IMA provides health benefits coverage only
through contracts with health insurance issuers
and does not assume insurance risk with re-
spect to such coverage.
‘‘(3) GEOGRAPHIC AREAS.—Nothing in this title
shall be construed as preventing the establishment
and operation of more than one IMA in a geographic
area or as limiting the number of IMAs that may
operate in any area.
‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES
TO PURCHASERS.—
‘‘(A) IN GENERAL.—The IMA may provide
administrative services for members. Such serv-
ices may include accounting, billing, and enroll-
ment information.
‘‘(B) CONSTRUCTION.—Nothing in this
subsection shall be construed as preventing an
IMA from serving as an administrative service
organization to any entity.
‘‘(5) FILING
INFORMATION.—The IMA files
with the Secretary information that demonstrates
the IMA’s compliance with the applicable require-
ments of this title.
‘‘(b) HEALTH
BENEFITS
COVERAGE
REQUIRE-
MENTS.—
‘‘(1) COMPLIANCE
WITH
CONSUMER
PROTEC-
TION REQUIREMENTS.—Any health benefits coverage
offered through an IMA shall—
‘‘(A) be underwritten by a health insurance
issuer that—
‘‘(i) is licensed (or otherwise regu-
lated) under State law,
‘‘(ii) meets all applicable State stand-
ards relating to consumer protection, sub-
ject to section 2902(b), and
‘‘(iii) offers the coverage under a con-
tract with the IMA; and
‘‘(B) subject to paragraph (2), be approved
or otherwise permitted to be offered under
State law.
‘‘(2) EXAMPLES OF TYPES OF COVERAGE.—The
benefits coverage made available through an IMA
may include, but is not limited to, any of the fol-
lowing if it meets the other applicable requirements
of this title:
‘‘(A) Coverage through a health mainte-
nance organization.
‘‘(B) Coverage in connection with a pre-
ferred provider organization.
‘‘(C) Coverage in connection with a li-
censed provider-sponsored organization.
‘‘(D) Indemnity coverage through an insur-
ance company.
‘‘(E) Coverage offered in connection with a
contribution into a medical savings account or
flexible spending account.
‘‘(F) Coverage that includes a point-of-
service option.
‘‘(G) Any combination of such types of
coverage.
‘‘(3) WELLNESS BONUSES FOR HEALTH PRO-
MOTION.—Nothing in this title shall be construed as
precluding a health insurance issuer offering health
benefits coverage through an IMA from establishing
premium discounts or rebates for members or from
modifying 
otherwise 
applicable 
copayments 
or
deductibles in return for adherence to programs of
health promotion and disease prevention so long as
such programs are agreed to in advance by the IMA
and comply with all other provisions of this title and
do not discriminate among similarly situated mem-
bers.
‘‘(c) MEMBERS; HEALTH INSURANCE ISSUERS.—
‘‘(1) MEMBERS.—
‘‘(A) IN
GENERAL.—Under rules estab-
lished to carry out this title, with respect to an
individual who is a member of an IMA, the in-
dividual may enroll for health benefits coverage
(including coverage for dependents of such indi-
vidual) offered by a health insurance issuer
through the IMA.
‘‘(B) RULES FOR ENROLLMENT.—Nothing
in this paragraph shall preclude an IMA from
establishing rules of enrollment and reenroll-
ment of members. Such rules shall be applied
consistently to all members within the IMA and
shall not be based in any manner on health sta-
tus-related factors.
‘‘(2) HEALTH INSURANCE ISSUERS.—The con-
tract between an IMA and a health insurance issuer
shall provide, with respect to a member enrolled with
health benefits coverage offered by the issuer
through the IMA, for the payment of the premiums
collected by the issuer.
‘‘SEC. 2902. APPLICATION OF CERTAIN LAWS AND REQUIRE-
MENTS.
‘‘State laws insofar as they relate to any of the fol-
lowing are superseded and shall not apply to health bene-
fits coverage made available through an IMA:
‘‘(1) Benefit requirements for health benefits
coverage offered through an IMA, including (but not
limited to) requirements relating to coverage of spe-
cific providers, specific services or conditions, or the
amount, duration, or scope of benefits, but not in-
cluding requirements to the extent required to imple-
ment title XXVII or other Federal law and to the
extent the requirement prohibits an exclusion of a
specific disease from such coverage.
‘‘(2) Any other requirements (including limita-
tions on compensation arrangements) that, directly
or indirectly, preclude (or have the effect of pre-
cluding) the offering of such coverage through an
IMA, if the IMA meets the requirements of this
title.
Any State law or regulation relating to the composition
or organization of an IMA is preempted to the extent the
law or regulation is inconsistent with the provisions of this
title.
‘‘SEC. 2903. ADMINISTRATION.
‘‘(a) IN GENERAL.—The Secretary shall administer
this title and is authorized to issue such regulations as
may be required to carry out this title. Such regulations
shall be subject to Congressional review under the provi-
sions of chapter 8 of title 5, United States Code. The Sec-
retary shall incorporate the process of ‘deemed file and
use’ with respect to the information filed under section
2901(a)(5)(A) and shall determine whether information
filed by an IMA demonstrates compliance with the applica-
ble requirements of this title. The Secretary shall exercise
authority under this title in a manner that fosters and
promotes the development of IMAs in order to improve
access to health care coverage and services.
‘‘(b) PERIODIC REPORTS.—The Secretary shall sub-
mit to Congress a report every 30 months, during the 10-
year period beginning on the effective date of the rules
promulgated by the Secretary to carry out this title, on
the effectiveness of this title in promoting coverage of un-
insured individuals. The Secretary may provide for the
production of such reports through one or more contracts
with appropriate private entities.
‘‘SEC. 2904. DEFINITIONS.
‘‘For purposes of this title:
‘‘(1) ASSOCIATION.—The term ‘association’
means, with respect to health insurance coverage of-
fered in a State, an association which—
‘‘(A) has been actively in existence for at
least 5 years;
‘‘(B) has been formed and maintained in
good faith for purposes other than obtaining in-
surance;
‘‘(C) does not condition membership in the
association on any health status-related factor
relating to an individual (including an employee
of an employer or a dependent of an employee);
and
‘‘(D) does not make health insurance cov-
erage offered through the association available
other than in connection with a member of the
association.
‘‘(2) DEPENDENT.—The term ‘dependent’, as
applied to health insurance coverage offered by a
health insurance issuer licensed (or otherwise regu-
lated) in a State, shall have the meaning applied to
such term with respect to such coverage under the
laws of the State relating to such coverage and such
an issuer. Such term may include the spouse and
children of the individual involved.
‘‘(3) HEALTH BENEFITS COVERAGE.—The term
‘health benefits coverage’ has the meaning given the
term 
health 
insurance 
coverage 
in 
section
2791(b)(1).
‘‘(4) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning given such
term in section 2791(b)(2).
‘‘(5) HEALTH STATUS-RELATED FACTOR.—The
term ‘health status-related factor’ has the meaning
given such term in section 2791(d)(9).
‘‘(6) IMA; INDIVIDUAL MEMBERSHIP ASSOCIA-
TION.—The terms ‘IMA’ and ‘individual membership
association’ are defined in section 2901(a).
‘‘(7) MEMBER.—The term ‘member’ means,
with respect to an IMA, an individual who is a mem-
ber of the association to which the IMA is offering
coverage.’’.
TITLE III—FEDERAL MATCHING
FUNDING FOR STATE INSUR-
ANCE EXPENDITURES
SEC. 301. FEDERAL MATCHING FUNDING FOR STATE IN-
SURANCE EXPENDITURES.
(a) IN GENERAL.—Subject to the succeeding provi-
sions of this section, each State shall receive from the Sec-
retary of Health and Human Services an amount equal
to 50 percent of the funds expended by the State in pro-
viding for the use, in connection with providing health ben-
efits coverage, of a high-risk pool, a reinsurance pool, or
other risk-adjustment mechanism used for the purpose of
subsidizing the purchase of private health insurance.
(b) FUNDING LIMITATION.—A State shall not receive
under this section for a fiscal year more than a total of
50 cents multiplied by the average number of residents
(as estimated by the Secretary) in the State in the fiscal
year.
(c) ADMINISTRATION.—The Secretary of Health and
Human Services shall provide for the administration of
this section and may establish such terms and conditions,
including the requirement of an application, as may be ap-
propriate to carry out this section.
(d) CONSTRUCTION.—Nothing in this section shall be
construed as requiring a State to operate a reinsurance
pool (or other risk-adjustment mechanism) under this sec-
tion or as preventing a State from operating such a pool
or mechanism through one or more private entities.
(e) HIGH-RISK POOL.—For purposes of this section,
the term ‘‘high-risk pool’’ means any qualified high risk
pool (as defined in section 2744(c)(2) of the Public Health
Service Act).
(f) REINSURANCE POOL OR OTHER RISK-ADJUST-
MENT MECHANISM DEFINED.—For purposes of this sec-
tion, the term ‘‘reinsurance pool or other risk-adjustment
mechanism’’ means any State-based risk spreading mecha-
nism to subsidize the purchase of private health insurance
for the high-risk population.
(g) HIGH-RISK POPULATION.—For purposes of this
section, the term ‘‘high-risk population’’ means—
(1) individuals who, by reason of the existence
or history of a medical condition, are able to acquire
health coverage only at rates which are at least 150
percent of the standard risk rates for such coverage,
and
(2) individuals who are provided health cov-
erage by a high-risk pool.
(h) STATE DEFINED.—For purposes of this section,
the term ‘‘State’’ includes the District of Columbia, Puer-
to Rico, the Virgin Islands, Guam, American Samoa, and
the Northern Mariana Islands.
TITLE IV—AFFORDABLE HEALTH
COVERAGE FOR EMPLOYEES
OF SMALL BUSINESSES
SEC. 401. SHORT TITLE OF TITLE.
This title may be cited as the ‘‘Small Business Access
and Choice for Entrepreneurs Act of 1999’’.
SEC. 402. RULES.
(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—
‘‘(1) whose sponsor is (or is deemed under this
part to be) described in subsection (b); and
‘‘(2) under which at least one option of health
insurance coverage offered by a health insurance
issuer (which may include, among other options,
managed care options, point of service options, and
preferred provider options) is provided to partici-
‘‘(f) JURISDICTION OF COURT.—
‘‘(1) IN GENERAL.—Upon the filing of an appli-
cation for the appointment as trustee or the issuance
of a decree under this section, the court to which the
application is made shall have exclusive jurisdiction
of the plan involved and its property wherever lo-
cated with the powers, to the extent consistent with
the purposes of this section, of a court of the United
States having jurisdiction over cases under chapter
11 of title 11, United States Code. Pending an adju-
dication under this section such court shall stay, and
upon appointment by it of the Secretary as trustee,
such court shall continue the stay of, any pending
mortgage foreclosure, equity receivership, or other
proceeding to reorganize, conserve, or liquidate the
plan, the sponsor, or property of such plan or spon-
sor, and any other suit against any receiver, conser-
vator, or trustee of the plan, the sponsor, or prop-
erty of the plan or sponsor. Pending such adjudica-
tion and upon the appointment by it of the Sec-
retary as trustee, the court may stay any proceeding
to enforce a lien against property of the plan or the
sponsor or any other suit against the plan or the
sponsor.
135
‘‘(1) COORDINATION
WITH
MEDICAL
DEDUC-
TION, ETC.—Any amount paid by a taxpayer for in-
surance to which subsection (a) applies shall not be
taken into account in computing the amount allow-
able to the taxpayer as a deduction under section
162(l) or 213(a).
‘‘(2) DENIAL OF CREDIT TO DEPENDENTS.—No
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which
such individual’s taxable year begins.
‘‘(3) VERIFICATION
OF
COVERAGE, ETC.—No
credit shall be allowed under this section to any indi-
vidual unless such individual’s coverage under quali-
fied health insurance, and the amount paid for such
coverage, are verified in such manner as the Sec-
retary may prescribe.
‘‘(4) COST-OF-LIVING
ADJUSTMENT.—In the
case of any taxable year beginning in a calendar
year after 2000, each dollar amount contained in
subsection (b)(1)(B) shall be increased by an
amount equal to—
‘‘(A) such dollar amount, multiplied by
136
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins by sub-
stituting ‘calendar year 1999’ for ‘calendar year
1992’ in subparagraph (B) thereof.
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of
$10.
‘‘(e) TERMINATION.—This section shall not apply to
any taxable year beginning after December 31, 2002.’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title
31, United States Code, is amended by inserting be-
fore the period ‘‘or from section 35 of such Code’’.
(2) The table of sections for subpart C of part
IV of subchapter A of chapter 1 of such Code is
amended by striking the last item and inserting the
following new items:
‘‘Sec. 35. Health insurance costs.
‘‘Sec. 36. Overpayments of tax.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
(d) RATIONALE FOR CREDIT TERMINATION.—The
purpose of the credit provided by section 35 of the Inter-
nal Revenue Code of 1986 (as added by this section) is