I
103D CONGRESS
2D SESSION
H. R. 4469
To restrain health care costs and ensure adequate medical care for all Ameri-
cans by providing for a State and market-based system of choice among
qualified health plans, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 20, 1994
Mr. PETRI introduced the following bill; which was referred jointly to the
Committees on Energy and Commerce, Ways and Means, the Judiciary,
and Education and Labor
A BILL
To restrain health care costs and ensure adequate medical
care for all Americans by providing for a State and
market-based system of choice among qualified health
plans, and for other purposes.
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
‘‘Multiple Choice Health Care Act of 1994’’ or the
‘‘Multicare Act of 1994’’.
(b) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Goals and strategies.
Sec. 3. General definitions.
TITLE I—ESTABLISHMENT OF STATE MULTICARE PROGRAMS;
TAX CHANGES
Subtitle A—Establishment of State Multicare Programs
Sec. 101. Grants to States for State multicare programs.
Sec. 102. Requirement for certification of multicare plans.
Sec. 103. Requirement for enrollment process.
Sec. 104. Suggestive list of multicare services; limits on cost-sharing; treatment
practice guidelines.
Sec. 105. Continuity of coverage.
Sec. 106. Contribution toward premium costs for eligible individuals.
Sec. 107. Additional subsidies for poor and near poor individuals.
Sec. 108. Establishment of reinsurance mechanism.
Sec. 109. Consumer education and assistance.
Sec. 110. Consumer rights enforcement.
Sec. 111. Compliance of State income tax laws.
Sec. 112. Distribution of information on average prices of common health care
services.
Subtitle B—Federal Contribution Toward Multicare Plan Premiums; Tax Law
Changes
Sec. 121. Computation of amount of Federal contribution.
Sec. 122. Termination of exclusion for employer-provided health care coverage
and of deduction for health insurance costs of self-employed.
Sec. 123. Termination of deduction for medical care.
TITLE II—REQUIREMENTS FOR MULTICARE PLANS
Subtitle A—General Requirements
Sec. 201. Enrollment and continuity of coverage.
Sec. 202. Covered services.
Sec. 203. Premiums and cost-sharing; catastrophic protection.
Sec. 204. Participation in reinsurance system.
Sec. 205. Data requirement.
Sec. 206. Medical malpractice reform and administrative cost savings.
Sec. 207. Consumer rights.
Subtitle B—Multiple Employer Health Benefits Protections
Sec. 211. Limited exemption under preemption rules for multiple employer
plans providing health benefits subject to certain Federal
standards.
‘‘Part 7—Multiple Employer Health Plans
‘‘Sec. 701. Definitions.
‘‘Sec. 702. Exempted multiple employer plans providing benefits in the
form of medical care relieved of certain restrictions on
preemption of State law and treated as employee welfare
benefit plans.
‘‘Sec. 703. Exemption procedure.
‘‘Sec. 704. Eligibility requirements.
‘‘Sec. 705. Additional requirements applicable to exempted arrangements.
‘‘Sec. 706. Disclosure to participating employers by arrangements provid-
ing medical care.
‘‘Sec. 707. Maintenance of reserves.
‘‘Sec. 708. Corrective actions.
‘‘Sec. 709. Expiration, suspension, or revocation of exemption.
‘‘Sec. 710. Review of actions of the Secretary.
Sec. 212. Clarification of scope of preemption rules.
Sec. 213. Clarification of treatment of single employer arrangements.
Sec. 214. Clarification of treatment of certain collectively bargained arrange-
ments.
Sec. 215. Employee leasing healthcare arrangements.
Sec. 216. Enforcement provisions relating to multiple employer welfare arrange-
ments and employee leasing healthcare arrangements.
Sec. 217. Filing requirements for health benefit multiple employer welfare ar-
rangements.
Sec. 218. Cooperation between Federal and State authorities.
Sec. 219. Effective date; transitional rules.
Subtitle C—Repeal of COBRA Continuation Requirements
Sec. 221. Repeal of requirements of the Internal Revenue Code of 1954.
Sec. 222. Repeal of requirements of Employee Retirement Income Security Act
of 1974.
Sec. 223. Repeal of requirements of Public Health Service Act.
TITLE III—STATES WITHOUT STATE MULTICARE PROGRAMS;
FEDERAL HEALTH CARE PROGRAMS; NATIONAL REINSURANCE
POOL
Subtitle A—Multicare Plans in States without State Multicare Programs
Sec. 301. General provisions.
Subtitle B—Federal Health Care Programs
Sec. 321. Medicare program.
Sec. 322. Federal Employees Health Benefit Program.
Sec. 323. Report recommending integration of CHAMPUS, Veterans health,
and Indian Health Services.
Sec. 324. Consumer rights for individuals in Federal programs.
Subtitle C—National Reinsurance Mechanism
Sec. 331. National reinsurance mechanism.
TITLE IV—MEDICAL MALPRACTICE LIABILITY REFORM
Subtitle A—Medical Malpractice Liability Reform
PART 1—GENERAL PROVISIONS
Sec. 401. Federal reform of medical malpractice liability actions.
Sec. 402. Definitions.
Sec. 403. Effective date.
PART 2—UNIFORM STANDARDS FOR MEDICAL MALPRACTICE LIABILITY
ACTIONS
Sec. 411. Statute of limitations.
Sec. 412. Requirement for initial resolution of action through alternative dis-
pute resolution.
Sec. 413. Relation to alternative dispute resolution of Federal agencies.
Sec. 414. Mandatory pre-trial settlement conference.
Sec. 415. Calculation and payment of damages.
Sec. 416. Treatment of attorney’s fees and other costs.
Sec. 417. Joint and several liability.
Sec. 418. Uniform standard for determining negligence.
Sec. 419. Application of medical practice guidelines in malpractice liability ac-
tions.
Sec. 420. Special provision for certain obstetric services.
Sec. 421. Preemption.
PART 3—REQUIREMENTS FOR STATE ALTERNATIVE DISPUTE RESOLUTION
SYSTEMS (ADR)
Sec. 431. Basic requirements for ADR.
Sec. 432. Certification of State systems.
Sec. 433. Reports on implementation and effectiveness of alternative dispute
resolution systems.
Subtitle B—Other Requirements and Programs
Sec. 441. Facilitating development and use of medical practice guidelines.
Sec. 442. Permitting State professional societies to participate in disciplinary
activities.
TITLE V—ADMINISTRATIVE COST SAVINGS
Subtitle A—Standardization of Claims Processing
Sec. 501. Adoption of data elements, uniform claims, and uniform electronic
transmission standards.
Sec. 502. Application of standards.
Sec. 503. Periodic review and revision of standards.
Sec. 504. Health benefit plan defined.
Subtitle B—Electronic Medical Data Standards
Sec. 511. Medical data standards for hospitals and other providers.
Sec. 512. Application of electronic data standards to certain hospitals.
Sec. 513. Electronic transmission to Federal agencies.
Sec. 514. Limitation on data requirements where standards in effect.
Sec. 515. Advisory commission.
TITLE VI—REMOVING RESTRICTIONS ON MANAGED CARE
Sec. 601. Removing restrictions on managed care.
TITLE VII—MODIFICATION OF THE OPERATION OF THE
ANTITRUST LAWS TO HOSPITALS
Sec. 701. Purpose.
Sec. 702. Exemptions from the operation of the antitrust laws.
Sec. 703. Reports.
Sec. 704. Definitions.
SEC. 2. GOALS AND STRATEGIES.
(a) GOALS.—The goals of this Act are—
(1) to restrain health care price inflation
through market incentives and competition,
(2) to ensure adequate medical care for all
Americans,
(3) to distribute Federal health subsidies more
fairly across the population,
(4) to allow meaningful consumer choice among
health care plans and providers,
(5) to allow States flexibility to tailor health
programs to local needs, and
(6) to accomplish these goals at no added cost
to taxpayers.
(b) STRATEGIES.—The strategies to be used in this
Act to achieve these goals are—
(1) to increase the role and flexibility of State
and local governments in providing health care infor-
mation to consumers, in ensuring health care for the
needy, and in promoting competition among health
plans,
(2) to replace the current tax exemption for em-
ployer-paid insurance with a payment towards health
care premiums for all Americans,
(3) to increase public-private partnership by al-
lowing individuals in public programs to meet their
health care needs through the purchase of private
health insurance,
(4) to reduce the amount of direct regulation of
health care providers, and
(5) to allow individuals to participate in open
enrollment health plans.
SEC. 3. GENERAL DEFINITIONS.
In this Act:
(1) The term ‘‘acute care services’’ means such
services, identified by the Secretary, of the type cov-
ered under multicare plans.
(2) The term ‘‘eligible individual’’ means, with
respect to a State, an individual—
(A) who is a citizen or national of the
United States, an alien lawfully admitted for
permanent residence, or an alien otherwise law-
fully residing permanently in the United States
under color of law, and
(B) who is a resident of the State (as de-
fined by the Secretary).
(3) The term ‘‘exempt individual’’ means an in-
dividual who—
(A) is entitled to benefits under part A or
part B of title XVIII of the Social Security
Act);
(B) is entitled to medicare and dental care
under section 1074(a) of title 10, United States
Code; or
(C) is a member on active duty (as defined
in section 101(22) of such title) of the armed
forces of the United States.
(4) The term ‘‘family income’’ means the total
value of income of the individual and the individual’s
family members (as defined by the Secretary), as de-
fined by the State in which the individual resides
and includes at least—
(A) cash income,
(B) aid under title IV of the Social Secu-
rity Act (relating to the aid to families with de-
pendent children program) and assistance re-
ceived under title XVI of such Act,
(C) the value of State or Federal housing
assistance (as determined by the State),
(D) the cash value of food stamps,
(E) general relief, and
(F) other State and local cash welfare pay-
ment.
(5) The term ‘‘Federal official poverty level’’
means the income official poverty line defined by the
Office of Management and Budget and revised an-
nually in accordance with section 673(2) of the Om-
nibus Budget Reconciliation Act of 1981.
(6) The term ‘‘medicaid eligible individual’’
means an individual who is entitled to medical as-
sistance under a State medicaid plan, or would be so
eligible but for the election of a State under section
101(c)(1)(A).
(7) The terms ‘‘medicaid opt-out State’’ and
‘‘medicaid opt-in State’’ mean a State that in its
multicare program has elected the option described
in section 101(c)(1)(A) or in section 101(c)(1)(B),
respectively.
(8) The term ‘‘multicare plan’’ means a health
benefits plan which is determined to meet the re-
quirements of title II, and includes a health benefit
plan in which an individual is enrolled under chapter
89 of title 5, United States Code, if the plan partici-
pates in a reinsurance system that meets the re-
quirements of section 108.
(9) The term ‘‘near poor individual’’ means an
individual whose family income is greater than 100
percent, but does not exceed 150 percent, of the
Federal official poverty level applicable to a family
of the size involved.
(10) The term ‘‘open enrollment multicare
plan’’ means a multicare plan offered in an area of
a State that permits all eligible residents of the area
to enroll under the plan.
(11) The term ‘‘poor individual’’ means an indi-
vidual whose family income does not exceed the Fed-
eral official poverty level applicable to a family of
the size involved.
(12) The term ‘‘Secretary’’ means the Secretary
of Health and Human Services.
(13) The term ‘‘State’’ includes the District of
Columbia, Puerto Rico, the Virgin Islands, Guam,
American Samoa, and the Northern Mariana Is-
lands.
(14) The term ‘‘State medicaid plan’’ means
the plan of a State approved under title XIX of the
Social Security Act, and includes a statewide medi-
cal assistance plan operating under section 1115 of
such Act.
(15) The term ‘‘State multicare program’’
means such a program that the Secretary finds
meets the requirements of title I.
TITLE 
I—ESTABLISHMENT 
OF
STATE 
MULTICARE 
PRO-
GRAMS; TAX CHANGES
Subtitle A—Establishment of State
Multicare Programs
SEC. 101. GRANTS TO STATES FOR STATE MULTICARE PRO-
GRAMS.
(a) IN GENERAL.—The Secretary of Health and
Human Services shall provide grants to each State to es-
tablish a State multicare program for the offering of com-
peting multicare plans in the State.
(b) GRANT APPLICATION.—No grant may be made
under this section to a State unless—
(1) the State has submitted an application in
such form and manner as the Secretary shall speci-
fy, and
(2) the Secretary determines that the applica-
tion provides for the operation of a State multicare
program that meets the requirements of the succeed-
ing sections of this title.
(c) AMOUNT OF GRANT.—
(1) BASE AMOUNT.—For any State, subject to
the succeeding provisions of this subsection, the
amount of a grant under this section, with respect
to each eligible individual (other than an exempt in-
dividual) enrolled in a multicare plan, is equal to the
Federal contribution amount (determined under sec-
tion 121) for the class of enrollment involved.
(2) SUPPLEMENTAL
PAYMENT
TO
STATES.—
The amount of such a grant shall be increased, with
respect to each eligible individual (other than an ex-
empt individual) who is not enrolled in a multicare
plan, by an amount equal to the amount that would
have been paid under paragraph (1) if the individual
were enrolled in a multicare plan.
(3) ADDITIONAL
AMOUNTS.—The amount of
such a grant shall be further increased by the sum
of the following:
(A) MEDICAID SAVINGS.—
(i) IN
GENERAL.—The amount de-
scribed in clause (ii) for the State, in-
creased (for each year after the last full
year referred to in clause (ii)(I), up to the
year involved) by the applicable inflator
(specified in section 107(b)(2)(D)) for the
year, and subject to any adjustment for
changes 
in 
population 
under 
section
107(b)(4).
(ii) 
AMOUNT
DESCRIBED.—The
amount described in this clause for a State
is—
(I) the total amount of Federal
payments made to the State under
section 1903(a) of the Social Security
Act for acute care services during the
last full year prior to the implementa-
tion of a State multicare program in
the State, reduced by
(II) the product of $400 and the
average number of individuals entitled
to assistance for such services under
the medicaid program in the State
during that year.
(B) CASH
ASSISTANCE
SAVINGS.—The
total amount of the reductions in Federal pay-
ments under title IV or XVI of the Social Secu-
rity Act, the Food Stamp Act, and other Fed-
eral welfare programs for residents of a State
resulting directly from the implementation of
the financial assistance provided under section
107 as a substitute for medical assistance for
acute care services under the State medicaid
plan.
(d) USE OF FUNDS.—
(1) USE OF BASE AMOUNTS.—At least 97 per-
cent of the funds provided to a State under sub-
section (c)(1) with respect to enrollment of an eligi-
ble individual shall be used only, in accordance with
section 106, for payment of all or a portion of the
premium for enrollment of such an eligible individual
in a multicare plan under the multicare program.
(2) 
USE
OF
FEDERAL
SUPPLEMENTAL
AMOUNTS.—At least 97 percent of the funds pro-
vided to the State under subsection (c)(2) shall be
used only towards—
(A) financing the State reinsurance mecha-
nism under section 108, or
(B) providing additional subsidies for poor
and near poor individuals under section 107.
(3) USE OF ADDITIONAL AMOUNTS FOR FINAN-
CIAL ASSISTANCE.—At least 97 percent of the funds
provided to the State under subsection (c)(3) shall
be used only for additional financial assistance for
poor and near poor individuals under section 107.
(4) APPLICATION
TOWARD
ADMINISTRATIVE
COSTS.—
(A) IN GENERAL.—Except as provided in
the previous paragraphs, Federal grant funds
may only be used to finance administrative
costs.
(B) 
ADMINISTRATIVE
COSTS.—In 
this
paragraph, the term ‘‘administrative costs’’ in-
cludes costs associated with—
(i) soliciting bids and negotiating with
multicare plans and certifying compliance
of plans with the requirements of title II,
(ii) preparing and disseminating com-
parative value information on multicare
plans,
(iii) planning, developing, and imple-
menting the process for enrollment of eligi-
ble individuals in multicare plans, and
(iv) establishing and administering the
reinsurance mechanism under section 108
(not including reinsurance payments made
under such a mechanism).
(5) REQUIRED USE OF STATE SUPPLEMENTAL
FUNDS.—
(A) IN GENERAL.—Each State multicare
program shall assure that—
(i) at least 97 percent of the funds de-
scribed in subparagraph (C) are used to-
wards—
(I) financing the State reinsur-
ance mechanism under section 108, or
(II) providing additional sub-
sidies for poor and near poor individ-
uals under section 107, and
(ii) at least 97 percent of the funds
described in section 107(b)(5) (relating to
State welfare savings) are used towards
providing additional subsidies for poor and
near poor individuals under section 107.
(B) STATE
SUPPLEMENTAL
FUNDS
DE-
SCRIBED.—The funds described in this sub-
paragraph are the amount by which (i) the
State aggregate contribution amount (described
in section 106(b)(2)), exceeds (ii) the aggregate
amounts of the contributions paid by the State
under section 106(b)(1)(B) (determined as if
the reference to ‘‘97 percent’’ in such section
were a reference to ‘‘100 percent’’).
(e) SPECIAL RULES FOR TERRITORIES.—The Sec-
retary may establish such special rules as may be appro-
priate to adapt the provisions of this title (and titles II
and III) in the case of Puerto Rico, the Virgin Islands,
Guam, American Samoa, and the Northern Mariana Is-
lands.
SEC. 
102. 
REQUIREMENT 
FOR 
CERTIFICATION 
OF
MULTICARE PLANS.
(a) PROCESS.—
(1) IN GENERAL.—Each State multicare pro-
gram shall provide a mechanism for certifying at
least 2 competing open enrollment multicare plans in
all areas of the State.
(2) WAIVER AUTHORITY.—The Secretary may
waive the requirement of paragraph (1) that a State
multicare program offer more than 1 open enroll-
ment multicare plan in all areas of a State if the
Secretary finds that a single, coordinated open en-
rollment multicare plan would be more cost-effective.
(b) REQUIREMENTS
FOR CERTIFICATION.—A pro-
gram shall not certify a multicare plan for purposes of
subsection (a) unless the program determines that the
plan—
(1) is in compliance with the requirements of
title II (including requirements relating to consumer
education and assistance and consumer rights) and
other Federal health care regulations, and
(2) meets such standards as the program or the
Secretary may establish relating to financial solvency
and quality of care.
(c) TREATMENT OF MULTI-STATE REGIONS.—The
State multicare programs of one or more adjacent States
may establish agreements, consistent with the require-
ments of this Act, governing the certification and oper-
ation of multicare plans that enroll individuals residing in
an area that includes portions of such States.
(d) GENERAL AUTHORITY OF STATES.—Nothing in
this Act shall be construed as preventing a State—
(1) from sponsoring a multicare plan,
(2) from requiring individuals to select enroll-
ment under the plan,
(3) from providing additional subsidies for indi-
viduals selecting such a plan, or
(4) from requiring employers to provide for
payment of multicare premiums of employees
through automatic payroll deductions.
(e) TREATMENT OF FEHBP PLANS.—Nothing in
this title (other than section 108) shall be construed as
authorizing a State to regulate health plans offered under
the Federal Employees Health Benefits Program, under
chapter 89, of title 5, United States Code.
SEC. 103. REQUIREMENT FOR ENROLLMENT PROCESS.
(a) REQUIREMENT.—
(1) IN GENERAL.—Each State multicare pro-
gram—
(A) shall provide a mechanism for the en-
rollment, during open season periods, of eligible
individuals (other than exempt individuals) who
are residents of the State in multicare plans,
and
(B) may require each eligible individual
(other than such an exempt individual or an in-
dividual described in paragraph (2)) residing in
the State to be enrolled in a multicare plan and
may require that such a plan be a multicare
plan operated directly by the program.
(2) EXCEPTION.—A State may, at its option,
except from the requirement described in paragraph
(1)(B) any of the following:
(A) An individual who is within a class of
individuals eligible for health care benefits from
the Department of Veterans Affairs.
(B) An individual who is incarcerated.
(C) An individual who is within any other
class of individuals with respect to whom the
State determines that members of the class are
likely to have health care coverage reasonably
comparable to the coverage available through
enrollment in a multicare plan.
(b) PERMITTING CLOSED ENROLLMENT PLANS.—
(1) IN GENERAL.—A State multicare program
may not deny approval of a plan (such as an em-
ployer self-insured plan or a plan based on an asso-
ciation with or membership in a group) as a
multicare plan because the plan is not an open en-
rollment multicare plan and limits enrollment to in-
dividuals associated with an employer or association.
(2) CONSTRUCTION.—Nothing in this sub-
section shall be construed as waiving the require-
ment under section 204 that a multicare plan par-
ticipate in a reinsurance system (established under
the State multicare program under section 108 or by
the Secretary under section 301 or 331).
(c) DISTRIBUTION OF COMPARATIVE VALUE INFOR-
MATION.—
(1) IN GENERAL.—Each State multicare pro-
gram shall provide for the distribution to eligible in-
dividuals of comparative value information. Such
program may require that the information conform
to the national standards established under para-
graph (3).
(2) CONTENTS.—The comparative value infor-
mation shall include, with respect to each multicare
plan offered, information on—
(A) benefits, premiums costs, and patient
cost-sharing arrangements (including projected
annual costs for medium-risk individuals), and
(B) indicators of the quality of health care
offered under the plan.
(3) STANDARDS.—The Secretary shall establish
national standards for the collection and distribution
of comparative value information.
(d) USE OF EMPLOYERS.—A State multicare pro-
gram may require employers to distribute the comparative
value information concerning multicare plans to employees
and to require automatic payroll deductions for payment
of premiums for such plans by such employees.
SEC. 104. SUGGESTIVE LIST OF MULTICARE SERVICES; LIM-
ITS ON COST-SHARING; TREATMENT PRAC-
TICE GUIDELINES.
(a) MULTICARE SERVICES.—
(1) NATIONAL
SUGGESTED
LIST.—The Sec-
retary shall develop a national list of services which
may be covered by a multicare plan. Such list shall
include those services identified as cost-effective by
the Secretary.
(2) STATE SUGGESTED LIST.—
(A) 
ESTABLISHMENT.—Each 
State
multicare program shall establish a State-spe-
cific list of covered health care services. Such
list may, but need not, include the services in-
cluded in the national standard list developed
under paragraph (1).
(B) LIMITATIONS.—A State multicare pro-
gram may, with respect to a covered service,
limit the amount, duration, or scope of the serv-
ice to be included in the list of services.
(b) CATASTROPHIC PROTECTION.—A State multicare
program may decrease, under section 203(e)(2)(C) or oth-
erwise, the amount of the cost-sharing limit otherwise per-
mitted under multicare plans.
(c) SUGGESTED
TREATMENT
PRACTICE
GUIDE-
LINES.—The Secretary shall publish and distribute treat-
ment practice guidelines for use by multicare plans under
State multicare programs.
SEC. 105. CONTINUITY OF COVERAGE.
(a) PROCESS.—Each State multicare program shall
establish procedures, including procedures for administer-
ing changes in enrollment in cases of changes in area of
residence, employment, and family status, to ensure for
eligible individuals residing in each State continuity of cov-
erage under a multicare plan.
(b) GUARANTEED ISSUANCE AND PROHIBITION OF
PREEXISTING
CONDITION
EXCLUSIONS.—In addition,
each State multicare program shall establish procedures
to ensure—
(1) the multicare plans do not deny coverage to
any eligible individual, and
(2) multicare plans do not exclude coverage on
the basis of preexisting conditions.
SEC. 106. CONTRIBUTION TOWARD PREMIUM COSTS FOR
ELIGIBLE INDIVIDUALS.
(a) IN GENERAL.—Each State multicare program
shall provide, for each eligible individual (other than an
exempt individual) enrolled in a multicare plan under the
program for a contribution toward the premium cost of
such enrollment.
(b) AMOUNT OF CONTRIBUTION.—
(1) IN GENERAL.—The amount of the contribu-
tion under subsection (a) with respect to an eligible
individual is equal to the sum of—
(A) not less than 97 percent of the funds
provided to a State under section 101(d)(1)
with respect to enrollment of the eligible indi-
vidual, and
(B) not less than 97 percent of the amount
specified under paragraph (2) with respect to
the enrollment of the individual.
Except as the Secretary may otherwise permit, such
contribution shall be provided on a monthly basis.
(2) STATE CONTRIBUTION AMOUNT.—
(A) INITIAL AMOUNT.—
(i) IN GENERAL.—Subject to subpara-
graph (C), the State aggregate contribu-
tion amount for a year is equal to—
(I) the total amount of available
funds (determined under clause (ii))
for the year, divided by
(II) the average number of indi-
viduals described in clause (iii) for the
year.
(ii) FUNDS
AVAILABLE.—The total
amount of available funds for a year is
equal to the increase in all State revenues
(including employment-related excise taxes)
effected as a result of section 111 and the
amendment made by section 123.
(iii) INDIVIDUALS
DESCRIBED.—The
number of individuals described in this
clause for a year is the estimated total av-
erage population of the State in the year,
less the sum of the average number of ex-
empt individuals (as defined in section
121(d)) in the State in the year.
(B) 
APPLICATION
BY
ENROLLMENT
CLASS.—The State shall adjust the State aggre-
gate contribution amount determined under this
section among enrollment classes established
under section 121(c)(1) in the same manner as
the Secretary provides for adjustment of the
Federal contribution amount among such class-
es under section 121(c)(2).
SEC. 107. ADDITIONAL SUBSIDIES FOR POOR AND NEAR
POOR INDIVIDUALS.
(a) REQUIREMENT.—
(1) IN GENERAL.—Each State multicare pro-
gram shall include a mechanism for providing addi-
tional financial assistance, consistent with this sec-
tion, to poor individuals and near poor individuals
(as defined in section 3) to assist them in purchas-
ing coverage under multicare plans.
(2) INCOME
DETERMINATIONS.—Each such
program is responsible for making income deter-
minations necessary to determine if individuals are
poor or near poor individuals.
(b) MAINTENANCE OF EFFORT REQUIRED.—
(1) IN GENERAL.—The financial assistance pro-
vided under this section shall not be less than the
maintenance-of-effort level described in paragraph
(2).
(2) MAINTENANCE-OF-EFFORT
LEVEL.—Sub-
ject to paragraphs (4) and (5), for a State for a
year, the ‘‘maintenance-of-effort level’’ described in
this subparagraph is equal to—
(A) the total amount of expenditures made
under the State medicaid plan (net of any Fed-
eral payments under section 1903(a) of the So-
cial Security Act) during the last full year prior
to the implementation of a State multicare pro-
gram in the State for acute care services, in-
creased
(B) for each subsequent year (up to the
year involved) by the applicable inflator (speci-
fied in paragraph (3)) for the year.
Expenditures under paragraph (A) shall include pay-
ments to disproportionate share hospitals under sec-
tion 1923 of the Social Security Act.
(3) APPLICABLE INFLATOR.—For purposes of
paragraph (1)(B), the applicable inflator for a year
is the lesser of—
(A) the rate of health care inflation for the
year, as determined by the Secretary, or
(B) 
the 
percentage 
increase 
in 
the
consumer price index for all urban consumers
(all items; U.S. city average) for the year (as
specified by the Secretary), plus—
(i) for the first year in which the
State multicare program is implemented, 3
percentage points,
(ii) for the second such year, 2.5 per-
centage points,
(iii) for the third such year, 2.0 per-
centage points,
(iv) for the fourth such year, 1.5 per-
centage points,
(v) for the fifth such year, 1.0 per-
centage points,
(vi) for the sixth such year 0.5 per-
centage points, and
(vii) for any subsequent year, 0 per-
centage points.
(4) ADJUSTMENT
TO
REFLECT
CHANGES
IN
POPULATION.—The Secretary may adjust the main-
tenance-of-effort level of a State to reflect changes
in the population of poor and near poor individuals
in the State between the year described in paragraph
(2)(A) and the year involved.
(5) STATE
SAVINGS
FROM
WELFARE
PRO-
GRAMS.—The maintenance-of-effort level for a State
shall be increased by the total amount of the reduc-
tions in State payments under title IV or XVI of the
Social Security Act, the Food Stamp Act, and other
Federal welfare programs (net of any Federal pay-
ments) for residents of a State resulting directly
from the implementation of the financial assistance
provided under this section as a substitute for medi-
cal assistance for acute care services under the State
medicaid plan.
(c) MEDICAID
REVISIONS.—Notwithstanding any
other provision of law—
(1) a State may deny medical assistance for
acute care services under its State medicaid plan to
any poor or near poor individual who is eligible to
enroll under a multicare plan and for whom addi-
tional financial assistance is made available under
this section; and
(2) no Federal financial participation is allow-
able under section 1903(a) of the Social Security
Act for expenditures relating to acute care services
to any poor or near poor individual who is eligible
to enroll under a multicare plan and for whom addi-
tional financial assistance is made available under
this section.
Expenditures under paragraph (2) shall include payments
to disproportionate share hospitals under section 1923 of
the Social Security Act.
(d) SPECIFIC LIMITATIONS ON COST-SHARING.—
(1) SLIDING SCALE.—The premiums and cost-
sharing imposed under the lowest cost multicare
plans for poor and near poor individuals shall be de-
termined on a sliding scale based on the family in-
come of an individual.
(2) MAXIMUM
LEVEL.—Such premiums and
cost-sharing may not exceed—
(A) in the case of a poor individual, 5 per-
cent of the individual’s family income, and
(B) in the case of a near-poor individual,
5 percent of the Federal official poverty level
(applicable to a family of the size involved) plus
10 percent of the amount by which the individ-
ual’s family income exceeds such poverty level.
SEC. 108. ESTABLISHMENT OF REINSURANCE MECHANISM.
(a) ESTABLISHMENT.—
(1) IN GENERAL.—Each State multicare pro-
gram shall include a reinsurance mechanism for high
risk individuals enrolled (or enrolling) in multicare
plans offered in the State.
cluding plans participating in the Federal Employees
Health Benefits program under chapter 89 of title
5, United States Code) to make contributions to the
fund to offset such additional payments.
(2) CONTINUOUS COVERAGE INCENTIVES.—The
mechanism may provide for appropriate incentives to
encourage continuous coverage of individuals and
groups.
(3) COST-SHARING
LIMIT.—The mechanism
may provide for limits on the non-premium cost-
sharing of enrollees.
(4) MULTI-STATE
OPTION.—State multicare
programs may cooperate and establish multistate re-
insurance mechanisms to carry out this section.
(d) TREATMENT OF SELF-INSURED PLANS.—
(1) IN GENERAL.—In the case of a multicare
plan that is a self-insured plan (as defined by the
Secretary), except as provided in paragraph (2), the
plan is subject to the requirements of this section,
notwithstanding any provision of the Employee Re-
tirement Income Security Act of 1974 to the con-
trary.
(2) EXCEPTION.—Paragraph (1) and the provi-
sions of subsections (a) through (c) shall not apply
to a self-insured plan that operates in at least 3
States and that has elected, under section 331(c), to
participate in the national reinsurance mechanism
(under section 331) rather than in State reinsurance
mechanisms under this section.
SEC. 109. CONSUMER EDUCATION AND ASSISTANCE.
(a) IN GENERAL.—Each State multicare program
shall establish procedures—
(1) for collecting, publishing, and distributing
comparative value information (described in section
103(c)) on multicare plans to consumers, and
(2) for educating individuals eligible for State
health care subsidies regarding their health care op-
tions and the requirements under section 107 to
qualify for reduced cost-sharing.
(b) 
DISTRIBUTION
OF
PLAN
INFORMATION
THROUGH EMPLOYERS.—A State multicare program may
require employers to supply basic information on
multicare plans in the State (whether prepared by the pro-
gram or the plans) to their employees.
SEC. 110. CONSUMER RIGHTS ENFORCEMENT.
Each State multicare program shall assure compli-
ance of multicare plans with the consumer rights under
section 203.
SEC. 111. COMPLIANCE OF STATE INCOME TAX LAWS.
Each State multicare program shall provide for as-
surances that any income tax laws of the State, insofar
as they provide for the determination of tax based upon
income as determined under the Federal income tax laws,
treat employer payments for health care premiums and ex-
penses of employees or dependents as payment of wages
to such employees and dependents.
SEC. 112. DISTRIBUTION OF INFORMATION ON AVERAGE
PRICES OF COMMON HEALTH CARE SERV-
ICES.
Each State multicare program shall provide for the
distribution, on both a State and local level, of information
on the average prices of common health care services, in-
cluding such services as the Secretary may specify.
Subtitle B—Federal Contribution
Toward 
Multicare 
Plan 
Pre-
miums; Tax Law Changes
SEC. 121. COMPUTATION OF AMOUNT OF FEDERAL CON-
TRIBUTION.
(a) DETERMINATION OF AMOUNT.—The Secretary
shall determine for each year (beginning with 1996) an
annual Federal contribution amount in accordance with
this section.
(b) AMOUNT.—Subject to subsection (c):
(1) AMOUNT FOR YEARS BEFORE 2002.—
(A) IN GENERAL.—The Federal contribu-
tion amount for a year before 2002 is equal
to—
(i) the total amount of available funds
(determined under subparagraph (B)) for
the year, divided by
(ii) the average number of individuals
described in subparagraph (C) for the
year.
(B) 
FUNDS
AVAILABLE.—The 
total
amount of available funds for a year is equal to
the sum of the following:
(i) ADDITIONAL NET FEDERAL REVE-
NUES.—The amount described in this sub-
paragraph is the amount by which—
(I) the increase in all Federal
revenues (including employment-relat-
ed excise taxes) resulting from the
amendments made by sections 122
and 123, exceeds
(II) the increase in appropria-
tions resulting from the increase in
authorization of appropriations pro-
vided under section 441(a) (relating
to facilitating development and use of
medical practice guidelines).
(ii) ADDITIONAL
MEDICAID-RELATED
AMOUNT.—The product described in sec-
tion 101(c)(3)(A)(ii)(II) for the State, in-
creased (for each year after the last full
year 
referred 
to 
in 
section
101(c)(3)(A)(ii)(I), up to the year in-
volved) by the applicable inflator (specified
in section 107(b)(2)(D)) for the year, and
subject to any adjustment for changes in
population under section 107(b)(4).
(C) INDIVIDUALS DESCRIBED.—
(i) IN GENERAL.—The number of in-
dividuals described in this subparagraph
for a year is—
(I) the estimated total average
population of the United States in the
year, less
(II) the sum of the average num-
ber of exempt individuals in the year.
(2) YEARS BEGINNING WITH 2002.—The Fed-
eral contribution amount for a year after 2001 is
equal to the Federal contribution amount deter-
mined under this subsection for the previous year in-
creased by the applicable inflator for the year in-
volved (as specified under section 107(b)(3)).
(c) APPLICATION BY ENROLLMENT CLASS.—
(1) ESTABLISHMENT OF ENROLLMENT CLASS-
ES.—
(A) IN GENERAL.—The Secretary shall es-
tablish one or more sets of enrollment classes
based on both—
(i) family composition, and
(ii) ages of family members.
(B) USE
OF
COMMON
CLASSIFICATIONS
FOR FAMILY ENROLLMENT.—The family classi-
fications under subparagraph (A)(i) shall be
based on common family enrollment categories,
such as individual only, individual with children,
married couple without children, and a married
couple with children.
(2) ADJUSTMENT OF FEDERAL CONTRIBUTION
BASED
ON
ENROLLMENT
CLASS.—The Secretary
shall adjust the Federal contribution amount deter-
mined under this section for each of the enrollment
classes so that, without changing the total amount
of the Federal contribution, the ratio of the Federal
contribution amount for enrollees in the different
classes is equal to the ratio of average costs under
multicare plans for enrollees in the respective class-
es.
SEC. 122. TERMINATION OF EXCLUSION FOR EMPLOYER-
PROVIDED HEALTH CARE COVERAGE AND OF
DEDUCTION FOR HEALTH INSURANCE COSTS
OF SELF-EMPLOYED.
(a) TERMINATION OF EXCLUSION FOR EMPLOYER-
PROVIDED HEALTH CARE COVERAGE.—
(1) IN GENERAL.—The text of section 106 of
the Internal Revenue Code of 1986 is amended to
read as follows:
‘‘(a) IN GENERAL.—Gross income of an employee
does not include employer-provided coverage under an ac-
cident or health plan.
‘‘(b) TERMINATION.—
‘‘(1) IN GENERAL.—This section shall not apply
to any taxable year beginning on or after the first
day of the second calendar year beginning after the
date of the enactment of this subsection.
‘‘(2) EXCEPTION.—Paragraph (1) shall not
apply to a medical or dental care plan provided
under section 1074(a) of title 10, United States
Code.
‘‘(c) SPECIAL RULES FOR DETERMINING AMOUNT OF
INCLUSION.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the value of any coverage shall be determined
on the basis of the average cost of providing such
coverage to the beneficiaries receiving such coverage.
‘‘(2) SPECIAL RULE.—To the extent provided
by the Secretary, cost determinations under para-
graph (1) may be made on the basis of reasonable
estimates but shall not vary based on the age of em-
ployees or their dependents.’’
(2) REPORTING ON W-2 FORM.—Subsection (a)
of section 6051 of such Code (relating to receipts for
employees) is amended by striking ‘‘and’’ at the end
of paragraph (8), by striking the period at the end
of paragraph (9) and inserting ‘‘, and’’, and by in-
serting after paragraph (9) the following new para-
graph:
‘‘(10) the value of the employer-provided cov-
erage under any accident or health plan (determined
in accordance with section 106(c)) which is not ex-
cludable from gross income under section 106 by
reason of section 106(b) and the number of months
during such calendar year that such coverage was
provided.’’
(b) TERMINATION OF DEDUCTION FOR HEALTH IN-
SURANCE COSTS OF SELF-EMPLOYED.—Subsection (l) of
section 162 of such Code is amended by adding at the
end thereof the following new paragraph:
‘‘(7) TERMINATION
ON
IMPLEMENTATION
OF
MULTICARE.—In no event shall this subsection apply
to any taxable year beginning on or after the first
day of the second calendar year beginning after the
date of the enactment of this paragraph.’’
(c) APPLICATION OF FICA TAXES AND INCOME TAX
WITHHOLDING.—
(1) FICA TAXES.—Subsection (a) of section
3121 of such Code is amended by adding at the end
thereof the following new flush sentence:
‘‘Paragraphs (2) and (4) shall not apply to any amount
paid for coverage of an employee or any of his dependents
under an accident or health plan.’’
(2) WAGE
WITHHOLDING.—Subsection (a) of
section 3401 of such Code is amended by adding at
the end thereof the following new flush sentence:
‘‘The term ‘wages’ shall include amounts paid for coverage
of an employee or any of his dependents under an accident
or health plan.’’
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning on or after the first day of the second calendar
year beginning after the date of the enactment of
this Act.
SEC. 123. TERMINATION OF DEDUCTION FOR MEDICAL
CARE.
Section 213 of the Internal Revenue Code of 1986
is amended by adding at the end the following new sub-
section:
‘‘(f) 
TERMINATION
ON
IMPLEMENTATION
OF
MULTICARE.—In no event shall this section apply to any
taxable year beginning on or after the first day of the sec-
ond calendar year beginning after the date of the enact-
ment of this subsection.’’
TITLE II—REQUIREMENTS FOR
MULTICARE PLANS
Subtitle A—General Requirements
SEC. 201. ENROLLMENT AND CONTINUITY OF COVERAGE.
(a) IN GENERAL.—Each multicare plan shall—
(1) accept for enrollment (except to the extent
the Secretary may provide) all individuals eligible for
enrollment, except as provided in section 103(b); and
(2) not condition or limit the provision or pay-
ment for services based on any pre-existing condi-
tion.
(b) CERTIFICATION OF ENROLLMENT FOR PURPOSES
OF
RECEIPT
OF
FEDERAL
CONTRIBUTION.—Each
multicare plan shall provide for notice to the Secretary
or the State multicare program of such information as the
Secretary may require in order to establish the entitlement
of the plan to payment from a State multicare program
under section 106.
SEC. 202. COVERED SERVICES.
A multicare plan must—
(1) clearly disclose to each enrollee (in a man-
ner specified by the State multicare program) the
differences between the services covered under the
plan and the list of services established under sec-
tion 104(a)(2)(A), and
(2) include, for purposes of applying the cata-
strophic protection under section 203(e), hospital,
professional, and other services specified by the Sec-
retary.
SEC. 203. PREMIUMS AND COST-SHARING; CATASTROPHIC
PROTECTION.
(a) IN GENERAL.—Except as a State multicare pro-
gram otherwise provides under title I and except as pro-
vided in this section, a multicare plan—
(1) may impose cost-sharing in the form of pre-
miums, deductibles, coinsurance, and copayments,
and
(2) shall disclose the portion of such a premium
which is met through the contribution provided
under section 106.
(b) LIMITS ON PREMIUM VARIATIONS.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the premiums with respect to multicare
plans offered in an area of a State shall be estab-
lished, and shall vary, based only on the enrollment
classes provided under section 121(c)(1). Each plan
shall fairly allocate the costs of such premiums
among such classes.
(2) USE OF BEHAVIORAL FACTORS.—Premiums
under a multicare plan may vary based on factors
(such as smoking, substance abuse, and excessive
weight) which are defined by the Secretary and for
which personal behavior is clearly related to receipt
of health care services.
(c) LIMITATION ON ADJUSTMENT OF COINSURANCE
AND COPAYMENTS.—A multicare plan—
(1) may adjust coinsurance or copayment rates
to encourage enrollees to use (A) preferred provid-
ers, (B) providers that charge lower amounts, or (C)
different procedures, but
(2) may not adjust coinsurance based on indi-
vidual patient characteristics, including the age, sex,
wellness, or medical history of the individual.
(d) USE
OF
MEDICAL
SAVINGS
ACCOUNTS.—A
multicare plan may establish for its enrollees medical sav-
ings accounts—
(1) from which payments for services (below a
catastrophic limit) are made by the enrollees, and
(2) for which balances may be carried forward
from year to year and may be applied against future
expenses, be rebated to the enrollee, or used for re-
tirement purposes.
(e) CATASTROPHIC PROTECTION.—
(1) IN GENERAL.—A multicare plan shall in-
clude a maximum limit on the annual amount of pa-
tient cost-sharing for premiums and out-of-pocket
expenses for covered services.
(2) LIMIT.—
(A) IN GENERAL.—Subject to the succeed-
ing provisions of this paragraph, such annual
maximum limit shall not exceed—
(i) $5,000 for any individual, and
(ii) $10,000, in the aggregate, for all
members of a family.
(B) INDEXING.—For any year, after the
year in which this Act is enacted, the dollar
amounts specified under subparagraph (A) shall
be the dollar amounts specified under this para-
graph for the previous year (taking into account
any previous application of this subparagraph)
increased by the applicable inflator for the year
(as specified under section 107(b)(3)).
(C) 
ADDITIONAL
LIMITS.—A 
State
multicare program may—
(i) impose dollar limits that are less
than the limits otherwise specified under
this paragraph; and
(ii) provide for the application of lim-
its for expenses over a multi-year period.
(D) 
STATE
AUTHORITY.—If 
a 
State
multicare program provides for a subsidy of
stop-loss limits for catastrophic coverage for
lower income residents (under its reinsurance
mechanism under section 108), the program
may establish regulations designed to prevent
manipulation of household size and membership
so as to qualify for catastrophic protection ben-
efits.
(f) 
APPLICATION
OF
EXCESS
CONTRIBUTION
AMOUNT TOWARDS COST SHARING.—If the amount of the
State contribution under section 106(b) toward the pre-
mium of an individual exceeds the individual’s premium
for a multicare plan, the excess amount shall be counted
by the plan towards the cost sharing for the individual
under the plan.
SEC. 204. PARTICIPATION IN REINSURANCE SYSTEM.
Each multicare plan shall participate in the applica-
ble reinsurance system (established by the State multicare
program under section 108 or by the Secretary pursuant
to section 301 or 331).
SEC. 205. DATA REQUIREMENT.
(a) IN GENERAL.—Each multicare plan (and health
care providers participating in the plan) shall collect and
provide to the State multicare program data on costs of
health care, prices for services, and patient outcomes, in
accordance with standards established by the Secretary by
regulation.
(b) PRICING INFORMATION.—A multicare plan shall
condition the payment under the plan for services of a pro-
vider upon the provider disclosing to the public, in a form,
manner, and at a time specified by the Secretary, such
information on the provider’s charges as the State
multicare program specifies, in accordance with guidelines
of the Secretary.
SEC. 206. MEDICAL MALPRACTICE REFORM AND ADMINIS-
TRATIVE COST SAVINGS.
Each multicare plan (and health care providers par-
ticipating in the plan) shall comply with the applicable re-
quirements of—
(1) title IV (relating to medical malpractice li-
ability reform),
(2) subtitle A of title V (relating to standard-
ization of claims processing), and
(3) subtitle B of title V (relating to electronic
medical data standards).
SEC. 207. CONSUMER RIGHTS.
(a) NOTICE OF RIGHTS; ENFORCEMENT.—
(1) NOTICE.—Each multicare plan shall notify
enrollees of their consumer rights under this section
and of the procedures established by the plan to en-
sure these rights.
(2) DEVELOPMENT
OF
REGULATIONS.—The
Secretary shall develop regulation to implement the
consumer rights established under this section.
(3) STATE ENFORCEMENT.—States are respon-
sible, under their multicare programs, for assuring
compliance of multicare plans with the requirements
of this section.
(b) PROVISION OF PATIENT COST-SHARING INFOR-
MATION.—
(1) IN GENERAL.—Each multicare plan which
provides for cost-sharing (other than premiums)
shall ensure that enrollees are provided, in advance
of the receipt of treatment (except as provided in
paragraph (3)), with information on the expected
total costs of treatment and their expected share of
the costs. Such information may be based on the es-
timates for the average cost for such treatment.
(2) TOTAL COST.—For purposes of paragraph
(1), the total cost of treatment—
(A) in the case of a patient’s initial visit,
shall consist of the initial visit only, and
(B) in the case of subsequent treatment,
shall include all expenses resulting from the
treatment procedure prescribed by the provider.
(3) EXCEPTION
FOR
EMERGENCIES.—In the
case of emergency treatment, the information under
this subsection shall be provided at the earliest rea-
sonable time after such treatment is initiated.
(c) PROVISION OF PRICE INFORMATION BY HEALTH
CARE PROVIDERS.—
(1) IN GENERAL.—Each health care provider is
required to make available information on the pro-
vider’s prices for health care services. Such informa-
tion shall be made available to the public and to in-
dividuals and organizations upon request.
(2) STANDARDS.—Such information shall be
made available in accordance with standards and a
common format established by the Secretary.
(d) PATIENT ACCESS TO MEDICAL INFORMATION.—
Each individual has a right to obtain, through the
multicare plan in which the individual is enrolled, informa-
tion contained in the medical record of a provider that
has provided health care services for which payment may
be made under the plan.
Subtitle B—Multiple Employer
Health Benefits Protections
SEC. 
211. 
LIMITED 
EXEMPTION 
UNDER 
PREEMPTION
RULES FOR MULTIPLE EMPLOYER PLANS
PROVIDING HEALTH BENEFITS SUBJECT TO
CERTAIN FEDERAL STANDARDS.
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 is amend-
ed by adding at the end the following new part:
‘‘Part 7—Multiple Employer Health Plans
‘‘SEC. 701. DEFINITIONS.
‘‘For purposes of this part:
‘‘(1) INSURER.—The term ‘insurer’ means an
insurance company, insurance service, or insurance
organization, licensed to engage in the business of
insurance by a State.
‘‘(2) PARTICIPATING
EMPLOYER.—The term
‘participating employer’ means, in connection with a
multiple employer welfare arrangement, any em-
ployer if any of its employees, or any of the depend-
ents of its employees, are or were covered under
such arrangement during the employment of the
employees.
‘‘(3) EXCESS/STOP LOSS COVERAGE.—The term
‘excess/stop loss coverage’ means, in connection with
a multiple employer welfare arrangement, a contract
under which an insurer provides for payment with
respect to claims under the arrangement, relating to
participants or beneficiaries individually or other-
wise, in excess of an amount or amounts specified in
such contract.
‘‘(4) QUALIFIED
ACTUARY.—The term ‘quali-
fied actuary’ means an individual who is a member
of the American Academy of Actuaries or meets
such reasonable standards and qualifications as the
Secretary may provide by regulation.
‘‘(5) SPONSOR.—The term ‘sponsor’ means, in
connection with a multiple employer welfare arrange-
ment, the association or other entity which estab-
lishes or maintains the arrangement.
‘‘(6) STATE LOCATION OF COVERED INDIVID-
UALS.—
‘‘(A) IN GENERAL.—A multiple employer
welfare arrangement shall be treated as cover-
ing individuals located in a State only if the
minimum required number of individuals who
are covered under the arrangement are located
in such State, except that if the minimum re-
quired number of individuals are not located in
any State, such arrangement shall be treated as
covering individuals in any State in which any
covered individual is located.
‘‘(B) MINIMUM REQUIRED NUMBER.—For
purposes of subparagraph (A), the minimum re-
quired number is the greater of—
‘‘(i) 5 percent of the total number of
individuals described in subparagraph (A),
or
‘‘(ii) 50.
‘‘(C) 
LOCATION
OF
INDIVIDUALS
IN
STATE.—For purposes of subparagraph (A), an
individual shall be treated as located in a State
if such individual is employed in such State or
the address of such individual last known by
the arrangement is located in such State.
‘‘(7) STATE INSURANCE COMMISSIONER.—The
term ‘State insurance commissioner’ means the in-
surance commissioner (or similar official) of a State.
‘‘(8) DOMICILE
STATE.—The term ‘domicile
State’ means, in connection with a multiple employer
welfare arrangement, the State in which, according
to the application for an exemption under this part,
most individuals to be covered under the arrange-
ment are located, except that, in any case in which
information contained in the latest annual report of
the arrangement filed under this part indicates that
most individuals covered under the arrangement are
located in a different State, such term means such
different State.
‘‘(9) FULLY INSURED ARRANGEMENT.—A mul-
tiple employer welfare arrangement shall be treated
as fully insured only if one or more insurers, health
maintenance organizations, similar organizations
regulated under State law for solvency, or any com-
bination thereof are liable under one or more insur-
ance policies or contracts for all benefits under the
arrangement (irrespective of any recourse they may
have against other parties).
‘‘(10) MULTIPLE EMPLOYER HEALTH PLAN.—
The term ‘multiple employer health plan’ means a
multiple employer welfare arrangement treated as an
employee welfare benefit plan by reason of an
exemption under this part.
‘‘SEC. 702. EXEMPTED MULTIPLE EMPLOYER PLANS PRO-
VIDING BENEFITS IN THE FORM OF MEDICAL
CARE RELIEVED OF CERTAIN RESTRICTIONS
ON PREEMPTION OF STATE LAW AND TREAT-
ED AS EMPLOYEE WELFARE BENEFIT PLANS.
‘‘(a) IN GENERAL.—Subject to subsection (b), a mul-
tiple employer welfare arrangement which is not fully in-
sured and with respect to which there is in effect an ex-
emption granted by the Secretary under this part (or with
respect to which there is pending a complete application
for such an exemption and the Secretary determines that
provisional protection under this part is appropriate)—
‘‘(1) shall be treated for purposes of subtitle A
and the preceding parts of this subtitle as an em-
ployee welfare benefit plan, irrespective of whether
such arrangement is an employee welfare benefit
plan, and
‘‘(2) 
shall 
be 
exempt 
from 
section
514(b)(6)(A)(ii).
‘‘(b) BENEFITS
MUST
CONSIST
OF
MEDICAL
CARE.—Subsection (a) shall apply to a multiple employer
welfare arrangement only if the benefits provided there-
under consist solely of medical care described in section
607(1) (disregarding such incidental benefits as the
Secretary shall specify by regulation).
‘‘(c) RESTRICTION ON COMMENCEMENT OF NEW AR-
RANGEMENTS.—A multiple employer welfare arrangement
providing benefits which consist of medical care described
in section 607(1) which has not commenced operations as
of January 1, 1994, may commence operations only if an
exemption granted to the arrangement under this part is
in effect (or there is pending with respect to the arrange-
ment a complete application for such an exemption and
the Secretary determines that provisional protection under
this part is appropriate).
‘‘SEC. 703. EXEMPTION PROCEDURE.
‘‘(a) IN GENERAL.—The Secretary shall grant an ex-
emption described in section 702(a) to a multiple employer
welfare arrangement if—
‘‘(1) an application for such exemption with re-
spect to such arrangement, identified individually or
by class, has been duly filed in complete form with
the Secretary in accordance with this part,
‘‘(2) such application demonstrates compliance
with the requirements of section 704 with respect to
such arrangement, and
‘‘(3) the Secretary finds that such exemption
is—
‘‘(A) administratively feasible,
‘‘(B) not adverse to the interests of the in-
dividuals covered under the arrangement, and
‘‘(C) protective of the rights and benefits
of the individuals covered under the arrange-
ment.
‘‘(b) NOTICE AND HEARING.—Before granting an ex-
emption under this section, the Secretary shall publish no-
tice in the Federal Register of the pendency of the exemp-
tion, shall require that adequate notice be given to inter-
ested persons, including the State insurance commissioner
of each State in which covered individuals under the ar-
rangement are, or are expected to be, located, and shall
afford interested persons opportunity to present views.
The Secretary may not grant an exemption under this sec-
tion unless the Secretary affords an opportunity for a
hearing and makes a determination on the record with re-
spect to the findings required under subsection (a)(3). The
Secretary shall, to the maximum extent practicable, make
a final determination with respect to any application filed
under this section in the case of a newly established ar-
rangement within 90 days after the date which the Sec-
retary determines is the date on which such application
is filed in complete form.
‘‘SEC. 704. ELIGIBILITY REQUIREMENTS.
‘‘(a) APPLICATION FOR EXEMPTION.—
‘‘(1) IN
GENERAL.—An exemption may be
granted by the Secretary under this part only on the
basis of an application filed with the Secretary in
such form and manner as shall be prescribed in reg-
ulations of the Secretary. Any such application shall
be signed by the operating committee and the spon-
sor of the arrangement.
‘‘(2) FILING FEE.—The arrangement shall pay
to the Secretary at the time of filing an application
under this section a filing fee in the amount of
$5,000, which shall be available, to the extent pro-
vided in appropriation Acts, to the Secretary for the
sole purpose of administering the exemption proce-
dures under this part.
‘‘(3) INFORMATION INCLUDED.—An application
filed under this section shall include, in a manner
and form prescribed in regulations of the Secretary,
at least the following information:
‘‘(A) IDENTIFYING
INFORMATION.—The
names and addresses of—
‘‘(i) the sponsor, and
‘‘(ii) the members of the operating
committee of the arrangement.
‘‘(B) STATES IN WHICH ARRANGEMENT IN-
TENDS TO DO BUSINESS.—The States in which
individuals covered under the arrangement are
to be located and the number of such individ-
uals expected to be located in each such State.
‘‘(C) BONDING REQUIREMENTS.—Evidence
provided by the operating committee that the
bonding requirements of section 412 will be met
as of the date of the application.
‘‘(D) PLAN DOCUMENTS.—A copy of the
documents governing the arrangement (includ-
ing any bylaws and trust agreements), the sum-
mary plan description, and other material de-
scribing the benefits and coverage that will be
provided to individuals covered under the ar-
rangement.
‘‘(E) AGREEMENTS WITH SERVICE PROVID-
ERS.—A copy of any agreements between the
arrangement and contract administrators and
other service providers.
‘‘(F) FUNDING REPORT.—A report setting
forth information determined as of a date with-
in the 120-day period ending with the date of
the application, including the following:
‘‘(i) RESERVES.—A statement, cer-
tified by the operating committee of the ar-
rangement, and a statement of actuarial
opinion, signed by a qualified actuary, that
all applicable requirements of section 707
are or will be met in accordance with regu-
lations which the Secretary shall prescribe.
‘‘(ii) ADEQUACY
OF
CONTRIBUTION
RATES.—A statement of actuarial opinion,
signed by a qualified actuary, which sets
forth a description of the extent to which
contribution rates are adequate to provide
for the payment of all obligations and the
maintenance of required reserves under the
arrangement for the 12-month period be-
ginning with such date within such 120-
day period, taking into account the ex-
pected coverage and experience of the ar-
rangement. If the contribution rates are
not fully adequate, the statement of actu-
arial opinion shall indicate the extent to
which the rates are inadequate and the
changes needed to ensure adequacy.
‘‘(iii) 
CURRENT
AND
PROJECTED
VALUE
OF
ASSETS
AND
LIABILITIES.—A
statement of actuarial opinion signed by a
qualified actuary, which sets forth the cur-
rent value of the assets and liabilities accu-
mulated under the arrangement and a pro-
jection of the assets, liabilities, income,
and expenses of the arrangement for the
12-month period referred to in clause (ii).
The income statement shall identify sepa-
rately the arrangement’s administrative ex-
penses and claims.
‘‘(iv) COSTS
OF
COVERAGE
TO
BE
CHARGED
AND
OTHER
EXPENSES.—A
statement of the costs of coverage to be
charged, 
including 
an 
itemization 
of
amounts for administration, reserves, and
other expenses associated with the oper-
ation of the arrangement.
‘‘(v) 
OTHER
INFORMATION.—Any
other information which may be prescribed
in regulations of the Secretary as nec-
essary to carry out the purposes of this
part.
‘‘(b) OTHER REQUIREMENTS.—A complete applica-
tion for an exemption under this part shall include infor-
mation which the Secretary determines to be complete and
accurate and sufficient to demonstrate that the following
requirements are met with respect to the arrangement:
‘‘(1) SPONSOR.—The sponsor is, and has been
(together with its immediate predecessor, if any) for
a continuous period of not less than 3 years before
the date of the application, organized and main-
tained in good faith, with a constitution and bylaws
specifically stating its purpose, as a trade associa-
tion, an industry association, a professional associa-
tion, or a chamber of commerce or other business
group, for substantial purposes other than that of
obtaining or providing medical care described in sec-
tion 607(1), and the applicant demonstrates to the
satisfaction of the Secretary that the sponsor is es-
tablished as a permanent entity which receives the
active support of its members.
‘‘(2) OPERATING
COMMITTEE.—The arrange-
ment is operated, pursuant to a trust agreement, by
an operating committee which has complete fiscal
control over the arrangement and which is respon-
sible for all operations of the arrangement, and the
operating committee has in effect rules of operation
and financial controls, based on a 3-year plan of op-
eration, adequate to carry out the terms of the ar-
rangement and to meet all requirements of this title
applicable to the arrangement. The members of the
committee are individuals selected from individuals
who are the owners, officers, directors, or employees
of the participating employers or who are partners
in the participating employers and actively partici-
pate in the business. No such member is an owner,
officer, director, or employee of, or partner in, a con-
tract administrator or other service provider to the
arrangement, except that officers or employees of a
sponsor which is a service provider (other than a
contract administrator) to the arrangement may be
members of the committee if they constitute not
more than 25 percent of the membership of the com-
mittee and they do not provide services to the ar-
rangement other than on behalf of the sponsor. The
committee has sole authority to approve applications
for participation in the arrangement and to contract
with a service provider to administer the day-to-day
affairs of the arrangement.
‘‘(3) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the arrange-
ment include a written instrument, meeting the re-
quirements of an instrument required under section
402(a)(1), which—
‘‘(A) provides that the committee serves as
the named fiduciary required for plans under
section 402(a)(1) and serves in the capacity of
a plan administrator (referred to in section
3(16)(A)),
‘‘(B) provides that the sponsor is to serve
as plan sponsor (referred to in section
3(16)(B)),
‘‘(C) incorporates the requirements of sec-
tion 707, and
‘‘(D) provides that, effective upon the
granting of an exemption under this part—
‘‘(i) all participating employers must
be members or affiliated members of the
sponsor, except that, in the case of a spon-
sor which is a professional association or
other individual-based association, if at
least one of the officers, directors, or em-
ployees of an employer, or at least one of
the individuals who are partners in an em-
ployer and who actively participates in the
business, is a member or affiliated member
of the sponsor, participating employers
may also include such employer, and
‘‘(ii) all individuals thereafter com-
mencing coverage under the arrangement
must be—
‘‘(I) active or retired owners, offi-
cers, directors, or employees of, or
partners in, participating employers,
or
‘‘(II) the beneficiaries of individ-
uals described in subclause (I).
‘‘(4) CONTRIBUTION RATES.—The contribution
rates referred to in subsection (a)(3)(F)(ii) are
adequate.
‘‘(5) 
REGULATORY
REQUIREMENTS.—Such
other requirements as the Secretary may prescribe
by regulation as necessary to carry out the purposes
of this part.
‘‘(c) TREATMENT OF PARTY SEEKING EXEMPTION
WHERE PARTY IS SUBJECT TO DISQUALIFICATION.—
‘‘(1) IN GENERAL.—In the case of any applica-
tion for an exemption under this part with respect
to a multiple employer welfare arrangement, if the
Secretary determines that the sponsor of the ar-
rangement or any other person associated with the
arrangement is subject to disqualification under
paragraph (2), the Secretary may deny the exemp-
tion with respect to such arrangement.
‘‘(2) DISQUALIFICATION.—A person is subject
to disqualification under this paragraph if such per-
son—
‘‘(A) has intentionally made a material
misstatement in the application for exemption,
‘‘(B) has obtained or attempted to obtain
an exemption under this part through misrepre-
sentation or fraud,
‘‘(C) has misappropriated or converted to
such person’s own use, or improperly withheld,
money held under a plan or any multiple
employer welfare arrangement,
‘‘(D) is prohibited (or would be prohibited
if the arrangement were a plan) from serving in
any capacity in connection with the arrange-
ment under section 411,
‘‘(E) has failed to appear without reason-
able cause or excuse in response to a subpoena,
examination, warrant, or any other order law-
fully issued by the Secretary compelling such
response,
‘‘(F) has previously been subject to a de-
termination under this part resulting in the de-
nial, suspension, or revocation of an exemption
under this part on similar grounds, or
‘‘(G) has otherwise violated any provision
of this title with respect to a matter which the
Secretary determines of sufficient consequence
to merit disqualification for purposes of this
part.
‘‘(d) FRANCHISE NETWORKS.—In the case of a mul-
tiple employer welfare arrangement established and main-
tained by a franchisor for a franchise network consisting
of its franchisees, such franchisor shall be treated as the
sponsor referred to in the preceding provisions of this sec-
tion, such network shall be treated as an association re-
ferred to in such provisions, and each franchisee shall be
treated as a member (of the association and the sponsor)
referred to in such provisions, if all participating employ-
ers are such franchisees and the requirements of sub-
section (b)(1) with respect to a sponsor are met with
respect to the network.
‘‘(e) CERTAIN COLLECTIVELY BARGAINED ARRANGE-
MENTS.—In applying the preceding provisions of this sec-
tion in the case of a multiple employer welfare arrange-
ment which would be described in section 3(40)(A)(i) but
for the failure to meet any requirement of section
3(40)(C)—
‘‘(1) paragraphs (1) and (2) of subsection (b)
and subparagraphs (A), (B), and (D) of paragraph
(3) of subsection (b) shall be disregarded, and
‘‘(2) the joint board of trustees shall be consid-
ered the operating committee of the arrangement.
‘‘(f) CERTAIN ARRANGEMENTS NOT MEETING SIN-
GLE EMPLOYER REQUIREMENT.—
‘‘(1) IN GENERAL.—In any case in which the
majority of the employees covered under a multiple
employer welfare arrangement are employees of a
single employer (within the meaning of clauses (i)
and (ii) of section 3(40)(B)), if all other employees
covered under the arrangement are employed by em-
ployers who are related to such single employer, sub-
section (b)(3)(D) shall be disregarded.
‘‘(2) RELATED EMPLOYERS.—For purposes of
paragraph (1), employers are ‘related’ if there is
among all such employers a common ownership in-
terest or a substantial commonality of business oper-
ations based on common suppliers or customers.
‘‘SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO
EXEMPTED ARRANGEMENTS.
‘‘(a) NOTICE OF MATERIAL CHANGES.—In the case
of any multiple employer welfare arrangement with respect
to which there is in effect an exemption granted under
this part, descriptions of material changes in any informa-
tion which was required to be submitted with the applica-
tion for the exemption shall be filed in such form and man-
ner as shall be prescribed in regulations of the Secretary.
The Secretary may require by regulation prior notice of
material changes with respect to specified matters which
might serve as the basis for suspension or revocation of
the exemption.
‘‘(b) REPORTING REQUIREMENTS.—Under regula-
tions of the Secretary, the requirements of sections 102,
103, and 104 shall apply with respect to any multiple em-
ployer welfare arrangement with respect to which there is
or has been in effect an exemption granted under this part
in the same manner and to the same extent as such re-
quirements apply to employee welfare benefit plans, irre-
spective of whether such exemption continues in effect.
The annual report required under section 103 for any plan
year in the case of any such multiple employer welfare ar-
rangement shall also include information described in sec-
tion 704(a)(3)(F) with respect to the plan year and, not-
withstanding section 104(a)(1)(A), shall be filed not later
than 90 days after the close of the plan year.
‘‘(c) ENGAGEMENT OF QUALIFIED ACTUARY.—The
operating committee of each multiple employer welfare ar-
rangement with respect to which there is or has been in
effect an exemption granted under this part shall engage,
on behalf of all covered individuals, a qualified actuary
who shall be responsible for the preparation of the mate-
rials comprising information necessary to be submitted by
a qualified actuary under this part. The qualified actuary
shall utilize such assumptions and techniques as are nec-
essary to enable such actuary to form an opinion as to
whether the contents of the matters reported under this
part—
‘‘(1) are in the aggregate reasonably related to
the experience of the arrangement and to reasonable
expectations, and
‘‘(2) represent such actuary’s best estimate of
anticipated experience under the arrangement.
The opinion by the qualified actuary shall be made with
respect to, and shall be made a part of, the annual report.
‘‘(d) 
FILING
NOTICE
OF
EXEMPTION
WITH
STATES.—An exemption granted to a multiple employer
welfare arrangement under this part shall not be effective
unless written notice of such exemption is filed with the
State insurance commissioner of each State in which at
least 5 percent of the individuals covered under the ar-
rangement are located. For purposes of this paragraph,
an individual shall be considered to be located in the State
in which a known address of such individual is located or
in which such individual is employed. The Secretary may
by regulation provide in specified cases for the application
of the preceding sentence with lesser percentages in lieu
of such 5 percent amount.
‘‘SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY
ARRANGEMENTS PROVIDING MEDICAL CARE.
‘‘(a) IN GENERAL.—A multiple employer welfare ar-
rangement providing benefits consisting of medical care
described in section 607(1) shall issue to each participat-
ing employer—
‘‘(1) a document equivalent to the summary
plan description required of plans under part 1,
‘‘(2) information describing the contribution
rates applicable to participating employers, and
‘‘(3) a statement indicating—
‘‘(A) whether or not the arrangement is
fully insured,
‘‘(B) whether or not there is in effect with
respect to the arrangement an exemption grant-
ed under this part and, if there is in effect such
an exemption, that the arrangement is (or is
treated as) an employee welfare benefit plan
under this title, and
‘‘(C) that the arrangement is not a li-
censed insurer under the laws of any State.
‘‘(b) TIME
FOR DISCLOSURE.—Such information
shall be issued to employers within such reasonable period
of time before becoming participating employers as may
be prescribed in regulations of the Secretary.
‘‘SEC. 707. MAINTENANCE OF RESERVES.
‘‘(a) IN GENERAL.—Each multiple employer welfare
arrangement with respect to which there is or has been
in effect an exemption granted under this part and which
is not fully insured shall establish and maintain reserves,
consisting of—
‘‘(1) a reserve for unearned contributions,
‘‘(2) a reserve for payment of claims reported
and not yet paid and claims incurred but not yet re-
ported, and for expected administrative costs with
respect to such claims, and
‘‘(3) a reserve, in an amount recommended by
the qualified actuary, for any other obligations of
the arrangement.
‘‘(b) MINIMUM AMOUNT FOR CERTAIN RESERVES.—
The total of the reserves described in subsection (a)(2)
shall not be less than an amount equal to 25 percent of
expected incurred claims and expenses for the plan year.
‘‘(c) REQUIRED
MARGIN.—In determining the
amounts of reserves required under this section in connec-
tion with any multiple employer welfare arrangement, the
qualified actuary shall include a margin for error and
other fluctuations taking into account the specific
circumstances of such arrangement.
‘‘(d) ADDITIONAL REQUIREMENTS.—The Secretary
may provide such additional requirements relating to re-
serves and excess/stop loss coverage as the Secretary con-
siders appropriate. Such requirements may be provided,
by regulation or otherwise, with respect to any arrange-
ment or any class of arrangements.
‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS COV-
ERAGE.—The Secretary may provide for adjustments to
the levels of reserves otherwise required under subsections
(a) and (b) with respect to any arrangement or class of
arrangements to take into account excess/stop loss cov-
erage provided with respect to such arrangement or ar-
rangements.
‘‘SEC. 708. CORRECTIVE ACTIONS.
‘‘(a) ACTIONS
TO
AVOID
DEPLETION
OF
RE-
SERVES.—A multiple employer welfare arrangement with
respect to which there is or has been in effect an exemp-
tion granted under this part shall continue to meet the
requirements of section 707, irrespective of whether such
exemption continues in effect. The operating committee of
such arrangement shall determine semiannually whether
the requirements of section 707 are met. In any case in
which the committee determines that there is reason to
believe that there is or will be a failure to meet such re-
quirements, or the Secretary makes such a determination
and so notifies the committee, the committee shall imme-
diately notify the qualified actuary engaged by the ar-
rangement, and such actuary shall, not later than the end
of the next following month, make such recommendations
to the committee for corrective action as the actuary deter-
mines necessary to ensure compliance with section 707.
Not later than 10 days after receiving from the actuary
recommendations for corrective actions, the committee
shall notify the Secretary (in such form and manner as
the Secretary may prescribe by regulation) of such rec-
ommendations of the actuary for corrective action, to-
gether with a description of the actions (if any) that the
committee has taken or plans to take in response to such
recommendations. The committee shall thereafter report
to the Secretary, in such form and frequency as the Sec-
retary may specify to the committee, regarding corrective
action taken by the committee until the requirements of
section 707 are met.
‘‘(b) TERMINATION.—
‘‘(1) NOTICE OF TERMINATION.—In any case in
which the operating committee of a multiple em-
ployer welfare arrangement with respect to which
there is or has been in effect an exemption granted
under this part determines that there is reason to
believe that the arrangement will terminate, the
committee shall so inform the Secretary, shall de-
velop a plan for winding up the affairs of the ar-
rangement in connection with such termination in a
manner which will result in timely payment of all
benefits for which the arrangement is obligated, and
shall submit such plan in writing to the Secretary.
Actions required under this paragraph shall be taken
in such form and manner as may be prescribed in
regulations of the Secretary.
‘‘(2) ACTIONS REQUIRED IN CONNECTION WITH
TERMINATION.—In any case in which—
‘‘(A) the Secretary has been notified under
subsection (a) of a failure of a multiple em-
ployer welfare arrangement with respect to
which there is or has been in effect an exemp-
tion granted under this part to meet the re-
quirements of section 707 and has not been no-
tified by the operating committee of the ar-
rangement that corrective action has restored
compliance with such requirements, and
‘‘(B) the Secretary determines that the
continuing failure to meet the requirements of
section 707 can be reasonably expected to result
in a continuing failure to pay benefits for which
the arrangement is obligated,
the operating committee of the arrangement shall, at
the direction of the Secretary, terminate the ar-
rangement and, in the course of the termination,
take such actions as the Secretary may require as
necessary to ensure that the affairs of the arrange-
ment will be, to the maximum extent possible, wound
up in a manner which will result in timely payment
of all benefits for which the arrangement is
obligated.
injurious to participating employers, or covered
individuals,
‘‘(C) the arrangement, or the sponsor
thereof, has refused to be examined in accord-
ance with this part or to produce its accounts,
records, and files for examination in accordance
with this part, or
‘‘(D) any of the officers of the arrange-
ment, or the sponsor thereof, has refused to
give information with respect to the affairs of
the arrangement or the sponsor or to perform
any other legal obligation relating to such an
examination when required by the Secretary in
accordance with this part.
Any such suspension or revocation under this subsection
shall be effective only upon a final decision of the Sec-
retary made after notice and opportunity for a hearing
is provided in accordance with section 710.
‘‘(c) SUSPENSION OR REVOCATION OF EXEMPTION
UNDER COURT PROCEEDINGS.—An exemption granted to
a multiple employer welfare arrangement under this part
may be suspended or revoked by a court of competent ju-
risdiction in an action by the Secretary brought under
paragraph (2), (5), or (6) of section 502(a), except that
the suspension or revocation under this subsection shall
be effective only upon notification of the Secretary of such
suspension or revocation.
‘‘(d) NOTIFICATION
OF PARTICIPATING EMPLOY-
ERS.—All participating employers in a multiple employer
welfare arrangement shall be notified of the expiration,
suspension, or revocation of an exemption granted to such
arrangement under this part, by such persons and in such
form and manner as shall be prescribed in regulations of
the Secretary, not later than 20 days after such expiration
or after receipt of notice of a final decision requiring such
suspension or revocation.
‘‘(e) PUBLICATION OF EXPIRATIONS, SUSPENSIONS,
AND REVOCATIONS.—The Secretary shall publish all expi-
rations of, and all final decisions to suspend or revoke,
exemptions granted under this part.
‘‘SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.
‘‘(a) IN GENERAL.—Any decision by the Secretary
which involves the denial of an application by a multiple
employer welfare arrangement for an exemption under this
part or the suspension or revocation of such an exemption
shall contain a statement of the specific reason or reasons
supporting the Secretary’s action, including reference to
the specific terms of the exemption and the statutory pro-
vision or provisions relevant to the determination.
‘‘(b) DENIALS OF APPLICATIONS.—In the case of the
denial of an application for an exemption under this part,
the Secretary shall send a copy of the decision to the appli-
cant by certified or registered mail at the address specified
in the records of the Secretary. Such decision shall con-
stitute the final decision of the Secretary unless the ar-
rangement, or any party that would be prejudiced by the
decision, files a written appeal of the denial within 30 days
after the mailing of such decision. The Secretary may af-
firm, modify, or reverse the initial decision. The decision
on appeal shall become final upon the mailing of a copy
by certified or registered mail to the arrangement or party
that filed the appeal.
‘‘(c) SUSPENSIONS
OR REVOCATIONS
OF EXEMP-
TION.—In the case of the suspension or revocation of an
exemption granted under this part, the Secretary shall
send a copy of the decision to the arrangement by certified
or registered mail at its address, as specified in the
records of the Secretary. Upon the request of the arrange-
ment, or any party that would be prejudiced by the sus-
pension or revocation, filed within 15 days of the mailing
of the Secretary’s decision, the Secretary shall schedule
a hearing on such decision by written notice, sent by cer-
tified or registered mail to the arrangement or party
requesting such hearing. Such notice shall set forth—
‘‘(1) a specific date and time for the hearing,
which shall be within the 10-day period commencing
20 days after the date of the mailing of the notice,
and
‘‘(2) a specific place for the hearing, which shall
be in the District of Columbia or in the State and
county thereof (or parish or other similar political
subdivision thereof) in which is located the arrange-
ment’s principal place of business.
The decision as affirmed or modified in such hearing shall
constitute the final decision of the Secretary, unless such
decision is reversed in such hearing.’’.
(b) CONFORMING AMENDMENT TO DEFINITION OF
PLAN SPONSOR.—Section 3(16)(B) of such Act (29
U.S.C. 1002(16)(B)) is amended by adding at the end the
following new sentence: ‘‘Such term also includes the spon-
sor (as defined in section 701(5)) of a multiple employer
welfare arrangement, or a multiple employer health plan
(as defined in section 701(10)), with respect to which
there is or has been in effect an exemption granted under
part 7.’’.
(c) ALTERNATIVE MEANS
OF DISTRIBUTION
OF
SUMMARY PLAN DESCRIPTIONS.—Section 110 of such
Act (29 U.S.C. 1030) is amended by adding at the end
the following new subsection:
‘‘(c) The Secretary shall prescribe, as an alternative
method for distributing summary plan descriptions in
order to meet the requirements of section 104(b)(1) in the
case of multiple employer welfare arrangements providing
benefits consisting of medical care described in section
607(1), a means of distribution of such descriptions by
participating employers.’’.
(d) CLERICAL AMENDMENT.—The table of contents
in section 1 of the Employee Retirement Income Security
Act of 1974 is amended by inserting after the item relat-
ing to section 608 the following new items:
‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS
‘‘Sec. 701. Definitions.
‘‘Sec. 702. Exempted multiple employer welfare arrangements treated as em-
ployee welfare benefit plans and exempt from certain restric-
tions on preemption.
‘‘Sec. 703. Exemption procedure.
‘‘Sec. 704. Eligibility requirements.
‘‘Sec. 705. Additional requirements applicable to exempted arrangements.
‘‘Sec. 706. Disclosure to participating employers by arrangements providing
medical care.
‘‘Sec. 707. Maintenance of reserves.
‘‘Sec. 708. Corrective actions.
‘‘Sec. 709. Expiration, suspension, or revocation of exemption.
‘‘Sec. 710. Review of actions of the Secretary.’’.
SEC. 212. CLARIFICATION OF SCOPE OF PREEMPTION
RULES.
(a) IN GENERAL.—Section 514(b)(6)(A)(ii) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1144(b)(6)(A)(ii)) is amended by inserting ‘‘, but
only, in the case of an arrangement which provides medi-
cal care described in section 607(1) and with respect to
which an exemption under part 7 is not in effect,’’ before
‘‘to the extent not inconsistent with the preceding sections
of this title’’.
(b) CROSS-REFERENCE.—Section 514(b)(6) of such
Act (29 U.S.C. 1144(b)(6)) is amended by adding at the
end the following new subparagraph:
‘‘(E) For additional rules relating to exemption from
subparagraph (A)(ii) of multiple employer welfare ar-
rangements providing medical care, see part 7.’’.
SEC. 213. CLARIFICATION OF TREATMENT OF SINGLE EM-
PLOYER ARRANGEMENTS.
Section 3(40)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend-
ed—
(1) in clause (i), by inserting ‘‘for any plan year
of any such plan, or any fiscal year of any such
other arrangement,’’ after ‘‘single employer’’, and by
inserting ‘‘during such year or at any time during
the preceding 1-year period’’ after ‘‘common con-
trol’’,
(2) in clause (iii), by striking ‘‘common control
shall not be based on an interest of less than 25 per-
cent’’ and inserting ‘‘an interest of greater than 25
percent may not be required as the minimum inter-
est necessary for common control’’, and by striking
‘‘and’’ at the end,
(3) by redesignating clause (iv) as clause (v),
and
(4) by inserting after clause (iii) the following
new clause:
‘‘(iv) in determining, after the application of
clause (i), whether benefits are provided to employ-
ees of two or more employers, the arrangement shall
be treated as having only 1 participating employer
if, at the time the determination under clause (i) is
made, the number of individuals who are employees
and former employees of any one participating em-
ployer and who are covered under the arrangement
is greater than 95 percent of the aggregate number
of all individuals who are employees or former em-
ployees of participating employers and who are
covered under the arrangement.’’.
SEC. 214. CLARIFICATION OF TREATMENT OF CERTAIN
COLLECTIVELY 
BARGAINED 
ARRANGE-
MENTS.
(a) IN GENERAL.—Section 3(40)(A)(i) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1002(40)(A)(i)) is amended to read as follows:
‘‘(i) under or pursuant to one or more collective
bargaining agreements,’’.
(b) LIMITATIONS.—Section 3(40) of such Act (29
U.S.C. 1002(40)) is amended by adding at the end the
following new subparagraphs:
‘‘(C) Clause (i) of subparagraph (A) shall
apply only if—
‘‘(i) the plan or other arrangement,
and the employee organization or any other
entity sponsoring the plan or other ar-
rangement, do not—
‘‘(I) utilize the services of any li-
censed insurance agent or broker for
soliciting or enrolling employers or in-
dividuals as participating employers or
covered individuals under the plan or
other arrangement, or
‘‘(II) pay a commission or any
other type of compensation to a per-
son that is related either to the vol-
ume or number of employers or indi-
viduals solicited or enrolled as partici-
pating employers or covered individ-
uals under the plan or other arrange-
ment, or to the dollar amount or size
of the contributions made by partici-
pating employers or covered individ-
uals to the plan or other arrangement,
‘‘(ii) not less than 85 percent of the
covered individuals under the plan or other
arrangement are individuals who—
‘‘(I) are employed within a bar-
gaining unit covered by at least one of
the collective bargaining agreements
with a participating employer (or are
covered on the basis of an individual’s
employment in such a bargaining
unit), or
‘‘(II) are present or former em-
ployees of the sponsoring employee or-
ganization, of an employer who is or
was a party to at least one of the col-
lective bargaining agreements, or of
the plan or other arrangement or a
related plan or arrangement (or are
covered on the basis of such present
or former employment),
‘‘(iii) the plan or other arrangement
does not provide benefits to individuals
(other than individuals described in clause
(ii)(II)) who work outside the standard
metropolitan statistical area in which the
sponsoring 
employee 
organization 
rep-
resents employees (or to individuals (other
than 
individuals 
described 
in 
clause
(ii)(II)) on the basis of such work by oth-
ers), except that in the case of a sponsor-
ing employee organization that represents
employees who work outside of any stand-
ard metropolitan statistical area, this
clause shall be applied by reference to the
State in which the sponsoring organization
represents employees, and
‘‘(iv) the employee organization or
other entity sponsoring the plan or other
arrangement certifies to the Secretary each
year, in a form and manner which shall
be prescribed in regulations of the Sec-
retary—
‘‘(I) that the plan or other ar-
rangement meets the requirements of
clauses (i), (ii), and (iii), and
‘‘(II) if, for any year, 10 percent
or more of the covered individuals
under the plan are individuals not de-
scribed in subclause (I) or (II) of
clause (ii), the total number of cov-
ered individuals and the total number
of covered individuals not so de-
scribed.
‘‘(D)(i) Clause (i) of subparagraph (A)
shall not apply to a plan or other arrangement
that is established or maintained pursuant to
one or more collective bargaining agreements
which the National Labor Relations Boards de-
termines to have been negotiated or otherwise
agreed to in a manner or through conduct
which violates section 8(a)(2) of the National
Labor Relations Act (29 U.S.C. 158(a)(2)).
‘‘(ii)(I) Whenever a State insurance com-
missioner has reason to believe that this sub-
paragraph is applicable to part or all of a plan
or other arrangement, the State insurance com-
missioner may file a petition with the National
Labor Relations Board for a determination
under clause (i), along with sworn written testi-
mony supporting the petition.
‘‘(II) The Board shall give any such peti-
tion priority over all other petitions and cases,
other than other petitions under subclause (I)
or cases given priority under section 10 of the
National Labor Relations Act (29 U.S.C. 160).
‘‘(III) The Board shall determine, upon
the petition and any response, whether, on the
facts before it, the plan or other arrangement
was negotiated, created, or otherwise agreed to
in a manner or through conduct which violates
section 8(a)(2) of the National Labor Relations
Act (29 U.S.C. 158(a)(2)). Such determination
shall constitute a final determination for pur-
poses of this subparagraph and shall be binding
in all Federal or State actions with respect to
the status of the plan or other arrangement
under this subparagraph.
‘‘(IV) A person aggrieved by the deter-
mination of the Board under subclause (III)
may obtain review of the determination in any
United States court of appeals in the circuit in
which the collective bargaining at issue oc-
curred. Commencement of proceedings under
this subclause shall not, unless specifically or-
dered by the court, operate as a stay of any
State administrative or judicial action or pro-
ceeding related to the status of the plan or
other arrangement, except that in no case may