Title I, Subtitle B
(d) ESTABLISHMENT NOT REQUIRED.—Nothing in
this section shall be construed as requiring—
(1) that a purchasing arrangement be estab-
lished in each area of a State in which it operates;
and
(2) that there be only one purchasing arrange-
ment established with respect to any area.
SEC. 1122. AGREEMENTS WITH INSURERS.
(a) AGREEMENTS.—
(1) IN GENERAL.—Except as provided in para-
graph (3), each purchasing arrangement for an area
shall enter into an agreement under this section with
each insurer that desires to make MedAccess cov-
erage available through the purchasing arrangement
(consistent with any procedures established by the
State).
(2) TERMINATION OF AGREEMENT.—An agree-
ment under paragraph (1) shall remain in effect for
a 12-month period, except that the purchasing ar-
rangement may terminate an agreement under para-
graph (1) if the insurer’s license or certification
under State law is terminated or for other good
cause shown.
(3) LIMITATION
ON
RENEWAL
OF
AGREE-
MENTS.—Subsequent to the 12-month period de-
Title I, Subtitle B
scribed in paragraph (2), a purchasing arrangement
may—
(A) refuse to enter into a subsequent
agreement with an insurer if the arrangement
determines that the enrollment or premium is
too low, and
(B) if a previous agreement with an in-
surer was terminated for good cause and the
arrangement determines appropriate actions
have not been taken to correct the problems,
refuse to enter into a subsequent agreement
with the insurer.
(4) NO PROHIBITION ON OFFERING OF COV-
ERAGE.—Nothing in this subsection shall be con-
strued as prohibiting an insurer that does not enter
into an agreement under paragraph (1) from offer-
ing health insurance coverage to small employers
and eligible individuals within any area, so long as
the premium rates charged outside such arrange-
ment are the same as those charged within the ar-
rangement (subject to reasonable differences in pre-
miums that only reflect savings in administrative
costs under such an arrangement).
(b) RECEIPT
OF
PREMIUMS
ON
BEHALF
OF
PLANS.—
Title I, Subtitle B
(1) IN GENERAL.—Under an agreement under
this section between a purchasing arrangement and
an insurer—
(A) premiums shall be payable, and
(B) payment of premiums may be made by
individuals (or employers on their behalf) di-
rectly to the purchasing arrangement for the
benefit of the insurer.
(2) TIMING OF PAYMENT OF PREMIUMS.—Pre-
miums may be payable on a monthly basis (or, at
the option of an eligible employee or individual, on
a quarterly basis). The purchasing arrangement may
provide for reasonable penalties and grace periods
for late payment.
(3) QUALIFIED HEALTH PLANS RETAIN RISK OF
NONPAYMENT.—Nothing in this subsection shall be
construed as placing upon a purchasing arrangement
any risk associated with the failure of individuals
and employers to make prompt payment of pre-
miums to the purchasing arrangement (other than
the portion of the premium representing the pur-
chasing arrangement administrative fee under sec-
tion 1125). Each small employer and eligible individ-
ual who enrolls with an insurer through the purchas-
Title I, Subtitle B
ing arrangement is liable to the insurer for pre-
miums.
(c) FORWARDING OF PREMIUMS.—
(1) IN
GENERAL.—If, under an agreement
under subsection (a), premium payments for an in-
surer are made to the purchasing arrangement, the
purchasing arrangement shall forward to the insurer
the amount of the premiums and the purchasing ar-
rangement (and not the employer or individual) shall
be liable for the premium payment collected under
such arrangement.
(2) PAYMENTS.—Payments shall be made by
the purchasing arrangement under this subsection
within a period of days (specified by the Secretary
and not to exceed 7 days) after receipt of the pre-
mium from the small employer of the eligible em-
ployee or the eligible individual, as the case may be.
SEC. 1123. PROVISION OF INFORMATION.
(a) IN GENERAL.—Each purchasing arrangement for
an area shall provide, upon request, to each small em-
ployer that employs individuals in the area and to each
eligible individual who resides in the area—
(1) information provided to the purchasing ar-
rangement by the State or insurers in accordance
Title I, Subtitle B
with rules by the State in which such arrangement
is located, and
(2) the opportunity to enter into an agreement
with the arrangement for the purchase of coverage
through the insurer.
(b) FORWARDING INFORMATION AND PAYROLL DE-
DUCTIONS.—As part of an agreement entered into under
this section, a small employer shall forward the informa-
tion and make the payroll deductions required under sec-
tion 1001.
SEC. 1124. ENROLLING ELIGIBLE EMPLOYEES AND ELIGI-
BLE INDIVIDUALS THROUGH A PURCHASING
ARRANGEMENT.
A purchasing arrangement shall offer, on behalf of
each insurer with which an agreement was entered into
under section 1122 and in accordance with the enrollment
procedures of such insurers, enrollment in health insur-
ance coverage only to—
(1) all eligible employees employed by small em-
ployers in the area served by the purchasing ar-
rangement; and
(2) all eligible individuals residing in such area.
SEC. 1125. RESTRICTION ON CHARGES.
(a) IN GENERAL.—A purchasing arrangement may
impose an administrative fee with respect to an eligible
Title I, Subtitle B
employee or eligible individual obtaining coverage through
the purchasing arrangement.
(b) FEE.—A purchasing arrangement that elects to
impose a fee under subsection (a) shall ensure that such
fee is set as a percentage of the premium for such coverage
and is imposed uniformly with respect to all coverage pro-
vided through the arrangement.
PART 4—DEFINITIONS AND MISCELLANEOUS
PROVISIONS
SEC. 1131. DEFINITIONS.
Except as otherwise specifically provided, for pur-
poses of this subtitle:
(1) DEPENDENT CHILD.—The term ‘‘dependent
child’’ means a child (including an adopted child)
who is under 19 years of age or who is a full-time
student and under 25 years of age.
(2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible
employee’’ means, with respect to an employer, an
employee who—
(A) normally performs on a monthly basis
at least 10 hours of service per week for that
employer; or
(B) is reasonably expected as of the 1st
day of such month to be employed by the em-
ployer for a period of 120 consecutive days dur-
Title I, Subtitle B
ing any 365-day period that includes such 1st
day.
(3) EMPLOYER.—The term ‘‘employer’’ shall
have the meaning applicable under section 3(5) of
the Employee Retirement Income Security Act of
1974.
(4) HEALTH INSURANCE COVERAGE.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘‘health insurance
coverage’’ means any hospital or medical service
policy or certificate, hospital or medical service
plan contract, or health maintenance organiza-
tion group contract offered by an insurer.
(B) EXCEPTION.—Such term does not in-
clude any of the following:
(i) Coverage only for accident, dental,
vision, disability income, or long-term care
insurance, or any combination thereof.
(ii) Medicare supplemental health in-
surance.
(iii) Coverage issued as a supplement
to liability insurance.
(iv) Liability insurance, including gen-
eral liability insurance and automobile li-
ability insurance.
Title I, Subtitle B
(v) Worker’s compensation or similar
insurance.
(vi) Automobile medical-payment in-
surance.
(vii) Coverage for a specified disease
or illness.
(viii) A hospital or fixed indemnity
policy.
(5) NETWORK
PLAN.—The term ‘‘network
plan’’ includes, as defined in standards established
under section 1103, an organization that provides
health insurance coverage which meets specified
standards and under which health services are of-
fered to be provided on an at-risk basis primarily
through a defined set of providers.
(6) INSURER.—The term ‘‘insurer’’ means a li-
censed insurance company, an entity offering pre-
paid hospital or medical services, and a health main-
tenance organization offering such services to an
employer, and includes a similar organization regu-
lated under State law for solvency.
(7) NAIC.—The term ‘‘NAIC’’ means the Na-
tional Association of Insurance Commissioners.
(8) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Health and Human Services.
Title I, Subtitle B
(9) SMALL EMPLOYER.—The term ‘‘small em-
ployer’’ means, with respect to a calendar year, an
employer that normally employs more than 1 but
less than 51 eligible employees on a typical business
day. For the purposes of this paragraph, the term
‘‘employee’’ includes a self-employed individual. For
purposes of determining if an employer is a small
employer, rules similar to the rules of subsection (b)
and (c) of section 414 of the Internal Revenue Code
of 1986 shall apply.
(10) STATE.—The term ‘‘State’’ means the 50
States, the District of Columbia, Puerto Rico, the
Virgin Islands, Guam, and American Samoa.
(11) STATE COMMISSIONER OF INSURANCE.—
The term ‘‘State commissioner of insurance’’ in-
cludes a State superintendent of insurance.
SEC. 1132. ENFORCEMENT.
For enforcement of requirements of this subtitle, see
section 1031.
SEC. 1133. PROHIBITION OF IMPROPER INCENTIVES.
(a) LIMITATION ON FINANCIAL INCENTIVES.—No in-
surer that offers health insurance coverage may vary the
commission or financial or other remuneration to a person
based on the claims experience or health status of individ-
uals enrolled by or through the person.
Title I, Subtitle B
(b) PROHIBITION OF TIE-IN ARRANGEMENTS.—No
insurer that offers health insurance coverage may require
the purchase of any other insurance or product as a condi-
tion for the purchase of such coverage.
SEC. 1134. ANNUAL REPORTS.
(a) IN GENERAL.—The Secretary shall submit to
Congress an annual report on the implementation of this
subtitle and the need for additional reforms to assure and
expand coverage.
(b) INFORMATION
REGARDING
IMPACT
OF
RE-
FORMS.—Each annual report shall include information
concerning at least the following:
(1) Implementation and enforcement of the ap-
plicable MedAccess standards and consumer protec-
tion standards under this subtitle by the States and
by the Secretary.
(2) An evaluation of the impact of the reforms
under this subtitle on the availability of affordable
health coverage for individuals and for small employ-
ers that purchase group health coverage and for
their employees, and, in particular, the impact of—
(A) guaranteed availability of health cov-
erage,
(B) limitations of restrictions from cov-
erage of preexisting conditions,
Title I, Subtitle B
(C) requirement for continuity of coverage,
(D) 
risk-management 
mechanisms 
for
health coverage,
(E) limits on premium variations, and
(F) preemption of State benefit mandates.
In performing such evaluation, the Secretary shall
seek to discount the effect of the insurance cycle on
health insurance premiums.
(3) An assessment of the implications of the re-
forms on adverse selection among health insurance
plans and the distribution of risk among health in-
surance plans.
(c) INFORMATION REGARDING COVERAGE OF THE
UNINSURED.—The report submitted under this section 5
years after the date of the enactment of this Act also shall
include findings and recommendations regarding each of
the following:
(1) Characteristics of the insured and unin-
sured, including demographic characteristics, work-
ing status, health status, and geographic distribu-
tion.
(2) Steps which should be taken to improve ac-
cess to health care and increase health insurance
coverage of the chronically uninsured.
Title I, Subtitle B
(3) Effectiveness of efforts to measure and im-
prove health care outcomes in the public and private
sectors.
(4) Effectiveness of initiatives targeted to im-
proving access of underserved urban and rural popu-
lations to health care services.
(5) Effectiveness of new Federal subsidy pro-
grams, including recommendations to restrain future
growth of such programs.
SEC. 1135. RESEARCH AND DEMONSTRATION PROJECTS;
DEVELOPMENT OF A HEALTH RISK POOLING
MODEL.
(a) RESEARCH AND DEMONSTRATIONS.—The Sec-
retary is authorized, directly, by contract, and through
grants and cooperative agreements within the Department
of Health and Human Services and outside the Depart-
ment—
(1) to conduct research on the impact of this
subtitle on the availability of affordable health cov-
erage for employees and dependents in the small em-
ployers group and individual health care coverage
market and other topics described in section
1134(b), and
(2) to conduct demonstration projects relating
to such topics.
Title I, Subtitle B
(b) DEVELOPMENT
OF METHODS
OF MEASURING
RELATIVE HEALTH RISK.—
(1) IN GENERAL.—The Secretary shall develop
methods for measuring, in terms of the expected
costs of providing benefits under health insurance
plans and, in particular, MedAccess plans, the rel-
ative health risks of eligible individuals.
(2) METHODOLOGY.—The methods—
(A) shall rely on diagnosis or other health-
related information that is predictive of individ-
ual health care needs,
(B) may rely upon information routinely
collected in the process of making payments
under group health plans, and
(C) may provide for such random, sample
audits of records as may be necessary to verify
the accuracy of measurements.
(c) DEVELOPMENT OF A HEALTH RISK POOLING
MODEL.—
(1) IN GENERAL.—The Secretary shall develop
a model, based on the methods of measuring risks
under subsection (b), for equitably distributing
health risks among insurers and group health plans
in the small employer and individual health care cov-
erage market.
Title I, Subtitle B
(2) REDISTRIBUTION
OF
RISK.—Under such
model, insurers and group health plans with below
average health risks would be required to contribute
to a common fund for payment to insurers and
group health plans with above average health risks,
each in relation to the degree of their favorable or
adverse risk selection.
(3) INCENTIVES.—Such model shall include in-
centives to encourage continuous coverage of individ-
uals and eligible individuals and small employers.
(d) CONSULTATION.—The methods and model under
this section shall be developed in consultation with the
NAIC.
(e) REPORT.—By not later than January 1, 1996,
the Secretary shall submit to Congress a report on the
methods and model developed under this section (as well
as on research and demonstration projects conducted
under subsection (a)). The Secretary shall include in the
report such recommendations respecting the application of
the model to insurers and group health plans (and, in par-
ticular, to MedAccess plans) under this subtitle as the Sec-
retary deems appropriate.
(f) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section,
$5,000,000 in each of fiscal years 1995 through 1999.
Title I, Subtitle C
Subtitle C—Preemption
PART 1—SCOPE OF STATE REGULATION
SEC. 1201. PROHIBITION OF STATE BENEFIT MANDATES
FOR GROUP HEALTH PLANS.
In the case of a group health plan, no provision of
State or local law shall apply that requires the coverage
of one or more specific benefits, services, or categories of
health care, or services of any class or type of provider
of health care.
SEC. 1202. PROHIBITION OF PROVISIONS PROHIBITING EM-
PLOYER 
GROUPS 
FROM 
PURCHASING
HEALTH INSURANCE.
No provision of State or local law shall apply that
prohibits 2 or more employers from obtaining coverage
under a multiple employer welfare arrangement under
which all coverage consists of medical care described in
section 607(1) of the Employee Retirement Income Secu-
rity Act of 1974 and is fully insured.
SEC. 1203. PREEMPTION OF STATE ANTI-MANAGED CARE
LAWS.
(a) PREEMPTION OF STATE LAW PROVISIONS.—Sub-
ject to subsection (c), the following provisions of State law
are preempted and may not be enforced:
(1) RESTRICTIONS ON REIMBURSEMENT RATES
OR
SELECTIVE
CONTRACTING.—Any law that re-
Title I, Subtitle C
stricts the ability of a group health plan or insurer
to negotiate reimbursement rates with providers or
to contract selectively with one provider or a limited
number of providers.
(2) RESTRICTIONS
ON
DIFFERENTIAL
FINAN-
CIAL INCENTIVES.—Any law that limits the financial
incentives that a group health plan or insurer may
require a beneficiary to pay when a non-plan pro-
vider is used on a non-emergency basis.
(3) RESTRICTIONS
ON
UTILIZATION
REVIEW
METHODS.—Any law that—
(A) prohibits utilization review of any or
all treatments and conditions,
(B) requires that such review be made (i)
by a resident of the State in which the treat-
ment is to be offered or by an individual li-
censed in such State, or (ii) by a physician in
any particular specialty or with any board cer-
tified specialty of the same medical specialty as
the provider whose services are being reviewed,
(C) requires the use of specified standards
of health care practice in such reviews or re-
quires the disclosure of the specific criteria used
in such reviews,
Title I, Subtitle C
(D) requires payments to providers for the
expenses of responding to utilization review re-
quests,
(E) imposes liability for delays in perform-
ing such review, or
(F) requires standards in addition to or in-
consistent with standards established under sec-
tion 1022(b).
Nothing in subparagraph (B) shall be construed as
prohibiting a State from (i) requiring a licensed phy-
sician or other health care professional be available
at some time in the review or appeal process, or (ii)
requiring that any decision in an appeal from such
a review be made by a licensed physician.
(b) GAO STUDY.—
(1) IN
GENERAL.—The Comptroller General
shall conduct a study of the benefits and cost effec-
tiveness of the use of managed care in the delivery
of health services.
(2) REPORT.—By not later than 4 years after
the date of the enactment of this Act, the Comptrol-
ler General shall submit a report to Congress on the
study conducted under paragraph (1) and shall in-
clude in the report such recommendations (including
Title I, Subtitle C
whether the provisions of subsection (a) should be
extended) as may be appropriate.
(c) SUNSET.—Unless otherwise provided, subsection
(a) shall not apply 5 years after the date of the enactment
of this Act.
SEC. 1204. DEFINITIONS.
For purposes of this part, the terms ‘‘dependent’’,
‘‘employee’’, ‘‘employer’’, ‘‘fully insured’’, ‘‘group health
plan’’, ‘‘health insurance plan’’, ‘‘multiple employer wel-
fare arrangement’’, and ‘‘State’’ have the meanings given
such terms in section 1023(a).
PART 2—MULTIPLE EMPLOYER HEALTH
BENEFITS PROTECTIONS
SEC. 1211. LIMITED EXEMPTION FROM CERTAIN RESTRIC-
TIONS ON ERISA PREEMPTION OF STATE LAW
FOR HEALTH PLANS MAINTAINED BY MUL-
TIPLE EMPLOYERS 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—
Title I, Subtitle C
‘‘(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 INSURANCE COMMISSIONER.—The
term ‘State insurance commissioner’ means the in-
surance commissioner (or similar official) of a State.
‘‘(7) 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.
‘‘(8) FULLY INSURED.—Coverage under a mul-
tiple employer welfare arrangement is ‘fully insured’
if one or more insurers, health maintenance organi-
zations, similar organizations regulated under State
law for solvency, or any combination thereof are lia-
ble under one or more insurance policies or contracts
for all benefits under the arrangement (irrespective
Title I, Subtitle C
of any recourse they may have against other par-
ties).
‘‘(9) EXEMPTED MULTIPLE EMPLOYER HEALTH
PLAN.—The term ‘exempted multiple employer
health plan’ means a multiple employer welfare ar-
rangement treated as an employee welfare benefit
plan by reason of an exemption under this part.
‘‘(10) COMMUNITY
HEALTH
NETWORK.—The
term ‘community health network’ has the meaning
given such term in section 1421 of the Affordable
Health Care Now Act of 1994.
‘‘SEC. 702. EXEMPTED MULTIPLE EMPLOYER HEALTH
PLANS 
RELIEVED 
OF 
CERTAIN 
RESTRIC-
TIONS ON PREEMPTION OF STATE LAW AND
TREATED AS EMPLOYEE WELFARE BENEFIT
PLANS.
‘‘(a) IN GENERAL.—Subject to subsection (b), a mul-
tiple employer welfare arrangement under which coverage
is not fully insured and with respect to which there is in
effect an exemption 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 deter-
mines that provisional protection under this part is appro-
priate)—
Title I, Subtitle C
‘‘(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, 1995, 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).
Title I, Subtitle C
‘‘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
Title I, Subtitle C
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
Title I, Subtitle C
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
Title I, Subtitle C
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-
Title I, Subtitle C
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
Title I, Subtitle C
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.—
‘‘(A) IN GENERAL.—Except in a case to
which subparagraph (B) or (C) applies, the
sponsor is, and has been (together with its im-
mediate predecessor, if any) for a continuous
period of not less than 3 years before the date
of the application, organized and maintained in
good faith, with a constitution and bylaws spe-
cifically stating its purpose, as a trade associa-
tion, an industry association, a professional as-
sociation, or a chamber of commerce (or similar
business group), for substantial purposes other
than that of obtaining or providing medical care
Title I, Subtitle C
described in section 607(1), and the applicant
demonstrates to the satisfaction of the Sec-
retary that the sponsor is established as a per-
manent entity which receives the active support
of its members.
‘‘(B) SPECIAL
RULE
FOR
COMMUNITY
HEALTH
NETWORKS.—In the case of an ar-
rangement that is a community health network
(as defined in section 701(11)), the sponsor is
the operating committee of the network.
‘‘(C) SPECIAL RULE FOR EMPLOYERS IN
THE SAME TRADE OR BUSINESS.—In the case
of an arrangement under which all participating
employers are engaged in a common type of
trade or business, the sponsor is the operating
committee of the arrangement.
‘‘(2) OPERATING COMMITTEE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the arrangement is operated,
pursuant to a trust agreement, by an operating
committee which has complete fiscal control
over the arrangement and which is responsible
for all operations of the arrangement, and the
operating committee has in effect rules of oper-
ation and financial controls, based on a 3-year
Title I, Subtitle C
plan of operation, adequate to carry out the
terms of the arrangement and to meet all re-
quirements of this title applicable to the ar-
rangement. 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 par-
ticipate in the business. No such member is an
owner, officer, director, or employee of, or part-
ner in, a contract administrator or other service
provider to the arrangement, except that offi-
cers or employees of a sponsor which is a serv-
ice provider (other than a contract adminis-
trator) to the arrangement may be members of
the committee if they constitute not more than
25 percent of the membership of the committee
and they do not provide services to the arrange-
ment other than on behalf of the sponsor. The
committee has sole authority to approve appli-
cations for participation in the arrangement
and to contract with a service provider to ad-
minister the day-to-day affairs of the arrange-
ment.
100
Title I, Subtitle C
‘‘(B) SPECIAL
RULE
FOR
COMMUNITY
HEALTH
NETWORKS.—In the case of an ar-
rangement that is a community health network
(as defined in section 701(11)), the operating
committee is the board of the entity that is the
network.
‘‘(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
1212(a)(1), which—
‘‘(A) provides that the committee serves as
the named fiduciary required for plans under
section 1212(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
101
Title I, Subtitle C
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
102
Title I, Subtitle C
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;
103
Title I, Subtitle C
‘‘(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
104
Title I, Subtitle C
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-
105
Title I, Subtitle C
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 MULTIPLE EMPLOYER HEALTH
PLANS.
‘‘(a) NOTICE OF MATERIAL CHANGES.—In the case
of any exempted multiple employer health plan, descrip-
tions of material changes in any information which was
required to be submitted with the application for the ex-
emption granted under this part shall be filed in such form
and manner as shall be prescribed in regulations of the
Secretary. The Secretary may require by regulation prior
notice of material changes with respect to specified mat-
ters which might serve as the basis for suspension or rev-
ocation 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 which is or has been an ex-
empted multiple employer health plan in the same manner
106
Title I, Subtitle C
and to the same extent as such requirements apply to em-
ployee welfare benefit plans, irrespective 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 arrangement shall also in-
clude information described in section 704(a)(3)(F) with
respect to the plan year and, notwithstanding 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 which is or has been an exempted multiple em-
ployer health plan shall engage, on behalf of all covered
individuals, a qualified actuary who shall be responsible
for the preparation of the materials comprising informa-
tion necessary to be submitted by a qualified actuary
under this part. The qualified actuary shall utilize such
assumptions and techniques as are necessary to enable
such actuary to form an opinion as to whether the con-
tents 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.
107
Title I, Subtitle C
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
108
Title I, Subtitle C
‘‘(3) a statement indicating—
‘‘(A) that the arrangement is not a li-
censed insurer under the laws of any State,
‘‘(B) whether coverage under the arrange-
ment is fully insured, and
‘‘(C) if coverage under the arrangement if
not fully insured, (i) whether the arrangement
is (or has ceased to be) an exempted multiple
employer health plan, and (ii) if such an ar-
rangement is an exempted multiple employer
health plan, that such arrangement is treated
as an employee welfare benefit plan under this
title.
‘‘(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 which is or has been an exempted multiple
employer health plan and under which coverage is not fully
insured shall establish and maintain reserves, consisting
of—
‘‘(1) a reserve for unearned contributions,
109
Title I, Subtitle C
‘‘(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
110
Title I, Subtitle C
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.
‘‘(f) ALTERNATIVE MEANS OF COMPLIANCE.—The
Secretary may permit an arrangement (including a com-
munity health network) to substitute, for all or part of
the reserves required under subsection (a), such security,
guarantee, or other financial arrangement as the Sec-
retary determines to be adequate to enable the arrange-
ment to fully meet all its financial obligations on a timely
basis.
‘‘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
111
Title I, Subtitle C
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 which is or has been an
exempted multiple employer health plan determines
that there is reason to believe that the arrangement
will terminate, the committee shall so inform the
112
Title I, Subtitle C
Secretary, shall develop a plan for winding up the
affairs of the arrangement 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 which is or has
been an exempted multiple employer health plan
to meet the requirements of section 707 and
has not been notified by the operating commit-
tee of the arrangement that corrective action
has restored compliance with such require-
ments, 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,
113
Title I, Subtitle C
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.
‘‘SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF
EXEMPTION.
‘‘(a) EXPIRATION AND RENEWAL OF EXEMPTION.—
An exemption granted to a multiple employer welfare ar-
rangement under this part shall expire 3 years after the
date on which the exemption is granted. An exemption
which has expired may be renewed by means of application
for an exemption in accordance with section 704.
‘‘(b) SUSPENSION OR REVOCATION OF EXEMPTION
BY SECRETARY.—The Secretary may suspend or revoke
an exemption granted to a multiple employer welfare
arrangement under this part—
‘‘(1) for any cause that may serve as the basis
for the denial of an initial application for such an
exemption under section 704, or
‘‘(2) if the Secretary finds that—
114
Title I, Subtitle C
‘‘(A) the arrangement, or the sponsor
thereof, in the transaction of business while
under the exemption, has used fraudulent, coer-
cive, or dishonest practices, or has dem-
onstrated incompetence, untrustworthiness, or
financial irresponsibility,
‘‘(B) the arrangement, or the sponsor
thereof, is using such methods or practices in
the conduct of its operations, so as to render its
further transaction of operations hazardous or
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.
115
Title I, Subtitle C
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-
116
Title I, Subtitle C
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.
117
Title I, Subtitle C
‘‘(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.’’.
118
Title I, Subtitle C
(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 which is or has been an exempted
multiple employer health plan (as defined in section
701(10)).’’.
(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.
119
Title I, Subtitle C
‘‘Sec. 702. Exempted multiple employer health plans relieved of certain restric-
tions on preemption of State law and treated as employee wel-
fare benefit plans.
‘‘Sec. 703. Exemption procedure.
‘‘Sec. 704. Eligibility requirements.
‘‘Sec. 705. Additional requirements applicable to exempted multiple employer
health plans.
‘‘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. 1212. 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.’’.
121
Title I, Subtitle C
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. 1214. 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—
122
Title I, Subtitle C
‘‘(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
123
Title I, Subtitle C
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
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Title I, Subtitle C
State in which the sponsoring organization
represents employees,
‘‘(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 Board de-
termines to have been negotiated or otherwise
125
Title I, Subtitle C
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
126
Title I, Subtitle C
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
the court stay, before the completion of the re-
view, an order which prohibits the enrollment of
new individuals into coverage under a plan or
arrangement.’’.
SEC. 1215. EMPLOYEE LEASING HEALTHCARE ARRANGE-
MENTS.
(a) EMPLOYEE LEASING HEALTHCARE ARRANGE-
MENT DEFINED.—Section 3 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002) is amended
by adding at the end the following new paragraph:
127
Title I, Subtitle C
‘‘(43) EMPLOYEE LEASING HEALTHCARE ARRANGE-
MENT.—
‘‘(A) IN
GENERAL.—Subject to subparagraph
(B), the term ‘employee leasing healthcare arrange-
ment’ means any labor leasing arrangement, staff
leasing arrangement, extended employee staffing or
supply arrangement, or other arrangement under
which—
‘‘(i) one business or other entity (herein-
after in this paragraph referred to as the ‘les-
see’), under a lease or other arrangement en-
tered into with any other business or other en-
tity (hereinafter in this paragraph referred to
as the ‘lessor’), receives from the lessor the
services of individuals to be performed under
such lease or other arrangement, and
‘‘(ii) benefits consisting of medical care de-
scribed in section 607(1) are provided to such
individuals or such individuals and their de-
pendents as participants and beneficiaries.
‘‘(B) EXCEPTION.—Such term does not include
an arrangement described in subparagraph (A) if,
under such arrangement, the lessor retains, both le-
gally and in fact, a complete right of direction and
control within the scope of employment over the in-
128
Title I, Subtitle C
dividuals whose services are supplied under such
lease or other arrangement, and such individuals
perform a specified function for the lessee which is
separate and divisible from the primary business or
operations of the lessee.’’.
(b) 
TREATMENT
OF
EMPLOYEE
LEASING
HEALTHCARE ARRANGEMENTS AS MULTIPLE EMPLOYER
WELFARE ARRANGEMENTS.—Section 3(40) of such Act
(29 U.S.C. 1002(40)) (as amended by the preceding provi-
sions of this title) is further amended by adding at the
end the following new subparagraph:
‘‘(E) The term ‘multiple employer welfare arrange-
ment’ includes any employee leasing healthcare arrange-
ment.’’.
(c) SPECIAL
RULES
FOR
EMPLOYEE
LEASING
HEALTHCARE ARRANGEMENTS.—
(1) IN GENERAL.—Part 7 of subtitle B of title
I of such Act (as added by the preceding provisions
of this Act) is amended by adding at the end the fol-
lowing new section:
‘‘SEC. 711. SPECIAL RULES FOR EMPLOYEE LEASING
HEALTHCARE ARRANGEMENTS.
‘‘(a) IN GENERAL.—The requirements of paragraphs
(1), (2), and (3) of section 704(b) shall be treated as satis-
fied in the case of a multiple employer welfare arrange-
129
Title I, Subtitle C
ment that is an employee leasing healthcare arrangement
if the application for exemption includes information
which the Secretary determines to be complete and accu-
rate and sufficient to demonstrate that the following
requirements are met with respect to the arrangement:
‘‘(1) 3-YEAR TENURE.—The lessor has been in
operation for not less than 3 years.
‘‘(2) SOLICITATION
RESTRICTIONS.—Employee
leasing services provided under the arrangement are
not solicited, advertised, or marketed through li-
censed insurance agents or brokers acting in such
capacity.
‘‘(3) CREATION
OF
EMPLOYMENT
RELATION-
SHIP.—
‘‘(A) DISCLOSURE
STATEMENT.—Written
notice is provided to each applicant for employ-
ment subject to coverage under the arrange-
ment, at the time of application for employment
and before commencing coverage under the ar-
rangement, stating that the employer is the les-
sor under the arrangement.
‘‘(B) INFORMED
CONSENT.—Each such
applicant signs a written statement consenting
to the employment relationship with the lessor.
130
Title I, Subtitle C
‘‘(C) INFORMED
RECRUITMENT
OF
LES-
SEE’S EMPLOYEES.—In any case in which the
lessor offers employment to an employee of a
lessee under the arrangement, the lessor in-
forms each employee in writing that his or her
acceptance of employment with the lessor is vol-
untary and that refusal of such offer will not be
deemed to be resignation from or abandonment
of current employment.
‘‘(4) REQUISITE
EMPLOYER-EMPLOYEE
RELA-
TIONSHIP UNDER ARRANGEMENT.—Under the em-
ployer-employee relationship with the employees of
the lessor—
‘‘(A) the lessor retains the ultimate author-
ity to hire, terminate, and reassign such em-
ployees,
‘‘(B) the lessor is responsible for the pay-
ment of wages, payroll-related taxes, and em-
ployee benefits, without regard to payment by
the lessee to the lessor for its services,
‘‘(C) the lessor maintains the right of di-
rection and control over its employees, except to
the extent that the lessee is responsible for su-
pervision of the work performed consistent with
131
Title I, Subtitle C
the lessee’s responsibility for its product or
service, and
‘‘(D) in accordance with section 301(a) of
the Labor Management Relations Act, 1947 (29
U.S.C. 185(a)), the lessor retains in the ab-
sence of an applicable collective bargaining
agreement, the right to enter into arbitration
and to decide employee grievances, and
‘‘(E) no owner, officer, or director of, or
partner in, a lessee is an employee of the lessor,
and not more than 10 percent of the individuals
covered under the arrangement consist of own-
ers, officers, or directors of, or partners in,
such a lessee (or any combination thereof).
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) LESSOR.—The term ‘lessor’ means the
business or other entity from which services of indi-
viduals are obtained under an employee leasing
healthcare arrangement.
‘‘(2) LESSEE.—The term ‘lessee’ means a busi-
ness or other entity which receives the services of in-
dividuals provided under an employee leasing
healthcare arrangement.’’.
(2) CLERICAL AMENDMENT.—The table of con-
tents in section 1 of such Act (as amended by the
132
Title I, Subtitle C
preceding provisions of this title) is further amended
by inserting after the item relating to section 710
the following new item:
‘‘Sec. 711. Employee leasing healthcare arrangements.’’.
SEC. 1216. ENFORCEMENT PROVISIONS RELATING TO MUL-
TIPLE EMPLOYER WELFARE ARRANGEMENTS
AND EMPLOYEE LEASING HEALTHCARE AR-
RANGEMENTS.
(a) ENFORCEMENT
OF FILING REQUIREMENTS.—
Section 502 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1132) is amended—
(1) in subsection (a)(6), by striking ‘‘subsection
(c)(2) or (i) or (l)’’ and inserting ‘‘paragraph (2) or
(4) of subsection (c) or subsection (i) or (l)’’; and
(2) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) The Secretary may assess a civil penalty against
any person of up to $1,000 a day from the date of such
person’s failure or refusal to file the information required
to be filed with the Secretary under section 101(e).’’.
(b) ACTIONS BY STATES IN FEDERAL COURT.—Sec-
tion 502(a) of such Act (29 U.S.C. 1132(a)) is amended—
(1) in paragraph (5), by striking ‘‘or’’ at the
end;
(2) in paragraph (6), by striking the period and
inserting ‘‘, or’’; and
133
Title I, Subtitle C
(3) by adding at the end the following:
‘‘(7) by a State official having authority under
the law of such State to enforce the laws of such
State regulating insurance, to enjoin any act or
practice which violates any provision of part 7 which
such State has the power to enforce under part 7.’’.
(c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL
MISREPRESENTATIONS.—Section 501 of such Act (29
U.S.C. 1131) is amended—
(1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) Any person who, either willfully or with willful
blindness, falsely represents, to any employee, any employ-
ee’s beneficiary, any employer, the Secretary, or any State,
an arrangement established or maintained for the purpose
of offering or providing any benefit described in section
3(1) to employees or their beneficiaries as—
‘‘(1) being an exempted multiple employer wel-
fare arrangement (as defined in section 701(10)),
‘‘(2) being an employee leasing healthcare ar-
rangement under an exemption granted under part
7, or
134
Title I, Subtitle C
‘‘(3) having been established or maintained
under or pursuant to a collective bargaining agree-
ment,
shall, upon conviction, be imprisoned not more than five
years, be fined under title 18, United States Code, or
both.’’.
(d) CEASE ACTIVITIES ORDERS.—Section 502 of
such Act (29 U.S.C. 1132) is amended by adding at the
end the following new subsection:
‘‘(m)(1) Subject to paragraph (2), upon application
by the Secretary showing the operation, promotion, or
marketing of a multiple employer welfare arrangement
providing benefits consisting of medical care described in
section 607(1) that—
‘‘(A) is not licensed, registered, or otherwise ap-
proved under the insurance laws of the States in
which the arrangement offers or provides benefits, or
‘‘(B) is not operating in accordance with the
terms of an exemption granted by the Secretary
under part 7,
a district court of the United States shall enter an order
requiring that the arrangement cease activities.
‘‘(2) Paragraph (1) shall not apply in the case of a
multiple employer welfare arrangement if the arrangement
shows that—
135
Title I, Subtitle C
‘‘(A) coverage under it is fully insured, within
the meaning of section 701(9),
‘‘(B) it is licensed, registered, or otherwise ap-
proved in each State in which it offers or provides
benefits, except to the extent that such State does
not require licensing, registration, or approval of
multiple employer welfare arrangements under which
all coverage is fully insured, and
‘‘(C) with respect to each such State, it is oper-
ating in accordance with applicable State insurance
laws that are not superseded under section 514.
‘‘(3) The court may grant such additional equitable
or remedial relief, including any relief available under this
title, as it deems necessary to protect the interests of the
public and of persons having claims for benefits against
the arrangement.’’.
(e) RESPONSIBILITY
FOR CLAIMS PROCEDURE.—
Section 503 of such Act (29 U.S.C. 1133) is amended by
adding at the end (after and below paragraph (2)) the fol-
lowing new sentence: ‘‘The terms of each multiple em-
ployer welfare arrangement to which this section applies
and which provides benefits consisting of medical care de-
scribed in section 607(1) shall require the operating com-
mittee or the named fiduciary (as applicable) to ensure
136
Title I, Subtitle C
that the requirements of this section are met in connection
with claims filed under the arrangement.’’.
SEC. 1217. SOLVENCY REQUIREMENTS FOR CERTAIN SELF-
INSURED GROUP HEALTH PLANS.
(a) IN GENERAL.—The Secretary of Labor shall pre-
scribe by regulation provisions described in subsection (b)
applicable to group health plans which are not multiple
employer health plans, which offer coverage with respect
to employees of small employers (as defined in section
1131), and under which some or all coverage is not fully
insured (within the meaning of section 701(9) of the Em-
ployee Retirement Income Security Act of 1974)), for the
purpose of promoting adequate funding of such plans.
(b) REQUIREMENTS.—
(1) GENERAL
RULE.—Except as provided in
paragraph (2), the provisions described in subsection
(a) shall require the group health plan to establish
and maintain reserves, consisting of—
(A) a reserve for unearned contributions,
and
(B) a reserve for payment of claims re-
ported and not yet paid and claims incurred but
not yet reported, and for expected administra-
tive costs with respect to such claims.
137
Title I, Subtitle C
(2) EXCEPTION.—The Secretary may in such
regulations permit a group health plan to substitute,
for all or part of the reserves required under para-
graph (1), such security, guarantee, or other finan-
cial arrangement as the Secretary determines to be
adequate to enable the plan to fully meet all its fi-
nancial obligations on a timely basis.
(c) CRITERIA FOR COMPLIANCE.—The criteria that
the Secretary shall take into account in determining com-
pliance with the requirements described in subsection (b)
shall include—
(1) the size of the employer involved;
(2) the benefit package provided under the
plan;
(3) whether the coverage provided under the
plan is in the form of a fee-for-service arrangement,
a health maintenance organization, or any other type
of coverage;
(4) the extent to which excess/stop loss coverage
is maintained for the plan; and
(5) the nature of any security, guarantee, or
other financial arrangement described in subsection
(b)(2) obtained for the plan.
138
Title I, Subtitle C
SEC. 1218. FILING REQUIREMENTS FOR MULTIPLE EM-
PLOYER WELFARE ARRANGEMENTS PROVID-
ING HEALTH BENEFITS.
Section 101 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1021) is amended—
(1) by redesignating subsection (e) as sub-
section (f); and
(2) by inserting after subsection (d) the follow-
ing new subsection:
‘‘(e)(1) Each multiple employer welfare arrangement
shall file with the Secretary a registration statement de-
scribed in paragraph (2) within 60 days before commenc-
ing operations (in the case of an arrangement commencing
operations on or after January 1, 1995) and no later than
February 15 of each year (in the case of an arrangement
in operation since the beginning of such year), unless, as
of the date by which such filing otherwise must be made,
such arrangement provides no benefits consisting of medi-
cal care described in section 607(1).
‘‘(2) Each registration statement—
‘‘(A) shall be filed in such form, and contain
such information concerning the multiple employer
welfare arrangement and any persons involved in its
operation (including whether coverage under the ar-
rangement is fully insured), as shall be provided in
139
Title I, Subtitle C
regulations which shall be prescribed by the Sec-
retary, and
‘‘(B) if coverage under the arrangement is not
fully insured, shall contain a certification that copies
of such registration statement have been transmitted
by certified mail to—
‘‘(i) in the case of an arrangement which
is an exempted multiple employer health plan
(as defined in section 701(10)), the State insur-
ance commissioner of the domicile State of such
arrangement, or
‘‘(ii) in the case of an arrangement which
is not an exempted multiple employer health
plan, the State insurance commissioner of each
State in which the arrangement is located.
‘‘(3) The person or persons responsible for filing the
annual registration statement are—
‘‘(A) the trustee or trustees so designated by
the terms of the instrument under which the mul-
tiple employer welfare arrangement is established or
maintained, or
‘‘(B) in the case of a multiple employer welfare
arrangement for which the trustee or trustees can-
not be identified, or upon the failure of the trustee
or trustees of an arrangement to file, the person or
140
Title I, Subtitle C
persons actually responsible for the acquisition, dis-
position, control, or management of the cash or
property of the arrangement, irrespective of whether
such acquisition, disposition, control, or management
is exercised directly by such person or persons or
through an agent designated by such person or
persons.
‘‘(4) Any agreement entered into under section
506(c) with a State as the primary domicile State with
respect to any multiple employer welfare arrangement
shall provide for simultaneous filings of reports required
under this subsection with the Secretary and with the
State insurance commissioner of such State.’’.
SEC. 1219. COOPERATION BETWEEN FEDERAL AND STATE
AUTHORITIES.
Section 506 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1136) is amended by adding
at the end the following new subsection:
‘‘(c) RESPONSIBILITY WITH RESPECT TO MULTIPLE
EMPLOYER WELFARE ARRANGEMENTS.—
‘‘(1) STATE ENFORCEMENT.—
‘‘(A) 
AGREEMENTS
WITH
STATES.—A
State may enter into an agreement with the
Secretary for delegation to the State of some or
all of the Secretary’s authority under sections
141
Title I, Subtitle C
502 and 504 to enforce the provisions of this
title applicable to multiple employer welfare ar-
rangements which are or have been exempted
multiple employer health plans (as defined in
section 701(10)). The Secretary shall enter into
the agreement if the Secretary determines that
the delegation provided for therein would not
result in a lower level or quality of enforcement
of the provisions of this title.
‘‘(B) 
DELEGATIONS.—Any 
department,
agency, or instrumentality of a State to which
authority is delegated pursuant to an agree-
ment entered into under this paragraph may, if
authorized under State law and to the extent
consistent with such agreement, exercise the
powers of the Secretary under this title which
relate to such authority.
‘‘(C) CONCURRENT
AUTHORITY
OF
THE
SECRETARY.—If the Secretary delegates author-
ity to a State in an agreement entered into
under subparagraph (A), the Secretary may
continue to exercise such authority concurrently
with the State.
‘‘(D) RECOGNITION OF PRIMARY DOMICILE
STATE.—In entering into any agreement with a
142
Title I, Subtitle C
State under subparagraph (A), the Secretary
shall ensure that, as a result of such agreement
and all other agreements entered into under
subparagraph (A), only one State will be recog-
nized, with respect to any particular multiple
employer welfare arrangement, as the primary
domicile State to which authority has been dele-
gated pursuant to such agreements.
‘‘(2) ASSISTANCE TO STATES.—The Secretary
shall—
‘‘(A) provide enforcement assistance to the
States with respect to multiple employer welfare
arrangements, including, but not limited to, co-
ordinating Federal and State efforts through
the establishment of cooperative agreements
with appropriate State agencies under which
the Pension and Welfare Benefits Administra-
tion keeps the States informed of the status of
its cases and makes available to the States in-
formation obtained by it,
‘‘(B) provide continuing technical assist-
ance to the States with respect to issues involv-
ing multiple employer welfare arrangements
and this Act,
143
Title I, Subtitle C
‘‘(C) assist the States in obtaining from
the Office of Regulations and Interpretations
timely and complete responses to requests for
advisory opinions on issues described in sub-
paragraph (B), and
‘‘(D) distribute copies of all advisory opin-
ions described in subparagraph (C) to the State
insurance commissioner of each State.’’.
SEC. 1220. EFFECTIVE DATE; TRANSITIONAL RULES.
(a) EFFECTIVE DATE.—The amendments made by
this part shall take effect January 1, 1995, except that
the Secretary of Labor may issue regulations before such
date under such amendments. The Secretary shall issue
all regulations necessary to carry out the amendments
made by this title before the effective date thereof.
(b) TRANSITIONAL RULES.—If the sponsor of a mul-
tiple employer welfare arrangement which, as of January
1, 1995, provides benefits consisting of medical care de-
scribed in section 607(1) of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1167(1)) files with
the Secretary of Labor an application for an exemption
under part 7 of subtitle B of title I of such Act within
180 days after such date and the Secretary has not, as
of 90 days after receipt of such application, found such
application to be materially deficient, section 514(b)(6)(A)
144
Title I, Subtitle C
of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply
with respect to such arrangement during the 18-month pe-
riod following such date. If the Secretary determines, at
any time after the date of enactment of this Act, that any
such exclusion from coverage under the provisions of such
section 514(b)(6)(A) of such Act of a multiple employer
welfare arrangement would be detrimental to the interests
of individuals covered under such arrangement, such ex-
clusion shall cease as of the date of the determination.
Any determination made by the Secretary under this sub-
section shall be in the Secretary’s sole discretion.
PART 3—ENCOURAGEMENT OF MULTIPLE EM-
PLOYER ARRANGEMENTS PROVIDING BASIC
HEALTH BENEFITS
SEC. 1221. ELIMINATING COMMONALITY OF INTEREST OR
GEOGRAPHIC LOCATION REQUIREMENT FOR
TAX EXEMPT TRUST STATUS.
(a) IN GENERAL.—Paragraph (9) of section 501(c)
of the Internal Revenue Code of 1986 (relating to exempt
organizations) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and
(2) by adding at the end the following:
‘‘(B) Any determination of whether a multiple
employer health plan (as defined in section 701(10)
of the Employee Retirement Income Security Act of
145
Title I, Subtitle C
1974) or an insured multiple employer health plan
(as defined in section 701(11) of such Act) is a vol-
untary employees’ beneficiary association meeting
the requirements of this paragraph shall be made
without regard to any determination of commonality
of interest or geographic location if—
‘‘(i) such plan provides at least standard
coverage (consistent with section 102(c) of the
Affordable Health Care Now Act of 1994), and
‘‘(ii) in the case of an insured multiple em-
ployer health plan, it meets the requirements
enforceable under section 514(b)(6)(B)(i) of the
Employee Retirement Income Security Act of
1974 to the extent not preempted by section
1202 of the Affordable Health Care Now Act of
1994.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply with respect to determinations
made on or after January 1, 1995.
SEC. 1222. SINGLE ANNUAL FILING FOR ALL PARTICIPAT-
ING EMPLOYERS.
(a) IN GENERAL.—Section 110 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1030),
as amended by section 1211(c) of this subtitle, is amended
by adding at the end the following new subsection:
146
Title I, Subtitle C
‘‘(d) The Secretary shall prescribe by regulation or
otherwise an alternative method providing for the filing
of a single annual report (as referred to in section
104(a)(1)(A)) with respect to all employers who are par-
ticipating employers under a multiple employer welfare ar-
rangement under which all coverage consists of medical
care (described in section 607(1)) and is fully insured (as
defined in section 701(9)).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act. The Secretary of Labor shall prescribe
the alternative method referred to in section 110(d) of the
Employee Retirement Income Security Act of 1974, as
added by such amendment, within 90 days after the date
of the enactment of this Act.
SEC. 1223. COMPLIANCE WITH COVERAGE REQUIREMENTS
THROUGH MULTIPLE EMPLOYER HEALTH AR-
RANGEMENTS.
(a) COMPLIANCE WITH APPLICABLE REQUIREMENTS
THROUGH MULTIEMPLOYER PLANS.—In any case in
which an eligible employee is, for any plan year, a partici-
pant in a group health plan which is a multiemployer plan,
the requirements of section 1001(a) shall be deemed to
be met with respect to such employee for such plan year
if the employer requirements of subsection (c) are met
147
Title I, Subtitle C
with respect to the eligible employee, irrespective of wheth-
er, or to what extent, the employer makes employer con-
tributions on behalf of the eligible employee.
(b) COMPLIANCE WITH APPLICABLE REQUIREMENTS
THROUGH OTHER MULTIPLE EMPLOYER HEALTH AR-
RANGEMENTS.—
(1) IN GENERAL.—In any case in which an em-
ployer is, for any plan year, a participating employer
(as defined in paragraph (3)) in an exempted mul-
tiple employer health plan or in a multiple employer
welfare arrangement under which all coverage con-
sists of medical care (described in section 607(1) of
the Employee Retirement Income Security Act of
1974) and is fully insured (as defined in section
701(9) of such Act), the requirements of section
1001(a) shall be deemed to be met (and the ERISA
requirements of paragraph (2) shall be deemed to be
met by the employer) with respect to an eligible em-
ployee of the employer if—
(A) the employer requirements of sub-
section (c) are met with respect to the eligible
employee, and
(B) the applicable ERISA requirements of
paragraph (2) are met by the plan or arrange-
ment with respect to the plan or arrangement,
148
Title I, Subtitle C
irrespective of whether, or to what extent, the em-
ployer makes employer contributions on behalf of the
eligible employee.
(2) APPLICABLE ERISA REQUIREMENTS.—The
applicable ERISA requirements of this paragraph
are the requirements of—
(A) part 1 of subtitle B of title I of the
Employee Retirement Income Security Act of
1974 (relating to reporting and disclosure),
(B) section 503 of such Act (relating to
claims procedure), and
(C) part 6 of subtitle B of such title I (re-
lating to group health plans),
to the extent that such requirements relate to em-
ployers as plan sponsors or plan administrators.
(3) PARTICIPATING
EMPLOYER.—In this sub-
section, the term ‘‘participating employer’’ means, in
connection with an exempted multiple employer
health plan or a multiple employer welfare arrange-
ment under which all coverage consists of medical
care (described in section 607(1) of the Employee
Retirement Income Security Act of 1974) and is
fully insured (as defined in section 701(9) of such
Act), any employer if any of its employees, or any
of the dependents of its employees, are or were cov-
149
Title I, Subtitle C
ered under such plan or arrangement in connection
with the employment of the employees.
(c) EMPLOYER REQUIREMENTS.—The employer re-
quirements of this subsection are met under a plan or ar-
rangement with respect to an eligible employee if—
(1) the employee is eligible under the plan or
arrangement to elect coverage on an annual basis
and is provided a reasonable opportunity to make
the election in such form and manner and at such
times as are provided by the plan or arrangement,
(2) subject to section 1001(c), such coverage in-
cludes at least the standard coverage (consistent
with section 1102(c)),
(3) the employer facilitates collection of any
employee contributions under the plan or arrange-
ment and permits the employee to elect to have em-
ployee contributions under the plan or arrangement
collected through payroll deduction, and
(4) in the case of a plan or arrangement to
which part 1 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 does not
otherwise apply, the employer provides to the em-
ployee a summary plan description described in sec-
tion 102(a)(1) of such Act in the form and manner
150
Title I, Subtitle D
and at such times as are required under such part
1 with respect to employee welfare benefit plans.
Subtitle D—Health Deduction
Fairness
SEC. 1301. PERMANENT EXTENSION AND INCREASE IN
HEALTH INSURANCE TAX DEDUCTION FOR
SELF-EMPLOYED INDIVIDUALS.
(a) PERMANENT EXTENSION OF DEDUCTION.—
(1) IN GENERAL.—Subsection (l) of section 162
of the Internal Revenue Code of 1986 (relating to
special rules for health insurance costs of self-em-
ployed individuals) is amended by striking paragraph
(6).
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to taxable years begin-
ning after December 31, 1993.
(b) INCREASE IN AMOUNT OF DEDUCTION; INSUR-
ANCE PURCHASED MUST MEET CERTAIN STANDARDS.—
(1) INCREASE IN AMOUNT OF DEDUCTION.—
Paragraph (1) of section 162(l) of such Code is
amended by striking ‘‘25 percent of’’ and inserting
‘‘100 percent (25 percent in the case of taxable
years beginning in 1994 or 1995 and 50 percent in
the case of taxable years beginning in 1996 or 1997)
of’’.