105TH CONGRESS
2D SESSION
H. R. 4250
AN ACT
To provide new patient protections under group
health plans.
105TH CONGRESS
2D SESSION
H. R. 4250
AN ACT
To provide new patient protections under group health plans.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) SHORT TITLE.—The Act may be cited as the
‘‘Patient Protection Act of 1998’’.
(b) TABLE OF CONTENTS.—The table of contents is
as follows:
Sec. 1. Short title and table of contents.
TITLE I—AMENDMENTS TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974
Subtitle A—Patient Protections
Sec. 1001. Patient access to unrestricted medical advice, emergency medical
care, obstetric and gynecological care, and pediatric care.
Sec. 1002. Effective date and related rules.
Subtitle B—Patient Access to Information
Sec. 1101. Patient access to information regarding plan coverage, managed
care procedures, health care providers, and quality of medical
care.
Sec. 1102. Effective date.
Subtitle C—New Procedures and Access to Courts for Grievances Arising
under Group Health Plans
Sec. 1201. Special rules for group health plans.
Sec. 1202. Effective date.
Subtitle D—Affordable Health Coverage for Employees of Small Businesses
Sec. 1301. Short title of subtitle.
Sec. 1302. Rules governing association health plans.
Sec. 1303. Clarification of treatment of single employer arrangements.
Sec. 1304. Clarification of treatment of certain collectively bargained arrange-
ments.
Sec. 1305. Enforcement provisions relating to association health plans.
Sec. 1306. Cooperation between Federal and State authorities.
Sec. 1307. Effective date and transitional and other rules.
TITLE II—AMENDMENTS TO PUBLIC HEALTH SERVICE ACT
Subtitle A—Patient Protections and Point of Service Coverage Requirements
Sec. 2001. Patient access to unrestricted medical advice, emergency medical
care, obstetric and gynecological care, pediatric care.
Sec. 2002. Requiring health maintenance organizations to offer option of point-
of-service coverage.
Subtitle B—Patient Access to Information
Sec. 2101. Patient access to information regarding plan coverage, managed
care procedures, health care providers, and quality of medical
care.
Sec. 2102. Effective date.
Subtitle C—HealthMarts
Sec. 2201. Short title of subtitle.
Sec. 2202. Expansion of consumer choice through HealthMarts.
SUBTITLE D—COMMUNITY HEALTH ORGANIZATIONS
Sec. 2301. Promotion of provision of insurance by community health organiza-
tions.
TITLE III—AMENDMENTS TO THE INTERNAL REVENUE CODE OF
1986
Subtitle A—Patient Protections
Sec. 3001. Patient access to unrestricted medical advice, emergency medical
care, obstetric and gynecological care, pediatric care.
Sec. 3002. Effective date and related rules.
Subtitle B—Patient Access to Information
Sec. 3101. Patient access to information regarding plan coverage, managed
care procedures, health care providers, and quality of medical
care.
Sec. 3102. Effective date.
Subtitle C—Medical Savings Accounts
Sec. 3201. Expansion of availability of medical savings accounts.
Sec. 3202. Exception from insurance limitation in case of medical savings ac-
counts.
Sec. 3203. Sense of the House of Representatives.
Subtitle D—Revenue Offsets
Sec. 3301. Clarification of definition of specified liability loss.
Sec. 3302. Property subject to a liability treated in same manner as assumption
of liability.
Sec. 3303. Limitation on required accrual of amounts received for performance
of certain personal services.
Sec. 3304. Returns relating to cancellations of indebtedness by organizations
lending money.
Sec. 3305. Clarification and expansion of mathematical error assessment proce-
dures.
Sec. 3306. Inclusion of rotavirus gastroenteritis as a taxable vaccine.
TITLE IV—HEALTH CARE LAWSUIT REFORM
Subtitle A—General Provisions
Sec. 4001. Federal reform of health care liability actions.
Sec. 4002. Definitions.
Sec. 4003. Effective date.
Subtitle B—Uniform Standards for Health Care Liability Actions
Sec. 4011. Statute of limitations.
Sec. 4012. Calculation and payment of damages.
Sec. 4013. Alternative dispute resolution.
Sec. 4014. Reporting on fraud and abuse enforcement activities.
TITLE V—CONFIDENTIALITY OF HEALTH INFORMATION
Sec. 5001. Confidentiality of protected health information.
Sec. 5002. Study and report on effect of State law on health-related research.
Sec. 5003. Study and report on State law on protected health information.
Sec. 5004. Protection for certain information developed to reduce mortality or
morbidity or for improving patient care and safety.
Sec. 5005. Effective date for standards governing unique health identifiers for
individuals.
TITLE I—AMENDMENTS TO THE
EMPLOYEE RETIREMENT IN-
COME SECURITY ACT OF 1974
Subtitle A—Patient Protections
SEC. 1001. PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE, EMERGENCY MEDICAL CARE, OB-
STETRIC AND GYNECOLOGICAL CARE, AND
PEDIATRIC CARE.
(a) IN GENERAL.—Subpart B of part 7 of subtitle
B of title I of the Employee Retirement Income Security
Act of 1974 is amended further by adding at the end the
following new section:
‘‘SEC. 713. PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE, EMERGENCY MEDICAL CARE, OB-
STETRIC AND GYNECOLOGICAL CARE, PEDI-
ATRIC CARE.
‘‘(a) PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE.—
‘‘(1) IN GENERAL.—In the case of any health
care professional acting within the lawful scope of
practice in the course of carrying out a contractual
employment arrangement or other direct contractual
arrangement between such professional and a group
health plan or a health insurance issuer offering
health insurance coverage in connection with a group
health plan, the plan or issuer with which such con-
tractual employment arrangement or other direct
contractual arrangement is maintained by the pro-
fessional may not impose on such professional under
such arrangement any prohibition or restriction with
respect to advice, provided to a participant or bene-
ficiary under the plan who is a patient, about the
health status of the participant or beneficiary or the
medical care or treatment for the condition or dis-
ease of the participant or beneficiary, regardless of
whether benefits for such care or treatment are pro-
vided under the plan or health insurance coverage
offered in connection with the plan.
‘‘(2) HEALTH CARE PROFESSIONAL DEFINED.—
For purposes of this subsection, the term ‘health
care professional’ means a physician (as defined in
section 1861(r) of the Social Security Act) or other
health care professional if coverage for the profes-
sional’s services is provided under the group health
plan for the services of the professional. Such term
includes a podiatrist, optometrist, chiropractor, psy-
chologist, dentist, physician assistant, physical or oc-
cupational therapist and therapy assistant, speech–
language pathologist, audiologist, registered or li-
censed practical nurse (including nurse practitioner,
clinical nurse specialist, certified registered nurse
anesthetist, and certified nurse–midwife), licensed
certified social worker, registered respiratory thera-
pist, and certified respiratory therapy technician.
‘‘(b) PATIENT ACCESS
TO EMERGENCY MEDICAL
CARE.—
‘‘(1) IN
GENERAL.—To the extent that the
group health plan (or health insurance issuer offer-
ing health insurance coverage in connection with the
plan) provides for any benefits consisting of emer-
gency 
medical 
care 
(as 
defined 
in 
section
503(b)(9)(I)), except for items or services specifi-
cally excluded—
‘‘(A) the plan or issuer shall provide bene-
fits, without requiring preauthorization and
without regard to otherwise applicable network
limitations, for appropriate emergency medical
screening examinations (within the capability of
the emergency facility, including ancillary serv-
ices routinely available to the emergency facil-
ity) to the extent that a prudent layperson, who
possesses an average knowledge of health and
medicine, would determine such examinations to
be necessary in order to determine whether
emergency medical care (as so defined) is re-
quired; and
‘‘(B) the plan or issuer shall provide bene-
fits for additional emergency medical services
following an emergency medical screening exam-
ination (if determined necessary under subpara-
graph (A)) to the extent that a prudent emer-
gency medical professional would determine
such additional emergency services to be nec-
essary to avoid the consequences described in
section 503(b)(9)(I).
‘‘(2) UNIFORM
COST-SHARING
REQUIRED.—
Nothing in this subsection shall be construed as pre-
venting a group health plan or issuer from imposing
any form of cost-sharing applicable to any partici-
pant or beneficiary (including coinsurance, copay-
ments, deductibles, and any other charges) in rela-
tion to benefits described in paragraph (1), if such
form of cost-sharing is uniformly applied under such
plan, with respect to similarly situated participants
and beneficiaries, to all benefits consisting of emer-
gency 
medical 
care 
(as 
defined 
in 
section
503(b)(9)(I)) provided to such similarly situated
participants and beneficiaries under the plan.
‘‘(c) PATIENT ACCESS TO OBSTETRIC AND GYNECO-
LOGICAL CARE.—
‘‘(1) IN
GENERAL.—In any case in which a
group health plan (or a health insurance issuer of-
fering health insurance coverage in connection with
the plan)—
‘‘(A) provides benefits under the terms of
the plan consisting of—
‘‘(i) routine gynecological care (such
as preventive women’s health examina-
tions); or
‘‘(ii) routine obstetric care (such as
routine pregnancy-related services),
provided by a participating physician who spe-
cializes in such care (or provides benefits con-
sisting of payment for such care); and
‘‘(B) the plan requires or provides for des-
ignation by a participant or beneficiary of a
participating primary care provider,
if the primary care provider designated by such a
participant or beneficiary is not such a physician,
then the plan (or issuer) shall meet the requirements
of paragraph (2).
‘‘(2) REQUIREMENTS.—A group health plan (or
a health insurance issuer offering health insurance
coverage in connection with the plan) meets the re-
quirements of this paragraph, in connection with
benefits described in paragraph (1) consisting of
care described in clause (i) or (ii) of paragraph
(1)(A) (or consisting of payment therefor), if the
plan (or issuer)—
‘‘(A) does not require authorization or a
referral by the primary care provider in order
to obtain such benefits; and
‘‘(B) treats the ordering of other routine
care of the same type, by the participating phy-
sician providing the care described in clause (i)
or (ii) of paragraph (1)(A), as the authorization
of the primary care provider with respect to
such care.
‘‘(3) CONSTRUCTION.—Nothing in paragraph
(2)(B) shall waive any requirements of coverage re-
lating to medical necessity or appropriateness with
respect to coverage of gynecological or obstetric care
so ordered.
‘‘(d) PATIENT ACCESS TO PEDIATRIC CARE.—
‘‘(1) IN
GENERAL.—In any case in which a
group health plan (or a health insurance issuer of-
fering health insurance coverage in connection with
the plan) provides benefits consisting of routine pe-
diatric care provided by a participating physician
who specializes in pediatrics (or consisting of pay-
ment for such care) and the plan requires or pro-
vides for designation by a participant or beneficiary
of a participating primary care provider, the plan (or
issuer) shall provide that such a participating physi-
cian may be designated, if available, by a parent or
guardian of any beneficiary under the plan is who
under 18 years of age, as the primary care provider
with respect to any such benefits.
‘‘(2) CONSTRUCTION.—Nothing in paragraph
(1) shall waive any requirements of coverage relating
to medical necessity or appropriateness with respect
to coverage of pediatric care.
‘‘(e) TREATMENT
OF MULTIPLE COVERAGE OP-
TIONS.—In the case of a plan providing benefits under two
or more coverage options, the requirements of subsections
(c) and (d) shall apply separately with respect to each cov-
erage option.’’.
(b) CONFORMING AMENDMENT.—The table of con-
tents in section 1 of such Act is amended by adding at
the end of the items relating to subpart B of part 7 of
subtitle B of title I of such Act the following new item:
‘‘Sec. 713. Patient access to unrestricted medical advice, emergency medical
care, obstetric and gynecological care, and pediatric care.’’.
SEC. 1002. EFFECTIVE DATE AND RELATED RULES.
(a) IN GENERAL.—The amendments made by this
subtitle shall apply with respect to plan years beginning
on or after January 1 of the second calendar year follow-
ing the date of the enactment of this Act, except that the
Secretary of Labor may issue regulations before such date
under such amendments. The Secretary shall first issue
regulations necessary to carry out the amendments made
by this section before the effective date thereof.
(b) LIMITATION ON ENFORCEMENT ACTIONS.—No
enforcement action shall be taken, pursuant to the amend-
ments made by this subtitle, against a group health plan
or health insurance issuer with respect to a violation of
a requirement imposed by such amendments before the
date of issuance of regulations issued in connection with
such requirement, if the plan or issuer has sought to com-
ply in good faith with such requirement.
(c) SPECIAL RULE FOR COLLECTIVE BARGAINING
AGREEMENTS.—In the case of a group health plan main-
tained pursuant to one or more collective bargaining
agreements between employee representatives and one or
more employers ratified before the date of the enactment
of this Act, the provisions of subsections (b), (c), and (d)
of section 713 of the Employee Retirement Income Secu-
rity Act of 1974 (as added by this subtitle) shall not apply
with respect to plan years beginning before the later of—
(1) the date on which the last of the collective
bargaining agreements relating to the plan termi-
nates (determined without regard to any extension
thereof agreed to after the date of the enactment of
this Act); or
(2) January 1, 2001.
For purposes of this subsection, any plan amendment
made pursuant to a collective bargaining agreement relat-
ing to the plan which amends the plan solely to conform
to any requirement added by this subtitle shall not be
treated as a termination of such collective bargaining
agreement.
(d) ASSURING COORDINATION.—The Secretary of
Labor, the Secretary of the Treasury, and the Secretary
of Health and Human Services shall ensure, through the
execution of an interagency memorandum of understand-
ing among such Secretaries, that—
(1) regulations, rulings, and interpretations
issued by such Secretaries relating to the same mat-
ter over which two or more such Secretaries have re-
sponsibility under the provisions of this subtitle, sec-
tion 2101, and subtitle A of title III (and the
amendments made thereby) are administered so as
to have the same effect at all times; and
(2) coordination of policies relating to enforcing
the same requirements through such Secretaries in
order to have a coordinated enforcement strategy
that avoids duplication of enforcement efforts and
assigns priorities in enforcement.
(e) TREATMENT OF RELIGIOUS NONMEDICAL PRO-
VIDERS.—
(1) IN GENERAL.—Nothing in this Act (or the
amendments made thereby) shall be construed to—
(A) restrict or limit the right of group
health plans, and of health insurance issuers of-
fering health insurance coverage in connection
with group health plans, to include as providers
religious nonmedical providers;
(B) require such plans or issuers to—
(i) utilize medically based eligibility
standards or criteria in deciding provider
status of religious nonmedical providers;
(ii) use medical professionals or cri-
teria to decide patient access to religious
nonmedical providers;
(iii) utilize medical professionals or
criteria in making decisions in internal or
external appeals from decisions denying or
limiting coverage for care by religious non-
medical providers; or
(iv) compel a participant or bene-
ficiary to undergo a medical examination
or test as a condition of receiving health
insurance coverage for treatment by a reli-
gious nonmedical provider; or
(C) require such plans or issuers to ex-
clude religious nonmedical providers because
they do not provide medical or other data other-
wise required, if such data is inconsistent with
the religious nonmedical treatment or nursing
care provided by the provider.
(2) RELIGIOUS NONMEDICAL PROVIDER.—For
purposes of this subsection, the term ‘‘religious non-
medical provider’’ means a provider who provides no
medical care but who provides only religious non-
medical treatment or religious nonmedical nursing
care.
Subtitle B—Patient Access to
Information
SEC. 1101. PATIENT ACCESS TO INFORMATION REGARDING
PLAN COVERAGE, MANAGED CARE PROCE-
DURES, 
HEALTH 
CARE 
PROVIDERS, 
AND
QUALITY OF MEDICAL CARE.
(a) IN GENERAL.—Part 1 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974 is
amended—
(1) by redesignating section 111 as section 112;
and
(2) by inserting after section 110 the following
new section:
‘‘DISCLOSURE BY GROUP HEALTH PLANS
‘‘SEC. 111. (a) DISCLOSURE REQUIREMENT.—
‘‘(1) GROUP
HEALTH
PLANS.—The adminis-
trator of each group health plan shall take such ac-
tions as are necessary to ensure that the summary
plan description of the plan required under section
102 (or each summary plan description in any case
in which different summary plan descriptions are ap-
propriate under part 1 for different options of cov-
erage) contains, among any information otherwise
required under this part, the information required
under subsections (b), (c), (d), and (e)(2)(A).
‘‘(2) 
HEALTH
INSURANCE
ISSUERS.—Each
health insurance issuer offering health insurance
coverage in connection with a group health plan
shall provide the administrator on a timely basis
with the information necessary to enable the admin-
istrator to comply with the requirements of para-
graph (1). To the extent that any such issuer pro-
vides on a timely basis to plan participants and
beneficiaries information otherwise required under
this part to be included in the summary plan de-
scription, the requirements of sections 101(a)(1) and
104(b) shall be deemed satisfied in the case of such
plan with respect to such information.
‘‘(b) PLAN BENEFITS.—The information required
under subsection (a) includes the following:
‘‘(1) COVERED ITEMS AND SERVICES.—
‘‘(A) CATEGORIZATION OF INCLUDED BEN-
EFITS.—A description of covered benefits, cat-
egorized by—
‘‘(i) types of items and services (in-
cluding any special disease management
program); and
‘‘(ii) types of health care professionals
providing such items and services.
‘‘(B) EMERGENCY MEDICAL CARE.—A de-
scription of the extent to which the plan covers
emergency medical care (including the extent to
which the plan provides for access to urgent
care centers), and any definitions provided
under the plan for the relevant plan terminol-
ogy referring to such care.
‘‘(C) PREVENTATIVE
SERVICES.—A de-
scription of the extent to which the plan pro-
vides benefits for preventative services.
‘‘(D) DRUG FORMULARIES.—A description
of the extent to which covered benefits are de-
termined by the use or application of a drug
formulary and a summary of the process for de-
termining what is included in such formulary.
‘‘(E) 
COBRA 
CONTINUATION
COV-
ERAGE.—A description of the benefits available
under the plan pursuant to part 6.
‘‘(2) LIMITATIONS, EXCLUSIONS, AND RESTRIC-
TIONS ON COVERED BENEFITS.—
‘‘(A) 
CATEGORIZATION
OF
EXCLUDED
BENEFITS.—A description of benefits specifi-
cally excluded from coverage, categorized by
types of items and services.
‘‘(B) 
UTILIZATION
REVIEW
AND
PREAUTHORIZATION REQUIREMENTS.—Whether
coverage for medical care is limited or excluded
on 
the 
basis 
of 
utilization 
review 
or
preauthorization requirements.
‘‘(C) LIFETIME, ANNUAL, OR OTHER PE-
RIOD LIMITATIONS.—A description of the cir-
cumstances under which, and the extent to
which, coverage is subject to lifetime, annual, or
other period limitations, categorized by types of
benefits.
‘‘(D) CUSTODIAL CARE.—A description of
the circumstances under which, and the extent
to which, the coverage of benefits for custodial
care is limited or excluded, and a statement of
the definition used by the plan for custodial
care.
‘‘(E) 
EXPERIMENTAL
TREATMENTS.—
Whether coverage for any medical care is lim-
ited or excluded because it constitutes experi-
mental treatment or technology, and any defini-
tions provided under the plan for the relevant
plan terminology referring to such limited or
excluded care.
‘‘(F) MEDICAL APPROPRIATENESS OR NE-
CESSITY.—Whether coverage for medical care
may be limited or excluded by reason of a fail-
ure to meet the plan’s requirements for medical
appropriateness or necessity, and any defini-
tions provided under the plan for the relevant
plan terminology referring to such limited or
excluded care.
‘‘(G) SECOND
OR
SUBSEQUENT
OPIN-
IONS.—A description of the circumstances
under which, and the extent to which, coverage
for second or subsequent opinions is limited or
excluded.
‘‘(H) SPECIALTY CARE.—A description of
the circumstances under which, and the extent
to which, coverage of benefits for specialty care
is conditioned on referral from a primary care
provider.
‘‘(I) CONTINUITY OF CARE.—A description
of the circumstances under which, and the ex-
tent to which, coverage of items and services
provided by any health care professional is lim-
ited or excluded by reason of the departure by
the professional from any defined set of provid-
ers.
‘‘(J) RESTRICTIONS
ON
COVERAGE
OF
EMERGENCY
SERVICES.—A description of the
circumstances under which, and the extent to
which, the plan, in covering emergency medical
care furnished to a participant or beneficiary of
the plan imposes any financial responsibility de-
scribed in subsection (c) on participants or
beneficiaries or limits or conditions benefits for
such care subject to any other term or condition
of such plan.
‘‘(c) 
PARTICIPANT’S
FINANCIAL
RESPONSIBIL-
ITIES.—The information required under subsection (a) in-
cludes an explanation of—
‘‘(1) a participant’s financial responsibility for
payment of premiums, coinsurance, copayments,
deductibles, and any other charges; and
‘‘(2) the circumstances under which, and the
extent to which, the participant’s financial respon-
sibility described in paragraph (1) may vary, includ-
ing any distinctions based on whether a health care
provider from whom covered benefits are obtained is
included in a defined set of providers.
‘‘(d) DISPUTE RESOLUTION PROCEDURES.—The in-
formation required under subsection (a) includes a de-
scription of the processes adopted by the plan pursuant
to section 503(b), including—
‘‘(1) descriptions thereof relating specifically
to—
‘‘(A) coverage decisions;
‘‘(B) internal review of coverage decisions;
and
‘‘(C) any external review of coverage deci-
sions; and
‘‘(2) the procedures and time frames applicable
to each step of the processes referred to in subpara-
graphs (A), (B), and (C) of paragraph (1).
‘‘(e) INFORMATION AVAILABLE ON REQUEST.—
‘‘(1) ACCESS TO PLAN BENEFIT INFORMATION
IN ELECTRONIC FORM.—
‘‘(A) IN GENERAL.—In addition to the in-
formation required to be provided under section
104(b)(4), a group health plan (and a health
insurance issuer offering health insurance cov-
erage in connection with a group health plan)
shall, upon written request (made not more fre-
quently than annually), make available to par-
ticipants and beneficiaries, in a generally recog-
nized electronic format, the following informa-
tion:
‘‘(i) the latest summary plan descrip-
tion, including the latest summary of ma-
terial modifications; and
‘‘(ii) the actual plan provisions setting
forth the benefits available under the plan
to the extent such information relates to the
coverage options under the plan available to the
participant or beneficiary. A reasonable charge
may be made to cover the cost of providing
such information in such generally recognized
electronic format. The Secretary may by regula-
tion prescribe a maximum amount which will
constitute a reasonable charge under the pre-
ceding sentence.
‘‘(B) ALTERNATIVE ACCESS.—The require-
ments of this paragraph may be met by making
such information generally available (rather
than upon request) on the Internet or on a pro-
prietary computer network in a format which is
readily accessible to participants and bene-
ficiaries.
‘‘(2) ADDITIONAL
INFORMATION
TO
BE
PRO-
VIDED ON REQUEST.—
‘‘(A) INCLUSION IN SUMMARY PLAN DE-
SCRIPTION
OF
SUMMARY
OF
ADDITIONAL
IN-
FORMATION.—The information required under
subsection (a) includes a summary description
of the types of information required by this
subsection to be made available to participants
and beneficiaries on request.
‘‘(B) 
INFORMATION
REQUIRED
FROM
PLANS AND ISSUERS ON REQUEST.—In addition
to information required to be included in sum-
mary plan descriptions under this subsection, a
group health plan (and a health insurance
issuer offering health insurance coverage in
connection with a group health plan) shall pro-
vide the following information to a participant
or beneficiary on request:
‘‘(i) NETWORK CHARACTERISTICS.—If
the plan (or issuer) utilizes a defined set of
providers under contract with the plan (or
issuer), a detailed list of the names of such
providers and their geographic location, set
forth separately with respect to primary
care providers and with respect to special-
ists.
‘‘(ii) CARE
MANAGEMENT
INFORMA-
TION.—A description of the circumstances
under which, and the extent to which, the
plan has special disease management pro-
grams or programs for persons with dis-
abilities, indicating whether these pro-
grams are voluntary or mandatory and
whether a significant benefit differential
results from participation in such pro-
grams.
‘‘(iii) INCLUSION
OF
DRUGS
AND
BIOLOGICALS IN FORMULARIES.—A state-
ment of whether a specific drug or biologi-
cal is included in a formulary used to de-
termine benefits under the plan and a de-
scription of the procedures for considering
requests for any patient-specific waivers.
‘‘(iv) PROCEDURES FOR DETERMINING
EXCLUSIONS BASED ON MEDICAL NECES-
SITY OR EXPERIMENTAL TREATMENTS.—
Upon receipt by the participant or bene-
ficiary of any notification of an adverse
coverage decision based on a determination
relating to medical necessity or an experi-
mental treatment or technology, a descrip-
tion of the procedures and medically-based
criteria used in such decision.
‘‘(v) PREAUTHORIZATION AND UTILI-
ZATION REVIEW PROCEDURES.—Upon re-
ceipt by the participant or beneficiary of
any notification of an adverse coverage de-
cision, a description of the basis on which
any preauthorization requirement or any
utilization review requirement has resulted
in such decision.
‘‘(vi) ACCREDITATION
STATUS
OF
HEALTH INSURANCE ISSUERS AND SERV-
ICE PROVIDERS.—A description of the ac-
creditation and licencing status (if any) of
each health insurance issuer offering
health insurance coverage in connection
with the plan and of any utilization review
organization utilized by the issuer or the
plan, together with the name and address
of the accrediting or licencing authority.
‘‘(vii) MEASURES OF ENROLLEE SAT-
ISFACTION.—The latest information (if
any) maintained by the plan, or by any
health insurance issuer offering health in-
surance coverage in connection with the
plan, relating to enrollee satisfaction.
‘‘(viii) QUALITY PERFORMANCE MEAS-
URES.—The latest information (if any)
maintained by the plan, or by any health
insurance issuer offering health insurance
coverage in connection with the plan, relat-
ing to quality of performance of the deliv-
ery of medical care with respect to cov-
erage options offered under the plan and
of health care professionals and facilities
providing medical care under the plan.
‘‘(ix) INFORMATION RELATING TO EX-
TERNAL REVIEWS.—The number of exter-
nal reviews under section 503(b)(4) that
have been completed during the prior plan
year and the number of such reviews in
which the recommendation reported under
section 503(b)(4)(C)(iii) includes a rec-
ommendation for modification or reversal
of an internal review decision under the
plan.
‘‘(C) 
INFORMATION
REQUIRED
FROM
HEALTH CARE PROFESSIONALS ON REQUEST.—
Any health care professional treating a partici-
pant or beneficiary under a group health plan
shall provide to the participant or beneficiary,
on request, a description of his or her profes-
sional qualifications (including board certifi-
cation status, licensing status, and accreditation
status, if any), privileges, and experience and a
general description by category (including sal-
ary, fee-for-service, capitation, and such other
categories as may be specified in regulations of
the Secretary) of the applicable method by
which such professional is compensated in con-
nection with the provision of such medical care.
‘‘(D) 
INFORMATION
REQUIRED
FROM
HEALTH CARE FACILITIES ON REQUEST.—Any
health care facility from which a participant or
beneficiary has sought treatment under a group
health plan shall provide to the participant or
beneficiary, on request, a description of the fa-
cility’s corporate form or other organizational
form and all forms of licensing and accredita-
tion status (if any) assigned to the facility by
standard-setting organizations.
‘‘(f) ACCESS TO INFORMATION RELEVANT TO THE
COVERAGE OPTIONS UNDER WHICH THE PARTICIPANT OR
BENEFICIARY IS ELIGIBLE TO ENROLL.—In addition to
information otherwise required to be made available under
this section, a group health plan (and a health insurance
issuer offering health insurance coverage in connection
with a group health plan) shall, upon written request
(made not more frequently than annually), make available
to a participant (and an employee who, under the terms
of the plan, is eligible for coverage but not enrolled) in
connection with a period of enrollment the summary plan
description for any coverage option under the plan under
which the participant is eligible to enroll and any informa-
tion described in clauses (i), (ii), (iii), (vi), (vii), and (viii)
of subsection (e)(2)(B).
‘‘(g) ADVANCE NOTICE
OF CHANGES
IN DRUG
FORMULARIES.—Not later than 30 days before the effec-
tive of date of any exclusion of a specific drug or biological
from any drug formulary under the plan that is used in
the treatment of a chronic illness or disease, the plan shall
take such actions as are necessary to reasonably ensure
that plan participants are informed of such exclusion. The
requirements of this subsection may be satisfied—
‘‘(1) by inclusion of information in publications
broadly distributed by plan sponsors, employers, or
employee organizations;
‘‘(2) by electronic means of communication (in-
cluding the Internet or proprietary computer net-
works in a format which is readily accessible to par-
ticipants);
‘‘(3) by timely informing participants who,
under an ongoing program maintained under the
plan, have submitted their names for such notifica-
tion; or
‘‘(4) by any other reasonable means of timely
informing plan participants.
‘‘(h) DEFINITIONS.—For purposes of this section—
‘‘(1) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning provided such term
under section 503(b)(6).
‘‘(2) MEDICAL CARE.—The term ‘medical care’
has the meaning provided such term under section
733(a)(2).
‘‘(3) HEALTH
INSURANCE
COVERAGE.—The
term ‘health insurance coverage’ has the meaning
provided such term under section 733(b)(1).
‘‘(4) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning provided
such term under section 733(b)(2).’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 102(b) of such Act (29 U.S.C.
1022(b)) is amended—
(A) by striking ‘‘section 733(a)(1)’’ each
place 
it 
appears 
and 
inserting 
‘‘section
503(b)(6)’’; and
(B) by inserting before the period at the
end the following: ‘‘; and, in the case of a group
health plan (as defined in section 111(h)(1)),
the information required to be included under
section 111(a)’’.
(2) The table of contents in section 1 of such
Act is amended by striking the item relating to sec-
tion 111 and inserting the following new items:
‘‘Sec. 111. Disclosure by group health plans.
‘‘Sec. 112. Repeal and effective date.’’.
SEC. 1102. EFFECTIVE DATE AND RELATED RULES.
(a) IN GENERAL.—The amendments made by this
subtitle shall apply with respect to plan years beginning
on or after January 1 of the second calendar year follow-
ing the date of the enactment of this Act. The Secretary
shall first issue all regulations necessary to carry out the
amendments made by this subtitle before such date.
(b) LIMITATION ON ENFORCEMENT ACTIONS.—No
enforcement action shall be taken, pursuant to the amend-
ments made by this subtitle, against a group health plan
or health insurance issuer with respect to a violation of
a requirement imposed by such amendments before the
date of issuance of final regulations issued in connection
with such requirement, if the plan or issuer has sought
to comply in good faith with such requirement.
(c) ASSURING COORDINATION.—The Secretary of
Labor, the Secretary of Health and Human Services, and
the Secretary of the Treasury shall ensure, through the
execution of an interagency memorandum of understand-
ing among such Secretaries, that—
(1) regulations, rulings, and interpretations
issued by such Secretaries relating to the same mat-
ter over which two or more such Secretaries have re-
sponsibility under the provisions of this subtitle, sub-
title B of title II, and subtitle B of title III (and the
amendments made thereby) are administered so as
to have the same effect at all times; and
(2) coordination of policies relating to enforcing
the same requirements through such Secretaries in
order to have a coordinated enforcement strategy
that avoids duplication of enforcement efforts and
assigns priorities in enforcement.
Subtitle C—New Procedures and
Access to Courts for Grievances
Arising Under Group Health
Plans
SEC. 1201. SPECIAL RULES FOR GROUP HEALTH PLANS.
(a) IN GENERAL.—Section 503 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1133)
is amended—
(1) by inserting ‘‘(a) IN GENERAL.—’’ after
‘‘SEC. 503.’’;
(2) by inserting ‘‘(other than a group health
plan)’’ after ‘‘employee benefit plan’’; and
(3) by adding at the end the following new sub-
section:
‘‘(b) SPECIAL RULES FOR GROUP HEALTH PLANS.—
‘‘(1) 
COVERAGE
DETERMINATIONS.—Every
group health plan shall—
‘‘(A) provide adequate notice in writing in
accordance with this subsection to any partici-
pant or beneficiary of any adverse coverage de-
cision with respect to benefits of such partici-
pant or beneficiary under the plan, setting forth
the specific reasons for such coverage decision
and any rights of review provided under the
plan, written in a manner calculated to be un-
derstood by the participant;
‘‘(B) provide such notice in writing also to
any treating medical care provider of such par-
ticipant or beneficiary, if such provider has
claimed reimbursement for any item or service
involved in such coverage decision, or if a claim
submitted by the provider initiated the proceed-
ings leading to such decision;
‘‘(C) afford a reasonable opportunity to
any participant or beneficiary who is in receipt
of the notice of such adverse coverage decision,
and who files a written request for review of the
initial coverage decision within 180 days after
receipt of the notice of the initial decision, for
a full and fair de novo review of the decision by
an appropriate named fiduciary who did not
make the initial decision; and
‘‘(D) meet the additional requirements of
this subsection.
‘‘(2) TIME LIMITS FOR MAKING INITIAL COV-
ERAGE DECISIONS FOR BENEFITS AND COMPLETING
INTERNAL APPEALS.—
‘‘(A) TIME
LIMITS
FOR
DECIDING
RE-
QUESTS
FOR
BENEFIT
PAYMENTS, REQUESTS
FOR ADVANCE DETERMINATION OF COVERAGE,
AND
REQUESTS
FOR
REQUIRED
DETERMINA-
TION OF MEDICAL NECESSITY.—Except as pro-
vided in subparagraph (B)—
‘‘(i) INITIAL DECISIONS.—If a request
for benefit payments, a request for advance
determination of coverage, or a request for
required determination of medical necessity
is submitted to a group health plan in such
reasonable form as may be required under
the plan, the plan shall issue in writing an
initial coverage decision on the request be-
fore the end of the initial decision period
under paragraph (9)(J) following the filing
completion date. Failure to issue a cov-
erage decision on such a request before the
end of the period required under this
clause shall be treated as an adverse cov-
erage decision for purposes of internal re-
view under clause (ii).
‘‘(ii) INTERNAL REVIEWS OF INITIAL
DENIALS.—Upon the written request of a
participant or beneficiary for review of an
initial adverse coverage decision under
clause (i), a review by an appropriate
named fiduciary (subject to paragraph (3))
of the initial coverage decision shall be
completed, including issuance by the plan
of a written decision affirming, reversing,
or modifying the initial coverage decision,
setting forth the grounds for such decision,
before the end of the internal review period
following the review filing date. Such deci-
sion shall be treated as the final decision
of the plan, subject to any applicable re-
consideration under paragraph (4). Failure
to issue before the end of such period such
a written decision requested under this
clause shall be treated as a final decision
affirming the initial coverage decision, sub-
ject to any applicable reconsideration
under paragraph (4).
‘‘(B) TIME LIMITS FOR MAKING COVERAGE
DECISIONS RELATING TO URGENT AND EMER-
GENCY MEDICAL CARE AND FOR COMPLETING
INTERNAL APPEALS.—
‘‘(i) INITIAL
DECISIONS.—A group
health plan shall issue in writing an initial
coverage decision on any request for expe-
dited advance determination of coverage or
for expedited required determination of
medical necessity submitted, in such rea-
sonable form as may be required under the
plan—
‘‘(I) before the end of the urgent
decision 
period 
under 
paragraph
(9)(L), in cases involving urgent med-
ical care but not involving emergency
medical care; or
‘‘(II) before the end of the emer-
gency decision period under para-
graph (9)(M), in cases involving emer-
gency medical care,
following the filing completion date. Fail-
ure to approve or deny such a request be-
fore the end of the applicable decision pe-
riod shall be treated as a denial of the re-
quest for purposes of internal review under
clause (ii).
‘‘(ii) INTERNAL REVIEWS OF INITIAL
DENIALS.—Upon the written request of a
participant or beneficiary for review of an
initial adverse coverage decision under
clause (i), a review by an appropriate
named fiduciary (subject to paragraph (3))
of the initial coverage decision shall be
completed, including issuance by the plan
of a written decision affirming, reversing,
or modifying the initial converge decision,
setting forth the grounds for the deci-
sion—
‘‘(I) before the end of the urgent
decision 
period 
under 
paragraph
(9)(L), in cases involving urgent med-
ical care but not involving emergency
medical care; or
‘‘(II) before the end of the emer-
gency decision period under para-
graph (9)(M), in cases involving emer-
gency medical care,
following the review filing date. Such deci-
sion shall be treated as the final decision
of the plan, subject to any applicable re-
consideration under paragraph (4). Failure
to issue before the end of the applicable
decision period such a written decision re-
quested under this clause shall be treated
as a final decision affirming the initial cov-
erage decision, subject to any applicable re-
consideration under paragraph (4).
‘‘(3) PHYSICIANS MUST REVIEW INITIAL COV-
ERAGE
DECISIONS
INVOLVING
MEDICAL
APPRO-
PRIATENESS
OR
NECESSITY
OR
EXPERIMENTAL
TREATMENT.—If an initial coverage decision under
paragraph (2)(A)(i) or (2)(B)(i) is based on a deter-
mination that provision of a particular item or serv-
ice is excluded from coverage under the terms of the
plan because the provision of such item or service
does not meet the plan’s requirements for medical
appropriateness or necessity or would constitute ex-
perimental treatment or technology, the review
under paragraph (2)(A)(ii) or (2)(B)(ii), to the ex-
tent that it relates to medical appropriateness or ne-
cessity or to experimental treatment or technology,
shall be conducted by a physician who is selected to
serve as an appropriate named fiduciary under the
plan and who did not make the initial denial.
‘‘(4) ELECTIVE EXTERNAL REVIEW BY INDE-
PENDENT MEDICAL EXPERT AND RECONSIDERATION
OF INITIAL REVIEW DECISION.—
‘‘(A) IN GENERAL.—The requirements of
subparagraphs (B), (C) and (D) shall apply—
‘‘(i) in the case of any failure to time-
ly issue a coverage decision upon internal
review which is deemed to be an adverse
coverage 
decision 
under 
paragraph
(2)(A)(ii) or (2)(B)(ii) (thereby failing to
constitute a coverage decision for which
specific reasons have been set forth as re-
quired under paragraph (1)(A)); and
‘‘(ii) in the case of any adverse cov-
erage decision which is not reversed upon
a review conducted pursuant to paragraph
(1)(C) (including any review pursuant to
paragraph (2)(A)(ii) or (2)(B)(ii)), if such
coverage decision is based on a determina-
tion that provision of a particular item or
service is excluded from coverage under the
terms of the plan because the provision of
such item or service—
‘‘(I) does not meet the plan’s re-
quirements for medical appropriate-
ness or necessity; or
‘‘(II) would constitute experi-
mental treatment or technology.
‘‘(B) LIMITS
ON
ALLOWABLE
ADVANCE
PAYMENTS.—The review under this paragraph
in connection with an adverse coverage decision
shall be available subject to any requirement of
the plan (unless waived by the plan for financial
or other reasons) for payment in advance to the
plan by the participant or beneficiary seeking
review of an amount not to exceed the greater
of—
‘‘(i) the lesser of $100 or 10 percent
of the cost of the medical care involved in
the decision; or
‘‘(ii) $25,
with each such dollar amount subject to com-
pounded annual adjustments in the same man-
ner and to the same extent as apply under sec-
tion 215(i) of the Social Security Act, except
that, for any calendar year, such amount as so
adjusted shall be deemed, solely for such cal-
endar year, to be equal to such amount rounded
to the nearest $10. No such payment may be
required in the case of any participant or bene-
ficiary whose enrollment under the plan is paid
for, in whole or in part, under a State plan
under title XIX or XXI of the Social Security
Act. Any such advance payment shall be subject
to reimbursement if the recommendation of the
independent medical expert or experts under
subparagraph (C)(iii) is to reverse or modify
the coverage decision.
‘‘(C) RECONSIDERATION
OF
INITIAL
RE-
VIEW DECISION.—In any case in which a partic-
ipant or beneficiary who has received an ad-
verse decision of the plan upon initial review of
the coverage decision and who has not com-
menced review of the initial coverage decision
under section 502 makes a request in writing,
within 30 days after the date of such review de-
cision, for reconsideration of such review deci-
sion, the terms of the plan shall provide for a
procedure 
for 
such 
reconsideration 
under
which—
‘‘(i) one or more independent medical
experts will be selected in accordance with
subparagraph (E) to review the coverage
decision described in subparagraph (A) to
determine whether such decision was in ac-
cordance with the terms of the plan and
this title;
‘‘(ii) the record for review (including a
specification of the terms of the plan and
other criteria serving as the basis for the
initial review decision) will be presented to
such expert or experts and maintained in
a manner which will ensure confidentiality
of such record;
‘‘(iii) such expert or experts will re-
port in writing to the plan their rec-
ommendation, based on the determination
made under clause (i), as to whether such
coverage decision should be affirmed, modi-
fied, or reversed, setting forth the grounds
(including the clinical basis) for the rec-
ommendation; and
‘‘(iv) a physician who did not make
the initial review decision will reconsider
the initial review decision to determine
whether such decision was in accordance
with the terms of the plan and this title
and will issue a written decision affirming,
modifying, or reversing the initial review
decision, taking into account any rec-
ommendations reported to the plan pursu-
ant to clause (iii), and setting forth the
grounds for the decision.
‘‘(D) TIME
LIMITS
FOR
RECONSIDER-
ATION.—Any review under this paragraph shall
be completed before the end of the reconsider-
ation period (as defined in paragraph (9)(O))
following the review filing date in connection
with such review. The decision under this para-
graph affirming, reversing, or modifying the ini-
tial review decision of the plan shall be the final
decision of the plan. Failure to issue a written
decision before the end of the reconsideration
period in any reconsideration requested under
this paragraph shall be treated as a final deci-
sion affirming the initial review decision of the
plan.
‘‘(E) INDEPENDENT MEDICAL EXPERTS.—
‘‘(i) IN
GENERAL.—For purposes of
this paragraph, the term ‘independent
medical expert’ means, in connection with
any coverage decision by a group health
plan, a professional—
‘‘(I) who is a physician or, if ap-
propriate, another medical profes-
sional;
‘‘(II) who has appropriate cre-
dentials and has attained recognized
expertise in the applicable medical
field;
‘‘(III) who was not involved in
the initial decision or any earlier re-
view thereof; and
‘‘(IV) who is selected in accord-
ance with clause (ii) and meets the re-
quirements of clause (iii).
‘‘(ii) SELECTION
OF
MEDICAL
EX-
PERTS.—An independent medical expert is
selected in accordance with this clause if—
‘‘(I) the expert is selected by an
intermediary which itself meets the re-
quirements of clause (iii), by means of
a method which ensures that the iden-
tity of the expert is not disclosed to
the plan, any health insurance issuer
offering health insurance coverage to
the aggrieved participant or bene-
ficiary in connection with the plan,
and the aggrieved participant or bene-
ficiary under the plan, and the identi-
ties of the plan, the issuer, and the
aggrieved participant or beneficiary
are not disclosed to the expert;
‘‘(II) the expert is selected, by an
appropriately credentialed panel of
physicians meeting the requirements
of clause (iii) established by a fully
accredited teaching hospital meeting
such requirements;
‘‘(III) the expert is selected by an
organization 
described 
in 
section
1152(1)(A) of the Social Security Act
which meets the requirements of
clause (iii);
‘‘(IV) the expert is selected by an
external review organization which
meets the requirements of clause (iii)
and is accredited by a private stand-
ard-setting organization meeting such
requirements and recognized as such
by the Secretary; or
‘‘(V) the expert is selected, by an
intermediary or otherwise, in a man-
ner that is, under regulations issued
pursuant to negotiated rulemaking,
sufficient to ensure the expert’s inde-
pendence,
and the method of selection is devised to
reasonably ensure that the expert selected
meets the independence requirements of
clause (iii).
‘‘(iii) 
INDEPENDENCE
REQUIRE-
MENTS.—An independent medical expert
or another entity described in clause (ii)
meets the independence requirements of
this clause if—
‘‘(I) the expert or entity is not
affiliated with any related party;
‘‘(II) any compensation received
by such expert or entity in connection
with the external review is reasonable
and not contingent on any decision
rendered by the expert or entity;
‘‘(III) under the terms of the
plan and any health insurance cov-
erage offered in connection with the
plan, the plan and the issuer (if any)
have no recourse against the expert or
entity in connection with the external
review; and
‘‘(IV) the expert or entity does
not otherwise have a conflict of inter-
est with a related party as determined
under any regulations which the Sec-
retary may prescribe.
‘‘(iv) RELATED PARTY.—For purposes
of clause (ii)(I), the term ‘related party’
means—
‘‘(I) the plan or any health insur-
ance issuer offering health insurance
coverage in connection with the plan
(or any officer, director, or manage-
ment employee of such plan or issuer);
‘‘(II) the physician or other medi-
cal care provider that provided the
medical care involved in the coverage
decision;
‘‘(III) the institution at which
the medical care involved in the cov-
erage decision is provided;
‘‘(IV) the manufacturer of any
drug or other item that was included
in the medical care involved in the
coverage decision; or
‘‘(V) any other party determined
under any regulations which the Sec-
retary may prescribe to have a sub-
stantial interest in the coverage deci-
sion .
‘‘(v) AFFILIATED.—For purposes of
clause (iii)(I), the term ‘affiliated’ means,
in connection with any entity, having a fa-
milial, financial, or professional relation-
ship with, or interest in, such entity.
‘‘(F) INAPPLICABILITY WITH RESPECT TO
ITEMS AND SERVICES SPECIFICALLY EXCLUDED
FROM COVERAGE.—An adverse coverage deci-
sion based on a determination that an item or
service is excluded from coverage under the
terms of the plan shall not be subject to review
under this paragraph, unless such determina-
tion is found in such decision to be based solely
on the fact that the item or service—
‘‘(i) does not meet the plan’s require-
ments for medical appropriateness or ne-
cessity; or
‘‘(ii) would constitute experimental
treatment or technology (as defined under
the plan).
‘‘(5) PERMITTED ALTERNATIVES TO REQUIRED
INTERNAL REVIEW.—
‘‘(A) IN GENERAL.—A group health plan
shall not be treated as failing to meet the re-
quirements under paragraphs (2)(A)(ii) and
(2)(B)(ii) relating to review of initial coverage
decisions for benefits, if—
‘‘(i) in lieu of the procedures relating
to review under paragraphs (2)(A)(ii) and
(2)(B)(ii) and in accordance with such reg-
ulations (if any) as may be prescribed by
the Secretary—
‘‘(I) the aggrieved participant or
beneficiary elects in the request for
the review an alternative dispute reso-
lution procedure which is available
under the plan with respect to simi-
larly situated participants and bene-
ficiaries; or
‘‘(II) in the case of any such plan
or portion thereof which is established
and maintained pursuant to a bona
fide collective bargaining agreement,
the plan provides for a procedure by
which such disputes are resolved by
means of any alternative dispute reso-
lution procedure;
‘‘(ii) the time limits not exceeding the
time limits otherwise applicable under
paragraphs (2)(A)(ii) and (2)(B)(ii) are in-
corporated in such alternative dispute reso-
lution procedure;
‘‘(iii) any applicable requirement for
review by a physician under paragraph (3),
unless waived by the participant or bene-
ficiary (in a manner consistent with such
regulations as the Secretary may prescribe
to ensure equitable procedures), is incor-
porated in such alternative dispute resolu-
tion procedure; and
‘‘(iv) the plan meets the additional re-
quirements of subparagraph (B).
In any case in which a procedure described in
subclause (I) or (II) of clause (i) is utilized and
an alternative dispute resolution procedure is
voluntarily elected by the aggrieved participant
or beneficiary, the plan may require or allow (in
a manner consistent with such regulations as
the Secretary may prescribe to ensure equitable
procedures) the aggrieved participant or bene-
ficiary to waive review of the coverage decision
under paragraph (3), to waive further review of
the coverage decision under paragraph (4) or
section 502, and to elect an alternative means
of external review (other than review under
paragraph (4)).
‘‘(B) ADDITIONAL
REQUIREMENTS.—The
requirements of this subparagraph are met if
the means of resolution of dispute allow for
adequate presentation by the aggrieved partici-
pant or beneficiary of scientific and medical evi-
dence supporting the position of such partici-
pant or beneficiary.
‘‘(6) PERMITTED ALTERNATIVES TO REQUIRED
EXTERNAL REVIEW.—A group health plan shall not
be treated as failing to meet the requirements of this
subsection in connection with review of coverage de-
cisions under paragraph (4) if the aggrieved partici-
pant or beneficiary elects to utilize a procedure in
connection with such review which is made generally
available under the plan (in a manner consistent
with such regulations as the Secretary may prescribe
to ensure equitable procedures) under which—
‘‘(A) the plan agrees in advance of the rec-
ommendations of the independent medical ex-
pert or experts under paragraph (4)(C)(iii) to
render a final decision in accordance with such
recommendations; and
‘‘(B) the participant or beneficiary waives
in advance any right to review of the final deci-
sion under section 502.
‘‘(7) SPECIAL RULE FOR ACCESS TO SPECIALTY
CARE.— In the case of a request for advance deter-
mination of coverage consisting of a request by a
physician for a determination of coverage of the
services of a specialist with respect to any condition,
if coverage of the services of such specialist for such
condition is otherwise provided under the plan, the
initial coverage decision referred to in subparagraph
(A)(i) or (B)(i) of paragraph (2) shall be issued
within the specialty decision period. For purposes of
this paragraph, the term ‘specialist’ means, with re-
spect to a condition, a physician who has a high level
of expertise through appropriate training and experi-
ence (including, in the case of a child, appropriate
pediatric expertise) to treat the condition.
‘‘(8) GROUP
HEALTH
PLAN
DEFINED.—For
purposes of this section—
‘‘(A) IN
GENERAL.—The term ‘group
health plan’ shall have the meaning provided in
section 733(a).
‘‘(B) TREATMENT
OF
PARTNERSHIPS.—
The provisions of paragraphs (1), (2), and (3)
of section 732(d) shall apply.
‘‘(9) OTHER
DEFINITIONS.—For purposes of
this subsection—
‘‘(A) 
REQUEST
FOR
BENEFIT
PAY-
MENTS.—The term ‘request for benefit pay-
ments’ means a request, for payment of benefits
by a group health plan for medical care, which
is made by or on behalf of a participant or ben-
eficiary after such medical care has been pro-
vided.
‘‘(B) REQUIRED DETERMINATION OF MED-
ICAL
NECESSITY.—The term ‘required deter-
mination of medical necessity’ means a deter-
mination required under a group health plan
solely that proposed medical care meets, under
the facts and circumstances at the time of the
determination, the plan’s requirements for med-
ical appropriateness or necessity (which may be
subject to exceptions under the plan for fraud
or misrepresentation), irrespective of whether
the proposed medical care otherwise meets
other terms and conditions of coverage, but
only if such determination does not constitute
an advance determination of coverage (as de-
fined in subparagraph (C)).
‘‘(C) ADVANCE DETERMINATION OF COV-
ERAGE.—The term ‘advance determination of
coverage’ means a determination under a group
health plan that proposed medical care meets,
under the facts and circumstances at the time
of the determination, the plan’s terms and con-
ditions of coverage (which may be subject to ex-
ceptions under the plan for fraud or misrepre-
sentation).
‘‘(D) REQUEST FOR ADVANCE DETERMINA-
TION OF COVERAGE.—The term ‘request for ad-
vance determination of coverage’ means a re-
quest for an advance determination of coverage
of medical care which is made by or on behalf
of a participant or beneficiary before such medi-
cal care is provided.
‘‘(E) REQUEST FOR EXPEDITED ADVANCE
DETERMINATION OF COVERAGE.—The term ‘re-
quest for expedited advance determination of
coverage’ means a request for advance deter-
mination of coverage, in any case in which the
proposed medical care constitutes urgent medi-
cal care or emergency medical care.
‘‘(F) REQUEST
FOR
REQUIRED
DETER-
MINATION OF MEDICAL NECESSITY.—The term
‘request for required determination of medical
necessity’ means a request for a required deter-
mination of medical necessity for medical care
which is made by or on behalf of a participant
or beneficiary before the medical care is pro-
vided.
‘‘(G) REQUEST FOR EXPEDITED REQUIRED
DETERMINATION
OF
MEDICAL
NECESSITY.—
The term ‘request for expedited required deter-
mination of medical necessity’ means a request
for required determination of medical necessity
in any case in which the proposed medical care
constitutes urgent medical care or emergency
medical care.
‘‘(H) URGENT MEDICAL CARE.—The term
‘urgent medical care’ means medical care in any
case in which an appropriate physician has cer-
tified in writing (or as otherwise provided in
regulations of the Secretary) that failure to pro-
vide the participant or beneficiary with such
medical care within 45 days can reasonably be
expected to result in either—
‘‘(i) the imminent death of the partici-
pant or beneficiary; or
‘‘(ii) the immediate, serious, and irre-
versible deterioration of the health of the
participant or beneficiary which will sig-
nificantly increase the likelihood of death
of, or irreparable harm to, the participant
or beneficiary.
‘‘(I) EMERGENCY
MEDICAL
CARE.—The
term ‘emergency medical care’ means medical
care in any case in which an appropriate physi-
cian has certified in writing (or as otherwise
provided in regulations of the Secretary)—
‘‘(i) that failure to immediately pro-
vide the care to the participant or bene-
ficiary could reasonably be expected to re-
sult in—
‘‘(I) placing the health of such
participant or beneficiary (or, with re-
spect to such a participant or bene-
ficiary who is a pregnant woman, the
health of the woman or her unborn
child) in serious jeopardy;
‘‘(II) serious impairment to bod-
ily functions; or
‘‘(III) serious dysfunction of any
bodily organ or part; or
‘‘(ii) that immediate provision of the
care is necessary because the participant
or beneficiary has made or is at serious
risk of making an attempt to harm himself
or herself or another individual.
‘‘(J) 
INITIAL
DECISION
PERIOD.—The
term ‘initial decision period’ means a period of
30 days, or such longer period as may be pre-
scribed in regulations of the Secretary.
‘‘(K) INTERNAL
REVIEW
PERIOD.—The
term ‘internal review period’ means a period of
30 days, or such longer period as may be pre-
scribed in regulations of the Secretary.
‘‘(L) URGENT
DECISION
PERIOD.—The
term ‘urgent decision period’ means a period of
10 days, or such longer period as may be pre-
scribed in regulations of the Secretary.
‘‘(M) EMERGENCY
DECISION
PERIOD.—
The term ‘emergency decision period’ means a
period of 72 hours, or such longer period as
may be prescribed in regulations of the Sec-
retary.
‘‘(N) SPECIALTY DECISION PERIOD.—The
term ‘specialty decision period’ means a period
of 72 hours, or such longer period as may be
prescribed in regulations of the Secretary.
‘‘(O) 
RECONSIDERATION
PERIOD.—The
term ‘reconsideration period’ means a period of
25 days, or such longer period as may be pre-
scribed in regulations of the Secretary, except
that—
‘‘(i) in the case of a decision involving
urgent medical care, such term means the
urgent decision period; and
‘‘(ii) in the case of a decision involving
emergency medical care, such term means
the emergency decision period.
‘‘(P) FILING
COMPLETION
DATE.—The
term ‘filing completion date’ means, in connec-
tion with a group health plan, the date as of
which the plan is in receipt of all information
reasonably required (in writing or in such other
reasonable form as may be specified by the
plan) to make an initial coverage decision.
‘‘(Q) REVIEW
FILING
DATE.—The term
‘review filing date’ means, in connection with a
group health plan, the date as of which the ap-
propriate named fiduciary (or the independent
medical expert or experts in the case of a review
under paragraph (4)) is in receipt of all infor-
mation reasonably required (in writing or in
such other reasonable form as may be specified
by the plan) to make a decision to affirm, mod-
ify, or reverse a coverage decision.
‘‘(R) MEDICAL CARE.—The term ‘medical
care’ has the meaning provided such term by
section 733(a)(2).
‘‘(S) HEALTH
INSURANCE
COVERAGE.—
The term ‘health insurance coverage’ has the
meaning 
provided 
such 
term 
by 
section
733(b)(1).
‘‘(T) HEALTH
INSURANCE
ISSUER.—The
term ‘health insurance issuer’ has the meaning
provided such term by section 733(b)(2).
‘‘(U) WRITTEN OR IN WRITING.—
‘‘(i) IN GENERAL.—A request or deci-
sion shall be deemed to be ‘written’ or ‘in
writing’ if such request or decision is pre-
sented in a generally recognized printable
or electronic format. The Secretary may by
regulation provide for presentation of in-
formation otherwise required to be in writ-
ten form in such other forms as may be
appropriate under the circumstances.
‘‘(ii) MEDICAL APPROPRIATENESS OR
EXPERIMENTAL
TREATMENT
DETERMINA-
TIONS.—For purposes of this subpara-
graph, in the case of a request for advance
determination of coverage, a request for
expedited advance determination of cov-
erage, a request for required determination
of medical necessity, or a request for expe-
dited required determination of medical ne-
cessity, if the decision on such request is
conveyed to the provider of medical care or
to the participant or beneficiary by means
of telephonic or other electronic commu-
nications, such decision shall be treated as
a written decision.’’.
(b) CIVIL PENALTIES.—
(1) IN GENERAL.—Section 502(c) of such Act
(29 U.S.C. 1132(c)) is amended by redesignating
paragraphs (6) and (7) as paragraphs (7) and (8),
respectively, and by inserting after paragraph (5)
the following new paragraph:
‘‘(6)(A)(i) In any case in which—
‘‘(I) a benefit under a group health plan (as de-
fined in section 503(b)(8)) is not timely provided to
a participant or beneficiary pursuant to a final deci-
sion of the plan which was not in accordance with
the terms of the plan or this title; and
‘‘(II) such final decision of the plan is contrary
to 
a 
recommendation 
described 
in 
section
503(b)(4)(C)(iii),
any person acting in the capacity of a fiduciary of such
plan so as to cause such failure may, in the court’s discre-
tion, be liable to the aggrieved participant or beneficiary
for a civil penalty.
‘‘(ii) Such civil penalty shall be in the amount of up
to $500 a day (or up to $1,000 a day in the case of a
bad faith failure) from the date on which the recommenda-
tion was made to the plan until the date the failure to
provide benefits is corrected, up to a total amount not to
exceed $250,000.
‘‘(B) In any action commenced under subsection (a)
by a participant or beneficiary with respect to a group
health plan (as defined in section 503(b)(8)) in which the
plaintiff alleges that a person, in the capacity of a fidu-
ciary and in violation of the terms of the plan or this title,
has taken an action resulting in an adverse coverage deci-
sion in violation of the terms of the plan, or has failed
to take an action for which such person is responsible
under the plan and which is necessary under the plan for
a favorable coverage decision, upon finding in favor of the
plaintiff, if such action was commenced after a final deci-
sion of the plan upon review which included a review under
section 503(b)(4) or such action was commenced under
subsection (b)(4) of this section, the court shall cause to
be served on the defendant an order requiring the defend-
ant—
‘‘(i) to cease and desist from the alleged action
or failure to act; and
‘‘(ii) to pay to the plaintiff a reasonable attor-
ney’s fee and other reasonable costs relating to the
prosecution of the action on the charges on which
the plaintiff prevails.
The remedies provided under this subparagraph shall be
in addition to remedies otherwise provided under this sec-
tion.
‘‘(C)(i) The Secretary may assess a civil penalty
against a person acting in the capacity of a fidicuary of
one or more group health plans (as defined in section
503(b)(8)) for—
‘‘(I) any pattern or practice of repeated adverse
coverage decisions in violation of the terms of the
plan or plans or this title; or
‘‘(II) any pattern or practice of repeated viola-
tions of the requirements of section 503 with respect
to such plan or plans.
Such penalty shall be payable only upon proof by clear
and convincing evidence of such pattern or practice.
‘‘(ii) Such penalty shall be in an amount not to exceed
the lesser of—
‘‘(I) 5 percent of the aggregate value of benefits
shown by the Secretary to have not been provided,
or unlawfully delayed in violation of section 503,
under such pattern or practice; or
‘‘(II) $100,000.
‘‘(iii) Any person acting in the capacity of a fiduciary
of a group health plan or plans who has engaged in any
such pattern or practice with respect to such plans, upon
the petition of the Secretary, may be removed by the court
from that position, and from any other involvement, with
respect to such plan or plans, and may be precluded from
returning to any such position or involvement for a period
determined by the court.’’.
(2) 
CONFORMING
AMENDMENT.—Section
502(a)(6) of such Act (29 U.S.C. 1132(a)(6)) is
amended by striking ‘‘, or (6)’’ and inserting ‘‘, (6),
or (7)’’.
(c) EXPEDITED COURT REVIEW.—Section 502 of
such Act (29 U.S.C. 1132) is amended—
(1) in subsection (a)(8), by striking ‘‘or’’ at the
end;
(2) in subsection (a)(9), by striking the period
and inserting ‘‘; or’’;
(3) by adding at the end of subsection (a) the
following new paragraph:
‘‘(10) by a participant or beneficiary for appropriate
relief under subsection (b)(4).’’.
(4) by adding at the end of subsection (b) the
following new paragraph:
‘‘(4) In any case in which exhaustion of administra-
tive remedies in accordance with paragraph (2)(A)(ii) or
(2)(B)(ii) of section 503(b) otherwise necessary for an ac-
tion for relief under paragraph (1)(B) or (3) of subsection
(a) has not been obtained and it is demonstrated to the
court by means of certification by an appropriate physi-
cian that such exhaustion is not reasonably attainable
under the facts and circumstances without undue risk of
irreparable harm to the health of the participant or bene-
ficiary, a civil action may be brought by a participant or
beneficiary to obtain appropriate equitable relief. Any de-
terminations 
made 
under 
paragraph 
(2)(A)(ii) 
or
(2)(B)(ii) of section 503(b) made while an action under
this paragraph is pending shall be given due consideration
by the court in any such action.’’.
(d) STANDARD
OF
REVIEW
UNAFFECTED.—The
standard of review under section 502 of the Employee Re-
tirement Income Security Act of 1974 (as amended by this
section) shall continue on and after the date of the enact-
ment of this Act to be the standard of review which was
applicable under such section as of immediately before
such date.
(e) CONCURRENT JURISDICTION.—Section 502(e)(1)
of such Act (29 U.S.C. 1132(e)(1)) is amended—
(1) in the first sentence, by striking ‘‘under
subsection (a)(1)(B) of this section’’ and inserting
‘‘under subsection (a)(1)(A) for relief under sub-
section (c)(6), under subsection (a)(1)(B), and
under subsection (b)(4)’’; and
(2) in the last sentence, by striking ‘‘of actions
under paragraphs (1)(B) and (7) of subsection (a)
of this section’’ and inserting ‘‘of actions under
paragraph (1)(A) of subsection (a) for relief under
subsection (c)(6) and of actions under paragraphs
(1)(B) and (7) of subsection (a) and paragraph (4)
of subsection (b)’’.
SEC. 1202. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this
subtitle shall apply with respect to grievances arising in
plan years beginning on or after January 1 of the second
calendar year following the date of the enactment of this
Act. The Secretary shall first issue all regulations nec-
essary to carry out the amendments made by this subtitle
before such date.
(b) LIMITATION ON ENFORCEMENT ACTIONS.—No
enforcement action shall be taken, pursuant to the amend-
ments made by this subtitle, against a group health plan
or health insurance issuer with respect to a violation of
a requirement imposed by such amendments before the
date of issuance of final regulations issued in connection
with such requirement, if the plan or issuer has sought
to comply in good faith with such requirement.
(c) COLLECTIVE BARGAINING AGREEMENTS.—Any
plan amendment made pursuant to a collective bargaining
agreement relating to the plan which amends the plan
solely to conform to any requirement added by this subtitle
shall not be treated as a termination of such collective bar-
gaining agreement.
Subtitle D—Affordable Health Cov-
erage for Employees of Small
Businesses
SEC. 1301. SHORT TITLE OF SUBTITLE.
This subtitle may be cited as the ‘‘Small Business
Affordable Health Coverage Act of 1998’’.
SEC. 1302. RULES GOVERNING ASSOCIATION HEALTH
PLANS.
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 is amend-
ed by adding after part 7 the following new part:
‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH
PLANS
‘‘SEC. 801. ASSOCIATION HEALTH PLANS.
‘‘(a) IN GENERAL.—For purposes of this part, the
term ‘association health plan’ means a group health
plan—
‘‘(1) whose sponsor is (or is deemed under this
part to be) described in subsection (b); and
‘‘(2) under which at least one option of health
insurance coverage offered by a health insurance
issuer (which may include, among other options,
managed care options, point of service options, and
preferred provider options) is provided to partici-
pants and beneficiaries, unless, for any plan year,
such coverage remains unavailable to the plan de-
spite good faith efforts exercised by the plan to se-
cure such coverage.
‘‘(b) SPONSORSHIP.—The sponsor of a group health
plan is described in this subsection if such sponsor—
‘‘(1) is organized and maintained in good faith,
with a constitution and bylaws specifically stating its
purpose and providing for periodic meetings on at
least an annual basis, as a trade association, an in-
dustry association (including a rural electric cooper-
ative association or a rural telephone cooperative as-
sociation), a professional association, or a chamber
of commerce (or similar business association, includ-
ing a corporation or similar organization that oper-
ates on a cooperative basis (within the meaning of
section 1381 of the Internal Revenue Code of
1986)), for substantial purposes other than that of
obtaining or providing medical care;
‘‘(2) is established as a permanent entity which
receives the active support of its members and col-
lects from its members on a periodic basis dues or
payments necessary to maintain eligibility for mem-
bership in the sponsor; and
‘‘(3) does not condition membership, such dues
or payments, or coverage under the plan on the
basis of health status-related factors with respect to
the employees of its members (or affiliated mem-
bers), or the dependents of such employees, and does
not condition such dues or payments on the basis of
group health plan participation.
Any sponsor consisting of an association of entities which
meet the requirements of paragraphs (1) and (2) shall be
deemed to be a sponsor described in this subsection.
‘‘SEC. 
802. 
CERTIFICATION 
OF 
ASSOCIATION 
HEALTH
PLANS.
‘‘(a) IN GENERAL.—The applicable authority shall
prescribe by regulation a procedure under which, subject
to subsection (b), the applicable authority shall certify as-
sociation health plans which apply for certification as
meeting the requirements of this part.
‘‘(b) STANDARDS.—Under the procedure prescribed
pursuant to subsection (a), the applicable authority shall
certify an association health plan as meeting the require-
ments of this part only if the applicable authority is satis-
fied that—
‘‘(1) such certification—
‘‘(A) is administratively feasible;
‘‘(B) is not adverse to the interests of the
individuals covered under the plan; and
‘‘(C) is protective of the rights and benefits
of the individuals covered under the plan; and
‘‘(2) the applicable requirements of this part
are met (or, upon the date on which the plan is to
commence operations, will be met) with respect to
the plan.
‘‘(c) REQUIREMENTS APPLICABLE
TO CERTIFIED
PLANS.—An association health plan with respect to which
certification under this part is in effect shall meet the ap-
plicable requirements of this part, effective on the date
of certification (or, if later, on the date on which the plan
is to commence operations).
‘‘(d) REQUIREMENTS
FOR
CONTINUED
CERTIFI-
CATION.—The applicable authority may provide by regula-
tion for continued certification of association health plans
under this part, including requirements relating to com-
mencement of new benefit options by plans which do not
consist of health insurance coverage.
‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED
PLANS.—The applicable authority shall establish a class
certification procedure for association health plans under
which all benefits consist of health insurance coverage.
Under such procedure, the applicable authority shall pro-
vide for the granting of certification under this part to
the plans in each class of such association health plans
upon appropriate filing under such procedure in connec-
tion with plans in such class and payment of the pre-
scribed fee under section 807(a).
‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND
BOARDS OF TRUSTEES.
‘‘(a) SPONSOR.—The requirements of this subsection
are met with respect to an association health plan if—
‘‘(1) the sponsor (together with its immediate
predecessor, if any) has met (or is deemed under
this part to have met) for a continuous period of not
less than 3 years ending with the date of the appli-
cation for certification under this part, the require-
ments of paragraphs (1) and (2) of section 801(b);
and
‘‘(2) the sponsor meets (or is deemed under this
part to meet) the requirements of section 801(b)(3).
‘‘(b) BOARD OF TRUSTEES.—The requirements of
this subsection are met with respect to an association
health plan if the following requirements are met:
‘‘(1) FISCAL CONTROL.—The plan is operated,
pursuant to a trust agreement, by a board of trust-
ees which has complete fiscal control over the plan
and which is responsible for all operations of the
plan.
‘‘(2) RULES
OF
OPERATION
AND
FINANCIAL
CONTROLS.—The board of trustees has in effect
rules of operation and financial controls, based on a
3-year plan of operation, adequate to carry out the
terms of the plan and to meet all requirements of
this title applicable to the plan.
‘‘(3) RULES
GOVERNING
RELATIONSHIP
TO
PARTICIPATING
EMPLOYERS
AND
TO
CONTRAC-
TORS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the members of the board of
trustees are individuals selected from individ-
uals who are the owners, officers, directors, or
employees of the participating employers or who
are partners in the participating employers and
actively participate in the business.
‘‘(B) LIMITATION.—
‘‘(i) GENERAL RULE.—Except as pro-
vided in clauses (ii) and (iii), no such
member is an owner, officer, director, or
employee of, or partner in, a contract ad-
ministrator or other service provider to the
plan.
‘‘(ii) LIMITED EXCEPTION FOR PRO-
VIDERS OF SERVICES SOLELY ON BEHALF
OF THE SPONSOR.—Officers or employees
of a sponsor which is a service provider
(other than a contract administrator) to
the plan may be members of the board if
they constitute not more than 25 percent
of the membership of the board and they
do not provide services to the plan other
than on behalf of the sponsor.
‘‘(iii) TREATMENT OF PROVIDERS OF
MEDICAL CARE.—In the case of a sponsor
which is an association whose membership
consists primarily of providers of medical
care, clause (i) shall not apply in the case
of any service provider described in sub-
paragraph (A) who is a provider of medical
care under the plan.
‘‘(C) SOLE
AUTHORITY.—The board has
sole authority to approve applications for par-
ticipation in the plan and to contract with a
service provider to administer the day-to-day af-
fairs of the plan.
‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In
the case of a group health plan which is established and
maintained by a franchiser for a franchise network con-
sisting of its franchisees—
‘‘(1) the requirements of subsection (a) and sec-
tion 801(a)(1) shall be deemed met if such require-
ments would otherwise be met if the franchiser were
deemed to be the sponsor referred to in section
801(b), such network were deemed to be an associa-
tion described in section 801(b), and each franchisee
were deemed to be a member (of the association and
the sponsor) referred to in section 801(b); and
‘‘(2) the requirements of section 804(a)(1) shall
be deemed met.
‘‘(d) CERTAIN COLLECTIVELY BARGAINED PLANS.—
‘‘(1) IN
GENERAL.—In the case of a group
health plan described in paragraph (2)—
‘‘(A) the requirements of subsection (a)
and section 801(a)(1) shall be deemed met;
‘‘(B) the joint board of trustees shall be
deemed a board of trustees with respect to
which the requirements of subsection (b) are
met; and
‘‘(C) the requirements of section 804 shall
be deemed met.
‘‘(2) REQUIREMENTS.—A group health plan is
described in this paragraph if—
‘‘(A) the plan is a multiemployer plan; or
‘‘(B) the plan is in existence on April 1,
1997, and would be described in section
3(40)(A)(i) but solely for the failure to meet
the requirements of section 3(40)(C)(ii).
‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE-
MENTS.
‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The
requirements of this subsection are met with respect to
an association health plan if, under the terms of the
plan—
‘‘(1) all participating employers must be mem-
bers or affiliated members of the sponsor, except
that, in the case of a sponsor which is a professional
association or other individual-based association, if
at least one of the officers, directors, or employees
of an employer, or at least one of the individuals
who are partners in an employer and who actively
participates in the business, is a member or affili-
ated member of the sponsor, participating employers
may also include such employer; and
‘‘(2) all individuals commencing coverage under
the plan after certification under this part must
be—
‘‘(A) active or retired owners (including
self-employed individuals), officers, directors, or
employees of, or partners in, participating em-
ployers; or
‘‘(B) the beneficiaries of individuals de-
scribed in subparagraph (A).
‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM-
PLOYEES.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
the requirements of this subsection are met with re-
spect to an association health plan if, under the
terms of the plan, no affiliated member of the spon-
sor may be offered coverage under the plan as a par-
ticipating employer, unless—
‘‘(A) the affiliated member was an affili-
ated member on the date of certification under
this part; or
‘‘(B) during the 12-month period preced-
ing the date of the offering of such coverage,
the affiliated member has not maintained or
contributed to a group health plan with respect
to any of its employees who would otherwise be
eligible to participate in such association health
plan.
‘‘(2) LIMITATION.—The requirements of this
subsection shall apply only in the case of plans
which were in existence on the date of the enactment
of the Small Business Affordable Health Coverage
Act of 1998.
‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re-
quirements of this subsection are met with respect to an
association health plan if, under the terms of the plan,
no participating employer may provide health insurance
coverage in the individual market for any employee not
covered under the plan which is similar to the coverage
contemporaneously provided to employees of the employer
under the plan, if such exclusion of the employee from cov-
erage under the plan is based on a health status-related
factor with respect to the employee and such employee
would, but for such exclusion on such basis, be eligible
for coverage under the plan.
‘‘(d) PROHIBITION
OF DISCRIMINATION AGAINST
EMPLOYERS
AND EMPLOYEES ELIGIBLE
TO PARTICI-
PATE.—The requirements of this subsection are met with
respect to an association health plan if—
‘‘(1) under the terms of the plan, no employer
meeting the preceding requirements of this section is
excluded as a participating employer, unless partici-
pation or contribution requirements of the type re-
ferred to in section 2711 of the Public Health Serv-
ice Act are not met with respect to the excluded em-
ployer;
‘‘(2) the applicable requirements of sections
701, 702, and 703 are met with respect to the plan;
and
‘‘(3) applicable benefit options under the plan
are actively marketed to all eligible participating em-
ployers.
‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN
DOCUMENTS, CONTRIBUTION RATES, AND
BENEFIT OPTIONS.
‘‘(a) IN GENERAL.—The requirements of this section
are met with respect to an association health plan if the
following requirements are met:
‘‘(1) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the plan in-
clude a written instrument, meeting the require-
ments of an instrument required under section
402(a)(1), which—
‘‘(A) provides that the board of trustees
serves as the named fiduciary required for plans
under section 402(a)(1) and serves in the ca-
pacity of a plan administrator (referred to in
section 3(16)(A));
‘‘(B) provides that the sponsor of the plan
is to serve as plan sponsor (referred to in sec-
tion 3(16)(B)); and
‘‘(C) incorporates the requirements of sec-
tion 806.
‘‘(2) CONTRIBUTION
RATES
MUST
BE
NON-
DISCRIMINATORY.—
‘‘(A) The contribution rates for any par-
ticipating small employer do not vary on the
basis of the claims experience of such employer
and do not vary on the basis of the type of
business or industry in which such employer is
engaged.
‘‘(B) Nothing in this title or any other pro-
vision of law shall be construed to preclude an
association health plan, or a health insurance
issuer offering health insurance coverage in
connection with an association health plan,
from—
‘‘(i) setting contribution rates based
on the claims experience of the plan; or
‘‘(ii) varying contribution rates for
small employers in a State to the extent
that such rates could vary using the same
methodology employed in such State for
regulating premium rates in the small
group market,
subject to the requirements of section 702(b)
relating to contribution rates.
‘‘(3) FLOOR FOR NUMBER OF COVERED INDI-
VIDUALS
WITH
RESPECT
TO
CERTAIN
PLANS.—If
any benefit option under the plan does not consist
of health insurance coverage, the plan has as of the
beginning of the plan year not fewer than 1,000 par-
ticipants and beneficiaries.
‘‘(4) MARKETING REQUIREMENTS.—
‘‘(A) IN
GENERAL.—If a benefit option
which consists of health insurance coverage is
offered under the plan, State-licensed insurance
agents shall be used to distribute to small em-
ployers coverage which does not consist of
health insurance coverage in a manner com-
parable to the manner in which such agents are
used to distribute health insurance coverage.
‘‘(B) 
STATE-LICENSED
INSURANCE
AGENTS.—For purposes of subparagraph (A),
the term ‘State-licensed insurance agents’
means one or more agents who are licensed in
a State and are subject to the laws of such
State relating to licensure, qualification, test-
ing, examination, and continuing education of
persons authorized to offer, sell, or solicit
health insurance coverage in such State.
‘‘(5) 
REGULATORY
REQUIREMENTS.—Such
other requirements as the applicable authority may
prescribe by regulation as necessary to carry out the
purposes of this part.
‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO
DESIGN BENEFIT OPTIONS.—Nothing in this part or any
provision of State law (as defined in section 514(c)(1))
shall be construed to preclude an association health plan,
or a health insurance issuer offering health insurance cov-
erage in connection with an association health plan, from
exercising its sole discretion in selecting the specific items
and services consisting of medical care to be included as
benefits under such plan or coverage, except (subject to
section 514) in the case of any law to the extent that it
(1) prohibits an exclusion of a specific disease from such
coverage, or (2) is not preempted under section 731(a)(1)
with respect to matters governed by section 711 or 712.
‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS
FOR 
SOLVENCY 
FOR 
PLANS 
PROVIDING
HEALTH BENEFITS IN ADDITION TO HEALTH
INSURANCE COVERAGE.
‘‘(a) IN GENERAL.—The requirements of this section
are met with respect to an association health plan if—
‘‘(1) the benefits under the plan consist solely
of health insurance coverage; or
‘‘(2) if the plan provides any additional benefit
options which do not consist of health insurance cov-
erage, the plan—
‘‘(A) establishes and maintains reserves
with respect to such additional benefit options,
in amounts recommended by the qualified actu-
ary, consisting of—
‘‘(i) a reserve sufficient for unearned
contributions;
‘‘(ii) a reserve sufficient for benefit li-
abilities which have been incurred, which
have not been satisfied, and for which risk
of loss has not yet been transferred, and
for expected administrative costs with re-
spect to such benefit liabilities;
‘‘(iii) a reserve sufficient for any other
obligations of the plan; and
‘‘(iv) a reserve sufficient for a margin
of error and other fluctuations, taking into
account the specific circumstances of the
plan; and
‘‘(B) establishes and maintains aggregate
and specific excess /stop loss insurance and sol-
vency indemnification, with respect to such ad-
ditional benefit options for which risk of loss
has not yet been transferred, as follows:
‘‘(i) The plan shall secure aggregate
excess /stop loss insurance for the plan
with an attachment point which is not
greater than 125 percent of expected gross
annual claims. The applicable authority
may by regulation provide for upward ad-
justments in the amount of such percent-
age in specified circumstances in which the
plan specifically provides for and maintains
reserves in excess of the amounts required
under subparagraph (A).
‘‘(ii) The plan shall secure specific ex-
cess /stop loss insurance for the plan with
an attachment point which is at least equal
to an amount recommended by the plan’s
qualified actuary (but not more than
$200,000). The applicable authority may
by regulation provide for adjustments in
the amount of such insurance in specified
circumstances in which the plan specifically
provides for and maintains reserves in ex-
cess of the amounts required under sub-
paragraph (A).
‘‘(iii) The plan shall secure indem-
nification insurance for any claims which
the plan is unable to satisfy by reason of
a plan termination.
Any regulations prescribed by the applicable authority
pursuant to clause (i) or (ii) of subparagraph (B) may
allow for such adjustments in the required levels of excess /
stop loss insurance as the qualified actuary may rec-
ommend, taking into account the specific circumstances
of the plan.
‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS
RESERVES.—The requirements of this subsection are met
if the plan establishes and maintains surplus in an amount
at least equal to $2,000,000, reduced in accordance with
a scale, prescribed in regulations of the applicable author-
ity to an amount not less than $500,000, based on the
level of aggregate and specific excess /stop loss insurance
provided with respect to such plan.
‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of
any association health plan described in subsection (a)(2),
the applicable authority may provide such additional re-
quirements relating to reserves and excess /stop loss insur-
ance as the applicable authority considers appropriate.
Such requirements may be provided, by regulation or oth-
erwise, with respect to any such plan or any class of such
plans.
‘‘(d) ADJUSTMENTS FOR EXCESS /STOP LOSS INSUR-
ANCE.—The applicable authority may provide for adjust-
ments to the levels of reserves otherwise required under
subsections (a) and (b) with respect to any plan or class
of plans to take into account excess /stop loss insurance
provided with respect to such plan or plans.
‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The
applicable authority may permit an association health plan
described in subsection (a)(2) to substitute, for all or part
of the requirements of this section (except subsection
(a)(2)(B)(iii)), such security, guarantee, hold-harmless ar-
rangement, or other financial arrangement as the applica-
ble authority determines to be adequate to enable the plan
to fully meet all its financial obligations on a timely basis
and is otherwise no less protective of the interests of par-
ticipants and beneficiaries than the requirements for
which it is substituted. The applicable authority may take
into account, for purposes of this subsection, evidence pro-
vided by the plan or sponsor which demonstrates an as-
sumption of liability with respect to the plan. Such evi-
dence may be in the form of a contract of indemnification,
lien, bonding, insurance, letter of credit, recourse under
applicable terms of the plan in the form of assessments
of participating employers, security, or other financial ar-
rangement.
‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT
OF BENEFITS BY CERTAIN PLANS IN DISTRESS.—
‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO-
CIATION HEALTH PLAN FUND.—
‘‘(A) IN GENERAL.—In the case of an as-
sociation health plan described in subsection
(a)(2), the requirements of this subsection are
met if the plan makes payments into the Asso-
ciation Health Plan Fund under this subpara-
graph when they are due. Such payments shall
consist of annual payments in the amount of
$5,000, and, in addition to such annual pay-
ments, such supplemental payments as the Sec-
retary may determine to be necessary under
paragraph (2). Payments under this paragraph
are payable to the Fund at the time determined
by the Secretary. Initial payments are due in
advance of certification under this part. Pay-
ments shall continue to accrue until a plan’s as-
sets are distributed pursuant to a termination
procedure.
‘‘(B) PENALTIES FOR FAILURE TO MAKE
PAYMENTS.—If any payment is not made by a
plan when it is due, a late payment charge of
not more than 100 percent of the payment
which was not timely paid shall be payable by
the plan to the Fund.
‘‘(C) CONTINUED
DUTY
OF
THE
SEC-
RETARY.—The Secretary shall not cease to
carry out the provisions of paragraph (2) on ac-
count of the failure of a plan to pay any pay-
ment when due.
‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE
EXCESS /STOP LOSS INSURANCE COVERAGE AND IN-
DEMNIFICATION
INSURANCE
COVERAGE
FOR
CER-
TAIN PLANS.—In any case in which the applicable
authority determines that there is, or that there is
reason to believe that there will be: (A) a failure to
take necessary corrective actions under section
809(a) with respect to an association health plan de-
scribed in subsection (a)(2); or (B) a termination of
such a plan under section 809(b) or 810(b)(8) (and,
if the applicable authority is not the Secretary, cer-
tifies such determination to the Secretary), the Sec-
retary shall determine the amounts necessary to
make payments to an insurer (designated by the
Secretary) to maintain in force excess /stop loss in-
surance coverage or indemnification insurance cov-
erage for such plan, if the Secretary determines that
there is a reasonable expectation that, without such
payments, claims would not be satisfied by reason of
termination of such coverage. The Secretary shall, to
the extent provided in advance in appropriation
Acts, pay such amounts so determined to the insurer
designated by the Secretary.
‘‘(3) ASSOCIATION HEALTH PLAN FUND.—
‘‘(A) IN GENERAL.—There is established
on the books of the Treasury a fund to be
known as the ‘Association Health Plan Fund’.
The Fund shall be available for making pay-
ments pursuant to paragraph (2). The Fund
shall be credited with payments received pursu-
ant to paragraph (1)(A), penalties received pur-
suant to paragraph (1)(B); and earnings on in-
vestments of amounts of the Fund under sub-
paragraph (B).
‘‘(B) INVESTMENT.—Whenever the Sec-
retary determines that the moneys of the fund
are in excess of current needs, the Secretary
may request the investment of such amounts as
the Secretary determines advisable by the Sec-
retary of the Treasury in obligations issued or
guaranteed by the United States.
‘‘(g) EXCESS /STOP LOSS INSURANCE.—For pur-
poses of this section—
‘‘(1) AGGREGATE
EXCESS /STOP
LOSS
INSUR-
ANCE.—The term ‘aggregate excess /stop loss insur-
ance’ means, in connection with an association
health plan, a contract—
‘‘(A) under which an insurer (meeting such
minimum standards as may be prescribed in regula-
tions of the applicable authority) provides for pay-
ment to the plan with respect to aggregate claims
under the plan in excess of an amount or amounts
specified in such contract;
‘‘(B) which is guaranteed renewable; and
‘‘(C) which allows for payment of premiums by
any third party on behalf of the insured plan.
‘‘(2) SPECIFIC
EXCESS /STOP
LOSS
INSUR-
ANCE.—The term ‘specific excess /stop loss insur-
ance’ means, in connection with an association
health plan, a contract—
‘‘(A) under which an insurer (meeting such
minimum standards as may be prescribed in
regulations of the applicable authority) provides
for payment to the plan with respect to claims
under the plan in connection with a covered in-
dividual in excess of an amount or amounts
specified in such contract in connection with
such covered individual;
‘‘(B) which is guaranteed renewable; and
‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan.
‘‘(h) INDEMNIFICATION INSURANCE.—For purposes
of this section, the term ‘indemnification insurance’
means, in connection with an association health plan, a
contract—
‘‘(1) under which an insurer (meeting such min-
imum standards as may be prescribed in regulations
of the applicable authority) provides for payment to
the plan with respect to claims under the plan which
the plan is unable to satisfy by reason of a termi-
nation pursuant to section 809(b) (relating to man-
datory termination);
‘‘(2) which is guaranteed renewable and
noncancellable for any reason (except as may be pro-
vided in regulations of the applicable authority); and
‘‘(3) which allows for payment of premiums by
any third party on behalf of the insured plan.
‘‘(i) RESERVES.—For purposes of this section, the
term ‘reserves’ means, in connection with an association
health plan, plan assets which meet the fiduciary stand-
ards under part 4 and such additional requirements re-
garding liquidity as may be prescribed in regulations of
the applicable authority.
‘‘(j) REGULATIONS
PRESCRIBED
UNDER
NEGO-
TIATED RULEMAKING.—The regulations under this sec-
tion shall be prescribed under negotiated rulemaking in
accordance with subchapter III of chapter 5 of title 5,
United States Code, except that, in establishing the nego-
tiated rulemaking committee for purposes of such rule-
making, the applicable authority shall include among per-
sons invited to membership on the committee at least one
of each of the following:
‘‘(1) a representative of the National Associa-
tion of Insurance Commissioners;
‘‘(2) a representative of the American Academy
of Actuaries;
‘‘(3) a representative of the State governments,
or their interests;
‘‘(4) a representative of existing self-insured ar-
rangements, or their interests;
‘‘(5) a representative of associations of the type
referred to in section 801(b)(1), or their interests;
and
‘‘(6) a representative of multiemployer plans
that are group health plans, or their interests.
‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RELAT-
ED REQUIREMENTS.
‘‘(a) FILING FEE.—Under the procedure prescribed
pursuant to section 802(a), an association health plan
shall pay to the applicable authority at the time of filing
an application for certification under this part a filing fee
in the amount of $5,000, which shall be available in the
case of the Secretary, to the extent provided in appropria-
tion Acts, for the sole purpose of administering the certifi-
cation procedures applicable with respect to association
health plans.
‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA-
TION FOR CERTIFICATION.—An application for certifi-
cation under this part meets the requirements of this sec-
tion only if it includes, in a manner and form prescribed
in regulations of the applicable authority, at least the fol-
lowing information:
‘‘(1) IDENTIFYING INFORMATION.—The names
and addresses of—
‘‘(A) the sponsor; and
‘‘(C) CURRENT AND PROJECTED VALUE OF
ASSETS AND LIABILITIES.—A statement of ac-
tuarial opinion signed by a qualified actuary,
which sets forth the current value of the assets
and liabilities accumulated under the plan and
a projection of the assets, liabilities, income,
and expenses of the plan for the 12-month pe-
riod referred to in subparagraph (B). The in-
come statement shall identify separately the
plan’s administrative expenses and claims.
‘‘(D) 
COSTS
OF
COVERAGE
TO
BE
CHARGED
AND
OTHER
EXPENSES.—A state-
ment of the costs of coverage to be charged, in-
cluding an itemization of amounts for adminis-
tration, reserves, and other expenses associated
with the operation of the plan.
‘‘(E) OTHER
INFORMATION.—Any other
information which may be prescribed in regula-
tions of the applicable authority as necessary to
carry out the purposes of this part.
‘‘(c) FILING
NOTICE
OF
CERTIFICATION
WITH
STATES.—A certification granted under this part to an
association health plan shall not be effective unless written
notice of such certification is filed with the applicable
State authority of each State in which at least 25 percent
of the participants and beneficiaries under the plan are
located. For purposes of this subsection, 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.
‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case
of any association health plan certified under this part,
descriptions of material changes in any information which
was required to be submitted with the application for the
certification under this part shall be filed in such form
and manner as shall be prescribed in regulations of the
applicable authority. The applicable authority 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 certification.
‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS-
SOCIATION HEALTH PLANS.—An association health plan
certified under this part which provides benefit options in
addition to health insurance coverage for such plan year
shall meet the requirements of section 103 by filing an
annual report under such section which shall include infor-
mation described in subsection (b)(6) with respect to the
plan year and, notwithstanding section 104(a)(1)(A), shall
be filed with the applicable authority not later than 90
days after the close of the plan year (or on such later date
as may be prescribed by the applicable authority).
‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The
board of trustees of each association health plan which
provides benefits options in addition to health insurance
coverage and which is applying for certification under this
part or is certified under this part shall engage, on behalf
of all participants and beneficiaries, 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 plan and to reasonable expecta-
tions; and
‘‘(2) represent such actuary’s best estimate of
anticipated experience under the plan.
The opinion by the qualified actuary shall be made with
respect to, and shall be made a part of, the annual report.
‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER-
MINATION.
‘‘Except as provided in section 809(b), an association
health plan which is or has been certified under this part
may terminate (upon or at any time after cessation of ac-
cruals in benefit liabilities) only if the board of trustees—
‘‘(1) not less than 60 days before the proposed
termination date, provides to the participants and
beneficiaries a written notice of intent to terminate
stating that such termination is intended and the
proposed termination date;
‘‘(2) develops a plan for winding up the affairs
of the plan in connection with such termination in
a manner which will result in timely payment of all
benefits for which the plan is obligated; and
‘‘(3) submits such plan in writing to the appli-
cable authority.
Actions required under this section shall be taken in such
form and manner as may be prescribed in regulations of
the applicable authority.
‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI-
NATION.
‘‘(a) ACTIONS
TO
AVOID
DEPLETION
OF
RE-
SERVES.—An association health plan which is certified
under this part and which provides benefits other than
health insurance coverage shall continue to meet the re-
quirements of section 806, irrespective of whether such
certification continues in effect. The board of trustees of
such plan shall determine quarterly whether the require-
ments of section 806 are met. In any case in which the
board determines that there is reason to believe that there
is or will be a failure to meet such requirements, or the
applicable authority makes such a determination and so
notifies the board, the board shall immediately notify the
qualified actuary engaged by the plan, and such actuary
shall, not later than the end of the next following month,
make such recommendations to the board for corrective
action as the actuary determines necessary to ensure com-
pliance with section 806. Not later than 30 days after re-
ceiving from the actuary recommendations for corrective
actions, the board shall notify the applicable authority (in
such form and manner as the applicable authority may
prescribe by regulation) of such recommendations of the
actuary for corrective action, together with a description
of the actions (if any) that the board has taken or plans
to take in response to such recommendations. The board
shall thereafter report to the applicable authority, in such
form and frequency as the applicable authority may speci-
fy to the board, regarding corrective action taken by the
board until the requirements of section 806 are met.
100
‘‘(b) MANDATORY TERMINATION.—In any case in
which—
‘‘(1) the applicable authority has been notified
under subsection (a) of a failure of an association
health plan which is or has been certified under this
part and is described in section 806(a)(2) to meet
the requirements of section 806 and has not been
notified by the board of trustees of the plan that
corrective action has restored compliance with such
requirements; and
‘‘(2) the applicable authority determines that
there is a reasonable expectation that the plan will
continue to fail to meet the requirements of section
806,
the board of trustees of the plan shall, at the direction
of the applicable authority, terminate the plan and, in the
course of the termination, take such actions as the appli-
cable authority may require, including satisfying any
claims referred to in section 806(a)(2)(B)(iii) and recover-
ing for the plan any liability under subsection
(a)(2)(B)(iii) or (e) of section 806, as necessary to ensure
that the affairs of the plan will be, to the maximum extent
possible, wound up in a manner which will result in timely
provision of all benefits for which the plan is obligated.
101
‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL-
VENT ASSOCIATION HEALTH PLANS PROVID-
ING HEALTH BENEFITS IN ADDITION TO
HEALTH INSURANCE COVERAGE.
‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR
INSOLVENT PLANS.—Whenever the Secretary determines
that an association health plan which is or has been cer-
tified under this part and which is described in section
806(a)(2) will be unable to provide benefits when due or
is otherwise in a financially hazardous condition as defined
in regulations of such Secretary, the Secretary shall, upon
notice to the plan, apply to the appropriate United States
district court for appointment of the Secretary as trustee
to administer the plan for the duration of the insolvency.
The plan may appear as a party and other interested per-
sons may intervene in the proceedings at the discretion
of the court. The court shall appoint such Secretary trust-
ee if the court determines that the trusteeship is necessary
to protect the interests of the participants and bene-
ficiaries or providers of medical care or to avoid any un-
reasonable deterioration of the financial condition of the
plan. The trusteeship of such Secretary shall continue
until the conditions described in the first sentence of this
subsection are remedied or the plan is terminated.
102
‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon
appointment as trustee under subsection (a), shall have
the power—
‘‘(1) to do any act authorized by the plan, this
title, or other applicable provisions of law to be done
by the plan administrator or any trustee of the plan;
‘‘(2) to require the transfer of all (or any part)
of the assets and records of the plan to the Sec-
retary as trustee;
‘‘(3) to invest any assets of the plan which the
Secretary holds in accordance with the provisions of
the plan, regulations of the Secretary, and applicable
provisions of law;
‘‘(4) to require the sponsor, the plan adminis-
trator, any participating employer, and any employee
organization representing plan participants to fur-
nish any information with respect to the plan which
the Secretary as trustee may reasonably need in
order to administer the plan;
‘‘(5) to collect for the plan any amounts due the
plan and to recover reasonable expenses of the trust-
eeship;
‘‘(6) to commence, prosecute, or defend on be-
half of the plan any suit or proceeding involving the
plan;
103
‘‘(7) to issue, publish, or file such notices, state-
ments, and reports as may be required under regula-
tions of the Secretary or by any order of the court;
‘‘(8) to terminate the plan (or provide for its
termination accordance with section 809(b)) and liq-
uidate the plan assets, to restore the plan to the re-
sponsibility of the sponsor, or to continue the trust-
eeship;
‘‘(9) to provide for the enrollment of plan par-
ticipants and beneficiaries under appropriate cov-
erage options; and
‘‘(10) to do such other acts as may be nec-
essary to comply with this title or any order of the
court and to protect the interests of plan partici-
pants and beneficiaries and providers of medical
care.
‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac-
ticable after the Secretary’s appointment as trustee, the
Secretary shall give notice of such appointment to—
‘‘(1) the sponsor and plan administrator;
‘‘(2) each participant;
‘‘(3) each participating employer; and
‘‘(4) if applicable, each employee organization
which, for purposes of collective bargaining, rep-
resents plan participants.
104
‘‘(d) ADDITIONAL DUTIES.—Except to the extent in-
consistent with the provisions of this title, or as may be
otherwise ordered by the court, the Secretary, upon ap-
pointment as trustee under this section, shall be subject
to the same duties as those of a trustee under section 704
of title 11, United States Code, and shall have the duties
of a fiduciary for purposes of this title.
‘‘(e) OTHER PROCEEDINGS.—An application by the
Secretary under this subsection may be filed notwithstand-
ing the pendency in the same or any other court of any
bankruptcy, mortgage foreclosure, or equity receivership
proceeding, or any proceeding to reorganize, conserve, or
liquidate such plan or its property, or any proceeding to
enforce a lien against property of the plan.
‘‘(f) JURISDICTION OF COURT.—
‘‘(1) IN GENERAL.—Upon the filing of an appli-
cation for the appointment as trustee or the issuance
of a decree under this section, the court to which the
application is made shall have exclusive jurisdiction
of the plan involved and its property wherever lo-
cated with the powers, to the extent consistent with
the purposes of this section, of a court of the United
States having jurisdiction over cases under chapter
11 of title 11, United States Code. Pending an adju-
dication under this section such court shall stay, and
105
upon appointment by it of the Secretary as trustee,
such court shall continue the stay of, any pending
mortgage foreclosure, equity receivership, or other
proceeding to reorganize, conserve, or liquidate the
plan, the sponsor, or property of such plan or spon-
sor, and any other suit against any receiver, con-
servator, or trustee of the plan, the sponsor, or
property of the plan or sponsor. Pending such adju-
dication and upon the appointment by it of the Sec-
retary as trustee, the court may stay any proceeding
to enforce a lien against property of the plan or the
sponsor or any other suit against the plan or the
sponsor.
‘‘(2) VENUE.—An action under this section
may be brought in the judicial district where the
sponsor or the plan administrator resides or does
business or where any asset of the plan is situated.
A district court in which such action is brought may
issue process with respect to such action in any
other judicial district.
‘‘(g) PERSONNEL.—In accordance with regulations of
the Secretary, the Secretary shall appoint, retain, and
compensate accountants, actuaries, and other professional
service personnel as may be necessary in connection with
the Secretary’s service as trustee under this section.
106
‘‘SEC. 811. STATE ASSESSMENT AUTHORITY.
‘‘(a) IN GENERAL.—Notwithstanding section 514, a
State may impose by law a contribution tax on an associa-
tion health plan described in section 806(a)(2), if the plan
commenced operations in such State after the date of the
enactment of the Small Business Affordable Health Cov-
erage Act of 1998.
‘‘(b) CONTRIBUTION TAX.—For purposes of this sec-
tion, the term ‘contribution tax’ imposed by a State on
an association health plan means any tax imposed by such
State if—
‘‘(1) such tax is computed by applying a rate to
the amount of premiums or contributions, with re-
spect to individuals covered under the plan who are
residents of such State, which are received by the
plan from participating employers located in such
State or from such individuals;
‘‘(2) the rate of such tax does not exceed the
rate of any tax imposed by such State on premiums
or contributions received by insurers or health main-
tenance organizations for health insurance coverage
offered in such State in connection with a group
health plan;
‘‘(3) such tax is otherwise nondiscriminatory;
and
107
‘‘(4) the amount of any such tax assessed on
the plan is reduced by the amount of any tax or as-
sessment otherwise imposed by the State on pre-
miums, contributions, or both received by insurers or
health maintenance organizations for health insur-
ance coverage, aggregate excess /stop loss insurance
(as defined in section 806(g)(1)), specific excess /
stop loss insurance (as defined in section 806(g)(2)),
other insurance related to the provision of medical
care under the plan, or any combination thereof pro-
vided by such insurers or health maintenance organi-
zations in such State in connection with such plan.
‘‘SEC. 812. SPECIAL RULES FOR CHURCH PLANS.
‘‘(a) ELECTION
FOR CHURCH PLANS.—Notwith-
standing section 4(b)(2), if a church, a convention or asso-
ciation of churches, or an organization described in section
3(33)(C)(i) maintains a church plan which is a group
health plan (as defined in section 733(a)(1)), and such
church, convention, association, or organization makes an
election with respect to such plan under this subsection
(in such form and manner as the Secretary may by regula-
tion prescribe), then the provisions of this section shall
apply to such plan, with respect to benefits provided under
such plan consisting of medical care, as if section 4(b)(2)
did not contain an exclusion for church plans. Nothing in
108
this subsection shall be construed to render any other sec-
tion of this title applicable to church plans, except to the
extent that such other section is incorporated by reference
in this section.
‘‘(b) EFFECT OF ELECTION.—
‘‘(1) PREEMPTION OF STATE INSURANCE LAWS
REGULATING COVERED CHURCH PLANS.—Subject to
paragraphs (2) and (3), this section shall supersede
any and all State laws which regulate insurance in-
sofar as they may now or hereafter regulate church
plans to which this section applies or trusts estab-
lished under such church plans.
‘‘(2) GENERAL STATE INSURANCE REGULATION
UNAFFECTED.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B) and paragraph (3), nothing
in this section shall be construed to exempt or
relieve any person from any provision of State
law which regulates insurance.
‘‘(B) CHURCH PLANS NOT TO BE DEEMED
INSURANCE COMPANIES OR INSURERS.—Neither
a church plan to which this section applies, nor
any trust established under such a church plan,
shall be deemed to be an insurance company or
other insurer or to be engaged in the business
109
of insurance for purposes of any State law pur-
porting to regulate insurance companies or in-
surance contracts.
‘‘(3) PREEMPTION
OF
CERTAIN
STATE
LAWS
RELATING
TO
PREMIUM
RATE
REGULATION
AND
BENEFIT MANDATES.—The provisions of subsections
(a)(2)(B) and (b) of section 805 shall apply with re-
spect to a church plan to which this section applies
in the same manner and to the same extent as such
provisions apply with respect to association health
plans.
‘‘(4) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) STATE LAW.—The term ‘State law’
includes all laws, decisions, rules, regulations,
or other State action having the effect of law,
of any State. A law of the United States appli-
cable only to the District of Columbia shall be
treated as a State law rather than a law of the
United States.
‘‘(B) STATE.—The term ‘State’ includes a
State, any political subdivision thereof, or any
agency or instrumentality of either, which pur-
ports to regulate, directly or indirectly, the
110
terms and conditions of church plans covered by
this section.
‘‘(c) 
REQUIREMENTS
FOR
COVERED
CHURCH
PLANS.—
‘‘(1) FIDUCIARY RULES AND EXCLUSIVE PUR-
POSE.—A fiduciary shall discharge his duties with
respect to a church plan to which this section ap-
plies—
‘‘(A) for the exclusive purpose of:
‘‘(i) providing benefits to participants
and their beneficiaries; and
‘‘(ii) defraying reasonable expenses of
administering the plan;
‘‘(B) with the care, skill, prudence and dili-
gence under the circumstances then prevailing
that a prudent man acting in a like capacity
and familiar with such matters would use in the
conduct of an enterprise of a like character and
with like aims; and
‘‘(C) in accordance with the documents
and instruments governing the plan.
The requirements of this paragraph shall not be
treated as not satisfied solely because the plan as-
sets are commingled with other church assets, to the
111
extent that such plan assets are separately ac-
counted for.
‘‘(2) CLAIMS PROCEDURE.—In accordance with
regulations of the Secretary, every church plan to
which this section applies shall—
‘‘(A) provide adequate notice in writing to
any participant or beneficiary whose claim for
benefits under the plan has been denied, setting
forth the specific reasons for such denial, writ-
ten in a manner calculated to be understood by
the participant;
‘‘(B) afford a reasonable opportunity to
any participant whose claim for benefits has
been denied for a full and fair review by the ap-
propriate fiduciary of the decision denying the
claim; and
‘‘(C) provide a written statement to each
participant describing the procedures estab-
lished pursuant to this paragraph.
‘‘(3) ANNUAL
STATEMENTS.—In accordance
with regulations of the Secretary, every church plan
to which this section applies shall file with the Sec-
retary an annual statement—
‘‘(A) stating the names and addresses of
the plan and of the church, convention, or asso-
112
ciation maintaining the plan (and its principal
place of business);
‘‘(B) certifying that it is a church plan to
which this section applies and that it complies
with the requirements of paragraphs (1) and
(2);
‘‘(C) identifying the States in which par-
ticipants and beneficiaries under the plan are or
likely will be located during the 1-year period
covered by the statement; and
‘‘(D) containing a copy of a statement of
actuarial opinion signed by a qualified actuary
that the plan maintains capital, reserves, insur-
ance, other financial arrangements, or any com-
bination thereof adequate to enable the plan to
fully meet all of its financial obligations on a
timely basis.
‘‘(4) DISCLOSURE.—At the time that the an-
nual statement is filed by a church plan with the
Secretary pursuant to paragraph (3), a copy of such
statement shall be made available by the Secretary
to the State insurance commissioner (or similar offi-
cial) of any State. The name of each church plan
and sponsoring organization filing an annual state-
113
ment in compliance with paragraph (3) shall be pub-
lished annually in the Federal Register.
‘‘(c) ENFORCEMENT.—The Secretary may enforce
the provisions of this section in a manner consistent with
section 502, to the extent applicable with respect to ac-
tions under section 502(a)(5), and with section 3(33)(D),
except that, other than for the purpose of seeking a tem-
porary restraining order, a civil action may be brought
with respect to the plan’s failure to meet any requirement
of this section only if the plan fails to correct its failure
within the correction period described in section 3(33)(D).
The other provisions of part 5 (except sections 501(a),
503, 512, 514, and 515) shall apply with respect to the
enforcement and administration of this section.
‘‘(d) DEFINITIONS AND OTHER RULES.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, any term used in this section
which is defined in any provision of this title shall
have the definition provided such term by such pro-
vision.
‘‘(2) SEMINARY STUDENTS.—Seminary students
who are enrolled in an institution of higher learning
described in section 3(33)(C)(iv) and who are treat-
ed as participants under the terms of a church plan
114
to which this section applies shall be deemed to be
employees as defined in section 3(6) if the number
of such students constitutes an insignificant portion
of the total number of individuals who are treated
as participants under the terms of the plan.
‘‘SEC. 813. DEFINITIONS AND RULES OF CONSTRUCTION.
‘‘(a) DEFINITIONS.—For purposes of this part—
‘‘(1) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning provided in section
733(a)(1) (after applying subsection (b) of this sec-
tion).
‘‘(2) MEDICAL CARE.—The term ‘medical care’
has the meaning provided in section 733(a)(2).
‘‘(3) HEALTH
INSURANCE
COVERAGE.—The
term ‘health insurance coverage’ has the meaning
provided in section 733(b)(1).
‘‘(4) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning provided
in section 733(b)(2).
‘‘(5) APPLICABLE AUTHORITY.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘applicable author-
ity’ means, in connection with an association
health plan—
115
‘‘(i) the State recognized pursuant to
subsection (c) of section 506 as the State
to which authority has been delegated in
connection with such plan; or
‘‘(ii) if there if no State referred to in
clause (i), the Secretary.
‘‘(B) EXCEPTIONS.—
‘‘(i) 
JOINT
AUTHORITIES.—Where
such term appears in section 808(3), sec-
tion 807(e) (in the first instance), section
809(a) (in the second instance), section
809(a) (in the fourth instance), and sec-
tion 809(b)(1), such term means, in con-
nection with an association health plan, the
Secretary and the State referred to in sub-
paragraph (A)(i) (if any) in connection
with such plan.
‘‘(ii) REGULATORY
AUTHORITIES.—
Where such term appears in section 802(a)
(in the first instance), section 802(d), sec-
tion 
802(e), 
section 
803(d), 
section
805(a)(5), 
section 
806(a)(2), 
section
806(b), section 806(c), section 806(d),
paragraphs (1)(A) and (2)(A) of section
806(g), section 806(h), section 806(i), sec-
116
tion 807(a) (in the second instance), sec-
tion 807(b), section 807(d), section 807(e)
(in the second instance), section 808 (in
the matter after paragraph (3)), and sec-
tion 809(a) (in the third instance), such
term means, in connection with an associa-
tion health plan, the Secretary.
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The
term ‘health status-related factor’ has the meaning
provided in section 733(d)(2).
‘‘(7) INDIVIDUAL MARKET.—
‘‘(A) IN GENERAL.—The term ‘individual
market’ means the market for health insurance
coverage offered to individuals other than in
connection with a group health plan.
‘‘(B) 
TREATMENT
OF
VERY
SMALL
GROUPS.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), such term includes coverage offered in
connection with a group health plan that
has fewer than 2 participants as current
employees or participants described in sec-
tion 732(d)(3) on the first day of the plan
year.
117
‘‘(ii) STATE
EXCEPTION.—Clause (i)
shall not apply in the case of health insur-
ance coverage offered in a State if such
State regulates the coverage described in
such clause in the same manner and to the
same extent as coverage in the small group
market (as defined in section 2791(e)(5) of
the Public Health Service Act) is regulated
by such State.
‘‘(8) PARTICIPATING
EMPLOYER.—The term
‘participating employer’ means, in connection with
an association health plan, any employer, if any indi-
vidual who is an employee of such employer, a part-
ner in such employer, or a self-employed individual
who is such employer (or any dependent, as defined
under the terms of the plan, of such individual) is
or was covered under such plan in connection with
the status of such individual as such an employee,
partner, or self-employed individual in relation to the
plan.
‘‘(9) APPLICABLE
STATE
AUTHORITY.—The
term ‘applicable State authority’ means, with respect
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of
118
title XXVII of the Public Health Service Act for the
State involved with respect to such issuer.
‘‘(10) 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.
‘‘(11) AFFILIATED MEMBER.—The term ‘affili-
ated member’ means, in connection with a sponsor,
a person eligible to be a member of the sponsor or,
in the case of a sponsor with member associations,
a person who is a member, or is eligible to be a
member, of a member association.
‘‘(12) LARGE EMPLOYER.—The term ‘large em-
ployer’ means, in connection with a group health
plan with respect to a plan year, an employer who
employed an average of at least 51 employees on
business days during the preceding calendar year
and who employs at least 2 employees on the first
day of the plan year.
‘‘(13) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, in connection with a group health
plan with respect to a plan year, an employer who
is not a large employer.
‘‘(b) RULES OF CONSTRUCTION.—
119
‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur-
poses of determining whether a plan, fund, or pro-
gram is an employee welfare benefit plan which is an
association health plan, and for purposes of applying
this title in connection with such plan, fund, or pro-
gram so determined to be such an employee welfare
benefit plan—
‘‘(A) in the case of a partnership, the term
‘employer’ (as defined in section (3)(5)) in-
cludes the partnership in relation to the part-
ners, and the term ‘employee’ (as defined in
section (3)(6)) includes any partner in relation
to the partnership; and
‘‘(B) in the case of a self-employed individ-
ual, the term ‘employer’ (as defined in section
3(5)) and the term ‘employee’ (as defined in
section 3(6)) shall include such individual.
‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED
AS EMPLOYEE WELFARE BENEFIT PLANS.—In the
case of any plan, fund, or program which was estab-
lished or is maintained for the purpose of providing
medical care (through the purchase of insurance or
otherwise) for employees (or their dependents) cov-
ered thereunder and which demonstrates to the Sec-
retary that all requirements for certification under
120
this part would be met with respect to such plan,
fund, or program if such plan, fund, or program
were a group health plan, such plan, fund, or pro-
gram shall be treated for purposes of this title as an
employee welfare benefit plan on and after the date
of such demonstration.’’.
(b) CONFORMING AMENDMENTS
TO PREEMPTION
RULES.—
(1) 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) The preceding subparagraphs of this paragraph
do not apply with respect to any State law in the case
of an association health plan which is certified under part
8.’’.
(2) Section 514 of such Act (29 U.S.C. 1144)
is amended—
(A) in subsection (b)(4), by striking ‘‘Sub-
section (a)’’ and inserting ‘‘Subsections (a) and
(d)’’;
(B) in subsection (b)(5), by striking ‘‘sub-
section (a)’’ in subparagraph (A) and inserting
‘‘subsection (a) of this section and subsections
(a)(2)(B) and (b) of section 805’’, and by strik-
ing ‘‘subsection (a)’’ in subparagraph (B) and
121
inserting ‘‘subsection (a) of this section or sub-
section (a)(2)(B) or (b) of section 805’’;
(C) by redesignating subsection (d) as sub-
section (e); and
(D) by inserting after subsection (c) the
following new subsection:
‘‘(d)(1) Except as provided in subsection (b)(4), the
provisions of this title shall supersede any and all State
laws insofar as they may now or hereafter preclude, or
have the effect of precluding, a health insurance issuer
from offering health insurance coverage in connection with
an association health plan which is certified under part
8.
‘‘(2) Except as provided in paragraphs (4) and (5)
of subsection (b) of this section—
‘‘(A) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan certified under part 8 to a partici-
pating employer operating in such State, the provi-
sions of this title shall supersede any and all laws
of such State insofar as they may preclude a health
insurance issuer from offering health insurance cov-
erage of the same policy type to other employers op-
erating in the State which are eligible for coverage
under such association health plan, whether or not
122
such other employers are participating employers in
such plan.
‘‘(B) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan in a State and the filing, with the
applicable State authority, of the policy form in con-
nection with such policy type is approved by such
State authority, the provisions of this title shall su-
persede any and all laws of any other State in which
health insurance coverage of such type is offered, in-
sofar as they may preclude, upon the filing in the
same form and manner of such policy form with the
applicable State authority in such other State, the
approval of the filing in such other State.
‘‘(3) For additional provisions relating to association
health plans, see subsections (a)(2)(B) and (b) of section
805.
‘‘(4) For purposes of this subsection, the term ‘asso-
ciation health plan’ has the meaning provided in section
801(a), and the terms ‘health insurance coverage’, ‘par-
ticipating employer’, and ‘health insurance issuer’ have
the meanings provided such terms in section 811, respec-
tively.’’.
(3) Section 514(b)(6)(A) of such Act (29
U.S.C. 1144(b)(6)(A)) is amended—
123
(A) in clause (i)(II), by striking ‘‘and’’ at
the end;
(B) in clause (ii), by inserting ‘‘and which
does not provide medical care (within the mean-
ing of section 733(a)(2)),’’ after ‘‘arrange-
ment,’’, and by striking ‘‘title.’’ and inserting
‘‘title, and’’; and
(C) by adding at the end the following new
clause:
‘‘(iii) subject to subparagraph (E), in the case
of any other employee welfare benefit plan which is
a multiple employer welfare arrangement and which
provides medical care (within the meaning of section
733(a)(2)), any law of any State which regulates in-
surance may apply.’’.
(4) Section 514(e) of such Act (as redesignated
by paragraph (2)(C)) is amended—
(A) by striking ‘‘Nothing’’ and inserting
‘‘(1) Except as provided in paragraph (2), noth-
ing’’; and
(B) by adding at the end the following new
paragraph:
‘‘(2) Nothing in any other provision of law enacted
on or after the date of the enactment of the Patient Pro-
tection Act of 1998 shall be construed to alter, amend,
124
modify, invalidate, impair, or supersede any provision of
this title, except by specific cross-reference to the affected
section.’’.
(c) PLAN SPONSOR.—Section 3(16)(B) of such Act
(29 U.S.C. 102(16)(B)) is amended by adding at the end
the following new sentence: ‘‘Such term also includes a
person serving as the sponsor of an association health plan
under part 8.’’.
(d) DISCLOSURE OF SOLVENCY PROTECTIONS RE-
LATED TO SELF-INSURED AND FULLY INSURED OPTIONS
UNDER ASSOCIATION HEALTH PLANS.—Section 102(b)
of such Act (29 U.S.C. 102(b)) is amended by adding at
the end the following: ‘‘An association health plan shall
include in its summary plan description, in connection
with each benefit option, a description of the form of sol-
vency or guarantee fund protection secured pursuant to
this Act or applicable State law, if any.’’.
(e) SAVINGS CLAUSE.—Section 731(c) of such Act is
amended by inserting ‘‘or part 8’’ after ‘‘this part’’.
(f) 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 734 the following new items:
‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS
‘‘Sec. 801. Association health plans.
‘‘Sec. 802. Certification of association health plans.
‘‘Sec. 803. Requirements relating to sponsors and boards of trustees.
125
‘‘Sec. 804. Participation and coverage requirements.
‘‘Sec. 805. Other requirements relating to plan documents, contribution rates,
and benefit options.
‘‘Sec. 806. Maintenance of reserves and provisions for solvency for plans pro-
viding health benefits in addition to health insurance coverage.
‘‘Sec. 807. Requirements for application and related requirements.
‘‘Sec. 808. Notice requirements for voluntary termination.
‘‘Sec. 809. Corrective actions and mandatory termination.
‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health plans
providing health benefits in addition to health insurance cov-
erage.
‘‘Sec. 811. State assessment authority.
‘‘Sec. 812. Special rules for church plans.
‘‘Sec. 813. Definitions and rules of construction.’’.
SEC. 1303. 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 ‘‘control group’’;
(2) in clause (iii)—
(A) by striking ‘‘common control shall not
be based on an interest of less than 25 percent’’
and inserting ‘‘an interest of greater than 25
percent may not be required as the minimum
interest necessary for common control’’; and
(B) by striking ‘‘similar to’’ and inserting
‘‘consistent and coextensive with’’;
126
(3) by redesignating clauses (iv) and (v) as
clauses (v) and (vi), respectively; 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 one participating employer
if, after the application of clause (i), the number of
individuals who are employees and former employees
of any one participating employer and who are cov-
ered under the arrangement is greater than 75 per-
cent of the aggregate number of all individuals who
are employees or former employees of participating
employers and who are covered under the arrange-
ment;’’.
SEC. 1304. 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)(I) under or pursuant to one or more collec-
tive bargaining agreements which are reached pursu-
ant to collective bargaining described in section 8(d)
127
of the National Labor Relations Act (29 U.S.C.
158(d)) or paragraph Fourth of section 2 of the
Railway Labor Act (45 U.S.C. 152, paragraph
Fourth) or which are reached pursuant to labor-
management negotiations under similar provisions of
State public employee relations laws, and (II) in ac-
cordance with subparagraphs (C), (D), and (E);’’.
(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) For purposes of subparagraph (A)(i)(II), a plan
or other arrangement shall be treated as established or
maintained in accordance with this subparagraph only if
the following requirements are met:
‘‘(i) The plan or other arrangement, and the
employee organization or any other entity sponsoring
the plan or other arrangement, do not—
‘‘(I) utilize the services of any licensed in-
surance agent or broker for soliciting or enroll-
ing employers or individuals 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 person, other than a full
time employee of the employee organization (or
128
a member of the organization to the extent pro-
vided in regulations of the Secretary), that is
related either to the volume or number of em-
ployers or individuals solicited or enrolled as
participating employers or covered individuals
under the plan or other arrangement, or to the
dollar amount or size of the contributions made
by participating employers or covered individ-
uals to the plan or other arrangement;
except to the extent that the services used by the
plan, arrangement, organization, or other entity con-
sist solely of preparation of documents necessary for
compliance with the reporting and disclosure re-
quirements of part 1 or administrative, investment,
or consulting services unrelated to solicitation or en-
rollment of covered individuals.
‘‘(ii) As of the end of the preceding plan year,
the number of covered individuals under the plan or
other arrangement who are identified to the plan or
arrangement and who are neither—
‘‘(I) employed within a bargaining unit
covered by any of the collective bargaining
agreements with a participating employer (nor
covered on the basis of an individual’s employ-
ment in such a bargaining unit); nor
129
‘‘(II) present employees (or former employ-
ees who were covered while employed) of the
sponsoring employee organization, of an em-
ployer who is or was a party to any of the col-
lective bargaining agreements, or of the plan or
other arrangement or a related plan or arrange-
ment (nor covered on the basis of such present
or former employment);
does not exceed 15 percent of the total number of
individuals who are covered under the plan or ar-
rangement and who are present or former employees
who are or were covered under the plan or arrange-
ment pursuant to a collective bargaining agreement
with a participating employer. The requirements of
the preceding provisions of this clause shall be treat-
ed as satisfied if, as of the end of the preceding plan
year, such covered individuals are comprised solely
of individuals who were covered individuals under
the plan or other arrangement as of the date of the
enactment of the Small Business Affordable Health
Coverage Act of 1998 and, as of the end of the pre-
ceding plan year, the number of such covered indi-
viduals does not exceed 25 percent of the total num-
ber of present and former employees enrolled under
the plan or other arrangement.
130
‘‘(iii) 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 that the plan or other arrangement meets the
requirements of clauses (i) and (ii).
‘‘(D) For purposes of subparagraph (A)(i)(II), a plan
or arrangement shall be treated as established or main-
tained in accordance with this subparagraph only if—
‘‘(i) all of the benefits provided under the plan
or arrangement consist of health insurance coverage;
or
‘‘(ii)(I) the plan or arrangement is a multiem-
ployer plan; and
‘‘(II) the requirements of clause (B) of the pro-
viso to clause (5) of section 302(c) of the Labor
Management Relations Act, 1947 (29 U.S.C.
186(c)) are met with respect to such plan or other
arrangement.
‘‘(E) For purposes of subparagraph (A)(i)(II), a plan
or arrangement shall be treated as established or main-
tained in accordance with this subparagraph only if—
‘‘(i) the plan or arrangement is in effect as of
the date of the enactment of the Small Business Af-
fordable Health Coverage Act of 1998; or
131
‘‘(ii) the employee organization or other entity
sponsoring the plan or arrangement—
‘‘(I) has been in existence for at least 3
years or is affiliated with another employee or-
ganization which has been in existence for at
least 3 years; or
‘‘(II) demonstrates to the satisfaction of
the Secretary that the requirements of subpara-
graphs (C) and (D) are met with respect to the
plan or other arrangement.’’.
(c) CONFORMING AMENDMENTS TO DEFINITIONS OF
PARTICIPANT AND BENEFICIARY.—Section 3(7) of such
Act (29 U.S.C. 1002(7)) is amended by adding at the end
the following new sentence: ‘‘Such term includes an indi-
vidual who is a covered individual described in paragraph
(40)(C)(ii).’’.
SEC. 1305. ENFORCEMENT PROVISIONS RELATING TO ASSO-
CIATION HEALTH PLANS.
(a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL
MISREPRESENTATIONS.—Section 501 of the Employee
Retirement Income Security Act of 1974 (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:
132
‘‘(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,
a plan or other 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 association health plan which has
been certified under part 8;
‘‘(2) having been established or maintained
under or pursuant to one or more collective bargain-
ing agreements which are reached pursuant to col-
lective bargaining described in section 8(d) of the
National Labor Relations Act (29 U.S.C. 158(d)) or
paragraph Fourth of section 2 of the Railway Labor
Act (45 U.S.C. 152, paragraph Fourth) or which are
reached pursuant to labor-management negotiations
under similar provisions of State public employee re-
lations laws; or
‘‘(3) being a plan or arrangement with respect
to which the requirements of subparagraph (C), (D),
or (E) of section 3(40) are met;
shall, upon conviction, be imprisoned not more than 5
years, be fined under title 18, United States Code, or
both.’’.
133
(b) CEASE ACTIVITIES ORDERS.—Section 502 of
such Act (29 U.S.C. 1132) is amended by adding at the
end the following new subsection:
‘‘(n)(1) Subject to paragraph (2), upon application
by the Secretary showing the operation, promotion, or
marketing of an association health plan (or similar ar-
rangement providing benefits consisting of medical care
(as defined in section 733(a)(2))) that—
‘‘(A) is not certified under part 8, is subject
under section 514(b)(6) to the insurance laws of any
State in which the plan or arrangement offers or
provides benefits, and is not licensed, registered, or
otherwise approved under the insurance laws of such
State; or
‘‘(B) is an association health plan certified
under part 8 and is not operating in accordance with
the requirements under part 8 for such certification,
a district court of the United States shall enter an order
requiring that the plan or arrangement cease activities.
‘‘(2) Paragraph (1) shall not apply in the case of an
association health plan or other arrangement if the plan
or arrangement shows that—
‘‘(A) all benefits under it referred to in para-
graph (1) consist of health insurance coverage; and
134
‘‘(B) with respect to each State in which the
plan or arrangement offers or provides benefits, the
plan or arrangement is operating in accordance with
applicable State laws that are not superseded under
section 514.
‘‘(3) The court may grant such additional equitable
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 plan.’’.
(c) RESPONSIBILITY
FOR CLAIMS PROCEDURE.—
Section 503 of such Act (29 U.S.C. 1133) (as amended
by title I) is amended by adding at the end the following
new subsection:
‘‘(c) ASSOCIATION HEALTH PLANS.—The terms of
each association health plan which is or has been certified
under part 8 shall require the board of trustees or the
named fiduciary (as applicable) to ensure that the require-
ments of this section are met in connection with claims
filed under the plan.’’.
SEC. 1306. 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:
135
‘‘(c) RESPONSIBILITY OF STATES WITH RESPECT TO
ASSOCIATION HEALTH PLANS.—
‘‘(1) AGREEMENTS
WITH
STATES.—A State
may enter into an agreement with the Secretary for
delegation to the State of some or all of—
‘‘(A) the Secretary’s authority under sec-
tions 502 and 504 to enforce the requirements
for certification under part 8;
‘‘(B) the Secretary’s authority to certify
association health plans under part 8 in accord-
ance with regulations of the Secretary applica-
ble to certification under part 8; or
‘‘(C) any combination of the Secretary’s
authority authorized to be delegated under sub-
paragraphs (A) and (B).
‘‘(2) DELEGATIONS.—Any department, agency,
or instrumentality of a State to which authority is
delegated pursuant to an agreement entered into
under this paragraph may, if authorized under State
law and to the extent consistent with such agree-
ment, exercise the powers of the Secretary under
this title which relate to such authority.
‘‘(3) RECOGNITION
OF
PRIMARY
DOMICILE
STATE.—In entering into any agreement with a
State under subparagraph (A), the Secretary shall
136
ensure that, as a result of such agreement and all
other agreements entered into under subparagraph
(A), only one State will be recognized, with respect
to any particular association health plan, as the
State to which all authority has been delegated pur-
suant to such agreements in connection with such
plan. In carrying out this paragraph, the Secretary
shall take into account the places of residence of the
participants and beneficiaries under the plan and the
State in which the trust is maintained.’’.
SEC. 1307. EFFECTIVE DATE AND TRANSITIONAL AND
OTHER RULES.
(a) EFFECTIVE DATE.—The amendments made by
sections 1302, 1305, and 1306 shall take effect on Janu-
ary 1, 2000. The amendments made by sections 1303 and
1304 shall take effect on the date of the enactment of
this Act. The Secretary of Labor shall first issue all regu-
lations necessary to carry out the amendments made by
this subtitle before January 1, 2000.
(b) EXCEPTION.—Section 801(a)(2) of the Employee
Retirement Income Security Act of 1974 (added by section
1302) does not apply in connection with an association
health plan (certified under part 8 of subtitle B of title
I of such Act) existing on April 1, 1997, if no benefits
provided thereunder as of the date of the enactment of
137
this Act consist of health insurance coverage (as defined
in section 733(b)(1) of such Act).
(c) TREATMENT
OF CERTAIN EXISTING HEALTH
BENEFITS PROGRAMS.—
(1) IN GENERAL.—In any case in which, as of
the date of the enactment of this Act, an arrange-
ment is maintained in a State for the purpose of
providing benefits consisting of medical care for the
employees and beneficiaries of its participating em-
ployers, at least 200 participating employers make
contributions to such arrangement, such arrange-
ment has been in existence for at least 10 years, and
such arrangement is licensed under the laws of one
or more States to provide such benefits to its par-
ticipating employers, upon the filing with the appli-
cable authority (as defined in section 813(a)(5) of
the Employee Retirement Income Security Act of
1974 (as amended by this Act)) by the arrangement
of an application for certification of the arrangement
under part 8 of subtitle B of title I of such Act—
(A) such arrangement shall be deemed to
be a group health plan for purposes of title I
of such Act;
(B) the requirements of sections 801(a)(1)
and 803(a)(1) of the Employee Retirement In-
138
come Security Act of 1974 shall be deemed met
with respect to such arrangement;
(C) the requirements of section 803(b) of
such Act shall be deemed met, if the arrange-
ment is operated by a board of directors
which—
(i) is elected by the participating em-
ployers, with each employer having one
vote; and
(ii) has complete fiscal control over
the arrangement and which is responsible
for all operations of the arrangement;
(D) the requirements of section 804(a) of
such Act shall be deemed met with respect to
such arrangement; and
(E) the arrangement may be certified by
any applicable authority with respect to its op-
erations in any State only if it operates in such
State on the date of certification.
The provisions of this subsection shall cease to apply
with respect to any such arrangement at such time
after the date of the enactment of this Act as the
applicable requirements of this subsection are not
met with respect to such arrangement.
139
(2) DEFINITIONS.—For purposes of this sub-
section, the terms ‘‘group health plan’’, ‘‘medical
care’’, and ‘‘participating employer’’ shall have the
meanings provided in section 813 of the Employee
Retirement Income Security Act of 1974, except
that the reference in paragraph (7) of such section
to an ‘‘association health plan’’ shall be deemed a
reference to an arrangement referred to in this sub-
section.
(d) PILOT PROGRAM FOR SELF-INSURED ASSOCIA-
TION HEALTH PLANS.—
(1) IN
GENERAL.—During the pilot program
period, association health plans which offer benefit
options which do not consist of health insurance cov-
erage may be certified under part 8 of subtitle B of
title I of the Employee Retirement Income Security
Act of 1974 only if such plans consist of the follow-
ing:
(A) plans which offered such coverage on
the date of the enactment of this Act;
(B) plans under which the sponsor does
not restrict membership to one or more trades
and businesses or industries and whose eligible
participating employers represent a broad cross-
140
section of trades and businesses or industries;
or
(C) plans whose eligible participating em-
ployers represent one or more trades or busi-
nesses, or one or more industries, which have
been indicated as having average or above-aver-
age health insurance risk or health claims expe-
rience by reason of State rate filings, denials of
coverage, proposed premium rate levels, and
other means demonstrated by such plans in ac-
cordance with regulations which the Secretary
shall prescribe, including (but not limited to)
the following: agriculture; automobile dealer-
ships; barbering and cosmetology; child care;
construction; dance, theatrical, and orchestra
productions; disinfecting and pest control; eat-
ing and drinking establishments; fishing; hos-
pitals; labor organizations; logging; manufactur-
ing (metals); mining; medical and dental prac-
tices; medical laboratories; sanitary services;
transportation 
(local 
and 
freight); 
and
warehousing.
(2) PILOT PROGRAM PERIOD.—For purposes of
this subsection, the term ‘‘pilot program period’’
141
means the 5-year period beginning on January 1,
1999.
TITLE II—AMENDMENTS TO
PUBLIC HEALTH SERVICE ACT
Subtitle 
A—Patient 
Protections
and Point of Service Coverage
Requirements
SEC. 2001. PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE, EMERGENCY MEDICAL CARE, OB-
STETRIC AND GYNECOLOGICAL CARE, PEDI-
ATRIC CARE.
(a) IN GENERAL.—Subpart 2 of part A of title
XXVII of the Public Health Service Act is amended by
adding at the end the following new section:
‘‘SEC. 2706. PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE, EMERGENCY MEDICAL CARE, OB-
STETRIC AND GYNECOLOGICAL CARE, PEDI-
ATRIC CARE.
‘‘(a) PATIENT ACCESS TO UNRESTRICTED MEDICAL
ADVICE.—
‘‘(1) IN GENERAL.—In the case of any health
care professional acting within the lawful scope of
practice in the course of carrying out a contractual
employment arrangement or other direct contractual
arrangement between such professional and a group
142
health plan or a health insurance issuer offering
health insurance coverage in connection with a group
health plan, the plan or issuer with which such con-
tractual employment arrangement or other direct
contractual arrangement is maintained by the pro-
fessional may not impose on such professional under
such arrangement any prohibition or restriction with
respect to advice, provided to a participant or bene-
ficiary under the plan who is a patient, about the
health status of the participant or beneficiary or the
medical care or treatment for the condition or dis-
ease of the participant or beneficiary, regardless of
whether benefits for such care or treatment are pro-
vided under the plan or health insurance coverage
offered in connection with the plan.
‘‘(2) HEALTH CARE PROFESSIONAL DEFINED.—
For purposes of this subsection, the term ‘health
care professional’ means a physician (as defined in
section 1861(r) of the Social Security Act) or other
health care professional if coverage for the profes-
sional’s services is provided under the group health
plan for the services of the professional. Such term
includes a podiatrist, optometrist, chiropractor, psy-
chologist, dentist, physician assistant, physical or oc-
cupational therapist and therapy assistant, speech–
143
language pathologist, audiologist, registered or li-
censed practical nurse (including nurse practitioner,
clinical nurse specialist, certified registered nurse
anesthetist, and certified nurse–midwife), licensed
certified social worker, registered respiratory thera-
pist, and certified respiratory therapy technician.
‘‘(b) PATIENT ACCESS
TO EMERGENCY MEDICAL
CARE.—
‘‘(1) IN
GENERAL.—To the extent that the
group health plan (or health insurance issuer offer-
ing health insurance coverage in connection with the
plan) provides for any benefits consisting of emer-
gency 
medical 
care 
(as 
defined 
in 
section
503(b)(9)(I) of the Employee Retirement Income Se-
curity Act of 1974), except for items or services spe-
cifically excluded—
‘‘(A) the plan or issuer shall provide bene-
fits, without requiring preauthorization and
without regard to otherwise applicable network
limitations, for appropriate emergency medical
screening examinations (within the capability of
the emergency facility, including ancillary serv-
ices routinely available to the emergency facil-
ity) to the extent that a prudent layperson, who
possesses an average knowledge of health and
144
medicine, would determine such examinations to
be necessary in order to determine whether
emergency medical care (as so defined) is re-
quired; and
‘‘(B) the plan or issuer shall provide bene-
fits for additional emergency medical services
following an emergency medical screening exam-
ination (if determined necessary under subpara-
graph (A)) to the extent that a prudent emer-
gency medical professional would determine
such additional emergency services to be nec-
essary to avoid the consequences described in
section 503(b)(9)(I) of such Act.
‘‘(2) UNIFORM
COST-SHARING
REQUIRED.—
Nothing in this subsection shall be construed as pre-
venting a group health plan or issuer from imposing
any form of cost-sharing applicable to any partici-
pant or beneficiary (including coinsurance, copay-
ments, deductibles, and any other charges) in rela-
tion to benefits described in paragraph (1), if such
form of cost-sharing is uniformly applied under such
plan, with respect to similarly situated participants
and beneficiaries, to all benefits consisting of emer-
gency 
medical 
care 
(as 
defined 
in 
section
503(b)(9)(I) of the Employee Retirement Income Se-
146
‘‘(2) REQUIREMENTS.—A group health plan (or
a health insurance issuer offering health insurance
coverage in connection with the plan) meets the re-
quirements of this paragraph, in connection with
benefits described in paragraph (1) consisting of
care described in clause (i) or (ii) of paragraph
(1)(A) (or consisting of payment therefor), if the
plan (or issuer)—
‘‘(A) does not require authorization or a
referral by the primary care provider in order
to obtain such benefits; and
‘‘(B) treats the ordering of other routine
care of the same type, by the participating phy-
sician providing the care described in clause (i)
or (ii) of paragraph (1)(A), as the authorization
of the primary care provider with respect to
such care.
‘‘(3) CONSTRUCTION.—Nothing in paragraph
(2)(B) shall waive any requirements of coverage re-
lating to medical necessity or appropriateness with
respect to coverage of gynecological or obstetric care
so ordered.
‘‘(d) PATIENT ACCESS TO PEDIATRIC CARE.—
‘‘(1) IN
GENERAL.—In any case in which a
group health plan (or a health insurance issuer of-
147
fering health insurance coverage in connection with
the plan) provides benefits consisting of routine pe-
diatric care provided by a participating physician
who specializes in pediatrics (or consisting of pay-
ment for such care) and the plan requires or pro-
vides for designation by a participant or beneficiary
of a participating primary care provider, the plan (or
issuer) shall provide that such a participating physi-
cian may be designated, if available, by a parent or
guardian of any beneficiary under the plan is who
under 18 years of age, as the primary care provider
with respect to any such benefits.
‘‘(2) CONSTRUCTION.—Nothing in paragraph
(1) shall waive any requirements of coverage relating
to medical necessity or appropriateness with respect
to coverage of pediatric care.
‘‘(e) TREATMENT
OF MULTIPLE COVERAGE OP-
TIONS.—In the case of a plan providing benefits under two
or more coverage options, the requirements of subsections
(c) and (d) shall apply separately with respect to each cov-
erage option.’’.
(c) EFFECTIVE DATE AND RELATED RULES.—
(1) IN GENERAL.—The amendments made by
this section shall apply with respect to plan years be-
ginning on or after January 1 of the second cal-
148
endar year following the date of the enactment of
this Act, except that the Secretary of Health and
Human Services may issue regulations before such
date under such amendments. The Secretary shall
first issue all regulations necessary to carry out the
amendments made by this section before the effec-
tive date thereof.
(2) LIMITATION ON ENFORCEMENT ACTIONS.—
No enforcement action shall be taken, pursuant to
the amendments made by this section, against a
group health plan or health insurance issuer with re-
spect to a violation of a requirement imposed by
such amendments before the date of issuance of reg-
ulations issued in connection with such requirement,
if the plan or issuer has sought to comply in good
faith with such requirement.
(3) SPECIAL RULE FOR COLLECTIVE BARGAIN-
ING AGREEMENTS.—In the case of a group health
plan maintained pursuant to one or more collective
bargaining agreements between employee representa-
tives and one or more employers ratified before the
date of the enactment of this Act, the amendments
made by this section shall not apply with respect to
plan years beginning before the later of—
149
(1) the date on which the last of the collec-
tive bargaining agreements relating to the plan
terminates (determined without regard to any
extension thereof agreed to after the date of the
enactment of this Act); or
(2) January 1, 2001.
For purposes of this paragraph, any plan amend-
ments made pursuant to a collective bargaining
agreement relating to the plan which amends the
plan solely to conform to any requirement added by
this section shall not be treated as a termination of
such collective bargaining agreement.
SEC. 2002. REQUIRING HEALTH MAINTENANCE ORGANIZA-
TIONS TO OFFER OPTION OF POINT-OF-SERV-
ICE COVERAGE.
(a) IN GENERAL.—Title XXVII of the Public Health
Service Act is amended by inserting after section 2713 the
following new section:
‘‘SEC. 2714. REQUIRING OFFERING OF OPTION OF POINT-
OF-SERVICE COVERAGE.
‘‘(a) REQUIREMENT TO OFFER COVERAGE OPTION
TO CERTAIN EMPLOYERS.—Except as provided in sub-
section (c), any health insurance issuer which—
‘‘(1) is a health maintenance organization (as
defined in section 2791(b)(3)); and
150
‘‘(2) which provides for coverage of services of
one or more classes of health care professionals
under health insurance coverage offered in connec-
tion with a group health plan only if such services
are furnished exclusively through health care profes-
sionals within such class or classes who are members
of a closed panel of health care professionals,
the issuer shall make available to the plan sponsor in con-
nection with such a plan a coverage option which provides
for coverage of such services which are furnished through
such class (or classes) of health care professionals regard-
less of whether or not the professionals are members of
such panel.
‘‘(b) REQUIREMENT TO OFFER SUPPLEMENTAL COV-
ERAGE TO PARTICIPANTS IN CERTAIN CASES.—Except as
provided in subsection (c), if a health insurance issuer
makes available a coverage option under and described in
subsection (a) to a plan sponsor of a group health plan
and the sponsor declines to contract for such coverage op-
tion, then the issuer shall make available in the individual
insurance market to each participant in the group health
plan optional separate supplemental health insurance cov-
erage in the individual health insurance market which con-
sists of services identical to those provided under such cov-
erage provided through the closed panel under the group
151
health plan but are furnished exclusively by health care
professionals who are not members of such a closed panel.
‘‘(c) EXCEPTIONS.—
‘‘(1) OFFERING OF NON-PANEL OPTION.—Sub-
sections (a) and (b) shall not apply with respect to
a group health plan if the plan offers a coverage op-
tion that provides coverage for services that may be
furnished by a class or classes of health care profes-
sionals who are not in a closed panel. This para-
graph shall be applied separately to distinguishable
groups of employees under the plan.
‘‘(2) AVAILABILITY
OF
COVERAGE
THROUGH
HEALTHMART.—Subsections (a) and (b) shall not
apply to a group health plan if the health insurance
coverage under the plan is made available through a
HealthMart (as defined in section 2801) and if any
health insurance coverage made available through
the HealthMart provides for coverage of the services
of any class of health care professionals other than
through a closed panel of professionals.
‘‘(3) RELICENSURE
EXEMPTION.—Subsections
(a) and (b) shall not apply to a health maintenance
organization in a State in any case in which—
‘‘(A) the organization demonstrates to the
applicable authority that the organization has
152
made a good faith effort to obtain (but has
failed to obtain) a contract between the organi-
zation and any other health insurance issuer
providing for the coverage option or supple-
mental coverage described in subsection (a) or
(b), as the case may be, within the applicable
service area of the organization; and
‘‘(B) the State requires the organization to
receive or qualify for a separate license, as an
indemnity insurer or otherwise, in order to offer
such coverage option or supplemental coverage,
respectively.
The applicable authority may require that the orga-
nization demonstrate that it meets the requirements
of the previous sentence no more frequently that
once every 2 years.
‘‘(4) INCREASED COSTS.—Subsections (a) and
(b) shall not apply to a health maintenance organi-
zation if the organization demonstrates to the appli-
cable authority, in accordance with generally accept-
ed actuarial practice, that, on either a prospective or
retroactive basis, the premium for the coverage op-
tion or supplemental coverage required to be made
available under such respective subsection exceeds by
more than 1 percent the premium for the coverage
153
consisting of services which are furnished through a
closed panel of health care professionals in the class
or classes involved. The applicable authority may re-
quire that the organization demonstrate such an in-
crease no more frequently that once every 2 years.
This paragraph shall be applied on an average per
enrollee or similar basis.
‘‘(5) COLLECTIVE BARGAINING AGREEMENTS.—
Subsections (a) and (b) shall not apply in connection
with a group health plan if the plan is established
or maintained pursuant to one or more collective
bargaining agreements.
‘‘(d) DEFINITIONS.—For purposes of this section:
‘‘(1) COVERAGE
THROUGH
CLOSED
PANEL.—
Health insurance coverage for a class of health care
professionals shall be treated as provided through a
closed panel of such professionals only if such cov-
erage consists of coverage of items or services con-
sisting of professionals services which are reim-
bursed for or provided only within a limited network
of such professionals.
‘‘(2) HEALTH CARE PROFESSIONAL.—The term
‘health care professional’ has the meaning given
such term in section 2706(a)(2).’’.
154
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to coverage offered on or after
January 1 of the second calendar year following the date
of the enactment of this Act.
Subtitle B—Patient Access to
Information
SEC. 2101. PATIENT ACCESS TO INFORMATION REGARDING
PLAN COVERAGE, MANAGED CARE PROCE-
DURES, 
HEALTH 
CARE 
PROVIDERS, 
AND
QUALITY OF MEDICAL CARE.
(a) IN GENERAL.—Subpart 2 of part A of title
XXVII of the Public Health Service Act (as amended by
subtitle A of this title) is amended further by adding at
the end the following new section:
‘‘SEC. 2707. PATIENT ACCESS TO INFORMATION REGARD-
ING PLAN COVERAGE, MANAGED CARE PRO-
CEDURES, HEALTH CARE PROVIDERS, AND
QUALITY OF MEDICAL CARE.
‘‘(a) DISCLOSURE REQUIREMENT.—Each health in-
surance issuer offering health insurance coverage in con-
nection with a group health plan shall provide the adminis-
trator of such plan on a timely basis with the information
necessary to enable the administrator to include in the
summary plan description of the plan required under sec-
tion 102 of the Employee Retirement Income Security Act
155
of 1974 (or each summary plan description in any case
in which different summary plan descriptions are appro-
priate under part 1 of subtitle B of title I of such Act
for different options of coverage) the information required
under subsections (b), (c), (d), and (e)(2)(A). To the ex-
tent that any such issuer provides such information on a
timely basis to plan participants and beneficiaries, the re-
quirements of this subsection shall be deemed satisfied in
the case of such plan with respect to such information.
‘‘(b) PLAN BENEFITS.—The information required
under subsection (a) includes the following:
‘‘(1) COVERED ITEMS AND SERVICES.—
‘‘(A) CATEGORIZATION OF INCLUDED BEN-
EFITS.—A description of covered benefits, cat-
egorized by—
‘‘(i) types of items and services (in-
cluding any special disease management
program); and
‘‘(ii) types of health care professionals
providing such items and services.
‘‘(B) EMERGENCY MEDICAL CARE.—A de-
scription of the extent to which the coverage in-
cludes emergency medical care (including the
extent to which the coverage provides for access
to urgent care centers), and any definitions pro-
156
vided under in connection with such coverage
for the relevant coverage terminology referring
to such care.
‘‘(C) PREVENTATIVE
SERVICES.—A de-
scription of the extent to which the coverage in-
cludes benefits for preventative services.
‘‘(D) DRUG FORMULARIES.—A description
of the extent to which covered benefits are de-
termined by the use or application of a drug
formulary and a summary of the process for de-
termining what is included in such formulary.
‘‘(E) 
COBRA 
CONTINUATION
COV-
ERAGE.—A description of the benefits available
under the coverage provided pursuant to part 6
of subtitle B of title I of the Employee Retire-
ment Income Security Act of 1974.
‘‘(2) LIMITATIONS, EXCLUSIONS, AND RESTRIC-
TIONS ON COVERED BENEFITS.—
‘‘(A) 
CATEGORIZATION
OF
EXCLUDED
BENEFITS.—A description of benefits specifi-
cally excluded from coverage, categorized by
types of items and services.
‘‘(B) 
UTILIZATION
REVIEW
AND
PREAUTHORIZATION REQUIREMENTS.—Whether
coverage for medical care is limited or excluded
157
on 
the 
basis 
of 
utilization 
review 
or
preauthorization requirements.
‘‘(C) LIFETIME, ANNUAL, OR OTHER PE-
RIOD LIMITATIONS.—A description of the cir-
cumstances under which, and the extent to
which, coverage is subject to lifetime, annual, or
other period limitations, categorized by types of
benefits.
‘‘(D) CUSTODIAL CARE.—A description of
the circumstances under which, and the extent
to which, the coverage of benefits for custodial
care is limited or excluded, and a statement of
the definition used in connection with such cov-
erage for custodial care.
‘‘(E) 
EXPERIMENTAL
TREATMENTS.—
Whether coverage for any medical care is lim-
ited or excluded because it constitutes experi-
mental treatment or technology, and any defini-
tions provided in connection with such coverage
for the relevant plan terminology referring to
such limited or excluded care.
‘‘(F) MEDICAL APPROPRIATENESS OR NE-
CESSITY.—Whether coverage for medical care
may be limited or excluded by reason of a fail-
ure to meet the plan’s requirements for medical
158
appropriateness or necessity, and any defini-
tions provided in connection with such coverage
for the relevant coverage terminology referring
to such limited or excluded care.
‘‘(G) SECOND
OR
SUBSEQUENT
OPIN-
IONS.—A description of the circumstances
under which, and the extent to which, coverage
for second or subsequent opinions is limited or
excluded.
‘‘(H) SPECIALTY CARE.—A description of
the circumstances under which, and the extent
to which, coverage of benefits for specialty care
is conditioned on referral from a primary care
provider.
‘‘(I) CONTINUITY OF CARE.—A description
of the circumstances under which, and the ex-
tent to which, coverage of items and services
provided by any health care professional is lim-
ited or excluded by reason of the departure by
the professional from any defined set of provid-
ers.
‘‘(J) RESTRICTIONS
ON
COVERAGE
OF
EMERGENCY
SERVICES.—A description of the
circumstances under which, and the extent to
which, the coverage, in including emergency
159
medical care furnished to a participant or bene-
ficiary of the plan imposes any financial respon-
sibility described in subsection (c) on partici-
pants or beneficiaries or limits or conditions
benefits for such care subject to any other term
or condition of such coverage.
‘‘(c) 
PARTICIPANT’S
FINANCIAL
RESPONSIBIL-
ITIES.—The information required under subsection (a) in-
cludes an explanation of—
‘‘(1) a participant’s financial responsibility for
payment of premiums, coinsurance, copayments,
deductibles, and any other charges; and
‘‘(2) the circumstances under which, and the
extent to which, the participant’s financial respon-
sibility described in paragraph (1) may vary, includ-
ing any distinctions based on whether a health care
provider from whom covered benefits are obtained is
included in a defined set of providers.
‘‘(d) DISPUTE RESOLUTION PROCEDURES.—The in-
formation required under subsection (a) includes a de-
scription of the processes adopted in connection with such
coverage pursuant to section 503(b) of the Employee Re-
tirement Income Security Act of 1974, including—
‘‘(1) descriptions thereof relating specifically
to—
160
‘‘(A) coverage decisions;
‘‘(B) internal review of coverage decisions;
and
‘‘(C) any external review of coverage deci-
sions; and
‘‘(2) the procedures and time frames applicable
to each step of the processes referred to in subpara-
graphs (A), (B), and (C) of paragraph (1).
‘‘(e) INFORMATION AVAILABLE ON REQUEST.—
‘‘(1) ACCESS TO PLAN BENEFIT INFORMATION
IN ELECTRONIC FORM.—
‘‘(A) IN GENERAL.—A group health plan
(and a health insurance issuer offering health
insurance coverage in connection with a group
health plan) shall, upon written request (made
not more frequently than annually), make avail-
able to participants and beneficiaries, in a gen-
erally recognized electronic format, the follow-
ing information:
‘‘(i) the latest summary plan descrip-
tion, including the latest summary of ma-
terial modifications; and
‘‘(ii) the actual plan provisions setting
forth the benefits available under the plan,
161
to the extent such information relates to the
coverage options under the plan available to the
participant or beneficiary. A reasonable charge
may be made to cover the cost of providing
such information in such generally recognized
electronic format. The Secretary may by regula-
tion prescribe a maximum amount which will
constitute a reasonable charge under the pre-
ceding sentence.
‘‘(B) ALTERNATIVE ACCESS.—The require-
ments of this paragraph may be met by making
such information generally available (rather
than upon request) on the Internet or on a pro-
prietary computer network in a format which is
readily accessible to participants and bene-
ficiaries.
‘‘(2) ADDITIONAL
INFORMATION
TO
BE
PRO-
VIDED ON REQUEST.—
‘‘(A) INCLUSION IN SUMMARY PLAN DE-
SCRIPTION
OF
SUMMARY
OF
ADDITIONAL
IN-
FORMATION.—The information required under
subsection (a) includes a summary description
of the types of information required by this
subsection to be made available to participants
and beneficiaries on request.
162
‘‘(B) 
INFORMATION
REQUIRED
FROM
PLANS AND ISSUERS ON REQUEST.—In addition
to information required to be included in sum-
mary plan descriptions under this subsection, a
group health plan (and a health insurance
issuer offering health insurance coverage in
connection with a group health plan) shall pro-
vide the following information to a participant
or beneficiary on request:
‘‘(i) NETWORK CHARACTERISTICS.—If
the plan (or issuer) utilizes a defined set of
providers under contract with the plan (or
issuer), a detailed list of the names of such
providers and their geographic location, set
forth separately with respect to primary
care providers and with respect to special-
ists.
‘‘(ii) CARE
MANAGEMENT
INFORMA-
TION.—A description of the circumstances
under which, and the extent to which, the
plan has special disease management pro-
grams or programs for persons with dis-
abilities, indicating whether these pro-
grams are voluntary or mandatory and
whether a significant benefit differential
163
results from participation in such pro-
grams.
‘‘(iii) INCLUSION
OF
DRUGS
AND
BIOLOGICALS IN FORMULARIES.—A state-
ment of whether a specific drug or biologi-
cal is included in a formulary used to de-
termine benefits under the plan and a de-
scription of the procedures for considering
requests for any patient-specific waivers.
‘‘(iv) PROCEDURES FOR DETERMINING
EXCLUSIONS BASED ON MEDICAL NECES-
SITY OR EXPERIMENTAL TREATMENTS.—
Upon receipt by the participant or bene-
ficiary of any notification of an adverse
coverage decision based on a determination
relating to medical necessity or an experi-
mental treatment or technology, a descrip-
tion of the procedures and medically-based
criteria used in such decision.
‘‘(v) PREAUTHORIZATION AND UTILI-
ZATION REVIEW PROCEDURES.—Upon re-
ceipt by the participant or beneficiary of
any notification of an adverse coverage de-
cision, a description of the basis on which
any preauthorization requirement or any
164
utilization review requirement has resulted
in such decision.
‘‘(vi) ACCREDITATION
STATUS
OF
HEALTH INSURANCE ISSUERS AND SERV-
ICE PROVIDERS.—A description of the ac-
creditation and licencing status (if any) of
each health insurance issuer offering
health insurance coverage in connection
with the plan and of any utilization review
organization utilized by the issuer or the
plan, together with the name and address
of the accrediting or licencing authority.
‘‘(vii) MEASURES OF ENROLLEE SAT-
ISFACTION.—The latest information (if
any) maintained by the plan, or by any
health insurance issuer offering health in-
surance coverage in connection with the
plan, relating to enrollee satisfaction.
‘‘(viii) QUALITY PERFORMANCE MEAS-
URES.—The latest information (if any)
maintained by the plan, or by any health
insurance issuer offering health insurance
coverage in connection with the plan, relat-
ing to quality of performance of the deliv-
ery of medical care with respect to cov-
165
erage options offered under the plan and
of health care professionals and facilities
providing medical care under the plan.
‘‘(ix) INFORMATION RELATING TO EX-
TERNAL REVIEWS.—The number of exter-
nal reviews under section 503(b)(4) of the
Employee Retirement Income Security Act
of 1974 that have been completed during
the prior plan year and the number of such
reviews in which the recommendation re-
ported under section 503(b)(4)(C)(iii) of
such Act includes a recommendation for
modification or reversal of an internal re-
view decision under the plan.
‘‘(C) 
INFORMATION
REQUIRED
FROM
HEALTH CARE PROFESSIONALS ON REQUEST.—
Any health care professional treating a partici-
pant or beneficiary under a group health plan
shall provide to the participant or beneficiary,
on request, a description of his or her profes-
sional qualifications (including board certifi-
cation status, licensing status, and accreditation
status, if any), privileges, and experience and a
general description by category (including sal-
ary, fee-for-service, capitation, and such other
166
categories as may be specified in regulations of
the Secretary) of the applicable method by
which such professional is compensated in con-
nection with the provision of such medical care.
‘‘(D) 
INFORMATION
REQUIRED
FROM
HEALTH CARE FACILITIES ON REQUEST.—Any
health care facility from which a participant or
beneficiary has sought treatment under a group
health plan shall provide to the participant or
beneficiary, on request, a description of the fa-
cility’s corporate form or other organizational
form and all forms of licensing and accredita-
tion status (if any) assigned to the facility by
standard-setting organizations.
‘‘(f) ACCESS TO INFORMATION RELEVANT TO THE
COVERAGE OPTIONS UNDER WHICH THE PARTICIPANT OR
BENEFICIARY IS ELIGIBLE TO ENROLL.—In addition to
information otherwise required to be made available under
this section, a group health plan (and a health insurance
issuer offering health insurance coverage in connection
with a group health plan) shall, upon written request
(made not more frequently than annually), make available
to a participant (and an employee who, under the terms
of the plan, is eligible for coverage but not enrolled) in
connection with a period of enrollment the summary plan
167
description for any coverage option under the plan under
which the participant is eligible to enroll and any informa-
tion described in clauses (i), (ii), (iii), (vi), (vii), and (viii)
of subsection (e)(2)(B).
‘‘(g) ADVANCE NOTICE
OF CHANGES
IN DRUG
FORMULARIES.—Not later than 30 days before the effec-
tive of date of any exclusion of a specific drug or biological
from any drug formulary under the plan that is used in
the treatment of a chronic illness or disease, the plan shall
take such actions as are necessary to reasonably ensure
that plan participants are informed of such exclusion. The
requirements of this subsection may be satisfied—
‘‘(1) by inclusion of information in publications
broadly distributed by plan sponsors, employers, or
employee organizations;
‘‘(2) by electronic means of communication (in-
cluding the Internet or proprietary computer net-
works in a format which is readily accessible to par-
ticipants);
‘‘(3) by timely informing participants who,
under an ongoing program maintained under the
plan, have submitted their names for such notifica-
tion; or
‘‘(4) by any other reasonable means of timely
informing plan participants.’’.
168
SEC. 2102. EFFECTIVE DATE.
(a) IN GENERAL.—The amendments made by this
subtitle shall apply with respect to plan years beginning
on or after January 1 of the second calendar year follow-
ing the date of the enactment of this Act. The Secretary
shall first issue all regulations necessary to carry out the
amendments made by this subtitle before such date.
(b) LIMITATION ON ENFORCEMENT ACTIONS.—No
enforcement action shall be taken, pursuant to the amend-
ments made by this subtitle, against a group health plan
or health insurance issuer with respect to a violation of
a requirement imposed by such amendments before the
date of issuance of final regulations issued in connection
with such requirement, if the plan or issuer has sought
to comply in good faith with such requirement.
Subtitle C—HealthMarts
SEC. 2201. SHORT TITLE OF SUBTITLE.
This subtitle may be cited as the ‘‘Health Care Con-
sumer Empowerment Act of 1998’’.
SEC. 2202. EXPANSION OF CONSUMER CHOICE THROUGH
HEALTHMARTS.
(a) IN GENERAL.—The Public Health Service Act is
amended by adding at the end the following new title:
169
‘‘TITLE XXVIII—HEALTHMARTS
‘‘SEC. 2801. DEFINITION OF HEALTHMART.
‘‘(a) IN GENERAL.—For purposes of this title, the
term ‘HealthMart’ means a legal entity that meets the fol-
lowing requirements:
‘‘(1) ORGANIZATION.—The HealthMart is a
nonprofit organization operated under the direction
of a board of directors which is composed of rep-
resentatives of not fewer than 2 and in equal num-
bers from each of the following:
‘‘(A) Small employers.
‘‘(B) Employees of small employers.
‘‘(C) Health care providers, which may be
physicians, other health care professionals,
health care facilities, or any combination there-
of.
‘‘(D) Entities, such as insurance compa-
nies, health maintenance organizations, and li-
censed provider-sponsored organizations, that
underwrite or administer health benefits cov-
erage.
‘‘(2) 
OFFERING
HEALTH
BENEFITS
COV-
ERAGE.—
‘‘(A) IN
GENERAL.—The HealthMart, in
conjunction with those health insurance issuers
170
that offer health benefits coverage through the
HealthMart, makes available health benefits
coverage in the manner described in subsection
(b) to all small employers and eligible employees
in the manner described in subsection (c)(2) at
rates (including employer’s and employee’s
share) that are established by the health insur-
ance issuer on a policy or product specific basis
and that may vary only as permissible under
State law. A HealthMart is deemed to be a
group health plan for purposes of applying sec-
tion 702 of the Employee Retirement Income
Security Act of 1974, section 2702 of this Act,
and section 9802(b) of the Internal Revenue
Code of 1986 (which limit variation among
similarly situated individuals of required pre-
miums for health benefits coverage on the basis
of health status-related factors).
‘‘(B) NONDISCRIMINATION
IN
COVERAGE
OFFERED.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), the HealthMart may not offer health
benefits coverage to an eligible employee in
a geographic area (as specified under para-
graph (3)(A)) unless the same coverage is
171
offered to all such employees in the same
geographic area. Section 2711(a)(1)(B) of
this Act limits denial of enrollment of cer-
tain eligible individuals under health bene-
fits coverage in the small group market.
‘‘(ii) 
CONSTRUCTION.—Nothing 
in
this title shall be construed as requiring or
permitting a health insurance issuer to
provide coverage outside the service area of
the issuer, as approved under State law.
‘‘(C) NO FINANCIAL UNDERWRITING.—The
HealthMart provides health benefits coverage
only through contracts with health insurance
issuers and does not assume insurance risk with
respect to such coverage.
(D) MINIMUM COVERAGE.—By the end of
the first year of its operation and thereafter,
the HealthMart maintains not fewer than 10
purchasers and 100 members.
‘‘(3) GEOGRAPHIC AREAS.—
‘‘(A) 
SPECIFICATION
OF
GEOGRAPHIC
AREAS.—The HealthMart shall specify the geo-
graphic area (or areas) in which it makes avail-
able health benefits coverage offered by health
insurance issuers to small employers. Such an
172
area shall encompass at least one entire county
or equivalent area.
‘‘(B) MULTISTATE AREAS.—In the case of
a HealthMart that serves more than one State,
such geographic areas may be areas that in-
clude portions of two or more contiguous
States.
‘‘(C) 
MULTIPLE
HEALTHMARTS
PER-
MITTED IN SINGLE GEOGRAPHIC AREA.—Noth-
ing in this title shall be construed as preventing
the establishment and operation of more than
one HealthMart in a geographic area or as lim-
iting the number of HealthMarts that may op-
erate in any area.
‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES
TO PURCHASERS.—
‘‘(A) IN GENERAL.—The HealthMart pro-
vides administrative services for purchasers.
Such services may include accounting, billing,
enrollment information, and employee coverage
status reports.
‘‘(B) CONSTRUCTION.—Nothing in this
subsection shall be construed as preventing a
HealthMart from serving as an administrative
service organization to any entity.
173
‘‘(5) DISSEMINATION
OF
INFORMATION.—The
HealthMart collects and disseminates (or arranges
for the collection and dissemination of) consumer-
oriented information on the scope, cost, and enrollee
satisfaction of all coverage options offered through
the HealthMart to its members and eligible individ-
uals. Such information shall be defined by the
HealthMart and shall be in a manner appropriate to
the type of coverage offered. To the extent prac-
ticable, such information shall include information
on provider performance, locations and hours of op-
eration of providers, outcomes, and similar matters.
Nothing in this section shall be construed as pre-
venting the dissemination of such information or
other information by the HealthMart or by health
insurance issuers through electronic or other means.
‘‘(6) 
FILING
INFORMATION.—The
HealthMart—
‘‘(A) files with the applicable Federal au-
thority information that demonstrates the
HealthMart’s compliance with the applicable re-
quirements of this title; or
‘‘(B) in accordance with rules established
under section 2803(a), files with a State such
174
information as the State may require to dem-
onstrate such compliance.
‘‘(b) HEALTH
BENEFITS
COVERAGE
REQUIRE-
MENTS.—
‘‘(1) COMPLIANCE
WITH
CONSUMER
PROTEC-
TION REQUIREMENTS.—Any health benefits coverage
offered through a HealthMart shall—
‘‘(A) be underwritten by a health insurance
issuer that—
‘‘(i) is licensed (or otherwise regu-
lated) under State law (or is a community
health organization that is offering health
insurance coverage pursuant to section
330B(a));
‘‘(ii) meets all applicable State stand-
ards relating to consumer protection, sub-
ject to section 2802(b); and
‘‘(iii) offers the coverage under a con-
tract with the HealthMart;
‘‘(B) subject to paragraph (2), be approved
or otherwise permitted to be offered under
State law; and
‘‘(C) provide full portability of creditable
coverage for individuals who remain members of
the same HealthMart notwithstanding that they
175
change the employer through which they are
members in accordance with the provisions of
the parts 6 and 7 of subtitle B of title I of the
Employee Retirement Income Security Act of
1974 and titles XXII and XXVII of this Act,
so long as both employers are purchasers in the
HealthMart.
‘‘(2) ALTERNATIVE PROCESS FOR APPROVAL OF
HEALTH BENEFITS COVERAGE IN CASE OF DISCRIMI-
NATION OR DELAY.—
‘‘(A) IN
GENERAL.—The requirement of
paragraph (1)(B) shall not apply to a policy or
product of health benefits coverage offered in a
State if the health insurance issuer seeking to
offer such policy or product files an application
to waive such requirement with the applicable
Federal authority, and the authority deter-
mines, based on the application and other evi-
dence presented to the authority, that—
‘‘(i) either (or both) of the grounds
described in subparagraph (B) for approval
of the application has been met; and
‘‘(ii) the coverage meets the applicable
State standards (other than those that
have been preempted under section 2802).
176
‘‘(B) GROUNDS.—The grounds described
in this subparagraph with respect to a policy or
product of health benefits coverage are as fol-
lows:
‘‘(i) FAILURE
TO
ACT
ON
POLICY,
PRODUCT, OR
RATE
APPLICATION
ON
A
TIMELY
BASIS.—The State has failed to
complete action on the policy or product
(or rates for the policy or product) within
90 days of the date of the State’s receipt
of a substantially complete application. No
period before the date of the enactment of
this section shall be included in determin-
ing such 90-day period.
‘‘(ii) DENIAL OF APPLICATION BASED
ON
DISCRIMINATORY
TREATMENT.—The
State has denied such an application
and—
‘‘(I) the standards or review
process imposed by the State as a
condition of approval of the policy or
product imposes either any material
requirements, procedures, or stand-
ards to such policy or product that
are not generally applicable to other
177
policies and products offered or any
requirements 
that 
are 
preempted
under section 2802; or
‘‘(II) the State requires the
issuer, as a condition of approval of
the policy or product, to offer any pol-
icy or product other than such policy
or product.
‘‘(C) ENFORCEMENT.—In the case of a
waiver granted under subparagraph (A) to an
issuer with respect to a State, the Secretary
may enter into an agreement with the State
under which the State agrees to provide for
monitoring and enforcement activities with re-
spect to compliance of such an issuer and its
health insurance coverage with the applicable
State standards described in subparagraph
(A)(ii). Such monitoring and enforcement shall
be conducted by the State in the same manner
as the State enforces such standards with re-
spect to other health insurance issuers and
plans, without discrimination based on the type
of issuer to which the standards apply. Such an
agreement shall specify or establish mechanisms
by which compliance activities are undertaken,
178
while not lengthening the time required to re-
view and process applications for waivers under
subparagraph (A).
‘‘(3) EXAMPLES OF TYPES OF COVERAGE.—The
health benefits coverage made available through a
HealthMart may include, but is not limited to, any
of the following if it meets the other applicable re-
quirements of this title:
‘‘(A) Coverage through a health mainte-
nance organization.
‘‘(B) Coverage in connection with a pre-
ferred provider organization.
‘‘(C) Coverage in connection with a li-
censed provider-sponsored organization.
‘‘(D) Indemnity coverage through an insur-
ance company.
‘‘(E) Coverage offered in connection with a
contribution into a medical savings account or
flexible spending account.
‘‘(F) Coverage that includes a point-of-
service option.
‘‘(G) Coverage offered by a community
health organization (as defined in section
330B(e)).
179
‘‘(H) Any combination of such types of
coverage.
‘‘(4) WELLNESS BONUSES FOR HEALTH PRO-
MOTION.—Nothing in this title shall be construed as
precluding a health insurance issuer offering health
benefits coverage through a HealthMart from estab-
lishing premium discounts or rebates for members or
from modifying otherwise applicable copayments or
deductibles in return for adherence to programs of
health promotion and disease prevention so long as
such programs are agreed to in advance by the
HealthMart and comply with all other provisions of
this title and do not discriminate among similarly
situated members.
‘‘(c) PURCHASERS; MEMBERS; HEALTH INSURANCE
ISSUERS.—
‘‘(1) PURCHASERS.—
‘‘(A) IN GENERAL.—Subject to the provi-
sions of this title, a HealthMart shall permit
any small employer to contract with the
HealthMart for the purchase of health benefits
coverage for its employees and dependents of
those employees and may not vary conditions of
eligibility (including premium rates and mem-
180
bership fees) of a small employer to be a pur-
chaser.
‘‘(B) ROLE
OF
ASSOCIATIONS, BROKERS,
AND LICENSED HEALTH INSURANCE AGENTS.—
Nothing in this section shall be construed as
preventing an association, broker, licensed
health insurance agent, or other entity from as-
sisting or representing a HealthMart or small
employers from entering into appropriate ar-
rangements to carry out this title.
‘‘(C) 
PERIOD
OF
CONTRACT.—The
HealthMart may not require a contract under
subparagraph (A) between a HealthMart and a
purchaser to be effective for a period of longer
than 12 months. The previous sentence shall
not be construed as preventing such a contract
from being extended for additional 12-month
periods or preventing the purchaser from volun-
tarily electing a contract period of longer than
12 months.
‘‘(D) 
EXCLUSIVE
NATURE
OF
CON-
TRACT.—Such a contract shall provide that the
purchaser agrees not to obtain or sponsor
health benefits coverage, on behalf of any eligi-
ble employees (and their dependents), other
181
than through the HealthMart. The previous
sentence shall not apply to an eligible individual
who resides in an area for which no coverage is
offered by any health insurance issuer through
the HealthMart.
‘‘(2) MEMBERS.—
‘‘(A) IN
GENERAL.—Under rules estab-
lished to carry out this title, with respect to a
small employer that has a purchaser contract
with a HealthMart, individuals who are employ-
ees of the employer may enroll for health bene-
fits coverage (including coverage for dependents
of such enrolling employees) offered by a health
insurance issuer through the HealthMart.
‘‘(B) NONDISCRIMINATION
IN
ENROLL-
MENT.—A HealthMart may not deny enroll-
ment as a member to an individual who is an
employee (or dependent of such an employee)
eligible to be so enrolled based on health status-
related factors, except as may be permitted con-
sistent with section 2742(b).
‘‘(C) ANNUAL
OPEN
ENROLLMENT
PE-
RIOD.—In the case of members enrolled in
health benefits coverage offered by a health in-
surance issuer through a HealthMart, subject
182
to subparagraph (D), the HealthMart shall pro-
vide for an annual open enrollment period of 30
days during which such members may change
the coverage option in which the members are
enrolled.
‘‘(D) RULES OF ELIGIBILITY.—Nothing in
this paragraph shall preclude a HealthMart
from establishing rules of employee eligibility
for enrollment and reenrollment of members
during the annual open enrollment period under
subparagraph (C). Such rules shall be applied
consistently to all purchasers and members
within the HealthMart and shall not be based
in any manner on health status-related factors
and may not conflict with sections 2701 and
2702 of this Act.
‘‘(3) HEALTH INSURANCE ISSUERS.—
‘‘(A) PREMIUM
COLLECTION.—The con-
tract between a HealthMart and a health insur-
ance issuer shall provide, with respect to a
member enrolled with health benefits coverage
offered by the issuer through the HealthMart,
for the payment of the premiums collected by
the HealthMart (or the issuer) for such cov-
erage (less a pre-determined administrative
183
charge negotiated by the HealthMart and the
issuer) to the issuer.
‘‘(B) SCOPE OF SERVICE AREA.—Nothing
in this title shall be construed as requiring the
service area of a health insurance issuer with
respect to health insurance coverage to cover
the entire geographic area served by a
HealthMart.
‘‘(C) AVAILABILITY
OF
COVERAGE
OP-
TIONS.—A HealthMart shall enter into con-
tracts with one or more health insurance issuers
in a manner that assures that at least 2 health
insurance coverage options are made available
in the geographic area specified under sub-
section (a)(3)(A).
‘‘(d) PREVENTION OF CONFLICTS OF INTEREST.—
‘‘(1) FOR BOARDS OF DIRECTORS.—A member
of a board of directors of a HealthMart may not
serve as an employee or paid consultant to the
HealthMart, but may receive reasonable reimburse-
ment for travel expenses for purposes of attending
meetings of the board or committees thereof.
‘‘(2) FOR BOARDS OF DIRECTORS OR EMPLOY-
EES.—An individual is not eligible to serve in a paid
or unpaid capacity on the board of directors of a
184
HealthMart or as an employee of the HealthMart, if
the individual is employed by, represents in any ca-
pacity, owns, or controls any ownership interest in
a organization from whom the HealthMart receives
contributions, grants, or other funds not connected
with 
a 
contract 
for 
coverage 
through 
the
HealthMart.
‘‘(3) 
EMPLOYMENT
AND
EMPLOYEE
REP-
RESENTATIVES.—
‘‘(A) IN GENERAL.—An individual who is
serving on a board of directors of a HealthMart
as a representative described in subparagraph
(A) or (B) of section 2801(a)(1) shall not be
employed by or affiliated with a health insur-
ance issuer or be licensed as or employed by or
affiliated with a health care provider.
‘‘(B) CONSTRUCTION.—For purposes of
subparagraph (A), the term ‘‘affiliated’’ does
not include membership in a health benefits
plan or the obtaining of health benefits cov-
erage offered by a health insurance issuer.
‘‘(e) CONSTRUCTION.—
‘‘(1) 
NETWORK
OF
AFFILIATED
HEALTHMARTS.—Nothing in this section shall be
construed as preventing one or more HealthMarts
185
serving different areas (whether or not contiguous)
from providing for some or all of the following
(through a single administrative organization or oth-
erwise):
‘‘(A) Coordinating the offering of the same
or similar health benefits coverage in different
areas served by the different HealthMarts.
‘‘(B) Providing for crediting of deductibles
and other cost-sharing for individuals who are
provided health benefits coverage through the
HealthMarts 
(or 
affiliated 
HealthMarts)
after—
‘‘(i) a change of employers through
which the coverage is provided; or
‘‘(ii) a change in place of employment
to an area not served by the previous
HealthMart.
‘‘(2) PERMITTING
HEALTHMARTS
TO
ADJUST
DISTRIBUTIONS AMONG ISSUERS TO REFLECT REL-
ATIVE RISK OF ENROLLEES.—Nothing in this sec-
tion shall be construed as precluding a HealthMart
from providing for adjustments in amounts distrib-
uted among the health insurance issuers offering
health benefits coverage through the HealthMart
based on factors such as the relative health care risk
186
of members enrolled under the coverage offered by
the different issuers.
‘‘(3) APPLICATION OF UNIFORM MINIMUM PAR-
TICIPATION
AND
CONTRIBUTION
RULES.—Nothing
in this section shall be construed as precluding a
HealthMart from establishing minimum participa-
tion and contribution rules (described in section
2711(e)(1)) for small employers that apply to be-
come purchasers in the HealthMart, so long as such
rules are applied uniformly for all health insurance
issuers.
‘‘SEC. 2802. APPLICATION OF CERTAIN LAWS AND REQUIRE-
MENTS.
‘‘(a) AUTHORITY OF STATES.—Nothing in this sec-
tion shall be construed as preempting State laws relating
to the following:
‘‘(1) The regulation of underwriters of health
coverage, including licensure and solvency require-
ments.
‘‘(2) The application of premium taxes and re-
quired payments for guaranty funds or for contribu-
tions to high-risk pools.
‘‘(3) The application of fair marketing require-
ments and other consumer protections (other than
187
those specifically relating to an item described in
subsection (b)).
‘‘(4) The application of requirements relating to
the adjustment of rates for health insurance cov-
erage.
‘‘(b) TREATMENT OF BENEFIT AND GROUPING RE-
QUIREMENTS.—State laws insofar as they relate to any
of the following are superseded and shall not apply to
health benefits coverage made available through a
HealthMart:
‘‘(1) Benefit requirements for health benefits
coverage offered through a HealthMart, including
(but not limited to) requirements relating to cov-
erage of specific providers, specific services or condi-
tions, or the amount, duration, or scope of benefits,
but not including requirements to the extent re-
quired to implement title XXVII or other Federal
law and to the extent the requirement prohibits an
exclusion of a specific disease from such coverage.
‘‘(2) Requirements (commonly referred to as
fictitious group laws) relating to grouping and simi-
lar requirements for such coverage to the extent
such requirements impede the establishment and op-
eration of HealthMarts pursuant to this title.
188
‘‘(3) Any other requirements (including limita-
tions on compensation arrangements) that, directly
or indirectly, preclude (or have the effect of preclud-
ing) the offering of such coverage through a
HealthMart, if the HealthMart meets the require-
ments of this title.
Any State law or regulation relating to the composition
or organization of a HealthMart is preempted to the ex-
tent the law or regulation is inconsistent with the provi-
sions of this title.
‘‘(c) APPLICATION OF ERISA FIDUCIARY AND DIS-
CLOSURE REQUIREMENTS.—The board of directors of a
HealthMart is deemed to be a plan administrator of an
employee welfare benefit plan which is a group health plan
for purposes of applying parts 1 and 4 of subtitle B of
title I of the Employee Retirement Income Security Act
of 1974 and those provisions of part 5 of such subtitle
which are applicable to enforcement of such parts 1 and
4, and the HealthMart shall be treated as such a plan
and the enrollees shall be treated as participants and bene-
ficiaries for purposes of applying such provisions pursuant
to this subsection.
‘‘(d) APPLICATION OF ERISA RENEWABILITY PRO-
TECTION.—A HealthMart is deemed to be group health
plan that is a multiple employer welfare arrangement for