Union Calendar No. 248
104TH CONGRESS
2D SESSION
H. R. 995
[Report No. 104–498, Part I]
A BILL
To amend the Employee Retirement Income Secu-
rity Act of 1974 to provide new portability, par-
ticipation, solvency, claims, and other consumer
protections and freedoms for workers in a mobile
workforce; to increase purchasing power for em-
ployers and employees by removing barriers to
the voluntary formation of multiple employer
health plans and fully-insured multiple employer
arrangements; to increase health plan competi-
tion providing more affordable choice of coverage
by removing restrictive State laws relating to
provider health networks, employer health coali-
tions, and insured plans and the offering of
medisave plans; to expand access to fully-insured
coverage for employees of small employers
through fair rating standards and open markets,
and for other purposes.
MARCH 29, 1996
Committee on Commerce discharged; committed to the
Committee of the Whole House on the State of the
Union and ordered to be printed
IB
Union Calendar No. 248
104TH CONGRESS
2D SESSION
H. R. 995
[Report No. 104–498, Part I]
To amend the Employee Retirement Income Security Act of 1974 to provide
new portability, participation, solvency, claims, and other consumer pro-
tections and freedoms for workers in a mobile workforce; to increase
purchasing power for employers and employees by removing barriers
to the voluntary formation of multiple employer health plans and fully-
insured multiple employer arrangements; to increase health plan competi-
tion providing more affordable choice of coverage by removing restrictive
State laws relating to provider health networks, employer health coali-
tions, and insured plans and the offering of medisave plans; to expand
access to fully-insured coverage for employees of small employers through
fair rating standards and open markets, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 21, 1995
Mr. FAWELL (for himself, Mr. GOODLING, Mr. ARMEY, Mr. PETRI, Mrs. ROU-
KEMA, Mr. BALLENGER, Mr. HOEKSTRA, Mr. MCKEON, Mrs. MEYERS of
Kansas, Mr. TALENT, Mr. GREENWOOD, Mr. HUTCHINSON, Mr.
KNOLLENBERG, Mr. GRAHAM, Mr. WELDON
of Florida, and Mr.
MCINTOSH) introduced the following bill; which was referred to the Com-
mittee on Economic and Educational Opportunity and, in addition, to the
Committee on Commerce, for a period to be subsequently determined by
the Speaker, in each case for consideration of such provisions as fall with-
in the jurisdiction of the committee concerned
MARCH 21, 1995
Additional sponsors: Mr. CUNNINGHAM, Mr. WELLER, Mr. MCHUGH, and Mr.
CALVERT
MARCH 25, 1996
Reported from the Committee on Economic and Educational Opportunities
with amendments
[Strike out all after the enacting clause and insert the part printed in italic]
MARCH 25, 1996
Referral to the Committee on Commerce extended for a period ending not
later than March 29, 1996
MARCH 29, 1996
Additional sponsors: Mr. PICKETT, Mr. GALLEGLY, Mr. COOLEY of Oregon,
Mr. ENGLISH of Pennsylvania, Mr. PORTER, Mr. SOUDER, Mr. RIGGS,
Mr. SOLOMON, Mr. FLANAGAN, Mr. SHAYS, Mr. LEACH, Mr. SAXTON,
Ms. LOFGREN, Mr. LIPINSKI, Mr. BARTON of Texas, Mr. CANADY of
Florida, Mr. DEAL of Georgia, Mr. HYDE, Mr. WELDON of Pennsylvania,
Mr. POSHARD, Mr. TRAFICANT, Mr. BOEHLERT, Mr. ROYCE, Mr. DICK-
EY, Mr. PACKARD, Mr. NEY, Mr. UPTON, Mr. NORWOOD, Mr. GUNDER-
SON, Mr. SAM JOHNSON of Texas, and Mr. QUINN
Deleted sponsor: Mr. ALLARD (added March 22, 1995; deleted May 16, 1995)
MARCH 29, 1996
Committee on Commerce discharged; committed to the Committee of the
Whole House on the State of the Union, and ordered to be printed
[For text of introduced bill, see copy of bill as introduced on February 21, 1995]
A BILL
To amend the Employee Retirement Income Security Act
of 1974 to provide new portability, participation, sol-
vency, claims, and other consumer protections and free-
doms for workers in a mobile workforce; to increase
purchasing power for employers and employees by remov-
ing barriers to the voluntary formation of multiple em-
ployer health plans and fully-insured multiple employer
arrangements; to increase health plan competition provid-
ing more affordable choice of coverage by removing re-
strictive State laws relating to provider health networks,
employer health coalitions, and insured plans and the
offering of medisave plans; to expand access to fully-
insured coverage for employees of small employers
through fair rating standards and open markets, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘ERISA Targeted Health
Insurance Reform Act of 1996’’.
TABLE OF CONTENTS
TITLE I—INCREASED AVAILABILITY AND CONTINUITY OF GROUP
HEALTH PLAN COVERAGE FOR EMPLOYEES AND THEIR FAMILIES
Sec. 101. Definition of group health plan.
Sec. 102. Access to, and continuity of, group health plan coverage.
‘‘PART 8—ACCESS TO, AND CONTINUITY OF, GROUP HEALTH PLAN COVERAGE
‘‘Sec. 800. Definitions and special rules.
‘‘SUBPART A—PREEXISTING CONDITION LIMITATIONS, PORTABILITY, AND
RENEWABILITY
‘‘Sec. 801. Limitations on preexisting condition exclusions.
‘‘Sec. 802. Portability.
‘‘Sec. 803. Requirements for renewability of coverage.
‘‘Sec. 804. Group health plan enrollment requirements.’’.
Sec. 103. Effective date.
TITLE II—REQUIREMENTS FOR INSURERS AND HEALTH MAINTE-
NANCE ORGANIZATIONS OFFERING HEALTH INSURANCE COV-
ERAGE TO GROUP HEALTH PLANS OF SMALL EMPLOYERS
Sec. 201. ERISA requirements for insurers and health maintenance organizations
offering health insurance coverage to group health plans of small
employers
‘‘SUBPART B—REQUIREMENTS FOR INSURERS AND HEALTH MAINTENANCE ORGA-
NIZATIONS
OFFERING
HEALTH
INSURANCE
COVERAGE
TO
GROUP
HEALTH
PLANS OF SMALL EMPLOYERS
‘‘Sec. 811. Definitions.
‘‘Sec. 812. Requirements for insurers and health maintenance organizations
in the small group market who offer general coverage.
Sec. 202. Effective date.
TITLE III—ENCOURAGEMENT OF MULTIPLE EMPLOYER HEALTH
PLANS, VOLUNTARY HEALTH INSURANCE ASSOCIATIONS, AND
OTHER FULLY INSURED ARRANGEMENTS; PREEMPTION
Sec. 301. Scope of State regulation; clarification of preemption rules relating to
voluntary health insurance associations and other fully insured
arrangements.
Sec. 302. Clarification of duty of the Secretary of Labor to implement provisions
of current law providing for exemptions from State regulation
of multiple employer health plans.
Title I
‘‘PART 7—RULES GOVERNING STATE REGULATION OF MULTIPLE EMPLOYER
HEALTH PLANS
‘‘Sec. 701. Definitions.
‘‘Sec. 702. Multiple employer health plans eligible for relief from certain re-
strictions on preemption of State law
‘‘Sec. 703. Requirements relating to sponsors, boards of trustees, and plan
operations.
Sec. 303. Clarification of scope of preemption rules.
Sec. 304. Clarification of treatment of single employer arrangements.
Sec. 305. Clarification of treatment of certain collectively bargained arrange-
ments.
Sec. 306. Treatment of church plans.
Sec. 307. Enforcement provisions relating to multiple employer welfare arrange-
ments.
Sec. 308. Cooperation between Federal and State authorities.
Sec. 309. Filing requirements for multiple employer welfare arrangements offer-
ing health benefits.
Sec. 310. Single annual filing for all participating employers.
Sec. 311. Effective date; transitional rule.
Sec. 312. Rule of construction.
TITLE I—INCREASED AVAILABIL-
ITY 
AND 
CONTINUITY 
OF
GROUP HEALTH PLAN COV-
ERAGE FOR EMPLOYEES AND
THEIR FAMILIES
SEC. 101. DEFINITION OF GROUP HEALTH PLAN.
(a) IN GENERAL.—Section 3 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1002) is
amended by adding at the end the following new paragraph:
‘‘(42) Except as otherwise provided in this title, the
term ‘group health plan’ means an employee welfare benefit
plan to the extent that the plan provides medical care (with-
in the meaning of section 607(1)) to employees or their de-
pendents (as defined under the terms of the plan) directly
or through insurance, reimbursement, or otherwise.’’.
Title I
(b) INCLUSION OF CERTAIN PARTNERS AND SELF-EM-
PLOYED SPONSORS IN DEFINITION OF PARTICIPANT.—Sec-
tion 3(7) of such Act (29 U.S.C. 1002(7)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(7)’’; and
(2) by adding at the end the following new para-
graph:
‘‘(B) In the case of a group health plan, such term
includes—
‘‘(i) in connection with a group health plan
maintained by a partnership, an individual who is
a partner in relation to the partnership, or
‘‘(ii) in connection with a group health plan
maintained by a self-employed individual (under
which one or more employees are participants), the
self-employed individual,
if such individual is or may become eligible to receive a
benefit under the plan or such individual’s beneficiaries
may be eligible to receive any such benefit.’’.
SEC. 102. ACCESS TO, AND CONTINUITY OF, GROUP HEALTH
PLAN COVERAGE.
(a) IN GENERAL.—Subtitle B of title I of the Employee
Retirement Income Security Act of 1974 is amended by
adding at the end the following:
Title I
‘‘PART 8—ACCESS TO, AND CONTINUITY OF,
GROUP HEALTH PLAN COVERAGE
‘‘SEC. 800. DEFINITIONS AND SPECIAL RULES.
‘‘(a) IN GENERAL.—For purposes of this part:
‘‘(1) EMPLOYER.—The term ‘employer’ shall
have the meaning applicable under section 3(5), ex-
cept that such term includes the partnership in rela-
tion to any partner.
‘‘(2) FULLY INSURED.—The term ‘fully insured’
shall have the meaning applicable under section
701(1).
‘‘(3) HEALTH INSURANCE COVERAGE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘health insurance
coverage’ means any hospital or medical service
policy or certificate, hospital or medical service
plan contract, or health maintenance organiza-
tion group contract offered by an insurer or a
health maintenance organization, to the extent of
the benefits under such policy, certificate, or con-
tract consisting of medical care, provided di-
rectly, through insurance or reimbursement, or
otherwise.
‘‘(B) EXCEPTION.—Such term does not in-
clude coverage under any separate policy, certifi-
Title I
cate, or contract only for one or more of any of
the following:
‘‘(i) Coverage for accident, dental, vi-
sion, disability income, on-site medical clin-
ics, employee assistance programs, or long-
term care insurance, or any combination
thereof.
‘‘(ii) Medicare supplemental health in-
surance (within the meaning of section
1882(g)(1) of the Social Security Act (42
U.S.C. 1395ss(g)(1))) and similar supple-
mental coverage provided under a group
health plan.
‘‘(iii) Coverage issued as a supplement
to liability insurance.
‘‘(iv) Liability insurance, including
general liability insurance and automobile
liability insurance.
‘‘(v) Worker’s compensation or similar
insurance.
‘‘(vi) Automobile medical-payment in-
surance.
‘‘(vii) Coverage consisting of benefit
payments made on a periodic basis for a
specified disease or illness or period of hos-
Title I
and delivery of medical care are provided, in whole
or in part, through a defined set of providers under
contract with the insurer or health maintenance orga-
nization.
‘‘(b) COVERAGE.—This part shall apply in the case of
a group health plan for any plan year only if such group
health plan has two or more participants as current em-
ployees on the first day of such plan year.
‘‘(c) SPECIAL RULES PROVIDING FOR TREATMENT AS
GROUP HEALTH PLAN.—
‘‘(1) An employee welfare benefit plan shall be
treated as a group health plan under this part only
with respect to medical care (within the meaning of
section 607(1))) which is provided under the plan and
which does not consist of coverage excluded from the
definition of health insurance coverage under sub-
section (a)(3)(B).
‘‘(2) Any plan, fund, or program which would
not be (but for this paragraph) an employee welfare
benefit plan and which is established or maintained
by a partnership, to the extent that such plan, fund,
or program provides medical care (within the mean-
ing of section 607(1)) to present or former partners
in the partnership or to their dependents (as defined
under the terms of the plan, fund, or program), di-
Title I
rectly or through insurance, reimbursement, or other-
wise, shall be treated (subject to paragraph (1)) as an
employee welfare benefit plan which is a group health
plan.
‘‘Subpart A—Preexisting Condition Limitations,
Portability, and Renewability
‘‘SEC. 801. LIMITATIONS ON PREEXISTING CONDITION EX-
CLUSIONS.
‘‘(a) TIME CONSTRAINTS ON LIMITATIONS OR EXCLU-
SIONS BASED ON PREEXISTING CONDITIONS.—
‘‘(1) IN GENERAL.—A group health plan, and an
insurer or health maintenance organization offering
health insurance coverage in connection with a group
health plan, may provide a limitation on, or exclu-
sion of, the benefits of a participant or beneficiary
otherwise available under the terms of the plan based
on a preexisting condition only if the limitation or
exclusion does not extend beyond—
‘‘(A) in the case of a participant or bene-
ficiary whose initial coverage commences at the
time such participant or beneficiary first be-
comes eligible for coverage under the plan, 12
months after the effective date of such coverage,
or
Title I
‘‘(B) in the case of a participant or bene-
ficiary whose initial coverage commences pursu-
ant to an election made after the period in which
the election may first be made, 18 months after
the effective date of such coverage.
‘‘(2) PREEXISTING CONDITION.—For purposes of
paragraph (1), the term ‘preexisting condition’ means
a medical condition which was diagnosed, or which
was treated—
‘‘(A) in the case of a participant or bene-
ficiary described in paragraph (1)(A), within the
6-month period preceding the effective date of the
coverage of such participant or beneficiary (as
determined by disregarding any applicable wait-
ing period), or
‘‘(B) in the case of a participant or bene-
ficiary described in paragraph (1)(B), within the
12-month period preceding the effective date of
the coverage of such participant or beneficiary
(as determined by disregarding any applicable
waiting period).’’.
‘‘(c) NO COVERAGE OF SPECIFIC TREATMENT, PROCE-
DURES, OR CLASSES REQUIRED.—Nothing in this part
may be construed to require the coverage of any specific
procedure, treatment, or service as part of a group health
Title I
plan or health insurance coverage under this Act or through
regulation.
‘‘(d) APPLICATION OF RULES BY CERTAIN HEALTH
MAINTENANCE ORGANIZATIONS.—A health maintenance or-
ganization that offers health insurance coverage shall not
be considered as failing to meet the requirements of section
1301 of the Public Health Service Act notwithstanding that
it provides for an exclusion of the coverage based on a pre-
existing condition consistent with the provisions of this sub-
part, so long as such exclusion is applied in a manner and
to an extent consistent with the provisions of this subpart.
‘‘(e) ELIGIBILITY PERIOD IMPOSED BY HEALTH MAIN-
TENANCE ORGANIZATIONS AS ALTERNATIVE TO PREEXIST-
ING CONDITION LIMITATION.—A health maintenance orga-
nization which offers health insurance coverage in connec-
tion with a group health plan and which does not use the
preexisting condition limitations allowed under this section
and section 802 with respect to any particular coverage op-
tion may impose an eligibility period for such coverage op-
tion, but only if such period does not exceed—
‘‘(1) 90 days, in the case of a participant or ben-
eficiary whose initial coverage commences at the time
such participant or beneficiary first becomes eligible
for coverage under the plan, or
Title I
‘‘(2) 180 days, in the case of a participant or
beneficiary whose initial coverage commences after the
date on which such participant or beneficiary first be-
comes eligible for coverage.
For purposes of this subsection, the term ‘eligibility period’
means a period which, under the terms of the health insur-
ance coverage offered by the health maintenance organiza-
tion, must expire before the health insurance coverage be-
comes effective. Any such eligibility period shall be treated
for purposes of this subpart as a waiting period under the
plan and shall run concurrently with any other applicable
waiting period under the plan.
‘‘SEC. 802. PORTABILITY.
‘‘(a) IN GENERAL.—Each group health plan, and each
insurer or health maintenance organization offering health
insurance coverage in connection with a group health plan,
shall provide that if a participant or beneficiary is in a
period of continuous coverage (as defined in subsection (e))
as of a date upon which coverage takes effect under the plan,
any period of limitation on, or exclusion of, covered benefits
in connection with a preexisting condition (as permitted
under section 801) shall be reduced by 1 month for each
month in the period of continuous coverage.
‘‘(b) CONSTRUCTION.—Nothing in this section shall be
construed to prohibit a limitation on, or exclusion of, any
Title I
benefit of a participant or beneficiary otherwise available
under the terms of the plan based on a preexisting condi-
tion, subject to the limits in section 801(a), if such benefit
was not previously provided under the group health plan
or health insurance coverage (or coverage consisting of med-
ical care under title XIX of the Social Security Act) under
which the individual was covered at the end of the period
of continuous coverage referred to in subsection (a).
‘‘(c) DOCUMENTATION.—A participant or beneficiary
may be treated by a group health plan, or by an insurer
or health maintenance organization offering health insur-
ance coverage in connection with a group health plan, as
not being in a period of continuous coverage if, upon the
request of the plan or of the insurer or health maintenance
organization (as the case may be), the participant or bene-
ficiary does not present satisfactory documentation of such
period of continuous coverage. The Secretary may prescribe
regulations defining standards for satisfactory documenta-
tion for purposes of this subsection.
‘‘(d) NO PREEXISTING CONDITION
FOR NEWBORNS
AND ADOPTED CHILDREN.—For purposes of this subpart—
‘‘(1) NEWBORNS.—A child who, within the 30-
day period beginning with the date of birth, becomes
covered under a group health plan or otherwise be-
comes covered under health insurance coverage (or
Title I
coverage consisting of medical care under title XIX of
the Social Security Act) and remains thereafter in a
period of continuous coverage shall not be considered,
beginning at the time of birth, to have any preexist-
ing condition.
‘‘(2) ADOPTED CHILDREN.—An adopted child or
a child placed for adoption (within the meaning of
section 609(c)(3)(B)) who, within the 30-day period
beginning on the date of adoption or placement, be-
comes covered under a group health plan or otherwise
becomes covered under health insurance coverage (or
coverage providing medical care under title XIX of
the Social Security Act) and remains thereafter in a
period of continuous coverage shall not be considered,
beginning at the time of adoption or placement, to
have any preexisting condition.
‘‘(e) PERIOD OF CONTINUOUS COVERAGE.—For pur-
poses of this subpart, the term ‘period of continuous cov-
erage’ means the period—
‘‘(1) beginning on the date an individual be-
comes covered under a group health plan or otherwise
becomes covered under health insurance coverage (or
coverage consisting of medical care under title XIX of
the Social Security Act), and
Title I
‘‘(2) ending on the date the individual does not
have such coverage for a continuous period of more
than 60 days.
‘‘SEC. 803. REQUIREMENTS FOR RENEWABILITY OF COV-
ERAGE.
‘‘(a) MULTIEMPLOYER PLANS, MULTIPLE EMPLOYER
HEALTH PLANS, AND MULTIPLE EMPLOYER WELFARE AR-
RANGEMENTS.—A group health plan which is a multiem-
ployer plan or a multiple employer health plan (as defined
in section 701(4)), and a multiple employer welfare ar-
rangement (to the extent to which benefits under the ar-
rangement consist of medical care and are fully insured),
may not deny an employer whose employees are covered
under such a plan or arrangement continued access to the
same or different coverage under the terms of such a plan
or arrangement, other than—
‘‘(1) for nonpayment of contributions,
‘‘(2) for fraud or other intentional misrepresen-
tation by the employer,
‘‘(3) for noncompliance with material plan or
arrangement provisions,
‘‘(4) because the plan or arrangement is ceasing
to offer any coverage in a geographic area,
‘‘(5) for failure to meet the terms of an applica-
ble collective bargaining agreement, to renew a collec-
Title I
tive bargaining or other agreement requiring or au-
thorizing contributions to the plan, or to employ em-
ployees covered by such an agreement,
‘‘(6) in the case of a plan or arrangement to
which subparagraph (C), (D), or (E) of section 3(40)
applies, to the extent necessary to meet the require-
ments of such subparagraph, or
‘‘(7) in the case of a multiple employer health
plan (as defined in section 701(4)), for failure to meet
the requirements under part 7 for exemption under
section 514(b)(6)(B).
Nothing in this subsection shall be construed to preclude
any such plan or arrangement from establishing employer
contribution requirements or group participation require-
ments not otherwise prohibited by this Act.
‘‘(b) INSURERS AND HEALTH MAINTENANCE ORGANI-
ZATIONS.—
‘‘(1) IN GENERAL.—In any case in which an in-
surer or a health maintenance organization is provid-
ing health insurance coverage in connection with a
group health plan, the insurer or health maintenance
organization may not deny an employer whose em-
ployees are covered under such plan continued access
to health insurance coverage provided by such insurer
or health maintenance organization, other than—
Title I
‘‘(A) for nonpayment of premiums or con-
tributions in accordance with the terms of the
health insurance coverage,
‘‘(B) for any act or practice constituting
fraud or other intentional misrepresentation
under the terms of the health insurance coverage,
‘‘(C) for noncompliance with material plan
provisions relating to participation or employer
contributions, or
‘‘(D) subject to paragraph (3), because the
insurer or health maintenance organization is
ceasing to offer any such coverage in a State, or,
in the case of a network plan (as defined in sec-
tion 800(a)(7)), in a geographic area.
‘‘(2) DISCONTINUANCE OF OFFERED HEALTH IN-
SURANCE COVERAGE.—In any case in which a policy,
certificate, or contract referred to in section 800(a)(3)
is no longer being offered in connection with group
health plans by an insurer or health maintenance or-
ganization, health insurance coverage as defined by
such policy, certificate, or contract may be discon-
tinued by the insurer or health maintenance organi-
zation in connection with any group health plan
upon the offer to the plan sponsor of an option to
purchase any other health insurance coverage cur-
Title I
rently being offered in connection with group health
plans, if the offer of such option is made uniformly
in connection with group health plans.
‘‘(3) 
NOTICE
REQUIREMENT
FOR
MARKET
EXIT.—Paragraph (1)(D) shall not apply to an in-
surer or health maintenance organization ceasing to
offer coverage unless the insurer provides notice of
such termination to employers and individuals cov-
ered at least 180 days before the date of termination
of coverage.
‘‘(4) EXCEPTION TO REQUIREMENT FOR RENEW-
ABILITY OF COVERAGE BY REASON OF FAILURE BY
PLAN
TO
MEET
CERTAIN
MINIMUM
PARTICIPATION
RULES.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply in the case of any group health plan
with respect to which participation rules of an
insurer or health maintenance organization
which are described in subparagraph (B) are not
met.
‘‘(B) PARTICIPATION RULES.—For purposes
of subparagraph (A), participation rules (if any)
of an insurer or health maintenance organiza-
tion shall be treated as met with respect to a
group health plan only if such rules are uni-
Title I
formly applicable and in accordance with appli-
cable State law and the number or percentage of
eligible individuals who, under the plan, are
participants or beneficiaries equals or exceeds a
level which is determined in accordance with
such rules.
‘‘SEC. 804. GROUP HEALTH PLAN ENROLLMENT REQUIRE-
MENTS.
‘‘(a) ENROLLMENT PERIODS.—
‘‘(1) ANNUAL
PERIOD.—A group health plan
shall provide for at least one annual open enrollment
period (of not less than 30 days) each year during
which—
‘‘(A) employees who are eligible for coverage
under the terms of the plan who are not other-
wise covered may elect to be covered under at
least one benefit option, and
‘‘(B) if family coverage is available, em-
ployees who are covered but who do not have
family coverage may elect family coverage.
‘‘(2) ENROLLMENT
OF
ELIGIBLE
INDIVIDUALS
WHO LOSE OTHER COVERAGE.—A group health plan
shall permit an uncovered employee who is otherwise
eligible for coverage under the terms of the plan (or
an uncovered dependent, as defined under the terms
Title I
of the plan, of such an employee, if family coverage
is available) to enroll for coverage under the plan
under at least one benefit option if—
‘‘(A) the employee or dependent was covered
under a group health plan or had health insur-
ance coverage at the time coverage was pre-
viously offered to the employee or individual,
‘‘(B) the employee stated in writing at such
time that coverage under a group health plan or
health insurance coverage was the reason for de-
clining enrollment,
‘‘(C) the employee or dependent lost cov-
erage under a group health plan or health insur-
ance coverage (as a result of loss of eligibility for
the coverage, termination of employment, or re-
duction in the number of hours of employment),
and
‘‘(D) the employee requests such enrollment
within 30 days after termination of such cov-
erage.
‘‘(b) DEPENDENTS.—
‘‘(1) IN GENERAL.—If a group health plan makes
family coverage available, the plan may not require,
as a condition of coverage of a beneficiary of a partic-
ipant in the plan, a waiting period applicable to the
Title I
coverage of a beneficiary who is a newborn or an
adopted child or child placed for adoption (within the
meaning of section 609(c)(3)(B)), at the time of adop-
tion or placement, or a spouse, at the time of mar-
riage, if the participant has met any waiting period
applicable to that participant.
‘‘(2) TIMELY ENROLLMENT.—
‘‘(A) IN GENERAL.—Enrollment of a par-
ticipant’s beneficiary described in paragraph (1)
shall be considered to be timely if a request for
enrollment is made either—
‘‘(i) within 30 days of the date of the
marriage with such a beneficiary who is the
spouse of the participant, or within 30 days
of the date of the birth, adoption, or place-
ment for adoption of such a beneficiary who
is a child of the participant, if family cov-
erage is available as of such date, or
‘‘(ii) within 30 days of the date family
coverage is first made available.
‘‘(B) COVERAGE.—If available coverage in-
cludes family coverage and enrollment is made
under such coverage on a timely basis under sub-
paragraph (A)(i), the coverage shall become effec-
tive not later than the first day of the first
Title I
month beginning 15 days after the date the com-
pleted request for enrollment is received.
‘‘(c) DENIAL OF ENROLLMENT BASED ON PREEXIST-
ING CONDITION PROHIBITED.—A group health plan, and
an insurer or health maintenance organization providing
health insurance coverage in connection with a group health
plan, may not exclude an employee or his or her beneficiary
from enrollment under the plan on the basis of a preexisting
condition (as defined in section 801(a)(2), but regardless
of the period within which the condition was diagnosed or
treated).’’.
(b) TREATMENT OF GOVERNMENTAL PLANS.—
(1) COVERAGE.—Section 4(b)(1) of such Act (29
U.S.C. 1003(b)(1)) is amended by inserting ‘‘except
with respect to sections 801 and 802,’’ after ‘‘(1)’’.
(2) VOLUNTARY
ELECTION
WITH
RESPECT
TO
GOVERNMENTAL
PLANS.—Section 4 of such Act is
amended further by adding at the end the following
new subsection:
‘‘(c) If the plan sponsor of a governmental plan which
is a group health plan to which sections 801 and 802 apply
makes an election under this paragraph for any specified
period (in such form and manner as the Secretary may
by regulations prescribe), then the provisions of sections 801
and 802 shall not apply to such governmental plans for
Title I
such period as if the exception in subsection (b)(1) relating
to sections 801 and 802 did not apply with respect to such
plan for such period.’’.
(3) INAPPLICABILITY OF PORTABILITY TO PAR-
TICIPANTS OF NON-ELECTING PLANS.—Section 802 of
such Act (as added by subsection (a) of this section)
is amended by adding at the end the following new
subsection:
‘‘(f) INAPPLICABILITY OF PORTABILITY TO PARTICI-
PANTS OF NON-ELECTING PLANS.—A group health plan
shall not be treated as failing to meet the requirements of
this section solely because, in determining whether there is
a period of continuous coverage, the plan disregards cov-
erage under any other group health plan that is a govern-
mental plan or church plan which is not subject to this sec-
tion or section 801.’’.
(c) ENFORCEMENT WITH RESPECT TO INSURERS AND
HEALTH MAINTENANCE ORGANIZATIONS.—Section 502 of
such Act (29 U.S.C. 1132) is amended—
(1) in subsection (a)(6), by striking ‘‘subsection
(c)(2) or (i) or (l)’’ and inserting ‘‘paragraph (2) or
(5) of subsection (c) or subsection (i) or (l)’’; and
(2) by adding at the end of subsection (c) the fol-
lowing new paragraph:
Title I
‘‘(5) The Secretary shall enforce under this part the
requirements of section 801, 802, or 803 with respect to any
entity which is an insurer or health maintenance organiza-
tion and which is subject to regulation by any State per-
mitted under section 514 only if the Secretary determines—
‘‘(A)(i) with respect to section 801 or 802, that
such State has not provided for effective enforcement
of State laws which govern the same matters as are
governed by such section 801 or 802, respectively (as
described in section 514(c)) and which are not
superceded by reason of section 514(c), or
‘‘(ii) with respect to section 803, that such State
has not provided for effective enforcement of State
laws which govern the same matters as are governed
by such section 803, and which require compliance by
such entity with at least the same requirements as
those provided under such section 803, and
‘‘(B) that such entity has failed to comply with
the requirements of such section which are applicable
to such entity.’’.
(d) PREEMPTION OF DIFFERING STATE LAWS.—Sec-
tion 514 of such Act (29 U.S.C. 1144) is amended—
(1) in subsection (b)(2)(A), by inserting ‘‘and
subsection (c)’’ after ‘‘subparagraph (B)’’;
Title I
(2) by redesignating subsections (c) and (d) as
subsections (d) and (e), respectively; and
(3) by inserting after subsection (b) the following
new subsection:
‘‘(c)(1) The provisions of sections 801 and 802 shall
supersede any and all State laws in relation to any group
health plan to which such sections apply insofar as the re-
quirements of such laws may now or hereafter—
‘‘(A) relate to insurers or health maintenance or-
ganizations offering health insurance coverage in con-
nection with group health plans,
‘‘(B) govern the same matters as are governed by
such sections 801 and 802, and
‘‘(C) provide requirements which differ from the
requirements of such sections 801 and 802.
‘‘(2) Nothing in this subsection shall be construed to
supercede any law of any State to the extent that such law
provides for the enforcement of laws which are not
superceded under paragraph (1).
‘‘(3) For purposes of this subsection, terms used in this
subsection which are defined in section 800 shall have the
meanings provided in such section.’’.
(e) GOOD FAITH COMPLIANCE WITH REQUIREMENT.—
A group health plan (within the meaning of section 3(42)
of the Employee Retirement Income Security Act of 1974),
Title I
an insurer (within the meaning of section 800(a)(5) of such
Act), or a health maintenance organization (within the
meaning of section 800(a)(4) of such Act) that complies in
good faith with an applicable requirement of subpart A of
part 8 of title I of such Act before the date a regulation
has been published and becomes effective to carry out such
requirement shall be considered to be in compliance with
such regulation.
(f) CONFORMING AMENDMENT.—Section 607(1) of such
Act (29 U.S.C. 1167(1)) is amended—
(1) by striking ‘‘The term’’ and inserting the fol-
lowing:
‘‘(A) IN GENERAL.—The term’’;
(2) by striking ‘‘(as defined’’ and all that follows
through ‘‘1986)’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(B) MEDICAL CARE.—For purposes of this
paragraph, the term ‘medical care’ means—
‘‘(i) amounts paid for, or items or
services in the form of, the diagnosis, cure,
mitigation, treatment, or prevention of dis-
ease, or amounts paid for, or items or serv-
ices provided for, the purpose of affecting
any structure or function of the body,
Title I
‘‘(ii) amounts paid for, or services in
the form of, transportation primarily for
and essential to medical care referred to in
clause (i), and
‘‘(iii) amounts paid for insurance cov-
ering medical care referred to in clauses (i)
and (ii).’’.
(g) 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 relating to
section 609 the following new items:
‘‘PART 8—ACCESS TO, AND CONTINUITY OF, GROUP HEALTH PLAN COVERAGE
‘‘Sec. 800. Definitions and special rules.
‘‘SUBPART A—PREEXISTING CONDITION LIMITATIONS, PORTABILITY, AND
RENEWABILITY
‘‘Sec. 801. Limitations on preexisting condition exclusions.
‘‘Sec. 802. Portability.
‘‘Sec. 803. Requirements for renewability of coverage.
‘‘Sec. 804. Group health plan enrollment requirements.’’.
SEC. 103. EFFECTIVE DATE.
The amendments made by this title shall apply with
respect to plan years beginning after 18 months after the
month in which this Act is enacted.
Title II
TITLE II—REQUIREMENTS FOR
INSURERS 
AND 
HEALTH
MAINTENANCE 
ORGANIZA-
TIONS OFFERING HEALTH IN-
SURANCE 
COVERAGE 
TO
GROUP HEALTH PLANS OF
SMALL EMPLOYERS
SEC. 201. ERISA REQUIREMENTS FOR INSURERS AND
HEALTH MAINTENANCE ORGANIZATIONS OF-
FERING HEALTH INSURANCE COVERAGE TO
GROUP HEALTH PLANS OF SMALL EMPLOY-
ERS
(a) IN GENERAL.—Part 8 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974 (as
added by the preceding provisions of this title) is amended
by adding at the end the following:
‘‘Subpart B—Requirements for Insurers and Health
Maintenance Organizations Offering Health In-
surance Coverage to Group Health Plans of
Small Employers
‘‘SEC. 811. DEFINITIONS.
‘‘Except as otherwise specifically provided, for pur-
poses of this subpart:
‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible
individual’ means, with respect to an insurer or
Title II
health maintenance organization that offers general
coverage to any small employer in connection with a
group health plan, such an individual in relation to
the employer as shall be determined—
‘‘(A) in accordance with the terms of such
plan,
‘‘(B) as provided by the insurer or health
maintenance organization under rules of the in-
surer or health maintenance organization which
are uniformly applicable, and
‘‘(C) in accordance with all applicable State
laws governing such insurer or health mainte-
nance organization.
‘‘(2) GENERAL
COVERAGE.—The term ‘general
coverage’ means health insurance coverage that—
‘‘(A) is offered at a particular time in the
small group market, and
‘‘(B) is not made available solely in connec-
tion with any trade, industry, or professional as-
sociation.
‘‘(3) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, in connection with a group health
plan with respect to a calendar year, an employer
who employs at least 2 but fewer than 51 employees
on a typical business day in the year. For purposes
Title II
of this paragraph, two or more trades or businesses,
whether or not incorporated, shall be deemed a single
employer if such trades or businesses are within the
same control group (within the meaning of section
3(40)(B)(ii)).
‘‘(4) SMALL GROUP MARKET.—The term ‘small
group market’ means the health insurance market
under which individuals obtain health insurance cov-
erage (directly or through any arrangement) on behalf
of themselves (and their dependents) on the basis of
employment or other relationship with respect to a
small employer.
‘‘(5) STATE.—The term ‘State’ means any of the
50 States, the District of Columbia, the Common-
wealth of Puerto Rico, the Virgin Islands, Guam, and
American Samoa.
‘‘SEC. 812. REQUIREMENTS FOR INSURERS AND HEALTH
MAINTENANCE 
ORGANIZATIONS 
IN 
THE
SMALL GROUP MARKET WHO OFFER GENERAL
COVERAGE.
‘‘(a) ISSUANCE OF COVERAGE.—Subject to the succeed-
ing subsections of this section, each insurer or health main-
tenance organization that offers general coverage in connec-
tion with a group health plan in the small group market
in a State—
Title II
‘‘(1) must accept every small employer in the
State that applies for such coverage; and
‘‘(2) must accept for enrollment under such cov-
erage every eligible individual (as defined in section
811(1)) who applies for enrollment on a timely basis
(consistent with section 804) and may not place any
restriction which is inconsistent with section 804 on
the eligibility of an individual to enroll so long as
such individual is an eligible individual.
‘‘(b) TREATMENT OF CERTAIN PREVIOUSLY SELF-IN-
SURED EMPLOYERS.—
‘‘(1) IN GENERAL.—An insurer or health mainte-
nance organization may elect not to make general
coverage available to group health plans of previously
self-insured small employers (described in paragraph
(2)), but only if such election is made in a uniform
manner for all such employers. The exclusion, pursu-
ant to such an election, of such a group health plan
from availability of general coverage shall not apply
after the end of the 1-year period (or such uniform,
shorter period as the insurer or organization may
specify) beginning on the last date no such coverage
was provided by such employer.
‘‘(2) PREVIOUS
SELF-INSURED
EMPLOYER
DE-
SCRIBED.—A previously self-insured small employer
Title II
described in this paragraph is a small employer that
has provided medical care (referred to in section
800(a)(6)) to employees other than through health in-
surance coverage to which this subpart applies.
‘‘(c) CONSTRUCTION WITH RESPECT TO COVERAGE OF-
FERED IN CONNECTION WITH ASSOCIATIONS.—Nothing in
subsection (a) shall be construed as requiring that the gen-
eral coverage made available by an insurer or health main-
tenance organization in the small group market in a State
in connection with any trade, industry, or professional as-
sociation be the same as the general coverage offered in the
State in the small group market not in connection with
such an association.
‘‘(d) SPECIAL RULES
FOR NETWORK PLANS
AND
HEALTH MAINTENANCE ORGANIZATIONS.—
‘‘(1) IN GENERAL.—In the case of an insurer
that offers health insurance coverage in connection
with a group health plan in the small group market
through a network plan (as defined in section
800(a)(7)) and in the case of a health maintenance
organization that offers health insurance coverage in
connection with such a plan, the insurer or organiza-
tion may—
‘‘(A) limit the employers that may apply
for such coverage to those with eligible individ-
Title II
small group market within such service area for a pe-
riod of 180 days after such coverage is denied.
‘‘(f) EXCEPTION TO REQUIREMENT FOR ISSUANCE OF
COVERAGE BY REASON OF FAILURE BY PLAN TO MEET
CERTAIN MINIMUM PARTICIPATION RULES.—
‘‘(1) IN
GENERAL.—Subsection (a) shall not
apply in the case of any group health plan with re-
spect to which participation rules of an insurer or
health maintenance organization which are described
in paragraph (2) are not met.
‘‘(2) PARTICIPATION
RULES.—For purposes of
paragraph (1), participation rules (if any) of an in-
surer or health maintenance organization shall be
treated as met with respect to a group health plan
only if such rules are uniformly applicable and in ac-
cordance with applicable State law and the number
or percentage of eligible individuals who, under the
plan, are participants or beneficiaries equals or ex-
ceeds a level which is determined in accordance with
such rules.
‘‘(3) SPECIAL RULE FOR COVERAGE IN CONNEC-
TION WITH CERTAIN ASSOCIATIONS.—In the case of
health insurance coverage in connection with any
trade, industry, or professional association, the in-
surer or health maintenance organization may not
Title II
provide for a minimum participation requirement
with respect to eligible individuals who are employees
of an employer.’’.
(b) ENFORCEMENT WITH RESPECT TO INSURERS AND
HEALTH
MAINTENANCE
ORGANIZATIONS.—Section
502(c)(5) of such Act (as added by section 102(c)) is amend-
ed—
(1) by striking ‘‘or 803’’ and inserting ‘‘803, or
812’’; and
(2) in subparagraph (A)(ii), by striking ‘‘section
803’’ each place it appears and inserting ‘‘section 803
or 812, respectively’’.
(c) GOOD FAITH COMPLIANCE WITH REQUIREMENT.—
An insurer (within the meaning of section 800(a)(5) of the
Employee Retirement Income Security Act of 1974) or a
health maintenance organization (within the meaning of
section 800(a)(6) of such Act) that complies in good faith
with an applicable requirement of subpart B of part 8 of
title I of such Act before the date a regulation has been pub-
lished and becomes effective to carry out such requirement
shall be considered to be in compliance with such regula-
tion.
(d) CLERICAL AMENDMENT.—The table of contents in
section 1 of the Employee Retirement Income Security Act
of 1974 is amended by inserting after the items relating
Title II
to part 8 (added by section 1001(b)) the following new
items:
‘‘SUBPART B—REQUIREMENTS FOR INSURERS AND HEALTH MAINTENANCE ORGA-
NIZATIONS
OFFERING
HEALTH
INSURANCE
COVERAGE
TO
GROUP
HEALTH
PLANS OF SMALL EMPLOYERS
‘‘Sec. 811. Definitions.
‘‘Sec. 812. Requirements for insurers and health maintenance organizations in
the small group market who offer general coverage.’’.
SEC. 202. EFFECTIVE DATE.
The requirements of section 812 of the Employee Re-
tirement Income Security Act of 1974 (added by this title)
shall apply with respect to insurers and health maintenance
organizations as of 18 months after the month in which
this Act is enacted.
Title III
TITLE III—ENCOURAGEMENT OF
MULTIPLE 
EMPLOYER
HEALTH PLANS, VOLUNTARY
HEALTH 
INSURANCE 
ASSO-
CIATIONS, AND OTHER FULLY
INSURED 
ARRANGEMENTS;
PREEMPTION
SEC. 301. SCOPE OF STATE REGULATION; CLARIFICATION
OF PREEMPTION RULES RELATING TO VOL-
UNTARY HEALTH INSURANCE ASSOCIATIONS
AND 
OTHER 
FULLY 
INSURED 
ARRANGE-
MENTS.
(a) SCOPE OF STATE REGULATION.—Section 514(c) of
the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1144) (as added by section 102(d)) is amended—
(1) by redesignating paragraph (3) as para-
graph (4);
(2) by inserting after paragraph (2) the follow-
ing new paragraphs:
‘‘(3)(A) The provisions of this title shall supersede any
and all State laws insofar as they may now or hereafter
require—
‘‘(i) health insurance coverage in connection
with a group health plan to include specific items or
services consisting of medical care, or
Title III
‘‘(ii) an insurer or health maintenance organiza-
tion offering health insurance coverage in connection
with a group health plan to include in such health in-
surance coverage specific items or services consisting
of medical care;
except to the extent that such State laws prohibit an exclu-
sion for a specific disease in such health insurance coverage.
‘‘(B) Notwithstanding subparagraph (A), a State may
require an insurer or health maintenance organization of-
fering health insurance coverage in the small group market
(as defined in section 811(4)) in connection with a group
health plan to offer under such coverage specific items or
services consisting of medical care, but only with respect
to not more than 2 different policies or contracts of health
insurance coverage.’’.
(b) PREEMPTION
OF
STATE
FICTITIOUS
GROUP
LAWS.—Section 514(c) of such Act (as amended by sub-
section (a)) is further amended by redesignating paragraph
(4) as paragraph (5) and inserting after paragraph (3) the
following new paragraph:
‘‘(4) The provisions of this title shall supercede any
and all State laws insofar as they may now or hereafter
prohibit—
‘‘(A) two or more employers from obtaining or
offering coverage under a multiple employer welfare
Title III
arrangement under which all benefits consist of medi-
cal care and are fully insured, or
‘‘(B) an insurer or health maintenance organiza-
tion from offering coverage described in subparagraph
(A).’’.
(c) CLARIFICATION OF PREEMPTION RULES RELATING
TO VOLUNTARY HEALTH INSURANCE ASSOCIATIONS.—Sec-
tion 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is amend-
ed by adding at the end the following new subparagraphs:
‘‘(E)(i) The provisions of this title shall supercede any
and all State laws which regulate insurance insofar as they
may now or hereafter preclude an insurer or health mainte-
nance organization offering health insurance coverage in
connection with employee welfare benefit plans which are
voluntary health insurance associations from setting pre-
mium rates based on the claims experience of each vol-
untary health insurance association, if such claims experi-
ence is defined as the claims experience of all employers
of each association taken as a whole (without varying the
premium rates of any particular employer on the basis of
the claims experience of such employer).
‘‘(ii) Subsection (c)(3)(B) shall not apply in the case
of an employee welfare benefit plan which is a voluntary
health insurance association.
Title III
‘‘(iii) For purposes of this subparagraph, the term ‘vol-
untary health insurance association’ means a multiple em-
ployer welfare arrangement—
‘‘(I) under which benefits include medical care
(within the meaning of section 607(1)),
‘‘(II) under which all benefits consisting of such
medical care are fully insured, and
‘‘(III) which is maintained by a qualified asso-
ciation.
‘‘(iv) For purposes of clause (iii)(III), the term ‘quali-
fied association’ means an association which consists of em-
ployers who together employ at least 200 employees who are
eligible individuals, but only if the sponsor of the associa-
tion—
‘‘(I) is, and has been (together with its imme-
diate predecessor, if any) for a continuous period of
not less than 3 years, organized and maintained in
good faith, with a constitution and bylaws specifi-
cally stating its purpose, as a trade association, an
industry association, a professional association, or a
chamber of commerce (or similar business group), for
substantial purposes other than that of obtaining or
providing medical care (within the meaning of sec-
tion 607(1)), and
Title III
‘‘(II) is established as a permanent entity which
receives the active support of its members.
‘‘(F) For purposes of this paragraph, the terms ‘fully
insured’, ‘health insurance coverage’, ‘health maintenance
organization’, and ‘insurer’ have the meanings given such
terms in section 800(a).’’.
SEC. 302. CLARIFICATION OF DUTY OF THE SECRETARY OF
LABOR TO IMPLEMENT PROVISIONS OF CUR-
RENT LAW PROVIDING FOR EXEMPTIONS
FROM STATE REGULATION OF MULTIPLE EM-
PLOYER HEALTH PLANS.
(a) RULES GOVERNING STATE REGULATION OF MUL-
TIPLE EMPLOYER HEALTH PLANS.—Subtitle B of title I
of the Employee Retirement Income Security Act of 1974
(as amended by the preceding provisions of this title) is
amended by inserting after part 6 the following new part:
‘‘PART 7—RULES GOVERNING STATE REGULA-
TION 
OF 
MULTIPLE 
EMPLOYER 
HEALTH
PLANS
‘‘SEC. 701. DEFINITIONS.
‘‘For purposes of this part—
‘‘(1) FULLY
INSURED.—A particular benefit
under a group health plan or a multiple employer
welfare arrangement is ‘fully insured’ if such benefit
(irrespective of any recourse available against other
Title III
parties) is provided in a manner so that such benefit
constitutes insurance regulated by the law of any
State (within the meaning of section 514(b)(2)).
‘‘(2) INSURER.—The term ‘insurer’ means an in-
surance company, insurance service, or insurance or-
ganization, licensed to engage in the business of in-
surance by a State.
‘‘(3) MEDICAL CARE.—The term ‘medical care’
means medical care within the meaning of section
607(1).
‘‘(4) MULTIPLE EMPLOYER HEALTH PLAN.—The
term ‘multiple employer health plan’ means a mul-
tiple employer welfare arrangement which provides
medical care and which has been granted an exemp-
tion under section 514(b)(6)(B).
‘‘(5) PARTICIPATING EMPLOYER.—The term ‘par-
ticipating employer’ means, in connection with a
multiple employer welfare arrangement, any employer
if any of its employees, or any of the individuals who
are dependents (as defined under the terms of the ar-
rangement) of its employees, are or were covered
under such arrangement in connection with the em-
ployment of the employees.
‘‘(6) SPONSOR.—The term ‘sponsor’ means, in
connection with a multiple employer welfare arrange-
Title III
ment, the association or other entity which establishes
or maintains the arrangement.
‘‘(7) STATE
INSURANCE
COMMISSIONER.—The
term ‘State insurance commissioner’ means the insur-
ance commissioner (or similar official) of a State.
‘‘SEC. 702. MULTIPLE EMPLOYER HEALTH PLANS ELIGIBLE
FOR RELIEF FROM CERTAIN RESTRICTIONS
ON PREEMPTION OF STATE LAW.
‘‘(a) TREATMENT AS EMPLOYEE WELFARE BENEFIT
PLAN WHICH IS A GROUP HEALTH PLAN.—
‘‘(1) IN GENERAL.—A multiple employer welfare
arrangement—
‘‘(A) under which the benefits consist solely
of medical care (disregarding such incidental
benefits as the Secretary shall specify by regula-
tion), and
‘‘(B) under which some or all benefits are
not fully insured,
shall be treated for purposes of subtitle A and the
other parts of this subtitle as an employee welfare
benefit plan which is a group health plan if an excep-
tion is granted to the arrangement under section
514(b)(6)(B) in accordance with this part.
‘‘(2) EXCEPTION.—In the case of a multiple em-
ployer welfare arrangement which would be described
Title III
in section 3(40)(A)(i) but solely for the failure to meet
the requirements of section 3(40)(C)(ii), paragraph
(1) shall apply with respect to such arrangement, but
only with respect to benefits provided thereunder
which constitute medical care.
‘‘(b) TREATMENT UNDER PREEMPTION RULES.—
‘‘(1) IN GENERAL.—The Secretary shall prescribe
regulations described in section 514(b)(6)(B)(i), ap-
plicable to multiple employer welfare arrangements
described in subparagraphs (A) and (B) of subsection
(a)(1), providing a procedure for granting exemptions
from section 514(b)(6)(A)(ii) with respect to such ar-
rangements. Under such regulations, any such ar-
rangement treated under subsection (a) as an em-
ployee welfare benefit plan shall be deemed to be an
arrangement described in section 514(b)(6)(B)(ii).
‘‘(2) STANDARDS.—Under the procedure pre-
scribed pursuant to paragraph (1), the Secretary shall
grant an arrangement described in subsection (a) an
exemption described in subsection (a) only if the Sec-
retary finds that—
‘‘(A) such exemption—
‘‘(i) is administratively feasible,
Title III
‘‘(ii) is not adverse to the interests of
the individuals covered under the arrange-
ment,
‘‘(iii) is protective of the rights and
benefits of the individuals covered under the
arrangement, and
‘‘(B) under such arrangement—
‘‘(i) the requirements of section 703(a)
are met,
‘‘(ii) reserves are maintained in an
amount of not less than $100,000 which
consist of at least a reserve sufficient—
‘‘(I) for unearned contributions,
‘‘(II) for benefit liabilities which
have been incurred, which have not
been satisfied, and for which risk of
loss has not yet been transferred (to the
extent that the arrangement does not
maintain such security, guarantee,
hold-harmless arrangement, or other fi-
nancial arrangement as the Secretary
determines to be adequate), and
‘‘(III) for expected administrative
costs with respect to such benefit liabil-
ities,
Title III
‘‘(iii) the arrangement will provide
such timely notice of material changes as
the Secretary shall specify in the regula-
tions referred to in paragraph (1), the ar-
rangement will meet such other financial,
actuarial, and other reporting requirements
as shall be specified in such regulations, the
arrangement is maintained by persons who
are not disqualified persons as defined in
such regulations, and the arrangement will
terminate upon failure to meet requirements
which shall be specified in such regulations.
‘‘(3) FILING
FEE.—Under the procedure pre-
scribed pursuant to paragraph (1), a multiple em-
ployer welfare arrangement shall pay to the Secretary
at the time of filing an application for an exemption
referred to in subsection (a) a filing fee in the amount
of $5,000, which shall be available, to the extent pro-
vided in appropriation Acts, to the Secretary for the
sole purpose of administering the exemption proce-
dures applicable with respect to such arrangement.
‘‘(4) CLASS EXEMPTION TREATMENT FOR EXIST-
ING
LARGE
ARRANGEMENTS.—Under the procedure
prescribed pursuant to paragraph (1), if—
Title III
‘‘(A) at the time of application for an ex-
emption under section 514(b)(6)(B) with respect
to an arrangement which has been in existence
as of the date of the enactment of the ERISA
Targeted Health Insurance Reform Act of 1996
for at least 3 years, either (A) the arrangement
covers at least 1,000 participants and bene-
ficiaries, or (B) with respect to the arrangement
there are at least 2,000 employees of eligible par-
ticipating employers,
‘‘(B) a complete application for the exemp-
tion with respect to the arrangement has been
filed and is pending, and
‘‘(C) the application meets such require-
ments (if any) as the Secretary may provide
with respect to class exemptions under this sub-
section,
the exemption shall be treated as having been granted
with respect to the arrangement unless and until the
Secretary provides appropriate notice that the exemp-
tion has been denied.
‘‘(c) FILING NOTICE OF EXEMPTION WITH STATES.—
An exemption granted under section 514(b)(6)(B) to a mul-
tiple employer welfare arrangement shall not be effective
unless written notice of such exemption is filed with the
Title III
State insurance commissioner of each State in which at
least 5 percent of the individuals covered under the arrange-
ment are located. For purposes of this subsection, an indi-
vidual shall be considered to be located in the State in which
a known address of such individual is located or in which
such individual is employed. The Secretary may by regula-
tion provide in specified cases for the application of the pre-
ceding sentence with lesser percentages in lieu of such 5 per-
cent amount.’’.
‘‘SEC. 
703. 
REQUIREMENTS 
RELATING 
TO 
SPONSORS,
BOARDS OF TRUSTEES, AND PLAN OPER-
ATIONS.
‘‘(a) IN GENERAL.—A complete application for an ex-
emption under section 514(b)(6)(B) shall include informa-
tion which the Secretary determines to be complete and ac-
curate and sufficient to demonstrate that the following re-
quirements are met with respect to the arrangement:
‘‘(1) SPONSOR.—The sponsor is, and has been
(together with its immediate predecessor, if any) for
a continuous period of not less than 3 years before the
date of the application, organized and maintained in
good faith, with a constitution and bylaws specifi-
cally stating its purpose, as a trade association, an
industry association, a professional association, or a
chamber of commerce (or similar business group, in-
Title III
cluding a corporation or similar organization that
operates on a cooperative basis (within the meaning
of section 1381 of the Internal Revenue Code of
1986)), for substantial purposes other than that of ob-
taining or providing medical care (referred to in sec-
tion 3(42)), and the applicant demonstrates to the
satisfaction of the Secretary that the sponsor is estab-
lished as a permanent entity which receives the active
support of its members.
‘‘(2) BOARD OF TRUSTEES.—The arrangement is
operated, pursuant to a trust agreement, by a board
of trustees which has complete fiscal control over the
arrangement and which is responsible for all oper-
ations of the arrangement, and 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 arrangement and to meet
all requirements of this title applicable to the ar-
rangement. The members of the board of trustees are
individuals selected from individuals who are the
owners, officers, directors, or employees of the partici-
pating employers or who are partners in the partici-
pating employers and actively participate in the busi-
ness. No such member is an owner, officer, director,
or employee of, or partner in, a contract adminis-
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trator or other service provider to the arrangement,
except that officers or employees of a sponsor which
is a service provider (other than a contract adminis-
trator) to the arrangement 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 arrangement other than on behalf of the
sponsor. The board has sole authority to approve ap-
plications for participation in the arrangement and
to contract with a service provider to administer the
day-to-day affairs of the arrangement.
‘‘(3) COVERED PERSONS.—The instruments gov-
erning the arrangement include a written instrument
which provides that, effective upon the granting of the
exemption to the arrangement—
‘‘(A) all participating employers must be
members or affiliated members of the sponsor, ex-
cept that, in the case of a sponsor which is a
professional association or other individual-based
association, if at least one of the officers, direc-
tors, or employees of an employer, or at least one
of the individuals who are partners in an em-
ployer and who actively participates in the busi-
ness, is a member or affiliated member of the
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sponsor, participating employers may also in-
clude such employer,
‘‘(B) all individuals thereafter commencing
coverage under the arrangement must be—
‘‘(i) active or retired owners (including
self-employed individuals), officers, direc-
tors, or employees of, or partners in, par-
ticipating employers, or
‘‘(ii) the beneficiaries of individuals
described in clause (i), and
‘‘(C) no participating employer may pro-
vide health insurance coverage in the individual
market for any employee not covered under the
arrangement which is similar to the coverage
contemporaneously provided to employees of the
employer under the arrangement, if such exclu-
sion of the employee from coverage under the ar-
rangement is based in whole or in part on the
health status of the employee and such employee
would, but for such exclusion on such basis, be
eligible for coverage under the arrangement.
‘‘(4) INCLUSION OF ELIGIBLE EMPLOYERS AND
EMPLOYEES.—No employer described in paragraph
(3) is excluded as a participating employer, no em-
ployee of a participating employer is ineligible for
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coverage offered under the plan in a geographic area
with respect to the employee, and no individual who
would otherwise be eligible for coverage under the ar-
rangement in connection with such an employer is ex-
cluded as a plan participant, based on—
‘‘(A) enrollment criteria more restrictive
than those required under section 804 with re-
spect to group health plans, or
‘‘(B) a minimum participation requirement
of the type referred to in section 812(f)(3).
‘‘(5) RESTRICTION ON VARIATIONS OF PREMIUM
RATES.—Premium rates under the arrangement with
respect any particular employer do not vary on the
basis of the claims experience of such employer.
‘‘(b) TREATMENT OF FRANCHISE NETWORKS.—In the
case of a multiple employer welfare arrangement which is
established and maintained by a franchisor for a franchise
network consisting of its franchisees, the requirements of
subsection (a)(1) shall be treated as met with respect to such
network in any case in which such requirements would be
met if the franchisor were deemed to be the sponsor referred
to in subsection (a)(1), such network were deemed to be an
association described in subsection (a)(1), and each
franchisee were deemed to be a member (of the association
and the sponsor) referred to in subsection (a)(1).
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‘‘(c) CERTAIN COLLECTIVELY BARGAINED ARRANGE-
MENTS.—In the case of a multiple employer welfare ar-
rangement in existence on February 1, 1995, which would
be described in section 3(40)(A)(i) but solely for the failure
to meet the requirements of section 3(40)(C)(ii) or (to the
extent provided in regulations of the Secretary) solely for
the failure to meet the requirements of subparagraph (D)
or (F) of section 3(40)—
‘‘(1) subsection (a)(1) shall not apply, and
‘‘(2) the joint board of trustees shall be consid-
ered the board of trustees required under subsection
(a)(2).
‘‘(d) CERTAIN ARRANGEMENTS NOT MEETING SINGLE
EMPLOYER REQUIREMENT.—
‘‘(1) IN GENERAL.—In any case in which the
majority of the employees covered under a multiple
employer welfare arrangement are employees of a sin-
gle employer (within the meaning of clauses (i) and
(ii) of section 3(40)(B)), if all other employees covered
under the arrangement are employed by employers
who are related to such single employer—
‘‘(A) subsection (a)(1) shall be treated as
satisfied if the sponsor of the arrangement is the
person who would be the plan sponsor if the re-
lated employers were disregarded in determining
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(C) by striking ‘‘Any such exemption’’ and
inserting:
‘‘(ii) Subject to part 7, any exemption under clause
(i)’’.
(c) CONFORMING AMENDMENT
TO DEFINITION
OF
PLAN SPONSOR.—Section 3(16)(B) of such Act (29 U.S.C.
1002(16)(B)) is amended by adding at the end the following
new sentence: ‘‘Such term also includes the sponsor (as de-
fined in section 701(6)) of a multiple employer welfare ar-
rangement which is or has been a multiple employer health
plan (as defined in section 701(4)).’’.
(d) CLERICAL AMENDMENT.—The table of contents in
section 1 of the Employee Retirement Income Security Act
of 1974 (as amended by section 102(g)) is amended by in-
serting after the item relating to section 609 the following
new items:
‘‘PART 7—RULES GOVERNING STATE REGULATION OF MULTIPLE EMPLOYER
HEALTH PLANS
‘‘Sec. 701. Definitions.
‘‘Sec. 702. Multiple employer health plans eligible for relief from certain restric-
tions on preemption of State law
‘‘Sec. 703. Requirements relating to sponsors, boards of trustees, and plan oper-
ations.’’.
SEC. 303. CLARIFICATION OF SCOPE OF PREEMPTION
RULES.
(a) IN GENERAL.—Section 514(b)(6)(A)(ii) of the Em-
ployee Retirement Income Security Act of 1974 (29 U.S.C.
1144(b)(6)(A)(ii)) is amended by inserting ‘‘, but only, in
the case of an arrangement which does not provide medical
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care (within the meaning of section 607(1)),’’ before ‘‘to the
extent not inconsistent with the preceding sections of this
title’’.
(b) CROSS-REFERENCE.—Section 514(b)(6) of such
Act (29 U.S.C. 1144(b)(6)) (as amended by section 301) is
amended by adding at the end the following new subpara-
graph:
‘‘(G) For additional rules relating to exemption from
subparagraph (A)(ii) of multiple employer health plans, see
part 7.’’.
SEC. 304. 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 amended—
(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 insert-
ing ‘‘during such year or at any time during the pre-
ceding 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 in-
terest necessary for common control’’; and
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(B) by striking ‘‘similar to’’ and inserting
‘‘consistent and coextensive with’’;
(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 employees
of two or more employers, the arrangement shall be
treated as having only 1 participating employer if,
after the application of clause (i), the number of indi-
viduals who are employees and former employees of
any one participating employer and who are covered
under the arrangement is greater than 75 percent of
the aggregate number of all individuals who are em-
ployees or former employees of participating employ-
ers and who are covered under the arrangement,’’.
SEC. 305. CLARIFICATION OF TREATMENT OF CERTAIN COL-
LECTIVELY BARGAINED ARRANGEMENTS.
(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)
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of the National Labor Relations Act (29 U.S.C.
158(d)) or paragraph Fourth of section 2 of the Rail-
way Labor Act (45 U.S.C. 152, paragraph Fourth) or
which are reached pursuant to labor-management ne-
gotiations under similar provisions of State public
employee relations laws, and (II) in accordance 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 fol-
lowing new subparagraphs:
‘‘(C) A plan or other arrangement is established or
maintained in accordance with this subparagraph only if
the following requirements are met:
‘‘(i) The plan or other arrangement, and the em-
ployee 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 enrolling
employers or individuals as participating em-
ployers 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
a member of the organization to the extent pro-
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vided in regulations of the Secretary), that is re-
lated either to the volume or number of employ-
ers or individuals solicited or enrolled as partici-
pating employers or covered individuals under
the plan or other arrangement, or to the dollar
amount or size of the contributions made by par-
ticipating employers or covered individuals to
the plan or other arrangement,
except to the extent that the services used by the plan,
arrangement, organization, or other entity consist
solely of preparation of documents necessary for com-
pliance with the reporting and disclosure require-
ments of part 1 or administrative, investment, or con-
sulting services unrelated to solicitation or enrollment
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 agree-
ments with a participating employer (nor cov-
ered on the basis of an individual’s employment
in such a bargaining unit), nor
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‘‘(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 collec-
tive 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 indi-
viduals who are covered under the plan or arrange-
ment and who are present or former employees who
are or were covered under the plan or arrangement
pursuant to a collective bargaining agreement with a
participating employer. The requirements of the pre-
ceding provisions of this clause shall be treated as sat-
isfied if, as of the end of the preceding plan year, such
covered individuals are comprised solely of individ-
uals who were covered individuals under the plan or
other arrangement as of the date of the enactment of
the ERISA Targeted Health Insurance Reform Act of
1996 and, as of the end of the preceding plan year,
the number of such covered individuals does not ex-
ceed 25 percent of the total number of present and
former employees enrolled under the plan or other ar-
rangement.
Title III
‘‘(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 Secretary that
the plan or other arrangement meets the requirements
of clauses (i) and (ii).
‘‘(D) A plan or arrangement is established or main-
tained in accordance with this subparagraph only if—
‘‘(i) all of the benefits provided under the plan
or arrangement are fully insured (as defined in sec-
tion 701(2)), 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 Man-
agement Relations Act, 1947 (29 U.S.C. 186(c)) are
met with respect to such plan or other arrangement.
‘‘(E) A plan or arrangement is 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 ERISA Targeted Health
Insurance Reform Act of 1996, or
‘‘(ii) the employee organization or other entity
sponsoring the plan or arrangement—
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‘‘(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 individual
who is a covered individual described in paragraph
(40)(C)(ii).’’.
SEC. 306. TREATMENT OF CHURCH PLANS.
(a) SPECIAL RULES FOR CHURCH PLANS.—
(1) IN GENERAL.—Part 7 of subtitle B of title I
of such Act (as added and amended by the preceding
provisions of this Act) is amended by adding at the
end the following new section:
‘‘SEC. 704. SPECIAL RULES FOR CHURCH PLANS.
‘‘(a) ELECTION FOR CHURCH PLANS.—
‘‘(1) IN
GENERAL.—Notwithstanding section
4(b)(2), if the church or convention or association of
churches which maintains a church plan covered
Title III
under this section makes an election with respect to
such plan under this subsection (in such form and
manner as the Secretary may by regulations pre-
scribe), then, subject to this section, the provisions of
this part (and other provisions of this title to the ex-
tent that they apply to group health plans which are
multiple employer welfare arrangements) shall apply
to such church plan, with respect to benefits provided
under such plan consisting of medical care, as if—
‘‘(A) section 4(b)(2) did not contain an ex-
clusion for church plans, and
‘‘(B) such plan were an arrangement eligi-
ble to apply for an exemption under this part.
‘‘(2) 
ELECTION
IRREVOCABLE.—An 
election
under this subsection with respect to any church plan
shall be binding with respect to such plan, and, once
made, shall be irrevocable.
‘‘(b) COVERED CHURCH PLANS.—A church plan is
covered under this section if such plan provides benefits
which include medical care and some or all of such benefits
are not fully insured.
‘‘(c) SPONSOR AND BOARD OF TRUSTEES.—For pur-
poses of this part, in the case of a church plan to which
this part applies pursuant to an election under subsection
Title III
(a), in treating such plan as if it were a multiple employer
welfare arrangement under this part—
‘‘(1) the church, convention or association of
churches, or other organization described in section
3(33)(C)(i) which is the entity maintaining the plan
shall be treated as the sponsor referred to in section
703(a)(1), and the requirements of section 703(a)(1)
shall be deemed satisfied with respect to the sponsor,
and
‘‘(2) the board of trustees, board of directors, or
other similar governing body of such sponsor shall be
treated as the board of trustees referred to in section
703(a)(2), and the requirements of section 703(a)(2)
shall be deemed satisfied with respect to the board of
trustees.
‘‘(d) DEEMED SATISFACTION
OF TRUST REQUIRE-
MENTS.—The requirements of section 403 shall not be treat-
ed as not satisfied with respect to a church plan to which
this part applies pursuant to an election under subsection
(a) solely because assets of the plan are held by an organiza-
tion described in section 3(33)(C)(i), if—
‘‘(1) such organization is incorporated separately
from the church or convention or association of
churches involved, and
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‘‘(2) such assets with respect to medical care are
separately accounted for.
‘‘(e) DEEMED SATISFACTION OF EXCLUSIVE BENEFIT
REQUIREMENTS.—The requirements of section 404 shall not
be treated as not satisfied with respect to a church plan
to which this part applies pursuant to an election under
subsection (a) solely because assets of the plan which are
in excess of reserves required for exemption under section
514(b)(6)(B) are held in a fund in which such assets are
pooled with assets of other church plans, if the assets held
by such fund may not, under the terms of the plan and
the terms governing such fund, be used for, or diverted to,
any purpose other than for the exclusive benefit of the par-
ticipants and beneficiaries of the church plans whose assets
are pooled in such fund.
‘‘(f) INAPPLICABILITY OF CERTAIN PROVISIONS.—
‘‘(1) PROHIBITED TRANSACTIONS.—Section 406
shall not apply to a church plan by reason of an elec-
tion under subsection (a).
‘‘(2) CONTINUATION
COVERAGE.—Section 601
shall not apply to a church plan by reason of an elec-
tion under subsection (a).’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 4(b)(2) of such Act (29 U.S.C.
1003(b)(2)) is amended by inserting before the semi-
Title III
colon the following: ‘‘, except with respect to provi-
sions made applicable under any election made under
section 704(a) of this Act’’.
(2) Section 514 of such Act (29 U.S.C. 1144) is
amended—
(A) in subsection (a), by inserting ‘‘(includ-
ing a church plan which is not exempt under
section 4(b)(2) by reason of an election under
section 704)’’ before the period in the first sen-
tence; and
(B) in subsection (b)(2)(B), by inserting
‘‘and including a church plan which is not ex-
empt under section 4(b)(2) by reason of an elec-
tion under section 704’’ after ‘‘death benefits’’.
(c) CLERICAL AMENDMENT.—The table of contents in
section 1 of such Act (as amended by the preceding provi-
sions of this title) is further amended by inserting after the
item relating to section 703 the following new item:
‘‘Sec. 704. Special rules for church plans.’’.
SEC. 307. ENFORCEMENT PROVISIONS RELATING TO MUL-
TIPLE EMPLOYER WELFARE ARRANGEMENTS.
(a) ENFORCEMENT OF FILING REQUIREMENTS.—Sec-
tion 502 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1132) (as amended by sections 102(c))
is further amended—
Title III
(1) in subsection (a)(6), by striking ‘‘paragraph
(2) or (5)’’ and inserting ‘‘paragraph (2), (5), or
(6)’’; and
(2) by adding at the end of subsection (c) the fol-
lowing new paragraph:
‘‘(6) The Secretary may assess a civil penalty against
any person of up to $1,000 a day from the date of such
person’s failure or refusal to file the information required
to be filed with the Secretary under section 101(g).’’.
(b) ACTIONS BY STATES IN FEDERAL COURT.—Section
502(a) of such Act (29 U.S.C. 1132(a)) is amended—
(1) in paragraph (8), by striking ‘‘or’’ at the
end;
(2) in paragraph (9), by striking the period and
inserting ‘‘, or’’; and
(3) by adding at the end the following:
‘‘(10) by a State official having authority under
the law of such State to enforce the laws of such State
regulating insurance, to enjoin any act or practice
which violates any requirement under part 7 for an
exemption under section 514(b)(6)(B) which such
State has the power to enforce pursuant to section
506(c)(1).’’.
Title III
(c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL MIS-
REPRESENTATIONS.—Section 501 of such Act (29 U.S.C.
1131) is amended—
(1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) Any person who, either willfully or with willful
blindness, falsely represents, to any employee, any employ-
ee’s beneficiary, any employer, the Secretary, or any State,
an arrangement established or maintained for the purpose
of offering or providing any benefit described in section 3(1)
to employees or their beneficiaries as—
‘‘(1) being a multiple employer welfare arrange-
ment to which an exemption has been granted under
section 514(b)(6)(B),
‘‘(2) having been established or maintained
under or pursuant to one or more collective bargain-
ing agreements which are reached pursuant to collec-
tive bargaining described in section 8(d) of the Na-
tional 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
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‘‘(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 five
years, be fined under title 18, United States Code, or both.’’.
(d) CEASE ACTIVITIES ORDERS.—Section 502 of such
Act (29 U.S.C. 1132) is amended by adding at the end the
following new subsection:
‘‘(n)(1) Subject to paragraph (2), upon application by
the Secretary showing the operation, promotion, or market-
ing of a multiple employer welfare arrangement providing
benefits consisting of medical care (within the meaning of
section 607(1)) that—
‘‘(A) is not licensed, registered, or otherwise ap-
proved under the insurance laws of the States in
which the arrangement offers or provides benefits, and
‘‘(B) if there is in effect with respect to such ar-
rangement an exemption under section 514(b)(6)(B),
is not operating in accordance with the requirements
under part 7 for such an exemption,
a district court of the United States shall enter an order
requiring that the arrangement cease activities.
‘‘(2) Paragraph (1) shall not apply in the case of a
multiple employer welfare arrangement if the arrangement
shows that—
Title III
‘‘(A) all benefits under it referred to in para-
graph (1) are fully insured, within the meaning of
section 701(1), and
‘‘(B) with respect to each State in which the ar-
rangement offers or provides benefits, the arrangement
is operating in accordance with applicable State in-
surance 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 arrange-
ment.’’.
(e) RESPONSIBILITY FOR CLAIMS PROCEDURE.—Sec-
tion 503 of such Act (29 U.S.C. 1133) is amended by adding
at the end (after and below paragraph (2)) the following
new sentence: ‘‘The terms of each multiple employer health
plan (within the meaning of section 701(4)) shall require
the board of trustees or the named fiduciary (as applicable)
to ensure that the requirements of this section are met in
connection with claims filed under the plan.’’.
Title III
SEC. 308. COOPERATION BETWEEN FEDERAL AND STATE
AUTHORITIES.
Section 506 of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1136) is amended by adding
at the end the following new subsection:
‘‘(c) RESPONSIBILITY WITH RESPECT TO MULTIPLE
EMPLOYER WELFARE ARRANGEMENTS.—
‘‘(1) STATE ENFORCEMENT.—
‘‘(A) AGREEMENTS WITH STATES.—A State
may enter into an agreement with the Secretary
for delegation to the State of some or all of the
Secretary’s authority under sections 502 and 504
to enforce the requirements under part 7 for an
exemption under section 514(b)(6)(B). The Sec-
retary shall enter into the agreement if the Sec-
retary determines that the delegation provided
for therein would not result in a lower level or
quality of enforcement of the provisions of this
title.
‘‘(B) 
DELEGATIONS.—Any 
department,
agency, or instrumentality of a State to which
authority is delegated pursuant to an agreement
entered into under this paragraph may, if au-
thorized under State law and to the extent con-
sistent with such agreement, exercise the powers
Title III
of the Secretary under this title which relate to
such authority.
‘‘(C) CONCURRENT AUTHORITY OF THE SEC-
RETARY.—If the Secretary delegates authority to
a State in an agreement entered into under sub-
paragraph (A), the Secretary may continue to
exercise such authority concurrently with the
State.
‘‘(D) RECOGNITION OF PRIMARY DOMICILE
STATE.—In entering into any agreement with a
State under subparagraph (A), the Secretary
shall ensure that, as a result of such agreement
and all other agreements entered into under sub-
paragraph (A), only one State will be recognized,
with respect to any particular multiple employer
welfare arrangement, as the primary domicile
State to which authority has been delegated pur-
suant to such agreements.
‘‘(2) ASSISTANCE
TO
STATES.—The Secretary
shall—
‘‘(A) provide enforcement assistance to the
States with respect to multiple employer welfare
arrangements, including, but not limited to, co-
ordinating Federal and State efforts through the
establishment of cooperative agreements with ap-