I 
108TH CONGRESS 
1ST SESSION H. R. 3423
To amend the Internal Revenue Code of 1986 to allow individuals a refund-
able credit against income tax for health insurance costs, to allow employ-
ees who elect not to participate in employer subsidized health plans 
an exclusion from gross income for employer payments in lieu of such 
participation, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 30, 2003
Mr. SHADEGG introduced the following bill; which was referred to the Com-
mittee on Energy and Commerce, and in addition to the Committees on 
Education and the Workforce, and Ways and Means, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
of such provisions as fall within the jurisdiction of the committee con-
cerned 
A BILL 
To amend the Internal Revenue Code of 1986 to allow indi-
viduals a refundable credit against income tax for health 
insurance costs, to allow employees who elect not to 
participate in employer subsidized health plans an exclu-
sion from gross income for employer payments in lieu 
of such participation, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
(1) EMPLOYER OWNERSHIP OF HEALTH BENE-
FITS.—The biggest problem with health care today 
is that the tax code has encouraged employers, not 
individuals, to become the purchaser of health insur-
ance. Employers have a tax incentive to offer health 
care benefits to their employees, which means that 
employers are truly the owner of the plan, not indi-
viduals. Therefore employees, who are the consumers 
of health care services are unconcerned with and not 
involved with issues of cost and overutilize health 
care services in the belief that such services are 
‘‘free’’. 
(2) INSUFFICIENT ACCESS.—Numerous persons 
are not able to obtain sufficient health care either 
because the necessary personnel and facilities are 
not located in their communities or because they do 
not have adequate financial resources to obtain such 
services, or both. 
(3) EXCESSIVE
GOVERNMENT
REGULATION.—
Continually increasing and complex Government reg-
ulation of the economic aspects of the health care 
delivery system has proven ineffective in restraining 
costs and is itself expensive and counterproductive in 
fulfilling its purposes and detrimental to the care of 
patients.
(4) THIRD-PARTY
PAYMENT
SYSTEMS.—Pay-
ment by third-party payers (including commercial in-
surance companies and various levels of government) 
for the preponderance of the health care delivered 
each year insulates patients, as well as physicians, 
hospitals, and other deliverers of health care, from 
the need to consider the cost of treatment in addi-
tion to the medical benefit expected from it. 
(5) REASONABLE COST REIMBURSEMENT.—Re-
imbursement of hospitals and other health care insti-
tutions by third-party payers on the basis of reason-
able costs of operation provides these institutions in-
sufficient incentives to introduce more efficient 
methods of delivering care and at the same time di-
minishes the extent to which these institutions and 
their patients are affected by the consequences of in-
efficiency and overexpansion. 
(6) GOVERNMENT AND THIRD-PARTY PAYER.—
The present role of government as a third-party 
payer poses a conflict of interest whereby the Gov-
ernment purchases or finances health care services 
and unilaterally determines the amount the deliverer 
will be paid for those services. 
(7) LACK OF COMPETITION.—The present sys-
tem of financing and regulation prevents health care
deliverers from competing with each other on the 
basis of efficiency and price as well as quality. 
SEC. 3. PURPOSES. 
The purposes of Act are—
(1) to make it possible for individuals, employ-
ees, and the self-employed to purchase and own their 
own health insurance without suffering any negative 
tax consequences; 
(2) to enable individuals to make their own in-
formed choice of the method by which their health 
care is provided, the persons who deliver it, and the 
price they wish to pay for it; 
(3) to assist individuals in obtaining and in 
paying for basic health care services; 
(4) to render patients and deliverers sensitive to 
the cost of health care, giving them both the incen-
tive and the ability to restrain undesired increases in 
health care costs; 
(5) to simplify and rationalize the payment 
mechanism for health care services; 
(6) to foster the development of numerous, var-
ied, and innovative systems of providing health care 
which will compete against each other in terms of 
price, service, and quality, and thus allow the Amer-
ican people to benefit from competitive forces which
will reward efficient and effective deliverers and 
eliminate those which provide unsatisfactory quality 
of care or are inefficient; 
(7) to replace governmental regulation of the 
economic aspects of health care delivery with indi-
vidual choice, private initiative, and marketplace in-
centives and disciplines; 
(8) to encourage the development of systems of 
delivering health care which are capable of supplying 
a broad range of health care services in a com-
prehensive and systematic manner, and 
(9) to preserve the independence of health care 
deliverers and encourage their close identification 
with and their accountability to the individuals they 
serve.
TITLE I—HEALTHMARTS 
SEC. 101. EXPANSION OF CONSUMER CHOICE THROUGH 
HEALTHMARTS. 
The Public Health Service Act is amended by adding 
at the end the following new title: 
‘‘TITLE XXIX—HEALTHMARTS 
‘‘SEC. 2901. DEFINITION OF HEALTHMART. 
‘‘(a) IN GENERAL.—For purposes of this title, the 
term ‘HealthMart’ means a legal entity that meets the fol-
lowing requirements:
‘‘(1) ORGANIZATION.—The HealthMart is an 
organization operated under the direction of a board 
of directors which is composed of representatives of 
not fewer than 2 from each of the following: 
‘‘(A) Employers. 
‘‘(B) Employees. 
‘‘(C) Individuals (other than those de-
scribed in subparagraph (B)) who are eligible to 
participate in the HealthMart. 
‘‘(D) Health care providers, which may be 
physicians, other health care professionals, 
health care facilities, or any combination there-
of. 
‘‘(E) Entities, such as insurance compa-
nies, health maintenance organizations, and li-
censed provider-sponsored organizations, that 
underwrite or administer health benefits cov-
erage. 
‘‘(2) 
OFFERING
HEALTH
BENEFITS
COV-
ERAGE.—
‘‘(A) 
DIFFERENT
GROUPS.—The 
HealthMart, in conjunction with those health 
insurance issuers that offer health benefits cov-
erage through the HealthMart, makes available 
health benefits coverage in the manner de-
scribed in subsection (b) to all employers, eligi-
ble employees, and individuals in the manner 
described in subsection (c)(2) at rates (includ-
ing employer’s and employee’s share, if applica-
ble) that are established by the health insurance 
issuer on a policy or product specific basis and 
that may vary only as permissible under State 
law. A HealthMart is deemed to be a group 
health plan for purposes of applying section 702 
of the Employee Retirement Income Security 
Act of 1974, section 2702 of this Act, and sec-
tion 9802(b) of the Internal Revenue Code of 
1986 (which limit variation among similarly sit-
uated individuals of required premiums for 
health benefits coverage on the basis of health 
status-related factors). 
‘‘(B) NONDISCRIMINATION
IN
COVERAGE 
OFFERED.—
‘‘(i) IN GENERAL.—Subject to clause 
(ii), the HealthMart may not offer health 
benefits coverage to an eligible employee or 
individual in a geographic area (as speci-
fied under paragraph (3)(A)) unless the 
same coverage is offered to all such em-
ployees or individuals in the same geo-
graphic area. Section 2711(a)(1)(B) of this 
Act limits denial of enrollment of certain 
eligible individuals under health benefits 
coverage in the small group market. 
‘‘(ii) 
CONSTRUCTION.—Nothing 
in 
this title shall be construed as requiring or 
permitting a health insurance issuer to 
provide coverage outside the service area of 
the issuer, as approved under State law. 
‘‘(C) NO FINANCIAL UNDERWRITING.—The 
HealthMart provides health benefits coverage 
only through contracts with health insurance 
issuers and does not assume insurance risk with 
respect to such coverage. 
‘‘(D) MINIMUM COVERAGE.—By the end of 
the first year of its operation and thereafter, 
the HealthMart maintains not fewer than 10 
purchasers and 100 members. 
‘‘(3) GEOGRAPHIC AREAS.—
‘‘(A) 
SPECIFICATION
OF
GEOGRAPHIC 
AREAS.—The HealthMart shall specify the geo-
graphic area (or areas) in which it makes avail-
able health benefits coverage offered by health 
insurance issuers to employers, or individuals, 
as the case may be. Any such area shall encom-
pass at least one entire county or equivalent 
area. 
‘‘(B) MULTISTATE AREAS.—In the case of 
a HealthMart that serves more than one State, 
such geographic areas may be areas that in-
clude portions of two or more contiguous 
States. 
‘‘(C) 
MULTIPLE
HEALTHMARTS
PER-
MITTED IN SINGLE GEOGRAPHIC AREA.—Noth-
ing in this title shall be construed as preventing 
the establishment and operation of more than 
one HealthMart in a geographic area or as lim-
iting the number of HealthMarts that may op-
erate in any area. 
‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES 
TO PURCHASERS.—
‘‘(A) IN GENERAL.—The HealthMart pro-
vides administrative services for purchasers. 
Such services may include accounting, billing, 
enrollment information, and employee coverage 
status reports. 
‘‘(B) CONSTRUCTION.—Nothing in this 
subsection shall be construed as preventing a 
HealthMart from serving as an administrative 
service organization to any entity.
‘‘(5) DISSEMINATION
OF
INFORMATION.—The 
HealthMart collects and disseminates (or arranges 
for the collection and dissemination of) consumer-
oriented information on the scope, cost, and enrollee 
satisfaction of all coverage options offered through 
the HealthMart to its members and eligible individ-
uals. Such information shall be defined by the 
HealthMart and shall be in a manner appropriate to 
the type of coverage offered. To the extent prac-
ticable, such information shall include information 
on provider performance, locations and hours of op-
eration of providers, outcomes, and similar matters. 
Nothing in this section shall be construed as pre-
venting the dissemination of such information or 
other information by the HealthMart or by health 
insurance issuers through electronic or other means. 
‘‘(6) 
FILING
INFORMATION.—The 
HealthMart—
‘‘(A) files with the applicable Federal au-
thority information that demonstrates the 
HealthMart’s compliance with the applicable re-
quirements of this title; or 
‘‘(B) in accordance with rules established 
under section 2903(a), files with a State such
information as the State may require to dem-
onstrate such compliance. 
‘‘(b) HEALTH
BENEFITS
COVERAGE
REQUIRE-
MENTS.—
‘‘(1) COMPLIANCE
WITH
CONSUMER
PROTEC-
TION REQUIREMENTS.—Any health benefits coverage 
offered through a HealthMart shall—
‘‘(A) be underwritten by a health insurance 
issuer that—
‘‘(i) is licensed (or otherwise regu-
lated) under State law, 
‘‘(ii) meets all applicable State stand-
ards relating to consumer protection, sub-
ject to section 2902(b), and 
‘‘(iii) offers the coverage under a con-
tract with the HealthMart; 
‘‘(B) subject to paragraph (2), be approved 
or otherwise permitted to be offered under 
State law; and 
‘‘(C) provide full portability of creditable 
coverage for individuals who remain members of 
the same HealthMart notwithstanding that they 
change the employer through which they are 
members in accordance with the provisions of 
the parts 6 and 7 of subtitle B of title I of the
Employee Retirement Income Security Act of 
1974 and titles XXII and XXVII of this Act, 
so long as both employers are purchasers in the 
HealthMart, and notwithstanding that they ter-
minate such employment, if the HealthMart 
permits enrollment directly by eligible individ-
uals. 
‘‘(2) ALTERNATIVE PROCESS FOR APPROVAL OF 
HEALTH BENEFITS COVERAGE IN CASE OF DISCRIMI-
NATION OR DELAY.—
‘‘(A) IN
GENERAL.—The requirement of 
paragraph (1)(B) shall not apply to a policy or 
product of health benefits coverage offered in a 
State if the health insurance issuer seeking to 
offer such policy or product files an application 
to waive such requirement with the applicable 
Federal authority, and the authority deter-
mines, based on the application and other evi-
dence presented to the authority, that—
‘‘(i) either (or both) of the grounds 
described in subparagraph (B) for approval 
of the application has been met; and 
‘‘(ii) the coverage meets the applicable 
State standards (other than those that 
have been preempted under section 2902).
‘‘(B) GROUNDS.—The grounds described 
in this subparagraph with respect to a policy or 
product of health benefits coverage are as fol-
lows: 
‘‘(i) FAILURE
TO
ACT
ON
POLICY, 
PRODUCT, OR
RATE
APPLICATION
ON
A 
TIMELY BASIS.—The State has failed to 
complete action on the policy or product 
(or rates for the policy or product) within 
90 days of the date of the State’s receipt 
of a substantially complete application. No 
period before the date of the enactment of 
this section shall be included in deter-
mining such 90-day period. 
‘‘(ii) DENIAL OF APPLICATION BASED 
ON
DISCRIMINATORY
TREATMENT.—The 
State has denied such an application 
and—
‘‘(I) the standards or review 
process imposed by the State as a 
condition of approval of the policy or 
product imposes either any material 
requirements, procedures, or stand-
ards to such policy or product that 
are not generally applicable to other
policies and products offered or any 
requirements 
that 
are 
preempted 
under section 2902; or 
‘‘(II) the State requires the 
issuer, as a condition of approval of 
the policy or product, to offer any pol-
icy or product other than such policy 
or product. 
‘‘(C) ENFORCEMENT.—In the case of a 
waiver granted under subparagraph (A) to an 
issuer with respect to a State, the Secretary 
may enter into an agreement with the State 
under which the State agrees to provide for 
monitoring and enforcement activities with re-
spect to compliance of such an issuer and its 
health insurance coverage with the applicable 
State standards described in subparagraph 
(A)(ii). Such monitoring and enforcement shall 
be conducted by the State in the same manner 
as the State enforces such standards with re-
spect to other health insurance issuers and 
plans, without discrimination based on the type 
of issuer to which the standards apply. Such an 
agreement shall specify or establish mechanisms 
by which compliance activities are undertaken,
while not lengthening the time required to re-
view and process applications for waivers under 
subparagraph (A). 
‘‘(3) EXAMPLES OF TYPES OF COVERAGE.—The 
benefits 
coverage 
made 
available 
through 
a 
HealthMart may include, but is not limited to, any 
of the following if it meets the other applicable re-
quirements of this title: 
‘‘(A) Coverage through a health mainte-
nance organization. 
‘‘(B) Coverage in connection with a pre-
ferred provider organization. 
‘‘(C) Coverage in connection with a li-
censed provider-sponsored organization. 
‘‘(D) Indemnity coverage through an insur-
ance company. 
‘‘(E) Coverage offered in connection with a 
contribution into a medical savings account or 
flexible spending account. 
‘‘(F) Coverage that includes a point-of-
service option. 
‘‘(G) Any combination of such types of 
coverage. 
‘‘(4) WELLNESS BONUSES FOR HEALTH PRO-
MOTION.—Nothing in this title shall be construed as
precluding a health insurance issuer offering health 
benefits coverage through a HealthMart from estab-
lishing premium discounts or rebates for members or 
from modifying otherwise applicable copayments or 
deductibles in return for adherence to programs of 
health promotion and disease prevention so long as 
such programs are agreed to in advance by the 
HealthMart and comply with all other provisions of 
this title and do not discriminate among similarly 
situated members. 
‘‘(c) PURCHASERS; MEMBERS; HEALTH INSURANCE 
ISSUERS.—
‘‘(1) PURCHASERS.—
‘‘(A) IN GENERAL.—Subject to the provi-
sions of this title, a HealthMart shall permit 
any employer or any individual described in 
subsection (a)(1)(C) to contract with the 
HealthMart for the purchase of health benefits 
coverage for its employees and dependents of 
those employees or for the individual (and the 
individual’s dependents), respectively, and may 
not vary conditions of eligibility (including pre-
mium rates and membership fees) of an em-
ployer or individual to be a purchaser.
‘‘(B) ROLE
OF
ASSOCIATIONS, BROKERS, 
AND LICENSED HEALTH INSURANCE AGENTS.—
Nothing in this section shall be construed as 
preventing an association, broker, licensed 
health insurance agent, or other entity from as-
sisting or representing a HealthMart or employ-
ers or individuals from entering into appro-
priate arrangements to carry out this title. 
‘‘(C) 
PERIOD
OF
CONTRACT.—The 
HealthMart may not require a contract under 
subparagraph (A) between a HealthMart and a 
purchaser to be effective for a period of longer 
than 24 months. The previous sentence shall 
not be construed as preventing such a contract 
from being extended for additional 24-month 
periods or preventing the purchaser from volun-
tarily electing a contract period of longer than 
24 months. 
‘‘(D) 
EXCLUSIVE
NATURE
OF
CON-
TRACT.—
‘‘(i) IN GENERAL.—Subject to clause 
(ii), such a contract shall provide that the 
purchaser agrees not to obtain or sponsor 
health benefits coverage, on behalf of any
eligible employees (and their dependents), 
other than through the HealthMart. 
‘‘(ii) EXCEPTION IF NO COVERAGE OF-
FERED IN AREA OF RESIDENCES.—Clause 
(i) shall not apply to an eligible individual 
who resides in an area for which no cov-
erage is offered by any health insurance 
issuer through the HealthMart. 
‘‘(iii) NOTHING
PRECLUDING
INDI-
VIDUAL EMPLOYEE OPT-OUT.—Nothing in 
this subparagraph shall be construed as re-
quiring an eligible employee of a large or 
small employer that is a purchaser to ob-
tain health benefits coverage through the 
HealthMart. 
‘‘(2) MEMBERS.—
‘‘(A) IN GENERAL.—
‘‘(i) EMPLOYMENT
BASED
MEMBER-
SHIP.—Under rules established to carry 
out this title, with respect to an employer 
that has a purchaser contract with a 
HealthMart, individuals who are employees 
of the employer may enroll for health bene-
fits coverage (including coverage for de-
pendents of such enrolling employees) of-
fered by a health insurance issuer through 
the HealthMart. 
‘‘(ii) INDIVIDUALS.—Under rules es-
tablished to carry out this title, with re-
spect to an individual who has a purchaser 
contract with a HealthMart for himself or 
herself, the individual may enroll for health 
benefits coverage (including coverage for 
dependents of such individual) offered by a 
health 
insurance 
issuer 
through 
the 
HealthMart. 
‘‘(B) NONDISCRIMINATION
IN
ENROLL-
MENT.—A HealthMart may not deny enroll-
ment as a member to an individual who is an 
employee or individual (or dependent of such an 
employee or individual) eligible to be so enrolled 
based on health status-related factors, except as 
may be permitted consistent with section 
2742(b). 
‘‘(C) ANNUAL
OPEN
ENROLLMENT
PE-
RIOD.—In the case of members enrolled in 
health benefits coverage offered by a health in-
surance issuer through a HealthMart, subject 
to subparagraph (D), the HealthMart shall pro-
vide for an annual open enrollment period of 30
days during which such members may change 
the coverage option in which the members are 
enrolled. 
‘‘(D) RULES OF ELIGIBILITY.—Nothing in 
this paragraph shall preclude a HealthMart 
from establishing rules of employee or indi-
vidual eligibility for enrollment and reenroll-
ment of members during the annual open en-
rollment period under subparagraph (C). Such 
rules shall be applied consistently to all pur-
chasers and members within the HealthMart 
and shall not be based in any manner on health 
status-related factors and may not conflict with 
sections 2701 and 2702 of this Act. 
‘‘(3) HEALTH INSURANCE ISSUERS.—
‘‘(A) PREMIUM
COLLECTION.—The con-
tract between a HealthMart and a health insur-
ance issuer shall provide, with respect to a 
member enrolled with health benefits coverage 
offered by the issuer through the HealthMart, 
for the payment of the premiums collected by 
the HealthMart (or the issuer) for such cov-
erage (less a pre-determined administrative 
charge negotiated by the HealthMart and the 
issuer) to the issuer.
‘‘(B) SCOPE OF SERVICE AREA.—Nothing 
in this title shall be construed as requiring the 
service area of a health insurance issuer with 
respect to health insurance coverage to cover 
the entire geographic area served by a 
HealthMart. 
‘‘(C) AVAILABILITY
OF
COVERAGE
OP-
TIONS.—
‘‘(i) IN
GENERAL.—A HealthMart 
shall enter into contracts with one or more 
health insurance issuers in a manner that 
assures that at least 2 health insurance 
coverage options are made available. 
‘‘(ii) REQUIREMENT
OF
NON-NET-
WORK OPTION.—At least one of the health 
insurance coverage options made available 
under clause (i) shall be a non-network 
coverage option under which enrollees may 
obtain benefits for health care items and 
services that are not provided under a con-
tract between the provider of the service 
and the issuer involved. 
‘‘(d) PREVENTION OF CONFLICTS OF INTEREST.—
‘‘(1) FOR BOARDS OF DIRECTORS.—A member 
of a board of directors of a HealthMart may not
serve as an employee or paid consultant to the 
HealthMart, but may receive reasonable reimburse-
ment for travel expenses for purposes of attending 
meetings of the board or committees thereof. 
‘‘(2) FOR BOARDS OF DIRECTORS OR EMPLOY-
EES.—An individual is not eligible to serve in a paid 
or unpaid capacity on the board of directors of a 
HealthMart or as an employee of the HealthMart, if 
the individual is employed by, represents in any ca-
pacity, owns, or controls any ownership interest in 
an organization from whom the HealthMart receives 
contributions, grants, or other funds not connected 
with 
a 
contract 
for 
coverage 
through 
the 
HealthMart. 
‘‘(3) 
EMPLOYMENT
AND
EMPLOYEE
REP-
RESENTATIVES.—
‘‘(A) IN GENERAL.—An individual who is 
serving on a board of directors of a HealthMart 
as a representative described in subparagraph 
(A) or (B) of section 2901(a)(1) shall not be 
employed by or affiliated with a health insur-
ance issuer or be licensed as or employed by or 
affiliated with a health care provider. 
‘‘(B) CONSTRUCTION.—For purposes of 
subparagraph (A), the term ‘‘affiliated’’ does
not include membership in a health benefits 
plan or the obtaining of health benefits cov-
erage offered by a health insurance issuer. 
‘‘(e) CONSTRUCTION.—
‘‘(1) 
NETWORK
OF
AFFILIATED 
HEALTHMARTS.—Nothing in this section shall be 
construed as preventing one or more HealthMarts 
serving different areas (whether or not contiguous) 
from providing for some or all of the following 
(through a single administrative organization or oth-
erwise): 
‘‘(A) Coordinating the offering of the same 
or similar health benefits coverage in different 
areas served by the different HealthMarts. 
‘‘(B) Providing for crediting of deductibles 
and other cost-sharing for individuals who are 
provided health benefits coverage through the 
HealthMarts 
(or 
affiliated 
HealthMarts) 
after—
‘‘(i) a change of employers through 
which the coverage is provided, or 
‘‘(ii) a change in place of employment 
to an area not served by the previous 
HealthMart.
‘‘(2) PERMITTING
HEALTHMARTS
TO
ADJUST 
DISTRIBUTIONS AMONG ISSUERS TO REFLECT REL-
ATIVE RISK OF ENROLLEES.—Nothing in this sec-
tion shall be construed as precluding a HealthMart 
from providing for adjustments in amounts distrib-
uted among the health insurance issuers offering 
health benefits coverage through the HealthMart 
based on factors such as the relative health care risk 
of members enrolled under the coverage offered by 
the different issuers. 
‘‘SEC. 2902. APPLICATION OF CERTAIN LAWS AND REQUIRE-
MENTS. 
‘‘(a) AUTHORITY OF STATES.—Nothing in this sec-
tion shall be construed as preempting State laws relating 
to the following: 
‘‘(1) The regulation of underwriters of health 
coverage, including licensure and solvency require-
ments. 
‘‘(2) The application of premium taxes and re-
quired payments for guaranty funds or for contribu-
tions to high-risk pools. 
‘‘(3) The application of fair marketing require-
ments and other consumer protections (other than 
those specifically relating to an item described in 
subsection (b)).
‘‘(4) The application of requirements relating to 
the adjustment of rates for health insurance cov-
erage. 
‘‘(b) TREATMENT OF BENEFIT AND GROUPING RE-
QUIREMENTS.—State laws insofar as they relate to any 
of the following are superseded and shall not apply to 
health benefits coverage made available through a 
HealthMart: 
‘‘(1) Benefit requirements for health benefits 
coverage offered through a HealthMart, including 
(but not limited to) requirements relating to cov-
erage of specific providers, specific services or condi-
tions, or the amount, duration, or scope of benefits, 
but not including requirements to the extent re-
quired to implement title XXVII or other Federal 
law and to the extent the requirement prohibits an 
exclusion of a specific disease from such coverage. 
‘‘(2) Requirements (commonly referred to as 
fictitious group laws) relating to grouping and simi-
lar requirements for such coverage to the extent 
such requirements impede the establishment and op-
eration of HealthMarts pursuant to this title. 
‘‘(3) Any other requirements (including limita-
tions on compensation arrangements) that, directly 
or indirectly, preclude (or have the effect of pre-
cluding) the offering of such coverage through a 
HealthMart, if the HealthMart meets the require-
ments of this title. 
Any State law or regulation relating to the composition 
or organization of a HealthMart is preempted to the ex-
tent the law or regulation is inconsistent with the provi-
sions of this title. 
‘‘(c) APPLICATION OF ERISA FIDUCIARY AND DIS-
CLOSURE REQUIREMENTS.—The board of directors of a 
HealthMart is deemed to be a plan administrator of an 
employee welfare benefit plan which is a group health plan 
for purposes of applying parts 1 and 4 of subtitle B of 
title I of the Employee Retirement Income Security Act 
of 1974 and those provisions of part 5 of such subtitle 
which are applicable to enforcement of such parts 1 and 
4, and the HealthMart shall be treated as such a plan 
and the enrollees enrolled on the basis of employment shall 
be treated as participants and beneficiaries for purposes 
of applying such provisions pursuant to this subsection. 
‘‘(d) APPLICATION OF ERISA RENEWABILITY PRO-
TECTION.—A HealthMart is deemed to be group health 
plan that is a multiple employer welfare arrangement for 
purposes of applying section 703 of the Employee Retire-
ment Income Security Act of 1974.
‘‘(e) APPLICATION OF RULES FOR NETWORK PLANS 
AND
FINANCIAL
CAPACITY.—The provisions of sub-
sections (c) and (d) of section 2711 apply to health bene-
fits coverage offered by a health insurance issuer through 
a HealthMart. 
‘‘(f) CONSTRUCTION RELATING TO OFFERING RE-
QUIREMENT.—Nothing in section 2711(a) of this Act or 
703 of the Employee Retirement Income Security Act of 
1974 shall be construed as permitting the offering outside 
the HealthMart of health benefits coverage that is only 
made available through a HealthMart under this section 
because of the application of subsection (b). 
‘‘(g) APPLICATION TO GUARANTEED RENEWABILITY 
REQUIREMENTS IN CASE OF DISCONTINUATION OF AN 
ISSUER.—For purposes of applying section 2712 in the 
case of health insurance coverage offered by a health in-
surance issuer through a HealthMart, if the contract be-
tween the HealthMart and the issuer is terminated and 
the HealthMart continues to make available any health in-
surance coverage after the date of such termination, the 
following rules apply: 
‘‘(1) RENEWABILITY.—The HealthMart shall 
fulfill the obligation under such section of the issuer 
renewing and continuing in force coverage by offer-
ing purchasers (and members and their dependents)
all available health benefits coverage that would oth-
erwise be available to similarly-situated purchasers 
and members from the remaining participating 
health insurance issuers in the same manner as 
would be required of issuers under section 2712(c). 
‘‘(2) APPLICATION OF ASSOCIATION RULES.—
The HealthMart shall be considered an association 
for purposes of applying section 2712(e). 
‘‘(h) CONSTRUCTION
IN RELATION
TO CERTAIN 
OTHER LAWS.—Nothing in this title shall be construed 
as modifying or affecting the applicability to HealthMarts 
or health benefits coverage offered by a health insurance 
issuer through a HealthMart of parts 6 and 7 of subtitle 
B of title I of the Employee Retirement Income Security 
Act of 1974 or titles XXII and XXVII of this Act. 
‘‘SEC. 2903. ADMINISTRATION. 
‘‘(a) IN GENERAL.—The applicable Federal authority 
shall administer this title and is authorized to issue such 
regulations as may be required to carry out this title. Such 
regulations shall be subject to Congressional review under 
the provisions of chapter 8 of title 5, United States Code. 
The applicable Federal authority shall incorporate the 
process of ‘deemed file and use’ with respect to the infor-
mation filed under section 2901(a)(6)(A) and shall deter-
mine whether information filed by a HealthMart dem-
onstrates compliance with the applicable requirements of 
this title. Such authority shall exercise its authority under 
this title in a manner that fosters and promotes the devel-
opment of HealthMarts in order to improve access to 
health care coverage and services. 
‘‘(b) PERIODIC REPORTS.—The applicable Federal 
authority shall submit to Congress a report every 30 
months, during the 10-year period beginning on the effec-
tive date of the rules promulgated by the applicable Fed-
eral authority to carry out this title, on the effectiveness 
of this title in promoting coverage of uninsured individ-
uals. Such authority may provide for the production of 
such reports through one or more contracts with appro-
priate private entities. 
‘‘SEC. 2904. DEFINITIONS. 
‘‘For purposes of this title: 
‘‘(1) APPLICABLE FEDERAL AUTHORITY.—The 
term ‘applicable Federal authority’ means the Sec-
retary of Health and Human Services . 
‘‘(2) ELIGIBLE
EMPLOYEE
OR
INDIVIDUAL.—
The term ‘eligible’ means, with respect to an em-
ployee or other individual and a HealthMart, an em-
ployee or individual who is eligible under section 
2901(c)(2) to enroll or be enrolled in health benefits 
coverage offered through the HealthMart.
‘‘(3) EMPLOYER; EMPLOYEE; DEPENDENT.—
Except as the applicable Federal authority may oth-
erwise provide, the terms ‘employer’, ‘employee’, and 
‘dependent’, as applied to health insurance coverage 
offered by a health insurance issuer licensed (or oth-
erwise regulated) in a State, shall have the meanings 
applied to such terms with respect to such coverage 
under the laws of the State relating to such coverage 
and such an issuer. The term ‘dependent’ may in-
clude the spouse and children of the individual in-
volved. 
‘‘(4) HEALTH BENEFITS COVERAGE.—The term 
‘health benefits coverage’ has the meaning given the 
term group health insurance coverage in section 
2791(b)(4). 
‘‘(5) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning given such 
term in section 2791(b)(2). 
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The 
term ‘health status-related factor’ has the meaning 
given such term in section 2791(d)(9). 
‘‘(7) HEALTHMART.—The term ‘HealthMart’ is 
defined in section 2901(a). 
‘‘(8) MEMBER.—The term ‘member‘‘means, 
with respect to a HealthMart, an individual enrolled
for health benefits coverage through the HealthMart 
under section 2901(c)(2). 
‘‘(9) 
PURCHASER.—The 
term 
‘purchaser’ 
means, with respect to a HealthMart, an employer 
or individual that has contracted under section 
2901(c)(1)(A) with the HealthMart for the purchase 
of health benefits coverage.’’. 
TITLE II—HEALTH CARE ACCESS 
AND CHOICE THROUGH INDI-
VIDUAL MEMBERSHIP ASSO-
CIATIONS (IMAs) 
SEC. 201. EXPANSION OF ACCESS AND CHOICE THROUGH 
INDIVIDUAL 
MEMBERSHIP 
ASSOCIATIONS 
(IMAs). 
The Public Health Service Act, as amended by sec-
tion 101, is further amended by adding at the end the 
following new title: 
‘‘TITLE XXX—INDIVIDUAL MEMBERSHIP 
ASSOCIATIONS 
‘‘SEC. 3001. DEFINITION OF INDIVIDUAL MEMBERSHIP AS-
SOCIATION (IMA). 
‘‘(a) IN GENERAL.—For purposes of this title, the 
terms ‘individual membership association’ and ‘IMA’ 
mean a legal entity that meets the following requirements:
‘‘(1) ORGANIZATION.—The IMA is an organiza-
tion operated under the direction of an association 
(as defined in section 3004(1)). 
‘‘(2) 
OFFERING
HEALTH
BENEFITS
COV-
ERAGE.—
‘‘(A) DIFFERENT GROUPS.—The IMA, in 
conjunction with those health insurance issuers 
that offer health benefits coverage through the 
IMA, makes available health benefits coverage 
in the manner described in subsection (b) to all 
members of the IMA and the dependents of 
such members in the manner described in sub-
section (c)(2) at rates that are established by 
the health insurance issuer on a policy or prod-
uct specific basis and that may vary only as 
permissible under State law. 
‘‘(B) NONDISCRIMINATION
IN
COVERAGE 
OFFERED.—
‘‘(i) IN GENERAL.—Subject to clause 
(ii), the IMA may not offer health benefits 
coverage to a member of an IMA unless 
the same coverage is offered to all such 
members of the IMA. 
‘‘(ii) 
CONSTRUCTION.—Nothing 
in 
this title shall be construed as requiring or
permitting a health insurance issuer to 
provide coverage outside the service area of 
the issuer, as approved under State law, or 
requiring a health insurance issuer from 
excluding or limiting the coverage on any 
individual, subject to the requirement of 
section 2741. 
‘‘(C) NO FINANCIAL UNDERWRITING.—The 
IMA provides health benefits coverage only 
through contracts with health insurance issuers 
and does not assume insurance risk with re-
spect to such coverage. 
‘‘(3) GEOGRAPHIC AREAS.—Nothing in this title 
shall be construed as preventing the establishment 
and operation of more than one IMA in a geographic 
area or as limiting the number of IMAs that may 
operate in any area. 
‘‘(4) PROVISION OF ADMINISTRATIVE SERVICES 
TO PURCHASERS.—
‘‘(A) IN GENERAL.—The IMA may provide 
administrative services for members. Such serv-
ices may include accounting, billing, and enroll-
ment information. 
‘‘(B) CONSTRUCTION.—Nothing in this 
subsection shall be construed as preventing an
IMA from serving as an administrative service 
organization to any entity. 
‘‘(5) FILING
INFORMATION.—The IMA files 
with the Secretary information that demonstrates 
the IMA’s compliance with the applicable require-
ments of this title. 
‘‘(b) HEALTH
BENEFITS
COVERAGE
REQUIRE-
MENTS.—
‘‘(1) COMPLIANCE
WITH
CONSUMER
PROTEC-
TION REQUIREMENTS.—Any health benefits coverage 
offered through an IMA shall—
‘‘(A) be underwritten by a health insurance 
issuer that—
‘‘(i) is licensed (or otherwise regu-
lated) under State law, 
‘‘(ii) meets all applicable State stand-
ards relating to consumer protection, sub-
ject to section 3002(b), and 
‘‘(B) subject to paragraph (2), be approved 
or otherwise permitted to be offered under 
State law. 
‘‘(2) EXAMPLES OF TYPES OF COVERAGE.—The 
benefits coverage made available through an IMA 
may include, but is not limited to, any of the fol-
lowing if it meets the other applicable requirements 
of this title:
‘‘(A) Coverage through a health mainte-
nance organization. 
‘‘(B) Coverage in connection with a pre-
ferred provider organization. 
‘‘(C) Coverage in connection with a li-
censed provider-sponsored organization. 
‘‘(D) Indemnity coverage through an insur-
ance company. 
‘‘(E) Coverage offered in connection with a 
contribution into a medical savings account or 
flexible spending account. 
‘‘(F) Coverage that includes a point-of-
service option. 
‘‘(G) Any combination of such types of 
coverage. 
‘‘(3) WELLNESS BONUSES FOR HEALTH PRO-
MOTION.—Nothing in this title shall be construed as 
precluding a health insurance issuer offering health 
benefits coverage through an IMA from establishing 
premium discounts or rebates for members or from 
modifying 
otherwise 
applicable 
copayments 
or 
deductibles in return for adherence to programs of 
health promotion and disease prevention so long as
such programs are agreed to in advance by the IMA 
and comply with all other provisions of this title and 
do not discriminate among similarly situated mem-
bers. 
‘‘(c) MEMBERS; HEALTH INSURANCE ISSUERS.—
‘‘(1) MEMBERS.—
‘‘(A) IN
GENERAL.—Under rules estab-
lished to carry out this title, with respect to an 
individual who is a member of an IMA, the in-
dividual may enroll for health benefits coverage 
(including coverage for dependents of such indi-
vidual) offered by a health insurance issuer 
through the IMA. 
‘‘(B) RULES FOR ENROLLMENT.—Nothing 
in this paragraph shall preclude an IMA from 
establishing rules of enrollment and reenroll-
ment of members. Such rules shall be applied 
consistently to all members within the IMA and 
shall not be based in any manner on health sta-
tus-related factors. 
‘‘(2) HEALTH INSURANCE ISSUERS.—The con-
tract between an IMA and a health insurance issuer 
shall provide, with respect to a member enrolled with 
health benefits coverage offered by the issuer
through the IMA, for the payment of the premiums 
collected by the issuer. 
‘‘SEC. 3002. APPLICATION OF CERTAIN LAWS AND REQUIRE-
MENTS. 
‘‘State laws insofar as they relate to any of the fol-
lowing are superseded and shall not apply to health bene-
fits coverage made available through an IMA: 
‘‘(1) Benefit requirements for health benefits 
coverage offered through an IMA, including (but not 
limited to) requirements relating to coverage of spe-
cific providers, specific services or conditions, or the 
amount, duration, or scope of benefits, but not in-
cluding requirements to the extent required to imple-
ment title XXVII or other Federal law and to the 
extent the requirement prohibits an exclusion of a 
specific disease from such coverage. 
‘‘(2) Any other requirements (including limita-
tions on compensation arrangements) that, directly 
or indirectly, preclude (or have the effect of pre-
cluding) the offering of such coverage through an 
IMA, if the IMA meets the requirements of this 
title. 
Any State law or regulation relating to the composition 
or organization of an IMA is preempted to the extent the
law or regulation is inconsistent with the provisions of this 
title. 
‘‘SEC. 3003. ADMINISTRATION.
‘‘(a) IN GENERAL.—The Secretary shall administer 
this title and is authorized to issue such regulations as 
may be required to carry out this title. Such regulations 
shall be subject to Congressional review under the provi-
sions of chapter 8 of title 5, United States Code. The Sec-
retary shall incorporate the process of ‘deemed file and 
use’ with respect to the information filed under section 
3001(a)(5)(A) and shall determine whether information 
filed by an IMA demonstrates compliance with the applica-
ble requirements of this title. The Secretary shall exercise 
authority under this title in a manner that fosters and 
promotes the development of IMAs in order to improve 
access to health care coverage and services. 
‘‘(b) PERIODIC REPORTS.—The Secretary shall sub-
mit to Congress a report every 30 months, during the 10-
year period beginning on the effective date of the rules 
promulgated by the Secretary to carry out this title, on 
the effectiveness of this title in promoting coverage of un-
insured individuals. The Secretary may provide for the 
production of such reports through one or more contracts 
with appropriate private entities.
‘‘SEC. 3004. DEFINITIONS. 
‘‘For purposes of this title: 
‘‘(1) ASSOCIATION.—The term ‘association’ 
means, with respect to health insurance coverage of-
fered in a State, an association which—
‘‘(A) has been actively in existence for at 
least 5 years; 
‘‘(B) has been formed and maintained in 
good faith for purposes other than obtaining in-
surance; 
‘‘(C) does not condition membership in the 
association on any health status-related factor 
relating to an individual (including an employee 
of an employer or a dependent of an employee); 
and 
‘‘(D) does not make health insurance cov-
erage offered through the association available 
other than in connection with a member of the 
association. 
‘‘(2) DEPENDENT.—The term ‘dependent’, as 
applied to health insurance coverage offered by a 
health insurance issuer licensed (or otherwise regu-
lated) in a State, shall have the meaning applied to 
such term with respect to such coverage under the 
laws of the State relating to such coverage and such
an issuer. Such term may include the spouse and 
children of the individual involved.
‘‘(3) HEALTH BENEFITS COVERAGE.—The term 
‘health benefits coverage’ has the meaning given the 
term 
health 
insurance 
coverage 
in 
section 
2791(b)(1). 
‘‘(4) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning given such 
term in section 2791(b)(2). 
‘‘(5) HEALTH STATUS-RELATED FACTOR.—The 
term ‘health status-related factor’ has the meaning 
given such term in section 2791(d)(9). 
‘‘(6) IMA; INDIVIDUAL MEMBERSHIP ASSOCIA-
TION.—The terms ‘IMA’ and ‘individual membership 
association’ are defined in section 3001(a). 
‘‘(7) MEMBER.—The term ‘member’ means, 
with respect to an IMA, an individual who is a mem-
ber of the association to which the IMA is offering 
coverage.’’.
TITLE III—FEDERAL MATCHING 
FUNDING FOR STATE INSUR-
ANCE EXPENDITURES 
SEC. 301. FEDERAL MATCHING FUNDING FOR STATE IN-
SURANCE EXPENDITURES. 
(a) IN GENERAL.—Subject to the succeeding provi-
sions of this section, each State shall receive from the Sec-
retary of Health and Human Services an amount equal 
to 50 percent of the funds expended by the State in pro-
viding for the use, in connection with providing health ben-
efits coverage, of a high-risk pool, a reinsurance pool, or 
other risk-adjustment mechanism used for the purpose of 
subsidizing the purchase of private health insurance. 
(b) FUNDING LIMITATION.—A State shall not receive 
under this section for a fiscal year more than a total of 
50 cents multiplied by the average number of residents 
(as estimated by the Secretary) in the State in the fiscal 
year. 
(c) ADMINISTRATION.—The Secretary of Health and 
Human Services shall provide for the administration of 
this section and may establish such terms and conditions, 
including the requirement of an application, as may be ap-
propriate to carry out this section. 
(d) CONSTRUCTION.—Nothing in this section shall be 
construed as requiring a State to operate a reinsurance
pool (or other risk-adjustment mechanism) under this sec-
tion or as preventing a State from operating such a pool 
or mechanism through one or more private entities. 
(e) HIGH-RISK POOL.—For purposes of this section, 
the term ‘‘high-risk pool’’ means any qualified high risk 
pool (as defined in section 2744(c)(2) of the Public Health 
Service Act). 
(f) REINSURANCE POOL OR OTHER RISK-ADJUST-
MENT MECHANISM DEFINED.—For purposes of this sec-
tion, the term ‘‘reinsurance pool or other risk-adjustment 
mechanism’’ means any State-based risk spreading mecha-
nism to subsidize the purchase of private health insurance 
for the high-risk population. 
(g) HIGH-RISK POPULATION.—For purposes of this 
section, the term ‘‘high-risk population’’ means—
(1) individuals who, by reason of the existence 
or history of a medical condition, are able to acquire 
health coverage only at rates which are at least 150 
percent of the standard risk rates for such coverage, 
and 
(2) individuals who are provided health cov-
erage by a high-risk pool. 
(h) STATE DEFINED.—For purposes of this section, 
the term ‘‘State’’ includes the District of Columbia, Puer-
to Rico, the Virgin Islands, Guam, American Samoa, and 
the Northern Mariana Islands.
TITLE IV—AFFORDABLE HEALTH 
COVERAGE FOR EMPLOYEES 
OF SMALL BUSINESSES 
SEC. 401. SHORT TITLE OF TITLE. 
This title may be cited as the ‘‘Small Business Access 
and Choice for Entrepreneurs Act of 2003’’. 
SEC. 402. RULES. 
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 is amend-
ed by adding after part 7 the following new part: 
‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH 
PLANS 
‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 
‘‘(a) IN GENERAL.—For purposes of this part, the 
term ‘association health plan’ means a group health 
plan—
‘‘(1) whose sponsor is (or is deemed under this 
part to be) described in subsection (b); and 
‘‘(2) under which at least one option of health 
insurance coverage offered by a health insurance 
issuer (which may include, among other options, 
managed care options, point of service options, and 
preferred provider options) is provided to partici-
‘‘(C) a representative of the State govern-
ments, or their interests; 
‘‘(D) a representative of existing self-in-
sured arrangements, or their interests; 
‘‘(E) a representative of associations of the 
type referred to in section 801(b)(1), or their 
interests; and 
‘‘(F) a representative of multiemployer 
plans that are group health plans, or their in-
terests. 
‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE-
LATED 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 which shall