144 
shall, upon conviction, be imprisoned not more than 5 
years, be fined under title 18, United States Code, or 
both.’’. 
(b) CEASE ACTIVITIES ORDERS.—Section 502 of 
such Act (29 U.S.C. 1132) is amended by adding at the 
end the following new subsection: 
‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE-
SIST ORDERS.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
upon application by the Secretary showing the oper-
ation, promotion, or marketing of an association 
health plan (or similar arrangement providing bene-
fits consisting of medical care (as defined in section 
733(a)(2))) that— 
‘‘(A) is not certified under part 8, is sub-
ject under section 514(b)(6) to the insurance 
laws of any State in which the plan or arrange-
ment offers or provides benefits, and is not li-
censed, registered, or otherwise approved under 
the insurance laws of such State; or 
‘‘(B) is an association health plan certified 
under part 8 and is not operating in accordance 
with the requirements under part 8 for such 
certification, 
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a district court of the United States shall enter an 
order requiring that the plan or arrangement cease 
activities. 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply in the case of an association health plan or 
other arrangement if the plan or arrangement shows 
that— 
‘‘(A) all benefits under it referred to in 
paragraph (1) consist of health insurance cov-
erage; and 
‘‘(B) with respect to each State in which 
the plan or arrangement offers or provides ben-
efits, the plan or arrangement is operating in 
accordance with applicable State laws that are 
not superseded under section 514. 
‘‘(3) ADDITIONAL
EQUITABLE
RELIEF.—The 
court may grant such additional equitable relief, in-
cluding any relief available under this title, as it 
deems necessary to protect the interests of the pub-
lic and of persons having claims for benefits against 
the plan.’’. 
(c) RESPONSIBILITY
FOR CLAIMS PROCEDURE.— 
Section 503 of such Act (29 U.S.C. 1133) is amended by 
inserting ‘‘(a) IN GENERAL.—’’ before ‘‘In accordance’’, 
and by adding at the end the following new subsection: 
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‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of 
each association health plan which is or has been certified 
under part 8 shall require the board of trustees or the 
named fiduciary (as applicable) to ensure that the require-
ments of this section are met in connection with claims 
filed under the plan.’’. 
SEC. 215. COOPERATION BETWEEN FEDERAL AND STATE 
AUTHORITIES. 
Section 506 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1136) is amended by adding 
at the end the following new subsection: 
‘‘(d) CONSULTATION WITH STATES WITH RESPECT 
TO ASSOCIATION HEALTH PLANS.— 
‘‘(1) AGREEMENTS
WITH
STATES.—The Sec-
retary shall consult with the State recognized under 
paragraph (2) with respect to an association health 
plan regarding the exercise of— 
‘‘(A) the Secretary’s authority under sec-
tions 502 and 504 to enforce the requirements 
for certification under part 8; and 
‘‘(B) the Secretary’s authority to certify 
association health plans under part 8 in accord-
ance with regulations of the Secretary applica-
ble to certification under part 8. 
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‘‘(2) RECOGNITION
OF
PRIMARY
DOMICILE 
STATE.—In carrying out paragraph (1), the Sec-
retary shall ensure that only one State will be recog-
nized, with respect to any particular association 
health plan, as the State with which consultation is 
required. In carrying out this paragraph— 
‘‘(A) in the case of a plan which provides 
health insurance coverage (as defined in section 
812(a)(3)), such State shall be the State with 
which filing and approval of a policy type of-
fered by the plan was initially obtained, and 
‘‘(B) in any other case, the Secretary shall 
take into account the places of residence of the 
participants and beneficiaries under the plan 
and the State in which the trust is main-
tained.’’. 
SEC. 216. EFFECTIVE DATE AND TRANSITIONAL AND 
OTHER RULES. 
(a) EFFECTIVE DATE.—The amendments made by 
this subtitle shall take effect 1 year after the date of the 
enactment of this Act. The Secretary of Labor shall first 
issue all regulations necessary to carry out the amend-
ments made by this subtitle within 1 year after the date 
of the enactment of this Act. 
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(b) TREATMENT
OF CERTAIN EXISTING HEALTH 
BENEFITS PROGRAMS.— 
(1) IN GENERAL.—In any case in which, as of 
the date of the enactment of this Act, an arrange-
ment is maintained in a State for the purpose of 
providing benefits consisting of medical care for the 
employees and beneficiaries of its participating em-
ployers, at least 200 participating employers make 
contributions to such arrangement, such arrange-
ment has been in existence for at least 10 years, and 
such arrangement is licensed under the laws of one 
or more States to provide such benefits to its par-
ticipating employers, upon the filing with the appli-
cable authority (as defined in section 812(a)(5) of 
the Employee Retirement Income Security Act of 
1974 (as amended by this subtitle)) by the arrange-
ment of an application for certification of the ar-
rangement under part 8 of subtitle B of title I of 
such Act— 
(A) such arrangement shall be deemed to 
be a group health plan for purposes of title I 
of such Act; 
(B) the requirements of sections 801(a) 
and 803(a) of the Employee Retirement Income 
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Security Act of 1974 shall be deemed met with 
respect to such arrangement; 
(C) the requirements of section 803(b) of 
such Act shall be deemed met, if the arrange-
ment is operated by a board of directors 
which— 
(i) is elected by the participating em-
ployers, with each employer having one 
vote; and 
(ii) has complete fiscal control over 
the arrangement and which is responsible 
for all operations of the arrangement; 
(D) the requirements of section 804(a) of 
such Act shall be deemed met with respect to 
such arrangement; and 
(E) the arrangement may be certified by 
any applicable authority with respect to its op-
erations in any State only if it operates in such 
State on the date of certification. 
The provisions of this subsection shall cease to apply 
with respect to any such arrangement at such time 
after the date of the enactment of this Act as the 
applicable requirements of this subsection are not 
met with respect to such arrangement. 
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(2) DEFINITIONS.—For purposes of this sub-
section, the terms ‘‘group health plan’’, ‘‘medical 
care’’, and ‘‘participating employer’’ shall have the 
meanings provided in section 812 of the Employee 
Retirement Income Security Act of 1974, except 
that the reference in paragraph (7) of such section 
to an ‘‘association health plan’’ shall be deemed a 
reference to an arrangement referred to in this sub-
section. 
Subtitle C—Health Insurance 
Reforms 
SEC. 221. REQUIREMENTS FOR INDIVIDUAL HEALTH INSUR-
ANCE. 
(a) IN GENERAL.—Section 2741 of the Public Health 
Service Act (42 U.S.C. 300gg–41), as restored and revived 
by section 2 of this Act, is amended— 
(1) in subsection (a)— 
(A) in the heading, by striking ‘‘to certain 
individuals with prior group coverage’’; 
(B) in paragraph (1), by striking ‘‘and sec-
tion 2744’’; 
(C) in paragraph (1)(B), by inserting ‘‘un-
less such exclusion complies with paragraph 
(2)’’ before the period; and 
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(D) by striking paragraph (2) and insert-
ing the following new paragraphs: 
‘‘(2) LIMITATION ON PREEXISTING CONDITION 
EXCLUSION PERIOD.— 
‘‘(A) LIMITATION.—A health insurance 
issuer offering health insurance coverage in the 
individual market may not, with respect to an 
enrollee in such coverage, impose any pre-
existing condition exclusion if such enrollee has 
at least 18 months of continuous creditable cov-
erage (as defined in section 2701(c)(1)) imme-
diately preceding the enrollment date. 
‘‘(B) IMPOSITION
OF
EXCLUSION.—Not-
withstanding paragraph (1)(B), a health insur-
ance issuer offering health insurance coverage 
in the individual market may, with respect to 
an enrollee in such coverage who is not de-
scribed in subparagraph (A), impose a pre-
existing condition exclusion only if— 
‘‘(i) such exclusion relates to a condi-
tion (whether physical or mental), regard-
less of the cause of the condition, for which 
medical advice, diagnosis, care, or treat-
ment was recommended or received within 
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the 6-month period ending on the enroll-
ment date; 
‘‘(ii) such exclusion extends for a pe-
riod of not more than 18 months after the 
enrollment date; and 
‘‘(iii) the period of any such pre-
existing condition exclusion is reduced by 
the aggregate of the periods of creditable 
coverage (if any, as defined in section 
2701(c)(1)) applicable to the enrollee as of 
the enrollment date. 
‘‘(C) 
PREMIUM
SURCHARGE.—Notwith-
standing paragraph (6), with respect to an en-
rollee described in subparagraph (B), a health 
insurance issuer may charge a premium for the 
coverage involved that does not exceed 150 per-
cent of the applicable standard rate, for not to 
exceed 24 months (or 36 months if the health 
insurance issuer does not impose any pre-
existing condition exclusion with respect to such 
enrollee), reduced by the aggregate of the peri-
ods of creditable coverage (if any, as defined in 
section 2701(c)(1)) applicable to the enrollee as 
of the enrollment date. For purposes of this 
subsection, the term ‘applicable standard rate’ 
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means the standard premium rate that the 
issuer charges for the coverage involved with re-
spect to an individual described in subpara-
graph (A) with the same rating characteristics 
or rating factors as the enrollee described in 
subparagraph (B), provided that any variations 
in standard premium rates are based on the 
uniform application of rating characteristics or 
rating factors that are permitted by State law 
and are not otherwise prohibited by paragraph 
(6). 
‘‘(3) 
EXCEPTIONS.—Notwithstanding 
para-
graph (2), and subject to subparagraph (D), a 
health insurance issuer offering health insurance 
coverage in the individual market, may not impose 
any of the following preexisting condition exclusion: 
‘‘(A) EXCLUSION
NOT
APPLICABLE
TO 
CERTAIN NEWBORNS.—In the case of an indi-
vidual who, as of the last day of the 30-day pe-
riod beginning with the date of birth, is a de-
pendent of an enrollee in such coverage. 
‘‘(B) EXCLUSION
NOT
APPLICABLE
TO 
CERTAIN ADOPTED CHILDREN.—In the case of 
a child who is adopted or placed for adoption 
before attaining 18 years of age and who, as of 
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the last day of the 30-day period beginning on 
the date of the adoption or placement for adop-
tion, is a dependent of an enrollee in such cov-
erage. The previous sentence shall not apply to 
coverage before the date of such adoption or 
placement for adoption. 
‘‘(C) EXCLUSION
NOT
APPLICABLE
TO 
PREGNANCY.—Relating to pregnancy as a pre-
existing condition. 
‘‘(D) LOSS IF BREAK IN COVERAGE.—Sub-
paragraphs (A) and (B) shall no longer apply 
to an individual after the end of the first 63- 
day period during all of which the individual 
was not covered under any creditable coverage. 
‘‘(4) OPEN ENROLLMENT PERIODS.—A health 
insurance issuer offering health insurance coverage 
in the individual market may limit the applicability 
of the provisions of paragraph (1) to scheduled open 
enrollment periods, provided that— 
‘‘(A) any such open enrollment period shall 
not be less than 30 days; 
‘‘(B) any period between scheduled open 
enrollment periods shall not exceed 24 months; 
and 
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‘‘(C) such limitation shall not apply to any 
individual who qualifies for a special enrollment 
period under paragraph (5). 
‘‘(5) SPECIAL ENROLLMENT PERIODS.—Subject 
to subparagraphs (E) and (F), a health insurance 
issuer offering health insurance coverage in the indi-
vidual market shall permit an individual who is an 
eligible individual or a dependent to enroll in cov-
erage during a special enrollment period if the indi-
vidual experiences any of the following qualifying 
events: 
‘‘(A) FOR DEPENDENT BENEFICIARIES.— 
The individual becomes, by reason of marriage, 
birth, adoption or placement for adoption, a de-
pendent of an individual enrolled in a plan of-
fered by the health insurance issuer and such 
individual otherwise qualifies, under the terms 
of the plan, as eligible for coverage as a depend-
ent of such enrollee. 
‘‘(B) LOSS OF GROUP COVERAGE.—The in-
dividual loses coverage under a group health 
plan as a result of— 
‘‘(i) loss of eligibility for the coverage 
(including as a result of legal separation, 
divorce, death, attaining an age at which 
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eligibility terminates, termination of em-
ployment, or reduction in the number of 
hours of employment); or 
‘‘(ii) termination of the coverage by 
the plan sponsor. 
‘‘(C) LOSS OF INDIVIDUAL COVERAGE.— 
The individual loses individual market coverage 
as a result of— 
‘‘(i) discontinuation of a plan as a re-
sult of a health insurance issuer ceasing to 
offer coverage in the individual market in 
accordance with section 2742(c)(2) (42 
U.S.C. 300gg–42(c)(2)) of this title; 
‘‘(ii) expiration of COBRA, or other, 
continuation coverage; 
‘‘(iii) ceasing to qualify, under the 
terms of the coverage, as a dependent (in-
cluding as a result of legal separation, di-
vorce, death, or attaining an age at which 
eligibility terminates); and 
‘‘(iv) permanently moving outside the 
State in which the coverage was issued, or 
in the case of a network plan, outside the 
plan’s service area. 
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‘‘(D) LOSS OF ELIGIBILITY FOR A GOV-
ERNMENT
COVERAGE
PROGRAM.—The indi-
vidual loses coverage by ceasing to be eligible 
for coverage under any of the following: 
‘‘(i) Part A or part B of title XVIII 
of the Social Security Act (42 U.S.C. 
1395c et seq., 1395j et seq.). 
‘‘(ii) Title XIX of the Social Security 
Act (42 U.S.C. 1396 et seq.), other than 
coverage consisting solely of benefits under 
section 1928 (42 U.S.C. 1396s). 
‘‘(iii) Title XXI of the Social Security 
Act (42 U.S.C. 1397aa et seq.). 
‘‘(iv) Chapter 55 of title 10. 
‘‘(v) Chapter 89 of title 5. 
‘‘(vi) A State health benefits risk pool. 
‘‘(E) For purposes of this paragraph, loss 
of coverage shall not include any of the fol-
lowing: 
‘‘(i) Voluntary termination of coverage 
by an individual, except if such termination 
is the result of circumstances described in 
subparagraph (C)(iv). 
‘‘(ii) Termination of coverage by the 
issuer or the plan sponsor of the coverage 
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for any reason described in paragraphs (1) 
or (2) of section 2742(b) (300gg–42(b)) of 
this title. 
‘‘(iii) Loss of any coverage that con-
sists solely of coverage of excepted benefits 
(as defined in section 300gg–91(c) of this 
title). 
‘‘(F) Any special enrollment period shall 
not be less than 60 days and shall begin on the 
date of the qualifying event. 
‘‘(6) STANDARD
PREMIUM
RATES.—With re-
spect to the premium rate charged by a health insur-
ance issuer for health insurance coverage offered in 
the individual market, such rate, with respect to the 
particular plan or coverage involved, shall not vary 
based on any of the following health status-related 
factors in relation to an eligible individual or de-
pendent: 
‘‘(A) Health status. 
‘‘(B) Medical condition (including both 
physical and mental illnesses). 
‘‘(C) Claims experience. 
‘‘(D) Receipt of health care. 
‘‘(E) Medical history. 
‘‘(F) Genetic information. 
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‘‘(G) Evidence of insurability (including 
conditions arising out of acts of domestic vio-
lence). 
‘‘(H) Disability.’’; 
(2) by amending subsection (b) to read as fol-
lows: 
‘‘(b) DEFINITIONS.—For purposes of this section: 
‘‘(1) ELIGIBLE INDIVIDUAL.—The term ‘eligible 
individual’ means an individual who is eligible under 
applicable State law to purchase individual health in-
surance coverage in the State. 
‘‘(2) 
DEPENDENT.—The 
term 
‘dependent’ 
means an individual who, under the terms of the 
coverage and applicable State law, qualifies to enroll 
in such coverage as a dependent of an individual de-
scribed in paragraph (1).’’; and 
(3) by striking subsection (c) and redesignating 
subsection (d) and the first subsection (e) as sub-
sections (c) and (d), respectively. 
(b) CONFORMING AMENDMENT.—Section 2744 of the 
Public Health Service Act (42 U.S.C. 300gg–44), as re-
stored and revived by section 2 of this Act, is repealed. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to health insurance 
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coverage offered for plan years beginning after the date 
of the enactment of this Act. 
TITLE III—INTERSTATE MARKET 
FOR HEALTH INSURANCE 
SEC. 
301. 
COOPERATIVE 
GOVERNING 
OF 
INDIVIDUAL 
HEALTH INSURANCE COVERAGE. 
(a) IN GENERAL.—Title XXVII of the Public Health 
Service Act (42 U.S.C. 300gg et seq.), as restored by sec-
tion 2, is amended by adding at the end the following new 
part: 
‘‘PART D—COOPERATIVE GOVERNING OF 
INDIVIDUAL HEALTH INSURANCE COVERAGE 
‘‘SEC. 2795. DEFINITIONS. 
‘‘In this part: 
‘‘(1) PRIMARY
STATE.—The term ‘primary 
State’ means, with respect to individual health insur-
ance coverage offered by a health insurance issuer, 
the State designated by the issuer as the State 
whose covered laws shall govern the health insurance 
issuer in the sale of such coverage under this part. 
An issuer, with respect to a particular policy, may 
only designate one such State as its primary State 
with respect to all such coverage it offers. Such an 
issuer may not change the designated primary State 
with respect to individual health insurance coverage 
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once the policy is issued, except that such a change 
may be made upon renewal of the policy. With re-
spect to such designated State, the issuer is deemed 
to be doing business in that State. 
‘‘(2) SECONDARY STATE.—The term ‘secondary 
State’ means, with respect to individual health insur-
ance coverage offered by a health insurance issuer, 
any State that is not the primary State. In the case 
of a health insurance issuer that is selling a policy 
in, or to a resident of, a secondary State, the issuer 
is deemed to be doing business in that secondary 
State. 
‘‘(3) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning given such 
term in section 2791(b)(2), except that such an 
issuer must be licensed in the primary State and be 
qualified to sell individual health insurance coverage 
in that State. 
‘‘(4) INDIVIDUAL
HEALTH
INSURANCE
COV-
ERAGE.—The term ‘individual health insurance cov-
erage’ means health insurance coverage offered in 
the individual market, as defined in section 
2791(e)(1), but does not include excepted benefits 
described in section 2791(c). 
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‘‘(5) APPLICABLE
STATE
AUTHORITY.—The 
term ‘applicable State authority’ means, with respect 
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of 
this title for the State with respect to the issuer. 
‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 
term ‘hazardous financial condition’ means that, 
based on its present or reasonably anticipated finan-
cial condition, a health insurance issuer is unlikely 
to be able— 
‘‘(A) to meet obligations to policyholders 
with respect to known claims and reasonably 
anticipated claims; or 
‘‘(B) to pay other obligations in the normal 
course of business. 
‘‘(7) COVERED LAWS.— 
‘‘(A) IN
GENERAL.—The term ‘covered 
laws’ means the laws, rules, regulations, agree-
ments, and orders governing the insurance busi-
ness pertaining to— 
‘‘(i) individual health insurance cov-
erage issued by a health insurance issuer; 
‘‘(ii) the offer, sale, rating (including 
medical 
underwriting), 
renewal, 
and 
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issuance of individual health insurance cov-
erage to an individual; 
‘‘(iii) the provision to an individual in 
relation to individual health insurance cov-
erage of health care and insurance related 
services; 
‘‘(iv) the provision to an individual in 
relation to individual health insurance cov-
erage of management, operations, and in-
vestment activities of a health insurance 
issuer; and 
‘‘(v) the provision to an individual in 
relation to individual health insurance cov-
erage of loss control and claims adminis-
tration for a health insurance issuer with 
respect to liability for which the issuer pro-
vides insurance. 
‘‘(B) EXCEPTION.—Such term does not in-
clude any law, rule, regulation, agreement, or 
order governing the use of care or cost manage-
ment techniques, including any requirement re-
lated to provider contracting, network access or 
adequacy, health care data collection, or quality 
assurance. 
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‘‘(8) STATE.—The term ‘State’ means only the 
50 States and the District of Columbia. 
‘‘(9) UNFAIR
CLAIMS
SETTLEMENT
PRAC-
TICES.—The term ‘unfair claims settlement prac-
tices’ means only the following practices: 
‘‘(A) Knowingly misrepresenting to claim-
ants and insured individuals relevant facts or 
policy provisions relating to coverage at issue. 
‘‘(B) Failing to acknowledge with reason-
able promptness pertinent communications with 
respect to claims arising under policies. 
‘‘(C) Failing to adopt and implement rea-
sonable standards for the prompt investigation 
and settlement of claims arising under policies. 
‘‘(D) Failing to effectuate prompt, fair, 
and equitable settlement of claims submitted in 
which liability has become reasonably clear. 
‘‘(E) Refusing to pay claims without con-
ducting a reasonable investigation. 
‘‘(F) Failing to affirm or deny coverage of 
claims within a reasonable period of time after 
having completed an investigation related to 
those claims. 
‘‘(G) A pattern or practice of compelling 
insured individuals or their beneficiaries to in-
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stitute suits to recover amounts due under its 
policies by offering substantially less than the 
amounts ultimately recovered in suits brought 
by them. 
‘‘(H) A pattern or practice of attempting 
to settle or settling claims for less than the 
amount that a reasonable person would believe 
the insured individual or his or her beneficiary 
was entitled by reference to written or printed 
advertising material accompanying or made 
part of an application. 
‘‘(I) Attempting to settle or settling claims 
on the basis of an application that was materi-
ally altered without notice to, or knowledge or 
consent of, the insured. 
‘‘(J) Failing to provide forms necessary to 
present claims within 15 calendar days of a re-
quests with reasonable explanations regarding 
their use. 
‘‘(K) Attempting to cancel a policy in less 
time than that prescribed in the policy or by the 
law of the primary State. 
‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 
and abuse’ means an act or omission committed by 
a person who, knowingly and with intent to defraud, 
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smartinez on DSK4TPTVN1PROD with BILLS
166 
commits, or conceals any material information con-
cerning, one or more of the following: 
‘‘(A) Presenting, causing to be presented 
or preparing with knowledge or belief that it 
will be presented to or by an insurer, a rein-
surer, broker or its agent, false information as 
part of, in support of or concerning a fact ma-
terial to one or more of the following: 
‘‘(i) An application for the issuance or 
renewal of an insurance policy or reinsur-
ance contract. 
‘‘(ii) The rating of an insurance policy 
or reinsurance contract. 
‘‘(iii) A claim for payment or benefit 
pursuant to an insurance policy or reinsur-
ance contract. 
‘‘(iv) Premiums paid on an insurance 
policy or reinsurance contract. 
‘‘(v) Payments made in accordance 
with the terms of an insurance policy or 
reinsurance contract. 
‘‘(vi) A document filed with the com-
missioner or the chief insurance regulatory 
official of another jurisdiction. 
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‘‘(vii) The financial condition of an in-
surer or reinsurer. 
‘‘(viii) The formation, acquisition, 
merger, 
reconsolidation, 
dissolution 
or 
withdrawal from one or more lines of in-
surance or reinsurance in all or part of a 
State by an insurer or reinsurer. 
‘‘(ix) The issuance of written evidence 
of insurance. 
‘‘(x) The reinstatement of an insur-
ance policy. 
‘‘(B) Solicitation or acceptance of new or 
renewal insurance risks on behalf of an insurer, 
reinsurer, or other person engaged in the busi-
ness of insurance by a person who knows or 
should know that the insurer or other person 
responsible for the risk is insolvent at the time 
of the transaction. 
‘‘(C) Transaction of the business of insur-
ance in violation of laws requiring a license, cer-
tificate of authority or other legal authority for 
the transaction of the business of insurance. 
‘‘(D) Attempt to commit, aiding or abet-
ting in the commission of, or conspiracy to com-
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