vide a balance between urban and rural rep-
resentatives under subparagraph (A), the pro-
portion of members of the Commission who rep-
resent the interests of health care providers and 
Medicare beneficiaries located in rural areas 
shall be no less than the proportion of the total 
number of Medicare beneficiaries who reside in 
rural areas.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to appointments to the Medicare 
Payment Advisory Commission made after the date of en-
actment of this Act. 
TITLE II—SMALL BUSINESS 
HEALTH PLANS 
Subtitle A—Enhanced Marketplace 
Pools 
SEC. 201. RULES GOVERNING ENHANCED MARKETPLACE 
POOLS. 
(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: 
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‘‘PART 8—RULES GOVERNING ENHANCED 
MARKETPLACE POOLS 
‘‘SEC. 801. SMALL BUSINESS HEALTH PLANS. 
‘‘(a) IN GENERAL.—For purposes of this part, the 
term ‘small business health plan’ means a fully insured 
group health plan whose sponsor is (or is deemed under 
this part to be) described in subsection (b). 
‘‘(b) SPONSORSHIP.—The sponsor of a group health 
plan is described in this subsection if such sponsor— 
‘‘(1) is organized and maintained in good faith, 
with a constitution and bylaws specifically stating its 
purpose and providing for periodic meetings on at 
least an annual basis, as a bona fide trade associa-
tion, a bona fide industry association (including a 
rural electric cooperative association or a rural tele-
phone cooperative association), a bona fide profes-
sional association, or a bona fide chamber of com-
merce (or similar bona fide business association, in-
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 
obtaining medical care; 
‘‘(2) is established as a permanent entity which 
receives the active support of its members and re-
quires for membership payment on a periodic basis 
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of dues or payments necessary to maintain eligibility 
for membership; 
‘‘(3) does not condition membership, such dues 
or payments, or coverage under the plan on the 
basis of health status-related factors with respect to 
the employees of its members (or affiliated mem-
bers), or the dependents of such employees, and does 
not condition such dues or payments on the basis of 
group health plan participation; and 
‘‘(4) does not condition membership on the 
basis of a minimum group size. 
Any sponsor consisting of an association of entities which 
meet the requirements of paragraphs (1), (2), (3), and (4) 
shall be deemed to be a sponsor described in this sub-
section. 
‘‘SEC. 802. ALTERNATIVE MARKET POOLING ORGANIZA-
TIONS. 
‘‘(a) IN GENERAL.—The Secretary, not later than 1 
year after the date of enactment of this part, shall promul-
gate regulations that apply the rules and standards of this 
part, as necessary, to circumstances in which a pooling 
entity other (hereinafter ‘Alternative Market Pooling Or-
ganizations’) is not made up principally of employers and 
their employees, or not a professional organization or such 
small business health plan entity identified in section 801. 
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‘‘(b) ADAPTION OF STANDARDS.—In developing and 
promulgating regulations pursuant to subsection (a), the 
Secretary, in consultation with the Secretary of Health 
and Human Services, small business health plans, small 
and large employers, large and small insurance issuers, 
consumer representatives, and state insurance commis-
sioners, shall— 
‘‘(1) adapt the standards of this part, to the 
maximum degree practicable, to assure balanced and 
comparable oversight standards for both small busi-
ness health plans and alternative market pooling or-
ganizations; 
‘‘(2) permit the participation as alternative 
market pooling organizations unions, churches and 
other faith-based organizations, or other organiza-
tions composed of individuals and groups which may 
have little or no association with employment, pro-
vided however, that such alternative market pooling 
organizations meet, and continue meeting on an on-
going basis, to satisfy standards, rules, and require-
ments materially equivalent to those set forth in this 
part with respect to small business health plans; 
‘‘(3) conduct periodic verification of such com-
pliance by alternative market pooling organizations, 
in consultation with the Secretary of Health and 
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Human Services and the National Association of In-
surance Commissioners, except that such periodic 
verification shall not materially impede market entry 
or participation as pooling entities comparable to 
that of small business health plans; 
‘‘(4) assure that consistent, clear, and regularly 
monitored standards are applied with respect to al-
ternative market pooling organizations to avert ma-
terial risk-selection within or among the composition 
of such organizations; 
‘‘(5) the expedited and deemed certification pro-
cedures provided in section 805(d) shall not apply to 
alternative market pooling organizations until sooner 
of the promulgation of regulations under this sub-
section or the expiration of one year following enact-
ment of this Act; and 
‘‘(6) make such other appropriate adjustments 
to the requirements of this part as the Secretary 
may reasonably deem appropriate to fit the cir-
cumstances of an individual alternative market pool-
ing organization or category of such organization, 
including but not limited to the application of the 
membership 
payment 
requirements 
of 
section 
801(b)(2) to alternative market pooling organiza-
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tions composed primarily of church- or faith-based 
membership. 
‘‘SEC. 803. CERTIFICATION OF SMALL BUSINESS HEALTH 
PLANS. 
‘‘(a) IN GENERAL.—Not later than 6 months after 
the date of enactment of this part, the applicable authority 
shall prescribe by interim final rule a procedure under 
which the applicable authority shall certify small business 
health plans which apply for certification as meeting the 
requirements of this part. 
‘‘(b) REQUIREMENTS APPLICABLE
TO CERTIFIED 
PLANS.—A small business health plan with respect to 
which certification under this part is in effect shall meet 
the applicable requirements of this part, effective on the 
date of certification (or, if later, on the date on which the 
plan is to commence operations). 
‘‘(c) REQUIREMENTS
FOR
CONTINUED
CERTIFI-
CATION.—The applicable authority may provide by regula-
tion for continued certification of small business health 
plans under this part. Such regulation shall provide for 
the revocation of a certification if the applicable authority 
finds that the small business health plan involved is failing 
to comply with the requirements of this part. 
‘‘(d) EXPEDITED AND DEEMED CERTIFICATION.— 
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‘‘(1) IN GENERAL.—If the Secretary fails to act 
on an application for certification under this section 
within 90 days of receipt of such application, the ap-
plying small business health plan shall be deemed 
certified until such time as the Secretary may deny 
for cause the application for certification. 
‘‘(2) CIVIL PENALTY.—The Secretary may as-
sess a civil penalty against the board of trustees and 
plan sponsor (jointly and severally) of a small busi-
ness health plan that is deemed certified under para-
graph (1) of up to $500,000 in the event the Sec-
retary determines that the application for certifi-
cation of such small business health plan was will-
fully or with gross negligence incomplete or inac-
curate. 
‘‘SEC. 804. REQUIREMENTS RELATING TO SPONSORS AND 
BOARDS OF TRUSTEES. 
‘‘(a) SPONSOR.—The requirements of this subsection 
are met with respect to a small business health plan if 
the sponsor has met (or is deemed under this part to have 
met) the requirements of section 801(b) for a continuous 
period of not less than 3 years ending with the date of 
the application for certification under this part. 
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‘‘(b) BOARD OF TRUSTEES.—The requirements of 
this subsection are met with respect to a small business 
health plan if the following requirements are met: 
‘‘(1) FISCAL CONTROL.—The plan is operated, 
pursuant to a plan document, by a board of trustees 
which pursuant to a trust agreement has complete 
fiscal control over the plan and which is responsible 
for all operations of the plan. 
‘‘(2) RULES
OF
OPERATION
AND
FINANCIAL 
CONTROLS.—The board of trustees has in effect 
rules of operation and financial controls, based on a 
3-year plan of operation, adequate to carry out the 
terms of the plan and to meet all requirements of 
this title applicable to the plan. 
‘‘(3) RULES
GOVERNING
RELATIONSHIP
TO 
PARTICIPATING
EMPLOYERS
AND
TO
CONTRAC-
TORS.— 
‘‘(A) BOARD MEMBERSHIP.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii) and (iii), the members 
of the board of trustees are individuals se-
lected from individuals who are the owners, 
officers, directors, or employees of the par-
ticipating employers or who are partners in 
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the participating employers and actively 
participate in the business. 
‘‘(ii) LIMITATION.— 
‘‘(I) GENERAL RULE.—Except as 
provided in subclauses (II) and (III), 
no such member is an owner, officer, 
director, or employee of, or partner in, 
a contract administrator or other 
service provider to the plan. 
‘‘(II) LIMITED
EXCEPTION
FOR 
PROVIDERS OF SERVICES SOLELY ON 
BEHALF OF THE SPONSOR.—Officers 
or employees of a sponsor which is a 
service provider (other than a contract 
administrator) to the plan may be 
members of the board if they con-
stitute not more than 25 percent of 
the membership of the board and they 
do not provide services to the plan 
other than on behalf of the sponsor. 
‘‘(III) 
TREATMENT
OF
PRO-
VIDERS
OF
MEDICAL
CARE.—In the 
case of a sponsor which is an associa-
tion whose membership consists pri-
marily of providers of medical care, 
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subclause (I) shall not apply in the 
case of any service provider described 
in subclause (I) who is a provider of 
medical care under the plan. 
‘‘(iii) CERTAIN
PLANS
EXCLUDED.— 
Clause (i) shall not apply to a small busi-
ness health plan which is in existence on 
the date of the enactment of this part. 
‘‘(B) SOLE
AUTHORITY.—The board has 
sole authority under the plan to approve appli-
cations for participation in the plan and to con-
tract with insurers. 
‘‘(c) TREATMENT OF FRANCHISES.—In the case of 
a group health plan which is established and maintained 
by a franchiser for a franchisor or for its franchisees— 
‘‘(1) the requirements of subsection (a) and sec-
tion 801(a) shall be deemed met if such require-
ments would otherwise be met if the franchisor were 
deemed to be the sponsor referred to in section 
801(b) and each franchisee were deemed to be a 
member (of the sponsor) referred to in section 
801(b); and 
‘‘(2) the requirements of section 804(a)(1) shall 
be deemed met. 
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For purposes of this subsection the terms ‘franchisor’ and 
‘franchisee’ shall have the meanings given such terms for 
purposes of sections 436.2(a) through 436.2(c) of title 16, 
Code of Federal Regulations (including any such amend-
ments to such regulation after the date of enactment of 
this part). 
‘‘SEC. 805. PARTICIPATION AND COVERAGE REQUIRE-
MENTS. 
‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 
requirements of this subsection are met with respect to 
a small business health plan if, under the terms of the 
plan— 
‘‘(1) each participating employer must be— 
‘‘(A) a member of the sponsor; 
‘‘(B) the sponsor; or 
‘‘(C) an affiliated member of the sponsor, 
except that, in the case of a sponsor which is 
a professional association or other individual- 
based association, if at least one of the officers, 
directors, or employees of an employer, or at 
least one of the individuals who are partners in 
an employer and who actively participates in 
the business, is a member or such an affiliated 
member of the sponsor, participating employers 
may also include such employer; and 
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‘‘(2) all individuals commencing coverage under 
the plan after certification under this part must 
be— 
‘‘(A) active or retired owners (including 
self-employed individuals), officers, directors, or 
employees of, or partners in, participating em-
ployers; or 
‘‘(B) the dependents of individuals de-
scribed in subparagraph (A). 
‘‘(b) INDIVIDUAL MARKET UNAFFECTED.—The re-
quirements of this subsection are met with respect to a 
small business health plan if, under the terms of the plan, 
no participating employer may provide health insurance 
coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer 
under the plan, if such exclusion of the employee from cov-
erage under the plan is based on a health status-related 
factor with respect to the employee and such employee 
would, but for such exclusion on such basis, be eligible 
for coverage under the plan. 
‘‘(c) PROHIBITION OF DISCRIMINATION AGAINST EM-
PLOYERS AND EMPLOYEES ELIGIBLE TO PARTICIPATE.— 
The requirements of this subsection are met with respect 
to a small business health plan if— 
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‘‘(1) under the terms of the plan, all employers 
meeting the preceding requirements of this section 
are eligible to qualify as participating employers for 
all geographically available coverage options, unless, 
in the case of any such employer, participation or 
contribution requirements of the type referred to in 
section 2711 of the Public Health Service Act are 
not met; 
‘‘(2) information regarding all coverage options 
available under the plan is made readily available to 
any employer eligible to participate; and 
‘‘(3) the applicable requirements of sections 
701, 702, and 703 are met with respect to the plan. 
‘‘SEC. 806. OTHER REQUIREMENTS RELATING TO PLAN 
DOCUMENTS, CONTRIBUTION RATES, AND 
BENEFIT OPTIONS. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to a small business health plan if 
the following requirements are met: 
‘‘(1) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.— 
‘‘(A) IN GENERAL.—The instruments gov-
erning the plan include a written instrument, 
meeting the requirements of an instrument re-
quired under section 402(a)(1), which— 
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‘‘(i) provides that the board of trust-
ees serves as the named fiduciary required 
for plans under section 402(a)(1) and 
serves in the capacity of a plan adminis-
trator (referred to in section 3(16)(A)); 
and 
‘‘(ii) provides that the sponsor of the 
plan is to serve as plan sponsor (referred 
to in section 3(16)(B)). 
‘‘(B) DESCRIPTION OF MATERIAL PROVI-
SIONS.—The terms of the health insurance cov-
erage (including the terms of any individual 
certificates that may be offered to individuals in 
connection with such coverage) describe the ma-
terial benefit and rating, and other provisions 
set forth in this section and such material pro-
visions are included in the summary plan de-
scription. 
‘‘(2) CONTRIBUTION
RATES
MUST
BE
NON-
DISCRIMINATORY.— 
‘‘(A) IN GENERAL.—The contribution rates 
for any participating small employer shall not 
vary on the basis of any health status-related 
factor in relation to employees of such employer 
or their beneficiaries and shall not vary on the 
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basis of the type of business or industry in 
which such employer is engaged, subject to sub-
paragraph (B) and the terms of this title. 
‘‘(B) EFFECT OF TITLE.—Nothing in this 
title or any other provision of law shall be con-
strued to preclude a health insurance issuer of-
fering health insurance coverage in connection 
with a small business health plan that meets 
the requirements of this part, and at the re-
quest of such small business health plan, 
from— 
‘‘(i) setting contribution rates for the 
small business health plan based on the 
claims experience of the small business 
health plan so long as any variation in 
such rates for participating small employ-
ers complies with the requirements of 
clause (ii), except that small business 
health plans shall not be subject, in non- 
adopting states, to subparagraphs (A)(ii) 
and (C) of section 2912(a)(2) of the Public 
Health Service Act, and in adopting states, 
to any State law that would have the effect 
of imposing requirements as outlined in 
such subparagraphs (A)(ii) and (C); or 
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‘‘(ii) varying contribution rates for 
participating small employers in a small 
business health plan in a State to the ex-
tent that such rates could vary using the 
same methodology employed in such State 
for regulating small group premium rates, 
subject to the terms of part I of subtitle A 
of title XXX of the Public Health Service 
Act (relating to rating requirements), as 
added by subtitle B of title II of the 
Health Security for All Americans Act of 
2008. 
‘‘(3) EXCEPTIONS REGARDING SELF-EMPLOYED 
AND LARGE EMPLOYERS.— 
‘‘(A) SELF-EMPLOYED.— 
‘‘(i) IN
GENERAL.—Small business 
health plans with participating employers 
who are self-employed individuals (and 
their dependents) shall enroll such self-em-
ployed participating employers in accord-
ance with rating rules that do not violate 
the rating rules for self-employed individ-
uals in the State in which such self-em-
ployed participating employers are located. 
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‘‘(ii) GUARANTEE ISSUE.—Small busi-
ness health plans with participating em-
ployers who are self-employed individuals 
(and their dependents) may decline to 
guarantee issue to such participating em-
ployers in States in which guarantee issue 
is not otherwise required for the self-em-
ployed in that State. 
‘‘(B) LARGE EMPLOYERS.—Small business 
health plans with participating employers that 
are larger than small employers (as defined in 
section 808(a)(10)) shall enroll such large par-
ticipating employers in accordance with rating 
rules that do not violate the rating rules for 
large employers in the State in which such large 
participating employers are located. 
‘‘(4) 
REGULATORY
REQUIREMENTS.—Such 
other requirements as the applicable authority deter-
mines are necessary to carry out the purposes of this 
part, which shall be prescribed by the applicable au-
thority by regulation. 
‘‘(b) ABILITY OF SMALL BUSINESS HEALTH PLANS 
TO DESIGN BENEFIT OPTIONS.—Nothing in this part or 
any provision of State law (as defined in section 
514(c)(1)) shall be construed to preclude a small business 
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health plan or a health insurance issuer offering health 
insurance coverage in connection with a small business 
health plan from exercising its sole discretion in selecting 
the specific benefits and services consisting of medical care 
to be included as benefits under such plan or coverage, 
except that such benefits and services must meet the terms 
and specifications of part II of subtitle A of title XXX 
of the Public Health Service Act (relating to lower cost 
plans), as added by subtitle B of title II of the Health 
Security for All Americans Act of 2008. 
‘‘(c) DOMICILE AND NON-DOMICILE STATES.— 
‘‘(1) DOMICILE
STATE.—Coverage shall be 
issued to a small business health plan in the State 
in which the sponsor’s principal place of business is 
located. 
‘‘(2) NON-DOMICILE STATES.—With respect to 
a State (other than the domicile State) in which par-
ticipating employers of a small business health plan 
are located but in which the insurer of the small 
business health plan in the domicile State is not yet 
licensed, the following shall apply: 
‘‘(A) TEMPORARY PREEMPTION.—If, upon 
the expiration of the 90-day period following 
the submission of a licensure application by 
such insurer (that includes a certified copy of 
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an approved licensure application as submitted 
by such insurer in the domicile State) to such 
State, such State has not approved or denied 
such application, such State’s health insurance 
licensure laws shall be temporarily preempted 
and the insurer shall be permitted to operate in 
such State, subject to the following terms: 
‘‘(i) APPLICATION OF NON-DOMICILE 
STATE LAW.—Except with respect to licen-
sure and with respect to the terms of sub-
title A of title XXX of the Public Health 
Service Act (relating to rating and benefits 
as added by subtitle B of title II of the 
Health Security for All Americans Act of 
2008), the laws and authority of the non- 
domicile State shall remain in full force 
and effect. 
‘‘(ii) REVOCATION OF PREEMPTION.— 
The preemption of a non-domicile State’s 
health insurance licensure laws pursuant to 
this subparagraph, shall be terminated 
upon the occurrence of either of the fol-
lowing: 
‘‘(I) APPROVAL
OR
DENIAL
OF 
APPLICATION.—The approval of denial 
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of an insurer’s licensure application, 
following the laws and regulations of 
the non-domicile State with respect to 
licensure. 
‘‘(II) DETERMINATION OF MATE-
RIAL VIOLATION.—A determination by 
a non-domicile State that an insurer 
operating in a non-domicile State pur-
suant to the preemption provided for 
in this subparagraph is in material 
violation of the insurance laws (other 
than licensure and with respect to the 
terms of subtitle A of title XXX of 
the Public Health Service Act (relat-
ing to rating and benefits added by 
subtitle B of title II of the Health Se-
curity for All Americans Act of 2008)) 
of such State. 
‘‘(B) NO PROHIBITION ON PROMOTION.— 
Nothing in this paragraph shall be construed to 
prohibit a small business health plan or an in-
surer from promoting coverage prior to the ex-
piration of the 90-day period provided for in 
subparagraph (A), except that no enrollment or 
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collection of contributions shall occur before the 
expiration of such 90-day period. 
‘‘(C) LICENSURE.—Except with respect to 
the application of the temporary preemption 
provision of this paragraph, nothing in this part 
shall be construed to limit the requirement that 
insurers issuing coverage to small business 
health plans shall be licensed in each State in 
which the small business health plans operate. 
‘‘(D) SERVICING
BY
LICENSED
INSUR-
ERS.—Notwithstanding subparagraph (C), the 
requirements of this subsection may also be sat-
isfied if the participating employers of a small 
business health plan are serviced by a licensed 
insurer in that State, even where such insurer 
is not the insurer of such small business health 
plan in the State in which such small business 
health plan is domiciled. 
‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE-
LATED REQUIREMENTS. 
‘‘(a) FILING FEE.—Under the procedure prescribed 
pursuant to section 802(a), a small business 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 
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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 small business 
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 
be prescribed by the applicable authority by regulation, at 
least the following information: 
‘‘(1) IDENTIFYING INFORMATION.—The names 
and addresses of— 
‘‘(A) the sponsor; and 
‘‘(B) the members of the board of trustees 
of the plan. 
‘‘(2) STATES IN WHICH PLAN INTENDS TO DO 
BUSINESS.—The States in which participants and 
beneficiaries under the plan are to be located and 
the number of them expected to be located in each 
such State. 
‘‘(3) BONDING REQUIREMENTS.—Evidence pro-
vided by the board of trustees that the bonding re-
quirements of section 412 will be met as of the date 
of the application or (if later) commencement of op-
erations. 
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‘‘(4) PLAN DOCUMENTS.—A copy of the docu-
ments governing the plan (including any bylaws and 
trust agreements), the summary plan description, 
and other material describing the benefits that will 
be provided to participants and beneficiaries under 
the plan. 
‘‘(5) 
AGREEMENTS
WITH
SERVICE
PRO-
VIDERS.—A copy of any agreements between the 
plan, health insurance issuer, and contract adminis-
trators and other service providers. 
‘‘(c) FILING
NOTICE
OF
CERTIFICATION
WITH 
STATES.—A certification granted under this part to a 
small business health plan shall not be effective unless 
written notice of such certification is filed with the appli-
cable State authority of each State in which the small 
business health plans operate. 
‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case 
of any small business health plan certified under this part, 
descriptions of material changes in any information which 
was required to be submitted with the application for the 
certification under this part shall be filed in such form 
and manner as shall be prescribed by the applicable au-
thority by regulation. The applicable authority may re-
quire by regulation prior notice of material changes with 
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respect to specified matters which might serve as the basis 
for suspension or revocation of the certification. 
‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER-
MINATION. 
‘‘A small business health plan which is or has been 
certified under this part may terminate (upon or at any 
time after cessation of accruals in benefit liabilities) only 
if the board of trustees, not less than 60 days before the 
proposed termination date— 
‘‘(1) provides to the participants and bene-
ficiaries a written notice of intent to terminate stat-
ing that such termination is intended and the pro-
posed termination date; 
‘‘(2) develops a plan for winding up the affairs 
of the plan in connection with such termination in 
a manner which will result in timely payment of all 
benefits for which the plan is obligated; and 
‘‘(3) submits such plan in writing to the appli-
cable authority. 
Actions required under this section shall be taken in such 
form and manner as may be prescribed by the applicable 
authority by regulation. 
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‘‘SEC. 809. IMPLEMENTATION AND APPLICATION AUTHOR-
ITY BY SECRETARY. 
‘‘The Secretary shall, through promulgation and im-
plementation of such regulations as the Secretary may 
reasonably determine necessary or appropriate, and in 
consultation with a balanced spectrum of effected entities 
and persons, modify the implementation and application 
of this part to accommodate with minimum disruption 
such changes to State or Federal law provided in this part 
and the (and the amendments made by such Act) or in 
regulations issued thereto. 
‘‘SEC. 810. DEFINITIONS AND RULES OF CONSTRUCTION. 
‘‘(a) DEFINITIONS.—For purposes of this part— 
‘‘(1) AFFILIATED MEMBER.—The term ‘affili-
ated member’ means, in connection with a sponsor— 
‘‘(A) a person who is otherwise eligible to 
be a member of the sponsor but who elects an 
affiliated status with the sponsor, or 
‘‘(B) in the case of a sponsor with mem-
bers which consist of associations, a person who 
is a member or employee of any such associa-
tion and elects an affiliated status with the 
sponsor. 
‘‘(2) APPLICABLE AUTHORITY.—The term ‘ap-
plicable authority’ means the Secretary of Labor, ex-
cept that, in connection with any exercise of the Sec-
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retary’s authority with respect to which the Sec-
retary is required under section 506(d) to consult 
with a State, such term means the Secretary, in con-
sultation with such State. 
‘‘(3) 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 
title XXVII of the Public Health Service Act for the 
State involved with respect to such issuer. 
‘‘(4) GROUP HEALTH PLAN.—The term ‘group 
health plan’ has the meaning provided in section 
733(a)(1) (after applying subsection (b) of this sec-
tion). 
‘‘(5) HEALTH
INSURANCE
COVERAGE.—The 
term ‘health insurance coverage’ has the meaning 
provided in section 733(b)(1), except that such term 
shall not include excepted benefits (as defined in sec-
tion 733(c)). 
‘‘(6) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning provided 
in section 733(b)(2). 
‘‘(7) INDIVIDUAL MARKET.— 
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‘‘(A) IN GENERAL.—The term ‘individual 
market’ means the market for health insurance 
coverage offered to individuals other than in 
connection with a group health plan. 
‘‘(B) 
TREATMENT
OF
VERY
SMALL 
GROUPS.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), such term includes coverage offered in 
connection with a group health plan that 
has fewer than 2 participants as current 
employees or participants described in sec-
tion 732(d)(3) on the first day of the plan 
year. 
‘‘(ii) STATE
EXCEPTION.—Clause (i) 
shall not apply in the case of health insur-
ance coverage offered in a State if such 
State regulates the coverage described in 
such clause in the same manner and to the 
same extent as coverage in the small group 
market (as defined in section 2791(e)(5) of 
the Public Health Service Act) is regulated 
by such State. 
‘‘(8) MEDICAL CARE.—The term ‘medical care’ 
has the meaning provided in section 733(a)(2). 
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‘‘(9) PARTICIPATING
EMPLOYER.—The term 
‘participating employer’ means, in connection with a 
small business health plan, any employer, if any in-
dividual who is an employee of such employer, a 
partner in such employer, or a self-employed indi-
vidual who is such employer (or any dependent, as 
defined under the terms of the plan, of such indi-
vidual) is or was covered under such plan in connec-
tion with the status of such individual as such an 
employee, partner, or self-employed individual in re-
lation to the plan. 
‘‘(10) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, in connection with a group health 
plan with respect to a plan year, a small employer 
as defined in section 2791(e)(4). 
‘‘(11) TRADE ASSOCIATION AND PROFESSIONAL 
ASSOCIATION.—The terms ‘trade association’ and 
‘professional association’ mean an entity that meets 
the requirements of section 1.501(c)(6)–1 of title 26, 
Code of Federal Regulations (as in effect on the 
date of enactment of this Act). 
‘‘(b) RULE OF CONSTRUCTION.—For purposes of de-
termining whether a plan, fund, or program is an em-
ployee welfare benefit plan which is a small business 
health plan, and for purposes of applying this title in con-
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nection with such plan, fund, or program so determined 
to be such an employee welfare benefit plan— 
‘‘(1) in the case of a partnership, the term ‘em-
ployer’ (as defined in section 3(5)) includes the part-
nership in relation to the partners, and the term 
‘employee’ (as defined in section 3(6)) includes any 
partner in relation to the partnership; and 
‘‘(2) in the case of a self-employed individual, 
the term ‘employer’ (as defined in section 3(5)) and 
the term ‘employee’ (as defined in section 3(6)) shall 
include such individual. 
‘‘(c) RENEWAL.—Notwithstanding any provision of 
law to the contrary, a participating employer in a small 
business health plan shall not be deemed to be a plan 
sponsor in applying requirements relating to coverage re-
newal. 
‘‘(d) HEALTH SAVINGS ACCOUNTS.—Nothing in this 
part shall be construed to create any mandates for cov-
erage of benefits for HSA-qualified health plans that 
would require reimbursements in violation of section 
223(c)(2) of the Internal Revenue Code of 1986.’’. 
(b) CONFORMING AMENDMENTS
TO PREEMPTION 
RULES.— 
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(1) Section 514(b)(6) of such Act (29 U.S.C. 
1144(b)(6)) is amended by adding at the end the 
following new subparagraph: 
‘‘(E) The preceding subparagraphs of this paragraph 
do not apply with respect to any State law in the case 
of a small business health plan which is certified under 
part 8.’’. 
(2) Section 514 of such Act (29 U.S.C. 1144) 
is amended— 
(A) in subsection (b)(4), by striking ‘‘Sub-
section (a)’’ and inserting ‘‘Subsections (a) and 
(d)’’; 
(B) in subsection (b)(5), by striking ‘‘sub-
section (a)’’ in subparagraph (A) and inserting 
‘‘subsection (a) of this section and subsections 
(a)(2)(B) and (b) of section 805’’, and by strik-
ing ‘‘subsection (a)’’ in subparagraph (B) and 
inserting ‘‘subsection (a) of this section or sub-
section (a)(2)(B) or (b) of section 805’’; 
(C) by redesignating subsection (d) as sub-
section (e); and 
(D) by inserting after subsection (c) the 
following new subsection: 
‘‘(d)(1) Except as provided in subsection (b)(4), the 
provisions of this title shall supersede any and all State 
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laws insofar as they may now or hereafter preclude a 
health insurance issuer from offering health insurance cov-
erage in connection with a small business health plan 
which is certified under part 8. 
‘‘(2) In any case in which health insurance coverage 
of any policy type is offered under a small business health 
plan certified under part 8 to a participating employer op-
erating in such State, the provisions of this title shall su-
persede any and all laws of such State insofar as they may 
establish rating and benefit requirements that would oth-
erwise apply to such coverage, provided the requirements 
of subtitle A of title XXX of the Public Health Service 
Act (as added by title II of the Health Security for All 
Americans Act of 2008) (concerning health plan rating 
and benefits) are met.’’. 
(c) PLAN SPONSOR.—Section 3(16)(B) of such Act 
(29 U.S.C. 102(16)(B)) is amended by adding at the end 
the following new sentence: ‘‘Such term also includes a 
person serving as the sponsor of a small business health 
plan under part 8.’’. 
(d) SAVINGS CLAUSE.—Section 731(c) of such Act 
is amended by inserting ‘‘or part 8’’ after ‘‘this part’’. 
(e) CLERICAL AMENDMENT.—The table of contents 
in section 1 of the Employee Retirement Income Security 
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Act of 1974 is amended by inserting after the item relat-
ing to section 734 the following new items: 
‘‘PART 8—RULES GOVERNING SMALL BUSINESS HEALTH PLANS 
‘‘801. Small business health plans. 
‘‘802. Alternative market pooling organizations. 
‘‘803. Certification of small business health plans. 
‘‘804. Requirements relating to sponsors and boards of trustees. 
‘‘805. Participation and coverage requirements. 
‘‘806. Other requirements relating to plan documents, contribution rates, and 
benefit options. 
‘‘807. Requirements for application and related requirements. 
‘‘808. Notice requirements for voluntary termination. 
‘‘809. Implementation and application authority by Secretary. 
‘‘810. Definitions and rules of construction.’’. 
SEC. 202. 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 SMALL BUSINESS HEALTH PLANS.— 
‘‘(1) AGREEMENTS
WITH
STATES.—The Sec-
retary shall consult with the State recognized under 
paragraph (2) with respect to a small business 
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 
small business health plans under part 8 in ac-
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cordance with regulations of the Secretary ap-
plicable to certification under part 8. 
‘‘(2) RECOGNITION
OF
DOMICILE
STATE.—In 
carrying out paragraph (1), the Secretary shall en-
sure that only one State will be recognized, with re-
spect to any particular small business health plan, 
as the State with which consultation is required. In 
carrying out this paragraph such State shall be the 
domicile State, as defined in section 805(c).’’. 
SEC. 203. EFFECTIVE DATE AND TRANSITIONAL AND 
OTHER RULES. 
(a) EFFECTIVE DATE.—The amendments made by 
this subtitle shall take effect 12 months after the date of 
the enactment of this Act. The Secretary of Labor shall 
first issue all regulations necessary to carry out the 
amendments made by this subtitle within 6 months after 
the date of the enactment of this Act. 
(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 
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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 808(a)(2) 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 
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 trustees which 
has control over the arrangement; 
(D) the requirements of section 804(a) of 
such Act shall be deemed met with respect to 
such arrangement; and 
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(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 or at such 
time that the arrangement provides coverage to par-
ticipants and beneficiaries in any State other than 
the States in which coverage is provided on such 
date of enactment. 
(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 808 of the Employee 
Retirement Income Security Act of 1974, except 
that the reference in paragraph (7) of such section 
to an ‘‘small business health plan’’ shall be deemed 
a reference to an arrangement referred to in this 
subsection. 
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Subtitle B—Market Relief 
SEC. 211. MARKET RELIEF. 
The Public Health Service Act (42 U.S.C. 201 et 
seq.) is amended by adding at the end the following: 
‘‘TITLE XXX—HEALTH CARE IN-
SURANCE 
MARKETPLACE 
MODERNIZATION 
‘‘SEC. 3001. GENERAL INSURANCE DEFINITIONS. 
‘‘In this title, the terms ‘health insurance coverage’, 
‘health insurance issuer’, ‘group health plan’, and ‘indi-
vidual health insurance’ shall have the meanings given 
such terms in section 2791. 
‘‘SEC. 3002. IMPLEMENTATION AND APPLICATION AUTHOR-
ITY BY SECRETARY. 
‘‘The Secretary shall, through promulgation and im-
plementation of such regulations as the Secretary may 
reasonably determine necessary or appropriate, and in 
consultation with a balanced spectrum of effected entities 
and persons, modify the implementation and application 
of this title to accommodate with minimum disruption 
such changes to State or Federal law provided in this title 
and the (and the amendments made by such Act) or in 
regulations issued thereto. 
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‘‘Subtitle A—Market Relief 
‘‘PART I—RATING REQUIREMENTS 
‘‘SEC. 3011. DEFINITIONS. 
‘‘In this part: 
‘‘(1) ADOPTING
STATE.—The term ‘adopting 
State’ means a State that, with respect to the small 
group market, has enacted small group rating rules 
that meet the minimum standards set forth in sec-
tion 3012(a)(1) or, as applicable, transitional small 
group rating rules set forth in section 3012(b). 
‘‘(2) 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 insurance laws 
of such State. 
‘‘(3) BASE
PREMIUM
RATE.—The term ‘base 
premium rate’ means, for each class of business with 
respect to a rating period, the lowest premium rate 
charged or that could have been charged under a 
rating system for that class of business by the small 
employer carrier to small employers with similar 
case characteristics for health benefit plans with the 
same or similar coverage. 
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‘‘(4) ELIGIBLE
INSURER.—The term ‘eligible 
insurer’ means a health insurance issuer that is li-
censed in a State and that— 
‘‘(A) notifies the Secretary, not later than 
30 days prior to the offering of coverage de-
scribed in this subparagraph, that the issuer in-
tends to offer health insurance coverage con-
sistent with the Model Small Group Rating 
Rules or, as applicable, transitional small group 
rating rules in a State; 
‘‘(B) notifies the insurance department of 
a nonadopting State (or other State agency), 
not later than 30 days prior to the offering of 
coverage described in this subparagraph, that 
the issuer intends to offer small group health 
insurance coverage in that State consistent with 
the Model Small Group Rating Rules, and pro-
vides with such notice a copy of any insurance 
policy that it intends to offer in the State, its 
most recent annual and quarterly financial re-
ports, and any other information required to be 
filed with the insurance department of the State 
(or other State agency); and 
‘‘(C) includes in the terms of the health in-
surance coverage offered in nonadopting States 
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(including in the terms of any individual certifi-
cates that may be offered to individuals in con-
nection with such group health coverage) and 
filed with the State pursuant to subparagraph 
(B), a description in the insurer’s contract of 
the Model Small Group Rating Rules and an af-
firmation that such Rules are included in the 
terms of such contract. 
‘‘(5) HEALTH
INSURANCE
COVERAGE.—The 
term ‘health insurance coverage’ means any coverage 
issued in the small group health insurance market, 
except that such term shall not include excepted 
benefits (as defined in section 2791(c)). 
‘‘(6) INDEX
RATE.—The term ‘index rate’ 
means for each class of business with respect to the 
rating period for small employers with similar case 
characteristics, the arithmetic average of the appli-
cable base premium rate and the corresponding 
highest premium rate. 
‘‘(7) MODEL SMALL GROUP RATING RULES.— 
The term ‘Model Small Group Rating Rules’ means 
the rules set forth in section 3012(a)(2). 
‘‘(8) NONADOPTING
STATE.—The term ‘non-
adopting State’ means a State that is not an adopt-
ing State. 
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‘‘(9) SMALL GROUP INSURANCE MARKET.—The 
term ‘small group insurance market’ shall have the 
meaning given the term ‘small group market’ in sec-
tion 2791(e)(5). 
‘‘(10) STATE
LAW.—The term ‘State law’ 
means all laws, decisions, rules, regulations, or other 
State actions (including actions by a State agency) 
having the effect of law, of any State. 
‘‘(11) VARIATION LIMITS.— 
‘‘(A) COMPOSITE VARIATION LIMIT.— 
‘‘(i) IN
GENERAL.—The term ‘com-
posite variation limit’ means the total vari-
ation in premium rates charged by a 
health insurance issuer in the small group 
market as permitted under applicable State 
law based on the following factors or case 
characteristics: 
‘‘(I) Age. 
‘‘(II) Duration of coverage. 
‘‘(III) Claims experience. 
‘‘(IV) Health status. 
‘‘(ii) USE OF FACTORS.—With respect 
to the use of the factors described in 
clause (i) in setting premium rates, a 
health insurance issuer shall use one or 
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both of the factors described in subclauses 
(I) or (IV) of such clause and may use the 
factors described in subclauses (II) or (III) 
of such clause. 
‘‘(B) TOTAL VARIATION LIMIT.—The term 
‘total variation limit’ means the total variation 
in premium rates charged by a health insurance 
issuer in the small group market as permitted 
under applicable State law based on all factors 
and case characteristics (as described in section 
3012(a)(1)). 
‘‘SEC. 3012. RATING RULES. 
‘‘(a) ESTABLISHMENT OF MINIMUM STANDARDS FOR 
PREMIUM VARIATIONS AND MODEL SMALL GROUP RAT-
ING RULES.—Not later than 6 months after the date of 
enactment of this title, the Secretary shall promulgate reg-
ulations establishing the following Minimum Standards 
and Model Small Group Rating Rules: 
‘‘(1) MINIMUM STANDARDS FOR PREMIUM VARI-
ATIONS.— 
‘‘(A) COMPOSITE VARIATION LIMIT.—The 
composite variation limit shall not be less than 
3:1. 
‘‘(B) TOTAL VARIATION LIMIT.—The total 
variation limit shall not be less than 5:1. 
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‘‘(C) PROHIBITION
ON
USE
OF
CERTAIN 
CASE CHARACTERISTICS.—For purposes of this 
paragraph, in calculating the total variation 
limit, the State shall not use case characteris-
tics other than those used in calculating the 
composite variation limit and industry, geo-
graphic area, group size, participation rate, 
class of business, and participation in wellness 
programs. 
‘‘(2) MODEL SMALL GROUP RATING RULES.— 
The following apply to an eligible insurer in a non- 
adopting State: 
‘‘(A) PREMIUM
RATES.—Premium rates 
for small group health benefit plans to which 
this title applies shall comply with the following 
provisions relating to premiums, except as pro-
vided for under subsection (b): 
‘‘(i) 
VARIATION
IN
PREMIUM 
RATES.—The plan may not vary premium 
rates by more than the minimum stand-
ards provided for under paragraph (1). 
‘‘(ii) INDEX
RATE.—The index rate 
for a rating period for any class of busi-
ness shall not exceed the index rate for any 
other class of business by more than 20 
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percent, excluding those classes of business 
related to association groups under this 
title. 
‘‘(iii) CLASS
OF
BUSINESSES.—With 
respect to a class of business, the premium 
rates charged during a rating period to 
small employers with similar case charac-
teristics for the same or similar coverage 
or the rates that could be charged to such 
employers under the rating system for that 
class of business, shall not vary from the 
index rate by more than 25 percent of the 
index rate under clause (ii). 
‘‘(iv) INCREASES
FOR
NEW
RATING 
PERIODS.—The percentage increase in the 
premium rate charged to a small employer 
for a new rating period may not exceed the 
sum of the following: 
‘‘(I) The percentage change in 
the new business premium rate meas-
ured from the first day of the prior 
rating period to the first day of the 
new rating period. In the case of a 
health benefit plan into which the 
small employer carrier is no longer en-
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rolling new small employers, the small 
employer carrier shall use the percent-
age change in the base premium rate, 
except that such change shall not ex-
ceed, on a percentage basis, the 
change in the new business premium 
rate for the most similar health ben-
efit plan into which the small em-
ployer carrier is actively enrolling new 
small employers. 
‘‘(II) Any adjustment, not to ex-
ceed 15 percent annually and adjusted 
pro rata for rating periods of less 
then 1 year, due to the claim experi-
ence, health status or duration of cov-
erage of the employees or dependents 
of the small employer as determined 
from the small employer carrier’s rate 
manual for the class of business in-
volved. 
‘‘(III) Any adjustment due to 
change in coverage or change in the 
case characteristics of the small em-
ployer as determined from the small 
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employer carrier’s rate manual for the 
class of business. 
‘‘(v) UNIFORM APPLICATION OF AD-
JUSTMENTS.—Adjustments 
in 
premium 
rates for claim experience, health status, or 
duration of coverage shall not be charged 
to individual employees or dependents. Any 
such adjustment shall be applied uniformly 
to the rates charged for all employees and 
dependents of the small employer. 
‘‘(vi) PROHIBITION ON USE OF CER-
TAIN CASE CHARACTERISTIC.—A small em-
ployer carrier shall not utilize case charac-
teristics, other than those permitted under 
paragraph (1)(C), without the prior ap-
proval of the applicable State authority. 
‘‘(vii) CONSISTENT
APPLICATION
OF 
FACTORS.—Small employer carriers shall 
apply rating factors, including case charac-
teristics, consistently with respect to all 
small employers in a class of business. 
Rating factors shall produce premiums for 
identical groups which differ only by the 
amounts attributable to plan design and do 
not reflect differences due to the nature of 
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the groups assumed to select particular 
health benefit plans. 
‘‘(viii) TREATMENT OF PLANS AS HAV-
ING SAME RATING PERIOD.—A small em-
ployer carrier shall treat all health benefit 
plans issued or renewed in the same cal-
endar month as having the same rating pe-
riod. 
‘‘(ix) REQUIRE
COMPLIANCE.—Pre-
mium rates for small business health ben-
efit plans shall comply with the require-
ments of this subsection notwithstanding 
any assessments paid or payable by a small 
employer carrier as required by a State’s 
small employer carrier reinsurance pro-
gram. 
‘‘(B) 
ESTABLISHMENT
OF
SEPARATE 
CLASS OF BUSINESS.—Subject to subparagraph 
(C), a small employer carrier may establish a 
separate class of business only to reflect sub-
stantial differences in expected claims experi-
ence or administrative costs related to the fol-
lowing: 
‘‘(i) The small employer carrier uses 
more than one type of system for the mar-
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keting and sale of health benefit plans to 
small employers. 
‘‘(ii) The small employer carrier has 
acquired a class of business from another 
small employer carrier. 
‘‘(iii) The small employer carrier pro-
vides coverage to one or more association 
groups that meet the requirements of this 
title. 
‘‘(C) LIMITATION.—A small employer car-
rier may establish up to 9 separate classes of 
business under subparagraph (B), excluding 
those classes of business related to association 
groups under this title. 
‘‘(D) 
LIMITATION
ON
TRANSFERS.—A 
small employer carrier shall not transfer a 
small employer involuntarily into or out of a 
class of business. A small employer carrier shall 
not offer to transfer a small employer into or 
out of a class of business unless such offer is 
made to transfer all small employers in the 
class of business without regard to case charac-
teristics, claim experience, health status or du-
ration of coverage since issue. 
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‘‘(b) TRANSITIONAL MODEL SMALL GROUP RATING 
RULES.— 
‘‘(1) IN GENERAL.—Not later than 6 months 
after the date of enactment of this title and to the 
extent necessary to provide for a graduated transi-
tion to the minimum standards for premium vari-
ation as provided for in subsection (a)(1), the Sec-
retary, in consultation with the National Association 
of Insurance Commissioners (NAIC), shall promul-
gate State-specific transitional small group rating 
rules in accordance with this subsection, which shall 
be applicable with respect to non-adopting States 
and eligible insurers operating in such States for a 
period of not to exceed 3 years from the date of the 
promulgation of the minimum standards for pre-
mium variation pursuant to subsection (a). 
‘‘(2) COMPLIANCE WITH TRANSITIONAL MODEL 
SMALL GROUP RATING RULES.—During the transi-
tion period described in paragraph (1), a State that, 
on the date of enactment of this title, has in effect 
a small group rating rules methodology that allows 
for a variation that is less than the variation pro-
vided for under subsection (a)(1) (concerning min-
imum standards for premium variation), shall be 
deemed to be an adopting State if the State complies 
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with the transitional small group rating rules as pro-
mulgated by the Secretary pursuant to paragraph 
(1). 
‘‘(3) TRANSITIONING OF OLD BUSINESS.— 
‘‘(A) IN
GENERAL.—In developing the 
transitional small group rating rules under 
paragraph (1), the Secretary shall, after con-
sultation with the National Association of In-
surance Commissioners and representatives of 
insurers operating in the small group health in-
surance market in non-adopting States, promul-
gate special transition standards with respect to 
independent rating classes for old and new busi-
ness, to the extent reasonably necessary to pro-
tect health insurance consumers and to ensure 
a stable and fair transition for old and new 
market entrants. 
‘‘(B) PERIOD FOR OPERATION OF INDE-
PENDENT RATING CLASSES.—In developing the 
special transition standards pursuant to sub-
paragraph (A), the Secretary shall permit a 
carrier in a non-adopting State, at its option, to 
maintain independent rating classes for old and 
new business for a period of up to 5 years, with 
the commencement of such 5-year period to 
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begin at such time, but not later than the date 
that is 3 years after the date of enactment of 
this title, as the carrier offers a book of busi-
ness meeting the minimum standards for pre-
mium variation provided for in subsection 
(a)(1) or the transitional small group rating 
rules under paragraph (1). 
‘‘(4) OTHER
TRANSITIONAL
AUTHORITY.—In 
developing the transitional small group rating rules 
under paragraph (1), the Secretary shall provide for 
the application of the transitional small group rating 
rules in transition States as the Secretary may de-
termine necessary for a an effective transition. 
‘‘(c) MARKET RE-ENTRY.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of law, a health insurance issuer that has 
voluntarily withdrawn from providing coverage in the 
small group market prior to the date of enactment 
of this title shall not be excluded from re-entering 
such market on a date that is more than 180 days 
after such date of enactment. 
‘‘(2) TERMINATION.—The provision of this sub-
section shall terminate on the date that is 24 
months after the date of enactment of this title. 
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‘‘SEC. 3013. APPLICATION AND PREEMPTION. 
‘‘(a) SUPERSEDING OF STATE LAW.— 
‘‘(1) IN GENERAL.—This part shall supersede 
any and all State laws of a non-adopting State inso-
far as such State laws (whether enacted prior to or 
after the date of enactment of this subtitle) relate to 
rating in the small group insurance market as ap-
plied to an eligible insurer, or small group health in-
surance coverage issued by an eligible insurer, in-
cluding with respect to coverage issued to a small 
employer through a small business health plan, in a 
State. 
‘‘(2) NONADOPTING STATES.—This part shall 
supersede any and all State laws of a nonadopting 
State insofar as such State laws (whether enacted 
prior to or after the date of enactment of this sub-
title)— 
‘‘(A) prohibit an eligible insurer from of-
fering, marketing, or implementing small group 
health insurance coverage consistent with the 
Model Small Group Rating Rules or transitional 
model small group rating rules; or 
‘‘(B) have the effect of retaliating against 
or otherwise punishing in any respect an eligible 
insurer for offering, marketing, or imple-
menting small group health insurance coverage 
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consistent with the Model Small Group Rating 
Rules or transitional model small group rating 
rules. 
‘‘(b) SAVINGS CLAUSE AND CONSTRUCTION.— 
‘‘(1) NONAPPLICATION TO ADOPTING STATES.— 
Subsection (a) shall not apply with respect to adopt-
ing states. 
‘‘(2) NONAPPLICATION
TO
CERTAIN
INSUR-
ERS.—Subsection (a) shall not apply with respect to 
insurers that do not qualify as eligible insurers that 
offer small group health insurance coverage in a 
nonadopting State. 
‘‘(3) NONAPPLICATION WHERE OBTAINING RE-
LIEF UNDER STATE LAW.—Subsection (a)(1) shall 
not supercede any State law in a nonadopting State 
to the extent necessary to permit individuals or the 
insurance department of the State (or other State 
agency) to obtain relief under State law to require 
an eligible insurer to comply with the Model Small 
Group Rating Rules or transitional model small 
group rating rules. 
‘‘(4) NO EFFECT ON PREEMPTION.—In no case 
shall this part be construed to limit or affect in any 
manner the preemptive scope of sections 502 and 
514 of the Employee Retirement Income Security 
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Act of 1974. In no case shall this part be construed 
to create any cause of action under Federal or State 
law or enlarge or affect any remedy available under 
the Employee Retirement Income Security Act of 
1974. 
‘‘(5) PREEMPTION LIMITED TO RATING.—Sub-
section (a) shall not preempt any State law that 
does not have a reference to or a connection with 
State rating rules that would otherwise apply to eli-
gible insurers. 
‘‘(c) EFFECTIVE DATE.—This section shall apply, at 
the election of the eligible insurer, beginning in the first 
plan year or the first calendar year following the issuance 
of the final rules by the Secretary under the Model Small 
Group Rating Rules or, as applicable, the Transitional 
Model Small Group Rating Rules, but in no event earlier 
than the date that is 12 months after the date of enact-
ment of this title. 
‘‘SEC. 3014. CIVIL ACTIONS AND JURISDICTION. 
‘‘(a) IN GENERAL.—The courts of the United States 
shall have exclusive jurisdiction over civil actions involving 
the interpretation of this part. 
‘‘(b) ACTIONS.—An eligible insurer may bring an ac-
tion in the district courts of the United States for injunc-
tive or other equitable relief against any officials or agents 
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of a nonadopting State in connection with any conduct or 
action, or proposed conduct or action, by such officials or 
agents which violates, or which would if undertaken vio-
late, section 3013. 
‘‘(c) DIRECT FILING IN COURT OF APPEALS.—At the 
election of the eligible insurer, an action may be brought 
under subsection (b) directly in the United States Court 
of Appeals for the circuit in which the nonadopting State 
is located by the filing of a petition for review in such 
Court. 
‘‘(d) EXPEDITED REVIEW.— 
‘‘(1) DISTRICT COURT.—In the case of an ac-
tion brought in a district court of the United States 
under subsection (b), such court shall complete such 
action, including the issuance of a judgment, prior 
to the end of the 120-day period beginning on the 
date on which such action is filed, unless all parties 
to such proceeding agree to an extension of such pe-
riod. 
‘‘(2) COURT OF APPEALS.—In the case of an 
action brought directly in a United States Court of 
Appeal under subsection (c), or in the case of an ap-
peal of an action brought in a district court under 
subsection (b), such Court shall complete all action 
on the petition, including the issuance of a judg-
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ment, prior to the end of the 60-day period begin-
ning on the date on which such petition is filed with 
the Court, unless all parties to such proceeding 
agree to an extension of such period. 
‘‘(e) STANDARD OF REVIEW.—A court in an action 
filed under this section, shall render a judgment based on 
a review of the merits of all questions presented in such 
action and shall not defer to any conduct or action, or 
proposed conduct or action, of a nonadopting State. 
‘‘SEC. 3015. ONGOING REVIEW. 
‘‘Not later than 5 years after the date on which the 
Model Small Group Rating Rules are issued under this 
part, and every 5 years thereafter, the Secretary, in con-
sultation with the National Association of Insurance Com-
missioners, shall prepare and submit to the appropriate 
committees of Congress a report that assesses the effect 
of the Model Small Group Rating Rules on access, cost, 
and market functioning in the small group market. Such 
report may, if the Secretary, in consultation with the Na-
tional Association of Insurance Commissioners, deter-
mines such is appropriate for improving access, costs, and 
market functioning, contain legislative proposals for rec-
ommended modification to such Model Small Group Rat-
ing Rules. 
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‘‘(B) notifies the insurance department of 
a nonadopting State (or other State agency), 
not later than 30 days prior to the offering of 
coverage described in this subparagraph, that 
the issuer intends to offer health insurance cov-
erage in that State consistent with the har-
monized standards published pursuant to sec-
tion 3033(d), and provides with such notice a 
copy of any insurance policy that it intends to 
offer in the State, its most recent annual and 
quarterly financial reports, and any other infor-
mation required to be filed with the insurance 
department of the State (or other State agency) 
by the Secretary in regulations; and 
‘‘(C) includes in the terms of the health in-
surance coverage offered in nonadopting States 
(including in the terms of any individual certifi-
cates that may be offered to individuals in con-
nection with such health coverage) and filed 
with the State pursuant to subparagraph (B), a 
description of the harmonized standards pub-
lished pursuant to section 3033(g)(2) and an 
affirmation that such standards are a term of 
the contract. 
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