I 
112TH CONGRESS 
1ST SESSION 
H. R. 397 
To repeal the Patient Protection and Affordable Care Act and the Health 
Care and Education Reconciliation Act of 2010 and to take meaningful 
steps to lower health care costs and increase access to health insurance 
coverage without raising taxes, cutting Medicare benefits for seniors, 
adding to the national deficit, intervening in the doctor-patient relation-
ship, or instituting a government takeover of health care. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 24, 2011 
Mr. HERGER (for himself, Mr. SAM JOHNSON of Texas, Mr. TIBERI, Mr. 
REICHERT, Mr. GERLACH, Mr. BACHUS, Mrs. BLACKBURN, Mr. DENT, 
Mr. HARPER, Mr. MCCAUL, Mrs. MCMORRIS RODGERS, Mr. GARY G. 
MILLER of California, and Mr. SESSIONS) introduced the following bill; 
which was referred to the Committee on Energy and Commerce, and in 
addition to the Committees on Ways and Means, Education and the 
Workforce, the Judiciary, House Administration, Natural Resources, Ap-
propriations, and Rules, for a period to be subsequently determined by 
the Speaker, in each case for consideration of such provisions as fall with-
in the jurisdiction of the committee concerned 
A BILL 
To repeal the Patient Protection and Affordable Care Act 
and the Health Care and Education Reconciliation Act 
of 2010 and to take meaningful steps to lower health 
care costs and increase access to health insurance cov-
erage without raising taxes, cutting Medicare benefits 
for seniors, adding to the national deficit, intervening 
in the doctor-patient relationship, or instituting a govern-
ment takeover of health care. 
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; PURPOSE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Reform Americans Can Afford Act of 2011’’. 
(b) PURPOSE.—The purpose of this Act is to take 
meaningful steps to lower health care costs and increase 
access to health insurance coverage (especially for individ-
uals with preexisting conditions) without— 
(1) raising taxes; 
(2) cutting Medicare benefits for seniors; 
(3) adding to the national deficit; 
(4) intervening in the doctor-patient relation-
ship; or 
(5) instituting a government takeover of health 
care. 
(c) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows: 
Sec. 1. Short title; purpose; table of contents. 
Sec. 2. Repeal of the Patient Protection and Affordable Care Act and the 
Health Care and Education Reconciliation Act of 2010. 
DIVISION A—MAKING HEALTH CARE COVERAGE AFFORDABLE 
FOR EVERY AMERICAN 
TITLE I—ENSURING COVERAGE FOR INDIVIDUALS WITH PRE-
EXISTING CONDITIONS AND MULTIPLE HEALTH CARE NEEDS 
Sec. 101. Establish universal access programs to improve high risk pools and 
reinsurance markets. 
Sec. 102. Elimination of certain requirements for guaranteed availability in in-
dividual market. 
Sec. 103. No annual or lifetime spending caps. 
Sec. 104. Preventing unjust cancellation of insurance coverage. 
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TITLE II—REDUCING HEALTH CARE PREMIUMS AND THE 
NUMBER OF UNINSURED AMERICANS 
Sec. 111. State innovation programs. 
Sec. 112. Health plan finders. 
Sec. 113. Administrative simplification. 
DIVISION B—IMPROVING ACCESS TO HEALTH CARE 
TITLE I—EXPANDING ACCESS AND LOWERING COSTS FOR SMALL 
BUSINESSES 
Sec. 201. Rules governing association health plans. 
Sec. 202. Clarification of treatment of single employer arrangements. 
Sec. 203. Enforcement provisions relating to association health plans. 
Sec. 204. Cooperation between Federal and State authorities. 
Sec. 205. Effective date and transitional and other rules. 
TITLE II—TARGETED EFFORTS TO EXPAND ACCESS 
Sec. 211. Extending coverage of dependents. 
Sec. 212. Allowing auto-enrollment for employer sponsored coverage. 
TITLE III—EXPANDING CHOICES BY ALLOWING AMERICANS TO 
BUY HEALTH CARE COVERAGE ACROSS STATE LINES 
Sec. 221. Interstate purchasing of health insurance. 
TITLE IV—IMPROVING HEALTH SAVINGS ACCOUNTS 
Sec. 231. Saver’s credit for contributions to health savings accounts. 
Sec. 232. HSA funds for premiums for high deductible health plans. 
Sec. 233. Requiring greater coordination between HDHP administrators and 
HSA account administrators so that enrollees can enroll in 
both at the same time. 
Sec. 234. Special rule for certain medical expenses incurred before establish-
ment of account. 
DIVISION C—ENACTING REAL MEDICAL LIABILITY REFORM 
Sec. 301. Encouraging speedy resolution of claims. 
Sec. 302. Compensating patient injury. 
Sec. 303. Maximizing patient recovery. 
Sec. 304. Additional health benefits. 
Sec. 305. Punitive damages. 
Sec. 306. Authorization of payment of future damages to claimants in health 
care lawsuits. 
Sec. 307. Definitions. 
Sec. 308. Effect on other laws. 
Sec. 309. State flexibility and protection of States’ rights. 
Sec. 310. Applicability; effective date. 
DIVISION D—PROTECTING THE DOCTOR-PATIENT RELATIONSHIP 
Sec. 401. Rule of construction. 
Sec. 402. Repeal of Federal Coordinating Council for Comparative Effective-
ness Research. 
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DIVISION E—INCENTIVIZING WELLNESS AND QUALITY 
IMPROVEMENTS 
Sec. 501. Incentives for prevention and wellness programs. 
DIVISION F—PROTECTING TAXPAYERS 
Sec. 601. Provide full funding to HHS OIG and HCFAC. 
Sec. 602. Prohibiting taxpayer funded abortions and conscience protections. 
Sec. 603. Improved enforcement of the Medicare and Medicaid secondary payer 
provisions. 
Sec. 604. Strengthen Medicare provider enrollment standards and safeguards. 
Sec. 605. Tracking banned providers across State lines. 
DIVISION G—PATHWAY FOR BIOSIMILAR BIOLOGICAL PRODUCTS 
Sec. 701. Licensure pathway for biosimilar biological products. 
Sec. 702. Fees relating to biosimilar biological products. 
Sec. 703. Amendments to certain patent provisions. 
SEC. 2. REPEAL OF THE PATIENT PROTECTION AND AF-
FORDABLE CARE ACT AND THE HEALTH 
CARE AND EDUCATION RECONCILIATION ACT 
OF 2010. 
(a) PATIENT PROTECTION AND AFFORDABLE CARE 
ACT.—Effective as of the enactment of the Patient Pro-
tection and Affordable Care Act, such Act is repealed, and 
the provisions of law amended or repealed by such Act 
are restored or revived as if such Act had not been en-
acted. 
(b) HEALTH CARE
AND EDUCATION RECONCILI-
ATION ACT OF 2010.—Effective as of the enactment of 
the Health Care and Education Reconciliation Act of 
2010, such Act is repealed, and the provisions of law 
amended or repealed by such Act are restored or revived 
as if such Act had not been enacted. 
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DIVISION 
A—MAKING 
HEALTH 
CARE 
COVERAGE 
AFFORD-
ABLE FOR EVERY AMERICAN 
TITLE I—ENSURING COVERAGE 
FOR INDIVIDUALS WITH PRE-
EXISTING CONDITIONS AND 
MULTIPLE 
HEALTH 
CARE 
NEEDS 
SEC. 101. ESTABLISH UNIVERSAL ACCESS PROGRAMS TO 
IMPROVE HIGH RISK POOLS AND REINSUR-
ANCE MARKETS. 
(a) STATE REQUIREMENT.— 
(1) IN GENERAL.—Not later than July 1, 2011, 
each State shall— 
(A) subject to paragraph (3), operate— 
(i) a qualified State reinsurance pro-
gram described in subsection (b); or 
(ii) qualifying State high risk pool de-
scribed in subsection (c)(1); and 
(B) subject to paragraph (3), apply to the 
operation of such a program from State funds 
an amount equivalent to the portion of State 
funds derived from State premium assessments 
(as defined by the Secretary) that are not oth-
erwise used on State health care programs. 
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(2) RELATION TO CURRENT QUALIFIED HIGH 
RISK POOL PROGRAM.— 
(A) STATES NOT OPERATING A QUALIFIED 
HIGH RISK POOL.—In the case of a State that 
is not operating a current section 2745 quali-
fied high risk pool as of the date of the enact-
ment of this Act— 
(i) the State may only meet the re-
quirement of paragraph (1) through the 
operation of a qualified State reinsurance 
program described in subsection (b); and 
(ii) the State’s operation of such a re-
insurance program shall be treated, for 
purposes of section 2745 of the Public 
Health Service Act, as the operation of a 
qualified high risk pool described in such 
section. 
(B) STATE OPERATING A QUALIFIED HIGH 
RISK POOL.—In the case of a State that is op-
erating a current section 2745 qualified high 
risk pool as of the date of the enactment of this 
Act— 
(i) as of July 1, 2011, such a pool 
shall not be treated as a qualified high risk 
pool under section 2745 of the Public 
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Health Service Act unless the pool is a 
qualifying State high risk pool described in 
subsection (c)(1); and 
(ii) the State may use premium as-
sessment funds described in paragraph 
(1)(B) to transition from operation of such 
a pool to operation of a qualified State re-
insurance program described in subsection 
(b). 
(3) APPLICATION OF FUNDS.—If the program 
or pool operated under paragraph (1)(A) is in strong 
fiscal health, as determined in accordance with 
standards established by the National Association of 
Insurance Commissioners and as approved by the 
State Insurance Commissioner involved, the require-
ment of paragraph (1)(B) shall be deemed to be 
met. 
(b) QUALIFIED STATE REINSURANCE PROGRAM.— 
(1) IN GENERAL.—For purposes of this section, 
a ‘‘qualified State reinsurance program’’ means a 
program operated by a State program that provides 
reinsurance for health insurance coverage offered in 
the small group market in accordance with the 
model for such a program established (as of the date 
of the enactment of this Act). 
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(2) FORM OF PROGRAM.—A qualified State re-
insurance program may provide reinsurance— 
(A) on a prospective or retrospective basis; 
and 
(B) on a basis that protects health insur-
ance issuers against the annual aggregate 
spending of their enrollees as well as purchase 
protection against individual catastrophic costs. 
(3) SATISFACTION OF HIPAA REQUIREMENT.— 
A qualified State reinsurance program shall be 
deemed, for purposes of section 2745 of the Public 
Health Service Act, to be a qualified high risk pool 
under such section. 
(c) QUALIFYING STATE HIGH RISK POOL.— 
(1) IN GENERAL.—A qualifying State high risk 
pool described in this subsection means a current 
section 2745 qualified high risk pool that meets the 
following requirements: 
(A) The pool must provide at least two 
coverage options, one of which must be a high 
deductible health plan coupled with a health 
savings account. 
(B) The pool must be funded with a stable 
funding source. 
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(C) The pool must eliminate any waiting 
lists so that all eligible residents who are seek-
ing coverage through the pool should be allowed 
to receive coverage through the pool. 
(D) The pool must allow for coverage of 
individuals who, but for the 24-month disability 
waiting period under section 226(b) of the So-
cial Security Act, would be eligible for Medicare 
during the period of such waiting period. 
(E) The pool must limit the pool premiums 
to no more than 150 percent of the average 
premium for applicable standard risk rates in 
that State. 
(F) The pool must conduct education and 
outreach initiatives so that residents and bro-
kers understand that the pool is available to eli-
gible residents. 
(G) The pool must provide coverage for 
preventive services and disease management for 
chronic diseases. 
(2) VERIFICATION OF CITIZENSHIP OR ALIEN 
QUALIFICATION.— 
(A) IN
GENERAL.—Notwithstanding any 
other provision of law, only citizens and nation-
als of the United States shall be eligible to par-
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ticipate in a qualifying State high risk pool that 
receives funds under section 2745 of the Public 
Health Service Act or this section. 
(B) CONDITION OF PARTICIPATION.—As a 
condition of a State receiving such funds, the 
Secretary shall require the State to certify, to 
the satisfaction of the Secretary, that such 
State requires all applicants for coverage in the 
qualifying State high risk pool to provide satis-
factory documentation of citizenship or nation-
ality in a manner consistent with section 
1903(x) of the Social Security Act. 
(C) RECORDS.—The Secretary shall keep 
sufficient records such that a determination of 
citizenship or nationality only has to be made 
once for any individual under this paragraph. 
(3) RELATION TO SECTION 2745.—As of Janu-
ary 1, 2012, a pool shall not qualify as qualified 
high risk pool under section 2745 of the Public 
Health Service Act unless the pool is a qualifying 
State high risk pool described in paragraph (1). 
(d) WAIVERS.—In order to accommodate new and in-
novative programs, the Secretary may waive such require-
ments of this section for qualified State reinsurance pro-
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grams and for qualifying State high risk pools as the Sec-
retary deems appropriate. 
(e) FUNDING.—In addition to any other amounts ap-
propriated, there is appropriated to carry out section 2745 
of the Public Health Service Act (including through a pro-
gram or pool described in subsection (a)(1))— 
(1) $15,000,000,000 for the period of fiscal 
years 2012 through 2021; and 
(2) an additional $10,000,000,000 for the pe-
riod of fiscal years 2017 through 2021. 
(f) DEFINITIONS.—In this section: 
(1) HEALTH INSURANCE COVERAGE; HEALTH 
INSURANCE ISSUER.—The terms ‘‘health insurance 
coverage’’ and ‘‘health insurance issuer’’ have the 
meanings given such terms in section 2791 of the 
Public Health Service Act. 
(2) CURRENT SECTION 2745 QUALIFIED HIGH 
RISK POOL.—The term ‘‘current section 2745 quali-
fied high risk pool’’ has the meaning given the term 
‘‘qualified high risk pool’’ under section 2745(g) of 
the Public Health Service Act as in effect as of the 
date of the enactment of this Act. 
(3) SECRETARY.—The term ‘‘Secretary’’ means 
Secretary of Health and Human Services. 
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(4) STANDARD RISK RATE.—The term ‘‘stand-
ard risk rate’’ means a rate that— 
(A) is determined under the State high 
risk pool by considering the premium rates 
charged by other health insurance issuers offer-
ing health insurance coverage to individuals in 
the insurance market served; 
(B) is established using reasonable actu-
arial techniques; and 
(C) reflects anticipated claims experience 
and expenses for the coverage involved. 
(5) STATE.—The term ‘‘State’’ means any of 
the 50 States or the District of Columbia. 
SEC. 102. ELIMINATION OF CERTAIN REQUIREMENTS FOR 
GUARANTEED AVAILABILITY IN INDIVIDUAL 
MARKET. 
(a) IN GENERAL.—Section 2741(b) of the Public 
Health Service Act (42 U.S.C. 300gg–41(b)) is amend-
ed— 
(1) in paragraph (1)— 
(A) by striking ‘‘(1)(A)’’ and inserting 
‘‘(1)’’; and 
(B) by striking ‘‘and (B)’’ and all that fol-
lows up to the semicolon at the end; 
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(2) by adding ‘‘and’’ at the end of paragraph 
(2); 
(3) in paragraph (3)— 
(A) by striking ‘‘(1)(A)’’ and inserting 
‘‘(1)’’; and 
(B) by striking the semicolon at the end 
and inserting a period; and 
(4) by striking paragraphs (4) and (5). 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on the date of the enact-
ment of this Act. 
SEC. 103. NO ANNUAL OR LIFETIME SPENDING CAPS. 
Notwithstanding any other provision of law, a health 
insurance issuer (including an entity licensed to sell insur-
ance with respect to a State or group health plan) may 
not apply an annual or lifetime aggregate spending cap 
on any health insurance coverage or plan offered by such 
issuer. The previous sentence shall not apply with respect 
to a health plan if, as of the date of the enactment of 
this Act, the imposition on such plan of an annual or life-
time aggregate spending cap would result in a significant 
decrease in access to benefits under the plan or would sig-
nificantly increase premiums under the plan. 
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SEC. 104. PREVENTING UNJUST CANCELLATION OF INSUR-
ANCE COVERAGE. 
(a) CLARIFICATION REGARDING APPLICATION
OF 
GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH 
INSURANCE COVERAGE.—Section 2742 of the Public 
Health Service Act (42 U.S.C. 300gg–42) is amended— 
(1) in its heading, by inserting ‘‘, CONTINU-
ATION IN FORCE, INCLUDING PROHIBITION OF 
RESCISSION,’’ 
after 
‘‘GUARANTEED
RENEW-
ABILITY’’; 
(2) in subsection (a), by inserting ‘‘, including 
without rescission,’’ after ‘‘continue in force’’; and 
(3) in subsection (b)(2), by inserting before the 
period at the end the following: ‘‘, including inten-
tional concealment of material facts regarding a 
health condition related to the condition for which 
coverage is being claimed’’. 
(b) OPPORTUNITY FOR INDEPENDENT, EXTERNAL 
THIRD PARTY REVIEW IN CERTAIN CASES.—Subpart 1 
of part B of title XXVII of the Public Health Service Act 
is amended by adding at the end the following new section: 
‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 
THIRD PARTY REVIEW IN CERTAIN CASES. 
‘‘(a) NOTICE AND REVIEW RIGHT.—If a health in-
surance issuer determines to nonrenew or not continue in 
force, including rescind, health insurance coverage for an 
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individual in the individual market on the basis described 
in section 2742(b)(2) before such nonrenewal, discontinu-
ation, or rescission, may take effect the issuer shall pro-
vide the individual with notice of such proposed non-
renewal, discontinuation, or rescission and an opportunity 
for a review of such determination by an independent, ex-
ternal third party under procedures specified by the Sec-
retary. 
‘‘(b) INDEPENDENT DETERMINATION.—If the indi-
vidual requests such review by an independent, external 
third party of a nonrenewal, discontinuation, or rescission 
of health insurance coverage, the coverage shall remain in 
effect until such third party determines that the coverage 
may be nonrenewed, discontinued, or rescinded under sec-
tion 2742(b)(2).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply after the date of the enactment 
of this Act with respect to health insurance coverage 
issued before, on, or after such date. 
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TITLE 
II—REDUCING 
HEALTH 
CARE PREMIUMS AND THE 
NUMBER 
OF 
UNINSURED 
AMERICANS 
SEC. 111. STATE INNOVATION PROGRAMS. 
(a) PROGRAMS
THAT
REDUCE
THE
COST
OF 
HEALTH INSURANCE PREMIUMS.— 
(1) PAYMENTS TO STATES.— 
(A) FOR PREMIUM REDUCTIONS IN THE 
SMALL GROUP MARKET.—If the Secretary de-
termines that a State has reduced the average 
per capita premium for health insurance cov-
erage in the small group market in year 3, in 
year 6, or year 9 (as defined in subsection (c)) 
below the premium baseline for such year (as 
defined paragraph (2)), the Secretary shall pay 
the State an amount equal to the product of— 
(i) bonus premium percentage (as de-
fined in paragraph (3)) for the State, mar-
ket, and year; and 
(ii) the maximum State premium pay-
ment amount (as defined in paragraph (4)) 
for the State, market, and year 
(B) FOR PREMIUM REDUCTIONS IN THE 
INDIVIDUAL MARKET.—If the Secretary deter-
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mines that a State has reduced the average per 
capita premium for health insurance coverage 
in the individual market in year 3, in year 6, 
or in year 9 below the premium baseline for 
such year, the Secretary shall pay the State an 
amount equal to the product of— 
(i) bonus premium percentage for the 
State, market, and year; and 
(ii) the maximum State premium pay-
ment amount for the State, market, and 
year. 
(2) PREMIUM BASELINE.—For purposes of this 
subsection, the term ‘‘premium baseline’’ means, for 
a market in a State— 
(A) for year 1, the average per capita pre-
miums for health insurance coverage in such 
market in the State in such year; or 
(B) for a subsequent year, the baseline for 
the market in the State for the previous year 
under this paragraph increased by a percentage 
specified in accordance with a formula estab-
lished by the Secretary, in consultation with the 
Congressional Budget Office and the Bureau of 
the Census, that takes into account at least the 
following: 
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(i) GROWTH FACTOR.—The inflation 
in the costs of inputs to health care serv-
ices in the year. 
(ii) 
HISTORIC
PREMIUM
GROWTH 
RATES.—Historic growth rates, during the 
10 years before year 1, of per capita pre-
miums for health insurance coverage. 
(iii) 
DEMOGRAPHIC
CONSIDER-
ATIONS.—Historic average changes in the 
demographics of the population covered 
that impact on the rate of growth of per 
capita health care costs. 
(3) BONUS PREMIUM PERCENTAGE DEFINED.— 
(A) IN GENERAL.—For purposes of this 
subsection, the term ‘‘bonus premium percent-
age’’ means, for the small group market or indi-
vidual market in a State for a year, such per-
centage as determined in accordance with the 
following table based on the State’s premium 
performance level (as defined in subparagraph 
(B)) for such market and year: 
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The bonus 
premium 
percentage 
for 
a State is— 
For year 3 
if the premium 
performance level 
of the State is— 
For year 6 
if the premium 
performance level 
of the State is— 
For year 9 
if the premium 
performance level 
of the State is— 
100 percent 
at least 8.5% 
at least 11% 
at least 13.5% 
50 percent 
at least 6.38%, 
but less than 
8.5% 
at least 10.38%, 
but less than 
11% 
at least 12.88%, 
but less than 
13.5% 
25 percent 
at least 4.25%, 
but less than 
6.38% 
at least 9.75%, 
but less than 
10.38% 
at least 12.25%, 
but less than 
12.88% 
0 percent 
less than 4.25% 
less than 9.75% 
less than 12.25%. 
(B) PREMIUM PERFORMANCE LEVEL.—For 
purposes of this subsection, the term ‘‘premium 
performance level’’ means, for a State, market, 
and year, the percentage reduction in the aver-
age per capita premiums for health insurance 
coverage for the State, market, and year, as 
compared to the premium baseline for such 
State, market, and year. 
(4) 
MAXIMUM
STATE
PREMIUM
PAYMENT 
AMOUNT
DEFINED.—For purposes of this sub-
section, the term ‘‘maximum State premium pay-
ment amount’’ means, for a State for the small 
group market or the individual market for a year, 
the product of— 
(A) the proportion (as determined by the 
Secretary), of the number of nonelderly individ-
uals lawfully residing in all the States who are 
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enrolled in health insurance coverage in the re-
spective market in the year, who are residents 
of the State; and 
(B) the amount available for obligation 
from amounts appropriated under subsection 
(d) for such market with respect to perform-
ance in such year. 
(5) METHODOLOGY
FOR
CALCULATING
AVER-
AGE PER CAPITA PREMIUMS.— 
(A) 
ESTABLISHMENT.—The 
Secretary 
shall establish, by rule and consistent with this 
subsection, a methodology for computing the 
average per capita premiums for health insur-
ance coverage for the small group market and 
for the individual market in each State for each 
year beginning with year 1. 
(B) ADJUSTMENTS.—Under such method-
ology, the Secretary shall provide for the fol-
lowing adjustments (in a manner determined 
appropriate by the Secretary): 
(i) EXCLUSION OF ILLEGAL ALIENS.— 
An adjustment so as not to take into ac-
count enrollees who are not lawfully 
present in the United States and their pre-
mium costs. 
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(ii) TREATING STATE PREMIUM SUB-
SIDIES
AS
PREMIUM
COSTS.—An adjust-
ment so as to increase per capita pre-
miums to remove the impact of premium 
subsidies made directly by a State to re-
duce health insurance premiums. 
(6) CONDITIONS OF PAYMENT.—As a condition 
of receiving a payment under paragraph (1), a State 
must agree to submit aggregate, non-individually 
identifiable data to the Secretary, in a form and 
manner specified by the Secretary, for use by the 
Secretary to determine the State’s premium baseline 
and premium performance level for purposes of this 
subsection. 
(b) PROGRAMS THAT REDUCE THE NUMBER OF UN-
INSURED.— 
(1) IN GENERAL.—If the Secretary determines 
that a State has reduced the percentage of unin-
sured nonelderly residents in year 5, year 7, or year 
9, below the uninsured baseline (as defined in para-
graph (2)) for the State for the year, the Secretary 
shall pay the State an amount equal to the product 
of— 
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(A) bonus uninsured percentage (as de-
fined in paragraph (3)) for the State and year; 
and 
(B) the maximum uninsured payment 
amount (as defined in paragraph (4)) for the 
State and year. 
(2) UNINSURED BASELINE.— 
(A) IN GENERAL.—For purposes of this 
subsection, and subject to subparagraph (B), 
the term ‘‘uninsured baseline’’ means, for a 
State, the percentage of nonelderly residents in 
the State who are uninsured in year 1. 
(B) ADJUSTMENT.—The Secretary may, at 
the written request of a State, adjust the unin-
sured baseline for States for a year to take into 
account unanticipated and exceptional changes, 
such as an unanticipated migration, of non-
elderly individuals into, or out of, States in a 
manner that does not reflect substantially the 
proportion of uninsured nonelderly residents in 
the States involved in year 1. Any such adjust-
ment shall only be done in a manner that does 
not result in the average of the uninsured base-
lines for nonelderly residents for all States 
being changed. 
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(3) BONUS UNINSURED PERCENTAGE.— 
(A) BONUS
UNINSURED
PERCENTAGE.— 
For purposes of this subsection, the term 
‘‘bonus uninsured percentage’’ means, for a 
State for a year, such percentage as determined 
in accordance with the following table, based on 
the uninsured performance level (as defined in 
subparagraph (B)) for such State and year: 
The bonus 
uninsured 
percentage 
for 
a State is— 
For year 5 
if the uninsured 
performance level 
of the State is— 
For year 7 
if the uninsured 
performance level 
of the State is— 
For year 9 
if the uninsured 
performance level 
of the State is— 
100 percent 
at least 10% 
at least 15% 
at least 20% 
50 percent 
at least 7.5%, 
but less than 
10% 
at least 13.75%, 
but less than 
15% 
at least 18.75%, 
but less than 
20% 
25 percent 
at least 5%, 
but less than 
7.5% 
at least 12.5%, 
but less than 
13.75% 
at least 17.5%, 
but less than 
18.75% 
0 percent 
less than 5% 
less than 12.5% 
less than 17.5%. 
(B) UNINSURED PERFORMANCE LEVEL.— 
For purposes of this subsection, the term ‘‘un-
insured performance level’’ means, for a State 
for a year, the reduction (expressed as a per-
centage) in the percentage of uninsured non-
elderly residents in such State in the year as 
compared to the uninsured baseline for such 
State for such year. 
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(4) MAXIMUM
STATE
UNINSURED
PAYMENT 
AMOUNT
DEFINED.—For purposes of this sub-
section, the term ‘‘maximum State uninsured pay-
ment amount’’ means, for a State for a year, the 
product of— 
(A) the proportion (as determined by the 
Secretary), of the number of uninsured non-
elderly individuals lawfully residing in all the 
States in the year, who are residents of the 
State; and 
(B) the amount available for obligation 
under this subsection from amounts appro-
priated under subsection (d) with respect to 
performance in such year. 
(5) METHODOLOGY FOR COMPUTING THE PER-
CENTAGE OF UNINSURED NONELDERLY RESIDENTS 
IN A STATE.— 
(A) 
ESTABLISHMENT.—The 
Secretary 
shall establish, by rule and consistent with this 
subsection, a methodology for computing the 
percentage of nonelderly residents in a State 
who are uninsured in each year beginning with 
year 1. 
(B) RULES.— 
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(i) TREATMENT
OF
UNINSURED.— 
Such methodology shall treat as uninsured 
those residents who do not have health in-
surance coverage or other creditable cov-
erage (as defined in section 9801(c)(1) of 
the Internal Revenue Code of 1986), ex-
cept that such methodology shall rely upon 
data on the nonelderly and uninsured pop-
ulations within each State in such year 
provided through population surveys con-
ducted by Federal agencies. 
(ii) LIMITATION TO NONELDERLY.— 
Such methodology shall exclude individuals 
who are 65 years of age or older. 
(iii) 
EXCLUSION
OF
ILLEGAL 
ALIENS.—Such methodology shall exclude 
individuals not lawfully present in the 
United States. 
(6) CONDITIONS OF PAYMENT.—As a condition 
of receiving a payment under paragraph (1), a State 
must agree to submit aggregate, non-individually 
identifiable data to the Secretary, in a form and 
manner specified by the Secretary, for use by the 
Secretary in determining the State’s uninsured base-
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ents) through a group health plan maintained by an 
employer who employed on average at least 2 but 
not more than 50 employees on business days during 
a calendar year. 
(6) STATE.—The term ‘‘State’’ means any of 
the 50 States and the District of Columbia. 
(7) YEARS.—The terms ‘‘year 1’’, ‘‘year 2’’, 
‘‘year 3’’, and similar subsequently numbered years 
mean 2012, 2013, 2014, and subsequent sequen-
tially numbered years. 
(d) APPROPRIATIONS; PAYMENTS.— 
(1) PAYMENTS FOR REDUCTIONS IN COST OF 
HEALTH INSURANCE COVERAGE.— 
(A) SMALL GROUP MARKET.— 
(i) IN GENERAL.—From any funds in 
the Treasury not otherwise appropriated, 
there is appropriated for payments under 
subsection (a)(1)(A)— 
(I) $18,000,000,000 with respect 
to performance in year 3; 
(II) $5,000,000,000 with respect 
to performance in year 6; and 
(III) $2,000,000,000 with re-
spect to performance in year 9. 
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(ii) AVAILABILITY OF APPROPRIATED 
FUNDS.—Funds appropriated under clause 
(i) shall remain available until expended. 
(B) INDIVIDUAL MARKET.— 
(i) IN
GENERAL.—Subject to clause 
(ii), from any funds in the Treasury not 
otherwise appropriated, there is appro-
priated for payments under subsection 
(a)(1)(B)— 
(I) $7,000,000,000 with respect 
to performance in year 3; 
(II) $2,000,000,000 with respect 
to performance in year 6; and 
(III) $1,000,000,000 with re-
spect to performance in year 9. 
(ii) AVAILABILITY OF APPROPRIATED 
FUNDS.—Of the funds appropriated under 
clause (i) that are not expended or obli-
gated by the end of the year following the 
year for which the funds are appro-
priated— 
(I) 75 percent shall remain avail-
able until expended for payments 
under subsection (a)(1)(B); and 
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(II) 25 percent shall remain 
available until expended for payments 
under subsection (a)(1)(A). 
(2) PAYMENTS FOR REDUCTIONS IN THE PER-
CENTAGE OF UNINSURED.— 
(A) IN GENERAL.—From any funds in the 
Treasury not otherwise appropriated, there is 
appropriated for payments under subsection 
(b)(1)— 
(i) $10,000,000,000 with respect to 
performance in year 5; 
(ii) $3,000,000,000 with respect to 
performance in year 7; and 
(iii) $2,000,000,000 with respect to 
performance in year 9. 
(B) 
AVAILABILITY
OF
APPROPRIATED 
FUNDS.—Funds appropriated under subpara-
graph (A) shall remain available until expended. 
(3) PAYMENT
TIMING.—Payments under this 
section shall be made in a form and manner speci-
fied by the Secretary in the year after the perform-
ance year involved. 
SEC. 112. HEALTH PLAN FINDERS. 
(a) STATE PLAN FINDERS.—Not later than 12 
months after the date of the enactment of this Act, each 
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State may contract with a private entity to develop and 
operate a plan finder Web site (referred to in this section 
as a ‘‘State plan finder’’) which shall provide information 
to individuals in such State on plans of health insurance 
coverage that are available to individuals in such State (in 
this section referred to as a ‘‘health insurance plan’’). 
Such State may not operate a plan finder itself. 
(b) MULTI-STATE PLAN FINDERS.— 
(1) IN GENERAL.—A private entity may operate 
a multi-State finder that operates under this section 
in the States involved in the same manner as a State 
plan finder would operate in a single State. 
(2) SHARING OF INFORMATION.—States shall 
regulate the manner in which data is shared between 
plan finders to ensure consistency and accuracy in 
the information about health insurance plans con-
tained in such finders. 
(c) REQUIREMENTS FOR PLAN FINDERS.—Each plan 
finder shall meet the following requirements: 
(1) The plan finder shall ensure that each 
health insurance plan in the plan finder meets the 
requirements for such plans under subsection (d). 
(2) The plan finder shall present complete in-
formation on the costs and benefits of health insur-
ance plans (including information on monthly pre-
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mium, copayments, and deductibles) in a uniform 
manner that— 
(A) uses the standard definitions developed 
under paragraph (3); and 
(B) is designed to allow consumers to eas-
ily compare such plans. 
(3) The plan finder shall be available on the 
Internet and accessible to all individuals in the State 
or, in the case of a multi-State plan finder, in all 
States covered by the multi-State plan finder. 
(4) The plan finder shall allow consumers to 
search and sort data on the health insurance plans 
in the plan finder on criteria such as coverage of 
specific benefits (such as coverage of disease man-
agement services or pediatric care services), as well 
as data available on quality. 
(5) The plan finder shall meet all relevant State 
laws and regulations, including laws and regulations 
related to the marketing of insurance products. In 
the case of a multi-State plan finder, the finder shall 
meet such laws and regulations for all of the States 
involved. 
(6) The plan finder shall meet solvency, finan-
cial, and privacy requirements established by the 
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State or States in which the plan finder operates or 
the Secretary for multi-State finders. 
(7) The plan finder and the employees of the 
plan finder shall be appropriately licensed in the 
State or States in which the plan finder operates, if 
such licensure is required by such State or States. 
(8) Notwithstanding subsection (f)(1), the plan 
finder shall assist individuals who are eligible for the 
Medicaid program under title XIX of the Social Se-
curity Act or State Children’s Health Insurance Pro-
gram under title XXI of such Act by including infor-
mation on Medicaid options, eligibility, and how to 
enroll. 
(d) REQUIREMENTS FOR PLANS PARTICIPATING IN 
A PLAN FINDER.— 
(1) IN GENERAL.—Each State shall ensure that 
health insurance plans participating in the State 
plan finder or in a multi-State plan finder meet the 
requirements of paragraph (2) (relating to adequacy 
of insurance coverage, consumer protection, and fi-
nancial strength). 
(2) SPECIFIC
REQUIREMENTS.—In order to 
participate in a plan finder, a health insurance plan 
must meet all of the following requirements, as de-
termined by each State in which such plan operates: 
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(A) The health insurance plan shall be ac-
tuarially sound. 
(B) The health insurance plan may not 
have a history of abusive policy rescissions. 
(C) The health insurance plan shall meet 
financial and solvency requirements. 
(D) The health insurance plan shall dis-
close— 
(i) all financial arrangements involv-
ing the sale and purchase of health insur-
ance, such as the payment of fees and 
commissions; and 
(ii) such arrangements may not be 
abusive. 
(E) The health insurance plan shall main-
tain electronic health records that comply with 
the requirements of the American Recovery and 
Reinvestment Act of 2009 (Public Law 111–5) 
related to electronic health records. 
(F) The health insurance plan shall make 
available to plan enrollees via the finder, wheth-
er by information provided to the finder or by 
a Web site link directing the enrollee from the 
finder to the health insurance plan Web site, 
data that includes the price and cost to the in-
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dividual of services offered by a provider ac-
cording to the terms and conditions of the 
health plan. Data described in this paragraph is 
not made public by the finder, only made avail-
able to the individual once enrolled in the 
health plan. 
(e) PROHIBITIONS.— 
(1) DIRECT
ENROLLMENT.—The State plan 
finder may not directly enroll individuals in health 
insurance plans. 
(2) CONFLICTS OF INTEREST.— 
(A) 
COMPANIES.—A 
health 
insurance 
issuer offering a health insurance plan through 
a plan finder may not— 
(i) be the private entity developing 
and maintaining a plan finder under sub-
sections (a) and (b); or 
(ii) have an ownership interest in such 
private entity or in the plan finder. 
(B) 
INDIVIDUALS.—An 
individual 
em-
ployed by a health insurance issuer offering a 
health insurance plan through a plan finder 
may not serve as a director or officer for— 
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(i) the private entity developing and 
maintaining a plan finder under sub-
sections (a) and (b); or 
(ii) the plan finder. 
(f) CONSTRUCTION.—Nothing in this section shall be 
construed to allow the Secretary authority to regulate ben-
efit packages or to prohibit health insurance brokers and 
agents from— 
(1) utilizing the plan finder for any purpose; or 
(2) marketing or offering health insurance 
products. 
(g) PLAN FINDER DEFINED.—For purposes of this 
section, the term ‘‘plan finder’’ means a State plan finder 
under subsection (a) or a multi-State plan finder under 
subsection (b). 
(h) STATE DEFINED.—In this section, the term 
‘‘State’’ has the meaning given such term for purposes of 
title XIX of the Social Security Act. 
SEC. 113. ADMINISTRATIVE SIMPLIFICATION. 
(a) OPERATING RULES FOR HEALTH INFORMATION 
TRANSACTIONS.— 
(1) DEFINITION OF OPERATING RULES.—Sec-
tion 1171 of the Social Security Act (42 U.S.C. 
1320d) is amended by adding at the end the fol-
lowing: 
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‘‘(9) OPERATING RULES.—The term ‘operating 
rules’ means the necessary business rules and guide-
lines for the electronic exchange of information that 
are not defined by a standard or its implementation 
specifications as adopted for purposes of this part.’’. 
(2) OPERATING
RULES
AND
COMPLIANCE.— 
Section 1173 of the Social Security Act (42 U.S.C. 
1320d–2) is amended— 
(A) in subsection (a)(2), by adding at the 
end the following new subparagraph: 
‘‘(J) Electronic funds transfers.’’; and 
(B) by adding at the end the following new 
subsections: 
‘‘(g) OPERATING RULES.— 
‘‘(1) IN GENERAL.—The Secretary shall adopt 
a single set of operating rules for each transaction 
described in subsection (a)(2) with the goal of cre-
ating as much uniformity in the implementation of 
the electronic standards as possible. Such operating 
rules shall be consensus-based and reflect the nec-
essary business rules affecting health plans and 
health care providers and the manner in which they 
operate pursuant to standards issued under Health 
Insurance Portability and Accountability Act of 
1996. 
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‘‘(2) OPERATING
RULES
DEVELOPMENT.—In 
adopting operating rules under this subsection, the 
Secretary shall rely on recommendations for oper-
ating rules developed by a qualified nonprofit entity, 
as selected by the Secretary, that meets the fol-
lowing requirements: 
‘‘(A) The entity focuses its mission on ad-
ministrative simplification. 
‘‘(B) The entity demonstrates an estab-
lished multi-stakeholder and consensus-based 
process for development of operating rules, in-
cluding representation by or participation from 
health plans, health care providers, vendors, rel-
evant Federal agencies, and other standard de-
velopment organizations. 
‘‘(C) The entity has established a public 
set of guiding principles that ensure the oper-
ating rules and process are open and trans-
parent. 
‘‘(D) The entity coordinates its activities 
with the HIT Policy Committee and the HIT 
Standards Committee (as established under 
title XXX of the Public Health Service Act) 
and complements the efforts of the Office of the 
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National Healthcare Coordinator and its related 
health information exchange goals. 
‘‘(E) The entity incorporates national 
standards, including the transaction standards 
issued under Health Insurance Portability and 
Accountability Act of 1996. 
‘‘(F) The entity supports nondiscrimina-
tion and conflict of interest policies that dem-
onstrate a commitment to open, fair, and non-
discriminatory practices. 
‘‘(G) The entity allows for public review 
and updates of the operating rules. 
‘‘(3) REVIEW
AND
RECOMMENDATIONS.—The 
National Committee on Vital and Health Statistics 
shall— 
‘‘(A) review the operating rules developed 
by a nonprofit entity described under paragraph 
(2); 
‘‘(B) determine whether such rules rep-
resent a consensus view of the health care in-
dustry and are consistent with and do not alter 
current standards; 
‘‘(C) evaluate whether such rules are con-
sistent with electronic standards adopted for 
health information technology; and 
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‘‘(D) submit to the Secretary a rec-
ommendation as to whether the Secretary 
should adopt such rules. 
‘‘(4) IMPLEMENTATION.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
adopt operating rules under this subsection, by 
regulation in accordance with subparagraph 
(C), following consideration of the rules devel-
oped by the non-profit entity described in para-
graph (2) and the recommendation submitted 
by the National Committee on Vital and Health 
Statistics under paragraph (3)(D) and having 
ensured consultation with providers. 
‘‘(B) ADOPTION
REQUIREMENTS; EFFEC-
TIVE DATES.— 
‘‘(i) ELIGIBILITY
FOR
A
HEALTH 
PLAN AND HEALTH CLAIM STATUS.—The 
set of operating rules for transactions for 
eligibility for a health plan and health 
claim status shall be adopted not later 
than July 1, 2011, in a manner ensuring 
that such rules are effective not later than 
January 1, 2013, and may allow for the 
use of a machine readable identification 
card. 
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‘‘(ii) ELECTRONIC FUNDS TRANSFERS 
AND HEALTH CARE PAYMENT AND REMIT-
TANCE
ADVICE.—The set of operating 
rules for electronic funds transfers and 
health care payment and remittance advice 
shall be adopted not later than July 1, 
2012, in a manner ensuring that such 
rules are effective not later than January 
1, 2014. 
‘‘(iii) OTHER
COMPLETED
TRANS-
ACTIONS.—The set of operating rules for 
the remainder of the completed trans-
actions described in subsection (a)(2), in-
cluding health claims or equivalent encoun-
ter 
information, 
enrollment 
and 
disenrollment in a health plan, health plan 
premium payments, and referral certifi-
cation and authorization, shall be adopted 
not later than July 1, 2014, in a manner 
ensuring that such rules are effective not 
later than January 1, 2016. 
‘‘(C) EXPEDITED RULEMAKING.—The Sec-
retary shall promulgate an interim final rule 
applying any standard or operating rule rec-
ommended by the National Committee on Vital 
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and Health Statistics pursuant to paragraph 
(3). The Secretary shall accept public comments 
on any interim final rule published under this 
subparagraph for 60 days after the date of such 
publication. 
‘‘(h) COMPLIANCE.— 
‘‘(1) HEALTH PLAN CERTIFICATION.— 
‘‘(A) ELIGIBILITY FOR A HEALTH PLAN, 
HEALTH
CLAIM
STATUS, ELECTRONIC
FUNDS 
TRANSFERS, HEALTH CARE PAYMENT AND RE-
MITTANCE ADVICE.—Not later than December 
31, 2013, a health plan shall file a statement 
with the Secretary, in such form as the Sec-
retary may require, certifying that the data and 
information systems for such plan are in com-
pliance with any applicable standards (as de-
scribed under paragraph (7) of section 1171) 
and operating rules (as described under para-
graph (9) of such section) for electronic funds 
transfers, eligibility for a health plan, health 
claim status, and health care payment and re-
mittance advice, respectively. 
‘‘(B) 
OTHER
COMPLETED
TRANS-
ACTIONS.—Not later than December 31, 2015, 
a health plan shall file a statement with the 
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Secretary, in such form as the Secretary may 
require, certifying that the data and informa-
tion systems for such plan are in compliance 
with any applicable standards and operating 
rules for the remainder of the completed trans-
actions described in subsection (a)(2), including 
health claims or equivalent encounter informa-
tion, enrollment and disenrollment in a health 
plan, health plan premium payments, and refer-
ral certification and authorization, respectively. 
A health plan shall provide the same level of 
documentation to certify compliance with such 
transactions as is required to certify compliance 
with the transactions specified in subparagraph 
(A). 
‘‘(2) DOCUMENTATION
OF
COMPLIANCE.—A 
health plan shall provide the Secretary, in such form 
as the Secretary may require, with adequate docu-
mentation of compliance with the standards and op-
erating rules described under paragraph (1). A 
health plan shall not be considered to have provided 
adequate documentation and shall not be certified as 
being in compliance with such standards, unless the 
health plan— 
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‘‘(A) demonstrates to the Secretary that 
the plan conducts the electronic transactions 
specified in paragraph (1) in a manner that 
fully complies with the regulations of the Sec-
retary; and 
‘‘(B) provides documentation showing that 
the plan has completed end-to-end testing for 
such transactions with their partners, such as 
hospitals and physicians. 
‘‘(3) SERVICE CONTRACTS.—A health plan shall 
be required to comply with any applicable certifi-
cation and compliance requirements (and provide the 
Secretary with adequate documentation of such com-
pliance) under this subsection for any entities that 
provide services pursuant to a contract with such 
health plan. 
‘‘(4) CERTIFICATION
BY
OUTSIDE
ENTITY.— 
The Secretary may contract with an independent, 
outside entity to certify that a health plan has com-
plied with the requirements under this subsection, 
provided that the certification standards employed 
by such entities are in accordance with any stand-
ards or rules issued by the Secretary. 
‘‘(5) COMPLIANCE WITH REVISED STANDARDS 
AND RULES.—A health plan (including entities de-
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scribed under paragraph (3)) shall comply with the 
certification and documentation requirements under 
this subsection for any interim final rule promul-
gated by the Secretary under subsection (i) that 
amends any standard or operating rule described 
under paragraph (1) of this subsection. A health 
plan shall comply with such requirements not later 
than the effective date of the applicable interim final 
rule. 
‘‘(6) AUDITS
OF
HEALTH
PLANS.—The Sec-
retary shall conduct periodic audits to ensure that 
health plans (including entities described under 
paragraph (3)) are in compliance with any standards 
and operating rules that are described under para-
graph (1). 
‘‘(i) REVIEW AND AMENDMENT OF STANDARDS AND 
RULES.— 
‘‘(1) ESTABLISHMENT.—Not later than Janu-
ary 1, 2014, the Secretary shall establish a review 
committee (as described under paragraph (4)). 
‘‘(2) EVALUATIONS AND REPORTS.— 
‘‘(A) HEARINGS.—Not later than April 1, 
2014, and not less than biennially thereafter, 
the Secretary, acting through the review com-
mittee, shall conduct hearings to evaluate and 
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review the existing standards and operating 
rules established under this section. 
‘‘(B) REPORT.—Not later than July 1, 
2014, and not less than biennially thereafter, 
the 
review 
committee 
shall 
provide 
rec-
ommendations for updating and improving such 
standards and rules. The review committee 
shall recommend a single set of operating rules 
per transaction standard and maintain the goal 
of creating as much uniformity as possible in 
the implementation of the electronic standards. 
‘‘(3) INTERIM FINAL RULEMAKING.— 
‘‘(A) IN GENERAL.—Any recommendations 
to amend existing standards and operating 
rules that have been approved by the review 
committee and reported to the Secretary under 
paragraph (2)(B) shall be adopted by the Sec-
retary through promulgation of an interim final 
rule not later than 90 days after receipt of the 
committee’s report. 
‘‘(B) PUBLIC COMMENT.— 
‘‘(i) PUBLIC COMMENT PERIOD.—The 
Secretary shall accept public comments on 
any interim final rule published under this 
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paragraph for 60 days after the date of 
such publication. 
‘‘(ii) EFFECTIVE DATE.—The effective 
date of any amendment to existing stand-
ards or operating rules that is adopted 
through an interim final rule published 
under this paragraph shall be 25 months 
following the close of such public comment 
period. 
‘‘(4) REVIEW COMMITTEE.— 
‘‘(A) DEFINITION.—For the purposes of 
this subsection, the term ‘review committee’ 
means a committee within the Department of 
Health and Human services that has been des-
ignated by the Secretary to carry out this sub-
section, including— 
‘‘(i) the National Committee on Vital 
and Health Statistics; or 
‘‘(ii) any appropriate committee as de-
termined by the Secretary. 
‘‘(B) COORDINATION
OF
HIT
STAND-
ARDS.—In developing recommendations under 
this subsection, the review committee shall con-
sider the standards approved by the Office of 
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the National Coordinator for Health Informa-
tion Technology. 
‘‘(j) PENALTIES.— 
‘‘(1) PENALTY FEE.— 
‘‘(A) IN GENERAL.—Not later than April 
1, 2014, and annually thereafter, the Secretary 
shall assess a penalty fee (as determined under 
subparagraph (B)) against a health plan that 
has failed to meet the requirements under sub-
section (h) with respect to certification and doc-
umentation of compliance with the standards 
(and their operating rules) as described under 
paragraph (1) of such subsection. 
‘‘(B) FEE AMOUNT.—Subject to subpara-
graphs (C), (D), and (E), the Secretary shall 
assess a penalty fee against a health plan in the 
amount of $1 per covered life until certification 
is complete. The penalty shall be assessed per 
person covered by the plan for which its data 
systems for major medical policies are not in 
compliance and shall be imposed against the 
health plan for each day that the plan is not in 
compliance with the requirements under sub-
section (h). 
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‘‘(C) ADDITIONAL
PENALTY
FOR
MIS-
REPRESENTATION.—A health plan that know-
ingly provides inaccurate or incomplete informa-
tion in a statement of certification or docu-
mentation of compliance under subsection (h) 
shall be subject to a penalty fee that is double 
the amount that would otherwise be imposed 
under this subsection. 
‘‘(D) 
ANNUAL
FEE
INCREASE.—The 
amount of the penalty fee imposed under this 
subsection shall be increased on an annual basis 
by the annual percentage increase in total na-
tional health care expenditures, as determined 
by the Secretary. 
‘‘(E) PENALTY LIMIT.—A penalty fee as-
sessed against a health plan under this sub-
section shall not exceed, on an annual basis— 
‘‘(i) an amount equal to $20 per cov-
ered life under such plan; or 
‘‘(ii) an amount equal to $40 per cov-
ered life under the plan if such plan has 
knowingly provided inaccurate or incom-
plete information (as described under sub-
paragraph (C)). 
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‘‘(F) DETERMINATION OF COVERED INDI-
VIDUALS.—The Secretary shall determine the 
number of covered lives under a health plan 
based upon the most recent statements and fil-
ings that have been submitted by such plan to 
the Securities and Exchange Commission. 
‘‘(2) NOTICE AND DISPUTE PROCEDURE.—The 
Secretary shall establish a procedure for assessment 
of penalty fees under this subsection that provides a 
health plan with reasonable notice and a dispute res-
olution procedure prior to provision of a notice of as-
sessment by the Secretary of the Treasury (as de-
scribed under paragraph (4)(B)). 
‘‘(3) PENALTY FEE REPORT.—Not later than 
December 1, 2015, and annually thereafter, the Sec-
retary shall provide the Secretary of the Treasury 
with a report identifying those health plans that 
have been assessed a penalty fee under this sub-
section. 
‘‘(4) COLLECTION OF PENALTY FEE.— 
‘‘(A) IN GENERAL.—The Secretary of the 
Treasury, acting through the Financial Man-
agement Service, shall administer the collection 
of penalty fees from health plans that have been 
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identified by the Secretary in the penalty fee re-
port provided under paragraph (3). 
‘‘(B) NOTICE.—Not later than August 1, 
2014, and annually thereafter, the Secretary of 
the Treasury shall provide notice to each health 
plan that has been assessed a penalty fee by the 
Secretary under this subsection. Such notice 
shall include the amount of the penalty fee as-
sessed by the Secretary and the due date for 
payment of such fee to the Secretary of the 
Treasury (as described in subparagraph (C)). 
‘‘(C) PAYMENT DUE DATE.—Payment by a 
health plan for a penalty fee assessed under 
this subsection shall be made to the Secretary 
of the Treasury not later than November 1, 
2014, and annually thereafter. 
‘‘(D) 
UNPAID
PENALTY
FEES.—Any 
amount of a penalty fee assessed against a 
health plan under this subsection for which pay-
ment has not been made by the due date pro-
vided under subparagraph (C) shall be— 
‘‘(i) increased by the interest accrued 
on such amount, as determined pursuant 
to the underpayment rate established 
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under section 6601 of the Internal Rev-
enue Code of 1986; and 
‘‘(ii) treated as a past-due, legally en-
forceable debt owed to a Federal agency 
for purposes of section 6402(d) of the In-
ternal Revenue Code of 1986. 
‘‘(E) ADMINISTRATIVE
FEES.—Any fee 
charged or allocated for collection activities con-
ducted by the Financial Management Service 
will be passed on to a health plan on a pro-rata 
basis and added to any penalty fee collected 
from the plan.’’. 
(b) PROMULGATION OF RULES.— 
(1) UNIQUE HEALTH PLAN IDENTIFIER.—The 
Secretary shall promulgate a final rule to establish 
a unique health plan identifier (as described in sec-
tion 1173(b) of the Social Security Act (42 U.S.C. 
1320d–2(b))) based on the input of the National 
Committee of Vital and Health Statistics. The Sec-
retary may do so on an interim final basis and such 
rule shall be effective not later than October 1, 
2012. 
(2) ELECTRONIC FUNDS TRANSFER.—The Sec-
retary shall promulgate a final rule to establish a 
standard for electronic funds transfers (as described 
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in section 1173(a)(2)(J) of the Social Security Act, 
as added by subsection (a)(2)(A)). The Secretary 
may do so on an interim final basis and shall adopt 
such standard not later than January 1, 2012, in a 
manner ensuring that such standard is effective not 
later than January 1, 2014. 
(c) EXPANSION OF ELECTRONIC TRANSACTIONS IN 
MEDICARE.—Section 1862(a) of the Social Security Act 
(42 U.S.C. 1395y(a)) is amended— 
(1) in paragraph (23), by striking the ‘‘or’’ at 
the end; 
(2) in paragraph (24), by striking the period 
and inserting ‘‘; or’’; and 
(3) by inserting after paragraph (24) the fol-
lowing new paragraph: 
‘‘(25) not later than January 1, 2014, for 
which the payment is other than by electronic funds 
transfer (EFT) or an electronic remittance in a form 
as specified in ASC X12 835 Health Care Payment 
and Remittance Advice or subsequent standard.’’. 
(d) MEDICARE
AND MEDICAID COMPLIANCE RE-
PORTS.—Not later than July 1, 2013, the Secretary of 
Health and Human Services shall submit a report to the 
chairs and ranking members of the Committee on Ways 
and Means and the Committee on Energy and Commerce 
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of the House of Representatives and the chairs and rank-
ing members of the Committee on Health, Education, 
Labor, and Pensions and the Committee on Finance of 
the Senate on the extent to which the Medicare program 
and providers that serve beneficiaries under that program, 
and State Medicaid programs and providers that serve 
beneficiaries under those programs, transact electronically 
in accordance with transaction standards issued under the 
Health Insurance Portability and Accountability Act of 
1996, part C of title XI of the Social Security Act, and 
regulations promulgated under such Acts. 
DIVISION B—IMPROVING 
ACCESS TO HEALTH CARE 
TITLE 
I—EXPANDING 
ACCESS 
AND LOWERING COSTS FOR 
SMALL BUSINESSES 
SEC. 
201. 
RULES 
GOVERNING 
ASSOCIATION 
HEALTH 
PLANS. 
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 is amend-
ed by adding after part 7 the following new part: 
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‘‘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 
whose sponsor is (or is deemed under this part to be) de-
scribed 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 or providing 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 in the sponsor; and 
‘‘(3) does not condition membership, such dues 
or payments, or coverage under the plan on the 
basis of health status-related factors with respect to 
the employees of its members (or affiliated mem-
bers), or the dependents of such employees, and does 
not condition such dues or payments on the basis of 
group health plan participation. 
Any sponsor consisting of an association of entities which 
meet the requirements of paragraphs (1), (2), and (3) 
shall be deemed to be a sponsor described in this sub-
section. 
‘‘SEC. 
802. 
CERTIFICATION 
OF 
ASSOCIATION 
HEALTH 
PLANS. 
‘‘(a) IN GENERAL.—The applicable authority shall 
prescribe by regulation a procedure under which, subject 
to subsection (b), the applicable authority shall certify as-
sociation health plans which apply for certification as 
meeting the requirements of this part. 
‘‘(b) STANDARDS.—Under the procedure prescribed 
pursuant to subsection (a), in the case of an association 
health plan that provides at least one benefit option which 
does not consist of health insurance coverage, the applica-
ble authority shall certify such plan as meeting the re-
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quirements of this part only if the applicable authority is 
satisfied that the applicable requirements of this part are 
met (or, upon the date on which the plan is to commence 
operations, will be met) with respect to the plan. 
‘‘(c) REQUIREMENTS APPLICABLE
TO CERTIFIED 
PLANS.—An association health plan with respect to which 
certification under this part is in effect shall meet the ap-
plicable requirements of this part, effective on the date 
of certification (or, if later, on the date on which the plan 
is to commence operations). 
‘‘(d) REQUIREMENTS
FOR
CONTINUED
CERTIFI-
CATION.—The applicable authority may provide by regula-
tion for continued certification of association health plans 
under this part. 
‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED 
PLANS.—The applicable authority shall establish a class 
certification procedure for association health plans under 
which all benefits consist of health insurance coverage. 
Under such procedure, the applicable authority shall pro-
vide for the granting of certification under this part to 
the plans in each class of such association health plans 
upon appropriate filing under such procedure in connec-
tion with plans in such class and payment of the pre-
scribed fee under section 807(a). 
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‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION 
HEALTH PLANS.—An association health plan which offers 
one or more benefit options which do not consist of health 
insurance coverage may be certified under this part only 
if such plan consists of any of the following: 
‘‘(1) a plan which offered such coverage on the 
date of the enactment of the Small Business Health 
Fairness Act of 2011, 
‘‘(2) a plan under which the sponsor does not 
restrict membership to one or more trades and busi-
nesses or industries and whose eligible participating 
employers represent a broad cross-section of trades 
and businesses or industries, or 
‘‘(3) a plan whose eligible participating employ-
ers represent one or more trades or businesses, or 
one or more industries, consisting of any of the fol-
lowing: agriculture; equipment and automobile deal-
erships; barbering and cosmetology; certified public 
accounting practices; child care; construction; dance, 
theatrical and orchestra productions; disinfecting 
and pest control; financial services; fishing; food 
service establishments; hospitals; labor organiza-
tions; logging; manufacturing (metals); mining; med-
ical and dental practices; medical laboratories; pro-
fessional consulting services; sanitary services; trans-
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portation (local and freight); warehousing; whole-
saling/distributing; or any other trade or business or 
industry which has been indicated as having average 
or above-average risk or health claims experience by 
reason of State rate filings, denials of coverage, pro-
posed premium rate levels, or other means dem-
onstrated by such plan in accordance with regula-
tions. 
‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 
BOARDS OF TRUSTEES. 
‘‘(a) SPONSOR.—The requirements of this subsection 
are met with respect to an association health plan if 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. 
‘‘(b) BOARD OF TRUSTEES.—The requirements of 
this subsection are met with respect to an association 
health plan if the following requirements are met: 
‘‘(1) FISCAL CONTROL.—The plan is operated, 
pursuant to a trust agreement, by a board of trust-
ees which has complete fiscal control over the plan 
and which is responsible for all operations of the 
plan. 
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‘‘(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 
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. 
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‘‘(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, 
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 an association 
health plan which is in existence on the 
date of the enactment of the Small Busi-
ness Health Fairness Act of 2011. 
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‘‘(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 a service provider to administer the 
day-to-day affairs of the plan. 
‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 
the case of a group health plan which is established and 
maintained by a franchiser for a franchise network con-
sisting of its franchisees— 
‘‘(1) the requirements of subsection (a) and sec-
tion 801(a) shall be deemed met if such require-
ments would otherwise be met if the franchiser were 
deemed to be the sponsor referred to in section 
801(b), such network were deemed to be an associa-
tion described in section 801(b), and each franchisee 
were deemed to be a member (of the association and 
the sponsor) referred to in section 801(b); and 
‘‘(2) the requirements of section 804(a)(1) shall 
be deemed met. 
The Secretary may by regulation define for purposes of 
this subsection the terms ‘franchiser’, ‘franchise network’, 
and ‘franchisee’. 
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‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE-
MENTS. 
‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 
requirements of this subsection are met with respect to 
an association health plan if, under the terms of the 
plan— 
‘‘(1) each participating employer must be— 
‘‘(A) a member of the sponsor, 
‘‘(B) the sponsor, or 
‘‘(C) an affiliated member of the sponsor 
with respect to which the requirements of sub-
section (b) are met, 
except that, in the case of a sponsor which is a pro-
fessional association or other individual-based asso-
ciation, if at least one of the officers, directors, or 
employees of an employer, or at least one of the in-
dividuals who are partners in an employer and who 
actively participates in the business, is a member or 
such an affiliated member of the sponsor, partici-
pating employers may also include such employer; 
and 
‘‘(2) all individuals commencing coverage under 
the plan after certification under this part must 
be— 
‘‘(A) active or retired owners (including 
self-employed individuals), officers, directors, or 
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employees of, or partners in, participating em-
ployers; or 
‘‘(B) the beneficiaries of individuals de-
scribed in subparagraph (A). 
‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM-
PLOYEES.—In the case of an association health plan in 
existence on the date of the enactment of the Small Busi-
ness Health Fairness Act of 2011, an affiliated member 
of the sponsor of the plan may be offered coverage under 
the plan as a participating employer only if— 
‘‘(1) the affiliated member was an affiliated 
member on the date of certification under this part; 
or 
‘‘(2) during the 12-month period preceding the 
date of the offering of such coverage, the affiliated 
member has not maintained or contributed to a 
group health plan with respect to any of its employ-
ees who would otherwise be eligible to participate in 
such association health plan. 
‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re-
quirements of this subsection are met with respect to an 
association health plan if, under the terms of the plan, 
no participating employer may provide health insurance 
coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
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contemporaneously provided to employees of the employer 
under the plan, if such exclusion of the employee from cov-
erage under the plan is based on a health status-related 
factor with respect to the employee and such employee 
would, but for such exclusion on such basis, be eligible 
for coverage under the plan. 
‘‘(d) PROHIBITION
OF DISCRIMINATION AGAINST 
EMPLOYERS
AND EMPLOYEES ELIGIBLE TO PARTICI-
PATE.—The requirements of this subsection are met with 
respect to an association health plan if— 
‘‘(1) under the terms of the plan, 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) upon request, any employer eligible to par-
ticipate is furnished information regarding all cov-
erage options available under the plan; and 
‘‘(3) the applicable requirements of sections 
701, 702, and 703 are met with respect to the plan. 
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‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 
DOCUMENTS, CONTRIBUTION RATES, AND 
BENEFIT OPTIONS. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if the 
following requirements are met: 
‘‘(1) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the plan in-
clude a written instrument, meeting the require-
ments of an instrument required under section 
402(a)(1), which— 
‘‘(A) provides that the board of trustees 
serves as the named fiduciary required for plans 
under section 402(a)(1) and serves in the ca-
pacity of a plan administrator (referred to in 
section 3(16)(A)); 
‘‘(B) provides that the sponsor of the plan 
is to serve as plan sponsor (referred to in sec-
tion 3(16)(B)); and 
‘‘(C) incorporates the requirements of sec-
tion 806. 
‘‘(2) CONTRIBUTION
RATES
MUST
BE
NON-
DISCRIMINATORY.— 
‘‘(A) The contribution rates for any par-
ticipating small employer do not vary on the 
basis of any health status-related factor in rela-
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tion to employees of such employer or their 
beneficiaries and do not vary on the basis of the 
type of business or industry in which such em-
ployer is engaged. 
‘‘(B) Nothing in this title or any other pro-
vision of law shall be construed to preclude an 
association health plan, or a health insurance 
issuer offering health insurance coverage in 
connection with an association health plan, 
from— 
‘‘(i) setting contribution rates based 
on the claims experience of the plan; or 
‘‘(ii) varying contribution rates for 
small employers in a State to the extent 
that such rates could vary using the same 
methodology employed in such State for 
regulating premium rates in the small 
group market with respect to health insur-
ance coverage offered in connection with 
bona fide associations (within the meaning 
of section 2791(d)(3) of the Public Health 
Service Act), 
subject to the requirements of section 702(b) 
relating to contribution rates. 
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‘‘(3) FLOOR FOR NUMBER OF COVERED INDI-
VIDUALS
WITH
RESPECT
TO
CERTAIN
PLANS.—If 
any benefit option under the plan does not consist 
of health insurance coverage, the plan has as of the 
beginning of the plan year not fewer than 1,000 par-
ticipants and beneficiaries. 
‘‘(4) MARKETING REQUIREMENTS.— 
‘‘(A) IN
GENERAL.—If a benefit option 
which consists of health insurance coverage is 
offered under the plan, State-licensed insurance 
agents shall be used to distribute to small em-
ployers coverage which does not consist of 
health insurance coverage in a manner com-
parable to the manner in which such agents are 
used to distribute health insurance coverage. 
‘‘(B) 
STATE-LICENSED
INSURANCE 
AGENTS.—For purposes of subparagraph (A), 
the term ‘State-licensed insurance agents’ 
means one or more agents who are licensed in 
a State and are subject to the laws of such 
State relating to licensure, qualification, test-
ing, examination, and continuing education of 
persons authorized to offer, sell, or solicit 
health insurance coverage in such State. 
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‘‘(5) 
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 ASSOCIATION HEALTH PLANS TO 
DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 
nothing in this part or any provision of State law (as de-
fined in section 514(c)(1)) shall be construed to preclude 
an association health plan, or a health insurance issuer 
offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion 
in selecting the specific items and services consisting of 
medical care to be included as benefits under such plan 
or coverage, except (subject to section 514) in the case 
of (1) any law to the extent that it is not preempted under 
section 731(a)(1) with respect to matters governed by sec-
tion 711, 712, or 713, or (2) any law of the State with 
which filing and approval of a policy type offered by the 
plan was initially obtained to the extent that such law pro-
hibits an exclusion of a specific disease from such cov-
erage. 
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‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 
FOR 
SOLVENCY 
FOR 
PLANS 
PROVIDING 
HEALTH BENEFITS IN ADDITION TO HEALTH 
INSURANCE COVERAGE. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if— 
‘‘(1) the benefits under the plan consist solely 
of health insurance coverage; or 
‘‘(2) if the plan provides any additional benefit 
options which do not consist of health insurance cov-
erage, the plan— 
‘‘(A) establishes and maintains reserves 
with respect to such additional benefit options, 
in amounts recommended by the qualified actu-
ary, consisting of— 
‘‘(i) a reserve sufficient for unearned 
contributions; 
‘‘(ii) a reserve sufficient for benefit li-
abilities which have been incurred, which 
have not been satisfied, and for which risk 
of loss has not yet been transferred, and 
for expected administrative costs with re-
spect to such benefit liabilities; 
‘‘(iii) a reserve sufficient for any other 
obligations of the plan; and 
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‘‘(iv) a reserve sufficient for a margin 
of error and other fluctuations, taking into 
account the specific circumstances of the 
plan; and 
‘‘(B) establishes and maintains aggregate 
and specific excess/stop loss insurance and sol-
vency indemnification, with respect to such ad-
ditional benefit options for which risk of loss 
has not yet been transferred, as follows: 
‘‘(i) The plan shall secure aggregate 
excess/stop loss insurance for the plan with 
an attachment point which is not greater 
than 125 percent of expected gross annual 
claims. The applicable authority may by 
regulation provide for upward adjustments 
in the amount of such percentage in speci-
fied circumstances in which the plan spe-
cifically provides for and maintains re-
serves in excess of the amounts required 
under subparagraph (A). 
‘‘(ii) The plan shall secure specific ex-
cess/stop loss insurance for the plan with 
an attachment point which is at least equal 
to an amount recommended by the plan’s 
qualified actuary. The applicable authority 
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may by regulation provide for adjustments 
in the amount of such insurance in speci-
fied circumstances in which the plan spe-
cifically provides for and maintains re-
serves in excess of the amounts required 
under subparagraph (A). 
‘‘(iii) The plan shall secure indem-
nification insurance for any claims which 
the plan is unable to satisfy by reason of 
a plan termination. 
Any person issuing to a plan insurance described in clause 
(i), (ii), or (iii) of subparagraph (B) shall notify the Sec-
retary of any failure of premium payment meriting can-
cellation of the policy prior to undertaking such a cancella-
tion. Any regulations prescribed by the applicable author-
ity pursuant to clause (i) or (ii) of subparagraph (B) may 
allow for such adjustments in the required levels of excess/ 
stop loss insurance as the qualified actuary may rec-
ommend, taking into account the specific circumstances 
of the plan. 
‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS 
RESERVES.—In the case of any association health plan de-
scribed in subsection (a)(2), the requirements of this sub-
section are met if the plan establishes and maintains sur-
plus in an amount at least equal to— 
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‘‘(1) $500,000, or 
‘‘(2) such greater amount (but not greater than 
$2,000,000) as may be set forth in regulations pre-
scribed by the applicable authority, considering the 
level of aggregate and specific excess/stop loss insur-
ance provided with respect to such plan and other 
factors related to solvency risk, such as the plan’s 
projected levels of participation or claims, the nature 
of the plan’s liabilities, and the types of assets avail-
able to assure that such liabilities are met. 
‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 
any association health plan described in subsection (a)(2), 
the applicable authority may provide such additional re-
quirements relating to reserves, excess/stop loss insurance, 
and indemnification insurance as the applicable authority 
considers appropriate. Such requirements may be provided 
by regulation with respect to any such plan or any class 
of such plans. 
‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR-
ANCE.—The applicable authority may provide for adjust-
ments to the levels of reserves otherwise required under 
subsections (a) and (b) with respect to any plan or class 
of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans. 
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‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 
applicable authority may permit an association health plan 
described in subsection (a)(2) to substitute, for all or part 
of the requirements of this section (except subsection 
(a)(2)(B)(iii)), such security, guarantee, hold-harmless ar-
rangement, or other financial arrangement as the applica-
ble authority determines to be adequate to enable the plan 
to fully meet all its financial obligations on a timely basis 
and is otherwise no less protective of the interests of par-
ticipants and beneficiaries than the requirements for 
which it is substituted. The applicable authority may take 
into account, for purposes of this subsection, evidence pro-
vided by the plan or sponsor which demonstrates an as-
sumption of liability with respect to the plan. Such evi-
dence may be in the form of a contract of indemnification, 
lien, bonding, insurance, letter of credit, recourse under 
applicable terms of the plan in the form of assessments 
of participating employers, security, or other financial ar-
rangement. 
‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT 
OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 
‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO-
CIATION HEALTH PLAN FUND.— 
‘‘(A) IN GENERAL.—In the case of an as-
sociation health plan described in subsection 
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(a)(2), the requirements of this subsection are 
met if the plan makes payments into the Asso-
ciation Health Plan Fund under this subpara-
graph when they are due. Such payments shall 
consist of annual payments in the amount of 
$5,000, and, in addition to such annual pay-
ments, such supplemental payments as the Sec-
retary may determine to be necessary under 
paragraph (2). Payments under this paragraph 
are payable to the Fund at the time determined 
by the Secretary. Initial payments are due in 
advance of certification under this part. Pay-
ments shall continue to accrue until a plan’s as-
sets are distributed pursuant to a termination 
procedure. 
‘‘(B) PENALTIES FOR FAILURE TO MAKE 
PAYMENTS.—If any payment is not made by a 
plan when it is due, a late payment charge of 
not more than 100 percent of the payment 
which was not timely paid shall be payable by 
the plan to the Fund. 
‘‘(C) CONTINUED
DUTY
OF
THE
SEC-
RETARY.—The Secretary shall not cease to 
carry out the provisions of paragraph (2) on ac-
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count of the failure of a plan to pay any pay-
ment when due. 
‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE 
EXCESS/STOP LOSS INSURANCE COVERAGE AND IN-
DEMNIFICATION
INSURANCE
COVERAGE
FOR
CER-
TAIN PLANS.—In any case in which the applicable 
authority determines that there is, or that there is 
reason to believe that there will be: (A) a failure to 
take necessary corrective actions under section 
809(a) with respect to an association health plan de-
scribed in subsection (a)(2); or (B) a termination of 
such a plan under section 809(b) or 810(b)(8) (and, 
if the applicable authority is not the Secretary, cer-
tifies such determination to the Secretary), the Sec-
retary shall determine the amounts necessary to 
make payments to an insurer (designated by the 
Secretary) to maintain in force excess/stop loss in-
surance coverage or indemnification insurance cov-
erage for such plan, if the Secretary determines that 
there is a reasonable expectation that, without such 
payments, claims would not be satisfied by reason of 
termination of such coverage. The Secretary shall, to 
the extent provided in advance in appropriation 
Acts, pay such amounts so determined to the insurer 
designated by the Secretary. 
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‘‘(3) ASSOCIATION HEALTH PLAN FUND.— 
‘‘(A) IN GENERAL.—There is established 
on the books of the Treasury a fund to be 
known as the ‘Association Health Plan Fund’. 
The Fund shall be available for making pay-
ments pursuant to paragraph (2). The Fund 
shall be credited with payments received pursu-
ant to paragraph (1)(A), penalties received pur-
suant to paragraph (1)(B); and earnings on in-
vestments of amounts of the Fund under sub-
paragraph (B). 
‘‘(B) INVESTMENT.—Whenever the Sec-
retary determines that the moneys of the fund 
are in excess of current needs, the Secretary 
may request the investment of such amounts as 
the Secretary determines advisable by the Sec-
retary of the Treasury in obligations issued or 
guaranteed by the United States. 
‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 
of this section— 
‘‘(1) AGGREGATE
EXCESS/STOP
LOSS
INSUR-
ANCE.—The term ‘aggregate excess/stop loss insur-
ance’ means, in connection with an association 
health plan, a contract— 
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‘‘(A) under which an insurer (meeting such 
minimum standards as the applicable authority 
may prescribe by regulation) provides for pay-
ment to the plan with respect to aggregate 
claims under the plan in excess of an amount 
or amounts specified in such contract; 
‘‘(B) which is guaranteed renewable; and 
‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan. 
‘‘(2) SPECIFIC
EXCESS/STOP
LOSS
INSUR-
ANCE.—The term ‘specific excess/stop loss insur-
ance’ means, in connection with an association 
health plan, a contract— 
‘‘(A) under which an insurer (meeting such 
minimum standards as the applicable authority 
may prescribe by regulation) provides for pay-
ment to the plan with respect to claims under 
the plan in connection with a covered individual 
in excess of an amount or amounts specified in 
such contract in connection with such covered 
individual; 
‘‘(B) which is guaranteed renewable; and 
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‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan. 
‘‘(h) INDEMNIFICATION INSURANCE.—For purposes 
of this section, the term ‘indemnification insurance’ 
means, in connection with an association health plan, a 
contract— 
‘‘(1) under which an insurer (meeting such min-
imum standards as the applicable authority may pre-
scribe by regulation) provides for payment to the 
plan with respect to claims under the plan which the 
plan is unable to satisfy by reason of a termination 
pursuant to section 809(b) (relating to mandatory 
termination); 
‘‘(2) which is guaranteed renewable and 
noncancellable for any reason (except as the applica-
ble authority may prescribe by regulation); and 
‘‘(3) which allows for payment of premiums by 
any third party on behalf of the insured plan. 
‘‘(i) RESERVES.—For purposes of this section, the 
term ‘reserves’ means, in connection with an association 
health plan, plan assets which meet the fiduciary stand-
ards under part 4 and such additional requirements re-
garding liquidity as the applicable authority may prescribe 
by regulation. 
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‘‘(j) SOLVENCY STANDARDS WORKING GROUP.— 
‘‘(1) IN GENERAL.—Within 90 days after the 
date of the enactment of the Small Business Health 
Fairness Act of 2011, the applicable authority shall 
establish a Solvency Standards Working Group. In 
prescribing the initial regulations under this section, 
the applicable authority shall take into account the 
recommendations of such Working Group. 
‘‘(2) MEMBERSHIP.—The Working Group shall 
consist of not more than 15 members appointed by 
the applicable authority. The applicable authority 
shall include among persons invited to membership 
on the Working Group at least one of each of the 
following: 
‘‘(A) a representative of the National Asso-
ciation of Insurance Commissioners; 
‘‘(B) a representative of the American 
Academy of Actuaries; 
‘‘(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 
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‘‘(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 
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. 
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‘‘(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. 
‘‘(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 and contract administrators and other service 
providers. 
‘‘(6) FUNDING REPORT.—In the case of asso-
ciation health plans providing benefits options in ad-
dition to health insurance coverage, a report setting 
forth information with respect to such additional 
benefit options determined as of a date within the 
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120-day period ending with the date of the applica-
tion, including the following: 
‘‘(A) RESERVES.—A statement, certified 
by the board of trustees of the plan, and a 
statement of actuarial opinion, signed by a 
qualified actuary, that all applicable require-
ments of section 806 are or will be met in ac-
cordance with regulations which the applicable 
authority shall prescribe. 
‘‘(B) 
ADEQUACY
OF
CONTRIBUTION 
RATES.—A statement of actuarial opinion, 
signed by a qualified actuary, which sets forth 
a description of the extent to which contribution 
rates are adequate to provide for the payment 
of all obligations and the maintenance of re-
quired reserves under the plan for the 12- 
month period beginning with such date within 
such 120-day period, taking into account the 
expected coverage and experience of the plan. If 
the contribution rates are not fully adequate, 
the statement of actuarial opinion shall indicate 
the extent to which the rates are inadequate 
and the changes needed to ensure adequacy. 
‘‘(C) CURRENT AND PROJECTED VALUE OF 
ASSETS AND LIABILITIES.—A statement of ac-
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tuarial opinion signed by a qualified actuary, 
which sets forth the current value of the assets 
and liabilities accumulated under the plan and 
a projection of the assets, liabilities, income, 
and expenses of the plan for the 12-month pe-
riod referred to in subparagraph (B). The in-
come statement shall identify separately the 
plan’s administrative expenses and claims. 
‘‘(D) 
COSTS
OF
COVERAGE
TO
BE 
CHARGED
AND
OTHER
EXPENSES.—A state-
ment of the costs of coverage to be charged, in-
cluding an itemization of amounts for adminis-
tration, reserves, and other expenses associated 
with the operation of the plan. 
‘‘(E) OTHER
INFORMATION.—Any other 
information as may be determined by the appli-
cable authority, by regulation, as necessary to 
carry out the purposes of this part. 
‘‘(c) FILING
NOTICE
OF
CERTIFICATION
WITH 
STATES.—A certification granted under this part to an 
association health plan shall not be effective unless written 
notice of such certification is filed with the applicable 
State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are 
located. For purposes of this subsection, an individual 
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shall be considered to be located in the State in which a 
known address of such individual is located or in which 
such individual is employed. 
‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case 
of any association health plan certified under this part, 
descriptions of material changes in any information which 
was required to be submitted with the application for the 
certification under this part shall be filed in such form 
and manner as shall be prescribed by the applicable au-
thority by regulation. The applicable authority may re-
quire by regulation prior notice of material changes with 
respect to specified matters which might serve as the basis 
for suspension or revocation of the certification. 
‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS-
SOCIATION HEALTH PLANS.—An association health plan 
certified under this part which provides benefit options in 
addition to health insurance coverage for such plan year 
shall meet the requirements of section 103 by filing an 
annual report under such section which shall include infor-
mation described in subsection (b)(6) with respect to the 
plan year and, notwithstanding section 104(a)(1)(A), shall 
be filed with the applicable authority not later than 90 
days after the close of the plan year (or on such later date 
as may be prescribed by the applicable authority). The ap-
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‘‘(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) PARTICIPATING
EMPLOYER.—The term 
‘participating employer’ means, in connection with 
an association health plan, any employer, if any indi-
vidual who is an employee of such employer, a part-
ner in such employer, or a self-employed individual 
who is such employer (or any dependent, as defined 
under the terms of the plan, of such individual) is 
or was covered under such plan in connection with 
the status of such individual as such an employee, 
VerDate Mar 15 2010 
00:55 Jan 26, 2011
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rfrederick on DSKD9S0YB1PROD with BILLS