‘‘(4) NOTICE OF DETERMINATION.—
‘‘(A) IN
GENERAL.—Written notice of a
determination made under an internal appeal of
a denial of a claim for benefits shall be issued
to the participant or beneficiary (or authorized
representative) and the treating health care
professional not later than 2 days after the
completion of the review (or within the 72-hour
or 24-hour period referred to in paragraph (2)
if applicable).
‘‘(B) FINAL DETERMINATION.—The deter-
mination by a plan or issuer under this sub-
section shall be treated as the final determina-
tion of the plan or issuer on a denial of a claim
for benefits.
‘‘(C) FAILURE TO ACT.—The failure of a
plan or issuer to issue a determination on an
appeal of a denial of a claim for benefits under
this subsection within the applicable timeline
established for such a determination shall be
treated as a final determination on an appeal
of a denial of a claim for benefits for purposes
of proceeding to external review under section
503B.
‘‘(D) REQUIREMENTS
OF
NOTICE.—With
respect to a determination made under this sub-
section, the notice described in subparagraph
(A) shall include—
‘‘(i) the reasons for the determination
(including a summary of the clinical or sci-
entific-evidence based rationale used in
making the determination and instruction
on obtaining a more complete description
written in a manner calculated to be un-
derstood by the average participant);
‘‘(ii) the procedures for obtaining ad-
ditional information concerning the deter-
mination; and
‘‘(iii) notification of the right to an
independent external review under section
503B and instructions on how to initiate
such a review.
‘‘(c) DEFINITIONS.—The definitions contained in sec-
tion 503B(i) shall apply for purposes of this section.
‘‘SEC. 503B. INDEPENDENT EXTERNAL APPEALS PROCE-
DURES FOR GROUP HEALTH PLANS.
‘‘(a) RIGHT TO EXTERNAL APPEAL.—A group health
plan, and a health insurance issuer that offers health in-
surance coverage in connection with a group health plan,
shall provide in accordance with this section participants
and beneficiaries (or authorized representatives) with ac-
cess to an independent external review for any denial of
a claim for benefits.
‘‘(b) INITIATION OF THE INDEPENDENT EXTERNAL
REVIEW PROCESS.—
‘‘(1) TIME TO FILE.—A request for an inde-
pendent external review under this section shall be
filed with the plan or issuer not later than 90 days
after the date on which the participant or bene-
ficiary receives notice of the denial under section
503A(b)(4) or the date on which the internal review
is waived by the plan or issuer under section
503A(b)(1)(D).
‘‘(2) FILING OF REQUEST.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this subsection, a group
health plan, and a health insurance issuer that
offers health insurance coverage in connection
with a group health plan, may—
‘‘(i) except as provided in subpara-
graph (B)(i), require that a request for re-
view be in writing;
‘‘(ii) limit the filing of such a request
to the participant or beneficiary involved
(or an authorized representative);
‘‘(iii) except if waived by the plan or
issuer under section 503A(b)(1)(D), condi-
tion access to an independent external re-
view under this section upon a final deter-
mination of a denial of a claim for benefits
under the internal review procedure under
section 503A;
‘‘(iv) except as provided in subpara-
graph (B)(ii), require payment of a filing
fee to the plan or issuer of a sum that does
not exceed $50; and
‘‘(v) require that a request for review
include the consent of the participant or
beneficiary (or authorized representative)
for the release of medical information or
records of the participant or beneficiary to
the qualified external review entity for pur-
poses of conducting external review activi-
ties.
‘‘(B) REQUIREMENTS AND EXCEPTION RE-
LATING TO GENERAL RULE.—
‘‘(i) ORAL REQUESTS PERMITTED IN
EXPEDITED OR CONCURRENT CASES.—In
the case of an expedited or concurrent ex-
ternal review as provided for under sub-
section (e), the request may be made oral-
ly. In such case a written confirmation of
such request shall be made in a timely
manner. Such written confirmation shall be
treated as a consent for purposes of sub-
paragraph (A)(v).
‘‘(ii) EXCEPTION TO FILING FEE RE-
QUIREMENT.—
‘‘(I) INDIGENCY.—Payment of a
filing fee shall not be required under
subparagraph (A)(iv) where there is a
certification (in a form and manner
specified in guidelines established by
the Secretary) that the participant or
beneficiary is indigent (as defined in
such 
guidelines). 
In 
establishing
guidelines under this subclause, the
Secretary shall ensure that the guide-
lines relating to indigency are con-
sistent with the poverty guidelines
used by the Secretary of Health and
Human Services under title XIX of
the Social Security Act.
‘‘(II) FEE NOT REQUIRED.—Pay-
ment of a filing fee shall not be re-
quired under subparagraph (A)(iv) if
the plan or issuer waives the internal
appeals 
process 
under 
section
503A(b)(1)(D).
‘‘(III) REFUNDING
OF
FEE.—
The filing fee paid under subpara-
graph (A)(iv) shall be refunded if the
determination under the independent
external review is to reverse the denial
which is the subject of the review.
‘‘(IV) INCREASE
IN
AMOUNT.—
The amount referred to in subpara-
graph (A)(iv) shall be increased or de-
creased, for each calendar year that
ends after December 31, 2002, by the
same percentage as the percentage by
which the Consumer Price Index for
All Urban Consumers (United States
city average), published by the Bu-
reau of Labor Statistics, for Sep-
tember of the preceding calendar year
has increased or decreased from the
such Index for September of 2002.
‘‘(c) REFERRAL TO QUALIFIED EXTERNAL REVIEW
ENTITY UPON REQUEST.—
‘‘(1) IN GENERAL.—Upon the filing of a re-
quest for independent external review with the group
health plan, or health insurance issuer that offers
health insurance coverage in connection with a group
health plan, the plan or issuer shall refer such re-
quest to a qualified external review entity selected in
accordance with this section.
‘‘(2) ACCESS TO PLAN OR ISSUER AND HEALTH
PROFESSIONAL INFORMATION.—With respect to an
independent external review conducted under this
section, the participant or beneficiary (or authorized
representative), the plan or issuer, and the treating
health care professional (if any) shall provide the ex-
ternal review entity with access to information re-
quested by the external review entity that is nec-
essary to conduct a review under this section, as de-
termined by the entity, not later than 5 days after
the date on which a request is referred to the quali-
fied external review entity under paragraph (1), or
earlier as determined appropriate by the entity to
meet the applicable timelines under clauses (ii) and
(iii) of subsection (e)(1)(A).
‘‘(3) SCREENING OF REQUESTS BY QUALIFIED
EXTERNAL REVIEW ENTITIES.—
‘‘(A) IN GENERAL.—With respect to a re-
quest referred to a qualified external review en-
tity under paragraph (1) relating to a denial of
a claim for benefits, the entity shall refer such
request for the conduct of an independent med-
ical review unless the entity determines that—
‘‘(i) any of the conditions described in
subsection (b)(2)(A) have not been met;
‘‘(ii) the thresholds described in sub-
paragraph (B) have not been met;
‘‘(iii) the denial of the claim for bene-
fits does not involve a medically reviewable
determination under subsection (d)(2);
‘‘(iv) the denial of the claim for bene-
fits relates to a determination regarding
whether an individual is a participant or
beneficiary who is enrolled under the terms
of the plan or coverage (including the ap-
plicability of any waiting period under the
plan or coverage); or
‘‘(v) the denial of the claim for bene-
fits is a determination as to the application
of cost-sharing requirements or the appli-
cation of a specific exclusion or express
limitation on the amount, duration, or
scope of coverage of items or services
under the terms and conditions of the plan
or coverage unless the determination is a
denial described in subsection (d)(2);
Upon making a determination that any of
clauses (i) through (v) applies with respect to
the request, the entity shall determine that the
denial of a claim for benefits involved is not eli-
gible for independent medical review under sub-
section (d), and shall provide notice in accord-
ance with subparagraph (D).
‘‘(B) THRESHOLDS.—
‘‘(i) IN GENERAL.—The thresholds de-
scribed in this subparagraph are that—
‘‘(I) the total amount payable
under the plan or coverage for the
item or service that was the subject of
such denial exceeds $100; or
‘‘(II) a physician has asserted in
writing that there is a significant risk
of placing the life, health, or develop-
ment of the participant or beneficiary
in jeopardy if the denial of the claim
for benefits is sustained.
‘‘(ii) THRESHOLDS
NOT
APPLIED.—
The thresholds described in this subpara-
graph shall not apply if the plan or issuer
involved waives the internal appeals proc-
ess with respect to the denial of a claim for
benefits 
involved 
under 
section
503A(b)(1)(D).
‘‘(C) PROCESS FOR MAKING DETERMINA-
TIONS.—
‘‘(i) NO
DEFERENCE
TO
PRIOR
DE-
TERMINATIONS.—In 
making 
determina-
tions under subparagraph (A), there shall
be no deference given to determinations
made by the plan or issuer under section
503A or the recommendation of a treating
health care professional (if any).
‘‘(ii) USE
OF
APPROPRIATE
PER-
SONNEL.—A qualified external review enti-
ty shall use appropriately qualified per-
sonnel to make determinations under this
section.
‘‘(D) NOTICES AND GENERAL TIMELINES
FOR DETERMINATION.—
‘‘(i) NOTICE IN CASE OF DENIAL OF
REFERRAL.—If the entity under this para-
graph does not make a referral to an inde-
pendent medical reviewer, the entity shall
provide notice to the plan or issuer, the
participant or beneficiary (or authorized
representative) filing the request, and the
treating health care professional (if any)
that the denial is not subject to inde-
pendent medical review. Such notice—
‘‘(I) shall be written (and, in ad-
dition, may be provided orally) in a
manner calculated to be understood
by an average participant;
‘‘(II) shall include the reasons for
the determination; and
‘‘(III) include any relevant terms
and conditions of the plan or cov-
erage.
‘‘(ii) GENERAL TIMELINE FOR DETER-
MINATIONS.—Upon receipt of information
under paragraph (2), the qualified external
review entity, and if required the inde-
pendent medical reviewer, shall make a de-
termination within the overall timeline that
is applicable to the case under review as
described in subsection (e), except that if
the entity determines that a referral to an
independent medical reviewer is not re-
quired, the entity shall provide notice of
such determination to the participant or
beneficiary (or authorized representative)
within 2 days of such determination.
‘‘(d) INDEPENDENT MEDICAL REVIEW.—
‘‘(1) IN GENERAL.—If a qualified external re-
view entity determines under subsection (c) that a
denial of a claim for benefits is eligible for inde-
pendent medical review, the entity shall refer the de-
nial involved to an independent medical reviewer for
the conduct of an independent medical review under
this subsection.
‘‘(2) MEDICALLY
REVIEWABLE
DETERMINA-
TIONS.—For purposes of this section, a denial of a
claim for benefits is a medically reviewable deter-
mination if the benefit the item or service with re-
spect to which the determination is made would be
a covered benefit under the terms and conditions of
the plan or coverage but for one (or more) of the fol-
lowing determinations:
‘‘(A) DENIALS BASED ON MEDICAL NECES-
SITY AND APPROPRIATENESS.—The basis of the
determination is that the item or service is not
medically necessary and appropriate.
‘‘(B) DENIALS BASED ON EXPERIMENTAL
OR INVESTIGATIONAL TREATMENT.—The basis
of the determination is that the item or service
is experimental or investigational.
‘‘(C) DENIALS OTHERWISE BASED ON AN
EVALUATION
OF
MEDICAL
FACTS.—A deter-
mination that the item or service or condition
is not covered but an evaluation of the medical
facts by a health care professional in the spe-
cific case involved is necessary to determine
whether the item or service or condition is re-
quired to be provided under the terms and con-
ditions of the plan or coverage.
‘‘(3) INDEPENDENT MEDICAL REVIEW DETER-
MINATION.—
‘‘(A) IN GENERAL.—An independent med-
ical reviewer under this section shall make a
new independent determination with respect
to—
‘‘(i) whether the item or service or
condition that is the subject of the denial
is covered under the terms and conditions
of the plan or coverage; and
‘‘(ii) based upon an affirmative deter-
mination under clause (i), whether or not
the denial of a claim for a benefit that is
the subject of the review should be upheld
or reversed.
‘‘(B) STANDARD FOR DETERMINATION.—
The independent medical reviewer’s determina-
tion relating to the medical necessity and ap-
propriateness, or the experimental or investiga-
tion nature, or the evaluation of the medical
facts of the item, service, or condition shall be
based on the medical condition of the partici-
pant or beneficiary (including the medical
records of the participant or beneficiary) and
the valid, relevant scientific evidence and clin-
ical evidence. The independent medical reviewer
may consider peer-reviewed medical literature
or findings and peer-reviewed expert opinions
and expert consensus. In determining the med-
ical necessity and appropriateness of any item
or service for which a claim for benefits is de-
nied, the independent medical reviewer shall
consider the effectiveness of the alternative
items and services, if any, for which benefits
were authorized by the plan or issuer involved
for the participant or beneficiary.
‘‘(C) NO COVERAGE FOR EXCLUDED BENE-
FITS.—Nothing in this subsection shall be con-
strued to permit an independent medical re-
viewer to require that a group health plan, or
health insurance issuer that offers health insur-
ance coverage in connection with a group health
plan, provide coverage for items or services that
are specifically excluded or expressly limited
under the plan or coverage and that are not
covered regardless of any determination relating
to medical necessity and appropriateness, exper-
imental or investigational nature of the treat-
ment, or an evaluation of the medical facts in
the case involved.
‘‘(D) EVIDENCE AND INFORMATION TO BE
USED IN MEDICAL REVIEWS.—In making a de-
termination under this subsection, the inde-
pendent medical reviewer shall also consider ap-
propriate and available evidence and informa-
tion, including the following:
‘‘(i) The determination made by the
plan or issuer with respect to the claim
upon internal review and the evidence or
guidelines used by the plan or issuer in
reaching such determination.
‘‘(ii) The recommendation of the
treating health care professional and the
evidence, guidelines, and rationale used by
the treating health care professional in
reaching such recommendation.
‘‘(iii) Additional evidence or informa-
tion obtained by the reviewer or submitted
by the plan, issuer, participant or bene-
ficiary (or an authorized representative), or
treating health care professional.
‘‘(iv) The plan or coverage document.
‘‘(E) INDEPENDENT DETERMINATION.—In
making the determination, the independent
medical reviewer shall—
‘‘(i) consider the claim under review
without deference to the determinations
made by the plan or issuer under section
503A or the recommendation of the treat-
ing health care professional (if any); and
‘‘(ii) consider, but not be bound by
the definition used by the plan or issuer of
‘medically necessary and appropriate’, or
‘experimental or investigational’, or other
equivalent terms that are used by the plan
or issuer to describe medical necessity and
appropriateness or experimental or inves-
tigational nature of the treatment.
‘‘(F) DETERMINATION
OF
INDEPENDENT
MEDICAL REVIEWER.—An independent medical
reviewer shall, in accordance with the deadlines
described in subsection (e), prepare a written
determination to uphold or reverse the denial
under review and, in the case of a reversal, the
timeframe within which the plan or issuer shall
authorize coverage to comply with the deter-
mination. Such written determination shall in-
clude the specific reasons of the reviewer for
such determination, including a summary of the
clinical or scientific-evidence based rationale
used in making the determination. The reviewer
may provide the plan or issuer and the treating
health care professional with additional rec-
ommendations in connection with such a deter-
mination, but any such recommendations shall
not be treated as part of the determination and
shall not be admissible in any action under sec-
tion 502.
‘‘(e) TIMELINES AND NOTIFICATIONS.—
‘‘(1) TIMELINES FOR INDEPENDENT MEDICAL
REVIEW.—
‘‘(A) PRIOR AUTHORIZATION DETERMINA-
TION.—
‘‘(i) IN GENERAL.—The independent
medical reviewer (or reviewers) shall make
a determination on a denial of a claim for
benefits that is referred to the reviewer
under subsection (c)(3) not later than 14
days after the receipt of information under
subsection (c)(2) if the review involves a
prior authorization of items or services.
‘‘(ii) EXPEDITED DETERMINATION.—
Notwithstanding clause (i), the inde-
pendent medical reviewer (or reviewers)
shall make an expedited determination on
a denial of a claim for benefits described in
clause (i), when a request for such an ex-
pedited determination is made by a partici-
pant or beneficiary (or authorized rep-
resentative) at any time during the process
for making a determination, and the treat-
ing health care professional substantiates,
with the request, that a determination
under the timeline described in clause (i)
would seriously jeopardize the life or health
of the participant or beneficiary. Such de-
termination shall be made not later than
72 hours after the receipt of information
under subsection (c)(2).
‘‘(iii) 
CONCURRENT
DETERMINA-
TION.—Notwithstanding clause (i), a re-
view described in such subclause shall be
completed not later than 24 hours after
the receipt of information under subsection
(c)(2) if the review involves a discontinu-
ation of inpatient care.
‘‘(B) RETROSPECTIVE DETERMINATION.—
The independent medical reviewer (or review-
ers) shall complete a review in the case of a ret-
rospective determination on an appeal of a de-
nial of a claim for benefits that is referred to
the reviewer under subsection (c)(3) not later
than 30 days after the receipt of information
under subsection (c)(2).
‘‘(2) NOTIFICATION OF DETERMINATION.—The
external review entity shall ensure that the plan or
issuer, the participant or beneficiary (or authorized
representative) and the treating health care profes-
sional (if any) receives a copy of the written deter-
mination of the independent medical reviewer pre-
pared under subsection (d)(3)(F). Nothing in this
paragraph shall be construed as preventing an entity
or reviewer from providing an initial oral notice of
the reviewer’s determination.
‘‘(3) FORM OF NOTICES.—Determinations and
notices under this subsection shall be written in a
manner calculated to be understood by an average
participant.
‘‘(4) TERMINATION
OF
EXTERNAL
REVIEW
PROCESS IF APPROVAL OF A CLAIM FOR BENEFITS
DURING PROCESS.—
‘‘(A) IN GENERAL.—If a plan or issuer—
‘‘(i) reverses a determination on a de-
nial of a claim for benefits that is the sub-
ject of an external review under this sec-
tion and authorizes coverage for the claim
or provides payment of the claim; and
‘‘(ii) provides notice of such reversal
to the participant or beneficiary (or au-
thorized representative) and the treating
health care professional (if any), and the
external review entity responsible for such
review,
the external review process shall be terminated
with respect to such denial and any filing fee
paid under subsection (b)(2)(A)(iv) shall be re-
funded.
‘‘(B) TREATMENT OF TERMINATION.—An
authorization of coverage under subparagraph
(A) by the plan or issuer shall be treated as a
written determination to reverse a denial under
section (d)(3)(F) for purposes of liability under
section 502(n)(1)(B).
‘‘(f) COMPLIANCE.—
‘‘(1) APPLICATION OF DETERMINATIONS.—
‘‘(A) EXTERNAL REVIEW DETERMINATIONS
BINDING ON PLAN.—The determinations of an
external review entity and an independent med-
ical reviewer under this section shall be binding
upon the plan or issuer involved.
‘‘(B) 
COMPLIANCE
WITH
DETERMINA-
TION.—If the determination of an independent
medical reviewer is to reverse the denial, the
plan or issuer, upon the receipt of such deter-
mination, shall authorize coverage to comply
with the medical reviewer’s determination in ac-
cordance with the timeframe established by the
medical reviewer under subsection (d)(3)(F).
‘‘(2) FAILURE TO COMPLY.—
‘‘(A) WITH
TIMEFRAME
FOR
PROVIDING
ITEMS AND SERVICES.—If a plan or issuer fails
to comply with the timeframe established under
paragraph (1)(B) with respect to a participant
or beneficiary, where such failure to comply is
caused by the plan or issuer, the participant or
beneficiary may obtain the items or services in-
volved (in a manner consistent with the deter-
mination of the independent external reviewer)
from any provider regardless of whether such
provider is a participating provider under the
plan or coverage.
‘‘(B) REIMBURSEMENT.—
‘‘(i) IN GENERAL.—Where a partici-
pant or beneficiary obtains items or serv-
ices in accordance with subparagraph (A),
the plan or issuer involved shall provide for
reimbursement of the costs of such items
or services. Such reimbursement shall be
made to the treating health care profes-
sional or to the participant or beneficiary
(in the case of a participant or beneficiary
who pays for the costs of such items or
services).
‘‘(ii) AMOUNT.—The plan or issuer
shall fully reimburse a professional, partici-
pant or beneficiary under clause (i) for the
total costs of the items or services provided
(regardless of any plan limitations that
may apply to the coverage of such items or
services) so long as—
‘‘(I) the items or services would
have been covered under the terms of
the plan or coverage if provided by the
plan or issuer; and
‘‘(II) the items or services were
provided in a manner consistent with
the determination of the independent
medical reviewer.
‘‘(C) FAILURE TO REIMBURSE.—Where a
plan or issuer fails to provide reimbursement to
a professional, participant or beneficiary in ac-
cordance with this paragraph, the professional,
participant or beneficiary may commence a civil
action (or utilize other remedies available under
teopathic physician) or health care professional
who—
‘‘(i) is appropriately credentialed or li-
censed in 1 or more States to deliver
health care services; and
‘‘(ii) typically treats the diagnosis or
condition or provides the type of treatment
under review.
‘‘(B) PHYSICIAN REVIEW.—In referring a
denial for independent medical review under
subsection (c), the qualified external review en-
tity shall ensure that, in the case of the review
of treatment that is recommended or provided
by a physician, such referral may be made only
to a physician for such independent medical re-
view.
‘‘(3) INDEPENDENCE.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), each independent medical reviewer
in a case shall—
‘‘(i) not be a related party (as defined
in paragraph (7));
‘‘(ii) not have a material familial, fi-
nancial, or professional relationship with
such a party; and
‘‘(ii) prohibit an individual who has
staff privileges at the institution where the
treatment involved takes place from serv-
ing as an independent medical reviewer if
the affiliation is disclosed to the plan or
issuer and the participant or beneficiary
(or authorized representative), and neither
party objects; or
‘‘(iii) prohibit receipt of compensation
by an independent medical reviewer from
an entity if the compensation is provided
consistent with paragraph (6).
‘‘(4) PRACTICING HEALTH CARE PROFESSIONAL
IN SAME FIELD.—
‘‘(A) IN
GENERAL.—The requirement of
this paragraph with respect to a reviewer in a
case involving treatment, or the provision of
items or services, by—
‘‘(i) a physician, is that the reviewer
be a practicing physician of the same or
similar specialty as a physician who typi-
cally treats the diagnosis or condition or
provides such treatment in the case under
review; or
‘‘(ii) a health care professional (other
than a physician), is that the reviewer be
a practicing physician or, if determined ap-
propriate by the qualified external review
entity, a health care professional (other
than a physician), of the same or similar
specialty as the health care professional
who typically treats the diagnosis or condi-
tion or provides the treatment in the case
under review.
‘‘(B) PRACTICING
DEFINED.—For pur-
poses of this paragraph, the term ‘practicing’
means, with respect to an individual who is a
physician or other health care professional that
the individual provides health care services to
individual patients on average at least 2 days
per week.
‘‘(5) PEDIATRIC EXPERTISE.—The independent
medical reviewer shall have pediatric expertise under
paragraph (2) where necessary to evaluate the rel-
evant conditions for the participant or beneficiary
involved.
‘‘(6) LIMITATIONS
ON
REVIEWER
COMPENSA-
TION.—Compensation provided by a qualified exter-
nal review entity to an independent medical reviewer
in connection with a review under this section
shall—
‘‘(A) not exceed a reasonable level; and
‘‘(B) not be contingent on the determina-
tion rendered by the reviewer.
‘‘(7) RELATED PARTY DEFINED.—For purposes
of this section, the term ‘related party’ means, with
respect to a denial of a claim under a plan or cov-
erage relating to a participant or beneficiary, any of
the following:
‘‘(A) The plan, plan sponsor, or issuer in-
volved, or any fiduciary, officer, director, or em-
ployee of such plan, plan sponsor, or issuer.
‘‘(B) The participant or beneficiary (or au-
thorized representative).
‘‘(C) The health care professional that pro-
vides the items of services involved in the de-
nial.
‘‘(D) The institution at which the items or
services (or treatment) involved in the denial
are provided.
‘‘(E) The manufacturer of any drug or
other item that is included in the items or serv-
ices involved in the denial.
‘‘(F) Any other party determined under
any regulations to have a substantial interest in
the denial involved.
‘‘(h) QUALIFIED EXTERNAL REVIEW ENTITIES.—
‘‘(1) SELECTION OF QUALIFIED EXTERNAL RE-
VIEW ENTITIES.—
‘‘(A) LIMITATION ON PLAN OR ISSUER SE-
LECTION.—The Secretary shall implement pro-
cedures with respect to the selection of qualified
external review entities by a plan or issuer to
assure that the selection process among quali-
fied external review entities will not create any
incentives for external review entities to make a
determination in a biased manner. No such se-
lection process under the procedures imple-
mented by the Secretary may give either the pa-
tient or the plan or issuer any ability to deter-
mine or influence the selection of a qualified ex-
ternal review entity to review the case of any
participant or beneficiary.
‘‘(B) STATE
AUTHORITY
WITH
RESPECT
TO
QUALIFIED
EXTERNAL
REVIEW
ENTITIES
FOR HEALTH INSURANCE ISSUERS.—With re-
spect to health insurance issuers offering health
insurance coverage in a State, the State may
provide for the designation or selection of quali-
fied external review entities in a manner deter-
mined by the State to assure an unbiased deter-
mination in conducting external review activi-
ties. In conducting reviews under this section,
an entity designated or selected under this sub-
paragraph shall comply with provisions of this
section.
‘‘(2) CONTRACT
WITH
QUALIFIED
EXTERNAL
REVIEW ENTITY.—Except as provided in paragraph
(1)(B), the external review process of a plan or
issuer under this section shall be conducted under a
contract between the plan or issuer and 1 or more
qualified external review entities (as defined in para-
graph (4)(A)).
‘‘(3) TERMS AND CONDITIONS OF CONTRACT.—
The terms and conditions of a contract under para-
graph (2) shall—
‘‘(A) be consistent with the standards the
Secretary shall establish to assure there is no
real or apparent conflict of interest in the con-
duct of external review activities; and
‘‘(B) provide that the costs of the external
review process shall be borne by the plan or
issuer.
Subparagraph (B) shall not be construed as apply-
ing to the imposition of a filing fee under subsection
(b)(2)(A)(iv) or costs incurred by the participant or
beneficiary (or authorized representative) or treating
health care professional (if any) in support of the re-
view, including the provision of additional evidence
or information.
‘‘(4) QUALIFICATIONS.—
‘‘(A) IN
GENERAL.—In this section, the
term ‘qualified external review entity’ means, in
relation to a plan or issuer, an entity that is
initially certified (and periodically recertified)
under subparagraph (C) as meeting the fol-
lowing requirements:
‘‘(i) The entity has (directly or
through contracts or other arrangements)
sufficient medical, legal, and other exper-
tise and sufficient staffing to carry out du-
ties of a qualified external review entity
under this section on a timely basis, in-
cluding making determinations under sub-
section (b)(2)(A) and providing for inde-
pendent medical reviews under subsection
(d).
‘‘(ii) The entity is not a plan or issuer
or an affiliate or a subsidiary of a plan or
issuer, and is not an affiliate or subsidiary
of a professional or trade association of
plans or issuers or of health care providers.
‘‘(iii) The entity has provided assur-
ances that it will conduct external review
activities consistent with the applicable re-
quirements of this section and standards
specified in subparagraph (C), including
that it will not conduct any external review
activities in a case unless the independence
requirements of subparagraph (B) are met
with respect to the case.
‘‘(iv) The entity has provided assur-
ances that it will provide information in a
timely manner under subparagraph (D).
‘‘(v) The entity meets such other re-
quirements as the Secretary provides by
regulation.
‘‘(B) INDEPENDENCE REQUIREMENTS.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), an entity meets the independence re-
quirements of this subparagraph with re-
spect to any case if the entity—
‘‘(I) is not a related party (as de-
fined in subsection (g)(7));
‘‘(II) does not have a material fa-
milial, financial, or professional rela-
tionship with such a party; and
‘‘(III) does not otherwise have a
conflict of interest with such a party
(as determined under regulations).
‘‘(ii) EXCEPTION
FOR
REASONABLE
COMPENSATION.—Nothing in clause (i)
shall be construed to prohibit receipt by a
qualified external review entity of com-
pensation from a plan or issuer for the
conduct of external review activities under
this section if the compensation is provided
consistent with clause (iii).
‘‘(iii) LIMITATIONS ON ENTITY COM-
PENSATION.—Compensation provided by a
plan or issuer to, or charged by, a qualified
external review entity in connection with
reviews under this section shall—
‘‘(I) not exceed a reasonable
level; and
‘‘(II) not be contingent on the
determination rendered by the entity
or by any independent medical re-
viewer.
‘‘(C) 
CERTIFICATION
AND
RECERTIFI-
CATION PROCESS.—
‘‘(i) IN GENERAL.—The initial certifi-
cation and recertification of a qualified ex-
ternal review entity shall be made—
‘‘(I) under a process that is rec-
ognized or approved by the Secretary;
or
‘‘(II) by a qualified private
standard-setting organization that is
approved by the Secretary under
clause (iii).
The Secretary shall promulgate regulations
setting forth the process described in sub-
clause (I).
‘‘(ii) PROCESS.—The Secretary shall
not recognize or approve a process under
clause (i)(I) unless the process applies
standards (as promulgated in regulations)
that ensure that a qualified external review
entity—
‘‘(I) will carry out (and has car-
ried out, in the case of recertification)
the responsibilities of such an entity
in accordance with this section, in-
cluding meeting applicable deadlines;
‘‘(II) will meet (and has met, in
the case of recertification) appropriate
indicators of fiscal integrity;
‘‘(III) will maintain (and has
maintained, in the case of recertifi-
cation) 
appropriate 
confidentiality
with respect to individually identifi-
able health information obtained in
the course of conducting external re-
view activities; and
‘‘(IV) in the case of recertifi-
cation, shall review the matters de-
scribed in clause (iv).
‘‘(iii) APPROVAL OF QUALIFIED PRI-
VATE
STANDARD-SETTING
ORGANIZA-
TIONS.—For purposes of clause (i)(II), the
Secretary may approve a qualified private
standard-setting organization if the Sec-
retary finds that the organization only cer-
tifies (or recertifies) external review enti-
ties that meet at least the standards re-
quired for the certification (or recertifi-
100
cation) of external review entities under
clause (ii).
‘‘(iv) CONSIDERATIONS IN RECERTIFI-
CATIONS.—In conducting recertifications of
a qualified external review entity under
this paragraph, the Secretary or organiza-
tion conducting the recertification shall re-
view compliance of the entity with the re-
quirements for conducting external review
activities under this section, including the
following:
‘‘(I) Provision of information
under subparagraph (D).
‘‘(II) Adherence to applicable
deadlines (both by the entity and by
independent medical reviewers it re-
fers cases to).
‘‘(III) Compliance with limita-
tions on compensation (with respect to
both the entity and independent med-
ical reviewers it refers cases to).
‘‘(IV) Compliance with applicable
independence requirements.
‘‘(V) Quality and consistency of
medical review determinations with
101
valid, relevant scientific and clinical
evidence, as provided under clause
(vii).
‘‘(v) PERIOD
OF
CERTIFICATION
OR
RECERTIFICATION.—A certification or re-
certification provided under this paragraph
shall extend for a period not to exceed 3
years.
‘‘(vi) REVOCATION.—A certification or
recertification under this paragraph may
be revoked by the Secretary or by the or-
ganization 
providing 
such 
certification
upon a showing of cause.
‘‘(vii) ASSURANCE
OF
QUALITY
AND
CONSISTENCY WITH VALID, RELEVANT SCI-
ENTIFIC AND CLINICAL EVIDENCE OF EX-
TERNAL
REVIEW
DETERMINATIONS.—The
standards applied under this subparagraph
shall include procedures, promulgated by
the Secretary in consultation with the Sec-
retary of Health and Human Services, to
assure that each qualified external review
entity is accountable for the quality and
consistency of the external review deter-
minations made by its independent medical
102
reviewers with valid, relevant scientific and
clinical evidence.
‘‘(D) PROVISION OF INFORMATION.—
‘‘(i) IN GENERAL.—A qualified exter-
nal review entity shall provide to the Sec-
retary, in such manner and at such times
as the Secretary may require, such infor-
mation (relating to the denials which have
been referred to the entity for the conduct
of external review under this section) as
the Secretary determines appropriate to
assure compliance with the independence
and other requirements of this section to
monitor and assess the quality of its exter-
nal review activities and lack of bias in
making determinations. Such information
shall include information described in
clause (ii) but shall not include individually
identifiable medical information.
‘‘(ii) 
INFORMATION
TO
BE
IN-
CLUDED.—The information described in
this subclause with respect to an entity is
as follows:
103
‘‘(I) The number and types of de-
nials for which a request for review
has been received by the entity.
‘‘(II) The disposition by the enti-
ty of such denials, including the num-
ber referred to a independent medical
reviewer and the reasons for such dis-
positions (including the application of
exclusions), on a plan or issuer-spe-
cific basis and on a health care spe-
cialty-specific basis.
‘‘(III) The length of time in mak-
ing determinations with respect to
such denials.
‘‘(IV) Updated information on
the information required to be sub-
mitted as a condition of certification
with respect to the entity’s perform-
ance of external review activities.
‘‘(iii) INFORMATION TO BE PROVIDED
TO CERTIFYING ORGANIZATION.—
‘‘(I) IN GENERAL.—In the case
of a qualified external review entity
which is certified (or recertified)
under this subsection by a qualified
104
private standard-setting organization,
at the request of the organization, the
entity shall provide the organization
with the information provided to the
Secretary under clause (i).
‘‘(II) 
ADDITIONAL
INFORMA-
TION.—Nothing in this subparagraph
shall be construed as preventing such
an organization from requiring addi-
tional information as a condition of
certification or recertification of an
entity.
‘‘(iv) USE OF INFORMATION.—
‘‘(I) IN
GENERAL.—Information
provided under this subparagraph
may be used by the Secretary and
qualified private standard-setting or-
ganizations to conduct oversight of
qualified external review entities, in-
cluding recertification of such entities,
and shall be made available to the
public in an appropriate manner.
‘‘(II) REPORT
TO
CONGRESS.—
Not later than 2 years after the date
on which the Patients’ Bill of Rights
105
Act of 2001 takes effect under section
501 of such Act, and every 2 years
thereafter, the Secretary, in consulta-
tion with the Secretary of Health and
Human Services, shall prepare and
submit to the appropriate committees
of Congress, a report that contains—
‘‘(aa) a summary of the in-
formation provided to the Sec-
retary under clause (ii);
‘‘(bb) a description of the ef-
fect that the appeals process es-
tablished under this section and
section 503A had on the access
of individuals to health insurance
and health care;
‘‘(cc) a description of the ef-
fect on health care costs associ-
ated with the implementation of
the appeals process described in
item (bb); and
‘‘(dd) a description of the
quality and consistency of deter-
minations by qualified external
review entities.
106
‘‘(III) RECOMMENDATIONS.—The
Secretary may from time to time sub-
mit recommendations to Congress
with respect to proposed modifications
to the appeals process based on the
reports submitted under subclause
(II).
‘‘(E) 
LIMITATION
ON
LIABILITY.—No
qualified external review entity having a con-
tract with a plan or issuer, and no person who
is employed by any such entity or who furnishes
professional services to such entity (including as
an independent medical reviewer), shall be held
by reason of the performance of any duty, func-
tion, or activity required or authorized pursuant
to this section, to be civilly liable under any law
of the United States or of any State (or polit-
ical subdivision thereof) if there was no actual
malice or gross misconduct in the performance
of such duty, function, or activity.
‘‘(i) DEFINITIONS AND RELATED RULES.—For pur-
poses of this section—
‘‘(1) 
AUTHORIZED
REPRESENTATIVE.—The
term ‘authorized representative’ means, with respect
to a participant or beneficiary—
107
‘‘(A) a person to whom a participant or
beneficiary has given express written consent to
represent the participant or beneficiary in any
proceeding under this section;
‘‘(B) a person authorized by law to provide
substituted consent for the participant or bene-
ficiary; or
‘‘(C) a family member of the participant or
beneficiary (or the estate of the participant or
beneficiary) or the participant’s or beneficiary’s
treating health care professional when the par-
ticipant or beneficiary is unable to provide con-
sent.
‘‘(2) CLAIM FOR BENEFITS.—The term ‘claim
for benefits’ means any request by a participant or
beneficiary (or authorized representative) for bene-
fits, for eligibility, or for payment in whole or in
part, for an item or service under a group health
plan or health insurance coverage offered by a
health insurance issuer in connection with a group
health plan.
‘‘(3) GROUP HEALTH PLAN.—The term ‘group
health plan’ shall have the meaning given such term
in section 733(a).
108
‘‘(4) HEALTH
INSURANCE
COVERAGE.—The
term ‘health insurance coverage’ has the meaning
given such term in section 733(b)(1).
‘‘(5) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning given such
term in section 733(b)(2).
‘‘(6) 
PRIOR
AUTHORIZATION
DETERMINA-
TION.—The term ‘prior authorization determination’
means a determination by the group health plan or
health insurance issuer offering health insurance
coverage in connection with a group health plan
prior to the provision of the items and services as
a condition of coverage of the items and services
under the terms and conditions of the plan or cov-
erage.
‘‘(7) 
TREATING
HEALTH
CARE
PROFES-
SIONAL.—The term ‘treating health care profes-
sional’ with respect to a group health plan, health
insurance issuer or provider sponsored organization
means a physician (medical doctor or doctor of oste-
opathy) or other health care practitioner who is act-
ing within the scope of his or her State licensure or
certification for the delivery of health care services
and who is primarily responsible for delivering those
services to the participant or beneficiary.
109
‘‘(8) UTILIZATION REVIEW.—The term ‘utiliza-
tion review’ with respect to a group health plan or
health insurance coverage means procedures used in
the determination of coverage for a participant or
beneficiary, such as procedures to evaluate the med-
ical necessity, appropriateness, efficacy, quality, or
efficiency of health care services, procedures or set-
tings, and includes prospective review, concurrent re-
view, second opinions, case management, discharge
planning, or retrospective review.
‘‘(9) TREATMENT OF EXCEPTED BENEFITS.—
The requirements of this section and section 503A
shall not apply to excepted benefits (as defined in
section 733(c)), other than benefits described in sec-
tion 733(c)(2)(A), in the same manner as the provi-
sions of part 7 do not apply to such benefits under
subsections (b) and (c) of section 732.’’.
(b) CONFORMING AMENDMENT.—The table of con-
tents in section 1 of the Employee Retirement Income Se-
curity Act of 1974 is amended by inserting after the item
relating to section 503 the following:
‘‘Sec. 503A. Claims and internal appeals procedures for group health plans.
‘‘Sec. 503B. Independent external appeals procedures for group health plans.’’.
110
SEC. 132. ENFORCEMENT.
(a) CIVIL PENALTY AUTHORITY.—Section 502(c) of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1132(c)) is amended—
(1) by redesignating paragraph (7) as para-
graph (8); and
(2) by inserting after paragraph (6) the fol-
lowing new paragraph: in subsection (a)(1)(A), by
inserting ‘‘or (n)’’ after ‘‘subsection (c)’’; and
‘‘(7)(A) In the case of—
‘‘(i) a failure described in section 503B(f)(2)(A)
(relating to failure to comply with timeframe for
providing items and services), or
‘‘(ii) a failure of a group health plan or health
insurance issuer to take such actions as are nec-
essary to refer a denial of a claim for benefit to
independent medical review in accordance with sec-
tion 503B(c)(1) or to provide information required
in connection with such a referral under section
503B(c)(2),
the Secretary may assess a civil penalty in an amount de-
termined under subparagraph (B) against any person who,
acting in the capacity of authorizing the benefit involved,
causes such failure.
‘‘(B)(i) Subject to clause (iii), such civil penalty shall
not exceed the amount specified in clause (ii) for each day
111
from the date of commencement of such failure until the
date the failure is corrected.
‘‘(ii) The amount specified in this clause for any day
described in clause (i) shall be—
‘‘(I) $2,000 a day for the 1st through the 7th
days,
‘‘(II) $5,000 a day for the 8th through the 14th
days, and
‘‘(III) $10,000 a day for each day after the
14th day.
‘‘(iii) The total amount of the penalty under clause
(i) may not exceed $500,000.
‘‘(C) Civil monetary penalties under the preceding
provisions of this paragraph may be imposed against au-
thorized officials for failure to provide referral to a quali-
fied external review entity or access to health information,
as required under section 503B(c)(1) and (2).
‘‘(D)(i) In addition to any penalty imposed under
subparagraph (A), the Secretary may assess a civil penalty
against a person acting in the capacity of authorizing a
benefit determined by an external review entity for one
or more group health plans, or health insurance issuers
offering health insurance coverage, for any pattern or
practice of repeated violations of the requirements of this
section with respect to such plan or coverage (including
112
any failure described in subparagraph (A)(i) or the refusal
to authorize a benefit determined by an external appeal
entity to be covered).
‘‘(ii) Such penalty shall be payable only upon proof
by clear and convincing evidence of such pattern or prac-
tice and shall be in an amount not to exceed for such pat-
tern or practice the lesser of—
‘‘(I) 25 percent of the aggregate value of bene-
fits shown by the Secretary to have not been pro-
vided, or unlawfully delayed, in violation of this sec-
tion under such pattern or practice; or
‘‘(II) $500,000.
‘‘(iii) Any person acting in the capacity of authorizing
benefits who has engaged in any such pattern or practice
described in clause (i) with respect to a plan or coverage,
upon the petition of the Secretary, may be removed by
the court from such position, and from any other involve-
ment, with respect to such a plan or coverage, and may
be precluded from returning to any such position or in-
volvement for a period determined by the court.
‘‘(E) In any action under this paragraph to collect
a civil penalty under subparagraph (A) or (D), the court
shall cause to be served on the defendant an order requir-
ing the defendant—
113
‘‘(i) to cease and desist from the alleged failure
to act; and
‘‘(ii) to pay to the Secretary a reasonable attor-
ney’s fee and other reasonable costs relating to the
prosecution of the action on the charges on which
the Secretary prevails.
‘‘(F) The preceding provisions of this paragraph shall
not apply with respect to employee benefit plans that are
not group health plans. Such provisions also shall not
apply to excepted benefits (as defined in section 733(c)),
other than benefits described in section 733(c)(2)(A), in
the same manner as the provisions of part 7 do not apply
to such benefits under subsections (b) and (c) of section
732.
‘‘(G) The remedies provided under this paragraph are
in addition to any other available remedies.’’.
(b) CONFORMING AMENDMENT.—Section 502(a)(6)
of such Act (29 U.S.C. 1132(a)(6)) is amended by striking
‘‘or (6)’’ and inserting ‘‘(6), or (7)’’.
Subtitle D—Remedies
SEC. 141. AVAILABILITY OF COURT REMEDIES.
(a) IN GENERAL.—Section 502 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1132)
is amended by adding at the end the following:
114
‘‘(n) CAUSE OF ACTION RELATING TO DENIAL OF A
CLAIM FOR HEALTH BENEFITS.—
‘‘(1) IN GENERAL.—
‘‘(A) FAILURE TO COMPLY WITH EXTER-
NAL MEDICAL REVIEW.—With respect to an ac-
tion commenced by a participant or beneficiary
(or the estate of the participant or beneficiary)
in connection with a claim for benefits under a
group health plan, if—
‘‘(i) a designated decisionmaker de-
scribed in paragraph (2) fails to exercise
ordinary care in failing to authorize cov-
erage in compliance with the written deter-
mination of an independent medical re-
viewer under section 503B(d)(3)(F) that
reverses a denial of the claim for benefits;
and
‘‘(ii) the failure described in clause (i)
is the proximate cause of substantial harm
(as defined in paragraph (14)(G)) to the
participant or beneficiary;
such designated decisionmaker shall be liable to
the participant or beneficiary (or the estate) for
economic and noneconomic damages in connec-
115
tion with such failure and such injury or death
(subject to paragraph (4)).
‘‘(B) WRONGFUL
DETERMINATION
RE-
SULTING IN DELAY IN PROVIDING OR FAILURE
TO RECEIVE BENEFITS.—With respect to an ac-
tion commenced by a participant or beneficiary
(or the estate of the participant or beneficiary)
in connection with a claim for benefits under a
group health plan, if—
‘‘(i) a designated decisionmaker de-
scribed in paragraph (2)—
‘‘(I) fails to exercise ordinary
care in making a determination deny-
ing the claim for benefits under sec-
tion 503A(a) (relating to an initial
claim for benefits); or
‘‘(II) fails to exercise ordinary
care in making a determination deny-
ing the claim for benefits under sec-
tion 503A(b) (relating to an internal
appeal);
‘‘(ii) the denial described in clause
(i)—
116
‘‘(I) is reversed by an inde-
pendent medical reviewer under sec-
tion 503B(d) or 503B(e)(4)(B), or
‘‘(II) was determined by a quali-
fied external review entity under sec-
tion 503B(c)(3) not to be eligible for
referral for independent medical re-
view under such section; and
‘‘(iii) the delay in receiving, or failure
to receive, benefits attributable to the fail-
ure described in clause (i) is the proximate
cause of substantial harm to, or the wrong-
ful death of, the participant or beneficiary;
such designated decisionmaker shall be liable to
the participant or beneficiary (or the estate) for
economic and noneconomic damages in connec-
tion with such failure and such injury or death
(subject to paragraph (4)).
‘‘(C) LIMITATION ON LIABILITY BASED ON
APPOINTMENT
OF
DESIGNATED
DECISION-
MAKER.—If a plan sponsor or named fiduciary
appoints a designated decisionmaker in accord-
ance with paragraph (2), the plan sponsor or
named fiduciary, or any other person or group
health plan (or their employees) associated with
117
the plan sponsor or named fiduciary, shall not
be liable under this paragraph. The appoint-
ment of a designated decisionmaker in accord-
ance with paragraph (2) shall not affect the li-
ability of the appointing plan sponsor or named
fiduciary for the failure of the plan sponsor or
named fiduciary to comply with any other re-
quirement of this title.
‘‘(2) DESIGNATED DECISIONMAKER.—
‘‘(A) APPOINTMENT.—
‘‘(i) IN GENERAL.—The plan sponsor
or named fiduciary of a group health plan
shall, in accordance with this paragraph,
designate one or more persons to serve as
a designated decisionmaker with respect to
causes of action described in subpara-
graphs (A) and (B) of paragraph (1), ex-
cept that—
‘‘(I) with respect to health insur-
ance coverage offered in connection
with a group health plan, the health
insurance issuer shall be the des-
ignated decisionmaker unless the plan
sponsor and the issuer specifically
agree in writing (on a form to be pre-
118
scribed by the Secretary) to substitute
another person as the designated deci-
sionmaker; or
‘‘(II) with respect to the designa-
tion of a person other than a plan
sponsor or health insurance issuer,
such person shall satisfy the require-
ments of subparagraph (D).
‘‘(ii) PLAN
DOCUMENTS.—The des-
ignated decisionmaker shall be specifically
designated as such in the written instru-
ments of the plan (under section 402(a))
and be identified as required under section
121(b)(14) of the Patients’ Bill of Rights
Act of 2001.
‘‘(B) AUTHORITY.—A designated decision-
maker appointed under subparagraph (A) shall
have the exclusive authority under the group
health plan—
‘‘(i) to make determinations with re-
spect to a claim for benefits under section
503A(a) (relating to an initial claim for
benefits);
119
‘‘(ii) to make final determinations
under section 503A(b) (relating to an in-
ternal appeal); or
‘‘(iii) to approve coverage pursuant to
the written determination of independent
medical reviewers under section 503B.
‘‘(C) ALLOCATION OF RESPONSIBILITY.—
Responsibility may be allocated among different
designated decisionmakers with respect to—
‘‘(i) for purposes of paragraph (1)(A),
the approval of coverage under section
503B;
‘‘(ii) 
for 
purposes 
of 
paragraph
(1)(B), making determinations on a claim
for benefits under section 503A(a) (relat-
ing to an initial claim for benefits); and
‘‘(iii) for purposes of paragraph
(1)(B), making final determinations on
claims for benefits under section 503A(b)
(relating to internal appeals).
Where such an allocation is made, liability
under a cause of action under paragraph (1)
shall be assessed against the appropriate des-
ignated decisionmaker.
‘‘(D) QUALIFICATIONS.—
120
‘‘(i) CERTIFICATION OF ABILITY.—To
be appointed as a designated decision-
maker under this paragraph, a person shall
provide to the plan sponsor or named fidu-
ciary a certification of such person’s ability
to meet the requirement of clause (ii) and
the requirements of clause (iii) (relating to
financial obligation for liability under this
subsection). Such certification shall be pro-
vided upon appointment and not less fre-
quently than annually thereafter, or if the
designation is pursuant to a multi-year
contract, in conjunction with the renewal
of the contract, but in no case less than
once every 3 years.
‘‘(ii) TREATING PHYSICIAN NOT ELI-
GIBLE.—The treating physician of a par-
ticipant or beneficiary is not qualified to be
appointed as a designated decisionmaker
under this paragraph with respect to
claims for benefits of such participant or
beneficiary relating to the services of that
physician.
‘‘(iii) OTHER REQUIREMENTS RELAT-
ING
TO
FINANCIAL
OBLIGATIONS.—For
121
purposes of clause (i), requirements relat-
ing to financial obligation for liability shall
include evidence of—
‘‘(I) coverage of the person under
insurance policies or other arrange-
ments, secured and maintained by the
person, to insure the person against
losses arising from professional liabil-
ity claims, including those arising
from being designated as a designated
decisionmaker under this paragraph;
or
‘‘(II) minimum capital and sur-
plus levels that are maintained by the
person to cover any losses as a result
of liability arising from being des-
ignated as a designated decisionmaker
under this paragraph.
The appropriate amounts of liability insur-
ance and minimum capital and surplus lev-
els for purposes of subclauses (I) and (II)
shall be determined by an actuary using
sound actuarial principles and accounting
practices pursuant to established guidelines
of the American Academy of Actuaries and
122
shall be maintained throughout the course
of the contract in which such person is
designated as a designated decisionmaker.
‘‘(E) FLEXIBILITY IN ADMINISTRATION.—
A group health plan, and a health insurance
issuer offering health insurance coverage in
connection with a group health plan, may
provide—
‘‘(i) that any person or group of per-
sons may serve in more than one capacity
with respect to the plan or coverage (in-
cluding service as a designated decision-
maker, administrator, and named fidu-
ciary); or
‘‘(ii) that a designated decisionmaker
may employ one or more persons to pro-
vide advice with respect to any responsi-
bility of such decisionmaker under the plan
or coverage.
‘‘(F) FAILURE TO APPOINT.—With respect
to any cause of action under paragraph (1) re-
lating to a denial of a claim for benefits where
a designated decisionmaker has not been ap-
pointed in accordance with this paragraph, the
plan sponsor or named fiduciary responsible for
123
determinations under section 503 shall be
deemed to be the designated decisionmaker.
‘‘(3) REQUIREMENT OF EXHAUSTION OF INDE-
PENDENT MEDICAL REVIEW.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
apply only if—
‘‘(i) a final determination denying a
claim for benefits under section 503A(b)
has been referred for independent medical
review under section 503B(d) and a writ-
ten determination by an independent med-
ical reviewer to reverse such final deter-
mination has been issued with respect to
such review, or
‘‘(ii) the qualified external review enti-
ty 
has 
determined 
under 
section
503B(c)(3) that a referral to an inde-
pendent medical reviewer is not required.
‘‘(B) INJUNCTIVE
RELIEF
FOR
IRREP-
ARABLE
HARM.—A participant or beneficiary
may seek relief under subsection 502(a)(1)(B)
prior to the exhaustion of administrative rem-
edies under section 503A(b) or 503B (as re-
quired under subparagraph (A)) if it is dem-
onstrated to the court, by a preponderance of
124
the evidence, that the exhaustion of such rem-
edies would cause irreparable harm to the
health of the participant or beneficiary. Any de-
terminations that already have been made
under section 503A or 503B in such case, or
that are made in such case while an action
under this subparagraph is pending, shall be
given due consideration by the court in any ac-
tion under this subsection in such case. Not-
withstanding the awarding of relief under sub-
section 502(a)(1)(B) pursuant to this subpara-
graph, no relief shall be available under—
‘‘(i) paragraph (1), with respect to a
participant or beneficiary, unless the re-
quirements of subparagraph (A) are met;
or
‘‘(ii) subsection (q) unless the require-
ments of such subsection are met.
‘‘(4) LIMITATIONS
ON
RECOVERY
OF
DAM-
AGES.—
‘‘(A) MAXIMUM AWARD OF NONECONOMIC
DAMAGES.—The aggregate amount of liability
for noneconomic loss in an action under para-
graph (1) may not exceed $500,000.
125
‘‘(B) SEVERAL LIABILITY.—In the case of
any action commenced pursuant to paragraph
(1), the designated decisionmaker shall be liable
only for the amount of damages attributable to
such designated decisionmaker in direct propor-
tion to such decisionmaker’s share of fault or
responsibility for the injury suffered by the par-
ticipant or beneficiary. In all such cases, the li-
ability of a designated decisionmaker for dam-
ages shall be several and not joint.
‘‘(C) PROHIBITION
OF
AWARD
OF
PUNI-
TIVE
DAMAGES.—Notwithstanding any other
provision of law, in the case of any action com-
menced pursuant to paragraph (1), the court
may not award any punitive, exemplary, or
similar damages against a defendant.
‘‘(5) AFFIRMATIVE DEFENSES.—In the case of
any cause of action under paragraph (1), it shall be
an affirmative defense that—
‘‘(A) the designated decisionmaker of a
group health plan, or health insurance issuer
that offers health insurance coverage in connec-
tion with a group health plan, involved did not
receive from the participant or beneficiary (or
authorized representative) or the treating health
126
care professional (if any), the information re-
quested by the plan or issuer regarding the
medical condition of the participant or bene-
ficiary that was necessary to make a determina-
tion on a claim for benefits under section
503A(a) or a final determination on a claim for
benefits under section 503A(b);
‘‘(B) the participant or beneficiary (or au-
thorized representative) or treating health care
professional—
‘‘(i) was in possession of facts that
were sufficient to enable the participant or
beneficiary (or authorized representative)
to know that an expedited review under
section 503A or 503B would have pre-
vented the harm that is the subject of the
action; and
‘‘(ii) failed to notify the plan or issuer
of the need for such an expedited review;
or
‘‘(C) the qualified external review entity or
an independent medical reviewer failed to meet
the timelines applicable under section 503B, or
a period of time elapsing after coverage has
been authorized.
127
Nothing in this paragraph shall be construed to limit
the application of any other affirmative defense that
may be applicable to the cause of action involved.
‘‘(6) WAIVER OF INTERNAL REVIEW.—In the
case of any cause of action under paragraph (1), the
waiver or nonwaiver of internal review under section
503A(b)(1)(D) by the group health plan, or health
insurance issuer that offers health insurance cov-
erage in connection with a group health plan, shall
not be used in determining liability.
‘‘(7) LIMITATIONS
ON
ACTIONS.—Paragraph
(1) shall not apply in connection with any action
that is commenced more than 5 years after the date
on which the failure described in such paragraph oc-
curred or, if earlier, not later than 2 years after the
first date the participant or beneficiary became
aware of the substantial harm referred to in such
paragraph.
‘‘(8) 
EXCLUSION
OF
DIRECTED
RECORD-
KEEPERS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply with respect to a directed record
keeper in connection with a group health plan.
‘‘(B) 
DIRECTED
RECORDKEEPER.—For
purposes of this paragraph, the term ‘directed
128
record keeper’ means, in connection with a
group health plan, a person engaged in directed
record keeping activities pursuant to the in-
structions of the plan, the employer, or another
plan sponsor, including the distribution of en-
rollment information and distribution of disclo-
sure materials under this Act or the Public
Health Service Act and whose duties do not in-
clude making determinations on claims for ben-
efits.
‘‘(9) PROTECTION
OF
THE
REGULATION
OF
QUALITY OF MEDICAL CARE UNDER STATE LAW.—
Nothing in this subsection shall be construed to pre-
clude any action under State law against a person
or entity for liability or vicarious liability with re-
spect to the delivery of medical care. A claim that
is based on or otherwise relates to a group health
plan’s administration or determination of a claim for
benefits (as such term is defined in section
503B(i)(2) and notwithstanding the definition con-
tained in paragraph (14)(B)) shall not be deemed
to be the delivery of medical care under any State
law for purposes of this section. Any such claim
shall be maintained exclusively under section 502.
Nothing in this paragraph shall be construed as af-
129
fecting any action under State law that is permitted
under section 514(c).
‘‘(10) COORDINATION
WITH
FIDUCIARY
RE-
QUIREMENTS.—A fiduciary shall not be treated as
failing to meet any requirement of part 4 solely by
reason of any action taken by a fiduciary which con-
sists of full compliance with the reversal under sec-
tion 503B (relating to independent external appeals
procedures for group health plans) of a denial of
claim for benefits (within the meaning of section
503B(i)(2)).
‘‘(11) CONSTRUCTION.—Nothing in this sub-
section shall be construed as authorizing a cause of
action under paragraph (1) for the failure of a
group health plan or health insurance issuer to pro-
vide an item or service that is specifically excluded
under the plan or coverage.
‘‘(12) LIMITATION ON CLASS ACTION LITIGA-
TION.—A claim or cause of action under this sub-
section may not be maintained as a class action, as
a derivative action, or as an action on behalf of any
group of 2 or more claimants.
‘‘(13) PREVENTION
OF
DUPLICATION
OF
AC-
TION WITH ACTION UNDER STATE LAW.—No action
may be brought under this subsection based upon
130
facts and circumstances if a cause of action under
State law (that is permitted under section 514 only
because of the application of subsection (c) of such
section) is brought based upon the same facts and
circumstances.
‘‘(14) DEFINITIONS
AND
RELATED
RULES.—
For purposes of this subsection:
‘‘(A) AUTHORIZED
REPRESENTATIVE.—
The term ‘authorized representative’ has the
meaning given such term in section 503B(i).
‘‘(B) CLAIM
FOR
BENEFITS.—Except as
provided for in paragraph (8), the term ‘claim
for benefits’ shall have the meaning given such
term in section 503B(i), except that such term
shall only include claims for prior authorization
determinations (as such term is defined in sec-
tion 503B(i)).
‘‘(C) GROUP
HEALTH
PLAN.—The term
‘group health plan’ shall have the meaning
given such term in section 733(a).
‘‘(D) HEALTH
INSURANCE
COVERAGE.—
The term ‘health insurance coverage’ has the
meaning given such term in section 733(b)(1).
131
‘‘(E) HEALTH
INSURANCE
ISSUER.—The
term ‘health insurance issuer’ has the meaning
given such term in section 733(b)(2).
‘‘(F) ORDINARY
CARE.—The term ‘ordi-
nary care’ means the care, skill, prudence, and
diligence under the circumstances then pre-
vailing that a prudent individual acting in a like
capacity and familiar with such matters would
use in making a determination on a claim for
benefits of a similar character.
‘‘(G) SUBSTANTIAL
HARM.—The term
‘substantial harm’ means the loss of life, loss or
significant impairment of limb or bodily func-
tion, significant mental illness or disease, sig-
nificant disfigurement, or severe and chronic
physical pain.
‘‘(H) TREATMENT
OF
EXCEPTED
BENE-
FITS.—The provisions of this subsection shall
not apply to excepted benefits (as defined in
section 733(c)), other than benefits described in
section 733(c)(2)(A), in the same manner as
the provisions of part 7 do not apply to such
benefits under subsections (b) and (c) of section
732.’’.
132
(b) 
CONFORMING
AMENDMENT.—Section
502(a)(1)(A) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1132(a)(1)(A)) is amended by in-
serting ‘‘or (n)’’ after ‘‘subsection (c)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to acts and omissions occurring
on or after the effective date contained in section 501 of
this Act.
SEC. 142. TREATMENT OF STATE CAUSES OF ACTION WITH
RESPECT TO CERTAIN CLAIMS DENIALS BY
GROUP HEALTH PLANS.
Section 514 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1144) is amended—
(1) by redesignating subsections (c) and (d) as
subsections (d) and (e), respectively; and
(2) by inserting after subsection (b) the fol-
lowing new subsection:
‘‘(c) TREATMENT
OF STATE CAUSES
OF ACTION
WITH RESPECT TO CERTAIN CLAIMS DENIALS BY GROUP
HEALTH PLANS.—
‘‘(1) IN GENERAL.—Notwithstanding the pre-
ceding provisions of this section, a cause of action by
a participant or beneficiary under a group health
plan against the applicable designated decisionmaker
(within the meaning of section 502(o)) under State
133
law is not superseded by the provisions of this title
if—
‘‘(A) the action is one for damages from
personal injury or for wrongful death proxi-
mately caused by a denial of a claim for bene-
fits, and
‘‘(B) the conditions described in paragraph
(2) are met with respect to such denial.
‘‘(2) FAILURE TO AUTHORIZE COVERAGE OR-
DERED
BY
INDEPENDENT
MEDICAL
REVIEWER.—
The conditions in this paragraph with respect to a
denial of a claim for benefits are met if—
‘‘(A) the denial is reversed by a written de-
termination by an independent medical reviewer
under section 503B(d)(3)(F); and
‘‘(B) there has been a failure to authorize
coverage in compliance with such written deter-
mination.
‘‘(3) PREVENTION OF DUPLICATION OF ACTION
WITH
ACTION
UNDER
FEDERAL
LAW.—Paragraph
(1) shall not apply, in relation to a cause of action
under State law based upon facts and circumstances,
if a cause of action is brought under section 502(n)
based upon the same facts and circumstances.
134
‘‘(4) DEFINITIONS AND RELATED RULES.—For
purposes of this subsection—
‘‘(A) CLAIM
FOR
BENEFITS.—The term
‘claim for benefits’ has the meaning provided
such term under section 503B(i)(2).
‘‘(B) GROUP
HEALTH
PLAN.—The term
‘group health plan’ has the meaning provided
such term under section 733(a)(1), except that
such term includes a plan, fund, or program
treated as a group health plan under section
732(d).
‘‘(C) TREATMENT
OF
EXCEPTED
BENE-
FITS.—The provisions of this subsection shall
not apply to excepted benefits (as defined in
section 733(c)), other than benefits described in
section 733(c)(2)(A), in the same manner as
the provisions of part 7 do not apply to such
benefits under subsections (b) and (c) of section
732.’’.
SEC. 143. LIMITATION ON CERTAIN CLASS ACTION LITIGA-
TION.
(a) ERISA.—
(1) IN GENERAL.—Section 502 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
135
1132), as amended by section 141, is further
amended by adding at the end the following:
‘‘(o) LIMITATION ON CLASS ACTION LITIGATION.—
Any claim or cause of action that is maintained under this
section (other than under subsection (n)) or under section
1962 or 1964(c) of title 18, United States Code, in con-
nection with a group health plan, or health insurance cov-
erage issued in connection with a group health plan, as
a class action, derivative action, or as an action on behalf
of any group of 2 or more claimants, may be maintained
only if the class, the derivative claimant, or the group of
claimants is limited to the participants or beneficiaries of
a group health plan established by only 1 plan sponsor.
No action maintained by such class, such derivative claim-
ant, or such group of claimants may be joined in the same
proceeding with any action maintained by another class,
derivative claimant, or group of claimants or consolidated
for any purpose with any other proceeding. In this para-
graph, the terms ‘group health plan’ and ‘health insurance
coverage’ have the meanings given such terms in section
733.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply with respect to actions
commenced on or after June 26, 2001. Notwith-
standing the preceding sentence, with respect to
136
class actions, the amendment made by paragraph
(1) shall apply with respect to civil actions which are
pending on such date in which a class action has not
been certified as of such date.
(b) RICO.—
(1) IN GENERAL.—Section 1964(c) of title 18,
United States Code, is amended—
(A) by inserting ‘‘(1)’’ after the subsection
designation; and
(B) by adding at the end the following:
‘‘(2) No action may be brought under this subsection,
or alleging any violation of section 1962, where the action
seeks relief concerning the manner in which any person
has marketed, provided information concerning, estab-
lished, administered, or otherwise operated a group health
plan, or health insurance coverage in connection with a
group health plan. Any such action shall only be brought
under the Employee Retirement Income Security Act of
1974. In this paragraph, the terms ‘group health plan’
and ‘health insurance issuer’ shall have the meanings
given such terms in section 733 of the Employee Retire-
ment Income Security Act of 1974.’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply with respect to actions
commenced on or after June 26, 2001.
137
Subtitle E—State Flexibility
SEC. 151. STATE FLEXIBILITY IN APPLYING REQUIRE-
MENTS TO HEALTH INSURANCE ISSUERS AND
NON-FEDERAL 
GOVERNMENTAL 
GROUP
HEALTH PLANS.
(a) NONAPPLICATION
OF CERTAIN FEDERAL RE-
QUIREMENTS IN CASE OF QUALIFIED STATE REGULA-
TION.—
(1) IN GENERAL.—
(A) QUALIFIED STATE PATIENT PROTEC-
TIONS.—A patient protection requirement shall
not apply with respect to health insurance cov-
erage (and to a group health plan insofar as it
provides benefits in the form of health insur-
ance coverage) if there is a State law (as de-
fined in subsection (c)) that regulates such cov-
erage and that is substantially equivalent (as
provided under paragraph (2) or (4)) to such
requirement.
(B) 
INTERNAL
AND
EXTERNAL
AP-
PEALS.—The requirements of section 503A or
503B of the Employee Retirement Income Se-
curity Act of 1974 shall not apply with respect
to individual health insurance coverage or to a
non-Federal governmental group health plan if
138
there is a State law that regulates such cov-
erage or plan and that is substantially equiva-
lent (as provided under paragraph (2) or (4)) to
the section.
(C) PATIENT PROTECTION REQUIREMENT
DEFINED.—For purposes of this section, the
term ‘‘patient protection requirement’’ means
any one or more requirements under the fol-
lowing:
(i) Section 101 (relating to access to
emergency care).
(ii) Section 102 (relating to consumer
choice option) with respect to non-Federal
governmental plans only.
(iii) Section 103 (relating to patient
access to obstetric and gynecological care).
(iv) Section 104 (relating to access to
pediatric care).
(v) Section 105 (relating to timely ac-
cess to specialists).
(vi) Section 106 (relating to con-
tinuity of care), but only insofar as a re-
placement issuer assumes the obligation
for continuity of care.
139
(vii) Section 108 (relating to access to
needed prescription drugs).
(viii) Section 109 (relating to coverage
for individuals participating in approved
clinical trials).
(ix) A prohibition under—
(I) section 107 (relating to prohi-
bition of interference with certain
medical communications); and
(II) section 110 (relating to pro-
hibition of discrimination against pro-
viders based on licensure).
(x) An informational requirement
under section 121.
(2) STATE
CERTIFICATION
OF
SUBSTANTIAL
EQUIVALENCE.—
(A) IN GENERAL.—For purposes of para-
graph (1), a State law that imposes require-
ments that relate to a section in Federal law re-
ferred to in such paragraph is deemed to be
substantially equivalent to that section if the
chief executive officer of the State, not later
than the deadline specified in subparagraph
(D), submits to the Secretary of Health and
Human Services a certification described in
140
subparagraph (B). Such certification shall be
effective under paragraph (1) until otherwise
provided under paragraph (3)(C) or (3)(D).
(B) DESCRIPTION OF CERTIFICATION.—A
certification described in this subparagraph is,
with respect to a State law in relation to a sec-
tion of Federal law referred to in paragraph
(1), a certification that there is a reasonable
basis to find that the State law imposes re-
quirements that, taken as a whole and consid-
ering the need for flexibility in the application
of such section in relation to applicable State
law, provide protections that are substantially
equivalent to or greater than the protections to
participants and beneficiaries provided under
such section.
(C) 
PROCEDURES.—The 
Secretary 
of
Health and Human Services shall by regulation
establish procedures to carry out this sub-
section.
(D) DEADLINE.—The deadline specified in
this subparagraph is 90 days after the date reg-
ulations described in subparagraph (C) are first
promulgated.
141
(3) OPPORTUNITY FOR SECRETARIAL REVIEW
AND DETERMINATION.—
(A) NOTICE
OF
RECEIPT
OF
CERTIFI-
CATION.—The Secretary of Health and Human
Services shall provide for public notice upon re-
ceipt of a certification submitted under para-
graph (2). Such Secretary may review such a
certification to determine preliminarily whether
there is a reasonable basis for the certification,
(B) 
NOTICE
OF
PRELIMINARY
DIS-
APPROVAL.—A certification under paragraph
(2) shall be effective unless such Secretary de-
termines, within 90 days of the date of its sub-
mittal, that there is not a reasonable basis for
the certification. Such Secretary shall provide
notice to the State and the public of such deter-
mination. Such notice shall include an expla-
nation of the basis for the determination and
shall identify specific deficiencies in the State
law. The provision of such notice shall not sus-
pend the effectiveness of the State certification.
(C) FINAL DETERMINATION.—If such Sec-
retary has made a determination described in
subparagraph (B), such Secretary shall make a
final determination regarding whether there is a
142
reasonable basis for the certification. Such Sec-
retary shall provide notice of such final deter-
mination in the same manner as for determina-
tions under subparagraph (B). If such Sec-
retary decides that there is not a reasonable
basis for the certification, such Secretary shall
specify a time period (of not less than one year)
by the end of which the certification will no
longer be effective. Such determination shall
take effect (and the effectiveness of the certifi-
cation suspended) at the end of the period for
filing judicial review of such determination
under subparagraph (D) unless the State files
for judicial review. If the State files for judicial
review the certification shall remain in effect
during the period of judicial review and until
such time as ordered by the court under sub-
paragraph (D).
(D) JUDICIAL
REVIEW.—A final deter-
mination of the Secretary under subparagraph
(C) is subject to judicial review under chapter
5 of title 5, United States Code, in the Circuit
Court of Appeals for the State certification of
which is challenged. To find for such Secretary,
the court must find that there is not a reason-
143
able basis for the certification. If the court up-
holds the final determination of such Secretary,
the certification shall remain in effect until
such date as the court may specify in order to
provide for an orderly transition.
(4) STATE
CERTIFICATIONS
AFTER
FEDERAL
PROVISIONS HAVE TAKEN EFFECT.—After a section
of Federal law referred to in paragraph (1) has
taken effect, a State may nonetheless submit a cer-
tification described in paragraph (2)(B). Such a cer-
tification shall only become effective if—
(A) there is no challenge of the certifi-
cation by the Secretary of Health and Human
Services within 90 days after the date of its
submittal;
(B) such Secretary concurs in the certifi-
cation; or
(C) such Secretary challenges the certifi-
cation but such challenge is not upheld in court;
and not until 1 year after the expiration of such 90-
day period, the date of the Secretary’s concurrence,
or the date a court does not uphold the Secretary’s
challenge, as the case may be.
(b) RELATIONSHIP OF QUALIFIED STATE PATIENT
PROTECTIONS TO PLANS UNDER ERISA.—
144
(1) IN GENERAL.—Nothing in this section shall
be construed to affect or modify the provisions of
section 514 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1144) with respect to
group health plans. In any case in which health in-
surance coverage is provided by a health insurance
issuer in connection with a group health plan to
which title I of such Act applies and there is a State
law described in subsection (a)(1)(A) that regulates
such coverage and that is substantially equivalent
(as provided under paragraph (2) or (4) of sub-
section (a)) to requirements of a section of Federal
law referred to in subsection (a)(1)(A), to the extent
that such State law, as applicable to such plan, is
superseded by such title, the provisions of such State
law shall be deemed (including for purposes of ap-
plying administration and enforcement of part 5 of
subtitle B of title I of such Act) to be substituted
for (and incorporated as) the corresponding section
of Federal law referred to in subsection (a)(1)(A) in-
sofar as the plan provides benefits by means of such
coverage.
(2) PREVENTING APPLICATION OF STATE LAW
IN CASES WHERE FEDERAL LAW IS APPLIED.—In
any case in which, after applying the provisions of
145
this subsection with respect to a section of Federal
law described referred to in subsection (a)(1)(A), the
requirements of such section remain applicable with
respect to health insurance coverage (and to a group
health plan insofar as it provides benefits in the
form of health insurance coverage) in a State, any
State law that imposes requirements within the
scope of the subject matter and protections provided
by such section, taken as a whole, is preempted and
does not apply.
(c) DEFINITIONS.—For purposes of this section, the
terms ‘‘State’’ and ‘‘State law’’ shall have the meanings
given such terms in section 2723(d) of the Public Health
Service Act (42 U.S.C. 300gg–23(d)).
Subtitle F—Miscellaneous
Provisions
SEC. 161. DEFINITIONS.
(a) INCORPORATION OF GENERAL DEFINITIONS.—
Except as otherwise provided, the provisions of section
2791 of the Public Health Service Act shall apply for pur-
poses of this title in the same manner as they apply for
purposes of title XXVII of such Act.
(b) SECRETARY.—Except as otherwise provided, the
term ‘‘Secretary’’ means the Secretary of Health and
146
Human Services, in consultation with the Secretary of
Labor.
(c) ADDITIONAL DEFINITIONS.—For purposes of this
title:
(1) ENROLLEE.—The term ‘‘enrollee’’ means,
with respect to health insurance coverage offered by
a health insurance issuer, an individual enrolled with
the issuer to receive such coverage.
(2) HEALTH CARE PROFESSIONAL.—The term
‘‘health care professional’’ means an individual who
is licensed, accredited, or certified under State law
to provide specified health care services and who is
operating within the scope of such licensure, accredi-
tation, or certification.
(3) HEALTH
CARE
PROVIDER.—The term
‘‘health care provider’’ includes an allopathic or os-
teopathic physician or other health care professional,
as well as an institutional or other facility or agency
that provides health care services and that is li-
censed, accredited, or certified to provide health care
items and services under applicable State law.
(4) NETWORK.—The term ‘‘network’’ means,
with respect to a group health plan or health insur-
ance issuer offering health insurance coverage, the
participating health care professionals and providers
147
through whom the plan or issuer provides health
care items and services to participants, beneficiaries,
or enrollees.
(5) 
NONPARTICIPATING.—The 
term 
‘‘non-
participating’’ means, with respect to a health care
provider that provides health care items and services
to a participant, beneficiary, or enrollee under group
health plan or health insurance coverage, a health
care provider that is not a participating health care
provider with respect to such items and services.
(6) PARTICIPATING.—The term ‘‘participating’’
means, with respect to a health care provider that
provides health care items and services to a partici-
pant, beneficiary, or enrollee under group health
plan or health insurance coverage offered by a
health insurance issuer, a health care provider that
furnishes such items and services under a contract
or other arrangement with the plan or issuer.
(7) PRIOR AUTHORIZATION.—The term ‘‘prior
authorization’’ means the process of obtaining prior
approval from a health insurance issuer or group
health plan for the provision or coverage of medical
services.
(8) 
TERMS
AND
CONDITIONS.—The 
term
‘‘terms and conditions’’ includes, with respect to a
148
group health plan or health insurance coverage, re-
quirements imposed under this title (and sections
503A and 503B of the Employee Retirement Income
Security Act of 1974) with respect to the plan or
coverage.
SEC. 162. EXCLUSIONS.
(a) NO BENEFIT REQUIREMENTS.—Nothing in this
title (or the amendments made by this title) shall be con-
strued to require a group health plan or a health insurance
issuer offering health insurance coverage to provide spe-
cific benefits under the terms of such plan or coverage,
other than those provided under the terms of such plan
or coverage.
(b) 
EXCLUSION
FOR
FEE-FOR-SERVICE
COV-
ERAGE.—
(1) IN GENERAL.—The provisions of subtitle A
shall not apply to a group health plan or health in-
surance coverage if the only coverage offered under
such plan or coverage is fee-for-service coverage (as
defined in paragraph (2)).
(2) FEE-FOR-SERVICE
COVERAGE
DEFINED.—
For purposes of this subsection, the term ‘‘fee-for-
service coverage’’ means coverage under a group
health plan or health insurance coverage that—
149
(A) reimburses hospitals, health profes-
sionals, and other providers on a fee-for-service
basis without placing the provider at financial
risk;
(B) does not vary reimbursement for such
a provider based on an agreement to contract
terms or the utilization of health care items or
services relating to such provider;
(C) allows access to any provider that is
lawfully authorized to provide the covered serv-
ices and agree to accept the terms of payment
established under the plan or by the issuer; and
(D) for which the plan or issuer does not
require prior authorization before providing for
any health care services.
Notwithstanding subparagraph (D), coverage that
would satisfy the coverage requirements established
for an indemnity benefit plan or a service benefit
plan under the Federal employees health benefits
program under chapter 89 of title 5, United States
Code, and any related regulations and rules promul-
gated by the Office of Personnel Management, shall
be considered to meet the definition of fee-for-service
coverage under this paragraph.
150
(c) TREATMENT OF EXCEPTED BENEFITS.—The re-
quirements of this title shall not apply to excepted benefits
(as defined in section 733(c) of the Employee Retirement
Income Security Act of 1974, 29 U.S.C. 1191b(c)), other
than benefits described in section 733(c)(2)(A) of such
Act, in the same manner as the provisions of part 7 of
subtitle B of title I of such Act do not apply to such bene-
fits under subsections (b) and (c) of section 732 of such
Act (29 U.S.C. 1191a).
(d) RULE WITH RESPECT TO CERTAIN PLANS.—
(1) IN GENERAL.—Notwithstanding any other
provision of law, health insurance issuers may offer,
and eligible individuals may purchase, high deduct-
ible health plans described in section 220(c)(2)(A) of
the Internal Revenue Code of 1986. Effective for the
5-year period beginning on the date of the enact-
ment of this Act, such health plans shall not be re-
quired to provide payment for any health care items
or services that are exempt from the plan’s deduct-
ible.
(2) EXISTING STATE LAWS.—A State law relat-
ing to payment for health preempted under para-
graph (1), shall not apply to high deductible health
plans after the expiration of the 5-year period de-
151
scribed in such paragraph unless the State reenacts
such law after such period.
TITLE II—AMENDMENTS TO THE
PUBLIC HEALTH SERVICE ACT
SEC. 201. APPLICATION TO CERTAIN HEALTH INSURANCE
COVERAGE.
(a) IN GENERAL.—Subpart 2 of part A of title
XXVII of the Public Health Service Act (42 U.S.C.
300gg–4 et seq.) is amended by adding at the end the
following:
‘‘SEC. 2707. PATIENT PROTECTION STANDARDS AND AC-
COUNTABILITY.
‘‘(a) IN GENERAL.—Each health insurance issuer
shall comply with the patient protection requirements
under title I of the Patients’ Bill of Rights Act of 2001
with respect to non-Federal governmental group health in-
surance coverage offered by such issuers, and such re-
quirements shall be deemed to be incorporated into this
section.
‘‘(b) ACCOUNTABILITY.—The provisions of sections
503 through 503B of the Employee Retirement Income
Security Act of 1974 (as in effect as of the day after the
date of enactment of the Patients’ Bill of Rights Act of
2001) shall apply to non-Federal governmental group
health insurance coverage offered by health insurance
152
issuers with respect to an enrollee in the same manner
as they apply to health insurance coverage offered by a
health insurance issuer for a participant or beneficiary in
connection with a group health plan and the requirements
referred to in such sections shall be deemed to be incor-
porated into this section. For purposes of this subsection,
references in such sections 503 through 503B to the Sec-
retary shall be deemed to be references to the Secretary
of Health and Human Services.
‘‘(c) CONSTRUCTION.—Nothing in this section shall
be construed to affect section 2721(b)(2).’’.
(b) 
CONFORMING
AMENDMENT.—Section
2721(b)(2)(A) of such Act (42 U.S.C. 300gg–21(b)(2)(A))
is amended by inserting ‘‘(other than section 2707)’’ after
‘‘requirements of such subparts’’.
SEC. 202. APPLICATION TO INDIVIDUAL HEALTH INSUR-
ANCE COVERAGE.
Part B of title XXVII of the Public Health Service
Act (42 U.S.C. 300gg–41 et seq.) is amended—
(1) by redesignating the first subpart 3 (relat-
ing to other requirements) as subpart 2; and
(2) by inserting after section 2752 the fol-
lowing:
153
‘‘SEC. 2753. PATIENT PROTECTION STANDARDS AND AC-
COUNTABILITY.
‘‘(a) IN GENERAL.—Each health insurance issuer
shall comply with the patient protection requirements
under subtitles A and B of title I of the Patients’ Bill
of Rights Act of 2001 with respect to individual health
insurance coverage it offers, and such requirements shall
be deemed to be incorporated into this section.
‘‘(b) ACCOUNTABILITY.—The provisions of sections
503 through 503B of the Employee Retirement Income
Security Act of 1974 (as in effect as of the day after the
date of enactment of the Patients’ Bill of Rights Act of
2001) shall apply to health insurance coverage offered by
a health insurance issuer in the individual market with
respect to an enrollee in the same manner as they apply
to health insurance coverage offered by a health insurance
issuer for a participant or beneficiary in connection with
a group health plan and the requirements referred to in
such sections shall be deemed to be incorporated into this
section. For purposes of this subsection, references in such
sections 503 through 503B to the Secretary shall be
deemed to be references to the Secretary of Health and
Human Services.’’.
154
TITLE 
III—AMENDMENTS 
TO
THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF
1974
SEC. 301. APPLICATION OF PATIENT PROTECTION STAND-
ARDS TO GROUP HEALTH PLANS AND GROUP
HEALTH INSURANCE COVERAGE UNDER THE
EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974.
(a) IN GENERAL.—Subpart B of part 7 of subtitle
B of title I of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1185 et seq.) is further amended
by adding at the end the following new section:
‘‘SEC. 714. PATIENT PROTECTION STANDARDS.
‘‘(a) IN GENERAL.—Subject to subsection (b), a
group health plan (and a health insurance issuer offering
health insurance coverage in connection with a group
health plan) shall comply with the requirements of title
I of the Patients’ Bill of Rights Act of 2001 (as in effect
as of the date of the enactment of such Act), and such
requirements shall be deemed to be incorporated into this
subsection.
‘‘(b) PLAN SATISFACTION OF CERTAIN REQUIRE-
MENTS.—
156
‘‘(G) Section 108 (relating to access to
needed prescription drugs).
‘‘(H) Section 109 (relating to coverage for
individuals participating in approved clinical
trials).
‘‘(I) Section 121 (relating to the provision
of information).
‘‘(2) APPLICATION TO PROHIBITIONS.—Pursu-
ant to rules of the Secretary, if a health insurance
issuer offering health insurance coverage in connec-
tion with a group health plan takes an action in vio-
lation of any of the following sections of the Pa-
tients’ Bill of Rights Act of 2001, the group health
plan shall not be liable for such violation unless the
plan caused such violation:
‘‘(A) Section 107 (relating to prohibition of
interference with certain medical communica-
tions).
‘‘(B) Section 110 (relating to prohibition
of discrimination against providers based on li-
censure).
‘‘(3) CONSTRUCTION.—Nothing in this sub-
section shall be construed to affect or modify the re-
sponsibilities of the fiduciaries of a group health
plan under part 4 of subtitle B.
157
‘‘(4) 
TREATMENT
OF
CONSISTENT
STATE
LAWS.—For purposes of applying this subsection, a
health insurance issuer offering coverage in connec-
tion with a group health plan (and such group
health plan) shall be deemed to be in compliance
with one or more of the patient protection require-
ments of the Patients’ Bill of Rights Act of 2001 (as
defined in section 151(a)(1)(C) of such Act) that are
otherwise applicable to such issuer (or plan) under
this section where the issuer (or plan) is in compli-
ance with a State law, with respect to the patient
protection requirements involved, that has been cer-
tified in accordance with section 151 of such Act.
‘‘(c) CONFORMING REGULATIONS.—The Secretary
shall issue regulations to coordinate the requirements on
group health plans and health insurance issuers under this
section with the requirements imposed under the other
provisions of this title.’’.
(b) SATISFACTION OF ERISA CLAIMS PROCEDURE
REQUIREMENT.—Section 503 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1133) is
amended—
(1) by inserting ‘‘(a)’’ after ‘‘SEC. 503.’’; and
(2) by adding at the end the following:
158
‘‘(b) In the case of a group health plan (as defined
in section 733) compliance with the requirements of sub-
title A of title I of the Patients’ Bill of Rights Act of 2001,
and compliance with regulations promulgated by the Sec-
retary, in the case of a claims denial shall be deemed com-
pliance with subsection (a) with respect to such claims de-
nial.’’.
(c) ENFORCEMENT.—Section 502(b)(3) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1132(b)(3)) is amended—
(1) by striking ‘‘The Secretary’’ and inserting
‘‘(A) The Secretary’’; and
(2) by adding at the end the following:
‘‘(B) A participant, beneficiary, plan fiduciary, or the
Secretary may not bring an action to enforce the require-
ments of section 714 against a health insurance issuer of-
fering coverage in connection with a group health plan (or
such group health plan) where the patient protection re-
quirements of the Patients’ Bill of Rights Act of 2001 (as
defined in section 151(a)(1)(C) of such Act) otherwise ap-
plicable to such issuer (or plan) under section 714 do not
apply because the issuer (or plan) is in compliance with
a State law, with respect to the patient protection require-
ments involved, that has been certified or a determination
made in accordance with section 151 of such Act.’’.
159
(d) CONFORMING AMENDMENTS.—
(1) Section 732(a) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1185(a)) is
amended by striking ‘‘section 711’’ and inserting
‘‘sections 711 and 714’’.
(2) The table of contents in section 1 of the
Employee Retirement Income Security Act of 1974
is amended by inserting after the item relating to
section 713 the following new item:
‘‘Sec. 714. Patient protection standards.’’.
(3) Section 502(b)(3) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1132(b)(3)) is amended by inserting ‘‘(other than
section 135(b))’’ after ‘‘part 7’’.
(4) Section 731(a)(1) of such Act (29 U.S.C.
1191(a)(1)) is amended by inserting ‘‘and section
151 of the Patients’ Bill of Rights Act of 2001’’
after ‘‘Subject to paragraph (2)’’.
TITLE IV—AMENDMENTS TO THE
INTERNAL 
REVENUE 
CODE
OF 1986
SEC. 401. APPLICATION TO GROUP HEALTH PLANS UNDER
THE INTERNAL REVENUE CODE OF 1986.
Subchapter B of chapter 100 of the Internal Revenue
Code of 1986 is amended—
160
(1) in the table of sections, by inserting after
the item relating to section 9812 the following new
item:
‘‘Sec. 9813. Standard relating to patients’ bill of rights.’’;
and
(2) by inserting after section 9812 the fol-
lowing:
‘‘SEC. 9813. STANDARD RELATING TO PATIENTS’ BILL OF
RIGHTS.
‘‘A group health plan shall comply with the require-
ments of subtitles A and B title I of the Patients’ Bill
of Rights Act of 2001 (and subtitle F of such title insofar
as it applies to such subtitles A and B) and of sections
503A and 503B of the Employee Retirement Income Se-
curity Act of 1974, as such requirements are in effect as
of the date of the enactment of such Act, and such require-
ments shall be deemed to be incorporated into this sec-
tion.’’.
TITLE V—EFFECTIVE DATE;
SEVERABILITY
SEC. 501. EFFECTIVE DATE AND RELATED RULES.
(a) IN GENERAL.—Except as otherwise provided in
this Act, the provisions of this Act, including the amend-
ments made by title I, shall apply—
161
(1) to group health plans, and health insurance
coverage offered in connection with such plans, on
the later of—
(A) plan years beginning on or after Janu-
ary 1 of the first calendar year that begins
more than 1 year after the date of the enact-
ment of this Act; or
(B) plan years beginning on or after 18
months after the date on which the Secretary of
Health and Human Services and the Secretary
of Labor issue final regulations, subject to the
notice and comment period required under sub-
chapter 2 of chapter 5 of title 5, United States
Code, necessary to carry out such provisions
and the amendments made by this Act; and
(2) to individual health insurance coverage be-
ginning on or after the effective date described in
paragraph (1)(A).
(b) LIMITATION ON ENFORCEMENT ACTIONS.—No
enforcement action shall be taken, pursuant to the amend-
ments made by this Act, against a group health plan with
respect to a violation of a requirement imposed by such
amendments before the date of issuance of regulations
issued in connection with such requirement, if the plan
has sought to comply in good faith with such requirement.
162
(c) TREATMENT OF RELIGIOUS NONMEDICAL PRO-
VIDERS.—
(1) IN GENERAL.—Nothing in this Act (or the
amendments made thereby) shall be construed to—
(A) restrict or limit the right of group
health plans, and of health insurance issuers of-
fering health insurance coverage, to include as
providers religious nonmedical providers;
(B) require such plans or issuers to—
(i) utilize medically based eligibility
standards or criteria in deciding provider
status of religious nonmedical providers;
(ii) use medical professionals or cri-
teria to decide patient access to religious
nonmedical providers;
(iii) utilize medical professionals or
criteria in making determinations in inter-
nal or external appeals regarding coverage
for care by religious nonmedical providers;
or
(iv) compel a participant or bene-
ficiary to undergo a medical examination
or test as a condition of receiving health
insurance coverage for treatment by a reli-
gious nonmedical provider; or
163
(C) require such plans or issuers to ex-
clude religious nonmedical providers because
they do not provide medical or other required
data, if such data is inconsistent with the reli-
gious nonmedical treatment or nursing care
provided by the provider.
(2) RELIGIOUS NONMEDICAL PROVIDER.—For
purposes of this subsection, the term ‘‘religious non-
medical provider’’ means a provider who provides no
medical care but who provides only religious non-
medical treatment or religious nonmedical nursing
care.
SEC. 502. SEVERABILITY.
(a) IN GENERAL.—Except as provided in subsections
(b) and (c), if any provision of this Act, an amendment
made by this Act, or the application of such provision or
amendment to any person or circumstance is held to be
unconstitutional, the remainder of this Act, the amend-
ments made by this Act, and the application of the provi-
sions of such to any person or circumstance shall not be
affected thereby.
(b) DEPENDENCE OF REMEDIES ON APPEALS.—If
any provision of section 131, or the amendments made by
such section, or the application of such section or amend-
ments to any person or circumstance is held to be uncon-
164
stitutional, sections 141 and 142 and the amendments
made by such sections, shall be deemed to be null and
void and shall be given no force or effect.
(c) REMEDIES.—If any provision of section 141 or
142, or the amendments made by such section, or the ap-
plication of such section or amendments to any person or
circumstance is held to be unconstitutional, the remainder
of such section, and the amendments made by such section
shall be deemed to be null and void and shall be given
no force or effect.
TITLE VI—INCREASING ACCESS
TO AFFORDABLE HEALTH IN-
SURANCE
Subtitle A—Tax Incentives
SEC. 601. EXPANSION OF AVAILABILITY OF ARCHER MED-
ICAL SAVINGS ACCOUNTS.
(a) REPEAL OF LIMITATIONS ON NUMBER OF MED-
ICAL SAVINGS ACCOUNTS.—
(1) IN GENERAL.—Subsections (i) and (j) of
section 220 of the Internal Revenue Code of 1986
are hereby repealed.
(2) CONFORMING AMENDMENTS.—
(A) Paragraph (1) of section 220(c) of
such Code is amended by striking subparagraph
(D).
165
(B) Section 138 of such Code is amended
by striking subsection (f).
(b) AVAILABILITY NOT LIMITED TO ACCOUNTS FOR
EMPLOYEES
OF
SMALL
EMPLOYERS
AND
SELF-EM-
PLOYED INDIVIDUALS.—
(1) IN GENERAL.—Subparagraph (A) of section
220(c)(1) of such Code (relating to eligible indi-
vidual) is amended to read as follows:
‘‘(A) IN GENERAL.—The term ‘eligible in-
dividual’ means, with respect to any month, any
individual if—
‘‘(i) such individual is covered under a
high deductible health plan as of the 1st
day of such month, and
‘‘(ii) such individual is not, while cov-
ered under a high deductible health plan,
covered under any health plan—
‘‘(I) which is not a high deduct-
ible health plan, and
‘‘(II) which provides coverage for
any benefit which is covered under the
high deductible health plan.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 220(c)(1) of such Code is
amended by striking subparagraph (C).
166
(B) Section 220(c) of such Code is amend-
ed by striking paragraph (4) (defining small
employer) and by redesignating paragraph (5)
as paragraph (4).
(C) Section 220(b) of such Code is amend-
ed by striking paragraph (4) (relating to deduc-
tion limited by compensation) and by redesig-
nating paragraphs (5), (6), and (7) as para-
graphs (4), (5), and (6), respectively.
(c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED
FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section
220(b) of such Code is amended to read as follows:
‘‘(2) MONTHLY LIMITATION.—The monthly lim-
itation for any month is the amount equal to 1⁄12 of
the annual deductible (as of the first day of such
month) of the individual’s coverage under the high
deductible health plan.’’.
(2) CONFORMING AMENDMENT.—Clause (ii) of
section 220(d)(1)(A) of such Code is amended by
striking ‘‘75 percent of’’.
(d) BOTH EMPLOYERS AND EMPLOYEES MAY CON-
TRIBUTE TO MEDICAL SAVINGS ACCOUNTS.—Paragraph
(4) of section 220(b) of such Code (as redesignated by
subsection (b)(2)(C)) is amended to read as follows:
167
‘‘(4) COORDINATION WITH EXCLUSION FOR EM-
PLOYER
CONTRIBUTIONS.—The limitation which
would (but for this paragraph) apply under this sub-
section to the taxpayer for any taxable year shall be
reduced (but not below zero) by the amount which
would (but for section 106(b)) be includible in the
taxpayer’s gross income for such taxable year.’’.
(e) REDUCTION
OF
PERMITTED
DEDUCTIBLES
UNDER HIGH DEDUCTIBLE HEALTH PLANS.—
(1) IN GENERAL.—Subparagraph (A) of section
220(c)(2) of such Code (defining high deductible
health plan) is amended—
(A) by striking ‘‘$1,500’’ in clause (i) and
inserting ‘‘$1,000’’; and
(B) by striking ‘‘$3,000’’ in clause (ii) and
inserting ‘‘$2,000’’.
(2) CONFORMING AMENDMENT.—Subsection (g)
of section 220 of such Code is amended to read as
follows:
‘‘(g) COST-OF-LIVING ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning in a calendar year after 1998, each
dollar amount in subsection (c)(2) shall be increased
by an amount equal to—
‘‘(A) such dollar amount, multiplied by
168
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which such taxable year begins by sub-
stituting ‘calendar year 1997’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(2) SPECIAL
RULES.—In the case of the
$1,000 amount in subsection (c)(2)(A)(i) and the
$2,000 amount in subsection (c)(2)(A)(ii), para-
graph (1)(B) shall be applied by substituting ‘cal-
endar year 2000’ for ‘calendar year 1997’.
‘‘(3) ROUNDING.—If any increase under para-
graph (1) or (2) is not a multiple of $50, such in-
crease shall be rounded to the nearest multiple of
$50.’’.
(f) PROVIDING INCENTIVES FOR PREFERRED PRO-
VIDER ORGANIZATIONS TO OFFER MEDICAL SAVINGS AC-
COUNTS.—Clause (ii) of section 220(c)(2)(B) of such Code
is amended by striking ‘‘preventive care if’’ and all that
follows and inserting ‘‘preventive care.’’
(g) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED
UNDER CAFETERIA PLANS.—Subsection (f) of section
125 of such Code is amended by striking ‘‘106(b),’’.
(h) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
169
Subtitle B—Association Health
Plans
SEC. 
621. 
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:
‘‘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-
170
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 col-
lects from its members on a periodic basis dues or
payments necessary to maintain eligibility for mem-
bership 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, through negotiated rulemaking, a
171
procedure under which, subject to subsection (b), the ap-
plicable authority shall certify association 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-
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, through negotiated rulemaking, for continued certifi-
cation of association health plans under this part.
‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED
PLANS.—The applicable authority shall establish a class
172
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).
‘‘(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 Patients’ Bill of Rights
Act of 2001,
‘‘(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, which have been indicated as
having average or above-average health insurance
173
risk or health claims experience by reason of State
rate filings, denials of coverage, proposed premium
rate levels, and other means demonstrated by such
plan in accordance with regulations which the Sec-
retary shall prescribe through negotiated rule-
making, including (but not limited to) the following:
agriculture; equipment and automobile dealerships;
barbering and cosmetology; beverage wholesaling/dis-
tributing; certified public accounting practices; child
care; construction; dance, theatrical, and orchestra
productions; disinfecting and pest control; eating
and drinking establishments; fishing; hospitals; labor
organizations; logging; manufacturing (metals); min-
ing; medical and dental practices; medical labora-
tories; sanitary services; transportation (local and
freight); and warehousing.
‘‘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.
174
‘‘(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.
‘‘(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) IN GENERAL.—Except as provided in
subparagraphs (B) and (C), the members of the
board of trustees are individuals selected from
individuals who are the owners, officers, direc-
tors, or employees of the participating employ-
ers or who are partners in the participating em-
ployers and actively participate in the business.
‘‘(B) LIMITATION.—
175
‘‘(i) GENERAL RULE.—Except as pro-
vided in clauses (ii) and (iii), no such
member is an owner, officer, director, or
employee of, or partner in, a contract ad-
ministrator or other service provider to the
plan.
‘‘(ii) LIMITED EXCEPTION FOR PRO-
VIDERS 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 constitute 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 PROVIDERS OF
MEDICAL CARE.—In the case of a sponsor
which is an association whose membership
consists primarily of providers of medical
care, clause (i) shall not apply in the case
of any service provider described in sub-
paragraph (A) who is a provider of medical
care under the plan.
176
‘‘(C) CERTAIN
PLANS
EXCLUDED.—Sub-
paragraph (A) shall not apply to an association
health plan which is in existence on the date of
the enactment of the Patients’ Bill of Rights
Act of 2001.
‘‘(D) 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)(1) 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.
177
The Secretary may by regulation, through negotiated rule-
making, define for purposes of this subsection the terms
‘franchiser’, ‘franchise network’, and ‘franchisee’.
‘‘(d) CERTAIN COLLECTIVELY BARGAINED PLANS.—
‘‘(1) IN
GENERAL.—In the case of a group
health plan described in paragraph (2)—
‘‘(A) the requirements of subsection (a)
and section 801(a)(1) shall be deemed met;
‘‘(B) the joint board of trustees shall be
deemed a board of trustees with respect to
which the requirements of subsection (b) are
met; and
‘‘(C) the requirements of section 804 shall
be deemed met.
‘‘(2) REQUIREMENTS.—A group health plan is
described in this paragraph if—
‘‘(A) the plan is a multiemployer plan; or
‘‘(B) the plan is in existence on April 1,
2001, and would be described in section
3(40)(A)(i) but solely for the failure to meet
the requirements of section 3(40)(C)(ii).
‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE-
MENTS.
‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The
requirements of this subsection are met with respect to
178
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
employees of, or partners in, participating em-
ployers; or
179
‘‘(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 Patients’
Bill of Rights Act of 2001, 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
contemporaneously provided to employees of the employer
under the plan, if such exclusion of the employee from cov-
180
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.
181
‘‘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 the claims experience of such employer
182
and do not vary on the basis of the type of
business or industry in which such employer 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.
‘‘(3) FLOOR FOR NUMBER OF COVERED INDI-
VIDUALS
WITH
RESPECT
TO
CERTAIN
PLANS.—If
183
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.
‘‘(5) 
REGULATORY
REQUIREMENTS.—Such
other requirements as the applicable authority deter-
mines are necessary to carry out the purposes of this
184
part, which shall be prescribed by the applicable au-
thority by regulation through negotiated rulemaking.
‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO
DESIGN BENEFIT OPTIONS.—Subject to section 514(e),
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 any law to the extent that it (1) prohibits an exclusion
of a specific disease from such coverage, or (2) is not pre-
empted under section 731(a)(1) with respect to matters
governed by section 711 or 712.
‘‘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
185
‘‘(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
‘‘(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-
186
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, through negotiated
rulemaking, provide for upward adjust-
ments in the amount of such percentage in
specified circumstances in which the plan
specifically 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
may by regulation, through negotiated
rulemaking, provide for adjustments in the
amount of such insurance in specified cir-
cumstances in which the plan specifically
provides for and maintains reserves in ex-
187
cess of the amounts required under sub-
paragraph (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 regulations prescribed by the applicable authority
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—
‘‘(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 through nego-
tiated rulemaking, based on the level of aggregate
and specific excess /stop loss insurance provided with
respect to such plan.
188
‘‘(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 and excess /stop loss insur-
ance as the applicable authority considers appropriate.
Such requirements may be provided by regulation, through
negotiated rulemaking, 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.
‘‘(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
189
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
(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
190
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-
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,
191
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.
‘‘(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).
192
‘‘(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 pur-
poses 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—
‘‘(A) under which an insurer (meeting such
minimum standards as the applicable authority
may prescribe by regulation through negotiated
rulemaking) provides for payment 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.
193
‘‘(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 through negotiated
rulemaking) provides for payment to the plan
with respect to claims under the plan in connec-
tion 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
‘‘(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 through negotiated rulemaking) provides for
payment to the plan with respect to claims under the
plan which the plan is unable to satisfy by reason
194
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 through
negotiated rulemaking); 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
through negotiated rulemaking.
‘‘(j) SOLVENCY STANDARDS WORKING GROUP.—
‘‘(1) IN GENERAL.—Within 90 days after the
date of the enactment of the Patients’ Bill of Rights
Act of 2001, the applicable authority shall establish
a Solvency Standards Working Group. In prescribing
the initial regulations under this section, the applica-
ble authority shall take into account the rec-
ommendations 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
195
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
‘‘(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-
196
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 through nego-
tiated rulemaking, at least the following information:
‘‘(1) IDENTIFYING INFORMATION.—The names
and addresses of—
‘‘(A) the sponsor; and
‘‘(B) the members of the board of trustees
of the plan.
‘‘(2) STATES IN WHICH PLAN INTENDS TO DO
BUSINESS.—The States in which participants and
beneficiaries under the plan are to be located and
the number of them expected to be located in each
such State.
‘‘(3) BONDING REQUIREMENTS.—Evidence pro-
vided by the board of trustees that the bonding re-
quirements of section 412 will be met as of the date
of the application or (if later) commencement of op-
erations.
197
‘‘(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
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 through negotiated
rulemaking.
198
‘‘(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-
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.
199
‘‘(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 through nego-
tiated rulemaking, 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
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
200
certification under this part shall be filed in such form
and manner as shall be prescribed by the applicable au-
thority by regulation through negotiated rulemaking. The
applicable authority may require by regulation, through
negotiated rulemaking, 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-
plicable authority may require by regulation through nego-
tiated rulemaking such interim reports as it considers ap-
propriate.
‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The
board of trustees of each association health plan which
provides benefits options in addition to health insurance
coverage and which is applying for certification under this
201
part or is certified under this part shall engage, on behalf
of all participants and beneficiaries, a qualified actuary
who shall be responsible for the preparation of the mate-
rials comprising information necessary to be submitted by
a qualified actuary under this part. The qualified actuary
shall utilize such assumptions and techniques as are nec-
essary to enable such actuary to form an opinion as to
whether the contents of the matters reported under this
part—
‘‘(1) are in the aggregate reasonably related to
the experience of the plan and to reasonable expecta-
tions; and
‘‘(2) represent such actuary’s best estimate of
anticipated experience under the plan.
The opinion by the qualified actuary shall be made with
respect to, and shall be made a part of, the annual report.
‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER-
MINATION.
‘‘Except as provided in section 809(b), an association
health plan which is or has been certified under this part
may terminate (upon or at any time after cessation of ac-
cruals in benefit liabilities) only if the board of trustees—
‘‘(1) not less than 60 days before the proposed
termination date, provides to the participants and
beneficiaries a written notice of intent to terminate
202
stating that such termination is intended and the
proposed termination date;
‘‘(2) develops a plan for winding up the affairs
of the plan in connection with such termination in
a manner which will result in timely payment of all
benefits for which the plan is obligated; and
‘‘(3) submits such plan in writing to the appli-
cable authority.
Actions required under this section shall be taken in such
form and manner as may be prescribed by the applicable
authority by regulation through negotiated rulemaking.
‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI-
NATION.
‘‘(a) ACTIONS
TO
AVOID
DEPLETION
OF
RE-
SERVES.—An association health plan which is certified
under this part and which provides benefits other than
health insurance coverage shall continue to meet the re-
quirements of section 806, irrespective of whether such
certification continues in effect. The board of trustees of
such plan shall determine quarterly whether the require-
ments of section 806 are met. In any case in which the
board determines that there is reason to believe that there
is or will be a failure to meet such requirements, or the
applicable authority makes such a determination and so
notifies the board, the board shall immediately notify the
203
qualified actuary engaged by the plan, and such actuary
shall, not later than the end of the next following month,
make such recommendations to the board for corrective
action as the actuary determines necessary to ensure com-
pliance with section 806. Not later than 30 days after re-
ceiving from the actuary recommendations for corrective
actions, the board shall notify the applicable authority (in
such form and manner as the applicable authority may
prescribe by regulation through negotiated rulemaking) of
such recommendations of the actuary for corrective action,
together with a description of the actions (if any) that the
board has taken or plans to take in response to such rec-
ommendations. The board shall thereafter report to the
applicable authority, in such form and frequency as the
applicable authority may specify to the board, regarding
corrective action taken by the board until the requirements
of section 806 are met.
‘‘(b) MANDATORY TERMINATION.—In any case in
which—
‘‘(1) the applicable authority has been notified
under subsection (a) of a failure of an association
health plan which is or has been certified under this
part and is described in section 806(a)(2) to meet
the requirements of section 806 and has not been
notified by the board of trustees of the plan that
204
corrective action has restored compliance with such
requirements; and
‘‘(2) the applicable authority determines that
there is a reasonable expectation that the plan will
continue to fail to meet the requirements of section
806,
the board of trustees of the plan shall, at the direction
of the applicable authority, terminate the plan and, in the
course of the termination, take such actions as the appli-
cable authority may require, including satisfying any
claims referred to in section 806(a)(2)(B)(iii) and recov-
ering for the plan any liability under subsection
(a)(2)(B)(iii) or (e) of section 806, as necessary to ensure
that the affairs of the plan will be, to the maximum extent
possible, wound up in a manner which will result in timely
provision of all benefits for which the plan is obligated.
‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL-
VENT ASSOCIATION HEALTH PLANS PRO-
VIDING HEALTH BENEFITS IN ADDITION TO
HEALTH INSURANCE COVERAGE.
‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR
INSOLVENT PLANS.—Whenever the Secretary determines
that an association health plan which is or has been cer-
tified under this part and which is described in section
806(a)(2) will be unable to provide benefits when due or
205
is otherwise in a financially hazardous condition, as shall
be defined by the Secretary by regulation through nego-
tiated rulemaking, the Secretary shall, upon notice to the
plan, apply to the appropriate United States district court
for appointment of the Secretary as trustee to administer
the plan for the duration of the insolvency. The plan may
appear as a party and other interested persons may inter-
vene in the proceedings at the discretion of the court. The
court shall appoint such Secretary trustee if the court de-
termines that the trusteeship is necessary to protect the
interests of the participants and beneficiaries or providers
of medical care or to avoid any unreasonable deterioration
of the financial condition of the plan. The trusteeship of
such Secretary shall continue until the conditions de-
scribed in the first sentence of this subsection are rem-
edied or the plan is terminated.
‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon
appointment as trustee under subsection (a), shall have
the power—
‘‘(1) to do any act authorized by the plan, this
title, or other applicable provisions of law to be done
by the plan administrator or any trustee of the plan;
‘‘(2) to require the transfer of all (or any part)
of the assets and records of the plan to the Sec-
retary as trustee;
208
of title 11, United States Code, and shall have the duties
of a fiduciary for purposes of this title.
‘‘(e) OTHER PROCEEDINGS.—An application by the
Secretary under this subsection may be filed notwith-
standing the pendency in the same or any other court of
any bankruptcy, mortgage foreclosure, or equity receiver-
ship proceeding, or any proceeding to reorganize, conserve,
or liquidate such plan or its property, or any proceeding
to enforce a lien against property of the plan.
‘‘(f) JURISDICTION OF COURT.—
‘‘(1) IN GENERAL.—Upon the filing of an appli-
cation for the appointment as trustee or the issuance
of a decree under this section, the court to which the
application is made shall have exclusive jurisdiction
of the plan involved and its property wherever lo-
cated with the powers, to the extent consistent with
the purposes of this section, of a court of the United
States having jurisdiction over cases under chapter
11 of title 11, United States Code. Pending an adju-
dication under this section such court shall stay, and
upon appointment by it of the Secretary as trustee,
such court shall continue the stay of, any pending
mortgage foreclosure, equity receivership, or other
proceeding to reorganize, conserve, or liquidate the
plan, the sponsor, or property of such plan or spon-
209
sor, and any other suit against any receiver, conser-
vator, or trustee of the plan, the sponsor, or prop-
erty of the plan or sponsor. Pending such adjudica-
tion and upon the appointment by it of the Sec-
retary as trustee, the court may stay any proceeding
to enforce a lien against property of the plan or the
sponsor or any other suit against the plan or the
sponsor.
‘‘(2) VENUE.—An action under this section
may be brought in the judicial district where the
sponsor or the plan administrator resides or does
business or where any asset of the plan is situated.
A district court in which such action is brought may
issue process with respect to such action in any
other judicial district.
‘‘(g) PERSONNEL.—In accordance with regulations
which shall be prescribed by the Secretary through nego-
tiated rulemaking, the Secretary shall appoint, retain, and
compensate accountants, actuaries, and other professional
service personnel as may be necessary in connection with
the Secretary’s service as trustee under this section.
‘‘SEC. 811. STATE ASSESSMENT AUTHORITY.
‘‘(a) IN GENERAL.—Notwithstanding section 514, a
State may impose by law a contribution tax on an associa-
tion health plan described in section 806(a)(2), if the plan
210
commenced operations in such State after the date of the
enactment of the Patients’ Bill of Rights Act of 2001.
‘‘(b) CONTRIBUTION TAX.—For purposes of this sec-
tion, the term ‘contribution tax’ imposed by a State on
an association health plan means any tax imposed by such
State if—
‘‘(1) such tax is computed by applying a rate to
the amount of premiums or contributions, with re-
spect to individuals covered under the plan who are
residents of such State, which are received by the
plan from participating employers located in such
State or from such individuals;
‘‘(2) the rate of such tax does not exceed the
rate of any tax imposed by such State on premiums
or contributions received by insurers or health main-
tenance organizations for health insurance coverage
offered in such State in connection with a group
health plan;
‘‘(3) such tax is otherwise nondiscriminatory;
and
‘‘(4) the amount of any such tax assessed on
the plan is reduced by the amount of any tax or as-
sessment otherwise imposed by the State on pre-
miums, contributions, or both received by insurers or
health maintenance organizations for health insur-
211
ance coverage, aggregate excess /stop loss insurance
(as defined in section 806(g)(1)), specific excess /
stop loss insurance (as defined in section 806(g)(2)),
other insurance related to the provision of medical
care under the plan, or any combination thereof pro-
vided by such insurers or health maintenance organi-
zations in such State in connection with such plan.
‘‘SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION.
‘‘(a) DEFINITIONS.—For purposes of this part—
‘‘(1) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning provided in section
733(a)(1) (after applying subsection (b) of this sec-
tion).
‘‘(2) MEDICAL CARE.—The term ‘medical care’
has the meaning provided in section 733(a)(2).
‘‘(3) HEALTH
INSURANCE
COVERAGE.—The
term ‘health insurance coverage’ has the meaning
provided in section 733(b)(1).
‘‘(4) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning provided
in section 733(b)(2).
‘‘(5) APPLICABLE AUTHORITY.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘applicable author-
212
ity’ means, in connection with an association
health plan—
‘‘(i) the State recognized pursuant to
subsection (c) of section 506 as the State
to which authority has been delegated in
connection with such plan; or
‘‘(ii) if there if no State referred to in
clause (i), the Secretary.
‘‘(B) EXCEPTIONS.—
‘‘(i) 
JOINT
AUTHORITIES.—Where
such term appears in section 808(3), sec-
tion 807(e) (in the first instance), section
809(a) (in the second instance), section
809(a) (in the fourth instance), and sec-
tion 809(b)(1), such term means, in con-
nection with an association health plan, the
Secretary and the State referred to in sub-
paragraph (A)(i) (if any) in connection
with such plan.
‘‘(ii) REGULATORY
AUTHORITIES.—
Where such term appears in section 802(a)
(in the first instance), section 802(d), sec-
tion 
802(e), 
section 
803(d), 
section
805(a)(5), 
section 
806(a)(2), 
section
806(b), section 806(c), section 806(d),
213
paragraphs (1)(A) and (2)(A) of section
806(g), section 806(h), section 806(i), sec-
tion 806(j), section 807(a) (in the second
instance), section 807(b), section 807(d),
section 807(e) (in the second instance),
section 808 (in the matter after paragraph
(3)), and section 809(a) (in the third in-
stance), such term means, in connection
with an association health plan, the Sec-
retary.
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The
term ‘health status-related factor’ has the meaning
provided in section 733(d)(2).
‘‘(7) INDIVIDUAL MARKET.—
‘‘(A) IN GENERAL.—The term ‘individual
market’ means the market for health insurance
coverage offered to individuals other than in
connection with a group health plan.
‘‘(B) 
TREATMENT
OF
VERY
SMALL
GROUPS.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), such term includes coverage offered in
connection with a group health plan that
has fewer than 2 participants as current
employees or participants described in sec-
214
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,
partner, or self-employed individual in relation to the
plan.
‘‘(9) APPLICABLE
STATE
AUTHORITY.—The
term ‘applicable State authority’ means, with respect
to a health insurance issuer in a State, the State in-
215
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of
title XXVII of the Public Health Service Act for the
State involved with respect to such issuer.
‘‘(10) QUALIFIED ACTUARY.—The term ‘quali-
fied actuary’ means an individual who is a member
of the American Academy of Actuaries or meets
such reasonable standards and qualifications as the
Secretary may provide by regulation through nego-
tiated rulemaking.
‘‘(11) AFFILIATED MEMBER.—The term ‘affili-
ated member’ means, in connection with a sponsor—
‘‘(A) a person who is otherwise eligible to
be a member of the sponsor but who elects an
affiliated status with the sponsor,
‘‘(B) in the case of a sponsor with mem-
bers which consist of associations, a person who
is a member of any such association and elects
an affiliated status with the sponsor, or
‘‘(C) in the case of an association health
plan in existence on the date of the enactment
of the Patients’ Bill of Rights Act of 2001, a
person eligible to be a member of the sponsor
or one of its member associations.
216
‘‘(12) LARGE EMPLOYER.—The term ‘large em-
ployer’ means, in connection with a group health
plan with respect to a plan year, an employer who
employed an average of at least 51 employees on
business days during the preceding calendar year
and who employs at least 2 employees on the first
day of the plan year.
‘‘(13) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, in connection with a group health
plan with respect to a plan year, an employer who
is not a large employer.
‘‘(b) RULES OF CONSTRUCTION.—
‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur-
poses of determining whether a plan, fund, or pro-
gram is an employee welfare benefit plan which is an
association health plan, and for purposes of applying
this title in connection with such plan, fund, or pro-
gram so determined to be such an employee welfare
benefit plan—
‘‘(A) in the case of a partnership, the term
‘employer’ (as defined in section 3(5)) includes
the partnership in relation to the partners, and
the term ‘employee’ (as defined in section 3(6))
includes any partner in relation to the partner-
ship; and
217
‘‘(B) in the case of a self-employed indi-
vidual, the term ‘employer’ (as defined in sec-
tion 3(5)) and the term ‘employee’ (as defined
in section 3(6)) shall include such individual.
‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED
AS EMPLOYEE WELFARE BENEFIT PLANS.—In the
case of any plan, fund, or program which was estab-
lished or is maintained for the purpose of providing
medical care (through the purchase of insurance or
otherwise) for employees (or their dependents) cov-
ered thereunder and which demonstrates to the Sec-
retary that all requirements for certification under
this part would be met with respect to such plan,
fund, or program if such plan, fund, or program
were a group health plan, such plan, fund, or pro-
gram shall be treated for purposes of this title as an
employee welfare benefit plan on and after the date
of such demonstration.’’.
(b) CONFORMING AMENDMENTS
TO PREEMPTION
RULES.—
(1) Section 514(b)(6) of such Act (29 U.S.C.
1144(b)(6)) is amended by adding at the end the
following new subparagraph:
‘‘(E) The preceding subparagraphs of this paragraph
do not apply with respect to any State law in the case
218
of an association health plan which is certified under part
8.’’.
(2) Section 514 of such Act (29 U.S.C. 1144),
as amended by section 142, is amended—
(A) in subsection (b)(4), by striking ‘‘Sub-
section (a)’’ and inserting ‘‘Subsections (a) and
(e)’’;
(B) in subsection (b)(5), by striking ‘‘sub-
section (a)’’ in subparagraph (A) and inserting
‘‘subsection (a) of this section and subsections
(a)(2)(B) and (b) of section 805’’, and by strik-
ing ‘‘subsection (a)’’ in subparagraph (B) and
inserting ‘‘subsection (a) of this section or sub-
section (a)(2)(B) or (b) of section 805’’;
(C) by redesignating subsection (e) as sub-
section (f); and
(D) by inserting after subsection (d) the
following new subsection:
‘‘(e)(1) Except as provided in subsection (b)(4), the
provisions of this title shall supersede any and all State
laws insofar as they may now or hereafter preclude, or
have the effect of precluding, a health insurance issuer
from offering health insurance coverage in connection with
an association health plan which is certified under part
8.
219
‘‘(2) Except as provided in paragraphs (4) and (5)
of subsection (b) of this section—
‘‘(A) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan certified under part 8 to a partici-
pating employer operating in such State, the provi-
sions of this title shall supersede any and all laws
of such State insofar as they may preclude a health
insurance issuer from offering health insurance cov-
erage of the same policy type to other employers op-
erating in the State which are eligible for coverage
under such association health plan, whether or not
such other employers are participating employers in
such plan.
‘‘(B) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan in a State and the filing, with the
applicable State authority, of the policy form in con-
nection with such policy type is approved by such
State authority, the provisions of this title shall su-
persede any and all laws of any other State in which
health insurance coverage of such type is offered, in-
sofar as they may preclude, upon the filing in the
same form and manner of such policy form with the
220
applicable State authority in such other State, the
approval of the filing in such other State.
‘‘(3) For additional provisions relating to association
health plans, see subsections (a)(2)(B) and (b) of section
805.
‘‘(4) For purposes of this subsection, the term ‘asso-
ciation health plan’ has the meaning provided in section
801(a), and the terms ‘health insurance coverage’, ‘par-
ticipating employer’, and ‘health insurance issuer’ have
the meanings provided such terms in section 811, respec-
tively.’’.
(3) Section 514(b)(6)(A) of such Act (29
U.S.C. 1144(b)(6)(A)) is amended—
(A) in clause (i)(II), by striking ‘‘and’’ at
the end;
(B) in clause (ii), by inserting ‘‘and which
does not provide medical care (within the mean-
ing of section 733(a)(2)),’’ after ‘‘arrange-
ment,’’, and by striking ‘‘title.’’ and inserting
‘‘title, and’’; and
(C) by adding at the end the following new
clause:
‘‘(iii) subject to subparagraph (E), in the case
of any other employee welfare benefit plan which is
a multiple employer welfare arrangement and which
221
provides medical care (within the meaning of section
733(a)(2)), any law of any State which regulates in-
surance may apply.’’.
(4) Section 514(e) of such Act (as redesignated
by paragraph (2)(C)) is amended—
(A) by striking ‘‘Nothing’’ and inserting
‘‘(1) Except as provided in paragraph (2), noth-
ing’’; and
(B) by adding at the end the following new
paragraph:
‘‘(2) Nothing in any other provision of law enacted
on or after the date of the enactment of the Patients’ Bill
of Rights Act of 2001 shall be construed to alter, amend,
modify, invalidate, impair, or supersede any provision of
this title, except by specific cross-reference to the affected
section.’’.
(c) PLAN SPONSOR.—Section 3(16)(B) of such Act
(29 U.S.C. 102(16)(B)) is amended by adding at the end
the following new sentence: ‘‘Such term also includes a
person serving as the sponsor of an association health plan
under part 8.’’.
(d) DISCLOSURE OF SOLVENCY PROTECTIONS RE-
LATED TO SELF-INSURED AND FULLY INSURED OPTIONS
UNDER ASSOCIATION HEALTH PLANS.—Section 102(b)
of such Act (29 U.S.C. 102(b)) is amended by adding at
222
the end the following: ‘‘An association health plan shall
include in its summary plan description, in connection
with each benefit option, a description of the form of sol-
vency or guarantee fund protection secured pursuant to
this Act or applicable State law, if any.’’.
(e) SAVINGS CLAUSE.—Section 731(c) of such Act is
amended by inserting ‘‘or part 8’’ after ‘‘this part’’.
(f) REPORT TO THE CONGRESS REGARDING CERTIFI-
CATION
OF
SELF-INSURED
ASSOCIATION
HEALTH
PLANS.—Not later than January 1, 2006, the Secretary
of Labor shall report to the Committee on Education and
the Workforce of the House of Representatives and the
Committee on Health, Education, Labor, and Pensions of
the Senate the effect association health plans have had,
if any, on reducing the number of uninsured individuals.
(g) CLERICAL AMENDMENT.—The table of contents
in section 1 of the Employee Retirement Income Security
Act of 1974 is amended by inserting after the item relat-
ing to section 734 the following new items:
‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS
‘‘Sec. 801. Association health plans.
‘‘Sec. 802. Certification of association health plans.
‘‘Sec. 803. Requirements relating to sponsors and boards of trustees.
‘‘Sec. 804. Participation and coverage requirements.
‘‘Sec. 805. Other requirements relating to plan documents, contribution rates,
and benefit options.
‘‘Sec. 806. Maintenance of reserves and provisions for solvency for plans pro-
viding health benefits in addition to health insurance coverage.
‘‘Sec. 807. Requirements for application and related requirements.
‘‘Sec. 808. Notice requirements for voluntary termination.
‘‘Sec. 809. Corrective actions and mandatory termination.
223
‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health plans
providing health benefits in addition to health insurance cov-
erage.
‘‘Sec. 811. State assessment authority.
‘‘Sec. 812. Definitions and rules of construction.’’.
SEC. 622. CLARIFICATION OF TREATMENT OF SINGLE EM-
PLOYER ARRANGEMENTS.
Section 3(40)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(40)(B)) is
amended—
(1) in clause (i), by inserting ‘‘for any plan year
of any such plan, or any fiscal year of any such
other arrangement;’’ after ‘‘single employer’’, and by
inserting ‘‘during such year or at any time during
the preceding 1-year period’’ after ‘‘control group’’;
(2) in clause (iii)—
(A) by striking ‘‘common control shall not
be based on an interest of less than 25 percent’’
and inserting ‘‘an interest of greater than 25
percent may not be required as the minimum
interest necessary for common control’’; and
(B) by striking ‘‘similar to’’ and inserting
‘‘consistent and coextensive with’’;
(3) by redesignating clauses (iv) and (v) as
clauses (v) and (vi), respectively; and
(4) by inserting after clause (iii) the following
new clause:
224
‘‘(iv) in determining, after the application of
clause (i), whether benefits are provided to employ-
ees of two or more employers, the arrangement shall
be treated as having only one participating employer
if, after the application of clause (i), the number of
individuals who are employees and former employees
of any one participating employer and who are cov-
ered under the arrangement is greater than 75 per-
cent of the aggregate number of all individuals who
are employees or former employees of participating
employers and who are covered under the arrange-
ment;’’.
SEC. 623. CLARIFICATION OF TREATMENT OF CERTAIN
COLLECTIVELY 
BARGAINED 
ARRANGE-
MENTS.
(a) IN GENERAL.—Section 3(40)(A)(i) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1002(40)(A)(i)) is amended to read as follows:
‘‘(i)(I) under or pursuant to one or more collec-
tive bargaining agreements which are reached pursu-
ant to collective bargaining described in section 8(d)
of the National Labor Relations Act (29 U.S.C.
158(d)) or paragraph Fourth of section 2 of the
Railway Labor Act (45 U.S.C. 152, paragraph
Fourth) or which are reached pursuant to labor-
225
management negotiations under similar provisions of
State public employee relations laws, and (II) in ac-
cordance with subparagraphs (C), (D), and (E);’’.
(b) LIMITATIONS.—Section 3(40) of such Act (29
U.S.C. 1002(40)) is amended by adding at the end the
following new subparagraphs:
‘‘(C) For purposes of subparagraph (A)(i)(II), a plan
or other arrangement shall be treated as established or
maintained in accordance with this subparagraph only if
the following requirements are met:
‘‘(i) The plan or other arrangement, and the
employee organization or any other entity sponsoring
the plan or other arrangement, do not—
‘‘(I) utilize the services of any licensed in-
surance agent or broker for soliciting or enroll-
ing employers or individuals as participating
employers or covered individuals under the plan
or other arrangement; or
‘‘(II) pay any type of compensation to a
person, other than a full time employee of the
employee organization (or a member of the or-
ganization to the extent provided in regulations
prescribed by the Secretary through negotiated
rulemaking), that is related either to the volume
or number of employers or individuals solicited
226
or enrolled as participating employers or cov-
ered individuals under the plan or other ar-
rangement, or to the dollar amount or size of
the contributions made by participating employ-
ers or covered individuals to the plan or other
arrangement;
except to the extent that the services used by the
plan, arrangement, organization, or other entity con-
sist solely of preparation of documents necessary for
compliance with the reporting and disclosure re-
quirements of part 1 or administrative, investment,
or consulting services unrelated to solicitation or en-
rollment of covered individuals.
‘‘(ii) As of the end of the preceding plan year,
the number of covered individuals under the plan or
other arrangement who are neither—
‘‘(I) employed within a bargaining unit
covered by any of the collective bargaining
agreements with a participating employer (nor
covered on the basis of an individual’s employ-
ment in such a bargaining unit); nor
‘‘(II) present employees (or former employ-
ees who were covered while employed) of the
sponsoring employee organization, of an em-
ployer who is or was a party to any of the col-
227
lective bargaining agreements, or of the plan or
other arrangement or a related plan or arrange-
ment (nor covered on the basis of such present
or former employment);
does not exceed 15 percent of the total number of
individuals who are covered under the plan or ar-
rangement and who are present or former employees
who are or were covered under the plan or arrange-
ment pursuant to a collective bargaining agreement
with a participating employer. The requirements of
the preceding provisions of this clause shall be treat-
ed as satisfied if, as of the end of the preceding plan
year, such covered individuals are comprised solely
of individuals who were covered individuals under
the plan or other arrangement as of the date of the
enactment of the Patients’ Bill of Rights Act of
2001 and, as of the end of the preceding plan year,
the number of such covered individuals does not ex-
ceed 25 percent of the total number of present and
former employees enrolled under the plan or other
arrangement.
‘‘(iii) The employee organization or other entity
sponsoring the plan or other arrangement certifies
to the Secretary each year, in a form and manner
which shall be prescribed by the Secretary through
228
negotiated rulemaking that the plan or other ar-
rangement meets the requirements of clauses (i) and
(ii).
‘‘(D) For purposes of subparagraph (A)(i)(II), a plan
or arrangement shall be treated as established or main-
tained in accordance with this subparagraph only if—
‘‘(i) all of the benefits provided under the plan
or arrangement consist of health insurance coverage;
or
‘‘(ii)(I) the plan or arrangement is a multiem-
ployer plan; and
‘‘(II) the requirements of clause (B) of the pro-
viso to clause (5) of section 302(c) of the Labor
Management Relations Act, 1947 (29 U.S.C.
186(c)) are met with respect to such plan or other
arrangement.
‘‘(E) For purposes of subparagraph (A)(i)(II), a plan
or arrangement shall be treated as established or main-
tained in accordance with this subparagraph only if—
‘‘(i) the plan or arrangement is in effect as of
the date of the enactment of the Patients’ Bill of
Rights Act of 2001; or
‘‘(ii) the employee organization or other entity
sponsoring the plan or arrangement—
229
‘‘(I) has been in existence for at least 3
years; or
‘‘(II) demonstrates to the satisfaction of
the Secretary that the requirements of subpara-
graphs (C) and (D) are met with respect to the
plan or other arrangement.’’.
(c) CONFORMING AMENDMENTS TO DEFINITIONS OF
PARTICIPANT AND BENEFICIARY.—Section 3(7) of such
Act (29 U.S.C. 1002(7)) is amended by adding at the end
the following new sentence: ‘‘Such term includes an indi-
vidual who is a covered individual described in paragraph
(40)(C)(ii).’’.
SEC. 624. ENFORCEMENT PROVISIONS RELATING TO ASSO-
CIATION HEALTH PLANS.
(a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL
MISREPRESENTATIONS.—Section 501 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1131)
is amended—
(1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) Any person who willfully falsely represents, to
any employee, any employee’s beneficiary, any employer,
the Secretary, or any State, a plan or other arrangement
established or maintained for the purpose of offering or
230
providing any benefit described in section 3(1) to employ-
ees or their beneficiaries as—
‘‘(1) being an association health plan which has
been certified under part 8;
‘‘(2) having been established or maintained
under or pursuant to one or more collective bar-
gaining agreements which are reached pursuant to
collective bargaining described in section 8(d) of the
National Labor Relations Act (29 U.S.C. 158(d)) or
paragraph Fourth of section 2 of the Railway Labor
Act (45 U.S.C. 152, paragraph Fourth) or which are
reached pursuant to labor-management negotiations
under similar provisions of State public employee re-
lations laws; or
‘‘(3) being a plan or arrangement with respect
to which the requirements of subparagraph (C), (D),
or (E) of section 3(40) are met;
shall, upon conviction, be imprisoned not more than 5
years, be fined under title 18, United States Code, or
both.’’.
(b) CEASE ACTIVITIES ORDERS.—Section 502 of
such Act (29 U.S.C. 1132), as amended by sections 141
and 143, is further amended by adding at the end the
following new subsection:
231
‘‘(p) ASSOCIATION HEALTH PLAN CEASE AND DE-
SIST ORDERS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
upon application by the Secretary showing the oper-
ation, promotion, or marketing of an association
health plan (or similar arrangement providing bene-
fits consisting of medical care (as defined in section
733(a)(2))) that—
‘‘(A) is not certified under part 8, is sub-
ject under section 514(b)(6) to the insurance
laws of any State in which the plan or arrange-
ment offers or provides benefits, and is not li-
censed, registered, or otherwise approved under
the insurance laws of such State; or
‘‘(B) is an association health plan certified
under part 8 and is not operating in accordance
with the requirements under part 8 for such
certification,
a district court of the United States shall enter an
order requiring that the plan or arrangement cease
activities.
‘‘(2) EXCEPTION.—Paragraph (1) shall not
apply in the case of an association health plan or
other arrangement if the plan or arrangement shows
that—
232
‘‘(A) all benefits under it referred to in
paragraph (1) consist of health insurance cov-
erage; and
‘‘(B) with respect to each State in which
the plan or arrangement offers or provides ben-
efits, the plan or arrangement is operating in
accordance with applicable State laws that are
not superseded under section 514.
‘‘(3) ADDITIONAL
EQUITABLE
RELIEF.—The
court may grant such additional equitable relief, in-
cluding any relief available under this title, as it
deems necessary to protect the interests of the pub-
lic and of persons having claims for benefits against
the plan.’’.
(c) RESPONSIBILITY
FOR CLAIMS PROCEDURE.—
Section 503 of such Act (29 U.S.C. 1133), as amended
by section 301(b), is amended by adding at the end the
following new subsection:
‘‘(c) ASSOCIATION HEALTH PLANS.—The terms of
each association health plan which is or has been certified
under part 8 shall require the board of trustees or the
named fiduciary (as applicable) to ensure that the require-
ments of this section are met in connection with claims
filed under the plan.’’.
233
SEC. 625. COOPERATION BETWEEN FEDERAL AND STATE
AUTHORITIES.
Section 506 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1136) is amended by adding
at the end the following new subsection:
‘‘(c) CONSULTATION WITH STATES WITH RESPECT
TO ASSOCIATION HEALTH PLANS.—
‘‘(1) AGREEMENTS
WITH
STATES.—The Sec-
retary shall consult with the State recognized under
paragraph (2) with respect to an association health
plan regarding the exercise of—
‘‘(A) the Secretary’s authority under sec-
tions 502 and 504 to enforce the requirements
for certification under part 8; and
‘‘(B) the Secretary’s authority to certify
association health plans under part 8 in accord-
ance with regulations of the Secretary applica-
ble to certification under part 8.
‘‘(2) RECOGNITION
OF
PRIMARY
DOMICILE
STATE.—In carrying out paragraph (1), the Sec-
retary shall ensure that only one State will be recog-
nized, with respect to any particular association
health plan, as the State to with which consultation
is required. In carrying out this paragraph, the Sec-
retary shall take into account the places of residence
234
of the participants and beneficiaries under the plan
and the State in which the trust is maintained.’’.
SEC. 626. EFFECTIVE DATE AND TRANSITIONAL AND
OTHER RULES.
(a) EFFECTIVE DATE.—The amendments made by
sections 621, 624, and 625 shall take effect one year from
the date of enactment. The amendments made by sections
622 and 623 shall take effect on the date of the enactment
of this Act. The Secretary of Labor shall first issue all
regulations necessary to carry out the amendments made
by this subtitle within one year from the date of enact-
ment. Such regulations shall be issued through negotiated
rulemaking.
(b) EXCEPTION.—Section 801(a)(2) of the Employee
Retirement Income Security Act of 1974 (added by section
621) does not apply in connection with an association
health plan (certified under part 8 of subtitle B of title
I of such Act) existing on the date of the enactment of
this Act, if no benefits provided thereunder as of the date
of the enactment of this Act consist of health insurance
coverage (as defined in section 733(b)(1) of such Act).
(c) TREATMENT
OF CERTAIN EXISTING HEALTH
BENEFITS PROGRAMS.—
(1) IN GENERAL.—In any case in which, as of
the date of the enactment of this Act, an arrange-
235
ment is maintained in a State for the purpose of
providing benefits consisting of medical care for the
employees and beneficiaries of its participating em-
ployers, at least 200 participating employers make
contributions to such arrangement, such arrange-
ment has been in existence for at least 10 years, and
such arrangement is licensed under the laws of one
or more States to provide such benefits to its par-
ticipating employers, upon the filing with the appli-
cable authority (as defined in section 812(a)(5) of
the Employee Retirement Income Security Act of
1974 (as amended by this subtitle)) by the arrange-
ment of an application for certification of the ar-
rangement under part 8 of subtitle B of title I of
such Act—
(A) such arrangement shall be deemed to
be a group health plan for purposes of title I
of such Act;
(B) the requirements of sections 801(a)(1)
and 803(a)(1) of the Employee Retirement In-
come Security Act of 1974 shall be deemed met
with respect to such arrangement;
(C) the requirements of section 803(b) of
such Act shall be deemed met, if the arrange-