Title I, Subtitle A
HR 995 SC
‘‘(1) the extent to which individuals performing
utilization review may receive financial compensation
based upon the number of denials of coverage;
‘‘(2) the process under which a covered individ-
ual or provider may obtain timely review of a denial
of coverage, including the extent to which a review
must be conducted by a medical director of the in-
surer or plan (as applicable) or a physician des-
ignated by the insurer or plan;
‘‘(3) the extent to which utilization review is to
be conducted in accordance with uniformly applied
criteria that are based on currently available medical
evidence; and
‘‘(4) the extent to which providers are to par-
ticipate in the development of the utilization review
program.
‘‘Subpart C—Establishment of Standards;
Enforcement
‘‘SEC. 821. ESTABLISHMENT OF STANDARDS APPLICABLE
TO INSURERS OFFERING HEALTH INSUR-
ANCE COVERAGE TO GROUP HEALTH PLANS.
‘‘(a) ROLE OF NAIC.—The Secretary shall request
the NAIC to develop, within 12 months after the date of
the enactment of the ERISA Targeted Health Insurance
Reform Act of 1995, model regulations that specify stand-
Title I, Subtitle A
HR 995 SC
ards with respect to the requirements of subpart A (other
than section 804) and subpart B of this part to the extent
that such requirements are applicable to insurers offering
health insurance coverage in connection with group health
plans and not applicable to group health plans. If the Sec-
retary of Health and Human Services determines under
section 811(b)(1) that a private entity has established
standards for provider networks consistent with section
811(c), the standards established under this section with
respect to the requirements of section 811 shall consist
of the standards recognized or established under section
811. If the Secretary of Health and Human Services de-
termines under section 812(b)(1) that a private entity has
established standards for utilization review programs that
are consistent with section 812(c), the standards estab-
lished under this section with respect to the requirements
of section 812 shall consist of the standards recognized
or established under section 812. If the NAIC develops
recommended regulations under this section specifying
standards within such period, the Secretary shall review
the standards. Such review shall be completed within 120
days after the date the regulations are developed. Unless
the Secretary determines within such period that the
standards do not effectively provide for the application of
requirements to insurers in a manner and to an extent
Title I, Subtitle A
HR 995 SC
equivalent in substance to the manner and extent to which
the requirements apply to group health plans, such stand-
ards shall serve as the standards under this section, with
such amendments as the Secretary deems necessary. The
Secretary shall provide for public comment in connection
with the regulations during such 120-day period and in
advance of any determination by the Secretary.
‘‘(b) CONTINGENCY.—If the NAIC does not develop
such model regulations within such period or the Secretary
makes the determination described in subsection (a), the
Secretary shall specify, within 24 months after the date
of the enactment of the ERISA Targeted Health Insur-
ance Reform Act of 1995, standards to carry out those
requirements.
‘‘(c) DEFINITIONS.—In this subpart, the term ‘sec-
tion 821 standards’ means the standards established
under this section.
‘‘SEC. 822. ENFORCEMENT WITH RESPECT TO INSURERS
OFFERING HEALTH INSURANCE COVERAGE
TO GROUP HEALTH PLANS.
‘‘(a) VOLUNTARY ENFORCEMENT BY STATES.—
‘‘(1) IN GENERAL.—Each State that desires to
enforce the section 821 standards (to the extent that
the requirements to which such standards apply are
applicable to insurers offering health insurance cov-
Title I, Subtitle A
HR 995 SC
erage in connection with group health plans and not
applicable to group health plans) shall submit to the
Secretary, by the deadline specified in paragraph
(2), a report on the program the State has estab-
lished by such deadline and consistent with section
823 to implement and enforce such standards.
‘‘(2) DEADLINE.—
‘‘(A) 1 YEAR AFTER FINAL MODEL REGU-
LATIONS.—Subject to subparagraph (B), the
deadline under this paragraph is 1 year after
the date model regulations are established
under section 821.
‘‘(B) EXCEPTION
FOR
LEGISLATION.—In
the case of a State which the Secretary identi-
fies, in consultation with the NAIC, as—
‘‘(i) requiring State legislation (other
than legislation appropriating funds) in
order for insurers offering health insurance
coverage to group health plans to meet the
section 821 standards provided under such
model regulations, but
‘‘(ii) having a legislature which is not
scheduled to meet in 1996 in a legislative
session in which such legislation may be
considered,
Title I, Subtitle A
HR 995 SC
the date specified in this paragraph is the first
day of the first calendar quarter beginning after
the close of the first legislative session of the
State legislature that begins on or after Janu-
ary 1, 1997. For purposes of the previous sen-
tence, in the case of a State that has a 2-year
legislative session, each year of such session
shall be deemed to be a separate regular session
of the State legislature.
‘‘(3) NO
FEDERAL
MANDATE
ON
STATES.—
Nothing in this subsection shall be construed as im-
posing a requirement on a State. The establishment
by a State of an enforcement program under this
subsection is voluntary.
‘‘(b) FEDERAL ROLE.—
‘‘(1) STATE
ENFORCEMENT
EXCLUSIVE
OF
FEDERAL ENFORCEMENT.—If the Secretary deter-
mines that a State has submitted a report by the
deadline specified under subsection (a)(2) and finds
that the State has provided for implementation and
enforcement of the section 821 standards (to the ex-
tent that the requirements to which such standards
apply are applicable to insurers offering health in-
surance coverage in connection with group health
plans and not applicable to group health plans),
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HR 995 SC
such implementation and enforcement shall be car-
ried out exclusively under State law.
‘‘(2) REVIEW OF STATE ENFORCEMENT PRO-
GRAMS.—If the Secretary determines that a State
has submitted a report by the deadline specified
under subsection (a)(2) but finds that the State pro-
gram does not provide for implementation and en-
forcement of the section 821 standards that are ap-
plicable to insurers and not applicable to group
health plans, the Secretary shall notify the State and
provide the State a period of 60 days in which to
provide for changes that assure such implementation
and enforcement of such standards.
‘‘(3) CONTINGENCY.—If the Secretary deter-
mines that a State has not submitted a report by
the deadline specified under subsection (a)(2) or, in
the case of a State described in paragraph (2), the
State has not provided for an implementation and
enforcement program after the period of 60 days
specified in such paragraph, the Secretary shall pro-
vide for such mechanism for the implementation and
enforcement in the State of the section 821 stand-
ards (to the extent that the requirements to which
such standards apply are applicable to insurers of-
fering health insurance coverage in connection with
Title I, Subtitle A
HR 995 SC
group health plans and not applicable to group
health plans) (including the application of civil
money penalties under paragraph (4)) as the Sec-
retary determines to be appropriate. Any such imple-
mentation and enforcement shall cease to be effec-
tive on the date the Secretary finds that a State has
established an implementation and enforcement pro-
gram described in subsection (a)(1).
‘‘(4) APPLICATION OF CIVIL MONEY PENALTY
UNDER SECRETARIAL MECHANISM.—
‘‘(A) IN
GENERAL.—If the Secretary is
providing for implementation and enforcement
of section 821 standards under paragraph (3)
and determines that an insurer offering health
insurance coverage in connection with a group
health plan has failed to comply with such
standards applicable to the insurer, the Sec-
retary may impose on the insurer a civil money
penalty of not to exceed $25,000 for each such
failure. Provisions consistent and coextensive
with section 1128A of the Social Security Act
(other than the first sentence of subsection (a)
of such section and other than subsection (b) of
such subsection) shall apply to a civil money
penalty under this paragraph in the same man-
Title I, Subtitle A
HR 995 SC
ner as such section applies to a penalty or pro-
ceeding under section 1128A(a) of such Act.
Any action authorized under this subparagraph
shall be in addition to actions authorized under
section 502.
‘‘(B) CORRECTIONS WITHIN 30 DAYS.—The
Secretary shall not impose a civil money penalty
under this paragraph by reason of any failure
if—
‘‘(i) such failure was due to reason-
able cause and not to willful neglect, and
‘‘(ii) such failure is corrected within
the 30-day period beginning on the earliest
date the insurer knew, or exercising rea-
sonable diligence would have known, that
such failure existed.
‘‘(c) GOOD FAITH COMPLIANCE
WITH REQUIRE-
MENT.—An insurer that complies in good faith with an
applicable requirement of subpart A of this part shall not
be subject to a penalty under this section for failure to
meet such requirement on the basis of its failure to meet
section 821 standards (or regulations to carry out such
standards) for any failure that occurs before the date such
standards (or regulations) have been published and be-
come effective.
Title I, Subtitle A
HR 995 SC
‘‘(d) TREATMENT OF POLICY APPROVAL BY DOMI-
CILE STATE.—If a particular policy or contract of health
insurance coverage offered by an insurer is approved in
a State that has adopted and is enforcing section 821
standards and that is the domicile State with respect to
the insurer, the policy or contract shall be deemed to meet
such standards with respect to any other State but only
if a copy of the approval by the domicile State is filed
by the insurer with the applicable regulatory authority of
such other State at least 60 days before the date the policy
or contract is offered, sold, or issued in that other State.
‘‘SEC. 823. PREEMPTION.
‘‘(a) IN GENERAL.—Subject to subsection (b), a
State may not establish or enforce standards applicable
to insurers offering health insurance coverage in connec-
tion with group health plans and not applicable to group
health plans, if the standards are different from the sec-
tion 821 standards (to the extent that the requirements
to which such standards apply are applicable to such in-
surers and not applicable to group health plans).
‘‘(b) EXCEPTION
FOR
GOVERNMENTAL
HEALTH
PLANS.—Subsection (a) shall not prevent a State from es-
tablishing and enforcing different standards with respect
to group health plans that are established or maintained
by the State or political subdivision thereof, or by any
Title I, Subtitle A
HR 995 SC
agency or instrumentality of the State or political subdivi-
sion thereof. This part shall not be construed as imposing
any requirements on States or local governments. A group
health plan shall not be treated as failing to meet the re-
quirements of section 802 solely because the plan dis-
regards coverage under any other plan established or
maintained by a State or a political subdivision thereof
for which different standards not meeting the minimum
requirements of subpart A are established or enforced by
the State or political subdivision.’’.
(b) TREATMENT OF GOVERNMENTAL PLANS.—Sec-
tion 4(b)(1) of such Act (29 U.S.C. 1003(b)(1)) is amend-
ed by inserting ‘‘except with respect to part 8 of subtitle
B,’’ after ‘‘(1)’’.
(c) 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 608 the following new items:
‘‘PART 8—ACCESS TO, AND CONTINUITY OF, GROUP HEALTH
PLAN COVERAGE
‘‘Sec. 800. Definitions and special rules.
‘‘SUBPART A—NONDISCRIMINATION, PORTABILITY, RENEWABILITY, AND
PLAN PARTICIPATION STANDARDS
‘‘Sec. 801. Nondiscrimination and limitations on preexisting condition exclu-
sions.
‘‘Sec. 802. Portability.
‘‘Sec. 803. Requirements for renewability of coverage.
‘‘Sec. 804. Group health plan participation standards.
Title I, Subtitle A
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‘‘SUBPART B—ENCOURAGEMENT OF PRIVATE STANDARDS-SETTING ORGANI-
ZATIONS
FOR PROVIDER NETWORKS
AND UTILIZATION REVIEW
UNDER
GROUP HEALTH PLANS
‘‘Sec. 811. Encouragement of private standards-setting organizations for pro-
vider networks under group health plans.
‘‘Sec. 812. Encouragement of private standards-setting organizations for utili-
zation review under group health plans.
‘‘SUBPART C—ESTABLISHMENT OF STANDARDS; ENFORCEMENT
‘‘Sec. 821. Establishment of standards applicable to insurers offering health in-
surance coverage to group health plans.
‘‘Sec. 822. Enforcement with respect to insurers offering health insurance cov-
erage to group health plans.
‘‘Sec. 823. Preemption.’’.
(d) GOOD FAITH COMPLIANCE
WITH REQUIRE-
MENT.—A group health plan (within the meaning of sec-
tion 3(42) of the Employee Retirement Income Security
Act of 1974) that complies in good faith with an applicable
requirement of subpart A of part 8 of title I of such Act
before the date a regulation has been published and be-
comes effective to carry out such requirement shall be con-
sidered to be in compliance with such regulation.
SEC. 1002. EFFECTIVE DATE.
The requirements of subparts A and B of part 8 of
subtitle B of title I of the Employee Retirement Income
Security Act of 1974 (added by this subtitle), and the pre-
emption provisions of section 823 of such Act (added by
this subtitle), shall apply with respect to plan years begin-
ning after December 31, 1997.
Title I, Subtitle B
HR 995 SC
Subtitle B—Requirements for In-
surers Offering Health Insur-
ance Coverage to Group Health
Plans of Small Employers
SEC. 1101. ERISA REQUIREMENTS FOR INSURERS OFFER-
ING 
HEALTH 
INSURANCE 
COVERAGE 
TO
GROUP HEALTH PLANS OF SMALL EMPLOY-
ERS
(a) IN GENERAL.—Part 8 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974 (as
added by the preceding provisions of this title) is amended
by adding at the end the following:
‘‘Subpart D—Requirements for Insurers Offering
Health Insurance Coverage to Group Health
Plans of Small Employers
‘‘SEC. 831. DEFINITIONS.
‘‘Except as otherwise specifically provided, for pur-
poses of this subpart:
‘‘(1) CATASTROPHIC
DEDUCTIBLE
AMOUNT.—
(A) Subject to subparagraph (B), the term ‘cata-
strophic deductible amount’ means a deductible
amount that is at least $1,800 (or $3,600 if the cov-
erage includes family members).
‘‘(B) In the case of any calendar year after the
first year to which this subpart applies, each dollar
Title I, Subtitle B
HR 995 SC
amount in subparagraph (A) shall be increased by
the percentage by which (i) the average of the
monthly consumer price indexes for all urban con-
sumers for the previous year, exceeds (ii) the aver-
age of the monthly consumer price indexes for all
urban consumers for such first year. If any increase
under the preceding sentence does not result in an
amount that is a multiple of $50, such increase shall
be rounded so that the amount is determined to the
nearest multiple of $50.
‘‘(2) DEPENDENT CHILD.—The term ‘depend-
ent child’ means a child (including an adopted child)
who is under 19 years of age or who is a full-time
student and under 25 years of age.
‘‘(3) 
SECRETARY.—Notwithstanding 
section
3(13), the term ‘Secretary’ means the Secretary of
Health and Human Services.
‘‘(4) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, with respect to a calendar year, an
employer with more than 1 but less than 51 eligible
employees on a typical business day. For purposes of
this paragraph, the term ‘eligible employee’ includes
a self-employed individual.
Title I, Subtitle B
HR 995 SC
‘‘(5) SMALL GROUP MARKET.—The term ‘small
group market’ has the meaning provided in section
803(b)(4)(B).
‘‘(6) STATE.—The term ‘State’ means the 50
States, the District of Columbia, Puerto Rico, the
Virgin Islands, Guam, and American Samoa.
‘‘(7) STATE COMMISSIONER OF INSURANCE.—
The term ‘State commissioner of insurance’ includes
a State superintendent of insurance.
‘‘SEC. 832. REQUIREMENT FOR INSURERS TO OFFER GEN-
ERAL, 
CATASTROPHIC, 
AND 
OPTIONAL
MEDISAVE COVERAGE TO SMALL EMPLOY-
ERS.
‘‘(a) REQUIREMENT.—
‘‘(1) IN GENERAL.—Each insurer that makes
available any health insurance coverage in connec-
tion with a group health plan in the small group
market in the State—
‘‘(A) shall make available to each small
employer in the State general coverage (as de-
fined in section 833(a)), with a fee-for-service
option and, if the insurer makes the option
available in the State outside the small group
market, a point-of-service option and a man-
Title I, Subtitle B
HR 995 SC
aged care option (as such terms are defined in
section 800(a)(14)),
‘‘(B) shall make available to each small
employer in the State catastrophic coverage (as
defined in section 833(b)), and
‘‘(C) may make available to each small em-
ployer in the State medisave coverage (as de-
fined in section 833(c)).
‘‘(2) TREATMENT
OF
CERTAIN
PREVIOUSLY
SELF-INSURED EMPLOYERS.—
‘‘(A) IN GENERAL.—An insurer may elect
not to make general, catastrophic, and medisave
coverage available to group health plans of pre-
viously self-insured small employers (described
in subparagraph (B)), but only if such election
is made in a uniform manner for all such em-
ployers. Such an election shall not apply after
the end of the 1-year period (or such uniform,
shorter period as the insurer may specify) be-
ginning on the last date no such coverage was
provided by an employer.
‘‘(B) PREVIOUS SELF-INSURED EMPLOYER
DESCRIBED.—A previously self-insured small
employer described in this subparagraph is a
small employer that has provided medical care
Title I, Subtitle B
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(referred to in section 3(42)) to employees
other than through health insurance coverage to
which this subpart applies.
‘‘(3) SPECIAL
RULE
FOR
HEALTH
MAINTE-
NANCE ORGANIZATIONS.—The requirements of para-
graph (1)(A) (with regard to requiring a fee-for-
service option) and paragraph (1)(B) shall not apply
with respect to a health insurance coverage that is
offered by—
‘‘(A) a health maintenance organization, or
‘‘(B) any other entity if such other entity
does not provide for a fee-for-service option.
‘‘(4) CONSTRUCTION WITH RESPECT TO COV-
ERAGE
OFFERED
IN
CONNECTION
WITH
ASSOCIA-
TIONS.—Nothing in paragraph (1) or subsection
(b)(1) shall be construed as requiring the general,
catastrophic, or medisave coverage made available by
an insurer in the small group market in a State in
connection with an association referred to in section
834(a)(4) to be the same as the general, cata-
strophic, or medisave coverage offered in the State
in the small group market not in connection with
such an association.
‘‘(b) ISSUANCE OF COVERAGE.—
Title I, Subtitle B
HR 995 SC
‘‘(1) IN GENERAL.—Subject to the succeeding
paragraphs of this subsection and subsection (a)(4),
each insurer that offers general, catastrophic, or
medisave coverage in connection with a group health
plan in the small group market in a State—
‘‘(A) must accept every small employer in
the State that applies for such coverage; and
‘‘(B) must accept for enrollment under
such coverage every eligible individual (as de-
fined in section 800(a)(4)) who applies for en-
rollment on a timely basis (consistent with
paragraph (4)) and may not place any restric-
tion on the eligibility of an individual to enroll
so long as such individual is an eligible individ-
ual consistent with subpart D.
‘‘(2) SPECIAL
RULES
FOR
HEALTH
MAINTE-
NANCE ORGANIZATIONS.—In the case of an insurer
that offers health insurance coverage in connection
with a group health plan in the small group market
and that is a health maintenance organization or of-
fers coverage through a network plan (as defined in
section 800(a)(13)), the insurer may—
‘‘(A) limit the employers that may apply
for such coverage to those with eligible individ-
Title I, Subtitle B
HR 995 SC
uals residing in the service area for such orga-
nization or plan;
‘‘(B) limit the individuals who may be en-
rolled under such coverage to those who reside
in the service area for such organization or
plan; and
‘‘(C) within the service area of such orga-
nization or plan, deny such coverage to such
employers if the insurer demonstrates that—
‘‘(i) it will not have the capacity to de-
liver services adequately to enrollees of any
additional groups because of its obligations
to existing group contract holders and en-
rollees,
‘‘(ii) it is applying this subparagraph
uniformly to all employers without regard
to the health status, claims experience, or
duration of coverage of those employers
and their employees, and
‘‘(iii) it will not offer coverage to such
employers within such service area for a
period of at least 180 days after such cov-
erage is denied.
‘‘(3) SPECIAL RULE FOR FINANCIAL CAPACITY
LIMITS.—An insurer may deny health insurance cov-
Title I, Subtitle B
HR 995 SC
erage in connection with a group health plan in the
small group market if the insurer demonstrates
that—
‘‘(A) it does not have the financial reserves
necessary to underwrite additional coverage,
‘‘(B) it is applying this paragraph uni-
formly to all employers without regard to the
health status, claims experience, or duration of
coverage of the small employers and their em-
ployees, and
‘‘(C) it shall not offer coverage to such em-
ployers within such service area for a period of
at least 180 days after such coverage is denied.
‘‘(4) CLARIFICATION
OF
TIMELY
ENROLL-
MENT.—
‘‘(A) GENERAL INITIAL ENROLLMENT RE-
QUIREMENT.—Except as provided in this para-
graph, enrollment of an eligible individual for
general, catastrophic, or medisave coverage may
be considered not to be timely if the eligible em-
ployee or dependent fails to enroll under such
coverage during an initial enrollment period, if
such period is at least 30 days long.
‘‘(B) ENROLLMENT DUE TO LOSS OF PRE-
VIOUS COVERAGE.—Enrollment under general,
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catastrophic, or medisave coverage is considered
to be timely in the case of an eligible individual
who—
‘‘(i) was covered under a group health
plan or had health insurance coverage at
the time of the individual’s initial enroll-
ment period,
‘‘(ii) stated at the time of the initial
enrollment period that coverage under a
group health plan or health insurance cov-
erage was the reason for declining enroll-
ment,
‘‘(iii) lost coverage under a group
health plan or health insurance coverage
(as a result of the termination of the cov-
erage, termination of employment, reduc-
tion of numbers of hours of employment,
or other reason other than a reason de-
scribed in subparagraph (A) or (B) of sec-
tion 803(b)), and
‘‘(iv) requests enrollment within 30
days after termination of the coverage.
‘‘(C) 
REQUIREMENT
APPLIES
DURING
OPEN
ENROLLMENT
PERIODS.—Each insurer
offering general, catastrophic, or medisave cov-
Title I, Subtitle B
HR 995 SC
erage in connection with a group health plan in
the small group market shall provide for at
least one period (of not less than 30 days) each
year during which enrollment under such cov-
erage shall be considered to be timely. A late
enrollment penalty may apply with respect to
any subsequent period (not to extend beyond
the effective date of the next such enrollment
period).
‘‘(D) ENROLLMENT OF DEPENDENTS.—
‘‘(i) IN GENERAL.—Enrollment of an
eligible individual who is a spouse or child
of an eligible employee shall be considered
to be timely if a request for enrollment is
made either—
‘‘(I) within 30 days of the date of
the marriage or of the date of the
birth or adoption of such child, if fam-
ily coverage is available as of such
date, or
‘‘(II) within 30 days of the date
family coverage is first made avail-
able.
‘‘(ii) COVERAGE.—If available cov-
erage includes family coverage and enroll-
Title I, Subtitle B
HR 995 SC
ment is made under such coverage on a
timely basis under clause (i)(I), the cov-
erage shall become effective not later than
the first day of the first month beginning
after the date the completed request for
enrollment is received.
‘‘(5) MINIMUM EMPLOYEE PARTICIPATION RE-
QUIREMENT AND WAITING PERIOD PERMITTED.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (B) and (C), an insurer offering general,
catastrophic, or medisave coverage in connec-
tion with a group health plan in the small
group market may—
‘‘(i) provide for a minimum participa-
tion requirement with respect to eligible
employees of an employer if such require-
ment does not exceed 25 percent of the eli-
gible employees of the employer who do not
otherwise have coverage under a group
health plan or health insurance coverage
(or coverage under a public plan providing
medical benefits); and
‘‘(ii) require a waiting period with re-
spect to coverage of an eligible employee of
Title I, Subtitle B
HR 995 SC
an employer if such period is consistent
with section 804(a)(1).
‘‘(B) SPECIAL
RULE
FOR
COVERAGE
IN
CONNECTION WITH CERTAIN ASSOCIATIONS.—
In the case of health insurance coverage in con-
nection with an association referred to in sec-
tion 834(a)(4), the insurer may not provide for
a minimum participation requirement with re-
spect to eligible employees of an employer.
‘‘(C) TREATMENT OF COVERAGE ELECTED
SOLELY
FOR
DEPENDENTS.—In determining
whether the minimum participation require-
ments of subparagraph (A)(i) are met with re-
spect to a plan, coverage provided under the
plan for dependents of an eligible employee,
pursuant to an election of coverage by the eligi-
ble employee for dependents only, shall be treat-
ed as participation by the eligible employee
under the plan.
‘‘SEC. 833. GENERAL, CATASTROPHIC, AND MEDISAVE COV-
ERAGE DEFINED.
‘‘(a) GENERAL COVERAGE.—In this part, the term
‘general coverage’ means health insurance coverage that
meets the applicable standards provided for under section
Title I, Subtitle B
HR 995 SC
835 and that is not catastrophic coverage or medisave cov-
erage (as defined in this section).
‘‘(b) CATASTROPHIC COVERAGE.—In this part, the
term ‘catastrophic coverage’ means health insurance cov-
erage that meets the applicable standards provided for
under section 835 and under which benefits are available
for a year only to the extent that expenses for covered
services in a year exceed a catastrophic deductible amount
(as defined in section 831(1)).
‘‘(c) MEDISAVE COVERAGE.—
‘‘(1) IN
GENERAL.—In this part, the term
‘medisave coverage’ means coverage that meets the
applicable standards provided for under section 832
and—
‘‘(A) consists of—
‘‘(i) health insurance coverage under
which benefits are available for a year only
to the extent that expenses for covered
services in a year exceed a catastrophic de-
ductible amount (as defined in section
831(1)); and
‘‘(ii) medisave cash benefit coverage
consistent with paragraph (2); and
‘‘(B) meets such standards as may be pre-
scribed under section 835.
Title I, Subtitle B
HR 995 SC
‘‘(2) MEDISAVE CASH BENEFIT COVERAGE.—
‘‘(A) IN GENERAL.—Medisave cash benefit
coverage is considered to be consistent with this
paragraph to the extent that, in addition to and
separate from the benefits from the health in-
surance 
coverage 
described 
in 
paragraph
(1)(A)—
‘‘(i) under the terms of such coverage
there is a fixed dollar amount of additional
benefits that does not exceed the cata-
strophic deductible amount (as defined in
section 831(1)) for the catastrophic cov-
erage described in paragraph (1)(A);
‘‘(ii) subject to clause (iii), the dollar
amount may be used for deductibles, cost-
sharing, and other expenses, for items and
services specified under such catastrophic
coverage and medisave cash benefit cov-
erage;
‘‘(iii) any such amount of benefits not
so used shall be accumulated, shall remain
available to be applied against future
deductibles, cost-sharing, and other ex-
penses, and may be withdrawn for any
purpose, or used to pay for coverage de-
Title I, Subtitle B
HR 995 SC
scribed in paragraph (1)(A)(i), to the ex-
tent that the dollar amount exceeds 150
percent of the catastrophic deductible
amount (as defined in section 831(1)) for
the catastrophic coverage described in
paragraph (1)(A), shall be nonforfeitable,
and, upon the death of all beneficiaries
with respect to such benefits, shall be pay-
able in cash to the estate of the beneficiary
who dies last; and
‘‘(iv) the coverage meets the port-
ability rules established under subpara-
graph (B).
‘‘(B) PORTABILITY RULES.—In the case of
an individual who has medisave cash benefit
coverage with respect to which the requirements
of clauses (i), (ii), and (iii) of subparagraph (A)
are met in a year, who has accumulated an
amount of benefits under such coverage, and
who terminates such coverage (or terminates
enrollment under health insurance coverage
that contains medisave cash benefit coverage),
the coverage meets the portability rules of this
subparagraph if, under the terms of such cov-
Title I, Subtitle B
HR 995 SC
erage, the individual is permitted (as elected by
the individual)—
‘‘(i) to have an amount equal to all or
some of the amount of benefits accumu-
lated under such coverage paid towards the
payment of premiums under any group
health plan or health insurance coverage
providing coverage for the individual, and
‘‘(ii) to have an amount equal to all or
some of the remaining balance transferred
to a plan which will provide medisave cash
benefit coverage for that individual in ac-
cordance with the requirements of this
paragraph (and such plan shall credit such
amount transferred towards Medisave cash
benefit coverage provided by such plan).
‘‘SEC. 834. USE OF FAIR RATING, UNIFORM MARKETING MA-
TERIALS, AND MISCELLANEOUS CONSUMER
PROTECTIONS.
‘‘(a) USE OF FAIR RATING.—
‘‘(1) IN GENERAL.—As a standard under sec-
tion 835(a), subject to the succeeding paragraphs of
this subsection, the premium rates established by an
insurer for general, catastrophic, or medisave cov-
erage offered in connection with a group health plan
Title I, Subtitle B
HR 995 SC
in the small group market may not vary except by
the following:
‘‘(A) AGE.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), by age classes of individuals under 65
years of age which do not result in the
ratio of the highest age rate to the lowest
age rate exceeding 4-to-1.
‘‘(ii) SCHEDULE
OF
PHASED-IN
RE-
DUCTIONS IN RATIO.—The Secretary shall
request the NAIC to determine, within 12
months after the date of the enactment of
the ERISA Targeted Health Insurance Re-
form Act of 1995, whether the ratio re-
ferred to in clause (i) can be adjusted for
years after 1998, without adversely affect-
ing coverage rates and affordability of cov-
erage, so that the ratio of the highest age
rate to the lowest age rate in effect for any
year is reduced and phased in to a ratio of
not less than 3-to-1. If the NAIC submits
to the Secretary a determination that such
a reduction can so be made, under a sched-
ule of reductions in such ratio effective for
calendar years after 1998, and specifies
Title I, Subtitle B
HR 995 SC
the schedule of reductions for such years,
the Secretary shall review the schedule of
reductions. Such review shall be completed
within 120 days after the date the deter-
mination of the NAIC is submitted to the
Secretary. Unless the Secretary determines
within such period that such schedule of
reduced ratios will adversely affect cov-
erage rates and affordability of coverage,
the ratio in effect under this subparagraph
for any year under such schedule shall be
the ratio in effect for such year under this
subparagraph.
‘‘(B) GEOGRAPHIC AREA.—By geographic
area, based on 3-digit zip code or counties, as
identified by the Secretary in consultation with
the NAIC and the States involved.
‘‘(C) FAMILY
CLASS.—By family class,
based on classes of family coverage established
by the Secretary, in consultation with the NAIC
and the States.
‘‘(D) BENEFIT DESIGN.—By benefit design
of coverage, including by type of coverage, such
as general, catastrophic, and medisave coverage
and by type of coverage option (described in
Title I, Subtitle B
HR 995 SC
section 800(a)(14)) with respect to general cov-
erage.
‘‘(E) 12-MONTH SURCHARGE FOR LESS RE-
STRICTIVE
PRE-EXISTING
CONDITION
EXCLU-
SION.—By whether coverage is being offered
pursuant to section 801(a) (relating to a less
restrictive pre-existing condition exclusion), and
which is not described in section 801(b), but
only during the first 12 months in which such
coverage is offered.
‘‘(F) ADMINISTRATIVE
CATEGORIES.—By
permitted expense category, based on dif-
ferences in expenses among such categories,
consistent with subsection (b).
‘‘(2) DISCOUNT
FOR
EMPLOYER
WELLNESS
PROGRAM.—An insurer offering health insurance
coverage in connection with a group health plan in
the small group market may provide for a group dis-
count with respect to the employer that provides for
a wellness program for employees.
‘‘(3) ADDITIONAL
VARIATIONS
IN
RENEWAL
PREMIUMS
PERMITTED
FOR
CLAIMS
EXPERIENCE
WITHIN CLASS OF BUSINESS.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this paragraph, for a class
Title I, Subtitle B
HR 995 SC
of business of an insurer, with respect to small
employers with similar demographic and other
similar objective characteristics (and not relat-
ing to claims experience, health status, indus-
try, occupation, or duration of coverage since
issue) for the same or similar coverage, the in-
surer offering health insurance coverage in con-
nection with a group health plan in the small
group market may vary the renewal premiums
charged during a rating period based on claims
experience so long as the highest rates which
could be charged to such employers under the
rating system for that class of business does
not exceed the following percentage of the base
premium rate for the class of business for the
rating period:
‘‘(i) For a rating (or portion thereof)
that occurs in the first 2 years in which
this section is in effect, 150 percent.
‘‘(ii) For a rating (or portion thereof)
that occurs in a succeeding year, a per-
centage specified in any regulation of the
Secretary that may be prescribed under
paragraph (6).
Title I, Subtitle B
HR 995 SC
‘‘(B) LIMIT ON TRANSFER OF EMPLOYERS
AMONG
CLASSES
OF
BUSINESS.—In carrying
out subparagraph (A), an insurer offering
health insurance coverage in connection with a
group health plan in the small group market
may not involuntarily transfer a small employer
into or out of a class of business. An insurer of-
fering such coverage may not offer to transfer
a small employer into or out of a class of busi-
ness unless such offer is made to transfer all
small employers in the class of business without
regard to demographic characteristics, claim ex-
perience, health status, industry, occupation, or
duration since issue.
‘‘(C) DEFINITIONS.—In this paragraph:
‘‘(i) BASE PREMIUM RATE.—The term
‘base premium rate’ means, for each class
of business for each rating period, the low-
est premium rate charged or which could
have been charged under a rating system
for that class of business by the insurer to
small employers with similar demographic
characteristics and other similar objective
characteristics (not relating to claims expe-
rience, health status, industry, occupation,
Title I, Subtitle B
HR 995 SC
or duration of coverage since issue) for the
same or similar health insurance coverage.
‘‘(ii) CLASS OF BUSINESS.—The term
‘class of business’ means, with respect to
an insurer, all (or a distinct group of)
small employers as shown on the records of
the insurer.
‘‘(iii) 
RULES
FOR
ESTABLISHING
CLASSES OF BUSINESS.—For purposes of
clause (ii)—
‘‘(I) an insurer offering health
insurance coverage in connection with
a group health plan in the small
group market may establish, subject
to subclause (II), a distinct group of
small employers on the basis that the
applicable health insurance coverage
either is marketed and sold through
individuals and organizations which
are not participating in the marketing
or sale of other distinct groups of
small employers for the insurer or has
been acquired from another insurer as
a distinct group; and
Title I, Subtitle B
HR 995 SC
‘‘(II) such an insurer may not es-
tablish more than 2 groupings under
each class of business based on the in-
surer’s use of managed-care tech-
niques if the techniques are expected
to produce substantial variation in
health care costs.
‘‘(iv) DEMOGRAPHIC
CHARACTERIS-
TICS.—The term ‘demographic characteris-
tics’ means age (based upon classes estab-
lished under paragraph (1)(A)), geographic
area (based upon areas identified under
paragraph (1)(B)), and family composition
(based upon family classes established
under paragraph (1)(C)).
‘‘(4) TREATMENT OF ASSOCIATIONS AS SEPA-
RATE POOLS.—
‘‘(A) IN GENERAL.—At the election of an
insurer, the provisions of this section may be
applied separately with respect to either of the
following:
‘‘(i) POOLED EXPERIENCE FOR EACH
ASSOCIATION.—Small employers which are
members of each separate qualified asso-
ciation.
Title I, Subtitle B
HR 995 SC
‘‘(ii) POOLED EXPERIENCE FOR ALL
ASSOCIATIONS.—Small 
employers 
which
are members of any qualified association.
‘‘(B) 5-YEAR
RULE.—An election under
subparagraph (A) may not be made (or re-
voked) more frequently than once every 5 years.
‘‘(C) QUALIFIED ASSOCIATION DEFINED.—
In this paragraph, the term ‘qualified associa-
tion’ means an association which meets the fol-
lowing requirements:
‘‘(i) The association consists of em-
ployers who together employ at least 200
eligible employees.
‘‘(ii) At least 25 percent of the eligible
employees of employer members of the as-
sociation are eligible employees of small
employer members.
‘‘(iii) The sponsor of the association—
‘‘(I) is, and has been (together
with its immediate predecessor, if
any) for a continuous period of not
less than 3 years, organized and
maintained in good faith, with a con-
stitution and bylaws specifically stat-
ing its purpose, as a trade association,
Title I, Subtitle B
HR 995 SC
an industry association, a professional
association, or a chamber of com-
merce (or similar business group), for
substantial purposes other than that
of obtaining or providing medical care,
and
‘‘(II) is established as a perma-
nent entity which receives the active
support of its members.
‘‘(D) VARIATION
WITHIN
ASSOCIATION
BASED ON EXPERIENCE NOT PERMITTED.—In
the case of a small employer that is a member
of an association that an insurer elects to treat
separately under subparagraph (A), the insurer
may not vary premiums pursuant to paragraph
(3).
‘‘(5) ADDITIONAL VARIATIONS IN INITIAL PRE-
MIUMS
PERMITTED
FOR
UNDERWRITING
CHARAC-
TERISTICS.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this paragraph, for a class
of business of an insurer, with respect to small
employers with similar demographic and other
similar objective characteristics (not relating to
claims experience, health status, industry, occu-
Title I, Subtitle B
HR 995 SC
pation, or duration of coverage since issue), for
the same or similar coverage, the insurer offer-
ing health insurance coverage in connection
with a group health plan in the small group
market may vary the initial premiums charged
on the basis of prior claims experience, health
status, industry, occupation, and other under-
writing characteristics so long as the highest
rates which could be charged to such employers
under the rating system for that class of busi-
ness does not exceed the following percentage of
the base premium rate for the class of business
for the rating period:
‘‘(i) For a rating (or portion thereof)
that occurs in the first 2 years in which
this section is in effect, 150 percent.
‘‘(ii) For a rating (or portion thereof)
that occurs in a succeeding year, a per-
centage specified in any regulation of the
Secretary that may be prescribed under
paragraph (6).
‘‘(B) DEFINITIONS.—In this paragraph:
‘‘(i) BASE PREMIUM RATE.—The term
‘base premium rate’ means, for each class
of business, the lowest premium rate
Title I, Subtitle B
HR 995 SC
charged or which could have been charged
under a rating system for that class of
business by the insurer to small employers
with similar demographic characteristics
and other similar objective characteristics
(not relating to past claims experience,
health status, industry, occupation, and
other underwriting characteristics) for the
same or similar health insurance coverage.
‘‘(ii) OTHER
DEFINITIONS.—Clause
(ii) (relating to class of business), clause
(iii) (relating to rules for establishing
classes of business), and clause (iv) (relat-
ing to demographic characteristics) of
paragraph (3)(C) shall also apply with re-
spect to this paragraph.
‘‘(6) GRADUATED REDUCTION IN ALLOWABLE
PERCENTAGES OF BASE PREMIUM RATE.—The Sec-
retary shall request the NAIC to determine (in con-
sultation with the American Academy of Actuaries),
within 12 months after the date of the enactment of
the ERISA Targeted Health Insurance Reform Act
of 1995, whether model regulations that provide for
a schedule of graduated reductions in the percent-
ages of the base premium rates allowable under each
Title I, Subtitle B
HR 995 SC
flects differences based on marketing, commissions,
and similar expenses.
‘‘(2) LIMITATION
ON
VARIATIONS.—The vari-
ation provided among expense categories under sub-
section (a)(1)(F) may not result in a premium for
the highest expense category exceeding 115 percent
of the premium for the lowest expense category.
‘‘(c) FULL DISCLOSURE
OF APPLICABLE RATING
PRACTICES.—At the time an insurer offers health insur-
ance coverage in connection with a group health plan in
the small group market, the insurer shall fully disclose to
the plan sponsor, at the request of the plan sponsor, rating
practices for health insurance coverage applicable to that
plan, including rating practices for different benefit de-
signs offered to the plan sponsor.
‘‘(d) ACTUARIAL CERTIFICATION.—Each insurer that
offers health insurance coverage in connection with a
group health plan in the small group market in a State
shall file annually with the State commissioner of insur-
ance, to the extent required by such commissioner, a writ-
ten statement by a member of the American Academy of
Actuaries (or other individual acceptable to the commis-
sioner) that, based upon an examination by the individual
which includes a review of the appropriate records and of
the actuarial assumptions of the insurer and methods used
Title I, Subtitle B
HR 995 SC
by the insurer in establishing premium rates for applicable
health insurance coverage—
‘‘(1) the insurer is in compliance with the appli-
cable provisions of this section, and
‘‘(2) the rating methods are actuarially sound.
Each such insurer shall retain a copy of such statement
for examination at its principal place of business.
‘‘(e) REGISTRATION AND REPORTING.—Each insurer
that issues any health insurance coverage in connection
with a group health plan in the small group market in
a State shall be registered or licensed with the State com-
missioner of insurance and shall comply with any report-
ing requirements of the commissioner relating to such cov-
erage.
‘‘(f) MARKETING MATERIAL.—Each insurer that is-
sues any health insurance coverage in connection with a
group health plan in the small group market in a State
shall file with the State those marketing materials relating
to the offer and sale of health insurance coverage to be
used for distribution before the materials are used. Such
materials shall be in a uniform format, as may be provided
under standards established under section 835.
‘‘SEC. 835. ESTABLISHMENT OF STANDARDS.
‘‘(a) ROLE OF NAIC.—The Secretary of Labor shall
request the NAIC to develop, within 12 months after the
Title I, Subtitle B
HR 995 SC
date of the enactment of the ERISA Targeted Health In-
surance Reform Act of 1995, model regulations that speci-
fy standards with respect to the requirements of this sub-
part to the extent that such requirements are applicable
to insurers offering health insurance coverage in connec-
tion with group health plans in the small group market
and not applicable to group health plans. If the NAIC de-
velops recommended regulations specifying such standards
within such period, the Secretary of Labor shall review
the standards. Such review shall be completed within 120
days after the date the regulations are developed. Unless
the Secretary of Labor determines within such period that
the standards do not effectively provide for the application
of the requirements to such insurers, such standards shall
serve as the standards under this section, with such
amendments as the Secretary of Labor deems necessary.
Such Secretary shall provide for public comment in con-
nection with the standards during such 120-day period
and in advance of any determination by the Secretary.
‘‘(b) CONTINGENCY.—If the NAIC does not develop
such model regulations within such period or the Secretary
of Labor makes the determination described in subsection
(a), the Secretary of Labor shall specify, within 24 months
after the date of the enactment of ERISA Targeted
Title I, Subtitle B
HR 995 SC
Health Insurance Reform Act of 1995, standards to carry
out those requirements.
‘‘(c) DEFINITIONS.—In this part, the term ‘section
835 standards’ means the standards established under
this section.
‘‘SEC. 836. ENFORCEMENT.
‘‘(a) VOLUNTARY ENFORCEMENT BY STATES.—
‘‘(1) IN GENERAL.—Each State that desires to
enforce the section 835 standards (to the extent that
the requirements to which such standards apply are
applicable to insurers offering health insurance cov-
erage in connection with group health plans in the
small group market and not applicable to group
health plans) shall submit to the Secretary of Labor,
by the deadline specified in paragraph (2), a report
on the program the State has established by such
deadline and consistent with section 837 to imple-
ment and enforce such standards.
‘‘(2) DEADLINE.—
‘‘(A) 1 YEAR AFTER FINAL MODEL REGU-
LATIONS.—Subject to subparagraph (B), the
deadline under this paragraph is 1 year after
the date model regulations are established
under section 835.
Title I, Subtitle B
HR 995 SC
‘‘(B) EXCEPTION
FOR
LEGISLATION.—In
the case of a State which the Secretary of
Labor identifies, in consultation with the NAIC,
as—
‘‘(i) requiring State legislation (other
than legislation appropriating funds) in
order for insurers to meet the section 835
standards provided under such model regu-
lations, but
‘‘(ii) having a legislature which is not
scheduled to meet in 1996 in a legislative
session in which such legislation may be
considered,
the date specified in this paragraph is the first
day of the first calendar quarter beginning after
the close of the first legislative session of the
State legislature that begins on or after Janu-
ary 1, 1997. For purposes of the previous sen-
tence, in the case of a State that has a 2-year
legislative session, each year of such session
shall be deemed to be a separate regular session
of the State legislature.
‘‘(3) NO
FEDERAL
MANDATE
ON
STATES.—
Nothing in this subsection shall be construed as im-
posing a requirement on a State. The establishment
Title I, Subtitle B
HR 995 SC
by a State of an enforcement program under this
subsection is voluntary.
‘‘(b) FEDERAL ROLE.—
‘‘(1) STATE
ENFORCEMENT
EXCLUSIVE
OF
FEDERAL
ENFORCEMENT.—If the Secretary of
Labor determines that a State has submitted a re-
port by the deadline specified under subsection
(a)(2) and finds that the State has provided for im-
plementation and enforcement of the section 835
standards (to the extent that the requirements to
which such standards apply are applicable to insur-
ers offering health insurance coverage in connection
with group health plans in the small group market
and not applicable to group health plans), such im-
plementation and enforcement shall be carried out
exclusively under State law.
‘‘(2) REVIEW OF STATE ENFORCEMENT PRO-
GRAMS.—If the Secretary of Labor determines that
a State has submitted a report by the deadline speci-
fied under subsection (a)(2) but finds that the State
program does not provide for implementation and
enforcement of the section 835 standards (to the ex-
tent that the requirements to which such standards
apply are applicable to insurers offering health in-
surance coverage in connection with group health
Title I, Subtitle B
HR 995 SC
plans in the small group market and not applicable
to group health plans), the Secretary of Labor shall
notify the State and provide the State a period of
60 days in which to provide for changes that assure
such implementation and enforcement of such stand-
ards.
‘‘(3) CONTINGENCY.—If the Secretary of Labor
determines that a State has not submitted a report
by the deadline specified under subsection (a)(2) or,
in the case of a State described in paragraph (1),
the State has not provided for an implementation
and enforcement program after the period of 60
days specified in such paragraph, the Secretary of
Labor shall provide for such mechanism for the im-
plementation and enforcement in the State of the
section 835 standards (to the extent that the re-
quirements to which such standards apply are appli-
cable to insurers offering health insurance coverage
in connection with group health plans and not appli-
cable to group health plans) (including the applica-
tion of civil money penalties under paragraph (3))
as the Secretary of Labor determines to be appro-
priate. Any such implementation and enforcement
shall cease to be effective on the date the Secretary
of Labor finds that a State has established an imple-
Title I, Subtitle B
HR 995 SC
mentation and enforcement program described in
subsection (a)(1).
‘‘(4) APPLICATION OF CIVIL MONEY PENALTY
UNDER SECRETARIAL MECHANISM.—
‘‘(A) IN
GENERAL.—If the Secretary of
Labor is providing for implementation and en-
forcement of section 835 standards under para-
graph (2) and determines that an insurer has
failed to comply with such standards applicable
to the insurer, the Secretary of Labor may im-
pose on the insurer a civil money penalty of not
to exceed $25,000 for each such failure. Under
regulations of the Secretary of Labor, provi-
sions consistent and coextensive with section
1128A of the Social Security Act (other than
the first sentence of subsection (a) of such sec-
tion and other than subsection (b) of such sec-
tion) shall apply to a civil money penalty under
this paragraph in the same manner as such sec-
tion applies to a penalty or proceeding under
section 1128A(a) of such Act. Any action au-
thorized under this subparagraph shall be in
addition to actions authorized under section
502.
Title I, Subtitle B
HR 995 SC
‘‘(B) CORRECTIONS WITHIN 30 DAYS.—The
Secretary of Labor shall not impose a civil
money penalty under this paragraph by reason
of any failure if—
‘‘(i) such failure was due to reason-
able cause and not to willful neglect, and
‘‘(ii) such failure is corrected within
the 30-day period beginning on the earliest
date the insurer knew, or exercising rea-
sonable diligence would have known, that
such failure existed.
‘‘(c) GOOD FAITH COMPLIANCE
WITH REQUIRE-
MENT.—An insurer that complies in good faith with an
applicable requirement of this subpart shall not be subject
to a penalty under this section for failure to meet such
requirement on the basis of its failure to meet section 835
standards (or regulations to carry out such standards) for
any failure that occurs before the date such standards (or
regulations) have been published and become effective.
‘‘(d) TREATMENT OF POLICY APPROVAL BY DOMI-
CILE STATE.—If a particular policy or contract of health
insurance coverage offered by an insurer is approved in
a State that has adopted and is enforcing section 835
standards and that is the domicile State with respect to
the insurer, the policy or contract shall be deemed to meet
Title I, Subtitle B
HR 995 SC
such standards with respect to any other State but only
if a copy of the approval by the domicile State is filed
by the insurer with the applicable regulatory authority of
such other State at least 60 days before the date the policy
or contract is offered, sold, or issued in that other State.
‘‘SEC. 837. PREEMPTION.
‘‘(a) IN GENERAL.—Subject to subsection (b), a
State may not establish or enforce standards applicable
to insurers offering health insurance coverage in connec-
tion with group health plans in the small group market
and not applicable to group health plans, if the standards
are different from the section 835 standards (to the extent
that the requirements to which such standards apply are
applicable to such insurers and not applicable to group
health plans).
‘‘(b) TRANSITION FOR MORE RESTRICTIVE STATE
STANDARDS.—Subsection (a) shall not apply to a State
establishing and enforcing more restrictive standards re-
lating to the matters under this subpart during the 3-year
period beginning on January 1, 1998, if such standards
have been established and are enforced by the State as
of February 1, 1995.
‘‘(c) REFERENCE TO ADDITIONAL PROVISIONS.—For
additional preemption provisions relating to State benefit
mandates, see section 841.’’.
Title I, Subtitle B
HR 995 SC
(b) CONFORMING
AMENDMENT.—Section 505 of
such Act (29 U.S.C. 1135) is amended by striking ‘‘and
section 109’’ and inserting ‘‘, subpart D of part 8, and
section 109’’.
(c) CLERICAL AMENDMENT.—The table of contents
in section 1 of the Employee Retirement Income Security
Act of 1974 is amended by inserting after the items relat-
ing to part 8 (added by section 1001(b)) the following new
items:
‘‘SUBPART D—REQUIREMENTS FOR INSURERS OFFERING HEALTH
INSURANCE COVERAGE TO GROUP HEALTH PLANS OF SMALL EMPLOYERS
‘‘Sec. 831. Definitions.
‘‘Sec. 832. Requirement for insurers to offer general, catastrophic, and optional
medisave coverage to small employers.
‘‘Sec. 833. General, catastrophic, and medisave coverage defined.
‘‘Sec. 834. Use of fair rating, uniform marketing materials, and miscellaneous
consumer protections.
‘‘Sec. 835. Establishment of standards.
‘‘Sec. 836. Enforcement.
‘‘Sec. 837. Preemption.’’.
(d) AVAILABILITY OF MEDISAVE COVERAGE TO EM-
PLOYERS OF ALL SIZES.—In addition to the provisions
of section 832(a)(1)(C) of the Employee Retirement In-
come Security Act of 1974, an insurer that makes avail-
able any health insurance coverage in connection with a
group health plan may make available to employers that
are not small employers medisave coverage (as defined in
section 833(c) of such Act).
Title I, Subtitle C
HR 995 SC
SEC. 1102. EFFECTIVE DATE.
The requirements of sections 832, 833, and 834 of
the Employee Retirement Income Security Act of 1974
(added by this subtitle) and the provisions of section 837
of such Act (added by this subtitle) shall apply with re-
spect to insurers as of January 1, 1998.
Subtitle C—Encouragement of Mul-
tiple Employer Health Plans
and Preemption
SEC. 1201. SCOPE OF STATE REGULATION.
(a) IN GENERAL.—Part 8 of subtitle B of title I of
the Employee Retirement Income Security Act of 1974
(added by subtitle A of this title) is amended by adding
at the end the following new subpart:
‘‘Subpart E—Scope of State Regulation
‘‘SEC. 841. PROHIBITION OF STATE BENEFIT MANDATES
FOR GROUP HEALTH PLANS.
‘‘(a) IN GENERAL.—No provision of State or local
law shall apply that requires—
‘‘(1) health insurance coverage in connection
with a group health plan to include coverage of one
or more specific benefits, services, or categories of
health care, or services of any class or type of pro-
vider of health care; or
‘‘(2) an insurer offering health insurance cov-
erage in connection with a group health plan to pro-
Title I, Subtitle C
HR 995 SC
vide coverage of one or more specific benefits, serv-
ices, or categories of health care, or services of any
class or type of provider of health care.
‘‘(b) EXCEPTION.—
‘‘(1) STATE ENFORCEMENT PROGRAMS.—Sub-
section (a) shall not apply with respect to a State
enforcement program under section 822 or 835.
‘‘(2) 
CERTAIN
POLICIES.—Notwithstanding
subsection (a), a State may require an insurer offer-
ing health insurance coverage in connection with a
group health plan to offer coverage of one or more
specific benefits, services, or categories of health
care, or services of any class or type of provider of
health care, but only with respect to not more than
2 policies or contracts of health insurance coverage,
one of which provides less comprehensive coverage
than the other.
‘‘SEC. 842. PROHIBITION OF PROVISIONS PROHIBITING EM-
PLOYER 
GROUPS 
FROM 
PURCHASING
HEALTH INSURANCE.
‘‘No provision of State or local law shall apply that
prohibits—
‘‘(1) 2 or more employers from obtaining cov-
erage under a multiple employer welfare arrange-
ment under which all coverage consists of medical
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care referred to in section 3(42) and is fully insured
(within the meaning of section 701(8)), or
‘‘(2) an insurer from offering coverage de-
scribed in paragraph (1).
‘‘SEC. 843. PREEMPTION OF STATE ANTI-MANAGED CARE
LAWS.
‘‘(a) PREEMPTION OF STATE LAW PROVISIONS.—
Subject to subsection (b)(3), the following provisions of
State law are preempted and may not be enforced:
‘‘(1) 
RESTRICTIONS
ON
REIMBURSEMENT
RATES
OR
SELECTIVE
CONTRACTING.—Any State
law that—
‘‘(A) restricts the ability of an insurer of-
fering health insurance coverage in connection
with a group health plan to negotiate reim-
bursement rates or forms of payments with pro-
viders,
‘‘(B) restricts the ability of such an insurer
to limit the number of participating providers,
or
‘‘(C) requires standards inconsistent with
any standards established under section 811(b).
‘‘(2) RESTRICTIONS
ON
UTILIZATION
REVIEW
METHODS.—Any State law that, in relation to health
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insurance coverage offered by an insurer in connec-
tion with a group health plan—
‘‘(A) prohibits utilization review of any or
all 
treatments 
and 
conditions 
(including
preadmission certification, application of prac-
tice 
guidelines, 
continued 
stay 
review,
preauthorization of ambulatory procedures, and
retrospective review),
‘‘(B) requires that such review be made (i)
by a resident of the State in which the treat-
ment is to be offered or by an individual li-
censed in such State, or (ii) by a physician in
any particular specialty or with any board cer-
tified specialty of the same medical specialty as
the provider whose services are being reviewed,
‘‘(C) requires the use of specified stand-
ards of health care practice in such reviews or
requires the disclosure of the specific criteria
used in such reviews,
‘‘(D) requires payments to providers for
the expenses of responding to utilization review
requests,
‘‘(E) imposes liability for delays in per-
forming such review, or
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‘‘(F) requires standards in addition to or
inconsistent with standards established under
section 812(b).’’.
(b) CLERICAL AMENDMENT.—The table of contents
in section 1 of the Employee Retirement Income Security
Act of 1974 is amended by inserting after the items relat-
ing to part 8 (added by sections 1001(b) and 1101(c))
the following new items:
‘‘SUBPART E—SCOPE OF STATE REGULATION
‘‘Sec. 841. Prohibition of State benefit mandates for group health plans.
‘‘Sec. 842. Prohibition of provisions prohibiting employer groups from purchas-
ing health insurance.
‘‘Sec. 843. Preemption of State anti-managed care laws.’’.
SEC. 1202. PREEMPTION OF STATE LAW FOR MULTIPLE EM-
PLOYER HEALTH PLANS MEETING FEDERAL
STANDARDS.
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 (as
amended by the preceding provisions of this title) is
amended by inserting after part 6 the following new part:
‘‘Part 7—Multiple Employer Health Plans
‘‘SEC. 701. DEFINITIONS.
‘‘For purposes of this part—
‘‘(1) INSURER.—The term ‘insurer’ means an
insurance company, insurance service, or insurance
organization, licensed to engage in the business of
insurance by a State.
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‘‘(2) PARTICIPATING
EMPLOYER.—The term
‘participating employer’ means, in connection with a
multiple employer welfare arrangement, any em-
ployer if any of its employees, or any of the depend-
ents of its employees, are or were covered under
such arrangement in connection with the employ-
ment of the employees.
‘‘(3) EXCESS/STOP LOSS COVERAGE.—The term
‘excess/stop loss coverage’ means, in connection with
a multiple employer welfare arrangement or group
health plan, a contract under which an insurer pro-
vides for payment with respect to claims under the
arrangement, relating to participants or beneficiaries
individually or otherwise, in excess of an amount or
amounts specified in such contract.
‘‘(4) 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.
‘‘(5) SPONSOR.—The term ‘sponsor’ means, in
connection with a multiple employer welfare arrange-
ment, the association or other entity which estab-
lishes or maintains the arrangement.
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‘‘(6) STATE INSURANCE COMMISSIONER.—The
term ‘State insurance commissioner’ means the in-
surance commissioner (or similar official) of a State.
‘‘(7) DOMICILE
STATE.—The term ‘domicile
State’ means, in connection with a multiple employer
welfare arrangement, the State in which, according
to the application for an exemption under this part,
most individuals to be covered under the arrange-
ment are located, except that, in any case in which
information contained in the latest annual report of
the arrangement filed under this part indicates that
most individuals covered under the arrangement are
located in a different State, such term means such
different State.
‘‘(8) FULLY INSURED.—Coverage under a plan
or other arrangement is ‘fully insured’ if one or
more insurers or health maintenance organizations
(as defined in section 800(a)(10)(B)), or any com-
bination thereof, are liable under one or more insur-
ance policies or contracts for all benefits under the
arrangement (irrespective of any recourse they may
have against other parties).
‘‘(9) EXEMPTED MULTIPLE EMPLOYER HEALTH
PLAN.—The term ‘exempted multiple employer
health plan’ means a multiple employer welfare ar-
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rangement treated as an employee welfare benefit
plan by reason of an exemption under this part.
‘‘(10) PROVIDER
HEALTH
NETWORK.—The
term ‘provider health network’ means an arrange-
ment—
‘‘(A) under which one or more providers of
medical care (referred to in section 3(42)) (in-
cluding medical practitioners), or one or more
such providers and one or more community
groups, and such other organizations as may be
designated by the arrangement, enter into one
or more agreements with one or more group
health plans, sponsors of group health plans, or
both,
‘‘(B) under which such agreements provide
that such providers make available to such
group health plan or plans the items and serv-
ices which constitute the medical care provided
as benefits thereunder to participants and bene-
ficiaries thereunder, and
‘‘(C) which receives payment for such
items and services on a prospective capitated
basis or through a fee withhold arrangement, a
bonus arrangement, a per diem arrangement, a
fee-for-service arrangement, or any combination
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of the foregoing (irrespective of the extent to
which any of the foregoing may involve accept-
ance of risk).
‘‘SEC. 702. EXEMPTED MULTIPLE EMPLOYER HEALTH
PLANS 
RELIEVED 
OF 
CERTAIN 
RESTRIC-
TIONS ON PREEMPTION OF STATE LAW AND
TREATED AS EMPLOYEE WELFARE BENEFIT
PLANS.
‘‘(a) IN GENERAL.—Subject to subsection (b), a mul-
tiple employer welfare arrangement under which coverage
is not fully insured and with respect to which there is in
effect an exemption granted by the Secretary under this
part (or with respect to which there is pending a complete
application for such an exemption and the Secretary deter-
mines that provisional protection under this part is appro-
priate)—
‘‘(1) shall be treated for purposes of subtitle A
and the other parts of this subtitle as an employee
welfare benefit plan, irrespective of whether such ar-
rangement is an employee welfare benefit plan, and
‘‘(2) 
shall 
be 
exempt 
from 
section
514(b)(6)(A)(ii).
‘‘(b) BENEFITS
MUST
CONSIST
OF
MEDICAL
CARE.—Subsection (a) shall apply to a multiple employer
welfare arrangement only if the benefits provided there-
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under consist solely of medical care referred to in section
3(42) (disregarding such incidental benefits as the Sec-
retary shall specify by regulation).
‘‘(c) RESTRICTION ON COMMENCEMENT OF NEW AR-
RANGEMENTS.—A multiple employer welfare arrangement
providing benefits which consist of medical care referred
to in section 3(42) which has not commenced operations
as of January 1, 1998, may commence operations only if
an exemption granted to the arrangement under this part
is in effect (or there is pending with respect to the ar-
rangement a complete application for such an exemption
and the Secretary determines that provisional protection
under this part is appropriate).
‘‘(d) CLASS EXEMPTION TREATMENT.—In the case
of a multiple employer welfare arrangement, if—
‘‘(1) at the time of application for an exemption
under this part with respect to the arrangement, ei-
ther (A) the arrangement covers at least 1,000 par-
ticipants and beneficiaries, or (B) with respect to
the arrangement there are at least 2,000 employees
of eligible participating employers,
‘‘(2) a complete application for an exemption
under this part with respect to the arrangement has
been filed and is pending, and
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‘‘(3) the application meets such requirements
(if any) as the Secretary may provide with respect
to class exemptions under this subsection,
an exemption under this part shall be treated as having
been granted with respect to the arrangement unless and
until the Secretary provides appropriate notice that the
exemption has been denied.
‘‘SEC. 703. EXEMPTION PROCEDURE.
‘‘(a) IN GENERAL.—The Secretary shall grant an ex-
emption described in section 702(a) to a multiple employer
welfare arrangement if—
‘‘(1) an application for such exemption with re-
spect to such arrangement, identified individually or
by class, has been duly filed in complete form with
the Secretary in accordance with this part,
‘‘(2) such application demonstrates compliance
with the requirements of section 704 with respect to
such arrangement, and
‘‘(3) the Secretary finds that such exemption
is—
‘‘(A) administratively feasible,
‘‘(B) not adverse to the interests of the in-
dividuals covered under the arrangement, and
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‘‘(C) protective of the rights and benefits
of the individuals covered under the arrange-
ment.
‘‘(b) NOTICE AND HEARING.—Before granting an ex-
emption under this section, the Secretary shall publish no-
tice in the Federal Register of the pendency of the exemp-
tion, shall require that adequate notice be given to inter-
ested persons, including the State insurance commissioner
of each State in which covered individuals under the ar-
rangement are, or are expected to be, located, and shall
afford interested persons opportunity to present views.
The Secretary may not grant an exemption under this sec-
tion unless the Secretary affords an opportunity for a
hearing and makes a determination on the record with re-
spect to the findings required under subsection (a)(3). The
Secretary shall, to the maximum extent practicable, make
a final determination with respect to any application filed
under this section in the case of a newly established ar-
rangement within 90 days after the date which the Sec-
retary determines is the date on which such application
is filed in complete form.
‘‘SEC. 704. ELIGIBILITY REQUIREMENTS.
‘‘(a) APPLICATION FOR EXEMPTION.—
‘‘(1) IN
GENERAL.—An exemption may be
granted by the Secretary under this part only on the
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HR 995 SC
basis of an application filed with the Secretary in
such form and manner as shall be prescribed in reg-
ulations of the Secretary. Any such application shall
be signed by the operating committee and the spon-
sor of the arrangement.
‘‘(2) FILING FEE.—The arrangement shall pay
to the Secretary at the time of filing an application
under this section a filing fee in the amount of
$5,000, which shall be available, to the extent pro-
vided in appropriation Acts, to the Secretary for the
sole purpose of administering the exemption proce-
dures under this part.
‘‘(3) INFORMATION INCLUDED.—An application
filed under this section shall include, in a manner
and form prescribed in regulations of the Secretary,
at least the following information:
‘‘(A) IDENTIFYING
INFORMATION.—The
names and addresses of—
‘‘(i) the sponsor, and
‘‘(ii) the members of the operating
committee of the arrangement.
‘‘(B) STATES IN WHICH ARRANGEMENT IN-
TENDS TO DO BUSINESS.—The States in which
individuals covered under the arrangement are
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to be located and the number of such individ-
uals expected to be located in each such State.
‘‘(C) BONDING REQUIREMENTS.—Evidence
provided by the operating committee that the
bonding requirements of section 412 will be met
as of the date of the application.
‘‘(D) PLAN DOCUMENTS.—A copy of the
documents governing the arrangement (includ-
ing any bylaws and trust agreements), the sum-
mary plan description, and other material de-
scribing the benefits and coverage that will be
provided to individuals covered under the ar-
rangement.
‘‘(E) AGREEMENTS WITH SERVICE PROVID-
ERS.—A copy of any agreements between the
arrangement and contract administrators and
other service providers.
‘‘(F) FUNDING REPORT.—A report setting
forth information determined as of a date with-
in the 120-day period ending with the date of
the application, including the following:
‘‘(i) RESERVES.—A statement, cer-
tified by the operating committee of the ar-
rangement, and a statement of actuarial
opinion, signed by a qualified actuary, that
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all applicable requirements of section 707
are or will be met in accordance with regu-
lations which the Secretary shall prescribe.
‘‘(ii) 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 required reserves under the
arrangement for the 12-month period be-
ginning with such date within such 120-
day period, taking into account the ex-
pected coverage and experience of the ar-
rangement. If the contribution rates are
not fully adequate, the statement of actu-
arial opinion shall indicate the extent to
which the rates are inadequate and the
changes needed to ensure adequacy.
‘‘(iii) 
CURRENT
AND
PROJECTED
VALUE
OF
ASSETS
AND
LIABILITIES.—A
statement of actuarial opinion signed by a
qualified actuary, which sets forth the cur-
rent value of the assets and liabilities accu-
mulated under the arrangement and a pro-
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jection of the assets, liabilities, income,
and expenses of the arrangement for the
12-month period referred to in clause (ii).
The income statement shall identify sepa-
rately the arrangement’s administrative ex-
penses and claims.
‘‘(iv) COSTS
OF
COVERAGE
TO
BE
CHARGED
AND
OTHER
EXPENSES.—A
statement of the costs of coverage to be
charged, 
including 
an 
itemization 
of
amounts for administration, reserves, and
other expenses associated with the oper-
ation of the arrangement.
‘‘(v) 
OTHER
INFORMATION.—Any
other information which may be prescribed
in regulations of the Secretary as nec-
essary to carry out the purposes of this
part.
‘‘(b) OTHER REQUIREMENTS.—A complete applica-
tion for an exemption under this part shall include infor-
mation which the Secretary determines to be complete and
accurate and sufficient to demonstrate that the following
requirements are met with respect to the arrangement:
‘‘(1) SPONSOR.—
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‘‘(A) IN GENERAL.—Except in a case to
which subparagraph (B) or (C) applies, the
sponsor is, and has been (together with its im-
mediate predecessor, if any) for a continuous
period of not less than 3 years before the date
of the application, organized and maintained in
good faith, with a constitution and bylaws spe-
cifically stating its purpose, as a trade associa-
tion, an industry association, a professional as-
sociation, or a chamber of commerce (or similar
business group, including a corporation or simi-
lar organization that operates on a cooperative
basis (within the meaning of section 1381 of
the Internal Revenue Code of 1986)), for sub-
stantial purposes other than that of obtaining
or providing medical care (referred to in section
3(42)), and the applicant demonstrates to the
satisfaction of the Secretary that the sponsor is
established as a permanent entity which re-
ceives the active support of its members.
‘‘(B) 
SPECIAL
RULE
FOR
PROVIDER
HEALTH
NETWORKS.—In the case of an ar-
rangement that is a provider health network (as
defined in section 701(10)), the sponsor is the
operating committee of the network.
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‘‘(C) SPECIAL RULE FOR EMPLOYERS IN
THE SAME TRADE OR BUSINESS.—In the case
of an arrangement under which all participating
employers are engaged in a common type of
trade or business, the sponsor is the operating
committee of the arrangement.
‘‘(2) OPERATING COMMITTEE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the arrangement is operated,
pursuant to a trust agreement, by an operating
committee which has complete fiscal control
over the arrangement and which is responsible
for all operations of the arrangement, and the
operating committee has in effect rules of oper-
ation and financial controls, based on a 3-year
plan of operation, adequate to carry out the
terms of the arrangement and to meet all re-
quirements of this title applicable to the ar-
rangement. The members of the committee are
individuals selected from individuals who are
the owners, officers, directors, or employees of
the participating employers or who are partners
in the participating employers and actively par-
ticipate in the business. No such member is an
owner, officer, director, or employee of, or part-
Title I, Subtitle C
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ner in, a contract administrator or other service
provider to the arrangement, except that offi-
cers or employees of a sponsor which is a serv-
ice provider (other than a contract adminis-
trator) to the arrangement may be members of
the committee if they constitute not more than
25 percent of the membership of the committee
and they do not provide services to the arrange-
ment other than on behalf of the sponsor. The
committee has sole authority to approve appli-
cations for participation in the arrangement
and to contract with a service provider to ad-
minister the day-to-day affairs of the arrange-
ment.
‘‘(B) 
SPECIAL
RULE
FOR
PROVIDER
HEALTH
NETWORKS.—In the case of an ar-
rangement that is a provider health network (as
defined in section 701(10)), the operating com-
mittee is the board of the entity that is the net-
work.
‘‘(3) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the arrange-
ment include a written instrument, meeting the re-
quirements of an instrument required under section
402(a)(1), which—
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‘‘(A) provides that the committee serves as
the named fiduciary required for plans under
section 402(a)(1) and serves in the capacity of
a plan administrator (referred to in section
3(16)(A)),
‘‘(B) provides that the sponsor is to serve
as plan sponsor (referred to in section
3(16)(B)),
‘‘(C) incorporates the requirements of sec-
tion 707, and
‘‘(D) provides that, effective upon the
granting of an exemption under this part to the
arrangement (except in the case of a provider
health network)—
‘‘(i) all participating employers must
be members or affiliated members of the
sponsor, except that, in the case of a spon-
sor which is a professional association or
other individual-based association, if at
least one of the officers, directors, or em-
ployees of an employer, or at least one of
the individuals who are partners in an em-
ployer and who actively participates in the
business, is a member or affiliated member
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Title I, Subtitle C
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of the sponsor, participating employers
may also include such employer, and
‘‘(ii) all individuals thereafter com-
mencing coverage under the arrangement
must be—
‘‘(I) active or retired owners (in-
cluding self-employed individuals), of-
ficers, directors, or employees of, or
partners in, participating employers,
or
‘‘(II) the beneficiaries of individ-
uals described in subclause (I).
‘‘(4) CONTRIBUTION RATES.—The contribution
rates referred to in subsection (a)(3)(F)(ii) are ade-
quate.
‘‘(5) VARIATION IN CONTRIBUTIONS.—The con-
tribution rates established under the arrangement do
not vary except by age, geographic area, family
class, and benefit design in a manner provided under
such regulations as the Secretary may prescribe con-
sistent with subparagraphs (A), (B), (C), and (D) of
section 834(a)(1).
‘‘(6) 
REGULATORY
REQUIREMENTS.—Such
other requirements as the Secretary may prescribe
102
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‘‘(D) is prohibited (or would be prohibited
if the arrangement were a plan) from serving in
any capacity in connection with the arrange-
ment under section 411,
‘‘(E) has failed to appear without reason-
able cause or excuse in response to a subpoena,
examination, warrant, or any other order law-
fully issued by the Secretary compelling such
response,
‘‘(F) has previously been subject to a de-
termination under this part resulting in the de-
nial, suspension, or revocation of an exemption
under this part on similar grounds, or
‘‘(G) has otherwise violated any provision
of this title with respect to a matter which the
Secretary determines of sufficient consequence
to merit disqualification for purposes of this
part.
‘‘(d) FRANCHISE NETWORKS.—In the case of a mul-
tiple employer welfare arrangement established and main-
tained by a franchisor for a franchise network consisting
of its franchisees, such franchisor shall be treated as the
sponsor referred to in the preceding provisions of this sec-
tion, such network shall be treated as an association re-
ferred to in such provisions, and each franchisee shall be
103
Title I, Subtitle C
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treated as a member (of the association and the sponsor)
referred to in such provisions, if all participating employ-
ers are such franchisees and the requirements of sub-
section (b)(1) with respect to a sponsor are met with re-
spect to the network.
‘‘(e) CERTAIN COLLECTIVELY BARGAINED ARRANGE-
MENTS.—In applying the preceding provisions of this sec-
tion in the case of a multiple employer welfare arrange-
ment in existence on February 1, 1995, which would be
described in section 3(40)(A)(i) but solely for the failure
to meet the requirements of section 3(40)(C)(ii)—
‘‘(1) paragraphs (1) and (2) of subsection (b)
and subparagraphs (A), (B), and (D) of paragraph
(3) of subsection (b) shall be disregarded, and
‘‘(2) the joint board of trustees shall be consid-
ered the operating committee of the arrangement.
‘‘(f) CERTAIN ARRANGEMENTS NOT MEETING SIN-
GLE EMPLOYER REQUIREMENT.—
‘‘(1) IN GENERAL.—In any case in which the
majority of the employees covered under a multiple
employer welfare arrangement are employees of a
single employer (within the meaning of clauses (i)
and (ii) of section 3(40)(B)), if all other employees
covered under the arrangement are employed by em-
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ployers who are related to such single employer, sub-
section (b)(3)(D) shall be disregarded.
‘‘(2) RELATED EMPLOYERS.—For purposes of
paragraph (1), employers are ‘related’ if there is
among all such employers a common ownership in-
terest or a substantial commonality of business oper-
ations based on common suppliers or customers.
‘‘SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO
EXEMPTED MULTIPLE EMPLOYER HEALTH
PLANS.
‘‘(a) NOTICE OF MATERIAL CHANGES.—In the case
of any exempted multiple employer health plan, descrip-
tions of material changes in any information which was
required to be submitted with the application for the ex-
emption granted under this part shall be filed in such form
and manner as shall be prescribed in regulations of the
Secretary. The Secretary may require by regulation prior
notice of material changes with respect to specified mat-
ters which might serve as the basis for suspension or rev-
ocation of the exemption.
‘‘(b) REPORTING REQUIREMENTS.—Under regula-
tions of the Secretary, the requirements of sections 102,
103, and 104 shall apply with respect to any multiple em-
ployer welfare arrangement which is or has been an ex-
empted multiple employer health plan in the same manner
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Title I, Subtitle C
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and to the same extent as such requirements apply to em-
ployee welfare benefit plans, irrespective of whether such
exemption continues in effect. The annual report required
under section 103 for any plan year in the case of any
such multiple employer welfare arrangement shall also in-
clude information described in section 704(a)(3)(F) with
respect to the plan year and, notwithstanding section
104(a)(1)(A), shall be filed not later than 90 days after
the close of the plan year.
‘‘(c) ENGAGEMENT OF QUALIFIED ACTUARY.—The
operating committee of each multiple employer welfare ar-
rangement which is or has been an exempted multiple em-
ployer health plan shall engage, on behalf of all covered
individuals, a qualified actuary who shall be responsible
for the preparation of the materials comprising informa-
tion necessary to be submitted by a qualified actuary
under this part. The qualified actuary shall utilize such
assumptions and techniques as are necessary to enable
such actuary to form an opinion as to whether the con-
tents of the matters reported under this part—
‘‘(1) are in the aggregate reasonably related to
the experience of the arrangement and to reasonable
expectations, and
‘‘(2) represent such actuary’s best estimate of
anticipated experience under the arrangement.
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The opinion by the qualified actuary shall be made with
respect to, and shall be made a part of, the annual report.
‘‘(d) 
FILING
NOTICE
OF
EXEMPTION
WITH
STATES.—An exemption granted to a multiple employer
welfare arrangement under this part shall not be effective
unless written notice of such exemption is filed with the
State insurance commissioner of each State in which at
least 5 percent of the individuals covered under the ar-
rangement are located. For purposes of this paragraph,
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. The Secretary may
by regulation provide in specified cases for the application
of the preceding sentence with lesser percentages in lieu
of such 5 percent amount.
‘‘SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY
ARRANGEMENTS PROVIDING MEDICAL CARE.
‘‘(a) IN GENERAL.—A multiple employer welfare ar-
rangement providing benefits consisting of medical care
(referred to in section 3(42)) shall issue to each participat-
ing employer—
‘‘(1) a document equivalent to the summary
plan description required of plans under part 1,
‘‘(2) information describing the contribution
rates applicable to participating employers, and
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Title I, Subtitle C
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‘‘(3) a statement indicating—
‘‘(A) that the arrangement is not a li-
censed insurer under the laws of any State,
‘‘(B) whether coverage under the arrange-
ment is fully insured,
‘‘(C) if coverage under the arrangement is
not fully insured, (i) whether the arrangement
is (or has ceased to be) an exempted multiple
employer health plan, and (ii) if such an ar-
rangement is an exempted multiple employer
health plan, that such arrangement is treated
as an employee welfare benefit plan under this
title.
‘‘(b) TIME
FOR DISCLOSURE.—Such information
shall be issued to employers within such reasonable period
of time before becoming participating employers as may
be prescribed in regulations of the Secretary.
‘‘SEC. 707. MAINTENANCE OF RESERVES.
‘‘(a) IN GENERAL.—Each multiple employer welfare
arrangement which is or has been an exempted multiple
employer health plan and under which coverage is not fully
insured shall establish and maintain reserves, consisting
of—
‘‘(1) a reserve sufficient for unearned contribu-
tions,
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Title I, Subtitle C
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‘‘(2) a reserve sufficient for payment of claims
reported and not yet paid and claims incurred but
not yet reported, and for expected administrative
costs with respect to such claims, and
‘‘(3) a reserve, in an amount recommended by
the qualified actuary, for any other obligations of
the arrangement.
‘‘(b) MINIMUM AMOUNT FOR CERTAIN RESERVES.—
The total of the reserves described in subsection (a)(2)
shall not be less than an amount equal to the greater of
(1) 25 percent of expected incurred claims and expenses
for the plan year, or (2) $100,000.
‘‘(c) REQUIRED
MARGIN.—In determining the
amounts of reserves required under this section in connec-
tion with any multiple employer welfare arrangement, the
qualified actuary shall include a margin for error and
other fluctuations taking into account the specific cir-
cumstances of such arrangement.
‘‘(d) ADDITIONAL REQUIREMENTS.—The Secretary
may provide such additional requirements relating to re-
serves and excess/stop loss coverage as the Secretary con-
siders appropriate. Such requirements may be provided,
by regulation or otherwise, with respect to any arrange-
ment or any class of arrangements.
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‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS COV-
ERAGE.—The Secretary may provide for adjustments to
the levels of reserves otherwise required under subsections
(a) and (b) with respect to any arrangement or class of
arrangements to take into account excess/stop loss cov-
erage provided with respect to such arrangement or ar-
rangements.
‘‘(f) ALTERNATIVE MEANS OF COMPLIANCE.—The
Secretary may permit an arrangement (including a pro-
vider health network) to substitute, for all or part of the
reserves required under subsection (a), such security,
guarantee, or other financial arrangement as the Sec-
retary determines to be adequate to enable the arrange-
ment to fully meet all its financial obligations on a timely
basis.
‘‘SEC. 708. NOTICE REQUIREMENTS FOR VOLUNTARY TER-
MINATION.
‘‘Except as provided in section 709(b), a multiple em-
ployer welfare arrangement with respect to which there is
or has been in effect an exemption granted under this part
may terminate only if the operating committee—
‘‘(1) not less than 60 days before the proposed
termination date, provides to the participants and
beneficiaries a written notice of intent to terminate
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stating that such termination is intended and the
proposed termination date,
‘‘(2) develops a plan for winding up the affairs
of the arrangement in connection with such termi-
nation in a manner which will result in timely pay-
ment of all benefits for which the arrangement is ob-
ligated, and
‘‘(3) submits such plan in writing to the Sec-
retary.
Actions required under this paragraph shall be taken in
such form and manner as may be prescribed in regulations
of the Secretary.
‘‘SEC. 709. CORRECTIVE ACTIONS AND MANDATORY TERMI-
NATION.
‘‘(a) ACTIONS
TO
AVOID
DEPLETION
OF
RE-
SERVES.—A multiple employer welfare arrangement with
respect to which there is or has been in effect an exemp-
tion granted under this part shall continue to meet the
requirements of section 707, irrespective of whether such
exemption continues in effect. The operating committee of
such arrangement shall determine quarterly whether the
requirements of section 707 are met. In any case in which
the committee determines that there is reason to believe
that there is or will be a failure to meet such requirements,
or the Secretary makes such a determination and so noti-
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fies the committee, the committee shall immediately notify
the qualified actuary engaged by the arrangement, and
such actuary shall, not later than the end of the next fol-
lowing month, make such recommendations to the commit-
tee for corrective action as the actuary determines nec-
essary to ensure compliance with section 707. Not later
than 10 days after receiving from the actuary rec-
ommendations for corrective actions, the committee shall
notify the Secretary (in such form and manner as the Sec-
retary may prescribe by regulation) of such recommenda-
tions of the actuary for corrective action, together with
a description of the actions (if any) that the committee
has taken or plans to take in response to such rec-
ommendations. The committee shall thereafter report to
the Secretary, in such form and frequency as the Sec-
retary may specify to the committee, regarding corrective
action taken by the committee until the requirements of
section 707 are met.
‘‘(b) MANDATORY TERMINATION.—In any case in
which—
‘‘(1) the Secretary has been notified under sub-
section (a) of a failure of a multiple employer wel-
fare arrangement which is or has been an exempted
multiple employer health plan to meet the require-
ments of section 707 and has not been notified by
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the operating committee of the arrangement that
corrective action has restored compliance with such
requirements, and
‘‘(2) the Secretary determines that the continu-
ing failure to meet the requirements of section 707
can be reasonably expected to result in a continuing
failure to pay benefits for which the arrangement is
obligated,
the operating committee of the arrangement shall, at the
direction of the Secretary, terminate the arrangement and,
in the course of the termination, take such actions as the
Secretary may require as necessary to ensure that the af-
fairs of the arrangement will be, to the maximum extent
possible, wound up in a manner which will result in timely
payment of all benefits for which the arrangement is obli-
gated.
‘‘SEC. 710. EXPIRATION, SUSPENSION, OR REVOCATION OF
EXEMPTION.
‘‘(a) EXPIRATION AND RENEWAL OF EXEMPTION.—
An exemption granted to a multiple employer welfare ar-
rangement under this part shall expire 3 years after the
date on which the exemption is granted. An exemption
which has expired may be renewed by means of application
for an exemption in accordance with section 704.
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‘‘(b) SUSPENSION OR REVOCATION OF EXEMPTION
BY SECRETARY.—The Secretary may suspend or revoke
an exemption granted to a multiple employer welfare ar-
rangement under this part—
‘‘(1) for any cause that may serve as the basis
for the denial of an initial application for such an
exemption under section 704, or
‘‘(2) if the Secretary finds that—
‘‘(A) the arrangement, or the sponsor
thereof, in the transaction of business while
under the exemption, has used fraudulent, coer-
cive, or dishonest practices, or has dem-
onstrated incompetence, untrustworthiness, or
financial irresponsibility,
‘‘(B) the arrangement, or the sponsor
thereof, is using such methods or practices in
the conduct of its operations, so as to render its
further transaction of operations hazardous or
injurious to participating employers, or covered
individuals,
‘‘(C) the arrangement, or the sponsor
thereof, has refused to be examined in accord-
ance with this part or to produce its accounts,
records, and files for examination in accordance
with this part, or
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‘‘(D) any of the officers of the arrange-
ment, or the sponsor thereof, has refused to
give information with respect to the affairs of
the arrangement or the sponsor or to perform
any other legal obligation relating to such an
examination when required by the Secretary in
accordance with this part.
Any such suspension or revocation under this subsection
shall be effective only upon a final decision of the Sec-
retary made after notice and opportunity for a hearing
is provided in accordance with section 710.
‘‘(c) SUSPENSION OR REVOCATION OF EXEMPTION
UNDER COURT PROCEEDINGS.—An exemption granted to
a multiple employer welfare arrangement under this part
may be suspended or revoked by a court of competent ju-
risdiction in an action by the Secretary brought under
paragraph (2), (5), or (6) of section 502(a), except that
the suspension or revocation under this subsection shall
be effective only upon notification of the Secretary of such
suspension or revocation.
‘‘(d) NOTIFICATION
OF PARTICIPATING EMPLOY-
ERS.—All participating employers in a multiple employer
welfare arrangement shall be notified of the expiration,
suspension, or revocation of an exemption granted to such
arrangement under this part, by such persons and in such
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form and manner as shall be prescribed in regulations of
the Secretary, not later than 20 days after such expiration
or after receipt of notice of a final decision requiring such
suspension or revocation.
‘‘(e) PUBLICATION OF EXPIRATIONS, SUSPENSIONS,
AND REVOCATIONS.—The Secretary shall publish all expi-
rations of, and all final decisions to suspend or revoke,
exemptions granted under this part.
‘‘SEC. 711. REVIEW OF ACTIONS OF THE SECRETARY.
‘‘(a) IN GENERAL.—Any decision by the Secretary
which involves the denial of an application by a multiple
employer welfare arrangement for an exemption under this
part or the suspension or revocation of such an exemption
shall contain a statement of the specific reason or reasons
supporting the Secretary’s action, including reference to
the specific terms of the exemption and the statutory pro-
vision or provisions relevant to the determination.
‘‘(b) DENIALS OF APPLICATIONS.—In the case of the
denial of an application for an exemption under this part,
the Secretary shall send a copy of the decision to the appli-
cant by certified or registered mail at the address specified
in the records of the Secretary. Such decision shall con-
stitute the final decision of the Secretary unless the ar-
rangement, or any party that would be prejudiced by the
decision, files a written appeal of the denial within 30 days
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after the mailing of such decision. The Secretary may af-
firm, modify, or reverse the initial decision. The decision
on appeal shall become final upon the mailing of a copy
by certified or registered mail to the arrangement or party
that filed the appeal.
‘‘(c) SUSPENSIONS
OR REVOCATIONS
OF EXEMP-
TION.—In the case of the suspension or revocation of an
exemption granted under this part, the Secretary shall
send a copy of the decision to the arrangement by certified
or registered mail at its address, as specified in the
records of the Secretary. Upon the request of the arrange-
ment, or any party that would be prejudiced by the sus-
pension or revocation, filed within 15 days of the mailing
of the Secretary’s decision, the Secretary shall schedule
a hearing on such decision by written notice, sent by cer-
tified or registered mail to the arrangement or party re-
questing such hearing. Such notice shall set forth—
‘‘(1) a specific date and time for the hearing,
which shall be within the 10-day period commencing
20 days after the date of the mailing of the notice,
and
‘‘(2) a specific place for the hearing, which shall
be in the District of Columbia or in the State and
county thereof (or parish or other similar political
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subdivision thereof) in which is located the arrange-
ment’s principal place of business.
The decision as affirmed or modified in such hearing shall
constitute the final decision of the Secretary, unless such
decision is reversed in such hearing.’’.
(b) CONFORMING AMENDMENT TO DEFINITION OF
PLAN SPONSOR.—Section 3(16)(B) of such Act (29
U.S.C. 1002(16)(B)) is amended by adding at the end the
following new sentence: ‘‘Such term also includes the spon-
sor (as defined in section 701(5)) of a multiple employer
welfare arrangement which is or has been an exempted
multiple employer health plan (as defined in section
701(9)).’’.
(c) ALTERNATIVE MEANS
OF DISTRIBUTION
OF
SUMMARY PLAN DESCRIPTIONS.—Section 110 of such
Act (29 U.S.C. 1030) is amended by adding at the end
the following new subsection:
‘‘(c) The Secretary shall prescribe, as an alternative
method for distributing summary plan descriptions in
order to meet the requirements of section 104(b)(1) in the
case of multiple employer welfare arrangements providing
benefits consisting of medical care referred to in section
3(42), a means of distribution of such descriptions by par-
ticipating employers.’’.
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(d) 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 608 the following new items:
‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS
‘‘Sec. 701. Definitions.
‘‘Sec. 702. Exempted multiple employer health plans relieved of certain restric-
tions on preemption of State law and treated as employee wel-
fare benefit plans.
‘‘Sec. 703. Exemption procedure.
‘‘Sec. 704. Eligibility requirements.
‘‘Sec. 705. Additional requirements applicable to exempted multiple employer
health plans.
‘‘Sec. 706. Disclosure to participating employers by arrangements providing
medical care.
‘‘Sec. 707. Maintenance of reserves.
‘‘Sec. 708. Notice requirements for voluntary termination.
‘‘Sec. 709. Corrective actions and mandatory termination.
‘‘Sec. 710. Expiration, suspension, or revocation of exemption.
‘‘Sec. 711. Review of actions of the Secretary.’’
SEC. 1203. CLARIFICATION OF SCOPE OF PREEMPTION
RULES.
(a) IN GENERAL.—Section 514(b)(6)(A)(ii) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1144(b)(6)(A)(ii)) is amended by inserting ‘‘, but
only, in the case of an arrangement which provides medi-
cal care referred to in section 3(42) and with respect to
which an exemption under part 7 is not in effect,’’ before
‘‘to the extent not inconsistent with the preceding sections
of this title’’.
(b) CROSS-REFERENCE.—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:
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‘‘(E) For additional rules relating to exemption from
subparagraph (A)(ii) of multiple employer welfare ar-
rangements providing medical care, see part 7.’’.
(c) CONFORMING AMENDMENT.—Section 514 of such
Act is amended by adding at the end the following new
subsection:
‘‘(e) For additional provisions relating to preemption
of State law with respect to group health plans, see sec-
tions 702, 823, 837, 841, 842, and 843.’’.
SEC. 1204. 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 amend-
ed—
(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 ‘‘common con-
trol’’;
(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
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percent may not be required as the minimum
interest necessary for common control’’;
(B) by striking ‘‘similar to’’ and inserting
‘‘consistent and coextensive with’’; and
(C) by striking ‘‘and’’ at the end;
(3) by redesignating clause (iv) as clause (v);
and
(4) by inserting after clause (iii) the following
new clause:
‘‘(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 1 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 85 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.’’.
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SEC. 1205. 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) under or pursuant to one or more collective
bargaining agreements,’’.
(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) Clause (i) of subparagraph (A) shall
apply in the case of any plan or other arrange-
ment only if—
‘‘(i) the plan or other arrangement,
and the employee organization or any other
entity sponsoring the plan or other ar-
rangement, do not—
‘‘(I) utilize the services of any li-
censed insurance agent or broker for
soliciting or enrolling employers or in-
dividuals as participating employers or
covered individuals under the plan or
other arrangement, or
‘‘(II) pay a commission or any
other type of compensation to a per-
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son that is related either to the vol-
ume or number of employers or indi-
viduals solicited or enrolled as partici-
pating employers or covered individ-
uals under the plan or other arrange-
ment, or to the dollar amount or size
of the contributions made by partici-
pating employers or covered individ-
uals to the plan or other arrangement,
‘‘(ii) covered individuals under the
plan or other arrangement who are nei-
ther—
‘‘(I) employed within a bargain-
ing unit covered by any of the collec-
tive 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 or former employ-
ees of the sponsoring employee organi-
zation, of an employer who is or was
a party to any of the collective bar-
gaining agreements, or of the plan or
other arrangement or a related plan
or arrangement (nor covered on the
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basis of such present or former em-
ployment),
comprise not more than the lesser of 15
percent of the total number of present and
former employees enrolled under the plan
or other arrangement, or the total number
of such covered individuals under the plan
or other arrangement as of the date of the
enactment of the ERISA Targeted Health
Insurance Reform Act of 1995,
‘‘(iii) the plan or other arrangement
does not provide benefits to individuals
(other than individuals described in clause
(ii)(II)) who work outside the standard
metropolitan statistical area in which the
sponsoring 
employee 
organization 
rep-
resents employees (or to individuals (other
than 
individuals 
described 
in 
clause
(ii)(II)) on the basis of such work by oth-
ers), except that in the case of a sponsor-
ing employee organization that represents
employees who work outside of any stand-
ard metropolitan statistical area, this
clause shall be applied by reference to the
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State in which the sponsoring organization
represents employees,
‘‘(iv) 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 in regulations of the Sec-
retary—
‘‘(I) that the plan or other ar-
rangement meets the requirements of
clauses (i), (ii), and (iii), and
‘‘(II) if, for any year, 10 percent
or more of the covered individuals
under the plan are individuals not de-
scribed in subclause (I) or (II) of
clause (ii), the total number of cov-
ered individuals and the total number
of covered individuals not so de-
scribed,
‘‘(v) in the case of a plan or other ar-
rangement which is not fully insured (as
defined in section 701(8))—
‘‘(I) the plan or arrangement is a
multiemployer plan, and
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‘‘(II) the requirements of clause
(B) of the proviso to clause (5) of sec-
tion 305(c) of the National Labor Re-
lations Act (29 U.S.C. 186(c)) are
met with respect to such plan or other
arrangement, and
‘‘(vi) in the case of a plan or other ar-
rangement not in effect as of the date of
the enactment of the ERISA Targeted
Health Insurance Reform Act of 1995, the
employee organization or other entity spon-
soring the plan or arrangement—
‘‘(I) has been in existence for at
least 3 years or is affiliated with an-
other employee organization which has
been in existence for at least 3 years,
or
‘‘(II) demonstrates to the satis-
faction of the Secretary that the re-
quirements of clauses (i) through (v)
are met with respect to the plan or
other arrangement.
‘‘(D)(i) Clause (i) of subparagraph (A)
shall not apply to a plan or other arrangement
that is established or maintained pursuant to
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one or more collective bargaining agreements
which the National Labor Relations Boards de-
termines to have been negotiated or otherwise
agreed to in a manner or through conduct
which violates section 8(a)(2) of the National
Labor Relations Act (29 U.S.C. 158(a)(2)).
‘‘(ii)(I) Whenever a State insurance com-
missioner has reason to believe that this sub-
paragraph is applicable to part or all of a plan
or other arrangement, the State insurance com-
missioner may file a petition with the National
Labor Relations Board for a determination
under clause (i), along with sworn written testi-
mony supporting the petition.
‘‘(II) The Board shall give any such peti-
tion priority over all other petitions and cases,
other than other petitions under subclause (I)
or cases given priority under section 10 of the
National Labor Relations Act (29 U.S.C. 160).
‘‘(III) The Board shall determine, upon
the petition and any response, whether, on the
facts before it, the plan or other arrangement
was negotiated, created, or otherwise agreed to
in a manner or through conduct which violates
section 8(a)(2) of the National Labor Relations
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Act (29 U.S.C. 158(a)(2)). Such determination
shall constitute a final determination for pur-
poses of this subparagraph and shall be binding
in all Federal or State actions with respect to
the status of the plan or other arrangement
under this subparagraph.
‘‘(IV) A person aggrieved by the deter-
mination of the Board under subclause (III)
may obtain review of the determination in any
United States court of appeals in the circuit in
which the collective bargaining at issue oc-
curred. Commencement of proceedings under
this subclause shall not, unless specifically or-
dered by the court, operate as a stay of any
State administrative or judicial action or pro-
ceeding related to the status of the plan or
other arrangement, except that in no case may
the court stay, before the completion of the re-
view, an order which prohibits the enrollment of
new individuals into coverage under a plan or
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-
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vidual who is a covered individual described in paragraph
(40)(C)(ii).’’.
SEC. 1206. EMPLOYEE LEASING HEALTHCARE ARRANGE-
MENTS.
(a) EMPLOYEE LEASING HEALTHCARE ARRANGE-
MENT DEFINED.—Section 3 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1002) is amended
by adding at the end the following new paragraph:
‘‘(43) EMPLOYEE LEASING HEALTHCARE ARRANGE-
MENT.—
‘‘(A) IN
GENERAL.—Subject to subparagraph
(B), the term ‘employee leasing healthcare arrange-
ment’ means any labor leasing arrangement, staff
leasing arrangement, extended employee staffing or
supply arrangement, or other arrangement under
which—
‘‘(i) one business or other entity (herein-
after in this paragraph referred to as the ‘les-
see’), under a lease or other arrangement en-
tered into with any other business or other en-
tity (hereinafter in this paragraph referred to
as the ‘lessor’), receives from the lessor the
services of individuals to be performed under
such lease or other arrangement, and
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‘‘(ii) benefits consisting of medical care re-
ferred to in section 3(42) are provided to such
individuals or such individuals and their de-
pendents as participants and beneficiaries.
‘‘(B) EXCEPTION.—Such term does not include
an arrangement described in subparagraph (A) if,
under such arrangement, the lessor retains, both le-
gally and in fact, a complete right of direction and
control within the scope of employment over the in-
dividuals whose services are supplied under such
lease or other arrangement, and such individuals
perform a specified function for the lessee which is
separate and divisible from the primary business or
operations of the lessee.’’.
(b) 
TREATMENT
OF
EMPLOYEE
LEASING
HEALTHCARE ARRANGEMENTS AS MULTIPLE EMPLOYER
WELFARE ARRANGEMENTS.—Section 3(40) of such Act
(29 U.S.C. 1002(40)) (as amended by the preceding provi-
sions of this title) is further amended by adding at the
end the following new subparagraph:
‘‘(E)(i) Except as provided in clause (ii), the term
‘multiple employer welfare arrangement’ includes any em-
ployee leasing healthcare arrangement.
‘‘(ii) An arrangement which would not, by reason of
subparagraph (B), be treated as a multiple employer wel-
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fare arrangement but for this subparagraph shall not be
treated as a multiple employer welfare arrangement for
any plan year solely because such arrangement is an em-
ployee leasing healthcare arrangement if, as of the com-
mencement of such plan year—
‘‘(I) there are at least 1,000 individuals covered
under the arrangement, and
‘‘(II) under the lease or other arrangement re-
ferred to in paragraph (43)(A)(i), the number of in-
dividuals covered under the arrangement whose serv-
ices are received by the lessee from the lessor con-
stitute less than 15 percent of the total number of
individuals covered under the arrangement.’’.
(c) SPECIAL
RULES
FOR
EMPLOYEE
LEASING
HEALTHCARE ARRANGEMENTS.—
(1) IN GENERAL.—Part 7 of subtitle B of title
I of such Act (as added by the preceding provisions
of this Act) is amended by adding at the end the fol-
lowing new section:
‘‘SEC. 712. SPECIAL RULES FOR EMPLOYEE LEASING
HEALTHCARE ARRANGEMENTS.
‘‘(a) IN GENERAL.—The requirements of paragraphs
(1), (2), and (3) of section 704(b) shall be treated as satis-
fied in the case of a multiple employer welfare arrange-
ment that is an employee leasing healthcare arrangement
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if the application for exemption includes information
which the Secretary determines to be complete and accu-
rate and sufficient to demonstrate that the following re-
quirements are met with respect to the arrangement:
‘‘(1) 3-YEAR TENURE.—The lessor has been in
operation for not less than 3 years.
‘‘(2) SOLICITATION
RESTRICTIONS.—Employee
leasing services provided under the arrangement are
not solicited, advertised, or marketed through li-
censed insurance agents or brokers acting in such
capacity.
‘‘(3) CREATION
OF
EMPLOYMENT
RELATION-
SHIP.—
‘‘(A) DISCLOSURE
STATEMENT.—Written
notice is provided to each applicant for employ-
ment subject to coverage under the arrange-
ment, at the time of application for employment
and before commencing coverage under the ar-
rangement, stating that the employer is the les-
sor under the arrangement.
‘‘(B) INFORMED
CONSENT.—Each such
applicant signs a written statement consenting
to the employment relationship with the lessor.
‘‘(C) INFORMED
RECRUITMENT
OF
LES-
SEE’S EMPLOYEES.—In any case in which the
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lessor offers employment to an employee of a
lessee under the arrangement, the lessor in-
forms each employee in writing that his or her
acceptance of employment with the lessor is vol-
untary and that refusal of such offer will not be
deemed to be resignation from or abandonment
of current employment.
‘‘(4) REQUISITE
EMPLOYER-EMPLOYEE
RELA-
TIONSHIP UNDER ARRANGEMENT.—Under the em-
ployer-employee relationship with the employees of
the lessor—
‘‘(A) the lessor retains the ultimate author-
ity to hire, terminate, and reassign such em-
ployees,
‘‘(B) the lessor is responsible for the pay-
ment of wages, payroll-related taxes, and em-
ployee benefits, without regard to payment by
the lessee to the lessor for its services,
‘‘(C) the lessor maintains the right of di-
rection and control over its employees, except to
the extent that the lessee is responsible for su-
pervision of the work performed consistent with
the lessee’s responsibility for its product or
service, and
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‘‘(D) in accordance with section 301(a) of
the Labor Management Relations Act, 1947 (29
U.S.C. 185(a)), the lessor retains in the ab-
sence of an applicable collective bargaining
agreement, the right to enter into arbitration
and to decide employee grievances, and
‘‘(E) no owner, officer, or director of, or
partner in, a lessee is an employee of the lessor,
and not more than 10 percent of the individuals
covered under the arrangement consist of own-
ers, officers, or directors of, or partners in,
such a lessee (or any combination thereof).
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) LESSOR.—The term ‘lessor’ means the
business or other entity from which services of indi-
viduals are obtained under an employee leasing
healthcare arrangement.
‘‘(2) LESSEE.—The term ‘lessee’ means a busi-
ness or other entity which receives the services of in-
dividuals provided under an employee leasing
healthcare arrangement.’’.
(2) CLERICAL AMENDMENT.—The table of con-
tents in section 1 of such Act (as amended by the
preceding provisions of this title) is further amended
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by inserting after the item relating to section 711
the following new item:
‘‘Sec. 712. Employee leasing healthcare arrangements.’’.
SEC. 1207. ENFORCEMENT PROVISIONS RELATING TO MUL-
TIPLE EMPLOYER WELFARE ARRANGEMENTS
AND EMPLOYEE LEASING HEALTHCARE AR-
RANGEMENTS.
(a) ENFORCEMENT
OF FILING REQUIREMENTS.—
Section 502 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1132) is amended—
(1) in subsection (a)(6), by striking ‘‘subsection
(c)(2) or (i) or (l)’’ and inserting ‘‘paragraph (2) or
(4) of subsection (c) or subsection (i) or (l)’’; and
(2) by adding at the end of subsection (c) the
following new paragraph:
‘‘(4) The Secretary may assess a civil penalty against
any person of up to $1,000 a day from the date of such
person’s failure or refusal to file the information required
to be filed with the Secretary under section 101(e).’’.
(b) ACTIONS BY STATES IN FEDERAL COURT.—Sec-
tion 502(a) of such Act (29 U.S.C. 1132(a)) is amended—
(1) in paragraph (5), by striking ‘‘or’’ at the
end;
(2) in paragraph (6), by striking the period and
inserting ‘‘, or’’; and
(3) by adding at the end the following:
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‘‘(7) by a State official having authority under
the law of such State to enforce the laws of such
State regulating insurance, to enjoin any act or
practice which violates any provision of part 7 which
such State has the power to enforce under part 7.’’.
(c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL
MISREPRESENTATIONS.—Section 501 of such Act (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, either willfully or with willful
blindness, falsely represents, to any employee, any employ-
ee’s beneficiary, any employer, the Secretary, or any State,
an arrangement established or maintained for the purpose
of offering or providing any benefit described in section
3(1) to employees or their beneficiaries as—
‘‘(1) being an exempted multiple employer wel-
fare arrangement (as defined in section 701(10)),
‘‘(2) being an employee leasing healthcare ar-
rangement under an exemption granted under part
7,
‘‘(3) having been established or maintained
under or pursuant to a collective bargaining agree-
ment, or
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‘‘(4) being a plan or arrangement with respect
to which the requirements of section 3(40)(C) are
met,
shall, upon conviction, be imprisoned not more than five
years, be fined under title 18, United States Code, or
both.’’.
(d) CEASE ACTIVITIES ORDERS.—Section 502 of
such Act (29 U.S.C. 1132) is amended by adding at the
end the following new subsection:
‘‘(m)(1) Subject to paragraph (2), upon application
by the Secretary showing the operation, promotion, or
marketing of a multiple employer welfare arrangement
providing benefits consisting of medical care referred to
in section 3(42) that—
‘‘(A) is not licensed, registered, or otherwise ap-
proved under the insurance laws of the States in
which the arrangement offers or provides benefits, or
‘‘(B) is not operating in accordance with the
terms of an exemption granted by the Secretary
under part 7,
a district court of the United States shall enter an order
requiring that the arrangement cease activities.
‘‘(2) Paragraph (1) shall not apply in the case of a
multiple employer welfare arrangement if the arrangement
shows that—
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‘‘(A) coverage under it is fully insured, within
the meaning of section 701(8), and
‘‘(B) with respect to each such State, it is oper-
ating in accordance with applicable State insurance
laws that are not superseded under section 514.
‘‘(3) The court may grant such additional equitable
relief, including any relief available under this title, as it
deems necessary to protect the interests of the public and
of persons having claims for benefits against the arrange-
ment.’’.
(e) RESPONSIBILITY
FOR CLAIMS PROCEDURE.—
Section 503 of such Act (29 U.S.C. 1133) is amended by
adding at the end (after and below paragraph (2)) the fol-
lowing new sentence: ‘‘The terms of each multiple em-
ployer welfare arrangement to which this section applies
and which provides benefits consisting of medical care re-
ferred to in section 3(42) shall require the operating com-
mittee or the named fiduciary (as applicable) to ensure
that the requirements of this section are met in connection
with claims filed under the arrangement.’’.
SEC. 1208. FILING REQUIREMENTS FOR MULTIPLE EM-
PLOYER WELFARE ARRANGEMENTS OFFER-
ING HEALTH BENEFITS.
Section 101 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1021) is amended—
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(1) by redesignating subsection (e) as sub-
section (f); and
(2) by inserting after subsection (d) the follow-
ing new subsection:
‘‘(e)(1) Each multiple employer welfare arrangement
shall file with the Secretary a registration statement de-
scribed in paragraph (2) within 60 days before commenc-
ing operations (in the case of an arrangement commencing
operations on or after January 1, 1998) and no later than
February 15 of each year (in the case of an arrangement
in operation since the beginning of such year), unless, as
of the date by which such filing otherwise must be made,
such arrangement provides no benefits consisting of medi-
cal care referred to in section 3(42).
‘‘(2) Each registration statement—
‘‘(A) shall be filed in such form, and contain
such information concerning the multiple employer
welfare arrangement and any persons involved in its
operation (including whether coverage under the ar-
rangement is fully insured), as shall be provided in
regulations which shall be prescribed by the Sec-
retary, and
‘‘(B) if coverage under the arrangement is not
fully insured, shall contain a certification that copies
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of such registration statement have been transmitted
by certified mail to—
‘‘(i) in the case of an arrangement which
is an exempted multiple employer health plan
(as defined in section 701(10)), the State insur-
ance commissioner of the domicile State of such
arrangement, or
‘‘(ii) in the case of an arrangement which
is not an exempted multiple employer health
plan, the State insurance commissioner of each
State in which the arrangement is located.
‘‘(3) The person or persons responsible for filing the
annual registration statement are—
‘‘(A) the trustee or trustees so designated by
the terms of the instrument under which the mul-
tiple employer welfare arrangement is established or
maintained, or
‘‘(B) in the case of a multiple employer welfare
arrangement for which the trustee or trustees can-
not be identified, or upon the failure of the trustee
or trustees of an arrangement to file, the person or
persons actually responsible for the acquisition, dis-
position, control, or management of the cash or
property of the arrangement, irrespective of whether
such acquisition, disposition, control, or management
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is exercised directly by such person or persons or
through an agent designated by such person or per-
sons.
‘‘(4) Any agreement entered into under section
506(c) with a State as the primary domicile State with
respect to any multiple employer welfare arrangement
shall provide for simultaneous filings of reports required
under this subsection with the Secretary and with the
State insurance commissioner of such State.’’.
SEC. 1209. 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) RESPONSIBILITY WITH RESPECT TO MULTIPLE
EMPLOYER WELFARE ARRANGEMENTS.—
‘‘(1) STATE ENFORCEMENT.—
‘‘(A) 
AGREEMENTS
WITH
STATES.—A
State may enter into an agreement with the
Secretary for delegation to the State of some or
all of the Secretary’s authority under sections
502 and 504 to enforce the provisions of part
7 applicable to multiple employer welfare ar-
rangements which are or have been exempted
multiple employer health plans (as defined in
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section 701(10)). The Secretary shall enter into
the agreement if the Secretary determines that
the delegation provided for therein would not
result in a lower level or quality of enforcement
of the provisions of this title.
‘‘(B) 
DELEGATIONS.—Any 
department,
agency, or instrumentality of a State to which
authority is delegated pursuant to an agree-
ment entered into under this paragraph may, if
authorized under State law and to the extent
consistent with such agreement, exercise the
powers of the Secretary under this title which
relate to such authority.
‘‘(C) CONCURRENT
AUTHORITY
OF
THE
SECRETARY.—If the Secretary delegates author-
ity to a State in an agreement entered into
under subparagraph (A), the Secretary may
continue to exercise such authority concurrently
with the State.
‘‘(D) RECOGNITION OF PRIMARY DOMICILE
STATE.—In entering into any agreement with a
State under subparagraph (A), the Secretary
shall ensure that, as a result of such agreement
and all other agreements entered into under
subparagraph (A), only one State will be recog-
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nized, with respect to any particular multiple
employer welfare arrangement, as the primary
domicile State to which authority has been dele-
gated pursuant to such agreements.
‘‘(2) ASSISTANCE TO STATES.—The Secretary
shall—
‘‘(A) provide enforcement assistance to the
States with respect to multiple employer welfare
arrangements, including, but not limited to, co-
ordinating Federal and State efforts through
the establishment of cooperative agreements
with appropriate State agencies under which
the Pension and Welfare Benefits Administra-
tion keeps the States informed of the status of
its cases and makes available to the States in-
formation obtained by it,
‘‘(B) provide continuing technical assist-
ance to the States with respect to issues involv-
ing multiple employer welfare arrangements
and this Act,
‘‘(C) assist the States in obtaining from
the Office of Regulations and Interpretations
timely and complete responses to requests for
advisory opinions on issues described in sub-
paragraph (B), and
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‘‘(D) distribute copies of all advisory opin-
ions described in subparagraph (C) to the State
insurance commissioner of each State.’’.
SEC. 1210. CLARIFICATION OF TREATMENT OF EMPLOYER
HEALTH COALITIONS AND HEALTH MAINTE-
NANCE ORGANIZATIONS.
(a) IN GENERAL.—Section 3(40) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1002(40)) is amended—
(1) in subparagraph (A), by striking ‘‘or’’ at
the end of clause (ii), by striking the period at the
end of clause (iii) and inserting a comma, and by
adding at the end the following new clauses:
‘‘(iv) by an employer health coalition that—
‘‘(I) is not an arrangement excluded under
clause (i), and
‘‘(II) otherwise would not be, but for the
agreements described in subparagraph (B)(vi),
a multiple employer welfare arrangement (as
defined in the preceding provisions of this sub-
paragraph), or
‘‘(v) as a health maintenance organization (as
defined in section 800(a)(10)(B)).’’;
and
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(2) in subparagraph (B), by striking ‘‘and’’ at
the end of clause (iv)(II), by striking the period at
the end of clause (v) and inserting ‘‘, and’’, and by
adding at the end the following new clause:
‘‘(vi) the term ‘employer health coalition’ means
any arrangement under which—
‘‘(I) two or more sponsors of group health
plans, group health plans, or both enter into
one or more agreements with one or more pro-
viders of medical care (referred to in paragraph
(42)), and
‘‘(II) such agreements provide that such
providers make available to such group health
plans the items and services which constitute
the medical care provided as benefits under
such plans to participants and beneficiaries
under such plans.’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect on the date of the enact-
ment of this Act.
SEC. 1211. SINGLE ANNUAL FILING FOR ALL PARTICIPAT-
ING EMPLOYERS.
(a) IN GENERAL.—Section 110 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1030),
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as amended by section 1202(c) of this subtitle, is amended
by adding at the end the following new subsection:
‘‘(d) The Secretary shall prescribe by regulation or
otherwise an alternative method providing for the filing
of a single annual report (as referred to in section
104(a)(1)(A)) with respect to all employers who are par-
ticipating employers under a multiple employer welfare ar-
rangement under which all coverage consists of medical
care (referred to in section 3(42)) and is fully insured (as
defined in section 701(8)).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall take effect on the date of the enact-
ment of this Act. The Secretary of Labor shall prescribe
the alternative method referred to in section 110(d) of the
Employee Retirement Income Security Act of 1974, as
added by such amendment, within 90 days after the date
of the enactment of this Act.
SEC. 1212. EFFECTIVE DATE; TRANSITIONAL RULES.
(a) EFFECTIVE DATE.—The amendments made by
this subtitle (other than sections 1210 and 1211) shall
take effect January 1, 1998, except that the Secretary of
Labor may issue regulations before such date under such
amendments. The Secretary shall issue all regulations nec-
essary to carry out the amendments made by this subtitle
before the effective date thereof.
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(b) TRANSITIONAL RULES.—If the sponsor of a mul-
tiple employer welfare arrangement which, as of January
1, 1998, provides benefits consisting of medical care re-
ferred to in section 3(42) of the Employee Retirement In-
come Security Act of 1974 (added by section 1301(b) of
this Act) files with the Secretary of Labor an application
for an exemption under part 7 of subtitle B of title I of
such Act within 180 days after such date and the Sec-
retary has not, as of 90 days after receipt of such applica-
tion, found such application to be materially deficient, sec-
tion 514(b)(6)(A) of such Act (29 U.S.C. 1144(b)(6)(A))
shall not apply with respect to such arrangement during
the 18-month period following such date. If the Secretary
determines, at any time after the date of the enactment
of this Act, that any such exclusion from coverage under
the provisions of such section 514(b)(6)(A) of such Act
of a multiple employer welfare arrangement would be det-
rimental to the interests of individuals covered under such
arrangement, such exclusion shall cease as of the date of
the determination. Any determination made by the Sec-
retary under this subsection shall be in the Secretary’s
sole discretion.
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Subtitle D—Remedies and Enforce-
ment With Respect to Group
Health Plans
SEC. 1301. CLAIMS PROCEDURE FOR GROUP HEALTH
PLANS.
(a) IN GENERAL.—Section 503 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1133)
is amended—
(1) by inserting ‘‘(a) IN GENERAL.—’’ after
‘‘SEC. 503.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) SPECIAL RULES FOR GROUP HEALTH PLANS.—
‘‘(1) IN GENERAL.—In addition to meeting the
requirements of subsection (a), every group health
plan shall afford a reasonable opportunity to any
participant or beneficiary, whose request for a
preauthorization, an emergency preauthorization, a
utilization review determination, or an emergency
utilization review determination has been denied, for
a full and fair review by the appropriate fiduciary of
the decision denying the request.
‘‘(2) TIME LIMITS FOR DECIDING CLAIMS.—
‘‘(A) INITIAL DECISIONS.—A group health
plan shall issue an initial approval or denial of
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Title I, Subtitle D
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any claim for benefits under the terms of the
plan not later than 45 days after its filing com-
pletion date. Failure to approve or deny such a
claim within such 45-day period shall be treated
as a denial of the claim.
‘‘(B) REVIEWS OF INITIAL DECISIONS.—
Every review by a fiduciary required under
paragraph (1) of an initial denial under sub-
paragraph (A) shall be completed not later than
45 days after the review filing date. Failure to
issue a decision affirming, reversing, or modify-
ing the initial denial shall be treated as a final
decision denying the claim.
‘‘(3) TIME LIMIT FOR DECIDING REQUESTS FOR
PREAUTHORIZATION.—
‘‘(A) GENERAL RULE.—Except as provided
in subparagraph (B)—
‘‘(i) INITIAL DECISIONS.—If a request
for preauthorization is required under the
terms of a group health plan, the plan
shall approve or deny any such request not
later than 45 days after its filing comple-
tion date. Failure to approve or deny such
a request within such 45-day period shall
be treated as a denial of the request.
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Title I, Subtitle D
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‘‘(ii) REVIEWS
OF
INITIAL
DECI-
SIONS.—Every review by a fiduciary re-
quired under paragraph (1) of an initial
denial under clause (i) shall be completed
not later than 45 days after the review fil-
ing date. Failure to issue a decision affirm-
ing, reversing, or modifying the initial de-
nial within such 45-day period shall be
treated as a final decision denying the re-
quest.
‘‘(B) 
REQUESTS
FOR
EMERGENCY
PREAUTHORIZATION.—
‘‘(i) INITIAL DECISIONS.—In any case
in which a request for preauthorization re-
quired under the terms of a group health
plan 
is 
a 
request 
for 
emergency
preauthorization, the plan shall approve or
deny any such request not later than 10
days after its filing completion date (48
hours after such date in cases involving
emergency medical care). Failure to ap-
prove or deny such a request within such
10-day period (or 48-hour period) shall be
treated as a denial of the request.
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‘‘(ii) REVIEWS
OF
INITIAL
DECI-
SIONS.—Every review by a fiduciary re-
quired under paragraph (1) of an initial
denial under clause (i) shall be completed
not later than 10 days after the review fil-
ing date (48 hours after such date in cases
involving emergency medical care). Failure
to issue a decision affirming, reversing, or
modifying the initial denial within such 10-
day period (or 48-hour period) shall be
treated as a final decision denying the re-
quest.
‘‘(4) TIME LIMIT FOR DECIDING REQUESTS FOR
UTILIZATION REVIEW DETERMINATIONS.—
‘‘(A) GENERAL RULE.—Except as provided
in subparagraph (B)—
‘‘(i) INITIAL DECISIONS.—If a request
for a utilization review determination is re-
quired under the terms of a group health
plan, the plan shall approve or deny any
such request not later than 45 days after
its filing completion date. Failure to ap-
prove or deny such a request within such
45-day period shall be treated as a denial
of the request.
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‘‘(ii) REVIEWS
OF
INITIAL
DECI-
SIONS.—Every review by a fiduciary re-
quired under paragraph (1) of an initial
denial under clause (i) shall be completed
not later than 45 days after the review fil-
ing date. Failure to issue a decision affirm-
ing, reversing, or modifying the initial de-
nial within such 45-day period shall be
treated as a final decision denying the re-
quest.
‘‘(B) REQUESTS FOR EMERGENCY UTILIZA-
TION REVIEW DETERMINATIONS.—
‘‘(i) INITIAL DECISIONS.—In any case
in which a request for a utilization review
determination required under the terms of
a group health plan is a request for an
emergency utilization review determination,
the plan shall approve or deny any such re-
quest not later than 10 days after its filing
completion date (48 hours after such date
in cases involving emergency medical care).
Failure to approve or deny such a request
within such 10-day period (or 48-hour pe-
riod) shall be treated as a denial of the re-
quest.
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‘‘(ii) REVIEWS
OF
INITIAL
DECI-
SIONS.—Every review by a fiduciary re-
quired under paragraph (1) of an initial
denial under clause (i) shall be completed
not later than 10 days after the review fil-
ing date (48 hours after such date in cases
involving emergency medical care). Failure
to issue a decision affirming, reversing, or
modifying the initial denial within such 10-
day period (or 48-hour period) shall be
treated as a final decision denying the re-
quest.
‘‘(5) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) CLAIM
FOR
BENEFITS.—The term
‘claim for benefits’ means a request for pay-
ment by a group health plan of benefits made
by or on behalf of a participant or beneficiary
after the expense for such benefits has been in-
curred.
‘‘(B) UTILIZATION
REVIEW
DETERMINA-
TION.—The term ‘utilization review determina-
tion’ means a determination under a group
health plan solely that proposed medical care
meets the plan’s requirements for medical ap-
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propriateness or necessity. Unless otherwise ex-
pressly provided under the terms of the plan,
any such determination shall not by itself con-
stitute a guarantee that benefits under the plan
will be provided.
‘‘(C) 
PREAUTHORIZATION.—The 
term
‘preauthorization’ means a determination under
a group health plan that proposed medical care
meets, under the facts and circumstances at the
time of the determination, the plan’s terms and
conditions of coverage. Such a determination
shall, except in the case of a claim involving
fraud or misrepresentation, constitute a guar-
antee that benefits under the plan will be pro-
vided.
‘‘(D) 
REQUEST
FOR
PREAUTHOR-
IZATION.—The 
term 
‘request 
for
preauthorization’ 
means 
a 
request 
for
preauthorization by a group health plan of med-
ical care made by or on behalf of a participant
or beneficiary before the expense for such medi-
cal care has been incurred.
‘‘(E) 
REQUEST
FOR
EMERGENCY
PREAUTHORIZATION.—The term ‘request for
emergency preauthorization’ means a request
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for preauthorization by a group health plan in
any case in which the medical care for which
the expense is to be incurred constitutes urgent
medical care or emergency medical care.
‘‘(F) REQUEST FOR UTILIZATION REVIEW
DETERMINATION.—The term ‘request for a uti-
lization review determination’ means a request
by or on behalf of a participant or beneficiary,
made before an expense for medical care has
been incurred, for a utilization review deter-
mination by a plan.
‘‘(G) REQUEST FOR EMERGENCY UTILIZA-
TION REVIEW DETERMINATION.—The term ‘re-
quest for an emergency utilization review deter-
mination’ means a request for a utilization re-
view determination in any case in which the
medical care to be incurred constitutes urgent
medical care or emergency medical care.
‘‘(H) URGENT MEDICAL CARE.—The term
‘urgent medical care’ means medical care in any
case in which a physician with appropriate ex-
pertise has certified in writing that failure to
provide the participant or beneficiary with such
medical care within 45 days will result in ei-
ther—