H. R. 3103—32
‘‘(3) EXCEPTION.—An issuer is not required under this sec-
tion to disclose any information that is proprietary and trade
secret information under applicable law.
‘‘Subpart 3—Exclusion of Plans; Enforcement; Preemption
‘‘SEC. 2721. EXCLUSION OF CERTAIN PLANS.
‘‘(a) EXCEPTION FOR CERTAIN SMALL GROUP HEALTH PLANS.—
The requirements of subparts 1 and 2 shall not apply to any
group health plan (and health insurance coverage offered in connec-
tion with a group health plan) for any plan year if, on the first
day of such plan year, such plan has less than 2 participants
who are current employees.
‘‘(b) LIMITATION ON APPLICATION OF PROVISIONS RELATING TO
GROUP HEALTH PLANS.—
‘‘(1) IN
GENERAL.—The requirements of subparts 1 and
2 shall apply with respect to group health plans only—
‘‘(A) subject to paragraph (2), in the case of a plan
that is a nonfederal governmental plan, and
‘‘(B) with respect to health insurance coverage offered
in connection with a group health plan (including such
a plan that is a church plan or a governmental plan).
‘‘(2) TREATMENT OF NONFEDERAL GOVERNMENTAL PLANS.—
‘‘(A) ELECTION TO BE EXCLUDED.—If the plan sponsor
of a nonfederal governmental plan which is a group health
plan to which the provisions of subparts 1 and 2 otherwise
apply makes an election under this subparagraph (in such
form and manner as the Secretary may by regulations
prescribe), then the requirements of such subparts insofar
as they apply directly to group health plans (and not merely
to group health insurance coverage) shall not apply to
such governmental plans for such period except as provided
in this paragraph.
‘‘(B) PERIOD OF ELECTION.—An election under subpara-
graph (A) shall apply—
‘‘(i) for a single specified plan year, or
‘‘(ii) in the case of a plan provided pursuant to
a collective bargaining agreement, for the term of such
agreement.
An election under clause (i) may be extended through sub-
sequent elections under this paragraph.
‘‘(C) NOTICE TO ENROLLEES.—Under such an election,
the plan shall provide for—
‘‘(i) notice to enrollees (on an annual basis and
at the time of enrollment under the plan) of the fact
and consequences of such election, and
‘‘(ii) certification and disclosure of creditable cov-
erage under the plan with respect to enrollees in
accordance with section 2701(e).
‘‘(c) EXCEPTION FOR CERTAIN BENEFITS.—The requirements of
subparts 1 and 2 shall not apply to any group health plan (or
group health insurance coverage) in relation to its provision of
excepted benefits described in section 2791(c)(1).
‘‘(d) EXCEPTION FOR CERTAIN BENEFITS IF CERTAIN CONDITIONS
MET.—
‘‘(1) LIMITED, EXCEPTED
BENEFITS.—The requirements of
subparts 1 and 2 shall not apply to any group health plan
H. R. 3103—33
(and group health insurance coverage offered in connection
with a group health plan) in relation to its provision of excepted
benefits described in section 2791(c)(2) if the benefits—
‘‘(A) are provided under a separate policy, certificate,
or contract of insurance; or
‘‘(B) are otherwise not an integral part of the plan.
‘‘(2) NONCOORDINATED, EXCEPTED BENEFITS.—The require-
ments of subparts 1 and 2 shall not apply to any group health
plan (and group health insurance coverage offered in connection
with a group health plan) in relation to its provision of excepted
benefits described in section 2791(c)(3) if all of the following
conditions are met:
‘‘(A) The benefits are provided under a separate policy,
certificate, or contract of insurance.
‘‘(B) There is no coordination between the provision
of such benefits and any exclusion of benefits under any
group health plan maintained by the same plan sponsor.
‘‘(C) Such benefits are paid with respect to an event
without regard to whether benefits are provided with
respect to such an event under any group health plan
maintained by the same plan sponsor.
‘‘(3) SUPPLEMENTAL
EXCEPTED
BENEFITS.—The require-
ments of this part shall not apply to any group health plan
(and group health insurance coverage) in relation to its provi-
sion of excepted benefits described in section 27971(c)(4) if
the benefits are provided under a separate policy, certificate,
or contract of insurance.
‘‘(e) TREATMENT OF PARTNERSHIPS.—For purposes of this part—
‘‘(1) TREATMENT AS A GROUP HEALTH PLAN.—Any plan, fund,
or program which would not be (but for this subsection) an
employee welfare benefit plan and which is established or main-
tained by a partnership, to the extent that such plan, fund,
or program provides medical care (including items and services
paid for as medical care) to present or former partners in
the partnership or to their dependents (as defined under the
terms of the plan, fund, or program), directly or through insur-
ance, reimbursement, or otherwise, shall be treated (subject
to paragraph (2)) as an employee welfare benefit plan which
is a group health plan.
‘‘(2) EMPLOYER.—In the case of a group health plan, the
term ‘employer’ also includes the partnership in relation to
any partner.
‘‘(3) PARTICIPANTS OF GROUP HEALTH PLANS.—In the case
of a group health plan, the term ‘participant’ also includes—
‘‘(A) in connection with a group health plan maintained
by a partnership, an individual who is a partner in relation
to the partnership, or
‘‘(B) in connection with a group health plan maintained
by a self-employed individual (under which one or more
employees are participants), the self-employed individual,
if such individual is, or may become, eligible to receive a benefit
under the plan or such individual’s beneficiaries may be eligible
to receive any such benefit.
‘‘SEC. 2722. ENFORCEMENT.
‘‘(a) STATE ENFORCEMENT.—
H. R. 3103—34
‘‘(1) STATE AUTHORITY.—Subject to section 2723, each State
may require that health insurance issuers that issue, sell,
renew, or offer health insurance coverage in the State in the
small or large group markets meet the requirements of this
part with respect to such issuers.
‘‘(2) FAILURE TO IMPLEMENT PROVISIONS.—In the case of
a determination by the Secretary that a State has failed to
substantially enforce a provision (or provisions) in this part
with respect to health insurance issuers in the State, the Sec-
retary shall enforce such provision (or provisions) under sub-
section (b) insofar as they relate to the issuance, sale, renewal,
and offering of health insurance coverage in connection with
group health plans in such State.
‘‘(b) SECRETARIAL ENFORCEMENT AUTHORITY.—
‘‘(1) LIMITATION.—The provisions of this subsection shall
apply to enforcement of a provision (or provisions) of this part
only—
‘‘(A) as provided under subsection (a)(2); and
‘‘(B) with respect to group health plans that are non-
Federal governmental plans.
‘‘(2) IMPOSITION OF PENALTIES.—In the cases described in
paragraph (1)—
‘‘(A) IN GENERAL.—Subject to the succeeding provisions
of this subsection, any non-Federal governmental plan that
is a group health plan and any health insurance issuer
that fails to meet a provision of this part applicable to
such plan or issuer is subject to a civil money penalty
under this subsection.
‘‘(B) LIABILITY
FOR
PENALTY.—In the case of a
failure by—
‘‘(i) a health insurance issuer, the issuer is liable
for such penalty, or
‘‘(ii) a group health plan that is a non-Federal
governmental plan which is—
‘‘(I) sponsored by 2 or more employers, the
plan is liable for such penalty, or
‘‘(II) not so sponsored, the employer is liable
for such penalty.
‘‘(C) AMOUNT OF PENALTY.—
‘‘(i) IN GENERAL.—The maximum amount of pen-
alty imposed under this paragraph is $100 for each
day for each individual with respect to which such
a failure occurs.
‘‘(ii) CONSIDERATIONS IN IMPOSITION.—In determin-
ing the amount of any penalty to be assessed under
this paragraph, the Secretary shall take into account
the previous record of compliance of the entity being
assessed with the applicable provisions of this part
and the gravity of the violation.
‘‘(iii) LIMITATIONS.—
‘‘(I) PENALTY NOT TO APPLY WHERE FAILURE
NOT
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—No civil money penalty shall be imposed
under this paragraph on any failure during any
period for which it is established to the satisfaction
of the Secretary that none of the entities against
whom the penalty would be imposed knew, or
H. R. 3103—35
exercising reasonable diligence would have known,
that such failure existed.
‘‘(II) PENALTY NOT TO APPLY TO FAILURES COR-
RECTED WITHIN 30 DAYS.—No civil money penalty
shall be imposed under this paragraph on any
failure if such failure was due to reasonable cause
and not to willful neglect, and such failure is cor-
rected during the 30-day period beginning on the
first day any of the entities against whom the
penalty would be imposed knew, or exercising
reasonable diligence would have known, that such
failure existed.
‘‘(D) ADMINISTRATIVE REVIEW.—
‘‘(i) 
OPPORTUNITY
FOR
HEARING.—The 
entity
assessed shall be afforded an opportunity for hearing
by the Secretary upon request made within 30 days
after the date of the issuance of a notice of assessment.
In such hearing the decision shall be made on the
record pursuant to section 554 of title 5, United States
Code. If no hearing is requested, the assessment shall
constitute a final and unappealable order.
‘‘(ii) 
HEARING
PROCEDURE.—If 
a 
hearing 
is
requested, the initial agency decision shall be made
by an administrative law judge, and such decision shall
become the final order unless the Secretary modifies
or vacates the decision. Notice of intent to modify
or vacate the decision of the administrative law judge
shall be issued to the parties within 30 days after
the date of the decision of the judge. A final order
which takes effect under this paragraph shall be
subject to review only as provided under subparagraph
(E).
‘‘(E) JUDICIAL REVIEW.—
‘‘(i) FILING
OF
ACTION
FOR
REVIEW.—Any entity
against whom an order imposing a civil money penalty
has been entered after an agency hearing under this
paragraph may obtain review by the United States
district court for any district in which such entity
is located or the United States District Court for the
District of Columbia by filing a notice of appeal in
such court within 30 days from the date of such order,
and simultaneously sending a copy of such notice by
registered mail to the Secretary.
‘‘(ii) CERTIFICATION OF ADMINISTRATIVE RECORD.—
The Secretary shall promptly certify and file in such
court the record upon which the penalty was imposed.
‘‘(iii) STANDARD FOR REVIEW.—The findings of the
Secretary shall be set aside only if found to be unsup-
ported by substantial evidence as provided by section
706(2)(E) of title 5, United States Code.
‘‘(iv) APPEAL.—Any final decision, order, or judg-
ment of the district court concerning such review shall
be subject to appeal as provided in chapter 83 of title
28 of such Code.
‘‘(F) FAILURE
TO
PAY
ASSESSMENT; MAINTENANCE
OF
ACTION.—
H. R. 3103—36
‘‘(i) FAILURE TO PAY ASSESSMENT.—If any entity
fails to pay an assessment after it has become a final
and unappealable order, or after the court has entered
final judgment in favor of the Secretary, the Secretary
shall refer the matter to the Attorney General who
shall recover the amount assessed by action in the
appropriate United States district court.
‘‘(ii) NONREVIEWABILITY.—In such action the valid-
ity and appropriateness of the final order imposing
the penalty shall not be subject to review.
‘‘(G) PAYMENT OF PENALTIES.—Except as otherwise pro-
vided, penalties collected under this paragraph shall be
paid to the Secretary (or other officer) imposing the penalty
and shall be available without appropriation and until
expended for the purpose of enforcing the provisions with
respect to which the penalty was imposed.
‘‘SEC. 2723. PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION.
‘‘(a) CONTINUED APPLICABILITY OF STATE LAW WITH RESPECT
TO HEALTH INSURANCE ISSUERS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2) and except
as provided in subsection (b), this part and part C insofar
as it relates to this part shall not be construed to supersede
any provision of State law which establishes, implements, or
continues in effect any standard or requirement solely relating
to health insurance issuers in connection with group health
insurance coverage except to the extent that such standard
or requirement prevents the application of a requirement of
this part.
‘‘(2) CONTINUED
PREEMPTION
WITH
RESPECT
TO
GROUP
HEALTH
PLANS.—Nothing in this part shall be construed to
affect or modify the provisions of section 514 of the Employee
Retirement Income Security Act of 1974 with respect to group
health plans.
‘‘(b) SPECIAL RULES IN CASE OF PORTABILITY REQUIREMENTS.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), the provisions
of this part relating to health insurance coverage offered by
a health insurance issuer supersede any provision of State
law which establishes, implements, or continues in effect a
standard or requirement applicable to imposition of a preexist-
ing condition exclusion specifically governed by section 701
which differs from the standards or requirements specified
in such section.
‘‘(2) EXCEPTIONS.—Only in relation to health insurance cov-
erage offered by a health insurance issuer, the provisions of
this part do not supersede any provision of State law to the
extent that such provision—
‘‘(i) substitutes for the reference to ‘6-month period’
in section 2701(a)(1) a reference to any shorter period of
time;
‘‘(ii) substitutes for the reference to ‘12 months’ and
‘18 months’ in section 2701(a)(2) a reference to any shorter
period of time;
‘‘(iii) substitutes for the references to ‘63’ days in sec-
tions 2701(c)(2)(A) and 2701(d)(4)(A) a reference to any
greater number of days;
H. R. 3103—37
‘‘(iv) substitutes for the reference to ‘30-day period’
in sections 2701(b)(2) and 2701(d)(1) a reference to any
greater period;
‘‘(v) prohibits the imposition of any preexisting condi-
tion exclusion in cases not described in section 2701(d)
or expands the exceptions described in such section;
‘‘(vi) requires special enrollment periods in addition
to those required under section 2701(f); or
‘‘(vii) reduces the maximum period permitted in an
affiliation period under section 2701(g)(1)(B).
‘‘(c) RULES OF CONSTRUCTION.—Nothing in this part shall be
construed as requiring a group health plan or health insurance
coverage to provide specific benefits under the terms of such plan
or coverage.
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) STATE LAW.—The term ‘State law’ includes all laws,
decisions, rules, regulations, or other State action having the
effect of law, of any State. A law of the United States applicable
only to the District of Columbia shall be treated as a State
law rather than a law of the United States.
‘‘(2) STATE.—The term ‘State’ includes a State (including
the Northern Mariana Islands), any political subdivisions of
a State or such Islands, or any agency or instrumentality
of either.
‘‘PART C—DEFINITIONS; MISCELLANEOUS PROVISIONS
‘‘SEC. 2791. DEFINITIONS.
‘‘(a) GROUP HEALTH PLAN.—
‘‘(1) DEFINITION.—The term ‘group health plan’ means an
employee welfare benefit plan (as defined in section 3(1) of
the Employee Retirement Income Security Act of 1974) to the
extent that the plan provides medical care (as defined in para-
graph (2)) and including items and services paid for as medical
care) to employees or their dependents (as defined under the
terms of the plan) directly or through insurance, reimburse-
ment, or otherwise.
‘‘(2) MEDICAL
CARE.—The term ‘medical care’ means
amounts paid for—
‘‘(A) the diagnosis, cure, mitigation, treatment, or
prevention of disease, or amounts paid for the purpose
of affecting any structure or function of the body,
‘‘(B) amounts paid for transportation primarily for and
essential to medical care referred to in subparagraph (A),
and
‘‘(C) amounts paid for insurance covering medical care
referred to in subparagraphs (A) and (B).
‘‘(3) TREATMENT OF CERTAIN PLANS AS GROUP HEALTH PLAN
FOR NOTICE PROVISION.—A program under which creditable cov-
erage described in subparagraph (C), (D), (E), or (F) of section
2701(c)(1) is provided shall be treated as a group health plan
for purposes of applying section 2701(e).
‘‘(b) DEFINITIONS RELATING TO HEALTH INSURANCE.—
‘‘(1) HEALTH
INSURANCE
COVERAGE.—The term ‘health
insurance coverage’ means benefits consisting of medical care
(provided directly, through insurance or reimbursement, or
otherwise and including items and services paid for as medical
H. R. 3103—38
care) under any hospital or medical service policy or certificate,
hospital or medical service plan contract, or health maintenance
organization contract offered by a health insurance issuer.
‘‘(2) HEALTH INSURANCE ISSUER.—The term ‘health insur-
ance issuer’ means an insurance company, insurance service,
or insurance organization (including a health maintenance
organization, as defined in paragraph (3)) which is licensed
to engage in the business of insurance in a State and which
is subject to State law which regulates insurance (within the
meaning of section 514(b)(2) of the Employee Retirement
Income Security Act of 1974). Such term does not include
a group health plan.
‘‘(3) HEALTH
MAINTENANCE
ORGANIZATION.—The term
‘health maintenance organization’ means—
‘‘(A) a Federally qualified health maintenance organiza-
tion (as defined in section 1301(a)),
‘‘(B) an organization recognized under State law as
a health maintenance organization, or
‘‘(C) a similar organization regulated under State law
for solvency in the same manner and to the same extent
as such a health maintenance organization.
‘‘(4) GROUP
HEALTH
INSURANCE
COVERAGE.—The term
‘group health insurance coverage’ means, in connection with
a group health plan, health insurance coverage offered in
connection with such plan.
‘‘(5) INDIVIDUAL HEALTH INSURANCE COVERAGE.—The term
‘individual health insurance coverage’ means health insurance
coverage offered to individuals in the individual market, but
does not include short-term limited duration insurance.
‘‘(c) EXCEPTED BENEFITS.—For purposes of this title, the term
‘excepted benefits’ means benefits under one or more (or any com-
bination thereof) of the following:
‘‘(1) BENEFITS NOT SUBJECT TO REQUIREMENTS.—
‘‘(A) Coverage only for accident, or disability income
insurance, or any combination thereof.
‘‘(B) Coverage issued as a supplement to liability
insurance.
‘‘(C) Liability insurance, including general liability
insurance and automobile liability insurance.
‘‘(D) Workers’ compensation or similar insurance.
‘‘(E) Automobile medical payment insurance.
‘‘(F) Credit-only insurance.
‘‘(G) Coverage for on-site medical clinics.
‘‘(H) Other similar insurance coverage, specified in
regulations, under which benefits for medical care are
secondary or incidental to other insurance benefits.
‘‘(2) BENEFITS NOT SUBJECT TO REQUIREMENTS IF OFFERED
SEPARATELY.—
‘‘(A) Limited scope dental or vision benefits.
‘‘(B) Benefits for long-term care, nursing home care,
home health care, community-based care, or any combina-
tion thereof.
‘‘(C) Such other similar, limited benefits as are specified
in regulations.
‘‘(3) BENEFITS NOT SUBJECT TO REQUIREMENTS IF OFFERED
AS INDEPENDENT, NONCOORDINATED BENEFITS.—
‘‘(A) Coverage only for a specified disease or illness.
H. R. 3103—39
‘‘(B) 
Hospital 
indemnity 
or 
other 
fixed
indemnity insurance.
‘‘(4) BENEFITS NOT SUBJECT TO REQUIREMENTS IF OFFERED
AS
SEPARATE
INSURANCE
POLICY.—Medicare supplemental
health insurance (as defined under section 1882(g)(1) of the
Social Security Act), coverage supplemental to the coverage
provided under chapter 55 of title 10, United States Code,
and similar supplemental coverage provided to coverage under
a group health plan.
‘‘(d) OTHER DEFINITIONS.—
‘‘(1) APPLICABLE STATE AUTHORITY.—The term ‘applicable
State authority’ means, with respect to a health insurance
issuer in a State, the State insurance commissioner or official
or officials designated by the State to enforce the requirements
of this title for the State involved with respect to such issuer.
‘‘(2) BENEFICIARY.—The term ‘beneficiary’ has the meaning
given such term under section 3(8) of the Employee Retirement
Income Security Act of 1974.
‘‘(3) BONA FIDE ASSOCIATION.—The term ‘bona fide associa-
tion’ means, with respect to health insurance coverage offered
in a State, an association which—
‘‘(A) has been actively in existence for at least 5 years;
‘‘(B) has been formed and maintained in good faith
for purposes other than obtaining insurance;
‘‘(C) does not condition membership in the association
on any health status-related factor relating to an individual
(including an employee of an employer or a dependent
of an employee);
‘‘(D) makes health insurance coverage offered through
the association available to all members regardless of any
health status-related factor relating to such members (or
individuals eligible for coverage through a member);
‘‘(E) does not make health insurance coverage offered
through the association available other than in connection
with a member of the association; and
‘‘(F) meets such additional requirements as may be
imposed under State law.
‘‘(4) COBRA CONTINUATION PROVISION.—The term ‘COBRA
continuation provision’ means any of the following:
‘‘(A) Section 4980B of the Internal Revenue Code of
1986, other than subsection (f)(1) of such section insofar
as it relates to pediatric vaccines.
‘‘(B) Part 6 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974, other than section
609 of such Act.
‘‘(C) Title XXII of this Act.
‘‘(5) EMPLOYEE.—The term ‘employee’ has the meaning
given such term under section 3(6) of the Employee Retirement
Income Security Act of 1974.
‘‘(6) EMPLOYER.—The term ‘employer’ has the meaning
given such term under section 3(5) of the Employee Retirement
Income Security Act of 1974, except that such term shall include
only employers of two or more employees.
‘‘(7) CHURCH PLAN.—The term ‘church plan’ has the mean-
ing given such term under section 3(33) of the Employee Retire-
ment Income Security Act of 1974.
H. R. 3103—40
‘‘(8) GOVERNMENTAL
PLAN.—(A) The term ‘governmental
plan’ has the meaning given such term under section 3(32)
of the Employee Retirement Income Security Act of 1974 and
any Federal governmental plan.
‘‘(B) FEDERAL
GOVERNMENTAL
PLAN.—The term ‘Federal
governmental plan’ means a governmental plan established
or maintained for its employees by the Government of the
United States or by any agency or instrumentality of such
Government.
‘‘(C) NON-FEDERAL GOVERNMENTAL PLAN.—The term ‘non-
Federal governmental plan’ means a governmental plan that
is not a Federal governmental plan.
‘‘(9) HEALTH STATUS-RELATED FACTOR.—The term ‘health
status-related factor’ means any of the factors described in
section 2702(a)(1).
‘‘(10) NETWORK
PLAN.—The term ‘network plan’ means
health insurance coverage of a health insurance issuer under
which the financing and delivery of medical care (including
items and services paid for as medical care) are provided,
in whole or in part, through a defined set of providers under
contract with the issuer.
‘‘(11) PARTICIPANT.—The term ‘participant’ has the meaning
given such term under section 3(7) of the Employee Retirement
Income Security Act of 1974.
‘‘(12) PLACED FOR ADOPTION DEFINED.—The term ‘place-
ment’, or being ‘placed’, for adoption, in connection with any
placement for adoption of a child with any person, means
the assumption and retention by such person of a legal obliga-
tion for total or partial support of such child in anticipation
of adoption of such child. The child’s placement with such
person terminates upon the termination of such legal obligation.
‘‘(13) PLAN
SPONSOR.—The term ‘plan sponsor’ has the
meaning given such term under section 3(16)(B) of the
Employee Retirement Income Security Act of 1974.
‘‘(14) STATE.—The term ‘State’ means each of the several
States, the District of Columbia, Puerto Rico, the Virgin Islands,
Guam, American Samoa, and the Northern Mariana Islands.
‘‘(e) DEFINITIONS
RELATING
TO
MARKETS
AND
SMALL
EM-
PLOYERS.—For purposes of this title:
‘‘(1) INDIVIDUAL MARKET.—
‘‘(A) IN GENERAL.—The term ‘individual market’ means
the market for health insurance coverage offered to individ-
uals other than in connection with a group health plan.
‘‘(B) TREATMENT OF VERY SMALL GROUPS.—
‘‘(i) IN GENERAL.—Subject to clause (ii), such terms
includes coverage offered in connection with a group
health plan that has fewer than two participants as
current employees on the first day of the plan year.
‘‘(ii) STATE EXCEPTION.—Clause (i) shall not apply
in the case of a State that elects to regulate the cov-
erage described in such clause as coverage in the small
group market.
‘‘(2) LARGE EMPLOYER.—The term ‘large employer’ means,
in connection with a group health plan with respect to a cal-
endar year and a plan year, an employer who employed an
average of at least 51 employees on business days during the