I
103D CONGRESS
2D SESSION
H. R. 5300
To improve access to health insurance and contain health care costs, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 29, 1994
Mr. MICHEL introduced the following bill; which was referred jointly to the
Committees on Energy and Commerce, Ways and Means, Education and
Labor, and the Judiciary
A BILL
To improve access to health insurance and contain health
care costs, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Affordable Health Care Now Act of 1994’’.
(b) TABLE
OF CONTENTS
OF TITLES
AND SUB-
TITLES IN ACT.—The following are the titles and subtitles
contained in this Act:
Title I
TITLE I—IMPROVED ACCESS TO AFFORDABLE HEALTH
CARE
Subtitle A—Increased Availability and Continuity of Health Coverage for Indi-
viduals and Their Families
Subtitle B—Reform of Health Insurance
Subtitle C—Preemption
Subtitle D—Health Deduction Fairness
Subtitle E—Improved Access to Community Health Services
Subtitle F—Improved Access to Rural Health Services
Subtitle G—Assistance in Enrolling Uninsured Children in Health Insurance
Subtitle H—Medicaid Reform
Subtitle I—Remedies and Enforcement with Respect to Group Health Plans
Subtitle J—Delivery of Health Care Services to Illegal Immigrants
TITLE II—HEALTH CARE COST CONTAINMENT AND
QUALITY ENHANCEMENT
Subtitle A—Medical Malpractice Liability Reform
Subtitle B—Administrative Cost Savings and Fair Health Information Practices
Subtitle C—Deduction for Cost of Catastrophic Health Plan; Medical Savings
Accounts
Subtitle D—Anti-Fraud
Subtitle E—Increased Medicare Beneficiary Choice; Additional Medicare
Reforms
Subtitle F—Health Care Antitrust Improvements
Subtitle G—Encouraging Enforcement Activities of Medical Self-Regulatory
Entities
Subtitle H—Reform of Clinical Laboratory Requirements for Simple Tests
Subtitle I—Miscellaneous Provisions
TITLE III—LONG-TERM CARE
Subtitle A—Tax Treatment of Long-term Care Insurance
Subtitle B—Establishment of Federal Standards for Long-term Care Insurance
Subtitle C—Protection of Assets Under Medicaid Through Use of Qualified
Long-term Care Insurance
Subtitle D—Studies
Subtitle E—Volunteer Service Credit Demonstration Projects
TITLE I—IMPROVED ACCESS TO
AFFORDABLE HEALTH CARE
TABLE OF CONTENTS OF TITLE
TITLE I—IMPROVED ACCESS TO AFFORDABLE HEALTH
CARE
Subtitle A—Increased Availability and Continuity of Health
Coverage for Individuals and Their Families
PART 1—REQUIRED COVERAGE OPTIONS FOR ELIGIBLE EMPLOYEES,
SPOUSES, AND DEPENDENTS
Sec. 1001. Requiring employers to offer option of coverage for eligible
individuals.
Title I
PART 2—PORTABILITY AND NONDISCRIMINATION
Sec. 1011. Nondiscrimination based on health status.
Sec. 1012. Portability.
Sec. 1013. Requirements relating to renewability generally.
PART 3—STANDARDS FOR MANAGED CARE ARRANGEMENTS
Sec. 1021. Standards for managed care arrangements.
Sec. 1022. Utilization review.
PART 4—ENFORCEMENT; EFFECTIVE DATES; DEFINITIONS
Sec. 1031. Enforcement.
Sec. 1032. Effective dates.
Sec. 1033. Definitions and special rules.
Subtitle B—Reform of Health Insurance
PART 1—MARKETPLACE FOR SMALL BUSINESS
Sec. 1101. Requirement for insurers to offer MedAccess coverage.
Sec. 1102. MedAccess coverage defined.
Sec. 1103. Establishment of other MedAccess standards.
Sec. 1104. Use of modified community rating, uniform marketing materials,
and miscellaneous consumer protections.
Sec. 1105. Monitoring and response to adverse selection; risk adjustment
programs.
Sec. 1106. Establishment of reinsurance or allocation of risk mechanisms for
high risk individuals in marketplace for small business and
marketplace for individuals.
PART 2—MARKETPLACE FOR INDIVIDUALS
Sec. 1111. Application of similar requirements.
PART 3—VOLUNTARY HEALTH PURCHASING ARRANGEMENTS
Sec. 1121. Establishment and organization.
Sec. 1122. Agreements with insurers.
Sec. 1123. Provision of information.
Sec. 1124. Enrolling eligible employees and eligible individuals through a pur-
chasing arrangement.
Sec. 1125. Restriction on charges.
PART 4—DEFINITIONS AND MISCELLANEOUS PROVISIONS
Sec. 1131. Definitions.
Sec. 1132. Prohibition of improper incentives.
Sec. 1133. Enforcement.
Sec. 1134. Annual reports.
Sec. 1135. Research and demonstration projects; development of a health risk
pooling model.
Subtitle C—Preemption
PART 1—SCOPE OF STATE REGULATION
Sec. 1201. Prohibition of State benefit mandates for group health plans.
Title I
Sec. 1202. Prohibition of provisions prohibiting employer groups from purchas-
ing health insurance.
Sec. 1203. Preemption of State anti-managed care laws.
Sec. 1204. Definitions.
PART 2—MULTIPLE EMPLOYER HEALTH BENEFITS PROTECTIONS
Sec. 1211. Limited exemption from certain restrictions on ERISA preemption
of State law for health plans maintained by multiple employers
subject to certain Federal standards.
‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS
‘‘Sec. 701. Definitions.
‘‘Sec. 702. Exempted multiple employer health plans relieved of certain re-
strictions on preemption of State law and treated as em-
ployee welfare benefit plans.
‘‘Sec. 703. Exemption procedure.
‘‘Sec. 704. Eligibility requirements.
‘‘Sec. 705. Additional requirements applicable to exempted multiple em-
ployer health plans.
‘‘Sec. 706. Disclosure to participating employers by arrangements provid-
ing medical care.
‘‘Sec. 707. Maintenance of reserves.
‘‘Sec. 708. Corrective actions.
‘‘Sec. 709. Expiration, suspension, or revocation of exemption.
‘‘Sec. 710. Review of actions of the Secretary’’.
Sec. 1212. Clarification of scope of preemption rules.
Sec. 1213. Clarification of treatment of single employer arrangements.
Sec. 1214. Clarification of treatment of certain collectively bargained arrange-
ments.
Sec. 1215. Employee leasing healthcare arrangements.
Sec. 1216. Enforcement provisions relating to multiple employer welfare ar-
rangements and employee leasing healthcare arrangements.
Sec. 1217. Solvency requirements for certain self-insured group health plans.
Sec. 1218. Filing requirements for multiple employer welfare arrangements pro-
viding health benefits.
Sec. 1219. Cooperation between Federal and State authorities.
Sec. 1220. Effective date; transitional rules.
PART 3—ENCOURAGEMENT OF MULTIPLE EMPLOYER ARRANGEMENTS
PROVIDING BASIC HEALTH BENEFITS
Sec. 1221. Eliminating commonality of interest or geographic location require-
ment for tax exempt trust status.
Sec. 1222. Single annual filing for all participating employers.
Sec. 1223. Compliance with coverage requirements through multiple employer
health arrangements.
Subtitle D—Health Deduction Fairness
Sec. 1301. Permanent extension and increase in health insurance tax deduction
for self-employed individuals.
Sec. 1302. Deduction of health insurance premiums for certain previously unin-
sured individuals.
Subtitle E—Improved Access to Community Health Services
Title I
PART 1—INCREASED AUTHORIZATION FOR COMMUNITY AND MIGRANT
HEALTH CENTERS
Sec. 1401. Grant program to promote primary health care services for under-
served populations.
PART 2—GRANTS FOR PROJECTS FOR COORDINATING DELIVERY OF
SERVICES
Sec. 1411. Projects for coordinating delivery of outpatient primary health
services.
PART 3—COMMUNITY HEALTH NETWORKS
Sec. 1421. Qualifications for community health networks.
Subtitle F—Improved Access to Rural Health Services
PART 1—ESTABLISHMENT OF RURAL EMERGENCY ACCESS CARE HOSPITALS
UNDER MEDICARE
Sec. 1501. Rural emergency access care hospitals described.
Sec. 1502. Coverage of and payment for services.
Sec. 1503. Effective date.
PART 2—RURAL MEDICAL EMERGENCIES AIR TRANSPORT
Sec. 1511. Grants to States regarding aircraft for transporting rural victims of
medical emergencies.
PART 3—EMERGENCY MEDICAL SERVICES AMENDMENTS
Sec. 1521. Establishment of Office of Emergency Medical Services.
Sec. 1522. State offices of emergency medical services.
Sec. 1523. Programs for rural areas.
Sec. 1524. Funding.
Sec. 1525. Conforming amendments.
Sec. 1526. Effective date.
PART 4—ADDITIONAL RURAL HEALTH CARE PROVISIONS
Sec. 1531. Development of community-operated health plans in rural and fron-
tier areas.
Sec. 1532. Primary health care for medically underserved rural communities;
increased capacity of hospitals and outpatient facilities.
Sec. 1533. Innovative approaches to delivery of health services in rural areas.
Sec. 1534. Training of rural health professionals other than physicians.
Sec. 1535. General provisions.
Subtitle G—Assistance in Enrolling Uninsured Children in
Health Insurance
Sec. 1601. Establishment of State programs.
Subtitle H—Medicaid Reform
PART 1—STATE FLEXIBILITY IN THE MEDICAID PROGRAM: THE MEDICAL
HEALTH ALLOWANCE PROGRAM
Sec. 1701. Establishment of program.
Title I
Sec. 1702. Optional use of program to offer coverage to some or all State
residents.
PART 2—MEDICAID PROGRAM FLEXIBILITY
Sec. 1711. Modification of Federal requirements to allow States more flexibility
in contracting for coordinated care services under medicaid.
Sec. 1712. Period of certain waivers.
Sec. 1713. Elimination of duplicative pediatric immunization program.
PART 3—MEDICAID DISPROPORTIONATE SHARE ADJUSTMENT
Sec. 1721. 25 percent reduction in amount of payment adjustments for dis-
proportionate share hospitals.
Subtitle I—Remedies and Enforcement With Respect to Group
Health Plans
Sec. 1801. Claims procedure for group health plans.
Sec. 1802. Mediation of group health plan claims.
‘‘Subpart B—Mediation of Group Health Plan Claims
‘‘Sec. 521. Eligibility for submission to mediation.
‘‘Sec. 522. Facilitators.
‘‘Sec. 523. Role of attorneys.
‘‘Sec. 524. Initiation of mediation.
‘‘Sec. 525. Mediation procedure.
‘‘Sec. 526. Mediation time limit.
‘‘Sec. 527. Cost of mediation.
‘‘Sec. 528. Legal effect of participation in mediation program.
‘‘Sec. 529. Confidentiality and admissibility’’.
Sec. 1803. Available court remedies.
Sec. 1804. Effective date.
Subtitle J—Delivery of Health Care Services to Illegal
Immigrants
Sec. 1901. Study on the delivery of health care services to illegal immigrants.
Sec. 1902. Report.
Title I, Subtitle A
Subtitle A—Increased Availability
and Continuity of Health Cov-
erage for Individuals and Their
Families
PART 1—REQUIRED COVERAGE OPTIONS FOR EL-
IGIBLE EMPLOYEES, SPOUSES, AND DEPEND-
ENTS
SEC. 1001. REQUIRING EMPLOYERS TO OFFER OPTION OF
COVERAGE FOR ELIGIBLE INDIVIDUALS.
(a) IN GENERAL.—Each employer shall make avail-
able with respect to each eligible employee a group health
plan under which—
(1) coverage of each eligible individual with re-
spect to such an eligible employee may be elected on
an annual basis for each plan year,
(2) subject to subsection (d), coverage is pro-
vided for at least the required coverage specified in
subsection (c), and
(3) each eligible employee electing such cov-
erage may elect to have any premiums owed by the
employee collected through payroll deduction.
An employer is not required under this subsection to make
any contribution to the cost of coverage under such a plan.
(b) SPECIAL RULES.—
Title I, Subtitle A
(3) OPTIONAL APPLICATION OF WAITING PE-
RIOD.—A group health plan shall not be treated as
failing to meet the requirements of subsection (a)
solely because a period of service by an eligible em-
ployee of not more than 60 days is required under
the plan for coverage under the plan of eligible indi-
viduals with respect to such employee.
(c) REQUIRED COVERAGE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the required coverage specified in this
subsection is standard coverage (consistent with sec-
tion 1102(c)), including at least one option (either
a fee-for-service option or a point-of-service option)
that permits covered individuals an unlimited choice
of the lawful providers for which covered benefits are
made available.
(2) SPECIAL TREATMENT OF SMALL EMPLOY-
ERS
NOT
CONTRIBUTING
TO
EMPLOYEE
COV-
ERAGE.—In the case of a small employer (as defined
in section 1131(9)) that has not contributed during
the previous plan year to the cost of coverage for
any eligible employee under any group health plan,
the required coverage specified in this subsection for
the plan year (with respect to each eligible employee)
is—
Title I, Subtitle A
(A) MedAccess standard coverage, with a
fee-for-service option and, if available, a point-
of-service option and a managed care option (as
defined in section 1033);
(B) MedAccess catastrophic coverage; and
(C) if available, MedAccess medisave cov-
erage,
as such terms are defined in section 1102(a)(2).
(3) CONSTRUCTION.—Nothing in this section
shall be construed as limiting the group health
plans, or types of coverage under such a plan, that
an employer may offer to an employee.
(d) 5-YEAR TRANSITION
FOR EXISTING GROUP
HEALTH PLANS.—
(1) IN
GENERAL.—The requirement of sub-
section (a)(2) shall not apply to a group health plan
for a plan year if—
(A) the group health plan is in effect in
the plan year in which July 1, 1994, occurs,
and
(B) the employer makes (or offers to
make), in such plan year and each subsequent
plan year through the plan year involved, a con-
tribution to the plan on behalf of each employee
who is eligible to participate in the plan.
Title I, Subtitle A
(2) SUNSET.—Paragraph (1) shall only apply to
a group health plan until the expiration of a con-
tract in effect on the date of the enactment of this
Act or, if earlier, January 1, 2000.
PART 2—PORTABILITY AND
NONDISCRIMINATION
SEC. 
1011. 
NONDISCRIMINATION 
BASED 
ON 
HEALTH
STATUS.
(a) IN GENERAL.—A group health plan and an in-
surer providing health insurance coverage may not deny
or impose (and an insurer may not require an employer
under a group health plan to impose or otherwise to im-
pose through a waiting period for coverage under a plan
or similar requirement) a limitation or exclusion of bene-
fits relating to treatment of a condition based on health
status or based on the fact that the condition preexisted
the effective date of coverage of the individual under the
plan if—
(1) in the case of any individual eligible for
such coverage, such individual has such coverage at
the time at which such individual first becomes eligi-
ble;
(2) the limitation or exclusion applies to an in-
dividual who, as of the date of birth, was covered
under the plan;
Title I, Subtitle A
(3) the limitation or exclusion relates to preg-
nancy;
(4) the condition relates to a condition that was
not diagnosed or treated within 3 months (or 6
months in the case of coverage not under a group
health plan) before the date of such coverage; or
(5) the limitation or exclusion extends over
more than 6 months (or 12 months in the case of
coverage not under a group health plan) after the
date of such coverage.
In the case of an individual who is eligible for coverage
but for a waiting period imposed by the employer, in ap-
plying paragraphs (4) and (5), the individual shall be
treated as having had such coverage as of the earliest date
of the beginning of the waiting period.
(b) ONE-TIME AMNESTY PERIOD.—
(1) IN GENERAL.—In the case of an individual
who, as of the first date of the amnesty period is—
(A) covered under a group health plan or
has health insurance coverage, such coverage
shall not be subject to pre-existing condition ex-
clusions on and after such date; or
(B) not so covered, if the individual ob-
tains coverage under a group health plan or
health insurance coverage during the next avail-
Title I, Subtitle A
able open enrollment period with respect to the
individual, coverage so obtained shall not be
subject to pre-existing condition exclusions on
and after the effective date of such coverage.
(2) AMNESTY PERIOD.—The amnesty period de-
scribed in this paragraph, with respect to an individ-
ual who is a resident of a State, is the 45-calendar-
day period beginning on the effective date of this
part (under section 1032(b)).
(3) ESTABLISHMENT OF SPECIAL ALLOCATION
OF RISK POOL FOR AMNESTY.—Each State shall es-
tablish rules and requirements relating to the alloca-
tion of risk among insurers with respect to addi-
tional risks assumed as a result of the amnesty pe-
riod under this subsection (including individuals pre-
viously covered for whom a preexisting condition ex-
clusion will be no longer applicable).
(c) APPLICATION OF RULES BY CERTAIN HEALTH
MAINTENANCE ORGANIZATIONS.—A health maintenance
organization that provides health insurance coverage shall
not be considered as failing to meet the requirements of
section 1301 of the Public Health Service Act notwith-
standing that it provides for an exclusion of the coverage
based on a preexisting condition consistent with the provi-
Title I, Subtitle A
sions of this part so long as such exclusion is applied con-
sistent with the provisions of this part.
SEC. 1012. PORTABILITY.
(a) IN GENERAL.—Each group health plan and an
insurer providing health insurance coverage shall waive
any period applicable to a preexisting condition for similar
benefits with respect to an individual to the extent that
the individual, immediately prior to the date of such indi-
vidual’s enrollment in such plan, had health insurance cov-
erage for the condition, or was covered for the condition
under a group health plan, that was in effect before such
date.
(b) CONTINUOUS COVERAGE REQUIRED.—
(1) IN
GENERAL.—Subsection (a) shall no
longer apply if there is a continuous period of more
than 60 days (or, in the case of an individual de-
scribed in paragraph (2), 6 months) for which the
individual did not have health insurance coverage for
the condition or was not covered under a group
health plan for the condition.
(2) JOB TERMINATION.—An individual is de-
scribed in this paragraph if the individual loses cov-
erage under a group health plan due to termination
of employment.
Title I, Subtitle A
(3) EXCLUSION
OF
CASH-ONLY
AND
DREAD
DISEASE
PLANS.—In this subsection, the term
‘‘group health plan’’ does not include any group
health plan which is offered primarily to provide—
(A) coverage for a specified disease or ill-
ness, or
(B) a hospital or fixed indemnity policy,
unless the Secretary determines that such a
plan provides sufficiently comprehensive cov-
erage of a benefit so that it should be treated
as a group health plan under this subsection.
(c) TRANSITION FOR NON-CONFORMING POLICIES.—
Notwithstanding State law or the provision of any agree-
ment to the contrary, effective January 1, 1997, an in-
surer may cancel or refuse to renew health insurance cov-
erage in a State prior to the application of this subtitle
to health insurance coverage issued in the State if the cov-
erage does not provide for either standard or catastrophic
coverage, but only if the insurer offers the covered individ-
ual affected the opportunity to obtain health insurance
coverage that meets the applicable requirements of this
title.
(d) APPLICABILITY OF COVERAGE UNDER PUBLIC
INSURANCE.—In this section, an individual shall be con-
sidered to have health insurance coverage for a condition
Title I, Subtitle A
without regard to whether such coverage is under a private
or public plan.
SEC. 1013. REQUIREMENTS RELATING TO RENEWABILITY
GENERALLY.
(a) MULTIEMPLOYER PLANS AND EXEMPTED MUL-
TIPLE EMPLOYER HEALTH PLANS.—A multiemployer
plan and an exempted multiple employer health plan may
not cancel coverage or deny renewal of coverage under
such a plan with respect to an employer other than—
(1) for nonpayment of contributions,
(2) for fraud or other misrepresentation by the
employer,
(3) for noncompliance with plan provisions, or
(4) because the plan is ceasing to provide any
coverage in a geographic area.
(b) INSURERS.—
(1) IN GENERAL.—An insurer may not cancel
health insurance coverage or deny renewal of such
coverage other than—
(A) for nonpayment of premiums,
(B) for fraud or other misrepresentation
by the insured,
(C) for noncompliance with plan provi-
sions, or
Title I, Subtitle A
(D) subject to paragraph (2), because the
insurer is ceasing to provide any health insur-
ance coverage (or the same type of health insur-
ance coverage in the same individual or small
employer insurance market) in a State, or, in
the case of a health maintenance organization
or other network plan, in a geographic area.
(2) 
NOTICE
REQUIREMENT
FOR
MARKET
EXIT.—Paragraph (1)(D) shall not apply to an in-
surer ceasing to provide coverage unless the insurer
provides notice of such termination to employers and
individuals covered at least 180 days before the date
of termination of coverage.
(3) LIMITATION
ON
REENTRY
IN
EMPLOYER
AND INDIVIDUAL MARKETS.—If an insurer ceases to
offer or provide health insurance coverage (or a type
of insurance coverage) in an area with respect to the
individual or small group market, the insurer may
not offer such health insurance coverage (or type of
coverage) in the area in such market until 5 years
after the date of the termination.
(4) TYPE OF COVERAGE AND INSURANCE MAR-
KET DEFINED.—In this subsection—
(A) 
MedAccess 
standard 
coverage,
MedAccess 
catastrophic 
coverage, 
and
Title I, Subtitle A
MedAccess medisave coverage shall each be con-
sidered to be separate types of health insurance
coverage; and
(B) the term ‘‘small group market’’ means
the insurance market offered to individuals
seeking health care coverage on behalf of them-
selves (and their dependents) on the basis of
employment or other relationship with respect
to an employer or an association.
PART 3—STANDARDS FOR MANAGED CARE
ARRANGEMENTS
SEC. 1021. STANDARDS FOR MANAGED CARE ARRANGE-
MENTS.
(a) REQUIREMENT.—
(1) IN GENERAL.—Each group health plan, and
each insurer providing health insurance coverage, for
health care through a managed care arrangement
shall comply with the applicable requirements of this
section.
(2) DEFINITIONS.—In this section:
(A) MANAGED
CARE
ARRANGEMENT
DE-
FINED.—The term ‘‘managed care arrange-
ment’’ means, with respect to an arrangement
under a group health plan or under health in-
surance coverage, providers who have entered
Title I, Subtitle A
into an agreement under the arrangement
under which such providers are obligated to
provide items and services covered under the ar-
rangement to individuals covered under the
plan or who have such coverage.
(B) 
PROVIDER
NETWORK.—The 
term
‘‘provider network’’ means, with respect to a
group health plan or health insurance coverage,
providers who have entered into an agreement
described in subparagraph (A) under a man-
aged care arrangement.
(b) SCOPE OF ARRANGEMENTS WITH PROVIDERS.—
(1) IN GENERAL.—The entity providing for a
managed care arrangement on behalf of a group
health plan or under health insurance coverage shall
enter into such agreements with health care provid-
ers (including primary and specialty providers for
children) or have such other arrangements as may
be necessary to assure that covered individuals have
reasonably prompt access through the entity’s pro-
vider network to all items and services contained in
the package of benefits for which coverage is pro-
vided (including access to emergency services on a
24-hour basis where medically necessary), in a man-
Title I, Subtitle A
ner that assures the continuity of the provision of
such items and services.
(2) ACCESS TO CENTERS OF EXCELLENCE.—
(A) IN
GENERAL.—The entity providing
for a managed care arrangement on behalf of a
group health plan or under health insurance
coverage shall demonstrate that covered individ-
uals (including individuals with chronic dis-
eases) have access through the entity’s provider
network to specialized treatment expertise of
designated centers of excellence. Such entity
shall demonstrate such access according to
standards developed by the Secretary, including
requirements relating to arrangements with
such centers and referral of patients to such
centers.
(B) DESIGNATION OF CENTERS OF EXCEL-
LENCE.—The Secretary shall establish a proc-
ess for the designation of facilities, including
children’s hospitals and other pediatric facili-
ties, as centers of excellence for purposes of this
paragraph. A facility may not be designated un-
less the facility is determined—
(i) to provide specialty care,
Title I, Subtitle A
(ii) to deliver care for complex cases
requiring specialized treatment and for in-
dividuals with chronic diseases, and
(iii) to meet other requirements that
may be established by the Secretary relat-
ing to specialized education and training of
health professionals, participation in peer-
reviewed research, or treatment of patients
from outside the geographic area of the fa-
cility.
(3) NO REFERRAL REQUIRED FOR OBSTETRICS
AND GYNECOLOGY.—An entity providing for a man-
aged care arrangement may not require an individ-
ual to obtain a referral from a physician in order to
obtain covered items and services within the network
of the arrangement from a physician who specializes
in obstetrics and gynecology.
(c) PROVISION OF EMERGENCY AND URGENT CARE
SERVICES.—
(1) IN GENERAL.—The entity providing for a
managed care arrangement on behalf of a group
health plan or under health insurance coverage must
cover medically necessary emergency and urgent
care services provided to covered individuals (includ-
ing trauma services provided by designated trauma
Title I, Subtitle A
centers), without regard to whether or not the pro-
vider furnishing such services has a contractual (or
other) arrangement with the entity to provide items
or services to covered individuals and, in the case of
services furnished for the treatment of an emergency
medical condition (as defined in section 1867(e)(1)
of the Social Security Act), without regard to prior
authorization.
(2) 
DESIGNATED
TRAUMA
CENTERS
DE-
FINED.—In paragraph (1), the term ‘‘designated
trauma center’’—
(A) has the meaning given such term in
section 1231 of the Public Health Service Act,
and
(B) includes (for years prior to 2001) a
trauma center that—
(i) is located in a State that has not
designated trauma centers under section
1213 of such Act, and
(ii) the Secretary finds meets the
standards under such section to be a des-
ignated trauma center.
(d) DUE PROCESS STANDARDS RELATING TO PRO-
VIDER NETWORKS.—
Title I, Subtitle A
(1) STANDARDS FOR SELECTION OF PROVIDERS
FOR NETWORK.—
(A) ESTABLISHMENT.—The entity provid-
ing for a managed care arrangement on behalf
of a group health plan or under health insur-
ance coverage shall establish standards to be
used by the entity for contracting with health
care providers with respect the entity’s provider
network. Such standards shall be established in
consultation with providers who are members of
the network.
(B) DISTRIBUTION
OF
INFORMATION.—
Descriptive information regarding these stand-
ards shall be made available upon request to en-
rollees, providers who are members of the net-
work, and prospective enrollees and prospective
participating providers.
(2) NOTICE REQUIREMENT.—
(A) IN GENERAL.—The entity may not ter-
minate or refuse to renew an agreement with a
provider to participate in the entity’s provider
network unless the entity provides written noti-
fication to the provider of the entity’s decision
to terminate or to refuse to renew the agree-
ment. The notification shall include a statement
Title I, Subtitle A
of the reasons for the entity’s decision, consist-
ent with the standards established under para-
graph (1).
(B) TIMING OF NOTIFICATION.—The en-
tity shall provide the notification required under
subparagraph (A) at least 45 days prior to the
effective date of the termination or expiration of
the agreement (whichever is applicable). The
previous sentence shall not apply if failure to
terminate the agreement prior to the deadline
would adversely affect the health or safety of a
covered individual.
(3) REVIEW PROCESS.—
(A) IN GENERAL.—The entity shall provide
a process under which the provider may request
a review of the entity’s decision to terminate or
refuse to renew the provider’s participation
agreement. Such review shall be conducted by a
group of individuals the majority of whom are
health care providers who are members of the
entity’s provider network or employees of the
entity, and who are members of the same pro-
fession as the provider who requests the review.
(B) COUNSEL.—If the provider requests in
advance, the entity shall permit an attorney
Title I, Subtitle A
representing the provider to be present at the
provider’s review.
(C) REVIEW ADVISORY.—The findings and
conclusions of a review under this paragraph
shall be advisory and non-binding.
(4) CONSTRUCTION.—Nothing in this sub-
section shall be construed to affect any other provi-
sion of law that provides an appeals process or other
form of relief to a provider of health care services.
SEC. 1022. UTILIZATION REVIEW.
(a) REQUIRING REVIEW TO MEET STANDARDS.—A
group health plan or insurer providing health insurance
coverage may not deny coverage of or payment for items
and services on the basis of a utilization review program
unless the program meets the standards established by the
Secretary under this section.
(b) ESTABLISHMENT
OF
STANDARDS
BY
SEC-
RETARY.—The Secretary shall establish standards for uti-
lization review programs, consistent with subsection (c),
and shall periodically review and update such standards
to reflect changes in the delivery of health care services.
The Secretary shall establish such standards in consulta-
tion with appropriate parties, including representatives of
health care providers, specialists, insurers, plan adminis-
trators, and other experts.
Title I, Subtitle A
(c) REQUIREMENTS
FOR STANDARDS.—Under the
standards established under subsection (a)—
(1) individuals performing utilization review
may not receive financial compensation based upon
the number of denials of coverage;
(2) negative determinations of the medical ne-
cessity or appropriateness of services or the site at
which services are furnished may be made only by
clinically qualified personnel;
(3) the utilization review program shall provide
for a process under which an enrollee or provider
may obtain timely review of a denial of coverage;
(4) utilization review shall be conducted in ac-
cordance with uniformly applied standards that are
based on the most currently available medical evi-
dence; and
(5) providers shall participate in the develop-
ment of the utilization review program.
(d) PREEMPTION.—For provision preempting State
laws relating to utilization review, see section 1203(a)(3).
PART 4—ENFORCEMENT; EFFECTIVE DATES;
DEFINITIONS
SEC. 1031. ENFORCEMENT.
(a) ENFORCEMENT BY DEPARTMENT OF LABOR FOR
EMPLOYERS AND GROUP HEALTH PLANS.—
Title I, Subtitle A
(1) IN GENERAL.—For purposes of part 5 of
subtitle B of title I of the Employee Retirement In-
come Security Act of 1974, the provisions of parts
1 and 2 of this subtitle and part 1 of subtitle B
shall be deemed to be provisions of title I of such
Act irrespective of exclusions under section 4(b) of
such Act.
(2) REGULATORY AUTHORITY.—With respect to
the regulatory authority of the Secretary of Labor
under this subtitle pursuant to subsection (a), sec-
tion 505 of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1135) shall apply.
(b) ENFORCEMENT BY PENALTY FOR INSURERS.—
(1) IN GENERAL.—Chapter 43 of the Internal
Revenue Code of 1986 (relating to qualified pension,
etc., plans) is amended by adding at the end thereof
the following new section:
‘‘SEC. 4980C. FAILURE OF INSURER TO COMPLY WITH
HEALTH INSURANCE STANDARDS.
‘‘(a) IMPOSITION OF PENALTY.—
‘‘(1) IN GENERAL.—There is hereby imposed a
tax on the failure of an insurer to comply with the
requirements applicable to the insurer under parts 2
and 3 of subtitle A of title I and subtitle B of the
Affordable Health Care Now Act of 1994.
Title I, Subtitle A
‘‘(2) EXCEPTION.—Paragraph (1) shall not
apply to a failure by an insurer in a State if the Sec-
retary of Health and Human Services determines
that the State has in effect a regulatory enforcement
mechanism that provides adequate sanctions with re-
spect to such a failure by such an insurer.
‘‘(b) AMOUNT OF PENALTY.—
‘‘(1) IN GENERAL.—Subject to paragraph (2),
the amount of the tax imposed by subsection (a)
shall be $100 for each day during which such failure
persists for each individual to which such failure re-
lates. A rule similar to the rule of section
4980B(b)(3) shall apply for purposes of this section.
‘‘(2) LIMITATION.—The amount of the tax im-
posed by subsection (a) for an insurer with respect
to health insurance coverage shall not exceed 25 per-
cent of the amounts received for such coverage dur-
ing the period such failure persists.
‘‘(c) LIABILITY FOR PENALTY.—The penalty imposed
by this section shall be paid by the insurer.
‘‘(d) EXCEPTIONS.—
‘‘(1) CORRECTIONS WITHIN 30 DAYS.—No tax
shall be imposed by subsection (a) by reason of any
failure if—
Title I, Subtitle A
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected within the
30-day period beginning on the earliest date the
insurer knew, or exercising reasonable diligence
would have known, that such failure existed.
‘‘(2) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent
that payment of such tax would be excessive relative
to the failure involved.
‘‘(e) DEFINITIONS.—For purposes of this section, the
terms ‘health insurance coverage’ and ‘insurer’ have the
respective meanings given such terms in section 1033 of
the Affordable Health Care Now Act of 1994.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter 43 of such Code is amended by
adding at the end thereof the following new items:
‘‘Sec. 4980C. Failure of insurer to comply with health insurance
standards.’’
SEC. 1032. EFFECTIVE DATES.
(a) PART 1.—The requirements of part 1 shall apply
to plans years beginning after December 31, 1996.
(b) PARTS 2 AND 3.—The requirements of parts 2
and 3 shall apply with respect to—
Title I, Subtitle A
(1) group health plans and employers shall
apply to plans years beginning after December 31,
1996, and
(2) insurers shall take effect on January 1,
1997.
SEC. 1033. DEFINITIONS AND SPECIAL RULES.
(a) IN GENERAL.—For purposes of this subtitle:
(1) 
DEPENDENT.—The 
term 
‘‘dependent’’
means, with respect to any individual, any person
who is—
(A) the spouse or surviving spouse of the
individual, or
(B) under regulations of the Secretary, a
child (including an adopted child) of such indi-
vidual and—
(i) under 19 years of age, or
(ii) under 25 years of age and a full-
time student.
(2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible
employee’’ means, with respect to an employer, an
employee who normally performs on a monthly basis
at least 10 hours of service per week for that em-
ployer. Such term shall not include any employee
who is not reasonably expected as of the 1st day of
a month to be employed by the employer for a period
Title I, Subtitle A
of 120 consecutive days during any 365-day period
that includes such 1st day.
(3) ELIGIBLE INDIVIDUAL.—The term ‘‘eligible
individual’’ means, with respect to an eligible em-
ployee, such employee, and any dependent of such
employee.
(4) EMPLOYER.—The term ‘‘employer’’ shall
have the meaning applicable under section 3(5) of
the Employee Retirement Income Security Act of
1974.
(5) EXEMPTED MULTIPLE EMPLOYER HEALTH
PLAN.—The term ‘‘exempted multiple employer
health plan’’ means a multiple employer welfare ar-
rangement treated as an employee welfare benefit
plan by reason of an exemption under part 7 of sub-
title B of title I of the Employee Retirement Income
Security Act of 1974 (as added by part 2 of subtitle
C of this title).
(6) GROUP
HEALTH
PLAN; PLAN.—(A) The
term ‘‘group health plan’’ means an employee wel-
fare benefit plan providing medical care (as defined
in section 213(d) of the Internal Revenue Code of
1986) to participants or beneficiaries directly or
through insurance, reimbursement, or otherwise, but
does not include any type of coverage excluded from
Title I, Subtitle A
the definition of a health insurance coverage under
section 1131(4)(B).
(B) The term ‘‘plan’’ means a group health
plan (including any such plan which is a multiem-
ployer plan) and an exempted multiple employer
health plan.
(7) HEALTH INSURANCE COVERAGE.—The term
‘‘health insurance coverage’’ shall have the meaning
applicable under section 1131(4).
(8) FULLY
INSURED.—The term ‘‘fully in-
sured’’ shall have the meaning applicable under sec-
tion 701(9) of Employee Retirement Income Secu-
rity Act of 1974 (as added by section 1211 of this
title).
(9) INSURER.—The term ‘‘insurer’’ has the
meaning given such term in section 1131(6).
(10) MULTIPLE
EMPLOYER
WELFARE
AR-
RANGEMENT.—The term ‘‘multiple employer welfare
arrangement’’ shall have the meaning applicable
under section 3(40) of the Employee Retirement In-
come Security Act of 1974.
(11) OPTIONS.—
(A) FEE-FOR-SERVICE OPTION.—Standard
coverage is considered to provide a ‘‘fee-for-
service option’’ if benefits with respect to the
Title I, Subtitle A
covered items and services in the coverage are
made available for such items and services pro-
vided through any lawful provider of such cov-
ered items and services.
(B) MANAGED
CARE
OPTION.—Standard
coverage is considered to provide a ‘‘managed
care option’’ if benefits with respect to the cov-
ered items and services in the coverage are
made available exclusively through a managed
care arrangement (as defined in section
1021(a)(2)), except in the case of emergency
and urgent services and as otherwise required
under law.
(C) POINT-OF-SERVICE OPTION.—Standard
coverage is considered to provide a ‘‘point-of-
service option’’ if the benefits with respect to
covered items and services in the coverage are
made available principally through a managed
care arrangement, with the choice of the en-
rollee to obtain such benefits for items and
services provided through any lawful provider of
such covered items and services. The coverage
may provide for different cost sharing schedules
based on whether the items and services are
Title I, Subtitle B
provided through such an arrangement or out-
side such an arrangement.
(b) APPLICATION OF ERISA DEFINITIONS.—Except
as otherwise provided in this subtitle, terms used in this
subtitle shall have the meanings applicable to such terms
under section 3 of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1002).
(c) SECRETARY.—Except with respect to references
specifically to the Secretary of Labor, the term ‘‘Sec-
retary’’ means the Secretary of Health and Human
Services.
Subtitle B—Reform of Health
Insurance
PART 1—MARKETPLACE FOR SMALL BUSINESS
SEC. 1101. REQUIREMENT FOR INSURERS TO OFFER
MEDACCESS COVERAGE.
(a) REQUIREMENT.—
(1) IN GENERAL.—Each insurer (as defined in
section 1131(6)) that makes available any health in-
surance coverage (as defined in section 1131(4)) to
a small employer (as defined in section 1131(9)) in
a State—
(A) shall make available to each small em-
ployer in the State MedAccess standard cov-
erage (as defined in section 1102(a)(2)), with a
Title I, Subtitle B
fee-for-service option and, if available, a point-
of-service option and a managed care option (as
defined in section 1033),
(B) shall make available to each small em-
ployer in the State MedAccess catastrophic cov-
erage (as defined in section 1102(a)(2)), and
(C) may make available to each small em-
ployer in the State MedAccess medisave cov-
erage (as defined in section 1102(a)(2)).
(2) SPECIAL RULE FOR HEALTH MAINTENANCE
ORGANIZATIONS.—The requirements of paragraph
(1)(A) (with regard to requiring a fee-for-service op-
tion), and paragraphs (1)(B) and (1)(C) shall not
apply with respect to a health insurance coverage
that—
(A) is provided by a Federally qualified
health maintenance organization (as defined in
section 1301(a) of the Public Health Service
Act), or
(B) is not provided by such an organiza-
tion but is provided by an organization recog-
nized under State law as a health maintenance
organization or managed care organization or a
similar organization regulated under State law
for solvency.
Title I, Subtitle B
(3) EXCEPTION IF STATE PROVIDES FOR GUAR-
ANTEED AVAILABILITY (RATHER THAN GUARANTEED
ISSUE).—Paragraph (1) shall not apply to an insurer
in a State if the State is providing—
(A) access to each small employer in the
State to MedAccess standard coverage, to
MedAccess catastrophic coverage, and to a
MedAccess medisave coverage, and
(B) a risk allocation mechanism described
in subsection (c).
(b) GUARANTEED
ISSUE
OF
MEDACCESS
COV-
ERAGE.—Subject to subsection (c)—
(1) IN GENERAL.—Subject to paragraphs (2)
and (3), each insurer that offers MedAccess cov-
erage to a small employer 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 defined in
paragraph (5)) who applies for enrollment on a
timely basis (consistent with paragraph (4))
and may not place any restriction on the eligi-
bility of an individual to enroll so long as such
individual is an eligible individual.
Title I, Subtitle B
(2) SPECIAL
RULES
FOR
HEALTH
MAINTE-
NANCE ORGANIZATIONS.—In the case of coverage of-
fered by a health maintenance organization or other
network plan, the organization may—
(A) limit the employers that may apply for
such coverage to those with eligible individuals
residing in the service area of the plan;
(B) limit the individuals who may be en-
rolled under such coverage to those who reside
in the service area for such organization; and
(C) within the service area of such organi-
zation, deny such coverage to such employers if
the organization 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
Title I, Subtitle B
period of at least 180 days after such cov-
erage is denied.
In this paragraph, the term ‘‘health maintenance or-
ganization’’ includes an organization recognized
under State law as a health maintenance organiza-
tion or managed care organization or a similar orga-
nization regulated under State law for solvency.
(3) SPECIAL RULE FOR FINANCIAL CAPACITY
LIMITS.—In the case of coverage offered by an in-
surer other than a health maintenance organization
or network plan, the insurer may deny such coverage
to small employers if the organization demonstrates
that—
(A) it does not have the financial reserves
necessary to underwrite additional coverage,
(B) it is applying this paragraph uniformly
to all employers without regard to the health
status, claims experience, or duration of cov-
erage of those employers and their employees,
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.—
Title I, Subtitle B
(A) GENERAL INITIAL ENROLLMENT RE-
QUIREMENT.—Except as provided in this para-
graph, enrollment of an eligible individual for
MedAccess coverage may be considered not to
be timely if the eligible employee 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
MedAccess coverage is considered to be timely
in the case of an eligible individual who—
(i) was covered under a group health
plan or had other health insurance cov-
erage at the time of the individual’s initial
enrollment period,
(ii) stated at the time of the initial en-
rollment period that coverage under a
group health plan or other health insur-
ance coverage was the reason for declining
enrollment,
(iii) lost coverage under a group
health plan or other health insurance cov-
erage (as a result of the termination of the
Title I, Subtitle B
coverage, termination or reduction of em-
ployment, or other reason), and
(iv) requests enrollment within 30
days after termination of the coverage.
(C) REQUIREMENT APPLIES DURING OPEN
ENROLLMENT
PERIODS.—Each insurer and
each group health plan providing MedAccess
coverage shall provide for at least one period (of
not less than 30 days) each year during which
enrollment under such coverage shall be consid-
ered to be timely.
(D) EXCEPTION
FOR
COURT
ORDERS.—
Enrollment of a spouse or minor child of an
employee shall be considered to be timely if—
(i) a court has ordered that coverage
be provided for the spouse or child under
a covered employee’s group health plan,
and
(ii) a request for enrollment is made
within 30 days after the date the court is-
sues the order.
(E) ENROLLMENT OF SPOUSES AND DE-
PENDENTS.—
(i) IN GENERAL.—Enrollment of the
spouse (including a child of the spouse)
Title I, Subtitle B
and any dependent child of an eligible em-
ployee 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 a child, if family
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 coverage
includes family coverage and enrollment is
made under such coverage on a timely
basis under clause (i)(I), the coverage shall
become effective not later than the first
day of the first month beginning after the
date of the marriage or the date of birth
or adoption of the child (as the case may
be).
(5) DEFINITIONS.—In this subsection, the
terms ‘‘eligible individual’’ and ‘‘group health plan’’
have the meanings given such terms in section
1023(a).
Title I, Subtitle B
(c) STATE OPTION OF GUARANTEED AVAILABILITY
THROUGH
ALLOCATION
OF
RISK
(RATHER
THAN
THROUGH GUARANTEED ISSUE).—The requirements of
subsection (b) shall not apply in a State if the State has
provided (in accordance with standards established under
this part) a mechanism under which—
(1) each insurer offering health insurance cov-
erage to a small employer in the State must partici-
pate in a program for assigning high-risk small em-
ployer groups (or individuals within such a group)
among some or all such insurers, and
(2) the insurers to which such high-risk small
employer groups or individuals are so assigned com-
ply with the requirements of subsection (b).
SEC. 1102. MEDACCESS COVERAGE DEFINED.
(a) MEDACCESS COVERAGE DEFINED.—In this sub-
title:
(1) IN GENERAL.—The term ‘‘MedAccess cov-
erage’’ means a health insurance coverage (whether
under a managed-care plan, indemnity plan, or other
plan) that meets the following requirements:
(A) The coverage—
(i) is designed to provide standard
coverage (consistent with subsection (c))
with substantial cost-sharing,
Title I, Subtitle B
(ii) is designed to provide only cata-
strophic coverage (consistent with sub-
section (d)), or
(iii) is designed to provide medisave
coverage (consistent with subsection (e)).
(B) The coverage includes only services, in-
cluding (but not limited to) medical, surgical,
hospital, and preventive services, which are es-
sential and medically necessary; except that no
specific procedure or treatment, or classes
thereof, is required to be included in such cov-
erage, by this Act or through regulations.
(C) The coverage meets the applicable re-
quirements of section 1101(b) (relating to guar-
anteed issue).
(D) The coverage meets the consumer pro-
tection standards established under section
1103(a)(1)(B).
(2) MEDACCESS
STANDARD, 
CATASTROPHIC,
AND MEDISAVE COVERAGE.—The terms ‘‘MedAccess
standard coverage’’, ‘‘MedAccess catastrophic cov-
erage’’, ‘‘MedAccess medisave coverage’’ mean
MedAccess coverage that provides for at least stand-
ard coverage (referred to in paragraph (1)(A)(i)),
for only catastrophic coverage (referred to in para-
Title I, Subtitle B
graph (1)(A)(ii)), or medisave coverage (referred to
in paragraph (1)(A)(iii)), respectively.
(b) SET OF RULES OF ACTUARIAL EQUIVALENCE.—
(1) INITIAL
DETERMINATION.—The NAIC is
requested to submit to the Secretary, within 6
months after the date of the enactment of this Act,
a set of rules, including an appropriate set of safe-
harbors, which the NAIC determines is sufficient for
determining, in the case of any health insurance cov-
erage and for purposes of this section, the actuarial
value of the coverage offered.
(2) CERTIFICATION.—If the Secretary deter-
mines that the NAIC has submitted a set of rules
that comply with the requirements of paragraph (1),
the Secretary shall certify such set of rules for use
under this part. If the Secretary determines that
such a set of rules has not been submitted or does
not comply with such requirements, the Secretary
shall promptly establish a set of rules that meets
such requirements.
(c) STANDARD COVERAGE.—
(1) IN GENERAL.—For purposes of this Act,
health insurance coverage is considered to provide
standard coverage consistent with this subsection if
the benefits are specified in a written instrument
Title I, Subtitle B
providing for such coverage as essential and medi-
cally necessary services described in subsection
(a)(1)(B) and determined, in accordance with the set
of actuarial equivalence rules certified under sub-
section (b), to have a value that is within 5 percent-
age points of the applicable target actuarial value
for standard coverage established under paragraph
(2).
(2) INITIAL
DETERMINATION
OF
APPLICABLE
TARGET
ACTUARIAL
VALUE
FOR
STANDARD
COV-
ERAGE.—
(A) INITIAL DETERMINATION.—The NAIC
is requested to submit to the Secretary, within
6 months after the date of the enactment of
this Act, a procedure for determining the appli-
cable target actuarial value for standard cov-
erage (which may vary by geographic area).
Such value shall be equal to the average actuar-
ial value of a representative range of the dif-
ferent types of health benefits provisions (which
include cost-sharing) typically offered as stand-
ard coverage in the small employer health cov-
erage market. In determining the actuarial
value, the benefits considered should be suffi-
cient to cover only services, including (but not
Title I, Subtitle B
limited to) medical, surgical, hospital, and pre-
ventive services, which are essential and medi-
cally necessary; except that no specific proce-
dure or treatment, or classes thereof, is re-
quired to be considered in such determination
by this Act or through regulations. The deter-
mination of such value shall be based on a rep-
resentative distribution of the population of eli-
gible employees offered such coverage and a
single set of standardized utilization and cost
factors (which may vary by geographic area).
(B) CERTIFICATION.—If the Secretary de-
termines that the NAIC has submitted a proce-
dure for determining the applicable target actu-
arial value for standard coverage that complies
with the requirements of subparagraph (A), the
Secretary shall certify such procedure for use
under this part. If the Secretary determines
that such a procedure has not been submitted
or does not comply with such requirements, the
Secretary shall promptly prescribe such a proce-
dure that meets such requirements.
(d) CATASTROPHIC COVERAGE.—
(1) IN GENERAL.—For purposes of subsection
(a)(1)(B), health insurance coverage is considered to
Title I, Subtitle B
provide catastrophic coverage consistent with this
subsection if—
(A) benefits are available under such cov-
erage for a year only to the extent that ex-
penses for covered services in a year exceed a
deductible amount that is consistent with the
dollar amounts specified in section 220(c)(2)(A)
of the Internal Revenue Code of 1986, as added
by section 2202, and
(B) the benefits are determined, in accord-
ance with the set of actuarial equivalence rules
certified under subsection (b), to have a value
that is within 5 percentage points of the target
actuarial value for catastrophic coverage estab-
lished under paragraph (2).
(2) INITIAL DETERMINATION OF TARGET ACTU-
ARIAL VALUE FOR CATASTROPHIC COVERAGE.—
(A) INITIAL DETERMINATION.—The NAIC
is requested to submit to the Secretary, within
6 months after the date of the enactment of
this Act, a target actuarial value for cata-
strophic coverage equal to the actuarial value
that would have been computed under sub-
section (c)(2)(A) if a deductible that represents
the midpoint of the range of deductibles per-
Title I, Subtitle B
mitted consistent with subsections (b)(2) and
(c)(2)(A) of section 220 of the Internal Reve-
nue Code of 1986 were used in place of any
deductible that otherwise would be applicable.
(B) CERTIFICATION.—If the Secretary de-
termines that the NAIC has submitted a target
actuarial value for catastrophic coverage that
comply with the requirements of subparagraph
(A), the Secretary shall certify such value for
use under this part. If the Secretary determines
that such a value has not been submitted or
does not comply with such requirements, the
Secretary shall promptly determine such a tar-
get actuarial value that meets such require-
ments.
(e) MEDISAVE COVERAGE.—
(1) IN GENERAL.—For purposes of subsection
(a)(1)(C), health insurance coverage is considered to
provide medisave coverage consistent with this sub-
section if such coverage consists of—
(A) coverage under a catastrophic health
plan (within the meaning of section 220(c)(2)
of the Internal Revenue Code of 1986, as in-
serted by section 2202 of this Act), and
Title I, Subtitle B
(B) a medical savings account described in
section 220(d)(1)(B) of such Code.
(f) SUBSEQUENT REVISIONS.—
(1) NAIC.—The NAIC may submit from time
to time to the Secretary revisions of the set of rules
of actuarial equivalence previously established or de-
termined under this section if the NAIC determines
such revision necessary to take into account changes
in the relevant types of health benefits provisions, in
deductible levels for catastrophic coverage, or in de-
mographic conditions which form the basis for such
set of rules. The provisions of subsection (b)(2) shall
apply to such a revision in the same manner as they
apply to the initial determination of the set of rules.
(2) SECRETARY.—The Secretary may by regu-
lation revise such set or rules and values from time
to time if the Secretary determines such revision
necessary to take into account changes described in
paragraph (1).
SEC. 1103. ESTABLISHMENT OF OTHER MEDACCESS STAND-
ARDS.
(a) ESTABLISHMENT OF GENERAL STANDARDS.—
(1) ROLE OF NAIC.—The Secretary shall re-
quest the NAIC to develop, within 9 months after
the date of the enactment of this Act, model regula-
Title I, Subtitle B
tions that specify standards with respect to each of
the following:
(A)(i) The requirement, under section
1101(a), 
that 
insurers 
make 
available
MedAccess coverage.
(ii) The requirements of guaranteed avail-
ability of MedAccess coverage to small employ-
ers under section 1101(b).
(B) The requirements of section 1104 (re-
lating to use of modified community rating, uni-
form marketing materials, and miscellaneous
consumer protections).
If the NAIC develops recommended regulations
specifying such standards within such period, the
Secretary shall review the standards. Such review
shall be completed within 60 days after the date the
regulations are developed. Unless the Secretary de-
termines within such period that the standards do
not meet the requirements, such standards shall
serve as the standards under this section, with such
amendments as the Secretary deems necessary.
(2) CONTINGENCY.—If the NAIC does not de-
velop such model regulations within such period or
the Secretary determines that such regulations do
not specify standards that meet the requirements de-
Title I, Subtitle B
scribed in paragraph (1), the Secretary shall specify,
within 15 months after the date of the enactment of
this Act, standards to carry out those requirements.
(3) EFFECTIVE DATE.—The MedAccess stand-
ards and consumer protection standards (as defined
in paragraph (5)) shall apply to MedAccess coverage
and health insurance coverage provided in a State
on or after the respective date the standards are im-
plemented in the State under subsections (b) and
(c).
(4) PREEMPTION OF STATE LAW.—
(A) IN GENERAL.—Except as provided in
subparagraph (B), a State may not establish or
enforce standards for health insurance coverage
made available to small employers and individ-
uals that are different from the standards es-
tablished under this part.
(B) GRANDFATHER.—In the case of a
State that, as of August 1, 1994, required that
premiums in the individual and small group
market sectors be community-rated and not
vary based on age, the State continue such
standards (and reasonable modifications there-
of) in force.
(5) DEFINITIONS.—In this section:
Title I, Subtitle B
(A) 
CONSUMER
PROTECTION
STAND-
ARDS.—The term ‘‘consumer protection stand-
ards’’ means the standards established under
paragraph (1)(B).
(B) MEDACCESS STANDARDS.—The term
‘‘MedAccess standards’’ means the standards
established under paragraph (1)(A) (relating to
the requirements of section 1101), and includes
the consumer protection standards insofar as
they relate to MedAccess coverage.
(b) 
APPLICATION
OF
STANDARDS
THROUGH
STATES.—
(1) APPLICATION
OF
MEDACCESS
STAND-
ARDS.—
(A) IN GENERAL.—Each State shall sub-
mit to the Secretary, by the deadline specified
in subparagraph (B), a report on steps the
State is taking to implement and enforce the
consumer protection standards with respect to
insurers, and MedAccess coverage offered, not
later than such deadline.
(B) DEADLINE FOR REPORT.—
(i) 1 YEAR AFTER STANDARDS ESTAB-
LISHED.—Subject to clause (ii), the dead-
line under this subparagraph is 1 year
Title I, Subtitle B
after the date the MedAccess standards
are established under subsection (a).
(ii) EXCEPTION FOR LEGISLATION.—
In the case of a State which the Secretary
identifies, in consultation with the NAIC,
as—
(I) requiring State legislation
(other than legislation appropriating
funds) in order for insurers and plans
providing MedAccess coverage offered
to meet the MedAccess standards es-
tablished under subsection (a), but
(II) having a legislature which is
not scheduled to meet in 1995 in a
legislative session in which such legis-
lation may be considered,
the date specified in this subparagraph is
the first day of the first calendar quarter
beginning after the close of the first legis-
lative session of the State legislature that
begins on or after January 1, 1996. For
purposes of the previous sentence, in the
case of a State that has a 2-year legislative
session, each year of such session shall be
Title I, Subtitle B
deemed to be a separate regular session of
the State legislature.
(2) FEDERAL ROLE.—If the Secretary deter-
mines that a State has failed to submit a report by
the deadline specified under paragraph (1) or finds
that the State has not implemented and provided
adequate enforcement of the MedAccess standards
under such paragraph, the Secretary shall notify the
State and provide the State a period of 60 days in
which to submit such report or to implement and en-
force such standards under such paragraph. If, after
such 60-day period, the Secretary finds that such a
failure has not been corrected, the Secretary shall
provide for such mechanism for the implementation
and enforcement of such standards in the State as
the Secretary determines to be appropriate. Such
implementation and enforcement shall take effect
with respect to insurers, and plans providing
MedAccess coverage offered or renewed, on or after
3 months after the date of the Secretary’s finding
under the previous sentence, and until the date the
Secretary finds that such a failure has been cor-
rected. In exercising authority under this subpara-
graph, the Secretary shall determine whether the use
of a risk-allocation mechanism, described in section
Title I, Subtitle B
1101(c), would be more consistent with the small
employer group health coverage market in the State
than the guaranteed availability provisions of section
1101(b).
(3) APPLICATION OF CONSUMER PROTECTION
STANDARDS.—
(A) IN GENERAL.—Each State shall sub-
mit to the Secretary, by the deadline specified
in subparagraph (B), a report on steps the
State is taking to implement and enforce the
MedAccess standards with respect to insurers,
and health insurance coverage (other than
MedAccess coverage) offered, not later than
such deadline.
(B) DEADLINE FOR REPORT.—
(i) 1 YEAR AFTER STANDARDS ESTAB-
LISHED.—Subject to clause (ii), the dead-
line under this subparagraph is 1 year
after the date the consumer protection
standards are established under subsection
(a).
(ii) EXCEPTION FOR LEGISLATION.—
In the case of a State which the Secretary
identifies, in consultation with the NAIC,
as—
Title I, Subtitle B
(I) requiring State legislation
(other than legislation appropriating
funds) in order for insurers and plans
providing health insurance coverage
offered to meet the consumer protec-
tion standards established under sub-
section (a), but
(II) having a legislature which is
not scheduled to meet in 1995 in a
legislative session in which such legis-
lation may be considered,
the date specified in this subparagraph is
the first day of the first calendar quarter
beginning after the close of the first legis-
lative session of the State legislature that
begins on or after January 1, 1996. For
purposes of the previous sentence, 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.
(4) FEDERAL ROLE.—If the Secretary deter-
mines that a State has failed to submit a report by
the deadline specified under paragraph (1) or finds
that the State has not implemented and provided
Title I, Subtitle B
adequate enforcement of the consumer protection
standards under such paragraph, the Secretary shall
notify the State and provide the State a period of
60 days in which to submit such report or to imple-
ment and enforce such standards under such para-
graph. If, after such 60-day period, the Secretary
finds that such a failure has not been corrected, the
Secretary shall provide for such mechanism for the
implementation and enforcement of such standards
in the State as the Secretary determines to be ap-
propriate. Such implementation and enforcement
shall take effect with respect to insurers, and health
insurance coverage (other than MedAccess coverage)
offered or renewed, on or after 3 months after the
date of the Secretary’s finding under the previous
sentence, and until the date the Secretary finds that
such a failure has been corrected.
SEC. 1104. USE OF MODIFIED COMMUNITY RATING, UNI-
FORM MARKETING MATERIALS, AND MIS-
CELLANEOUS CONSUMER PROTECTIONS.
(a) USE OF MODIFIED COMMUNITY RATING.—
(1) IN GENERAL.—As a standard under section
1103(a)(1)(B), subject to paragraph (2), the pre-
mium rate established by an insurer for coverage
Title I, Subtitle B
may not vary within a type of product except by the
following:
(A) AGE.—By age, based on classes of age
established by a State.
(B) GEOGRAPHIC
AREA.—By geographic
area, based on 3-digit zip code or counties, as
identified by a State.
(C) FAMILY SIZE.—Family size, based on
a classification of individual, individual with one
or more children, married couple without chil-
dren, and married couple with children.
(2) DISCOUNT FOR EMPLOYER WELLNESS PRO-
GRAM.—An insurer may provide for a group dis-
count with respect to an employer that provides for
a wellness program for employees.
(b) FULL DISCLOSURE OF RATING PRACTICES.—At
the time an insurer offers health insurance coverage to
a small employer, the insurer shall fully disclose to the
employer rating practices for health insurance coverage,
including rating practices for different plan designs.
(c) ACTUARIAL CERTIFICATION.—Each insurer that
offers health insurance coverage to a small employer in
a State shall file annually with the State commissioner of
insurance a written statement by a member of the Amer-
ican Academy of Actuaries (or other individual acceptable
Title I, Subtitle B
to the commissioner) 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 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.
(d) REGISTRATION AND REPORTING.—Each insurer
that issues any health insurance coverage to a small em-
ployer in a State shall be registered or licensed with the
State commissioner of insurance and shall comply with
any reporting requirements of the commissioner relating
to such coverage.
(e) MARKETING MATERIAL.—Each insurer that is-
sues any health insurance coverage to a small employer
in a State shall file with the State those marketing mate-
rials relating to the offer and sale of health insurance cov-
erage to be used for distribution before the materials are
used. Such materials shall be in a uniform format speci-
fied under the standards established under section 1101.
Such materials (including information on plan designs of-
fered by different insurers) shall be distributed to employ-
Title I, Subtitle B
ers that do not contribute to health insurance coverage
for their employees, in order to distribute such informa-
tion to their employees as part of the offer of coverage
under section 1001(a).
SEC. 1105. MONITORING AND RESPONSE TO ADVERSE SE-
LECTION; RISK ADJUSTMENT PROGRAMS.
(a) MONITORING.—The Secretary of Labor shall
monitor the prevalence and impact of adverse risk selec-
tion in the fully insured plans made available to small em-
ployers resulting from the decision of small employers to
self insure. State insurance commissioners may submit to
the Secretary such information on such adverse risk selec-
tion as they determine to be appropriate.
(b) RESPONSE.—If the Secretary of Labor deter-
mines, on the basis of such information or otherwise, that,
due to decisions of small employers to self-insure, there
has been substantial or significant favorable selection with
respect to self-insured plans or unfavorable selection with
respect to fully insured plans in a State, the Secretary
shall develop a risk adjustment program under subsection
(c) that responds to such a pattern in the State. The Sec-
retary shall request the NAIC to submit to the Secretary
recommendations regarding the structure and operation of
such a program.
Title I, Subtitle B
(c) ESTABLISHMENT OF RISK ADJUSTMENT PRO-
GRAM.—The risk adjustment program applied in a State
under this subsection—
(1) shall be designed to be operated on a non-
governmental basis,
(2) shall require participation of each small em-
ployer in the State that is self-insured,
(3) shall require the imposition of such assess-
ments on self-insured plans offered by such employ-
ers as may be appropriate to prevent further adverse
or favorable selection, and
(4) shall provide for the distribution of such as-
sessments to the State involved for purposes of mak-
ing payments to insurers to stabilize the small group
insurance market.
The amounts of the assessments under paragraph (3) for
individual employers may take into account the number
of lives covered under the plans of such employers and
the area of residence of the lives covered.
SEC. 1106. ESTABLISHMENT OF REINSURANCE OR ALLOCA-
TION OF RISK MECHANISMS FOR HIGH RISK
INDIVIDUALS IN MARKETPLACE FOR SMALL
BUSINESS AND MARKETPLACE FOR INDIVID-
UALS.
(a) ESTABLISHMENT OF STANDARDS.—
Title I, Subtitle B
(1) ROLE OF NAIC.—The Secretary shall re-
quest the NAIC to develop, within 9 months after
the date of the enactment of this Act, models for re-
insurance or allocation of risk mechanisms (each in
this section referred to as a ‘‘reinsurance or alloca-
tion of risk mechanism’’) for health insurance cov-
erage made available to small employers and for
whom an insurer is at risk of incurring high costs
in providing such coverage. If the NAIC develops
such models within such period, the Secretary shall
review such models to determine if they provide for
an effective reinsurance or allocation of risk mecha-
nism. Such review shall be completed within 30 days
after the date the models are developed. Unless the
Secretary determines within such period that such a
model is not an effective reinsurance or allocation of
risk mechanism, such remaining models shall serve
as the models under this section, with such amend-
ments as the Secretary deems necessary.
(2) CONTINGENCY.—If the NAIC does not de-
velop such models within such period or the Sec-
retary determines that all such models do not pro-
vide for an effective reinsurance or allocation of risk
mechanism, the Secretary shall specify, within 15
Title I, Subtitle B
months after the date of the enactment of this Act,
models to carry out this section.
(b) IMPLEMENTATION OF REINSURANCE OR ALLOCA-
TION OF RISK MECHANISMS.—
(1) BY
STATES.—Each State shall establish
and maintain one or more reinsurance or allocation
of risk mechanisms that are consistent with a model
established under subsection (a) by not later than
the deadline specified in section 1103(b)(1)(B). A
State may establish and maintain such a mechanism
jointly with one or more other States.
(2) FEDERAL ROLE.—
(A) IN GENERAL.—If the Secretary deter-
mines that a State has failed to establish or
maintain a reinsurance or allocation of risk
mechanism in accordance with paragraph (1),
the Secretary shall establish and maintain such
a reinsurance or allocation of risk mechanism
meeting the requirements of this paragraph.
(B) REINSURANCE
MECHANISM.—Unless
the Secretary determines under subparagraph
(C) that an allocation of risk mechanism is the
appropriate mechanism to use in a State under
this paragraph, the Secretary shall establish
and maintain for use under this section for
Title I, Subtitle B
each State an appropriate reinsurance mecha-
nism.
(C) ALLOCATION OF RISK MECHANISM.—If
the Secretary determines that, due to the na-
ture of the health coverage market in the State
(including a relatively small number of plans of-
fered providing health insurance coverage or a
relatively small number of uninsurable small
employers), an allocation of risk mechanism
would be a better mechanism than a reinsur-
ance mechanism, the Secretary shall establish
and maintain for use under this section for a
State an allocation of risk mechanism under
which small employers with employees who are
at higher risk of significantly higher claims
would be equitably assigned among insurers of-
fering health insurance coverage to small em-
ployers.
(c) CONSTRUCTION.—Nothing in this section shall be
construed to prohibit reinsurance or allocation of risk ar-
rangements relating to health insurance coverage, whether
on a State or multi-State basis, not required under this
section.
Title I, Subtitle B
PART 2—MARKETPLACE FOR INDIVIDUALS
SEC. 1111. APPLICATION OF SIMILAR REQUIREMENTS.
(a) IN GENERAL.—Except as provided in subsection
(c)—
(1) the provisions of part 1 of this subtitle shall
apply to insurers offering health insurance coverage
to individuals in the individual market (as defined in
subsection (b)) in the same manner as such provi-
sions apply to insurers offering health insurance cov-
erage to employers, and
(2) the standards established under section
1103 shall apply under this part in the same manner
as they apply under part 1.
For purposes of this subsection, any reference to an em-
ployee or eligible employee is deemed a reference to such
an individual.
(b) INDIVIDUAL MARKET DEFINED.—In subsection
(a), the term ‘‘individual market’’ means the insurance
market offered to individuals seeking health care coverage
on behalf of themselves (and their dependents) and not
seeking coverage on the basis of employment, membership
in a organization, or through another group purchasing
arrangement.
(c) EXCEPTION AND SPECIAL RULE.—
Title I, Subtitle B
(1) 
WELLNESS
DISCOUNTS.—Section
1104(a)(2) (relating to discounts for employer
wellness programs) shall not apply under this part.
(2) SEPARATE APPLICATION OF RISK ADJUST-
MENT
TO
INDIVIDUAL
MARKET
SECTOR.—Section
1105 (relating to monitoring and response to ad-
verse selection; risk adjustment programs) shall be
applied under this part in a manner that is separate
from its application under part A.
(3) SEPARATE AGE RATING FACTOR FOR THE
INDIVIDUAL MARKET.—The provisions regarding age
under section 1104(a)(1)(A) shall be determined
separately for each year of age and not by the class-
es of age referred to in such section.
(4) CONVERSION OF PERMANENT HEALTH IN-
SURANCE POLICIES.—The provisions of section 1104
shall not apply in connection with a permanent pol-
icy of health insurance existing on the effective date,
if each individual covered under the policy is given
the option to convert the policy to a policy of health
insurance subject to this part.
(d) APPLICATION OF REQUIREMENTS.—Coverage of-
fered by an insurer shall not be treated as MedAccess cov-
erage under this part unless the insurer complies with the
requirements of part 3 of subtitle A (relating to standards
Title I, Subtitle B
for managed care arrangements and essential community
providers) in the same manner as such requirements apply
to a group health plan.
PART 3—VOLUNTARY HEALTH PURCHASING
ARRANGEMENTS
SEC. 1121. ESTABLISHMENT AND ORGANIZATION.
(a) IN GENERAL.—Voluntary health purchasing ar-
rangements (in this part referred to as ‘‘purchasing ar-
rangements’’) may be established in accordance with this
part. Each purchasing arrangement shall be chartered
under State law and operated as a not-for-profit corpora-
tion. An insurer may not form, underwrite, or possess a
majority vote of a purchasing arrangement, but may ad-
minister such an arrangement.
(b) BOARD OF DIRECTORS.—
(1) IN
GENERAL.—Each purchasing arrange-
ment shall be governed by a Board of Directors.
Such Board shall initially be appointed under proce-
dures established by the State in which it operates.
Subsequently, the Board shall be elected by the
members of the arrangement in accordance with
paragraph (3). Such Board shall be composed of in-
dividuals who are small employers (or representa-
tives of small employers), eligible employees of small
employers (or representatives of such employees),
Title I, Subtitle B
and eligible individuals in the area in which the ar-
rangement operates.
(2) MEMBERSHIP.—A purchasing arrangement
shall accept all small employers, eligible employees,
and eligible individuals residing within the area
served by the arrangement as members if such em-
ployers, employees or individuals request such mem-
bership.
(3) VOTING.—Members of a purchasing ar-
rangement shall have voting rights consistent with
the rules established under the bylaws governing the
arrangement.
(c) DUTIES OF PURCHASING ARRANGEMENTS.—
(1) IN GENERAL.—Subject to paragraph (2),
each purchasing arrangement shall—
(A) market MedAccess coverage to mem-
bers throughout the entire area served by the
arrangement;
(B) enter into agreements with insurers of-
fering MedAccess coverage under section 1122;
(C) enter into agreements with small em-
ployers under section 1123;
(D) enroll individuals in MedAccess cov-
erage, only in accordance with section 1124;
and
Title I, Subtitle B
(E) carry out other functions provided for
under this part.
(2) LIMITATION ON ACTIVITIES.—A purchasing
arrangement shall not—
(A) perform any activity (including review,
approval, or enforcement) relating to payment
rates for providers;
(B) perform any activity (including certifi-
cation or enforcement) relating to compliance of
insurers or coverage with the requirements of
parts 1 or 2;
(C) assume financial risk in relation to any
such coverage; or
(D) perform other activities identified by
the State as being inconsistent with the per-
formance of its duties under paragraph (1).
(3) CHARACTERISTICS
OF
SERVICE
AREA.—A
purchasing arrangement need not serve areas that
are contiguous, but the geographic boundaries of
such areas shall be consistent with the boundaries
established for geographic areas used in establishing
premium rates in the individual and small group
marketplace. If a purchasing arrangement serves a
part of a metropolitan statistical area the arrange-
ment shall serve the entire area.
Title I, Subtitle C
‘‘(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.
‘‘(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, a contract
under which an insurer provides for payment with
respect to claims under the arrangement, relating to
participants or beneficiaries individually or other-
wise, 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.
120
Title I, Subtitle C
SEC. 1213. CLARIFICATION OF TREATMENT OF SINGLE EM-
PLOYER ARRANGEMENTS.
Section 3(40)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(40)(B)) is
amended—
(1) in clause (i), by inserting ‘‘for any plan year
of any such plan, or any fiscal year of any such
other arrangement,’’ after ‘‘single employer’’, and by
inserting ‘‘during such year or at any time during
the preceding 1-year period’’ after ‘‘common con-
trol’’;
(2) in clause (iii), by striking ‘‘common control
shall not be based on an interest of less than 25 per-
cent’’ and inserting ‘‘an interest of greater than 25
percent may not be required as the minimum inter-
est necessary for common control’’, and 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, at the time the determination under clause (i) is