flexible spending arrangement shall not ex-
ceed the applicable amount. 
‘‘(ii) DISTRIBUTIONS FROM A HEALTH 
REIMBURSEMENT
ARRANGEMENT.—A 
qualified HSA distribution from a health 
reimbursement arrangement shall not ex-
ceed— 
‘‘(I) the applicable amount di-
vided by 12, multiplied by 
‘‘(II) the number of months dur-
ing which the individual is a partici-
pant in the health reimbursement ar-
rangement. 
‘‘(iii) 
APPLICABLE
AMOUNT.—For 
purposes of this subparagraph, the applica-
ble amount is— 
‘‘(I) $2,250 in the case of an eli-
gible individual who has self-only cov-
erage under a high deductible health 
plan at the time of such distribution, 
and 
‘‘(II) $4,500 in the case of an eli-
gible individual who has family cov-
erage under a high deductible health 
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plan at the time of such distribu-
tion.’’. 
(e) ELIMINATION OF ADDITIONAL TAX FOR FAILURE 
TO MAINTAIN HIGH DEDUCTIBLE HEALTH PLAN COV-
ERAGE.—Subsection (e) of section 106 is amended— 
(1) by striking paragraph (3) and redesignating 
paragraphs (4) and (5) as paragraphs (3) and (4), 
respectively, and 
(2) by striking subparagraph (A) of paragraph 
(3), as so redesignated, and redesignating subpara-
graphs (B) and (C) of such paragraph as subpara-
graphs (A) and (B) thereof, respectively. 
(f) LIMITED PURPOSE FSAS
AND HRAS.—Sub-
section (e) of section 106, as amended by this section, is 
amended by adding at the end the following new para-
graph: 
‘‘(5) LIMITED PURPOSE FSAS AND HRAS.—A 
plan shall not fail to be a health flexible spending 
arrangement or health reimbursement arrangement 
under this section or section 105 merely because the 
plan converts coverage for individuals who enroll in 
a high deductible health plan described in section 
223(c)(2) 
to 
coverage 
described 
in 
section 
223(c)(1)(B)(iv). Coverage for such individuals may 
be converted as of the date of enrollment in the high 
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deductible health plan, without regard to the period 
of coverage under the health flexible spending ar-
rangement or health reimbursement arrangement, 
and without requiring any change in coverage to in-
dividuals who do not enroll in a high deductible 
health plan.’’. 
(g) DISTRIBUTION AMOUNTS ADJUSTED FOR COST- 
OF-LIVING.—Subsection (e) of section 106, as amended 
by this section, is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(6) COST-OF-LIVING ADJUSTMENT.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year beginning after December 31, 
2011, each of the dollar amounts in paragraph 
(2)(B)(iii) shall be increased by an amount 
equal to such dollar amount, multiplied by the 
cost-of-living adjustment determined under sec-
tion 1(f)(3) for the calendar year in which such 
taxable year begins by substituting ‘calendar 
year 2010’ for ‘calendar year 1992’ in subpara-
graph (B) thereof. 
‘‘(B) ROUNDING.—If any increase under 
paragraph (1) is not a multiple of $50, such in-
crease shall be rounded to the nearest multiple 
of $50.’’. 
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(h) DISCLAIMER OF DISQUALIFYING COVERAGE.— 
Subparagraph (B) of section 223(c)(1), as amended by 
this section, is amended— 
(1) by striking ‘‘and’’ at the end of clause (iii), 
(2) by striking the period at the end of clause 
(iv) and inserting ‘‘, and’’, and 
(3) by inserting after clause (iv) the following 
new clause: 
‘‘(v) any coverage (including prospec-
tive coverage) under a health plan that is 
not a high deductible health plan which is 
disclaimed in writing, at the time of the 
creation or organization of the health sav-
ings account, including by execution of a 
trust 
described 
in 
subsection 
(d)(1) 
through a governing instrument that in-
cludes such a disclaimer, or by acceptance 
of an amendment to such a trust that in-
cludes such a disclaimer.’’. 
(i) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 518. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP-
TION AND OVER-THE-COUNTER MEDICINES 
AND DRUGS. 
(a) REFERENCE TO REPEAL OF DISTRIBUTIONS FOR 
MEDICINE QUALIFIED ONLY IF FOR PRESCRIBED DRUG 
OR INSULIN.—Section 101 of this Act provides for the re-
peal of section 9003 of the Patient Protection and Afford-
able Care Act (Public Law 111–148) and the amendments 
made by such section. The Internal Revenue Code of 1986 
shall be applied as if such section 9003 and amendments 
had never been enacted. 
(b) ALLOWANCE OF DISTRIBUTIONS FOR ALL MEDI-
CINES AND DRUGS.— 
(1) HSAS.—Subparagraph (A) of section 
223(d)(2) is amended by adding at the end the fol-
lowing: ‘‘Such term shall include an amount paid for 
any prescription or over-the-counter medicine or 
drug.’’. 
(2) ARCHER MSAS.—Subparagraph (A) of sec-
tion 220(d)(2) is amended by adding at the end the 
following: ‘‘Such term shall include an amount paid 
for any prescription or over-the-counter medicine or 
drug.’’. 
(3) HEALTH
FLEXIBLE
SPENDING
ARRANGE-
MENTS
AND
HEALTH
REIMBURSEMENT
ARRANGE-
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MENTS.—Section 106 is amended by adding at the 
end the following new subsection: 
‘‘(f) REIMBURSEMENTS FOR ALL MEDICINES AND 
DRUGS.—For purposes of this section and section 105, 
reimbursement for expenses incurred for any prescription 
or over-the-counter medicine or drug shall be treated as 
a reimbursement for medical expenses.’’. 
(4) EFFECTIVE DATES.— 
(A) DISTRIBUTIONS
FROM
SAVINGS
AC-
COUNTS.—The amendments made by para-
graphs (1) and (2) shall apply to amounts paid 
with respect to taxable years beginning after 
December 31, 2009. 
(B) REIMBURSEMENTS.—The amendment 
made by paragraph (3) shall apply to expenses 
incurred with respect to taxable years beginning 
after December 31, 2009. 
SEC. 519. PURCHASE OF HEALTH INSURANCE FROM HSA 
ACCOUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d) 
is amended to read as follows: 
‘‘(2) QUALIFIED MEDICAL EXPENSES.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
medical expenses’ means, with respect to an ac-
count beneficiary, amounts paid by such bene-
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ficiary for medical care (as defined in section 
213(d)) for any individual covered by a high de-
ductible health plan of the account beneficiary, 
but only to the extent such amounts are not 
compensated for by insurance or otherwise. 
‘‘(B) HEALTH
INSURANCE
MAY
NOT
BE 
PURCHASED FROM ACCOUNT.—Except as pro-
vided in subparagraph (C), subparagraph (A) 
shall not apply to any payment for insurance. 
‘‘(C) 
EXCEPTIONS.—Subparagraph 
(B) 
shall not apply to any expense for coverage 
under— 
‘‘(i) a health plan during any period 
of continuation coverage required under 
any Federal law, 
‘‘(ii) a qualified long-term care insur-
ance contract (as defined in section 
7702B(b)), 
‘‘(iii) a health plan during any period 
in which the individual is receiving unem-
ployment compensation under any Federal 
or State law, 
‘‘(iv) a high deductible health plan, or 
‘‘(v) any health insurance under title 
XVIII of the Social Security Act, other 
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than a Medicare supplemental policy (as 
defined in section 1882 of such Act).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to insurance pur-
chased after the date of the enactment of this Act in tax-
able years beginning after such date. 
SEC. 520. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 
INCURRED BEFORE ESTABLISHMENT OF AC-
COUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d), 
as amended by section 619, is amended by adding at the 
end the following new subparagraph: 
‘‘(D) CERTAIN
MEDICAL
EXPENSES
IN-
CURRED BEFORE ESTABLISHMENT OF ACCOUNT 
TREATED AS QUALIFIED.—An expense shall not 
fail to be treated as a qualified medical expense 
solely because such expense was incurred before 
the establishment of the health savings account 
if such expense was incurred— 
‘‘(i) during either— 
‘‘(I) the taxable year in which the 
health savings account was estab-
lished, or 
‘‘(II) the preceding taxable year 
in the case of a health savings ac-
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count established after the taxable 
year in which such expense was in-
curred but before the time prescribed 
by law for filing the return for such 
taxable year (not including extensions 
thereof), and 
‘‘(ii) for medical care of an individual 
during a period that such individual was 
covered by a high deductible health plan 
and met the requirements of subsection 
(c)(1)(A)(ii) (after application of sub-
section (c)(1)(B)).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 521. PREVENTIVE CARE PRESCRIPTION DRUG CLARI-
FICATION. 
(a) CLARIFY
USE
OF
DRUGS
IN
PREVENTIVE 
CARE.—Subparagraph (C) of section 223(c)(2) is amend-
ed by adding at the end the following: ‘‘Preventive care 
shall include prescription and over-the-counter drugs and 
medicines which have the primary purpose of preventing 
the onset of, further deterioration from, or complications 
associated with chronic conditions, illnesses, or diseases.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 522. EQUIVALENT BANKRUPTCY PROTECTIONS FOR 
HEALTH SAVINGS ACCOUNTS AS RETIRE-
MENT FUNDS. 
(a) IN GENERAL.—Section 522 of title 11, United 
States Code, is amended by adding at the end the fol-
lowing new subsection: 
‘‘(r) 
TREATMENT
OF
HEALTH
SAVINGS
AC-
COUNTS.—For purposes of this section, any health savings 
account (as described in section 223 of the Internal Rev-
enue Code of 1986) shall be treated in the same manner 
as an individual retirement account described in section 
408 of such Code.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to cases commencing under title 
11, United States Code, after the date of the enactment 
of this Act. 
SEC. 523. ADMINISTRATIVE ERROR CORRECTION BEFORE 
DUE DATE OF RETURN. 
(a) IN GENERAL.—Paragraph (4) of section 223(f) 
is amended by adding at the end the following new sub-
paragraph: 
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‘‘(D) EXCEPTION
FOR
ADMINISTRATIVE 
ERRORS CORRECTED BEFORE DUE DATE OF RE-
TURN.—Subparagraph (A) shall not apply if 
any payment or distribution is made to correct 
an administrative, clerical or payroll contribu-
tion error and if— 
‘‘(i) such distribution is received by 
the individual on or before the last day 
prescribed by law (including extensions of 
time) for filing such individual’s return for 
such taxable year, and 
‘‘(ii) such distribution is accompanied 
by the amount of net income attributable 
to such contribution. 
Any net income described in clause (ii) shall be 
included in the gross income of the individual 
for the taxable year in which it is received.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 524. REAUTHORIZATION OF MEDICAID HEALTH OP-
PORTUNITY ACCOUNTS. 
(a) IN GENERAL.—Section 1938 of the Social Secu-
rity Act (42 U.S.C. 1396u–8) is amended— 
(1) in subsection (a)— 
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(A) by striking paragraph (2) and insert-
ing the following: 
‘‘(2) INITIAL
DEMONSTRATION.—The dem-
onstration program under this section shall begin 90 
days after the date of the enactment of this para-
graph. The Secretary shall approve States to con-
duct demonstration programs under this section for 
a 5-year period, with each State demonstration pro-
gram covering 1 or more geographic areas specified 
by the State. With respect to a State, after the ini-
tial 5-year period of any demonstration program 
conducted under this section by the State, unless the 
Secretary finds, taking into account cost-effective-
ness and quality of care, that the State demonstra-
tion program has been unsuccessful, the demonstra-
tion program may be extended or made permanent 
in the State.’’; and 
(B) in paragraph (3), in the matter pre-
ceding subparagraph (A)— 
(i) by striking ‘‘not’’; and 
(ii) by striking ‘‘unless’’ and inserting 
‘‘if’’; 
(2) in subsection (b)— 
(A) in paragraph (3), by inserting ‘‘clause 
(i) through (vii), (viii) (without regard to the 
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GIBLE FOR PUBLIC BENEFIT.—Notwithstanding 
any other provision of law, if an account holder 
of a health opportunity account becomes ineli-
gible for benefits under this title because of an 
increase in income or assets— 
‘‘(i) no additional contribution shall be 
made into the account under paragraph 
(2)(A)(i); and 
‘‘(ii) the account shall remain avail-
able to the account holder for 3 years after 
the date on which the individual becomes 
ineligible for such benefits for withdrawals 
under the same terms and conditions as if 
the account holder remained eligible for 
such benefits, and such withdrawals shall 
be treated as medical assistance in accord-
ance with subsection (c)(4).’’. 
(b) CONFORMING
AMENDMENT.—Section 613 of 
Public Law 111–3 is repealed. 
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Subtitle B—Other Provisions 
SEC. 531. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 
FITNESS PROGRAMS TREATED AS MEDICAL 
CARE. 
(a) IN GENERAL.—Subsection (d) of section 213 is 
amended by adding at the end the following new para-
graph: 
‘‘(12) EXERCISE
EQUIPMENT
AND
PHYSICAL 
FITNESS PROGRAMS.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ shall include amounts paid— 
‘‘(i) to purchase or use equipment 
used in a program (including a self-di-
rected program) of physical exercise, 
‘‘(ii) to participate, or receive instruc-
tion, in a program of physical exercise, and 
‘‘(iii) for membership dues in a fitness 
club the primary purpose of which is to 
provide access to equipment and facilities 
for physical exercise. 
‘‘(B) LIMITATION.—Amounts treated as 
medical care under subparagraph (A) shall not 
exceed $1,000 with respect to any individual for 
any taxable year.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 532. CERTAIN NUTRITIONAL AND DIETARY SUPPLE-
MENTS TO BE TREATED AS MEDICAL CARE. 
(a) IN GENERAL.—Subsection (d) of section 213, as 
amended by section 631, is amended by adding at the end 
the following new paragraph: 
‘‘(13) NUTRITIONAL
AND
DIETARY
SUPPLE-
MENTS.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ shall include amounts paid to purchase 
herbs, vitamins, minerals, homeopathic rem-
edies, meal replacement products, and other di-
etary and nutritional supplements. 
‘‘(B) LIMITATION.—Amounts treated as 
medical care under subparagraph (A) shall not 
exceed $1,000 with respect to any individual for 
any taxable year. 
‘‘(C) MEAL
REPLACEMENT
PRODUCT.— 
For purposes of this paragraph, the term ‘meal 
replacement product’ means any product that— 
‘‘(i) is permitted to bear labeling mak-
ing a claim described in section 403(r)(3) 
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of the Federal Food, Drug, and Cosmetic 
Act, and 
‘‘(ii) is permitted to claim under such 
section that such product is low in fat and 
is a good source of protein, fiber, and mul-
tiple essential vitamins and minerals.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 533. CERTAIN PROVIDER FEES TO BE TREATED AS 
MEDICAL CARE. 
(a) IN GENERAL.—Subsection (d) of section 213, as 
amended by sections 631 and 632, is amended by adding 
at the end the following new paragraph: 
‘‘(14) PERIODIC
PROVIDER
FEES.—The term 
‘medical care’ shall include periodic fees paid to a 
primary physician, physician assistant, or nurse 
practitioner for the right to receive medical services 
on an as-needed basis.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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TITLE 
VI—COVERING 
PEOPLE 
WITH PRE-EXISTING CONDI-
TIONS, 
REMOVING 
ANNUAL 
AND 
LIFETIME 
COVERAGE 
CAPS, AND EXPANDING AC-
CESS TO CARE 
Subtitle A—Making Health Care 
Coverage Affordable for Every 
American 
CHAPTER 1—ENSURING COVERAGE FOR 
INDIVIDUALS 
WITH 
PREEXISTING 
CONDITIONS AND MULTIPLE HEALTH 
CARE NEEDS 
SEC. 601. ESTABLISH UNIVERSAL ACCESS PROGRAMS TO 
IMPROVE HIGH RISK POOLS AND REINSUR-
ANCE MARKETS. 
(a) STATE REQUIREMENT.— 
(1) IN GENERAL.—Not later than January 1, 
2012, each State shall— 
(A) subject to paragraph (3), operate— 
(i) a qualified State reinsurance pro-
gram described in subsection (b); or 
(ii) qualifying State high risk pool de-
scribed in subsection (c)(1); and 
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(B) subject to paragraph (3), apply to the 
operation of such a program from State funds 
an amount equivalent to the portion of State 
funds derived from State premium assessments 
(as defined by the Secretary) that are not oth-
erwise used on State health care programs. 
(2) RELATION TO CURRENT QUALIFIED HIGH 
RISK POOL PROGRAM.— 
(A) STATES NOT OPERATING A QUALIFIED 
HIGH RISK POOL.—In the case of a State that 
is not operating a current section 2745 quali-
fied high risk pool as of the date of the enact-
ment of this Act— 
(i) the State may only meet the re-
quirement of paragraph (1) through the 
operation of a qualified State reinsurance 
program described in subsection (b); and 
(ii) the State’s operation of such a re-
insurance program shall be treated, for 
purposes of section 2745 of the Public 
Health Service Act, as the operation of a 
qualified high risk pool described in such 
section. 
(B) STATE OPERATING A QUALIFIED HIGH 
RISK POOL.—In the case of a State that is op-
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erating a current section 2745 qualified high 
risk pool as of the date of the enactment of this 
Act— 
(i) as of January 1, 2012, such a pool 
shall not be treated as a qualified high risk 
pool under section 2745 of the Public 
Health Service Act unless the pool is a 
qualifying State high risk pool described in 
subsection (c)(1); and 
(ii) the State may use premium as-
sessment funds described in paragraph 
(1)(B) to transition from operation of such 
a pool to operation of a qualified State re-
insurance program described in subsection 
(b). 
(3) APPLICATION OF FUNDS.—If the program 
or pool operated under paragraph (1)(A) is in strong 
fiscal health, as determined in accordance with 
standards established by the National Association of 
Insurance Commissioners and as approved by the 
State Insurance Commissioner involved, the require-
ment of paragraph (1)(B) shall be deemed to be 
met. 
(b) QUALIFIED STATE REINSURANCE PROGRAM.— 
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(1) IN GENERAL.—For purposes of this section, 
a ‘‘qualified State reinsurance program’’ means a 
program operated by a State program that provides 
reinsurance for health insurance coverage offered in 
the small group market in accordance with the 
model for such a program established (as of the date 
of the enactment of this Act). 
(2) FORM OF PROGRAM.—A qualified State re-
insurance program may provide reinsurance— 
(A) on a prospective or retrospective basis; 
and 
(B) on a basis that protects health insur-
ance issuers against the annual aggregate 
spending of their enrollees as well as purchase 
protection against individual catastrophic costs. 
(3) SATISFACTION OF HIPAA REQUIREMENT.— 
A qualified State reinsurance program shall be 
deemed, for purposes of section 2745 of the Public 
Health Service Act, to be a qualified high risk pool 
under such section. 
(c) QUALIFYING STATE HIGH RISK POOL.— 
(1) IN GENERAL.—A qualifying State high risk 
pool described in this subsection means a current 
section 2745 qualified high risk pool that meets the 
following requirements: 
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(A) The pool must provide at least two 
coverage options, one of which must be a high 
deductible health plan coupled with a health 
savings account. 
(B) The pool must be funded with a stable 
funding source. 
(C) The pool must eliminate any waiting 
lists so that all eligible residents who are seek-
ing coverage through the pool should be allowed 
to receive coverage through the pool. 
(D) The pool must allow for coverage of 
individuals who, but for the 24-month disability 
waiting period under section 226(b) of the So-
cial Security Act, would be eligible for Medicare 
during the period of such waiting period. 
(E) The pool must limit the pool premiums 
to no more than 150 percent of the average 
premium for applicable standard risk rates in 
that State. 
(F) The pool must conduct education and 
outreach initiatives so that residents and bro-
kers understand that the pool is available to eli-
gible residents. 
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(G) The pool must provide coverage for 
preventive services and disease management for 
chronic diseases. 
(2) VERIFICATION OF CITIZENSHIP OR ALIEN 
QUALIFICATION.— 
(A) IN
GENERAL.—Notwithstanding any 
other provision of law, only citizens and nation-
als of the United States shall be eligible to par-
ticipate in a qualifying State high risk pool that 
receives funds under section 2745 of the Public 
Health Service Act or this section. 
(B) CONDITION OF PARTICIPATION.—As a 
condition of a State receiving such funds, the 
Secretary shall require the State to certify, to 
the satisfaction of the Secretary, that such 
State requires all applicants for coverage in the 
qualifying State high risk pool to provide satis-
factory documentation of citizenship or nation-
ality in a manner consistent with section 
1903(x) of the Social Security Act. 
(C) RECORDS.—The Secretary shall keep 
sufficient records such that a determination of 
citizenship or nationality only has to be made 
once for any individual under this paragraph. 
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(3) RELATION TO SECTION 2745.—As of Janu-
ary 1, 2012, a pool shall not qualify as qualified 
high risk pool under section 2745 of the Public 
Health Service Act unless the pool is a qualifying 
State high risk pool described in paragraph (1). 
(d) WAIVERS.—In order to accommodate new and in-
novative programs, the Secretary may waive such require-
ments of this section for qualified State reinsurance pro-
grams and for qualifying State high risk pools as the Sec-
retary deems appropriate. 
(e) FUNDING.—In addition to any other amounts ap-
propriated, there is appropriated to carry out section 2745 
of the Public Health Service Act (including through a pro-
gram or pool described in subsection (a)(1))— 
(1) $15,000,000,000 for the period of fiscal 
years 2012 through 2021; and 
(2) an additional $10,000,000,000 for the pe-
riod of fiscal years 2017 through 2021. 
(f) DEFINITIONS.—In this section: 
(1) HEALTH INSURANCE COVERAGE; HEALTH 
INSURANCE ISSUER.—The terms ‘‘health insurance 
coverage’’ and ‘‘health insurance issuer’’ have the 
meanings given such terms in section 2791 of the 
Public Health Service Act. 
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(2) CURRENT SECTION 2745 QUALIFIED HIGH 
RISK POOL.—The term ‘‘current section 2745 quali-
fied high risk pool’’ has the meaning given the term 
‘‘qualified high risk pool’’ under section 2745(g) of 
the Public Health Service Act as in effect as of the 
date of the enactment of this Act. 
(3) SECRETARY.—The term ‘‘Secretary’’ means 
Secretary of Health and Human Services. 
(4) STANDARD RISK RATE.—The term ‘‘stand-
ard risk rate’’ means a rate that— 
(A) is determined under the State high 
risk pool by considering the premium rates 
charged by other health insurance issuers offer-
ing health insurance coverage to individuals in 
the insurance market served; 
(B) is established using reasonable actu-
arial techniques; and 
(C) reflects anticipated claims experience 
and expenses for the coverage involved. 
(5) STATE.—The term ‘‘State’’ means any of 
the 50 States or the District of Columbia. 
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100 
SEC. 602. ELIMINATION OF CERTAIN REQUIREMENTS FOR 
GUARANTEED AVAILABILITY IN INDIVIDUAL 
MARKET. 
(a) IN GENERAL.—Section 2741(b) of the Public 
Health Service Act (42 U.S.C. 300gg–41(b)) is amend-
ed— 
(1) in paragraph (1)— 
(A) by striking ‘‘(1)(A)’’ and inserting 
‘‘(1)’’; and 
(B) by striking ‘‘and (B)’’ and all that fol-
lows up to the semicolon at the end; 
(2) by adding ‘‘and’’ at the end of paragraph 
(2); 
(3) in paragraph (3)— 
(A) by striking ‘‘(1)(A)’’ and inserting 
‘‘(1)’’; and 
(B) by striking the semicolon at the end 
and inserting a period; and 
(4) by striking paragraphs (4) and (5). 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on the date of the enact-
ment of this Act. 
SEC. 603. NO ANNUAL OR LIFETIME SPENDING CAPS. 
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, a health insurance issuer (including an entity 
licensed to sell insurance with respect to a State or group 
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101 
health plan) may not apply an annual or lifetime aggre-
gate spending cap on any health insurance coverage or 
plan offered by such issuer. The restriction of the previous 
sentence shall not apply with respect to a health insurance 
coverage or plan if, as of the date of the enactment of 
this Act, it would result in a significant decrease in access 
to benefits under the plan or would significantly increase 
premiums under the plan. 
(b) APPLICATION.—Subsection (a) shall be enforced 
as if it were included as a provision in parts A and B 
of title XXVII of the Public Health Service Act (as such 
title is in effect after the date of repeal of Public Law 
111–148 under section 101). 
SEC. 604. PREVENTING UNJUST CANCELLATION OF INSUR-
ANCE COVERAGE. 
(a) CLARIFICATION REGARDING APPLICATION
OF 
GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH 
INSURANCE COVERAGE.—Section 2742 of the Public 
Health Service Act (42 U.S.C. 300gg–42) is amended— 
(1) in its heading, by inserting ‘‘, CONTINU-
ATION IN FORCE, INCLUDING PROHIBITION OF 
RESCISSION,’’ 
after 
‘‘GUARANTEED
RENEW-
ABILITY’’; 
(2) in subsection (a), by inserting ‘‘, including 
without rescission,’’ after ‘‘continue in force’’; and 
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102 
(3) in subsection (b)(2), by inserting before the 
period at the end the following: ‘‘, including inten-
tional concealment of material facts regarding a 
health condition related to the condition for which 
coverage is being claimed’’. 
(b) OPPORTUNITY FOR INDEPENDENT, EXTERNAL 
THIRD PARTY REVIEW IN CERTAIN CASES.—Subpart 1 
of part B of title XXVII of the Public Health Service Act 
is amended by adding at the end the following new section: 
‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 
THIRD PARTY REVIEW IN CERTAIN CASES. 
‘‘(a) NOTICE AND REVIEW RIGHT.—If a health in-
surance issuer determines to nonrenew or not continue in 
force, including rescind, health insurance coverage for an 
individual in the individual market on the basis described 
in section 2742(b)(2) before such nonrenewal, discontinu-
ation, or rescission, may take effect the issuer shall pro-
vide the individual with notice of such proposed non-
renewal, discontinuation, or rescission and an opportunity 
for a review of such determination by an independent, ex-
ternal third party under procedures specified by the Sec-
retary. 
‘‘(b) INDEPENDENT DETERMINATION.—If the indi-
vidual requests such review by an independent, external 
third party of a nonrenewal, discontinuation, or rescission 
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103 
of health insurance coverage, the coverage shall remain in 
effect until such third party determines that the coverage 
may be nonrenewed, discontinued, or rescinded under sec-
tion 2742(b)(2).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply after the date of the enactment 
of this Act with respect to health insurance coverage 
issued before, on, or after such date. 
CHAPTER 2—REDUCING HEALTH CARE 
PREMIUMS AND THE NUMBER OF UN-
INSURED AMERICANS 
SEC. 611. STATE INNOVATION PROGRAMS. 
(a) PROGRAMS
THAT
REDUCE
THE
COST
OF 
HEALTH INSURANCE PREMIUMS.— 
(1) PAYMENTS TO STATES.— 
(A) FOR PREMIUM REDUCTIONS IN THE 
SMALL GROUP MARKET.—If the Secretary de-
termines that a State has reduced the average 
per capita premium for health insurance cov-
erage in the small group market in year 3, in 
year 6, or year 9 (as defined in subsection (c)) 
below the premium baseline for such year (as 
defined paragraph (2)), the Secretary shall pay 
the State an amount equal to the product of— 
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104 
(i) bonus premium percentage (as de-
fined in paragraph (3)) for the State, mar-
ket, and year; and 
(ii) the maximum State premium pay-
ment amount (as defined in paragraph (4)) 
for the State, market, and year. 
(B) FOR PREMIUM REDUCTIONS IN THE 
INDIVIDUAL MARKET.—If the Secretary deter-
mines that a State has reduced the average per 
capita premium for health insurance coverage 
in the individual market in year 3, in year 6, 
or in year 9 below the premium baseline for 
such year, the Secretary shall pay the State an 
amount equal to the product of— 
(i) bonus premium percentage for the 
State, market, and year; and 
(ii) the maximum State premium pay-
ment amount for the State, market, and 
year. 
(2) PREMIUM BASELINE.—For purposes of this 
subsection, the term ‘‘premium baseline’’ means, for 
a market in a State— 
(A) for year 1, the average per capita pre-
miums for health insurance coverage in such 
market in the State in such year; or 
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105 
(B) for a subsequent year, the baseline for 
the market in the State for the previous year 
under this paragraph increased by a percentage 
specified in accordance with a formula estab-
lished by the Secretary, in consultation with the 
Congressional Budget Office and the Bureau of 
the Census, that takes into account at least the 
following: 
(i) GROWTH FACTOR.—The inflation 
in the costs of inputs to health care serv-
ices in the year. 
(ii) 
HISTORIC
PREMIUM
GROWTH 
RATES.—Historic growth rates, during the 
10 years before year 1, of per capita pre-
miums for health insurance coverage. 
(iii) 
DEMOGRAPHIC
CONSIDER-
ATIONS.—Historic average changes in the 
demographics of the population covered 
that impact on the rate of growth of per 
capita health care costs. 
(3) BONUS PREMIUM PERCENTAGE DEFINED.— 
(A) IN GENERAL.—For purposes of this 
subsection, the term ‘‘bonus premium percent-
age’’ means, for the small group market or indi-
vidual market in a State for a year, such per-
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107 
group market or the individual market for a year, 
the product of— 
(A) the proportion (as determined by the 
Secretary), of the number of nonelderly individ-
uals lawfully residing in all the States who are 
enrolled in health insurance coverage in the re-
spective market in the year, who are residents 
of the State; and 
(B) the amount available for obligation 
from amounts appropriated under subsection 
(d) for such market with respect to perform-
ance in such year. 
(5) METHODOLOGY
FOR
CALCULATING
AVER-
AGE PER CAPITA PREMIUMS.— 
(A) 
ESTABLISHMENT.—The 
Secretary 
shall establish, by rule and consistent with this 
subsection, a methodology for computing the 
average per capita premiums for health insur-
ance coverage for the small group market and 
for the individual market in each State for each 
year beginning with year 1. 
(B) ADJUSTMENTS.—Under such method-
ology, the Secretary shall provide for the fol-
lowing adjustments (in a manner determined 
appropriate by the Secretary): 
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108 
(i) EXCLUSION OF ILLEGAL ALIENS.— 
An adjustment so as not to take into ac-
count enrollees who are not lawfully 
present in the United States and their pre-
mium costs. 
(ii) TREATING STATE PREMIUM SUB-
SIDIES
AS
PREMIUM
COSTS.—An adjust-
ment so as to increase per capita pre-
miums to remove the impact of premium 
subsidies made directly by a State to re-
duce health insurance premiums. 
(6) CONDITIONS OF PAYMENT.—As a condition 
of receiving a payment under paragraph (1), a State 
must agree to submit aggregate, non-individually 
identifiable data to the Secretary, in a form and 
manner specified by the Secretary, for use by the 
Secretary to determine the State’s premium baseline 
and premium performance level for purposes of this 
subsection. 
(b) PROGRAMS THAT REDUCE THE NUMBER OF UN-
INSURED.— 
(1) IN GENERAL.—If the Secretary determines 
that a State has reduced the percentage of unin-
sured nonelderly residents in year 5, year 7, or year 
9, below the uninsured baseline (as defined in para-
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109 
graph (2)) for the State for the year, the Secretary 
shall pay the State an amount equal to the product 
of— 
(A) bonus uninsured percentage (as de-
fined in paragraph (3)) for the State and year; 
and 
(B) the maximum uninsured payment 
amount (as defined in paragraph (4)) for the 
State and year. 
(2) UNINSURED BASELINE.— 
(A) IN GENERAL.—For purposes of this 
subsection, and subject to subparagraph (B), 
the term ‘‘uninsured baseline’’ means, for a 
State, the percentage of nonelderly residents in 
the State who are uninsured in year 1. 
(B) ADJUSTMENT.—The Secretary may, at 
the written request of a State, adjust the unin-
sured baseline for States for a year to take into 
account unanticipated and exceptional changes, 
such as an unanticipated migration, of non-
elderly individuals into, or out of, States in a 
manner that does not reflect substantially the 
proportion of uninsured nonelderly residents in 
the States involved in year 1. Any such adjust-
ment shall only be done in a manner that does 
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110 
not result in the average of the uninsured base-
lines for nonelderly residents for all States 
being changed. 
(3) BONUS UNINSURED PERCENTAGE.— 
(A) BONUS
UNINSURED
PERCENTAGE.— 
For purposes of this subsection, the term 
‘‘bonus uninsured percentage’’ means, for a 
State for a year, such percentage as determined 
in accordance with the following table, based on 
the uninsured performance level (as defined in 
subparagraph (B)) for such State and year: 
The bonus un-
insured per-
centage for a 
State is— 
For year 5 if the 
uninsured per-
formance level of 
the State is— 
For year 7 if the 
uninsured per-
formance level of 
the State is— 
For year 9 if the 
uninsured per-
formance level of 
the State is— 
100 percent 
at least 10% 
at least 15% 
at least 20% 
50 percent 
at least 7.5% but 
less than 10% 
at least 13.75% 
but less than 15% 
at least 18.75% 
but less than 20% 
25 percent 
at least 5% but 
less than 7.5% 
at least 12.5% but 
less than 13.75% 
at least 17.5% but 
less than 18.75% 
0 percent 
less than 5% 
less than 12.5% 
less than 17.5%. 
(B) UNINSURED PERFORMANCE LEVEL.— 
For purposes of this subsection, the term ‘‘un-
insured performance level’’ means, for a State 
for a year, the reduction (expressed as a per-
centage) in the percentage of uninsured non-
elderly residents in such State in the year as 
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111 
compared to the uninsured baseline for such 
State for such year. 
(4) MAXIMUM
STATE
UNINSURED
PAYMENT 
AMOUNT
DEFINED.—For purposes of this sub-
section, the term ‘‘maximum State uninsured pay-
ment amount’’ means, for a State for a year, the 
product of— 
(A) the proportion (as determined by the 
Secretary), of the number of uninsured non-
elderly individuals lawfully residing in all the 
States in the year, who are residents of the 
State; and 
(B) the amount available for obligation 
under this subsection from amounts appro-
priated under subsection (d) with respect to 
performance in such year. 
(5) METHODOLOGY FOR COMPUTING THE PER-
CENTAGE OF UNINSURED NONELDERLY RESIDENTS 
IN A STATE.— 
(A) 
ESTABLISHMENT.—The 
Secretary 
shall establish, by rule and consistent with this 
subsection, a methodology for computing the 
percentage of nonelderly residents in a State 
who are uninsured in each year beginning with 
year 1. 
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112 
(B) RULES.— 
(i) TREATMENT
OF
UNINSURED.— 
Such methodology shall treat as uninsured 
those residents who do not have health in-
surance coverage or other creditable cov-
erage (as defined in section 9801(c)(1) of 
the Internal Revenue Code of 1986), ex-
cept that such methodology shall rely upon 
data on the nonelderly and uninsured pop-
ulations within each State in such year 
provided through population surveys con-
ducted by federal agencies. 
(ii) LIMITATION TO NONELDERLY.— 
Such methodology shall exclude individuals 
who are 65 years of age or older. 
(iii) 
EXCLUSION
OF
ILLEGAL 
ALIENS.—Such methodology shall exclude 
individuals not lawfully present in the 
United States. 
(6) CONDITIONS OF PAYMENT.—As a condition 
of receiving a payment under paragraph (1), a State 
must agree to submit aggregate, non-individually 
identifiable data to the Secretary, in a form and 
manner specified by the Secretary, for use by the 
Secretary in determining the State’s uninsured base-
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113 
line and uninsured performance level for purposes of 
this subsection. 
(c) DEFINITIONS.—For purposes of this section: 
(1) GROUP HEALTH PLAN.—The term ‘‘group 
health plan’’ has the meaning given such term in 
section 9832(a) of the Internal Revenue Code of 
1986. 
(2) HEALTH INSURANCE COVERAGE.—The term 
‘‘health insurance coverage’’ has the meaning given 
such term in section 9832(b)(1) of the Internal Rev-
enue Code of 1986. 
(3) INDIVIDUAL MARKET.—Except as the Sec-
retary may otherwise provide in the case of group 
health plans that have fewer than 2 participants as 
current employees on the first day of a plan year, 
the term ‘‘individual market’’ means the market for 
health insurance coverage offered to individuals 
other than in connection with a group health plan. 
(4) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
(5) SMALL GROUP MARKET.—The term ‘‘small 
group market’’ means the market for health insur-
ance coverage under which individuals obtain health 
insurance coverage (directly or through any arrange-
ment) on behalf of themselves (and their depend-
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114 
ents) through a group health plan maintained by an 
employer who employed on average at least 2 but 
not more than 50 employees on business days during 
a calendar year. 
(6) STATE.—The term ‘‘State’’ means any of 
the 50 States and the District of Columbia. 
(7) YEARS.—The terms ‘‘year 1’’, ‘‘year 2’’, 
‘‘year 3’’, and similar subsequently numbered years 
mean 2012, 2013, 2014, and subsequent sequen-
tially numbered years. 
(d) APPROPRIATIONS; PAYMENTS.— 
(1) PAYMENTS FOR REDUCTIONS IN COST OF 
HEALTH INSURANCE COVERAGE.— 
(A) SMALL GROUP MARKET.— 
(i) IN GENERAL.—From any funds in 
the Treasury not otherwise appropriated, 
there is appropriated for payments under 
subsection (a)(1)(A)— 
(I) $18,000,000,000 with respect 
to performance in year 3; 
(II) $5,000,000,000 with respect 
to performance in year 6; and 
(III) $2,000,000,000 with re-
spect to performance in year 9. 
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115 
(ii) AVAILABILITY OF APPROPRIATED 
FUNDS.—Funds appropriated under clause 
(i) shall remain available until expended. 
(B) INDIVIDUAL MARKET.— 
(i) IN
GENERAL.—Subject to clause 
(ii), from any funds in the Treasury not 
otherwise appropriated, there is appro-
priated for payments under subsection 
(a)(1)(B)— 
(I) $7,000,000,000 with respect 
to performance in year 3; 
(II) $2,000,000,000 with respect 
to performance in year 6; and 
(III) $1,000,000,000 with re-
spect to performance in year 9. 
(ii) AVAILABILITY OF APPROPRIATED 
FUNDS.—Of the funds appropriated under 
clause (i) that are not expended or obli-
gated by the end of the year following the 
year for which the funds are appro-
priated— 
(I) 75 percent shall remain avail-
able until expended for payments 
under subsection (a)(1)(B); and 
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116 
(II) 25 percent shall remain 
available until expended for payments 
under subsection (a)(1)(A). 
(2) PAYMENTS FOR REDUCTIONS IN THE PER-
CENTAGE OF UNINSURED.— 
(A) IN GENERAL.—From any funds in the 
Treasury not otherwise appropriated, there is 
appropriated for payments under subsection 
(b)(1)— 
(i) $10,000,000,000 with respect to 
performance in year 5; 
(ii) $3,000,000,000 with respect to 
performance in year 7; and 
(iii) $2,000,000,000 with respect to 
performance in year 9. 
(B) 
AVAILABILITY
OF
APPROPRIATED 
FUNDS.—Funds appropriated under subpara-
graph (A) shall remain available until expended. 
(3) PAYMENT
TIMING.—Payments under this 
section shall be made in a form and manner speci-
fied by the Secretary in the year after the perform-
ance year involved. 
SEC. 612. HEALTH PLAN FINDERS. 
(a) STATE PLAN FINDERS.—Not later than 12 
months after the date of the enactment of this Act, each 
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State may contract with a private entity to develop and 
operate a plan finder website (referred to in this section 
as a ‘‘State plan finder’’) which shall provide information 
to individuals in such State on plans of health insurance 
coverage that are available to individuals in such State (in 
this section referred to as a ‘‘health insurance plan’’). 
Such State may not operate a plan finder itself. 
(b) MULTI-STATE PLAN FINDERS.— 
(1) IN GENERAL.—A private entity may operate 
a multi-State finder that operates under this section 
in the States involved in the same manner as a State 
plan finder would operate in a single State. 
(2) SHARING OF INFORMATION.—States shall 
regulate the manner in which data is shared between 
plan finders to ensure consistency and accuracy in 
the information about health insurance plans con-
tained in such finders. 
(c) REQUIREMENTS FOR PLAN FINDERS.—Each plan 
finder shall meet the following requirements: 
(1) The plan finder shall ensure that each 
health insurance plan in the plan finder meets the 
requirements for such plans under subsection (d). 
(2) The plan finder shall present complete in-
formation on the costs and benefits of health insur-
ance plans (including information on monthly pre-
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118 
mium, copayments, and deductibles) in a uniform 
manner that— 
(A) uses the standard definitions developed 
under paragraph (3); and 
(B) is designed to allow consumers to eas-
ily compare such plans. 
(3) The plan finder shall be available on the 
Internet and accessible to all individuals in the State 
or, in the case of a multi-State plan finder, in all 
States covered by the multi-State plan finder. 
(4) The plan finder shall allow consumers to 
search and sort data on the health insurance plans 
in the plan finder on criteria such as coverage of 
specific benefits (such as coverage of disease man-
agement services or pediatric care services), as well 
as data available on quality. 
(5) The plan finder shall meet all relevant State 
laws and regulations, including laws and regulations 
related to the marketing of insurance products. In 
the case of a multi-State plan finder, the finder shall 
meet such laws and regulations for all of the States 
involved. 
(6) The plan finder shall meet solvency, finan-
cial, and privacy requirements established by the 
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119 
State or States in which the plan finder operates or 
the Secretary for multi-State finders. 
(7) The plan finder and the employees of the 
plan finder shall be appropriately licensed in the 
State or States in which the plan finder operates, if 
such licensure is required by such State or States. 
(8) Notwithstanding subsection (f)(1), the plan 
finder shall assist individuals who are eligible for the 
Medicaid program under title XIX of the Social Se-
curity Act or State Children’s Health Insurance Pro-
gram under title XXI of such Act by including infor-
mation on Medicaid options, eligibility, and how to 
enroll. 
(d) REQUIREMENTS FOR PLANS PARTICIPATING IN 
A PLAN FINDER.— 
(1) IN GENERAL.—Each State shall ensure that 
health insurance plans participating in the State 
plan finder or in a multi-State plan finder meet the 
requirements of paragraph (2) (relating to adequacy 
of insurance coverage, consumer protection, and fi-
nancial strength). 
(2) SPECIFIC
REQUIREMENTS.—In order to 
participate in a plan finder, a health insurance plan 
must meet all of the following requirements, as de-
termined by each State in which such plan operates: 
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120 
(A) The health insurance plan shall be ac-
tuarially sound. 
(B) The health insurance plan may not 
have a history of abusive policy rescissions. 
(C) The health insurance plan shall meet 
financial and solvency requirements. 
(D) The health insurance plan shall dis-
close— 
(i) all financial arrangements involv-
ing the sale and purchase of health insur-
ance, such as the payment of fees and 
commissions; and 
(ii) such arrangements may not be 
abusive. 
(E) The health insurance plan shall main-
tain electronic health records that comply with 
the requirements of the American Recovery and 
Reinvestment Act of 2009 (Public Law 111–5) 
related to electronic health records. 
(F) The health insurance plan shall make 
available to plan enrollees via the finder, wheth-
er by information provided to the finder or by 
a website link directing the enrollee from the 
finder to the health insurance plan website, 
data that includes the price and cost to the in-
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121 
dividual of services offered by a provider ac-
cording to the terms and conditions of the 
health plan. Data described in this paragraph is 
not made public by the finder, only made avail-
able to the individual once enrolled in the 
health plan. 
(e) PROHIBITIONS.— 
(1) DIRECT
ENROLLMENT.—The State plan 
finder may not directly enroll individuals in health 
insurance plans. 
(2) CONFLICTS OF INTEREST.— 
(A) 
COMPANIES.—A 
health 
insurance 
issuer offering a health insurance plan through 
a plan finder may not— 
(i) be the private entity developing 
and maintaining a plan finder under sub-
sections (a) and (b); or 
(ii) have an ownership interest in such 
private entity or in the plan finder. 
(B) 
INDIVIDUALS.—An 
individual 
em-
ployed by a health insurance issuer offering a 
health insurance plan through a plan finder 
may not serve as a director or officer for— 
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122 
(i) the private entity developing and 
maintaining a plan finder under sub-
sections (a) and (b); or 
(ii) the plan finder. 
(f) CONSTRUCTION.—Nothing in this section shall be 
construed to allow the Secretary authority to regulate ben-
efit packages or to prohibit health insurance brokers and 
agents from— 
(1) utilizing the plan finder for any purpose; or 
(2) marketing or offering health insurance 
products. 
(g) PLAN FINDER DEFINED.—For purposes of this 
section, the term ‘‘plan finder’’ means a State plan finder 
under subsection (a) or a multi-State plan finder under 
subsection (b). 
(h) STATE DEFINED.—In this section, the term 
‘‘State’’ has the meaning given such term for purposes of 
title XIX of the Social Security Act. 
SEC. 613. ADMINISTRATIVE SIMPLIFICATION. 
(a) OPERATING RULES FOR HEALTH INFORMATION 
TRANSACTIONS.— 
(1) DEFINITION OF OPERATING RULES.—Sec-
tion 1171 of the Social Security Act (42 U.S.C. 
1320d) is amended by adding at the end the fol-
lowing: 
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‘‘(9) OPERATING RULES.—The term ‘operating 
rules’ means the necessary business rules and guide-
lines for the electronic exchange of information that 
are not defined by a standard or its implementation 
specifications as adopted for purposes of this part.’’. 
(2) OPERATING
RULES
AND
COMPLIANCE.— 
Section 1173 of the Social Security Act (42 U.S.C. 
1320d–2) is amended— 
(A) in subsection (a)(2), by adding at the 
end the following new subparagraph: 
‘‘(J) Electronic funds transfers.’’; and 
(B) by adding at the end the following new 
subsections: 
‘‘(g) OPERATING RULES.— 
‘‘(1) IN GENERAL.—The Secretary shall adopt 
a single set of operating rules for each transaction 
described in subsection (a)(2) with the goal of cre-
ating as much uniformity in the implementation of 
the electronic standards as possible. Such operating 
rules shall be consensus-based and reflect the nec-
essary business rules affecting health plans and 
health care providers and the manner in which they 
operate pursuant to standards issued under Health 
Insurance Portability and Accountability Act of 
1996. 
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124 
‘‘(2) OPERATING
RULES
DEVELOPMENT.—In 
adopting operating rules under this subsection, the 
Secretary shall rely on recommendations for oper-
ating rules developed by a qualified nonprofit entity, 
as selected by the Secretary, that meets the fol-
lowing requirements: 
‘‘(A) The entity focuses its mission on ad-
ministrative simplification. 
‘‘(B) The entity demonstrates an estab-
lished multi-stakeholder and consensus-based 
process for development of operating rules, in-
cluding representation by or participation from 
health plans, health care providers, vendors, rel-
evant Federal agencies, and other standard de-
velopment organizations. 
‘‘(C) The entity has established a public 
set of guiding principles that ensure the oper-
ating rules and process are open and trans-
parent. 
‘‘(D) The entity coordinates its activities 
with the HIT Policy Committee and the HIT 
Standards Committee (as established under 
title XXX of the Public Health Service Act) 
and complements the efforts of the Office of the 
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125 
National Healthcare Coordinator and its related 
health information exchange goals. 
‘‘(E) The entity incorporates national 
standards, including the transaction standards 
issued under Health Insurance Portability and 
Accountability Act of 1996. 
‘‘(F) The entity supports nondiscrimina-
tion and conflict of interest policies that dem-
onstrate a commitment to open, fair, and non-
discriminatory practices. 
‘‘(G) The entity allows for public review 
and updates of the operating rules. 
‘‘(3) REVIEW
AND
RECOMMENDATIONS.—The 
National Committee on Vital and Health Statistics 
shall— 
‘‘(A) review the operating rules developed 
by a nonprofit entity described under paragraph 
(2); 
‘‘(B) determine whether such rules rep-
resent a consensus view of the health care in-
dustry and are consistent with and do not alter 
current standards; 
‘‘(C) evaluate whether such rules are con-
sistent with electronic standards adopted for 
health information technology; and 
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126 
‘‘(D) submit to the Secretary a rec-
ommendation as to whether the Secretary 
should adopt such rules. 
‘‘(4) IMPLEMENTATION.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
adopt operating rules under this subsection, by 
regulation in accordance with subparagraph 
(C), following consideration of the rules devel-
oped by the non-profit entity described in para-
graph (2) and the recommendation submitted 
by the National Committee on Vital and Health 
Statistics under paragraph (3)(D) and having 
ensured consultation with providers. 
‘‘(B) ADOPTION
REQUIREMENTS; EFFEC-
TIVE DATES.— 
‘‘(i) ELIGIBILITY
FOR
A
HEALTH 
PLAN AND HEALTH CLAIM STATUS.—The 
set of operating rules for transactions for 
eligibility for a health plan and health 
claim status shall be adopted not later 
than July 1, 2013, in a manner ensuring 
that such rules are effective not later than 
January 1, 2015, and may allow for the 
use of a machine readable identification 
card. 
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127 
‘‘(ii) ELECTRONIC FUNDS TRANSFERS 
AND HEALTH CARE PAYMENT AND REMIT-
TANCE
ADVICE.—The set of operating 
rules for electronic funds transfers and 
health care payment and remittance advice 
shall be adopted not later than July 1, 
2014, in a manner ensuring that such 
rules are effective not later than January 
1, 2016. 
‘‘(iii) OTHER
COMPLETED
TRANS-
ACTIONS.—The set of operating rules for 
the remainder of the completed trans-
actions described in subsection (a)(2), in-
cluding health claims or equivalent encoun-
ter 
information, 
enrollment 
and 
disenrollment in a health plan, health plan 
premium payments, and referral certifi-
cation and authorization, shall be adopted 
not later than July 1, 2016, in a manner 
ensuring that such rules are effective not 
later than January 1, 2018. 
‘‘(C) EXPEDITED RULEMAKING.—The Sec-
retary shall promulgate an interim final rule 
applying any standard or operating rule rec-
ommended by the National Committee on Vital 
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128 
and Health Statistics pursuant to paragraph 
(3). The Secretary shall accept public comments 
on any interim final rule published under this 
subparagraph for 60 days after the date of such 
publication. 
‘‘(h) COMPLIANCE.— 
‘‘(1) HEALTH PLAN CERTIFICATION.— 
‘‘(A) ELIGIBILITY FOR A HEALTH PLAN, 
HEALTH
CLAIM
STATUS, ELECTRONIC
FUNDS 
TRANSFERS, HEALTH CARE PAYMENT AND RE-
MITTANCE ADVICE.—Not later than December 
31, 2015, a health plan shall file a statement 
with the Secretary, in such form as the Sec-
retary may require, certifying that the data and 
information systems for such plan are in com-
pliance with any applicable standards (as de-
scribed under paragraph (7) of section 1171) 
and operating rules (as described under para-
graph (9) of such section) for electronic funds 
transfers, eligibility for a health plan, health 
claim status, and health care payment and re-
mittance advice, respectively. 
‘‘(B) 
OTHER
COMPLETED
TRANS-
ACTIONS.—Not later than December 31, 2017, 
a health plan shall file a statement with the 
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129 
Secretary, in such form as the Secretary may 
require, certifying that the data and informa-
tion systems for such plan are in compliance 
with any applicable standards and operating 
rules for the remainder of the completed trans-
actions described in subsection (a)(2), including 
health claims or equivalent encounter informa-
tion, enrollment and disenrollment in a health 
plan, health plan premium payments, and refer-
ral certification and authorization, respectively. 
A health plan shall provide the same level of 
documentation to certify compliance with such 
transactions as is required to certify compliance 
with the transactions specified in subparagraph 
(A). 
‘‘(2) DOCUMENTATION
OF
COMPLIANCE.—A 
health plan shall provide the Secretary, in such form 
as the Secretary may require, with adequate docu-
mentation of compliance with the standards and op-
erating rules described under paragraph (1). A 
health plan shall not be considered to have provided 
adequate documentation and shall not be certified as 
being in compliance with such standards, unless the 
health plan— 
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130 
‘‘(A) demonstrates to the Secretary that 
the plan conducts the electronic transactions 
specified in paragraph (1) in a manner that 
fully complies with the regulations of the Sec-
retary; and 
‘‘(B) provides documentation showing that 
the plan has completed end-to-end testing for 
such transactions with their partners, such as 
hospitals and physicians. 
‘‘(3) SERVICE CONTRACTS.—A health plan shall 
be required to comply with any applicable certifi-
cation and compliance requirements (and provide the 
Secretary with adequate documentation of such com-
pliance) under this subsection for any entities that 
provide services pursuant to a contract with such 
health plan. 
‘‘(4) CERTIFICATION
BY
OUTSIDE
ENTITY.— 
The Secretary may contract with an independent, 
outside entity to certify that a health plan has com-
plied with the requirements under this subsection, 
provided that the certification standards employed 
by such entities are in accordance with any stand-
ards or rules issued by the Secretary. 
‘‘(5) COMPLIANCE WITH REVISED STANDARDS 
AND RULES.—A health plan (including entities de-
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131 
scribed under paragraph (3)) shall comply with the 
certification and documentation requirements under 
this subsection for any interim final rule promul-
gated by the Secretary under subsection (i) that 
amends any standard or operating rule described 
under paragraph (1) of this subsection. A health 
plan shall comply with such requirements not later 
than the effective date of the applicable interim final 
rule. 
‘‘(6) AUDITS
OF
HEALTH
PLANS.—The Sec-
retary shall conduct periodic audits to ensure that 
health plans (including entities described under 
paragraph (3)) are in compliance with any standards 
and operating rules that are described under para-
graph (1). 
‘‘(i) REVIEW AND AMENDMENT OF STANDARDS AND 
RULES.— 
‘‘(1) ESTABLISHMENT.—Not later than Janu-
ary 1, 2016, the Secretary shall establish a review 
committee (as described under paragraph (4)). 
‘‘(2) EVALUATIONS AND REPORTS.— 
‘‘(A) HEARINGS.—Not later than April 1, 
2016, and not less than biennially thereafter, 
the Secretary, acting through the review com-
mittee, shall conduct hearings to evaluate and 
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132 
review the existing standards and operating 
rules established under this section. 
‘‘(B) REPORT.—Not later than July 1, 
2016, and not less than biennially thereafter, 
the 
review 
committee 
shall 
provide 
rec-
ommendations for updating and improving such 
standards and rules. The review committee 
shall recommend a single set of operating rules 
per transaction standard and maintain the goal 
of creating as much uniformity as possible in 
the implementation of the electronic standards. 
‘‘(3) INTERIM FINAL RULEMAKING.— 
‘‘(A) IN GENERAL.—Any recommendations 
to amend existing standards and operating 
rules that have been approved by the review 
committee and reported to the Secretary under 
paragraph (2)(B) shall be adopted by the Sec-
retary through promulgation of an interim final 
rule not later than 90 days after receipt of the 
committee’s report. 
‘‘(B) PUBLIC COMMENT.— 
‘‘(i) PUBLIC COMMENT PERIOD.—The 
Secretary shall accept public comments on 
any interim final rule published under this 
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133 
paragraph for 60 days after the date of 
such publication. 
‘‘(ii) EFFECTIVE DATE.—The effective 
date of any amendment to existing stand-
ards or operating rules that is adopted 
through an interim final rule published 
under this paragraph shall be 25 months 
following the close of such public comment 
period. 
‘‘(4) REVIEW COMMITTEE.— 
‘‘(A) DEFINITION.—For the purposes of 
this subsection, the term ‘review committee’ 
means a committee within the Department of 
Health and Human services that has been des-
ignated by the Secretary to carry out this sub-
section, including— 
‘‘(i) the National Committee on Vital 
and Health Statistics; or 
‘‘(ii) any appropriate committee as de-
termined by the Secretary. 
‘‘(B) COORDINATION
OF
HIT
STAND-
ARDS.—In developing recommendations under 
this subsection, the review committee shall con-
sider the standards approved by the Office of 
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134 
the National Coordinator for Health Informa-
tion Technology. 
‘‘(j) PENALTIES.— 
‘‘(1) PENALTY FEE.— 
‘‘(A) IN GENERAL.—Not later than April 
1, 2016, and annually thereafter, the Secretary 
shall assess a penalty fee (as determined under 
subparagraph (B)) against a health plan that 
has failed to meet the requirements under sub-
section (h) with respect to certification and doc-
umentation of compliance with the standards 
(and their operating rules) as described under 
paragraph (1) of such subsection. 
‘‘(B) FEE AMOUNT.—Subject to subpara-
graphs (C), (D), and (E), the Secretary shall 
assess a penalty fee against a health plan in the 
amount of $1 per covered life until certification 
is complete. The penalty shall be assessed per 
person covered by the plan for which its data 
systems for major medical policies are not in 
compliance and shall be imposed against the 
health plan for each day that the plan is not in 
compliance with the requirements under sub-
section (h). 
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135 
‘‘(C) ADDITIONAL
PENALTY
FOR
MIS-
REPRESENTATION.—A health plan that know-
ingly provides inaccurate or incomplete informa-
tion in a statement of certification or docu-
mentation of compliance under subsection (h) 
shall be subject to a penalty fee that is double 
the amount that would otherwise be imposed 
under this subsection. 
‘‘(D) 
ANNUAL
FEE
INCREASE.—The 
amount of the penalty fee imposed under this 
subsection shall be increased on an annual basis 
by the annual percentage increase in total na-
tional health care expenditures, as determined 
by the Secretary. 
‘‘(E) PENALTY LIMIT.—A penalty fee as-
sessed against a health plan under this sub-
section shall not exceed, on an annual basis— 
‘‘(i) an amount equal to $20 per cov-
ered life under such plan; or 
‘‘(ii) an amount equal to $40 per cov-
ered life under the plan if such plan has 
knowingly provided inaccurate or incom-
plete information (as described under sub-
paragraph (C)). 
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136 
‘‘(F) DETERMINATION OF COVERED INDI-
VIDUALS.—The Secretary shall determine the 
number of covered lives under a health plan 
based upon the most recent statements and fil-
ings that have been submitted by such plan to 
the Securities and Exchange Commission. 
‘‘(2) NOTICE AND DISPUTE PROCEDURE.—The 
Secretary shall establish a procedure for assessment 
of penalty fees under this subsection that provides a 
health plan with reasonable notice and a dispute res-
olution procedure prior to provision of a notice of as-
sessment by the Secretary of the Treasury (as de-
scribed under paragraph (4)(B)). 
‘‘(3) PENALTY FEE REPORT.—Not later than 
May 1, 2016, and annually thereafter, the Secretary 
shall provide the Secretary of the Treasury with a 
report identifying those health plans that have been 
assessed a penalty fee under this subsection. 
‘‘(4) COLLECTION OF PENALTY FEE.— 
‘‘(A) IN GENERAL.—The Secretary of the 
Treasury, acting through the Financial Man-
agement Service, shall administer the collection 
of penalty fees from health plans that have been 
identified by the Secretary in the penalty fee re-
port provided under paragraph (3). 
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138 
‘‘(ii) treated as a past-due, legally en-
forceable debt owed to a Federal agency 
for purposes of section 6402(d) of the In-
ternal Revenue Code of 1986. 
‘‘(E) ADMINISTRATIVE
FEES.—Any fee 
charged or allocated for collection activities con-
ducted by the Financial Management Service 
will be passed on to a health plan on a pro-rata 
basis and added to any penalty fee collected 
from the plan.’’. 
(b) PROMULGATION OF RULES.— 
(1) UNIQUE HEALTH PLAN IDENTIFIER.—The 
Secretary shall promulgate a final rule to establish 
a unique health plan identifier (as described in sec-
tion 1173(b) of the Social Security Act (42 U.S.C. 
1320d–2(b))) based on the input of the National 
Committee of Vital and Health Statistics. The Sec-
retary may do so on an interim final basis and such 
rule shall be effective not later than October 1, 
2014. 
(2) ELECTRONIC FUNDS TRANSFER.—The Sec-
retary shall promulgate a final rule to establish a 
standard for electronic funds transfers (as described 
in section 1173(a)(2)(J) of the Social Security Act, 
as added by subsection (a)(2)(A)). The Secretary 
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139 
may do so on an interim final basis and shall adopt 
such standard not later than January 1, 2014, in a 
manner ensuring that such standard is effective not 
later than January 1, 2016. 
(c) EXPANSION OF ELECTRONIC TRANSACTIONS IN 
MEDICARE.—Section 1862(a) of the Social Security Act 
(42 U.S.C. 1395y(a)) is amended— 
(1) in paragraph (23), by striking the ‘‘or’’ at 
the end; 
(2) in paragraph (24), by striking the period 
and inserting ‘‘; or’’; and 
(3) by inserting after paragraph (24) the fol-
lowing new paragraph: 
‘‘(25) not later than January 1, 2016, for 
which the payment is other than by electronic funds 
transfer (EFT) or an electronic remittance in a form 
as specified in ASC X12 835 Health Care Payment 
and Remittance Advice or subsequent standard.’’. 
(d) MEDICARE
AND MEDICAID COMPLIANCE RE-
PORTS.—Not later than July 1, 2015, the Secretary of 
Health and Human Services shall submit a report to the 
chairs and ranking members of the Committee on Ways 
and Means and the Committee on Energy and Commerce 
of the House of Representatives and the chairs and rank-
ing members of the Committee on Health, Education, 
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140 
Labor, and Pensions and the Committee on Finance of 
the Senate on the extent to which the Medicare program 
and providers that serve beneficiaries under that program, 
and State Medicaid programs and providers that serve 
beneficiaries under those programs, transact electronically 
in accordance with transaction standards issued under the 
Health Insurance Portability and Accountability Act of 
1996, part C of title XI of the Social Security Act, and 
regulations promulgated under such Acts. 
Subtitle B—Improving Access to 
Health Care 
CHAPTER 
1—EXPANDING 
ACCESS 
AND 
LOWERING COSTS FOR SMALL BUSI-
NESSES 
SEC. 620. SHORT TITLE. 
This chapter may be cited as the ‘‘Small Business 
Health Fairness Act of 2011’’. 
SEC. 
621. 
RULES 
GOVERNING 
ASSOCIATION 
HEALTH 
PLANS. 
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 is amend-
ed by adding after part 7 the following new part: 
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141 
‘‘PART 8—RULES GOVERNING ASSOCIATION 
HEALTH PLANS 
‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 
‘‘(a) IN GENERAL.—For purposes of this part, the 
term ‘association health plan’ means a group health plan 
whose sponsor is (or is deemed under this part to be) de-
scribed in subsection (b). 
‘‘(b) SPONSORSHIP.—The sponsor of a group health 
plan is described in this subsection if such sponsor— 
‘‘(1) is organized and maintained in good faith, 
with a constitution and bylaws specifically stating its 
purpose and providing for periodic meetings on at 
least an annual basis, as a bona fide trade associa-
tion, a bona fide industry association (including a 
rural electric cooperative association or a rural tele-
phone cooperative association), a bona fide profes-
sional association, or a bona fide chamber of com-
merce (or similar bona fide business association, in-
cluding a corporation or similar organization that 
operates on a cooperative basis (within the meaning 
of section 1381 of the Internal Revenue Code of 
1986)), for substantial purposes other than that of 
obtaining or providing medical care; 
‘‘(2) is established as a permanent entity which 
receives the active support of its members and re-
quires for membership payment on a periodic basis 
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of dues or payments necessary to maintain eligibility 
for membership in the sponsor; and 
‘‘(3) does not condition membership, such dues 
or payments, or coverage under the plan on the 
basis of health status-related factors with respect to 
the employees of its members (or affiliated mem-
bers), or the dependents of such employees, and does 
not condition such dues or payments on the basis of 
group health plan participation. 
Any sponsor consisting of an association of entities which 
meet the requirements of paragraphs (1), (2), and (3) 
shall be deemed to be a sponsor described in this sub-
section. 
‘‘SEC. 
802. 
CERTIFICATION 
OF 
ASSOCIATION 
HEALTH 
PLANS. 
‘‘(a) IN GENERAL.—The applicable authority shall 
prescribe by regulation a procedure under which, subject 
to subsection (b), the applicable authority shall certify as-
sociation health plans which apply for certification as 
meeting the requirements of this part. 
‘‘(b) STANDARDS.—Under the procedure prescribed 
pursuant to subsection (a), in the case of an association 
health plan that provides at least one benefit option which 
does not consist of health insurance coverage, the applica-
ble authority shall certify such plan as meeting the re-
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quirements of this part only if the applicable authority is 
satisfied that the applicable requirements of this part are 
met (or, upon the date on which the plan is to commence 
operations, will be met) with respect to the plan. 
‘‘(c) REQUIREMENTS APPLICABLE
TO CERTIFIED 
PLANS.—An association health plan with respect to which 
certification under this part is in effect shall meet the ap-
plicable requirements of this part, effective on the date 
of certification (or, if later, on the date on which the plan 
is to commence operations). 
‘‘(d) REQUIREMENTS
FOR
CONTINUED
CERTIFI-
CATION.—The applicable authority may provide by regula-
tion for continued certification of association health plans 
under this part. 
‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED 
PLANS.—The applicable authority shall establish a class 
certification procedure for association health plans under 
which all benefits consist of health insurance coverage. 
Under such procedure, the applicable authority shall pro-
vide for the granting of certification under this part to 
the plans in each class of such association health plans 
upon appropriate filing under such procedure in connec-
tion with plans in such class and payment of the pre-
scribed fee under section 807(a). 
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144 
‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION 
HEALTH PLANS.—An association health plan which offers 
one or more benefit options which do not consist of health 
insurance coverage may be certified under this part only 
if such plan consists of any of the following: 
‘‘(1) a plan which offered such coverage on the 
date of the enactment of the Small Business Health 
Fairness Act of 2011, 
‘‘(2) a plan under which the sponsor does not 
restrict membership to one or more trades and busi-
nesses or industries and whose eligible participating 
employers represent a broad cross-section of trades 
and businesses or industries, or 
‘‘(3) a plan whose eligible participating employ-
ers represent one or more trades or businesses, or 
one or more industries, consisting of any of the fol-
lowing: agriculture; equipment and automobile deal-
erships; barbering and cosmetology; certified public 
accounting practices; child care; construction; dance, 
theatrical and orchestra productions; disinfecting 
and pest control; financial services; fishing; food 
service establishments; hospitals; labor organiza-
tions; logging; manufacturing (metals); mining; med-
ical and dental practices; medical laboratories; pro-
fessional consulting services; sanitary services; trans-
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145 
portation (local and freight); warehousing; whole-
saling/distributing; or any other trade or business or 
industry which has been indicated as having average 
or above-average risk or health claims experience by 
reason of State rate filings, denials of coverage, pro-
posed premium rate levels, or other means dem-
onstrated by such plan in accordance with regula-
tions. 
‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 
BOARDS OF TRUSTEES. 
‘‘(a) SPONSOR.—The requirements of this subsection 
are met with respect to an association health plan if the 
sponsor has met (or is deemed under this part to have 
met) the requirements of section 801(b) for a continuous 
period of not less than 3 years ending with the date of 
the application for certification under this part. 
‘‘(b) BOARD OF TRUSTEES.—The requirements of 
this subsection are met with respect to an association 
health plan if the following requirements are met: 
‘‘(1) FISCAL CONTROL.—The plan is operated, 
pursuant to a trust agreement, by a board of trust-
ees which has complete fiscal control over the plan 
and which is responsible for all operations of the 
plan. 
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146 
‘‘(2) RULES
OF
OPERATION
AND
FINANCIAL 
CONTROLS.—The board of trustees has in effect 
rules of operation and financial controls, based on a 
3-year plan of operation, adequate to carry out the 
terms of the plan and to meet all requirements of 
this title applicable to the plan. 
‘‘(3) RULES
GOVERNING
RELATIONSHIP
TO 
PARTICIPATING
EMPLOYERS
AND
TO
CONTRAC-
TORS.— 
‘‘(A) BOARD MEMBERSHIP.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii) and (iii), the members 
of the board of trustees are individuals se-
lected from individuals who are the owners, 
officers, directors, or employees of the par-
ticipating employers or who are partners in 
the participating employers and actively 
participate in the business. 
‘‘(ii) LIMITATION.— 
‘‘(I) GENERAL RULE.—Except as 
provided in subclauses (II) and (III), 
no such member is an owner, officer, 
director, or employee of, or partner in, 
a contract administrator or other 
service provider to the plan. 
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‘‘(II) LIMITED
EXCEPTION
FOR 
PROVIDERS OF SERVICES SOLELY ON 
BEHALF OF THE SPONSOR.—Officers 
or employees of a sponsor which is a 
service provider (other than a contract 
administrator) to the plan may be 
members of the board if they con-
stitute not more than 25 percent of 
the membership of the board and they 
do not provide services to the plan 
other than on behalf of the sponsor. 
‘‘(III) 
TREATMENT
OF
PRO-
VIDERS
OF
MEDICAL
CARE.—In the 
case of a sponsor which is an associa-
tion whose membership consists pri-
marily of providers of medical care, 
subclause (I) shall not apply in the 
case of any service provider described 
in subclause (I) who is a provider of 
medical care under the plan. 
‘‘(iii) CERTAIN
PLANS
EXCLUDED.— 
Clause (i) shall not apply to an association 
health plan which is in existence on the 
date of the enactment of the Small Busi-
ness Health Fairness Act of 2011. 
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148 
‘‘(B) SOLE
AUTHORITY.—The board has 
sole authority under the plan to approve appli-
cations for participation in the plan and to con-
tract with a service provider to administer the 
day-to-day affairs of the plan. 
‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 
the case of a group health plan which is established and 
maintained by a franchiser for a franchise network con-
sisting of its franchisees— 
‘‘(1) the requirements of subsection (a) and sec-
tion 801(a) shall be deemed met if such require-
ments would otherwise be met if the franchiser were 
deemed to be the sponsor referred to in section 
801(b), such network were deemed to be an associa-
tion described in section 801(b), and each franchisee 
were deemed to be a member (of the association and 
the sponsor) referred to in section 801(b); and 
‘‘(2) the requirements of section 804(a)(1) shall 
be deemed met. 
The Secretary may by regulation define for purposes of 
this subsection the terms ‘franchiser’, ‘franchise network’, 
and ‘franchisee’. 
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149 
‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE-
MENTS. 
‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 
requirements of this subsection are met with respect to 
an association health plan if, under the terms of the 
plan— 
‘‘(1) each participating employer must be— 
‘‘(A) a member of the sponsor, 
‘‘(B) the sponsor, or 
‘‘(C) an affiliated member of the sponsor 
with respect to which the requirements of sub-
section (b) are met, 
except that, in the case of a sponsor which is a pro-
fessional association or other individual-based asso-
ciation, if at least one of the officers, directors, or 
employees of an employer, or at least one of the in-
dividuals who are partners in an employer and who 
actively participates in the business, is a member or 
such an affiliated member of the sponsor, partici-
pating employers may also include such employer; 
and 
‘‘(2) all individuals commencing coverage under 
the plan after certification under this part must 
be— 
‘‘(A) active or retired owners (including 
self-employed individuals), officers, directors, or 
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150 
employees of, or partners in, participating em-
ployers; or 
‘‘(B) the beneficiaries of individuals de-
scribed in subparagraph (A). 
‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM-
PLOYEES.—In the case of an association health plan in 
existence on the date of the enactment of the Small Busi-
ness Health Fairness Act of 2011, an affiliated member 
of the sponsor of the plan may be offered coverage under 
the plan as a participating employer only if— 
‘‘(1) the affiliated member was an affiliated 
member on the date of certification under this part; 
or 
‘‘(2) during the 12-month period preceding the 
date of the offering of such coverage, the affiliated 
member has not maintained or contributed to a 
group health plan with respect to any of its employ-
ees who would otherwise be eligible to participate in 
such association health plan. 
‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re-
quirements of this subsection are met with respect to an 
association health plan if, under the terms of the plan, 
no participating employer may provide health insurance 
coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
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151 
contemporaneously provided to employees of the employer 
under the plan, if such exclusion of the employee from cov-
erage under the plan is based on a health status-related 
factor with respect to the employee and such employee 
would, but for such exclusion on such basis, be eligible 
for coverage under the plan. 
‘‘(d) PROHIBITION
OF DISCRIMINATION AGAINST 
EMPLOYERS
AND EMPLOYEES ELIGIBLE TO PARTICI-
PATE.—The requirements of this subsection are met with 
respect to an association health plan if— 
‘‘(1) under the terms of the plan, all employers 
meeting the preceding requirements of this section 
are eligible to qualify as participating employers for 
all geographically available coverage options, unless, 
in the case of any such employer, participation or 
contribution requirements of the type referred to in 
section 2711 of the Public Health Service Act are 
not met; 
‘‘(2) upon request, any employer eligible to par-
ticipate is furnished information regarding all cov-
erage options available under the plan; and 
‘‘(3) the applicable requirements of sections 
701, 702, and 703 are met with respect to the plan. 
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152 
‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 
DOCUMENTS, CONTRIBUTION RATES, AND 
BENEFIT OPTIONS. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if the 
following requirements are met: 
‘‘(1) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the plan in-
clude a written instrument, meeting the require-
ments of an instrument required under section 
402(a)(1), which— 
‘‘(A) provides that the board of trustees 
serves as the named fiduciary required for plans 
under section 402(a)(1) and serves in the ca-
pacity of a plan administrator (referred to in 
section 3(16)(A)); 
‘‘(B) provides that the sponsor of the plan 
is to serve as plan sponsor (referred to in sec-
tion 3(16)(B)); and 
‘‘(C) incorporates the requirements of sec-
tion 806. 
‘‘(2) CONTRIBUTION
RATES
MUST
BE
NON-
DISCRIMINATORY.— 
‘‘(A) The contribution rates for any par-
ticipating small employer do not vary on the 
basis of any health status-related factor in rela-
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153 
tion to employees of such employer or their 
beneficiaries and do not vary on the basis of the 
type of business or industry in which such em-
ployer is engaged. 
‘‘(B) Nothing in this title or any other pro-
vision of law shall be construed to preclude an 
association health plan, or a health insurance 
issuer offering health insurance coverage in 
connection with an association health plan, 
from— 
‘‘(i) setting contribution rates based 
on the claims experience of the plan; or 
‘‘(ii) varying contribution rates for 
small employers in a State to the extent 
that such rates could vary using the same 
methodology employed in such State for 
regulating premium rates in the small 
group market with respect to health insur-
ance coverage offered in connection with 
bona fide associations (within the meaning 
of section 2791(d)(3) of the Public Health 
Service Act), 
subject to the requirements of section 702(b) 
relating to contribution rates. 
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154 
‘‘(3) FLOOR FOR NUMBER OF COVERED INDI-
VIDUALS
WITH
RESPECT
TO
CERTAIN
PLANS.—If 
any benefit option under the plan does not consist 
of health insurance coverage, the plan has as of the 
beginning of the plan year not fewer than 1,000 par-
ticipants and beneficiaries. 
‘‘(4) MARKETING REQUIREMENTS.— 
‘‘(A) IN
GENERAL.—If a benefit option 
which consists of health insurance coverage is 
offered under the plan, State-licensed insurance 
agents shall be used to distribute to small em-
ployers coverage which does not consist of 
health insurance coverage in a manner com-
parable to the manner in which such agents are 
used to distribute health insurance coverage. 
‘‘(B) 
STATE-LICENSED
INSURANCE 
AGENTS.—For purposes of subparagraph (A), 
the term ‘State-licensed insurance agents’ 
means one or more agents who are licensed in 
a State and are subject to the laws of such 
State relating to licensure, qualification, test-
ing, examination, and continuing education of 
persons authorized to offer, sell, or solicit 
health insurance coverage in such State. 
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155 
‘‘(5) 
REGULATORY
REQUIREMENTS.—Such 
other requirements as the applicable authority deter-
mines are necessary to carry out the purposes of this 
part, which shall be prescribed by the applicable au-
thority by regulation. 
‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO 
DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 
nothing in this part or any provision of State law (as de-
fined in section 514(c)(1)) shall be construed to preclude 
an association health plan, or a health insurance issuer 
offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion 
in selecting the specific items and services consisting of 
medical care to be included as benefits under such plan 
or coverage, except (subject to section 514) in the case 
of (1) any law to the extent that it is not preempted under 
section 731(a)(1) with respect to matters governed by sec-
tion 711, 712, or 713, or (2) any law of the State with 
which filing and approval of a policy type offered by the 
plan was initially obtained to the extent that such law pro-
hibits an exclusion of a specific disease from such cov-
erage. 
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156 
‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 
FOR 
SOLVENCY 
FOR 
PLANS 
PROVIDING 
HEALTH BENEFITS IN ADDITION TO HEALTH 
INSURANCE COVERAGE. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if— 
‘‘(1) the benefits under the plan consist solely 
of health insurance coverage; or 
‘‘(2) if the plan provides any additional benefit 
options which do not consist of health insurance cov-
erage, the plan— 
‘‘(A) establishes and maintains reserves 
with respect to such additional benefit options, 
in amounts recommended by the qualified actu-
ary, consisting of— 
‘‘(i) a reserve sufficient for unearned 
contributions; 
‘‘(ii) a reserve sufficient for benefit li-
abilities which have been incurred, which 
have not been satisfied, and for which risk 
of loss has not yet been transferred, and 
for expected administrative costs with re-
spect to such benefit liabilities; 
‘‘(iii) a reserve sufficient for any other 
obligations of the plan; and 
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157 
‘‘(iv) a reserve sufficient for a margin 
of error and other fluctuations, taking into 
account the specific circumstances of the 
plan; and 
‘‘(B) establishes and maintains aggregate 
and specific excess/stop loss insurance and sol-
vency indemnification, with respect to such ad-
ditional benefit options for which risk of loss 
has not yet been transferred, as follows: 
‘‘(i) The plan shall secure aggregate 
excess/stop loss insurance for the plan with 
an attachment point which is not greater 
than 125 percent of expected gross annual 
claims. The applicable authority may by 
regulation provide for upward adjustments 
in the amount of such percentage in speci-
fied circumstances in which the plan spe-
cifically provides for and maintains re-
serves in excess of the amounts required 
under subparagraph (A). 
‘‘(ii) The plan shall secure specific ex-
cess/stop loss insurance for the plan with 
an attachment point which is at least equal 
to an amount recommended by the plan’s 
qualified actuary. The applicable authority 
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158 
may by regulation provide for adjustments 
in the amount of such insurance in speci-
fied circumstances in which the plan spe-
cifically provides for and maintains re-
serves in excess of the amounts required 
under subparagraph (A). 
‘‘(iii) The plan shall secure indem-
nification insurance for any claims which 
the plan is unable to satisfy by reason of 
a plan termination. 
Any person issuing to a plan insurance described in clause 
(i), (ii), or (iii) of subparagraph (B) shall notify the Sec-
retary of any failure of premium payment meriting can-
cellation of the policy prior to undertaking such a cancella-
tion. Any regulations prescribed by the applicable author-
ity pursuant to clause (i) or (ii) of subparagraph (B) may 
allow for such adjustments in the required levels of excess/ 
stop loss insurance as the qualified actuary may rec-
ommend, taking into account the specific circumstances 
of the plan. 
‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS 
RESERVES.—In the case of any association health plan de-
scribed in subsection (a)(2), the requirements of this sub-
section are met if the plan establishes and maintains sur-
plus in an amount at least equal to— 
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159 
‘‘(1) $500,000, or 
‘‘(2) such greater amount (but not greater than 
$2,000,000) as may be set forth in regulations pre-
scribed by the applicable authority, considering the 
level of aggregate and specific excess/stop loss insur-
ance provided with respect to such plan and other 
factors related to solvency risk, such as the plan’s 
projected levels of participation or claims, the nature 
of the plan’s liabilities, and the types of assets avail-
able to assure that such liabilities are met. 
‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 
any association health plan described in subsection (a)(2), 
the applicable authority may provide such additional re-
quirements relating to reserves, excess/stop loss insurance, 
and indemnification insurance as the applicable authority 
considers appropriate. Such requirements may be provided 
by regulation with respect to any such plan or any class 
of such plans. 
‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR-
ANCE.—The applicable authority may provide for adjust-
ments to the levels of reserves otherwise required under 
subsections (a) and (b) with respect to any plan or class 
of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans. 
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160 
‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 
applicable authority may permit an association health plan 
described in subsection (a)(2) to substitute, for all or part 
of the requirements of this section (except subsection 
(a)(2)(B)(iii)), such security, guarantee, hold-harmless ar-
rangement, or other financial arrangement as the applica-
ble authority determines to be adequate to enable the plan 
to fully meet all its financial obligations on a timely basis 
and is otherwise no less protective of the interests of par-
ticipants and beneficiaries than the requirements for 
which it is substituted. The applicable authority may take 
into account, for purposes of this subsection, evidence pro-
vided by the plan or sponsor which demonstrates an as-
sumption of liability with respect to the plan. Such evi-
dence may be in the form of a contract of indemnification, 
lien, bonding, insurance, letter of credit, recourse under 
applicable terms of the plan in the form of assessments 
of participating employers, security, or other financial ar-
rangement. 
‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT 
OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 
‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO-
CIATION HEALTH PLAN FUND.— 
‘‘(A) IN GENERAL.—In the case of an as-
sociation health plan described in subsection 
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161 
(a)(2), the requirements of this subsection are 
met if the plan makes payments into the Asso-
ciation Health Plan Fund under this subpara-
graph when they are due. Such payments shall 
consist of annual payments in the amount of 
$5,000, and, in addition to such annual pay-
ments, such supplemental payments as the Sec-
retary may determine to be necessary under 
paragraph (2). Payments under this paragraph 
are payable to the Fund at the time determined 
by the Secretary. Initial payments are due in 
advance of certification under this part. Pay-
ments shall continue to accrue until a plan’s as-
sets are distributed pursuant to a termination 
procedure. 
‘‘(B) PENALTIES FOR FAILURE TO MAKE 
PAYMENTS.—If any payment is not made by a 
plan when it is due, a late payment charge of 
not more than 100 percent of the payment 
which was not timely paid shall be payable by 
the plan to the Fund. 
‘‘(C) CONTINUED
DUTY
OF
THE
SEC-
RETARY.—The Secretary shall not cease to 
carry out the provisions of paragraph (2) on ac-
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162 
count of the failure of a plan to pay any pay-
ment when due. 
‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE 
EXCESS/STOP LOSS INSURANCE COVERAGE AND IN-
DEMNIFICATION
INSURANCE
COVERAGE
FOR
CER-
TAIN PLANS.—In any case in which the applicable 
authority determines that there is, or that there is 
reason to believe that there will be: (A) a failure to 
take necessary corrective actions under section 
809(a) with respect to an association health plan de-
scribed in subsection (a)(2); or (B) a termination of 
such a plan under section 809(b) or 810(b)(8) (and, 
if the applicable authority is not the Secretary, cer-
tifies such determination to the Secretary), the Sec-
retary shall determine the amounts necessary to 
make payments to an insurer (designated by the 
Secretary) to maintain in force excess/stop loss in-
surance coverage or indemnification insurance cov-
erage for such plan, if the Secretary determines that 
there is a reasonable expectation that, without such 
payments, claims would not be satisfied by reason of 
termination of such coverage. The Secretary shall, to 
the extent provided in advance in appropriation 
Acts, pay such amounts so determined to the insurer 
designated by the Secretary. 
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‘‘(3) ASSOCIATION HEALTH PLAN FUND.— 
‘‘(A) IN GENERAL.—There is established 
on the books of the Treasury a fund to be 
known as the ‘Association Health Plan Fund’. 
The Fund shall be available for making pay-
ments pursuant to paragraph (2). The Fund 
shall be credited with payments received pursu-
ant to paragraph (1)(A), penalties received pur-
suant to paragraph (1)(B); and earnings on in-
vestments of amounts of the Fund under sub-
paragraph (B). 
‘‘(B) INVESTMENT.—Whenever the Sec-
retary determines that the moneys of the fund 
are in excess of current needs, the Secretary 
may request the investment of such amounts as 
the Secretary determines advisable by the Sec-
retary of the Treasury in obligations issued or 
guaranteed by the United States. 
‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 
of this section— 
‘‘(1) AGGREGATE
EXCESS/STOP
LOSS
INSUR-
ANCE.—The term ‘aggregate excess/stop loss insur-
ance’ means, in connection with an association 
health plan, a contract— 
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‘‘(A) under which an insurer (meeting such 
minimum standards as the applicable authority 
may prescribe by regulation) provides for pay-
ment to the plan with respect to aggregate 
claims under the plan in excess of an amount 
or amounts specified in such contract; 
‘‘(B) which is guaranteed renewable; and 
‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan. 
‘‘(2) SPECIFIC
EXCESS/STOP
LOSS
INSUR-
ANCE.—The term ‘specific excess/stop loss insur-
ance’ means, in connection with an association 
health plan, a contract— 
‘‘(A) under which an insurer (meeting such 
minimum standards as the applicable authority 
may prescribe by regulation) provides for pay-
ment to the plan with respect to claims under 
the plan in connection with a covered individual 
in excess of an amount or amounts specified in 
such contract in connection with such covered 
individual; 
‘‘(B) which is guaranteed renewable; and 
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165 
‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan. 
‘‘(h) INDEMNIFICATION INSURANCE.—For purposes 
of this section, the term ‘indemnification insurance’ 
means, in connection with an association health plan, a 
contract— 
‘‘(1) under which an insurer (meeting such min-
imum standards as the applicable authority may pre-
scribe by regulation) provides for payment to the 
plan with respect to claims under the plan which the 
plan is unable to satisfy by reason of a termination 
pursuant to section 809(b) (relating to mandatory 
termination); 
‘‘(2) which is guaranteed renewable and 
noncancellable for any reason (except as the applica-
ble authority may prescribe by regulation); and 
‘‘(3) which allows for payment of premiums by 
any third party on behalf of the insured plan. 
‘‘(i) RESERVES.—For purposes of this section, the 
term ‘reserves’ means, in connection with an association 
health plan, plan assets which meet the fiduciary stand-
ards under part 4 and such additional requirements re-
garding liquidity as the applicable authority may prescribe 
by regulation. 
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166 
‘‘(j) SOLVENCY STANDARDS WORKING GROUP.— 
‘‘(1) IN GENERAL.—Within 90 days after the 
date of the enactment of the Small Business Health 
Fairness Act of 2011, the applicable authority shall 
establish a Solvency Standards Working Group. In 
prescribing the initial regulations under this section, 
the applicable authority shall take into account the 
recommendations of such Working Group. 
‘‘(2) MEMBERSHIP.—The Working Group shall 
consist of not more than 15 members appointed by 
the applicable authority. The applicable authority 
shall include among persons invited to membership 
on the Working Group at least one of each of the 
following: 
‘‘(A) a representative of the National Asso-
ciation of Insurance Commissioners; 
‘‘(B) a representative of the American 
Academy of Actuaries; 
‘‘(C) a representative of the State govern-
ments, or their interests; 
‘‘(D) a representative of existing self-in-
sured arrangements, or their interests; 
‘‘(E) a representative of associations of the 
type referred to in section 801(b)(1), or their 
interests; and 
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167 
‘‘(F) a representative of multiemployer 
plans that are group health plans, or their in-
terests. 
‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE-
LATED REQUIREMENTS. 
‘‘(a) FILING FEE.—Under the procedure prescribed 
pursuant to section 802(a), an association health plan 
shall pay to the applicable authority at the time of filing 
an application for certification under this part a filing fee 
in the amount of $5,000, which shall be available in the 
case of the Secretary, to the extent provided in appropria-
tion Acts, for the sole purpose of administering the certifi-
cation procedures applicable with respect to association 
health plans. 
‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA-
TION FOR CERTIFICATION.—An application for certifi-
cation under this part meets the requirements of this sec-
tion only if it includes, in a manner and form which shall 
be prescribed by the applicable authority by regulation, at 
least the following information: 
‘‘(1) IDENTIFYING INFORMATION.—The names 
and addresses of— 
‘‘(A) the sponsor; and 
‘‘(B) the members of the board of trustees 
of the plan. 
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168 
‘‘(2) STATES IN WHICH PLAN INTENDS TO DO 
BUSINESS.—The States in which participants and 
beneficiaries under the plan are to be located and 
the number of them expected to be located in each 
such State. 
‘‘(3) BONDING REQUIREMENTS.—Evidence pro-
vided by the board of trustees that the bonding re-
quirements of section 412 will be met as of the date 
of the application or (if later) commencement of op-
erations. 
‘‘(4) PLAN DOCUMENTS.—A copy of the docu-
ments governing the plan (including any bylaws and 
trust agreements), the summary plan description, 
and other material describing the benefits that will 
be provided to participants and beneficiaries under 
the plan. 
‘‘(5) 
AGREEMENTS
WITH
SERVICE
PRO-
VIDERS.—A copy of any agreements between the 
plan and contract administrators and other service 
providers. 
‘‘(6) FUNDING REPORT.—In the case of asso-
ciation health plans providing benefits options in ad-
dition to health insurance coverage, a report setting 
forth information with respect to such additional 
benefit options determined as of a date within the 
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169 
120-day period ending with the date of the applica-
tion, including the following: 
‘‘(A) RESERVES.—A statement, certified 
by the board of trustees of the plan, and a 
statement of actuarial opinion, signed by a 
qualified actuary, that all applicable require-
ments of section 806 are or will be met in ac-
cordance with regulations which the applicable 
authority shall prescribe. 
‘‘(B) 
ADEQUACY
OF
CONTRIBUTION 
RATES.—A statement of actuarial opinion, 
signed by a qualified actuary, which sets forth 
a description of the extent to which contribution 
rates are adequate to provide for the payment 
of all obligations and the maintenance of re-
quired reserves under the plan for the 12- 
month period beginning with such date within 
such 120-day period, taking into account the 
expected coverage and experience of the plan. If 
the contribution rates are not fully adequate, 
the statement of actuarial opinion shall indicate 
the extent to which the rates are inadequate 
and the changes needed to ensure adequacy. 
‘‘(C) CURRENT AND PROJECTED VALUE OF 
ASSETS AND LIABILITIES.—A statement of ac-
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170 
tuarial opinion signed by a qualified actuary, 
which sets forth the current value of the assets 
and liabilities accumulated under the plan and 
a projection of the assets, liabilities, income, 
and expenses of the plan for the 12-month pe-
riod referred to in subparagraph (B). The in-
come statement shall identify separately the 
plan’s administrative expenses and claims. 
‘‘(D) 
COSTS
OF
COVERAGE
TO
BE 
CHARGED
AND
OTHER
EXPENSES.—A state-
ment of the costs of coverage to be charged, in-
cluding an itemization of amounts for adminis-
tration, reserves, and other expenses associated 
with the operation of the plan. 
‘‘(E) OTHER
INFORMATION.—Any other 
information as may be determined by the appli-
cable authority, by regulation, as necessary to 
carry out the purposes of this part. 
‘‘(c) FILING
NOTICE
OF
CERTIFICATION
WITH 
STATES.—A certification granted under this part to an 
association health plan shall not be effective unless written 
notice of such certification is filed with the applicable 
State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are 
located. For purposes of this subsection, an individual 
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171 
shall be considered to be located in the State in which a 
known address of such individual is located or in which 
such individual is employed. 
‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case 
of any association health plan certified under this part, 
descriptions of material changes in any information which 
was required to be submitted with the application for the 
certification under this part shall be filed in such form 
and manner as shall be prescribed by the applicable au-
thority by regulation. The applicable authority may re-
quire by regulation prior notice of material changes with 
respect to specified matters which might serve as the basis 
for suspension or revocation of the certification. 
‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS-
SOCIATION HEALTH PLANS.—An association health plan 
certified under this part which provides benefit options in 
addition to health insurance coverage for such plan year 
shall meet the requirements of section 103 by filing an 
annual report under such section which shall include infor-
mation described in subsection (b)(6) with respect to the 
plan year and, notwithstanding section 104(a)(1)(A), shall 
be filed with the applicable authority not later than 90 
days after the close of the plan year (or on such later date 
as may be prescribed by the applicable authority). The ap-
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172 
plicable authority may require by regulation such interim 
reports as it considers appropriate. 
‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The 
board of trustees of each association health plan which 
provides benefits options in addition to health insurance 
coverage and which is applying for certification under this 
part or is certified under this part shall engage, on behalf 
of all participants and beneficiaries, a qualified actuary 
who shall be responsible for the preparation of the mate-
rials comprising information necessary to be submitted by 
a qualified actuary under this part. The qualified actuary 
shall utilize such assumptions and techniques as are nec-
essary to enable such actuary to form an opinion as to 
whether the contents of the matters reported under this 
part— 
‘‘(1) are in the aggregate reasonably related to 
the experience of the plan and to reasonable expecta-
tions; and 
‘‘(2) represent such actuary’s best estimate of 
anticipated experience under the plan. 
The opinion by the qualified actuary shall be made with 
respect to, and shall be made a part of, the annual report. 
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173 
‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER-
MINATION. 
‘‘Except as provided in section 809(b), an association 
health plan which is or has been certified under this part 
may terminate (upon or at any time after cessation of ac-
cruals in benefit liabilities) only if the board of trustees, 
not less than 60 days before the proposed termination 
date— 
‘‘(1) provides to the participants and bene-
ficiaries a written notice of intent to terminate stat-
ing that such termination is intended and the pro-
posed termination date; 
‘‘(2) develops a plan for winding up the affairs 
of the plan in connection with such termination in 
a manner which will result in timely payment of all 
benefits for which the plan is obligated; and 
‘‘(3) submits such plan in writing to the appli-
cable authority. 
Actions required under this section shall be taken in such 
form and manner as may be prescribed by the applicable 
authority by regulation. 
‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI-
NATION. 
‘‘(a) ACTIONS
TO
AVOID
DEPLETION
OF
RE-
SERVES.—An association health plan which is certified 
under this part and which provides benefits other than 
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174 
health insurance coverage shall continue to meet the re-
quirements of section 806, irrespective of whether such 
certification continues in effect. The board of trustees of 
such plan shall determine quarterly whether the require-
ments of section 806 are met. In any case in which the 
board determines that there is reason to believe that there 
is or will be a failure to meet such requirements, or the 
applicable authority makes such a determination and so 
notifies the board, the board shall immediately notify the 
qualified actuary engaged by the plan, and such actuary 
shall, not later than the end of the next following month, 
make such recommendations to the board for corrective 
action as the actuary determines necessary to ensure com-
pliance with section 806. Not later than 30 days after re-
ceiving from the actuary recommendations for corrective 
actions, the board shall notify the applicable authority (in 
such form and manner as the applicable authority may 
prescribe by regulation) of such recommendations of the 
actuary for corrective action, together with a description 
of the actions (if any) that the board has taken or plans 
to take in response to such recommendations. The board 
shall thereafter report to the applicable authority, in such 
form and frequency as the applicable authority may speci-
fy to the board, regarding corrective action taken by the 
board until the requirements of section 806 are met. 
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175 
‘‘(b) MANDATORY TERMINATION.—In any case in 
which— 
‘‘(1) the applicable authority has been notified 
under subsection (a) (or by an issuer of excess/stop 
loss insurance or indemnity insurance pursuant to 
section 806(a)) of a failure of an association health 
plan which is or has been certified under this part 
and is described in section 806(a)(2) to meet the re-
quirements of section 806 and has not been notified 
by the board of trustees of the plan that corrective 
action has restored compliance with such require-
ments; and 
‘‘(2) the applicable authority determines that 
there is a reasonable expectation that the plan will 
continue to fail to meet the requirements of section 
806, 
the board of trustees of the plan shall, at the direction 
of the applicable authority, terminate the plan and, in the 
course of the termination, take such actions as the appli-
cable authority may require, including satisfying any 
claims referred to in section 806(a)(2)(B)(iii) and recov-
ering for the plan any liability under subsection 
(a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 
that the affairs of the plan will be, to the maximum extent 
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176 
possible, wound up in a manner which will result in timely 
provision of all benefits for which the plan is obligated. 
‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL-
VENT ASSOCIATION HEALTH PLANS PRO-
VIDING HEALTH BENEFITS IN ADDITION TO 
HEALTH INSURANCE COVERAGE. 
‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR 
INSOLVENT PLANS.—Whenever the Secretary determines 
that an association health plan which is or has been cer-
tified under this part and which is described in section 
806(a)(2) will be unable to provide benefits when due or 
is otherwise in a financially hazardous condition, as shall 
be defined by the Secretary by regulation, the Secretary 
shall, upon notice to the plan, apply to the appropriate 
United States district court for appointment of the Sec-
retary as trustee to administer the plan for the duration 
of the insolvency. The plan may appear as a party and 
other interested persons may intervene in the proceedings 
at the discretion of the court. The court shall appoint such 
Secretary trustee if the court determines that the trustee-
ship is necessary to protect the interests of the partici-
pants and beneficiaries or providers of medical care or to 
avoid any unreasonable deterioration of the financial con-
dition of the plan. The trusteeship of such Secretary shall 
continue until the conditions described in the first sen-
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177 
tence of this subsection are remedied or the plan is termi-
nated. 
‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon 
appointment as trustee under subsection (a), shall have 
the power— 
‘‘(1) to do any act authorized by the plan, this 
title, or other applicable provisions of law to be done 
by the plan administrator or any trustee of the plan; 
‘‘(2) to require the transfer of all (or any part) 
of the assets and records of the plan to the Sec-
retary as trustee; 
‘‘(3) to invest any assets of the plan which the 
Secretary holds in accordance with the provisions of 
the plan, regulations prescribed by the Secretary, 
and applicable provisions of law; 
‘‘(4) to require the sponsor, the plan adminis-
trator, any participating employer, and any employee 
organization representing plan participants to fur-
nish any information with respect to the plan which 
the Secretary as trustee may reasonably need in 
order to administer the plan; 
‘‘(5) to collect for the plan any amounts due the 
plan and to recover reasonable expenses of the trust-
eeship; 
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178 
‘‘(6) to commence, prosecute, or defend on be-
half of the plan any suit or proceeding involving the 
plan; 
‘‘(7) to issue, publish, or file such notices, state-
ments, and reports as may be required by the Sec-
retary by regulation or required by any order of the 
court; 
‘‘(8) to terminate the plan (or provide for its 
termination in accordance with section 809(b)) and 
liquidate the plan assets, to restore the plan to the 
responsibility of the sponsor, or to continue the 
trusteeship; 
‘‘(9) to provide for the enrollment of plan par-
ticipants and beneficiaries under appropriate cov-
erage options; and 
‘‘(10) to do such other acts as may be nec-
essary to comply with this title or any order of the 
court and to protect the interests of plan partici-
pants and beneficiaries and providers of medical 
care. 
‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac-
ticable after the Secretary’s appointment as trustee, the 
Secretary shall give notice of such appointment to— 
‘‘(1) the sponsor and plan administrator; 
‘‘(2) each participant; 
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179 
‘‘(3) each participating employer; and 
‘‘(4) if applicable, each employee organization 
which, for purposes of collective bargaining, rep-
resents plan participants. 
‘‘(d) ADDITIONAL DUTIES.—Except to the extent in-
consistent with the provisions of this title, or as may be 
otherwise ordered by the court, the Secretary, upon ap-
pointment as trustee under this section, shall be subject 
to the same duties as those of a trustee under section 704 
of title 11, United States Code, and shall have the duties 
of a fiduciary for purposes of this title. 
‘‘(e) OTHER PROCEEDINGS.—An application by the 
Secretary under this subsection may be filed notwith-
standing the pendency in the same or any other court of 
any bankruptcy, mortgage foreclosure, or equity receiver-
ship proceeding, or any proceeding to reorganize, conserve, 
or liquidate such plan or its property, or any proceeding 
to enforce a lien against property of the plan. 
‘‘(f) JURISDICTION OF COURT.— 
‘‘(1) IN GENERAL.—Upon the filing of an appli-
cation for the appointment as trustee or the issuance 
of a decree under this section, the court to which the 
application is made shall have exclusive jurisdiction 
of the plan involved and its property wherever lo-
cated with the powers, to the extent consistent with 
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180 
the purposes of this section, of a court of the United 
States having jurisdiction over cases under chapter 
11 of title 11, United States Code. Pending an adju-
dication under this section such court shall stay, and 
upon appointment by it of the Secretary as trustee, 
such court shall continue the stay of, any pending 
mortgage foreclosure, equity receivership, or other 
proceeding to reorganize, conserve, or liquidate the 
plan, the sponsor, or property of such plan or spon-
sor, and any other suit against any receiver, conser-
vator, or trustee of the plan, the sponsor, or prop-
erty of the plan or sponsor. Pending such adjudica-
tion and upon the appointment by it of the Sec-
retary as trustee, the court may stay any proceeding 
to enforce a lien against property of the plan or the 
sponsor or any other suit against the plan or the 
sponsor. 
‘‘(2) VENUE.—An action under this section 
may be brought in the judicial district where the 
sponsor or the plan administrator resides or does 
business or where any asset of the plan is situated. 
A district court in which such action is brought may 
issue process with respect to such action in any 
other judicial district. 
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181 
‘‘(g) PERSONNEL.—In accordance with regulations 
which shall be prescribed by the Secretary, the Secretary 
shall appoint, retain, and compensate accountants, actu-
aries, and other professional service personnel as may be 
necessary in connection with the Secretary’s service as 
trustee under this section. 
‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 
‘‘(a) IN GENERAL.—Notwithstanding section 514, a 
State may impose by law a contribution tax on an associa-
tion health plan described in section 806(a)(2), if the plan 
commenced operations in such State after the date of the 
enactment of the Small Business Health Fairness Act of 
2011. 
‘‘(b) CONTRIBUTION TAX.—For purposes of this sec-
tion, the term ‘contribution tax’ imposed by a State on 
an association health plan means any tax imposed by such 
State if— 
‘‘(1) such tax is computed by applying a rate to 
the amount of premiums or contributions, with re-
spect to individuals covered under the plan who are 
residents of such State, which are received by the 
plan from participating employers located in such 
State or from such individuals; 
‘‘(2) the rate of such tax does not exceed the 
rate of any tax imposed by such State on premiums 
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182 
or contributions received by insurers or health main-
tenance organizations for health insurance coverage 
offered in such State in connection with a group 
health plan; 
‘‘(3) such tax is otherwise nondiscriminatory; 
and 
‘‘(4) the amount of any such tax assessed on 
the plan is reduced by the amount of any tax or as-
sessment otherwise imposed by the State on pre-
miums, contributions, or both received by insurers or 
health maintenance organizations for health insur-
ance coverage, aggregate excess/stop loss insurance 
(as defined in section 806(g)(1)), specific excess/stop 
loss insurance (as defined in section 806(g)(2)), 
other insurance related to the provision of medical 
care under the plan, or any combination thereof pro-
vided by such insurers or health maintenance organi-
zations in such State in connection with such plan. 
‘‘SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION. 
‘‘(a) DEFINITIONS.—For purposes of this part— 
‘‘(1) GROUP HEALTH PLAN.—The term ‘group 
health plan’ has the meaning provided in section 
733(a)(1) (after applying subsection (b) of this sec-
tion). 
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183 
‘‘(2) MEDICAL CARE.—The term ‘medical care’ 
has the meaning provided in section 733(a)(2). 
‘‘(3) HEALTH
INSURANCE
COVERAGE.—The 
term ‘health insurance coverage’ has the meaning 
provided in section 733(b)(1). 
‘‘(4) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning provided 
in section 733(b)(2). 
‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap-
plicable authority’ means the Secretary, except that, 
in connection with any exercise of the Secretary’s 
authority regarding which the Secretary is required 
under section 506(d) to consult with a State, such 
term means the Secretary, in consultation with such 
State. 
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The 
term ‘health status-related factor’ has the meaning 
provided in section 733(d)(2). 
‘‘(7) INDIVIDUAL MARKET.— 
‘‘(A) IN GENERAL.—The term ‘individual 
market’ means the market for health insurance 
coverage offered to individuals other than in 
connection with a group health plan. 
‘‘(B) 
TREATMENT
OF
VERY
SMALL 
GROUPS.— 
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184 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), such term includes coverage offered in 
connection with a group health plan that 
has fewer than 2 participants as current 
employees or participants described in sec-
tion 732(d)(3) on the first day of the plan 
year. 
‘‘(ii) STATE
EXCEPTION.—Clause (i) 
shall not apply in the case of health insur-
ance coverage offered in a State if such 
State regulates the coverage described in 
such clause in the same manner and to the 
same extent as coverage in the small group 
market (as defined in section 2791(e)(5) of 
the Public Health Service Act) is regulated 
by such State. 
‘‘(8) PARTICIPATING
EMPLOYER.—The term 
‘participating employer’ means, in connection with 
an association health plan, any employer, if any indi-
vidual who is an employee of such employer, a part-
ner in such employer, or a self-employed individual 
who is such employer (or any dependent, as defined 
under the terms of the plan, of such individual) is 
or was covered under such plan in connection with 
the status of such individual as such an employee, 
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185 
partner, or self-employed individual in relation to the 
plan. 
‘‘(9) APPLICABLE
STATE
AUTHORITY.—The 
term ‘applicable State authority’ means, with respect 
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of 
title XXVII of the Public Health Service Act for the 
State involved with respect to such issuer. 
‘‘(10) QUALIFIED ACTUARY.—The term ‘quali-
fied actuary’ means an individual who is a member 
of the American Academy of Actuaries. 
‘‘(11) AFFILIATED MEMBER.—The term ‘affili-
ated member’ means, in connection with a sponsor— 
‘‘(A) a person who is otherwise eligible to 
be a member of the sponsor but who elects an 
affiliated status with the sponsor, 
‘‘(B) in the case of a sponsor with mem-
bers which consist of associations, a person who 
is a member of any such association and elects 
an affiliated status with the sponsor, or 
‘‘(C) in the case of an association health 
plan in existence on the date of the enactment 
of the Small Business Health Fairness Act of 
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186 
2011, a person eligible to be a member of the 
sponsor or one of its member associations. 
‘‘(12) LARGE EMPLOYER.—The term ‘large em-
ployer’ means, in connection with a group health 
plan with respect to a plan year, an employer who 
employed an average of at least 51 employees on 
business days during the preceding calendar year 
and who employs at least 2 employees on the first 
day of the plan year. 
‘‘(13) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, in connection with a group health 
plan with respect to a plan year, an employer who 
is not a large employer. 
‘‘(b) RULES OF CONSTRUCTION.— 
‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur-
poses of determining whether a plan, fund, or pro-
gram is an employee welfare benefit plan which is an 
association health plan, and for purposes of applying 
this title in connection with such plan, fund, or pro-
gram so determined to be such an employee welfare 
benefit plan— 
‘‘(A) in the case of a partnership, the term 
‘employer’ (as defined in section 3(5)) includes 
the partnership in relation to the partners, and 
the term ‘employee’ (as defined in section 3(6)) 
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187 
includes any partner in relation to the partner-
ship; and 
‘‘(B) in the case of a self-employed indi-
vidual, the term ‘employer’ (as defined in sec-
tion 3(5)) and the term ‘employee’ (as defined 
in section 3(6)) shall include such individual. 
‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED 
AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 
case of any plan, fund, or program which was estab-
lished or is maintained for the purpose of providing 
medical care (through the purchase of insurance or 
otherwise) for employees (or their dependents) cov-
ered thereunder and which demonstrates to the Sec-
retary that all requirements for certification under 
this part would be met with respect to such plan, 
fund, or program if such plan, fund, or program 
were a group health plan, such plan, fund, or pro-
gram shall be treated for purposes of this title as an 
employee welfare benefit plan on and after the date 
of such demonstration.’’. 
(b) CONFORMING AMENDMENTS
TO PREEMPTION 
RULES.— 
(1) Section 514(b)(6) of such Act (29 U.S.C. 
1144(b)(6)) is amended by adding at the end the 
following new subparagraph: 
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188 
‘‘(E) The preceding subparagraphs of this paragraph 
do not apply with respect to any State law in the case 
of an association health plan which is certified under part 
8.’’. 
(2) Section 514 of such Act (29 U.S.C. 1144) 
is amended— 
(A) in subsection (b)(4), by striking ‘‘Sub-
section (a)’’ and inserting ‘‘Subsections (a) and 
(d)’’; 
(B) in subsection (b)(5), by striking ‘‘sub-
section (a)’’ in subparagraph (A) and inserting 
‘‘subsection (a) of this section and subsections 
(a)(2)(B) and (b) of section 805’’, and by strik-
ing ‘‘subsection (a)’’ in subparagraph (B) and 
inserting ‘‘subsection (a) of this section or sub-
section (a)(2)(B) or (b) of section 805’’; 
(C) by redesignating subsections (d) and 
(e) as subsections (e) and (f), respectively; and 
(D) by inserting after subsection (c) the 
following new subsection: 
‘‘(d)(1) Except as provided in subsection (b)(4), the 
provisions of this title shall supersede any and all State 
laws insofar as they may now or hereafter preclude, or 
have the effect of precluding, a health insurance issuer 
from offering health insurance coverage in connection with 
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189 
an association health plan which is certified under part 
8. 
‘‘(2) Except as provided in paragraphs (4) and (5) 
of subsection (b) of this section— 
‘‘(A) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan certified under part 8 to a partici-
pating employer operating in such State, the provi-
sions of this title shall supersede any and all laws 
of such State insofar as they may preclude a health 
insurance issuer from offering health insurance cov-
erage of the same policy type to other employers op-
erating in the State which are eligible for coverage 
under such association health plan, whether or not 
such other employers are participating employers in 
such plan. 
‘‘(B) In any case in which health insurance cov-
erage of any policy type is offered in a State under 
an association health plan certified under part 8 and 
the filing, with the applicable State authority (as de-
fined in section 812(a)(9)), of the policy form in 
connection with such policy type is approved by such 
State authority, the provisions of this title shall su-
persede any and all laws of any other State in which 
health insurance coverage of such type is offered, in-
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190 
sofar as they may preclude, upon the filing in the 
same form and manner of such policy form with the 
applicable State authority in such other State, the 
approval of the filing in such other State. 
‘‘(3) Nothing in subsection (b)(6)(E) or the preceding 
provisions of this subsection shall be construed, with re-
spect to health insurance issuers or health insurance cov-
erage, to supersede or impair the law of any State— 
‘‘(A) providing solvency standards or similar 
standards regarding the adequacy of insurer capital, 
surplus, reserves, or contributions, or 
‘‘(B) relating to prompt payment of claims. 
‘‘(4) For additional provisions relating to association 
health plans, see subsections (a)(2)(B) and (b) of section 
805. 
‘‘(5) For purposes of this subsection, the term ‘asso-
ciation health plan’ has the meaning provided in section 
801(a), and the terms ‘health insurance coverage’, ‘par-
ticipating employer’, and ‘health insurance issuer’ have 
the meanings provided such terms in section 812, respec-
tively.’’. 
(3) Section 514(b)(6)(A) of such Act (29 
U.S.C. 1144(b)(6)(A)) is amended— 
(A) in clause (i)(II), by striking ‘‘and’’ at 
the end; 
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201 
providing benefits consisting of medical care for the 
employees and beneficiaries of its participating em-
ployers, at least 200 participating employers make 
contributions to such arrangement, such arrange-
ment has been in existence for at least 10 years, and 
such arrangement is licensed under the laws of one 
or more States to provide such benefits to its par-
ticipating employers, upon the filing with the appli-
cable authority (as defined in section 812(a)(5) of 
the Employee Retirement Income Security Act of 
1974 (as amended by this chapter)) by the arrange-
ment of an application for certification of the ar-
rangement under part 8 of subtitle B of title I of 
such Act— 
(A) such arrangement shall be deemed to 
be a group health plan for purposes of title I 
of such Act; 
(B) the requirements of sections 801(a) 
and 803(a) of the Employee Retirement Income 
Security Act of 1974 shall be deemed met with 
respect to such arrangement; 
(C) the requirements of section 803(b) of 
such Act shall be deemed met, if the arrange-
ment is operated by a board of directors 
which— 
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