by the annual percentage increase in the Con-
sumer Price Index (United States city average) 
applicable to such year. 
(C) USE OF COPAYMENTS.—In establishing 
cost-sharing levels for basic, enhanced, and pre-
mium plans under this subsection, the Sec-
retary shall, to the maximum extent possible, 
use only copayments and not coinsurance. 
(3) MINIMUM ACTUARIAL VALUE.— 
(A) IN GENERAL.—The cost-sharing under 
the essential benefits package shall be designed 
to provide a level of coverage that is designed 
to provide benefits that are actuarially equiva-
lent to approximately 70 percent of the full ac-
tuarial value of the benefits provided under the 
reference benefits package described in sub-
paragraph (B). 
(B) REFERENCE BENEFITS PACKAGE DE-
SCRIBED.—The reference benefits package de-
scribed in this subparagraph is the essential 
benefits package if there were no cost-sharing 
imposed. 
SEC. 123. HEALTH BENEFITS ADVISORY COMMITTEE. 
(a) ESTABLISHMENT.— 
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(1) IN GENERAL.—There is established a pri-
vate-public advisory committee which shall be a 
panel of medical and other experts to be known as 
the Health Benefits Advisory Committee to rec-
ommend covered benefits and essential, enhanced, 
and premium plans. 
(2) CHAIR.—The Surgeon General shall be a 
member and the chair of the Health Benefits Advi-
sory Committee. 
(3) MEMBERSHIP.—The Health Benefits Advi-
sory Committee shall be composed of the following 
members, in addition to the Surgeon General: 
(A) 9 members who are not Federal em-
ployees or officers and who are appointed by 
the President. 
(B) 9 members who are not Federal em-
ployees or officers and who are appointed by 
the Comptroller General of the United States in 
a manner similar to the manner in which the 
Comptroller General appoints members to the 
Medicare Payment Advisory Commission under 
section 1805(c) of the Social Security Act. 
(C) Such even number of members (not to 
exceed 8) who are Federal employees and offi-
cers, as the President may appoint. 
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Such initial appointments shall be made not later 
than 60 days after the date of the enactment of this 
Act. 
(4) TERMS.—Each member of the Health Bene-
fits Advisory Committee shall serve a 3-year term on 
the Committee, except that the terms of the initial 
members shall be adjusted in order to provide for a 
staggered term of appointment for all such mem-
bers. 
(5) PARTICIPATION.—The membership of the 
Health Benefits Advisory Committee shall at least 
reflect providers, consumer representatives, employ-
ers, labor, health insurance issuers, experts in health 
care financing and delivery, experts in racial and 
ethnic disparities, experts in care for those with dis-
abilities, representatives of relevant governmental 
agencies. and at least one practicing physician or 
other health professional and an expert on children’s 
health and shall represent a balance among various 
sectors of the health care system so that no single 
sector unduly influences the recommendations of 
such Committee. 
(b) DUTIES.— 
(1) RECOMMENDATIONS
ON
BENEFIT
STAND-
ARDS.—The Health Benefits Advisory Committee 
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shall recommend to the Secretary of Health and 
Human Services (in this subtitle referred to as the 
‘‘Secretary’’) benefit standards (as defined in para-
graph (4)), and periodic updates to such standards. 
In developing such recommendations, the Committee 
shall take into account innovation in health care and 
consider how such standards could reduce health dis-
parities. 
(2) DEADLINE.—The Health Benefits Advisory 
Committee shall recommend initial benefit standards 
to the Secretary not later than 1 year after the date 
of the enactment of this Act. 
(3) PUBLIC INPUT.—The Health Benefits Advi-
sory Committee shall allow for public input as a part 
of developing recommendations under this sub-
section. 
(4) BENEFIT
STANDARDS
DEFINED.—In this 
subtitle, the term ‘‘benefit standards’’ means stand-
ards respecting— 
(A) the essential benefits package de-
scribed in section 122, including categories of 
covered treatments, items and services within 
benefit classes, and cost-sharing; and 
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(B) the cost-sharing levels for enhanced 
plans and premium plans (as provided under 
section 203(c)) consistent with paragraph (5). 
(5) LEVELS OF COST-SHARING FOR ENHANCED 
AND PREMIUM PLANS.— 
(A) ENHANCED PLAN.—The level of cost- 
sharing for enhanced plans shall be designed so 
that such plans have benefits that are actuari-
ally equivalent to approximately 85 percent of 
the actuarial value of the benefits provided 
under the reference benefits package described 
in section 122(c)(3)(B). 
(B) PREMIUM PLAN.—The level of cost- 
sharing for premium plans shall be designed so 
that such plans have benefits that are actuari-
ally equivalent to approximately 95 percent of 
the actuarial value of the benefits provided 
under the reference benefits package described 
in section 122(c)(3)(B). 
(c) OPERATIONS.— 
(1) PER
DIEM
PAY.—Each member of the 
Health Benefits Advisory Committee shall receive 
travel expenses, including per diem in accordance 
with applicable provisions under subchapter I of 
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chapter 57 of title 5, United States Code, and shall 
otherwise serve without additional pay. 
(2) MEMBERS NOT TREATED AS FEDERAL EM-
PLOYEES.—Members of the Health Benefits Advi-
sory Committee shall not be considered employees of 
the Federal government solely by reason of any serv-
ice on the Committee. 
(3) APPLICATION OF FACA.—The Federal Advi-
sory Committee Act (5 U.S.C. App.), other than sec-
tion 14, shall apply to the Health Benefits Advisory 
Committee. 
(d) PUBLICATION.—The Secretary shall provide for 
publication in the Federal Register and the posting on the 
Internet website of the Department of Health and Human 
Services of all recommendations made by the Health Ben-
efits Advisory Committee under this section. 
SEC. 124. PROCESS FOR ADOPTION OF RECOMMENDA-
TIONS; ADOPTION OF BENEFIT STANDARDS. 
(a) PROCESS
FOR ADOPTION
OF RECOMMENDA-
TIONS.— 
(1) REVIEW OF RECOMMENDED STANDARDS.— 
Not later than 45 days after the date of receipt of 
benefit standards recommended under section 123 
(including such standards as modified under para-
graph (2)(B)), the Secretary shall review such 
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propose adoption of initial benefit standards by such 
deadline. 
(4) PUBLICATION.—The Secretary shall provide 
for publication in the Federal Register of all deter-
minations made by the Secretary under this sub-
section. 
(b) ADOPTION OF STANDARDS.— 
(1) INITIAL
STANDARDS.—Not later than 18 
months after the date of the enactment of this Act, 
the Secretary shall, through the rulemaking process 
consistent with subsection (a), adopt an initial set of 
benefit standards. 
(2) PERIODIC UPDATING STANDARDS.—Under 
subsection (a), the Secretary shall provide for the 
periodic updating of the benefit standards previously 
adopted under this section. 
(3) REQUIREMENT.—The Secretary may not 
adopt any benefit standards for an essential benefits 
package or for level of cost-sharing that are incon-
sistent with the requirements for such a package or 
level under sections 122 and 123(b)(5). 
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Subtitle D—Additional Consumer 
Protections 
SEC. 131. REQUIRING FAIR MARKETING PRACTICES BY 
HEALTH INSURERS. 
The Commissioner shall establish uniform marketing 
standards that all insured QHBP offering entities shall 
meet. 
SEC. 132. REQUIRING FAIR GRIEVANCE AND APPEALS 
MECHANISMS. 
(a) IN GENERAL.—A QHBP offering entity shall pro-
vide for timely grievance and appeals mechanisms that the 
Commissioner shall establish. 
(b) INTERNAL CLAIMS AND APPEALS PROCESS.— 
Under a qualified health benefits plan the QHBP offering 
entity shall provide an internal claims and appeals process 
that initially incorporates the claims and appeals proce-
dures (including urgent claims) set forth at section 
2560.503–1 of title 29, Code of Federal Regulations, as 
published on November 21, 2000 (65 Fed. Reg. 70246) 
and shall update such process in accordance with any 
standards that the Commissioner may establish. 
(c) EXTERNAL REVIEW PROCESS.— 
(1) IN GENERAL.—The Commissioner shall es-
tablish an external review process (including proce-
dures for expedited reviews of urgent claims) that 
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provides for an impartial, independent, and de novo 
review of denied claims under this subdivision. 
(2) REQUIRING FAIR GRIEVANCE AND APPEALS 
MECHANISMS.—A determination made, with respect 
to a qualified health benefits plan offered by a 
QHBP offering entity, under the external review 
process established under this subsection shall be 
binding on the plan and the entity. 
(d) CONSTRUCTION.—Nothing in this section shall be 
construed as affecting the availability of judicial review 
under State law for adverse decisions under subsection (b) 
or (c), subject to section 151. 
SEC. 133. REQUIRING INFORMATION TRANSPARENCY AND 
PLAN DISCLOSURE. 
(a) ACCURATE AND TIMELY DISCLOSURE.— 
(1) IN GENERAL.—A qualified health benefits 
plan shall comply with standards established by the 
Commissioner for the accurate and timely disclosure 
of plan documents, plan terms and conditions, 
claims payment policies and practices, periodic fi-
nancial disclosure, data on enrollment, data on 
disenrollment, data on the number of claims denials, 
data on rating practices, information on cost-sharing 
and payments with respect to any out-of-network 
coverage, and other information as determined ap-
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propriate by the Commissioner. The Commissioner 
shall require that such disclosure be provided in 
plain language. 
(2) PLAIN LANGUAGE.—In this subsection, the 
term ‘‘plain language’’ means language that the in-
tended audience, including individuals with limited 
English proficiency, can readily understand and use 
because that language is clean, concise, well-orga-
nized, and follows other best practices of plain lan-
guage writing. 
(3) GUIDANCE.—The Commissioner shall de-
velop and issue guidance on best practices of plain 
language writing. 
(b) CONTRACTING REIMBURSEMENT.—A qualified 
health benefits plan shall comply with standards estab-
lished by the Commissioner to ensure transparency to each 
health care provider relating to reimbursement arrange-
ments between such plan and such provider. 
(c) ADVANCE
NOTICE
OF
PLAN
CHANGES.—A 
change in a qualified health benefits plan shall not be 
made without such reasonable and timely advance notice 
to enrollees of such change. 
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SEC. 134. APPLICATION TO QUALIFIED HEALTH BENEFITS 
PLANS 
NOT 
OFFERED 
THROUGH 
THE 
HEALTH INSURANCE EXCHANGE. 
The requirements of the previous provisions of this 
subtitle shall apply to qualified health benefits plans that 
are not being offered through the Health Insurance Ex-
change only to the extent specified by the Commissioner. 
SEC. 135. TIMELY PAYMENT OF CLAIMS. 
A QHBP offering entity shall comply with the re-
quirements of section 1857(f) of the Social Security Act 
with respect to a qualified health benefits plan it offers 
in the same manner an Medicare Advantage organization 
is required to comply with such requirements with respect 
to a Medicare Advantage plan it offers under part C of 
Medicare. 
SEC. 136. STANDARDIZED RULES FOR COORDINATION AND 
SUBROGATION OF BENEFITS. 
The Commissioner shall establish standards for the 
coordination and subrogation of benefits and reimburse-
ment of payments in cases involving individuals and mul-
tiple plan coverage. 
SEC. 137. APPLICATION OF ADMINISTRATIVE SIMPLIFICA-
TION. 
A QHBP offering entity is required to comply with 
standards for electronic financial and administrative 
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transactions under section 1173A of the Social Security 
Act, added by section 163(a). 
Subtitle E—Governance 
SEC. 141. HEALTH CHOICES ADMINISTRATION; HEALTH 
CHOICES COMMISSIONER. 
(a) IN GENERAL.—There is hereby established, as an 
independent agency in the executive branch of the Govern-
ment, a Health Choices Administration (in this subdivision 
referred to as the ‘‘Administration’’). 
(b) COMMISSIONER.— 
(1) IN GENERAL.—The Administration shall be 
headed by a Health Choices Commissioner (in this 
subdivision referred to as the ‘‘Commissioner’’) who 
shall be appointed by the President, by and with the 
advice and consent of the Senate. 
(2) COMPENSATION; ETC.—The provisions of 
paragraphs (2), (5), and (7) of subsection (a) (relat-
ing to compensation, terms, general powers, rule-
making, and delegation) of section 702 of the Social 
Security Act (42 U.S.C. 902) shall apply to the 
Commissioner and the Administration in the same 
manner as such provisions apply to the Commis-
sioner of Social Security and the Social Security Ad-
ministration. 
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SEC. 142. DUTIES AND AUTHORITY OF COMMISSIONER. 
(a) DUTIES.—The Commissioner is responsible for 
carrying out the following functions under this subdivi-
sion: 
(1) QUALIFIED PLAN STANDARDS.—The estab-
lishment of qualified health benefits plan standards 
under this title, including the enforcement of such 
standards in coordination with State insurance regu-
lators and the Secretaries of Labor and the Treas-
ury. 
(2) HEALTH INSURANCE EXCHANGE.—The es-
tablishment and operation of a Health Insurance 
Exchange under subtitle A of title II. 
(3) INDIVIDUAL
AFFORDABILITY
CREDITS.— 
The administration of individual affordability credits 
under subtitle C of title II, including determination 
of eligibility for such credits. 
(4) ADDITIONAL FUNCTIONS.—Such additional 
functions as may be specified in this subdivision. 
(b) PROMOTING ACCOUNTABILITY.— 
(1) IN GENERAL.—The Commissioner shall un-
dertake activities in accordance with this subtitle to 
promote accountability of QHBP offering entities in 
meeting Federal health insurance requirements, re-
gardless of whether such accountability is with re-
spect to qualified health benefits plans offered 
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through the Health Insurance Exchange or outside 
of such Exchange. 
(2) COMPLIANCE EXAMINATION AND AUDITS.— 
(A) 
IN
GENERAL.—The 
commissioner 
shall, in coordination with States, conduct au-
dits of qualified health benefits plan compliance 
with Federal requirements.
Such audits may 
include random compliance audits and targeted 
audits in response to complaints or other sus-
pected non-compliance. 
(B) RECOUPMENT OF COSTS IN CONNEC-
TION
WITH
EXAMINATION
AND
AUDITS.—The 
Commissioner is authorized to recoup from 
qualified health benefits plans reimbursement 
for the costs of such examinations and audit of 
such QHBP offering entities. 
(c) DATA COLLECTION.—The Commissioner shall 
collect data for purposes of carrying out the Commis-
sioner’s duties, including for purposes of promoting qual-
ity and value, protecting consumers, and addressing dis-
parities in health and health care and may share such data 
with the Secretary of Health and Human Services. 
(d) SANCTIONS AUTHORITY.— 
(1) IN GENERAL.—In the case that the Com-
missioner determines that a QHBP offering entity 
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violates a requirement of this title, the Commis-
sioner may, in coordination with State insurance 
regulators and the Secretary of Labor, provide, in 
addition to any other remedies authorized by law, 
for any of the remedies described in paragraph (2). 
(2) REMEDIES.—The remedies described in this 
paragraph, with respect to a qualified health benefits 
plan offered by a QHBP offering entity, are— 
(A) civil money penalties of not more than 
the amount that would be applicable under 
similar circumstances for similar violations 
under section 1857(g) of the Social Security 
Act; 
(B) suspension of enrollment of individuals 
under such plan after the date the Commis-
sioner notifies the entity of a determination 
under paragraph (1) and until the Commis-
sioner is satisfied that the basis for such deter-
mination has been corrected and is not likely to 
recur; 
(C) in the case of an Exchange-partici-
pating health benefits plan, suspension of pay-
ment to the entity under the Health Insurance 
Exchange for individuals enrolled in such plan 
after the date the Commissioner notifies the en-
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tity of a determination under paragraph (1) 
and until the Secretary is satisfied that the 
basis for such determination has been corrected 
and is not likely to recur; or 
(D) working with State insurance regu-
lators to terminate plans for repeated failure by 
the offering entity to meet the requirements of 
this title. 
(e) STANDARD DEFINITIONS
OF INSURANCE
AND 
MEDICAL TERMS.—The Commissioner shall provide for 
the development of standards for the definitions of terms 
used in health insurance coverage, including insurance-re-
lated terms. 
(f) EFFICIENCY IN ADMINISTRATION.—The Commis-
sioner shall issue regulations for the effective and efficient 
administration of the Health Insurance Exchange and af-
fordability credits under subtitle C, including, with respect 
to the determination of eligibility for affordability credits, 
the use of personnel who are employed in accordance with 
the requirements of title 5, United States Code, to carry 
out the duties of the Commissioner or, in the case of sec-
tions 208 and 241(b)(2), the use of State personnel who 
are employed in accordance with standards prescribed by 
the Office of Personnel Management pursuant to section 
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208 of the Intergovernmental Personnel Act of 1970 (42 
U.S.C. 4728). 
SEC. 143. CONSULTATION AND COORDINATION. 
(a) CONSULTATION.—In carrying out the Commis-
sioner’s duties under this subdivision, the Commissioner, 
as appropriate, shall consult with at least with the fol-
lowing: 
(1) The National Association of Insurance 
Commissioners, State attorneys general, and State 
insurance regulators, including concerning the 
standards for insured qualified health benefits plans 
under this title and enforcement of such standards. 
(2) Appropriate State agencies, specifically con-
cerning the administration of individual affordability 
credits under subtitle C of title II and the offering 
of Exchange-participating health benefits plans, to 
Medicaid eligible individuals under subtitle A of such 
title. 
(3) Other appropriate Federal agencies. 
(4) Indian tribes and tribal organizations. 
(5) The National Association of Insurance 
Commissioners for purposes of using model guide-
lines established by such association for purposes of 
subtitles B and D. 
(b) COORDINATION.— 
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(1) IN GENERAL.—In carrying out the func-
tions of the Commissioner, including with respect to 
the enforcement of the provisions of this subdivision, 
the Commissioner shall work in coordination with 
existing Federal and State entities to the maximum 
extent feasible consistent with this subdivision and 
in a manner that prevents conflicts of interest in du-
ties and ensures effective enforcement. 
(2) UNIFORM STANDARDS.—The Commissioner, 
in coordination with such entities, shall seek to 
achieve uniform standards that adequately protect 
consumers in a manner that does not unreasonably 
affect employers and insurers. 
SEC. 144. HEALTH INSURANCE OMBUDSMAN. 
(a) IN GENERAL.—The Commissioner shall appoint 
within the Health Choices Administration a Qualified 
Health Benefits Plan Ombudsman who shall have exper-
tise and experience in the fields of health care and edu-
cation of (and assistance to) individuals. 
(b) DUTIES.—The Qualified Health Benefits Plan 
Ombudsman shall, in a linguistically appropriate man-
ner— 
(1) receive complaints, grievances, and requests 
for information submitted by individuals; 
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(2) provide assistance with respect to com-
plaints, grievances, and requests referred to in para-
graph (1), including— 
(A) helping individuals determine the rel-
evant information needed to seek an appeal of 
a decision or determination; 
(B) assistance to such individuals with any 
problems arising from disenrollment from such 
a plan; 
(C) assistance to such individuals in choos-
ing a qualified health benefits plan in which to 
enroll; and 
(D) assistance to such individuals in pre-
senting information under subtitle C (relating 
to affordability credits); and 
(3) submit annual reports to Congress and the 
Commissioner that describe the activities of the Om-
budsman and that include such recommendations for 
improvement in the administration of this subdivi-
sion as the Ombudsman determines appropriate. The 
Ombudsman shall not serve as an advocate for any 
increases in payments or new coverage of services, 
but may identify issues and problems in payment or 
coverage policies. 
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Subtitle F—Relation to Other 
Requirements; Miscellaneous 
SEC. 151. RELATION TO OTHER REQUIREMENTS. 
(a) COVERAGE
NOT
OFFERED
THROUGH
EX-
CHANGE.— 
(1) IN GENERAL.—In the case of health insur-
ance coverage not offered through the Health Insur-
ance Exchange (whether or not offered in connection 
with an employment-based health plan), and in the 
case of employment-based health plans, the require-
ments of this title do not supercede any require-
ments applicable under titles XXII and XXVII of 
the Public Health Service Act, parts 6 and 7 of sub-
title B of title I of the Employee Retirement Income 
Security Act of 1974, or State law, except insofar as 
such requirements prevent the application of a re-
quirement of this subdivision, as determined by the 
Commissioner. 
(2) CONSTRUCTION.—Nothing in paragraph (1) 
shall be construed as affecting the application of sec-
tion 514 of the Employee Retirement Income Secu-
rity Act of 1974. 
(b) COVERAGE OFFERED THROUGH EXCHANGE.— 
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(1) IN GENERAL.—In the case of health insur-
ance coverage offered through the Health Insurance 
Exchange— 
(A) the requirements of this title do not 
supercede any requirements (including require-
ments relating to genetic information non-
discrimination and mental health) applicable 
under title XXVII of the Public Health Service 
Act or under State law, except insofar as such 
requirements prevent the application of a re-
quirement of this subdivision, as determined by 
the Commissioner; and 
(B) individual rights and remedies under 
State laws shall apply. 
(2) CONSTRUCTION.—In the case of coverage 
described in paragraph (1), nothing in such para-
graph shall be construed as preventing the applica-
tion of rights and remedies under State laws with 
respect to any requirement referred to in paragraph 
(1)(A). 
SEC. 152. PROHIBITING DISCRIMINATION IN HEALTH CARE. 
(a) IN GENERAL.—Except as otherwise explicitly per-
mitted by this division and by subsequent regulations con-
sistent with this division, all health care and related serv-
ices (including insurance coverage and public health activi-
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ties) covered by this division shall be provided without re-
gard to personal characteristics extraneous to the provi-
sion of high quality health care or related services. 
(b) IMPLEMENTATION.—To implement the require-
ment set forth in subsection (a), the Secretary of Health 
and Human Services shall, not later than 18 months after 
the date of the enactment of this Act, promulgate such 
regulations as are necessary or appropriate to insure that 
all health care and related services (including insurance 
coverage and public health activities) covered by this divi-
sion are provided (whether directly or through contractual, 
licensing, or other arrangements) without regard to per-
sonal characteristics extraneous to the provision of high 
quality health care or related services. 
SEC. 153. WHISTLEBLOWER PROTECTION. 
(a) RETALIATION PROHIBITED.—No employer may 
discharge any employee or otherwise discriminate against 
any employee with respect to his compensation, terms, 
conditions, or other privileges of employment because the 
employee (or any person acting pursuant to a request of 
the employee)— 
(1) provided, caused to be provided, or is about 
to provide or cause to be provided to the employer, 
the Federal Government, or the attorney general of 
a State information relating to any violation of, or 
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any act or omission the employee reasonably believes 
to be a violation of any provision of this division or 
any order, rule, or regulation promulgated under 
this division; 
(2) testified or is about to testify in a pro-
ceeding concerning such violation; 
(3) assisted or participated or is about to assist 
or participate in such a proceeding; or 
(4) objected to, or refused to participate in, any 
activity, policy, practice, or assigned task that the 
employee (or other such person) reasonably believed 
to be in violation of any provision of this division or 
any order, rule, or regulation promulgated under 
this division. 
(b) ENFORCEMENT ACTION.—An employee covered 
by this section who alleges discrimination by an employer 
in violation of subsection (a) may bring an action governed 
by the rules, procedures, legal burdens of proof, and rem-
edies set forth in section 40(b) of the Consumer Product 
Safety Act (15 U.S.C. 2087(b)). 
(c) EMPLOYER DEFINED.—As used in this section, 
the term ‘‘employer’’ means any person (including one or 
more individuals, partnerships, associations, corporations, 
trusts, professional membership organization including a 
certification, disciplinary, or other professional body, unin-
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corporated organizations, nongovernmental organizations, 
or trustees) engaged in profit or nonprofit business or in-
dustry whose activities are governed by this division, and 
any agent, contractor, subcontractor, grantee, or consult-
ant of such person. 
(d) RULE OF CONSTRUCTION.—The rule of construc-
tion set forth in section 20109(h) of title 49, United 
States Code, shall also apply to this section. 
SEC. 154. CONSTRUCTION REGARDING COLLECTIVE BAR-
GAINING. 
Nothing in this subdivision shall be construed to alter 
of supercede any statutory or other obligation to engage 
in collective bargaining over the terms and conditions of 
employment related to health care. 
SEC. 155. SEVERABILITY. 
If any provision of this division, or any application 
of such provision to any person or circumstance, is held 
to be unconstitutional, the remainder of the provisions of 
this division and the application of the provision to any 
other person or circumstance shall not be affected. 
Subtitle G—Early Investments 
SEC. 161. ENSURING VALUE AND LOWER PREMIUMS. 
(a) GROUP HEALTH INSURANCE COVERAGE.—Title 
XXVII of the Public Health Service Act is amended by 
inserting after section 2713 the following new section: 
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‘‘SEC. 2714. ENSURING VALUE AND LOWER PREMIUMS. 
‘‘(a) IN GENERAL.—Each health insurance issuer 
that offers health insurance coverage in the small or large 
group market shall provide that for any plan year in which 
the coverage has a medical loss ratio below a level specified 
by the Secretary, the issuer shall provide in a manner 
specified by the Secretary for rebates to enrollees of pay-
ment sufficient to meet such loss ratio. Such methodology 
shall be set at the highest level medical loss ratio possible 
that is designed to ensure adequate participation by 
issuers, competition in the health insurance market, and 
value for consumers so that their premiums are used for 
services. 
‘‘(b) UNIFORM DEFINITIONS.—The Secretary shall 
establish a uniform definition of medical loss ratio and 
methodology for determining how to calculate the medical 
loss ratio. Such methodology shall be designed to take into 
account the special circumstances of smaller plans, dif-
ferent types of plans, and newer plans.’’. 
(b) INDIVIDUAL HEALTH INSURANCE COVERAGE.— 
Such title is further amended by inserting after section 
2753 the following new section: 
‘‘SEC. 2754. ENSURING VALUE AND LOWER PREMIUMS. 
‘‘The provisions of section 2714 shall apply to health 
insurance coverage offered in the individual market in the 
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same manner as such provisions apply to health insurance 
coverage offered in the small or large group market.’’. 
(c) IMMEDIATE
IMPLEMENTATION.—The amend-
ments made by this section shall apply in the group and 
individual market for plan years beginning on or after 
January 1, 2011. 
SEC. 162. ENDING HEALTH INSURANCE RESCISSION ABUSE. 
(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 ‘‘AND CON-
TINUATION
IN
FORCE, INCLUDING
PROHIBI-
TION OF RESCISSION,’’ after ‘‘GUARANTEED RE-
NEWABILITY’’; and 
(2) in subsection (a), by inserting ‘‘, including 
without rescission,’’ after ‘‘continue in force’’. 
(b) SECRETARIAL GUIDANCE REGARDING RESCIS-
SIONS.—Section 2742 of such Act (42 U.S.C. 300gg–42) 
is amended by adding at the end the following: 
‘‘(f) RESCISSION.—A health insurance issuer may re-
scind health insurance coverage only upon clear and con-
vincing evidence of fraud described in subsection (b)(2). 
The Secretary, no later than July 1, 2010, shall issue 
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guidance implementing this requirement, including proce-
dures for independent, external third party review.’’. 
(c) OPPORTUNITY FOR INDEPENDENT, EXTERNAL 
THIRD PARTY REVIEW IN CERTAIN CASES.—Subpart 1 
of part B of title XXVII of such Act (42 U.S.C. 300gg– 
41 et seq.) is amended by adding at the end the following: 
‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 
THIRD PARTY REVIEW IN CASES OF RESCIS-
SION. 
‘‘(a) NOTICE AND REVIEW RIGHT.—If a health in-
surance issuer determines to rescind health insurance cov-
erage for an individual in the individual market, before 
such rescission may take effect the issuer shall provide the 
individual with notice of such proposed rescission and an 
opportunity for a review of such determination by an inde-
pendent, external third party under procedures specified 
by the Secretary under section 2742(f). 
‘‘(b) INDEPENDENT DETERMINATION.—If the indi-
vidual requests such review by an independent, external 
third party of a rescission of health insurance coverage, 
the coverage shall remain in effect until such third party 
determines that the coverage may be rescinded under the 
guidance issued by the Secretary under section 2742(f).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply on and after October 1, 2010, with 
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respect to health insurance coverage issued before, on, or 
after such date. 
SEC. 163. ADMINISTRATIVE SIMPLIFICATION. 
(a) STANDARDIZING ELECTRONIC ADMINISTRATIVE 
TRANSACTIONS.— 
(1) IN GENERAL.—Part C of title XI of the So-
cial Security Act (42 U.S.C. 1320d et seq.) is 
amended by inserting after section 1173 the fol-
lowing new section: 
‘‘SEC. 1173A. STANDARDIZE ELECTRONIC ADMINISTRATIVE 
TRANSACTIONS. 
‘‘(a) STANDARDS FOR FINANCIAL AND ADMINISTRA-
TIVE TRANSACTIONS.— 
‘‘(1) IN GENERAL.—The Secretary shall adopt 
and regularly update standards consistent with the 
goals described in paragraph (2). 
‘‘(2) GOALS FOR FINANCIAL AND ADMINISTRA-
TIVE
TRANSACTIONS.—The goals for standards 
under paragraph (1) are that such standards shall— 
‘‘(A) be unique with no conflicting or re-
dundant standards; 
‘‘(B) be authoritative, permitting no addi-
tions or constraints for electronic transactions, 
including companion guides; 
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‘‘(C) be comprehensive, efficient and ro-
bust, requiring minimal augmentation by paper 
transactions or clarification by further commu-
nications; 
‘‘(D) enable the real-time (or near real- 
time) determination of an individual’s financial 
responsibility at the point of service and, to the 
extent possible, prior to service, including 
whether the individual is eligible for a specific 
service with a specific physician at a specific fa-
cility, which may include utilization of a ma-
chine-readable health plan beneficiary identi-
fication card; 
‘‘(E) enable, where feasible, near real-time 
adjudication of claims; 
‘‘(F) provide for timely acknowledgment, 
response, and status reporting applicable to any 
electronic transaction deemed appropriate by 
the Secretary; 
‘‘(G) describe all data elements (such as 
reason and remark codes) in unambiguous 
terms, not permit optional fields, require that 
data elements be either required or conditioned 
upon set values in other fields, and prohibit ad-
ditional conditions; and 
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‘‘(H) harmonize all common data elements 
across administrative and clinical transaction 
standards. 
‘‘(3) TIME FOR ADOPTION.—Not later than 2 
years after the date of implementation of the X12 
Version 5010 transaction standards implemented 
under this part, the Secretary shall adopt standards 
under this section. 
‘‘(4) REQUIREMENTS
FOR
SPECIFIC
STAND-
ARDS.—The standards under this section shall be 
developed, adopted, and enforced so as to— 
‘‘(A) clarify, refine, complete, and expand, 
as needed, the standards required under section 
1173; 
‘‘(B) require paper versions of standard-
ized transactions to comply with the same 
standards as to data content such that a fully 
compliant, equivalent electronic transaction can 
be populated from the data from a paper 
version; 
‘‘(C) enable electronic funds transfers, in 
order to allow automated reconciliation with the 
related health care payment and remittance ad-
vice; 
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‘‘(D) require timely and transparent claim 
and denial management processes, including 
tracking, adjudication, and appeal processing ; 
‘‘(E) require the use of a standard elec-
tronic transaction with which health care pro-
viders may quickly and efficiently enroll with a 
health plan to conduct the other electronic 
transactions provided for in this part; and 
‘‘(F) provide for other requirements relat-
ing to administrative simplification as identified 
by the Secretary, in consultation with stake-
holders. 
‘‘(5) BUILDING ON EXISTING STANDARDS.—In 
developing the standards under this section, the Sec-
retary shall build upon existing and planned stand-
ards. 
‘‘(6) IMPLEMENTATION AND ENFORCEMENT.— 
Not later than 6 months after the date of the enact-
ment of this section, the Secretary shall submit to 
the appropriate committees of Congress a plan for 
the implementation and enforcement, by not later 
than 5 years after such date of enactment, of the 
standards under this section. Such plan shall in-
clude— 
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‘‘(A) a process and timeframe with mile-
stones for developing the complete set of stand-
ards; 
‘‘(B) an expedited upgrade program for 
continually developing and approving additions 
and modifications to the standards as often as 
annually to improve their quality and extend 
their functionality to meet evolving require-
ments in health care; 
‘‘(C) programs to provide incentives for, 
and ease the burden of, implementation for cer-
tain health care providers, with special consid-
eration given to such providers serving rural or 
underserved areas and ensure coordination with 
standards, implementation specifications, and 
certification criteria being adopted under the 
HITECH Act; 
‘‘(D) programs to provide incentives for, 
and ease the burden of, health care providers 
who volunteer to participate in the process of 
setting standards for electronic transactions; 
‘‘(E) an estimate of total funds needed to 
ensure timely completion of the implementation 
plan; and 
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‘‘(F) an enforcement process that includes 
timely investigation of complaints, random au-
dits to ensure compliance, civil monetary and 
programmatic penalties for non-compliance con-
sistent with existing laws and regulations, and 
a fair and reasonable appeals process building 
off of enforcement provisions under this part. 
‘‘(b) LIMITATIONS ON USE OF DATA.—Nothing in 
this section shall be construed to permit the use of infor-
mation collected under this section in a manner that would 
adversely affect any individual. 
‘‘(c) PROTECTION OF DATA.—The Secretary shall en-
sure (through the promulgation of regulations or other-
wise) that all data collected pursuant to subsection (a) 
are— 
‘‘(1) used and disclosed in a manner that meets 
the HIPAA privacy and security law (as defined in 
section 3009(a)(2) of the Public Health Service 
Act), including any privacy or security standard 
adopted under section 3004 of such Act; and 
‘‘(2) protected from all inappropriate internal 
use by any entity that collects, stores, or receives the 
data, including use of such data in determinations of 
eligibility (or continued eligibility) in health plans, 
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and from other inappropriate uses, as defined by the 
Secretary.’’. 
(2) DEFINITIONS.—Section 1171 of such Act 
(42 U.S.C. 1320d) is amended— 
(A) in paragraph (7), by striking ‘‘with 
reference to’’ and all that follows and inserting 
‘‘with reference to a transaction or data ele-
ment of health information in section 1173 
means implementation specifications, certifi-
cation criteria, operating rules, messaging for-
mats, codes, and code sets adopted or estab-
lished by the Secretary for the electronic ex-
change and use of information’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(9) OPERATING RULES.—The term ‘operating 
rules’ means business rules for using and processing 
transactions. Operating rules should address the fol-
lowing: 
‘‘(A) Requirements for data content using 
available and established national standards. 
‘‘(B) Infrastructure requirements that es-
tablish best practices for streamlining data flow 
to yield timely execution of transactions. 
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‘‘(C) Policies defining the transaction re-
lated rights and responsibilities for entities that 
are transmitting or receiving data.’’. 
(3) 
CONFORMING
AMENDMENT.—Section 
1179(a) of such Act (42 U.S.C. 1320d–8(a)) is 
amended, in the matter before paragraph (1)— 
(A) by inserting ‘‘on behalf of an indi-
vidual’’ after ‘‘1978)’’; and 
(B) by inserting ‘‘on behalf of an indi-
vidual’’ after ‘‘for a financial institution’’ and 
(b) STANDARDS
FOR CLAIMS ATTACHMENTS
AND 
COORDINATION OF BENEFITS .— 
(1) STANDARD FOR HEALTH CLAIMS ATTACH-
MENTS.—Not later than 1 year after the date of the 
enactment of this Act, the Secretary of Health and 
Human Services shall promulgate a final rule to es-
tablish a standard for health claims attachment 
transaction described in section 1173(a)(2)(B) of the 
Social Security Act (42 U.S.C. 1320d-2(a)(2)(B)) 
and coordination of benefits. 
(2) REVISION IN PROCESSING PAYMENT TRANS-
ACTIONS BY FINANCIAL INSTITUTIONS.— 
(A) IN GENERAL.—Section 1179 of the So-
cial Security Act (42 U.S.C. 1320d–8) is 
amended, in the matter before paragraph (1)— 
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(i) by striking ‘‘or is engaged’’ and in-
serting ‘‘and is engaged’’; and 
(ii) by inserting ‘‘(other than as a 
business associate for a covered entity)’’ 
after ‘‘for a financial institution’’. 
(B) EFFECTIVE DATE.—The amendments 
made by paragraph (1) shall apply to trans-
actions occurring on or after such date (not 
later than 6 months after the date of the enact-
ment of this Act) as the Secretary of Health 
and Human Services shall specify. 
SEC. 164. REINSURANCE PROGRAM FOR RETIREES. 
(a) ESTABLISHMENT.— 
(1) IN GENERAL.—Not later than 90 days after 
the date of the enactment of this Act, the Secretary 
of Health and Human Services shall establish a tem-
porary reinsurance program (in this section referred 
to as the ‘‘reinsurance program’’) to provide reim-
bursement to assist participating employment-based 
plans with the cost of providing health benefits to 
retirees and to eligible spouses, surviving spouses 
and dependents of such retirees. 
(2) DEFINITIONS.—For purposes of this sec-
tion: 
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(A) The term ‘‘eligible employment-based 
plan’’ means a group health benefits plan 
that— 
(i) is maintained by one or more em-
ployers, former employers or employee as-
sociations, or a voluntary employees’ bene-
ficiary association, or a committee or board 
of individuals appointed to administer such 
plan, and 
(ii) provides health benefits to retir-
ees. 
(B) The term ‘‘health benefits’’ means 
medical, surgical, hospital, prescription drug, 
and such other benefits as shall be determined 
by the Secretary, whether self-funded or deliv-
ered through the purchase of insurance or oth-
erwise. 
(C) The term ‘‘participating employment- 
based plan’’ means an eligible employment- 
based plan that is participating in the reinsur-
ance program. 
(D) The term ‘‘retiree’’ means, with re-
spect to a participating employment-benefit 
plan, an individual who— 
(i) is 55 years of age or older; 
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(ii) is not eligible for coverage under 
title XVIII of the Social Security Act; and 
(iii) is not an active employee of an 
employer maintaining the plan or of any 
employer that makes or has made substan-
tial contributions to fund such plan. 
(E) The term ‘‘Secretary’’ means Sec-
retary of Health and Human Services. 
(b) PARTICIPATION.—To be eligible to participate in 
the reinsurance program, an eligible employment-based 
plan shall submit to the Secretary an application for par-
ticipation in the program, at such time, in such manner, 
and containing such information as the Secretary shall re-
quire. 
(c) PAYMENT.— 
(1) SUBMISSION OF CLAIMS.— 
(A) IN GENERAL.—Under the reinsurance 
program, a participating employment-based 
plan shall submit claims for reimbursement to 
the Secretary which shall contain documenta-
tion of the actual costs of the items and serv-
ices for which each claim is being submitted. 
(B) BASIS FOR CLAIMS.—Each claim sub-
mitted under subparagraph (A) shall be based 
on the actual amount expended by the partici-
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pating employment-based plan involved within 
the plan year for the appropriate employment 
based health benefits provided to a retiree or to 
the spouse, surviving spouse, or dependent of a 
retiree. In determining the amount of any claim 
for purposes of this subsection, the partici-
pating employment-based plan shall take into 
account any negotiated price concessions (such 
as discounts, direct or indirect subsidies, re-
bates, and direct or indirect remunerations) ob-
tained by such plan with respect to such health 
benefits. For purposes of calculating the 
amount of any claim, the costs paid by the re-
tiree or by the spouse, surviving spouse, or de-
pendent of the retiree in the form of 
deductibles, co-payments, and co-insurance shall 
be included along with the amounts paid by the 
participating employment-based plan. 
(2) PROGRAM PAYMENTS AND LIMIT.—If the 
Secretary determines that a participating employ-
ment-based plan has submitted a valid claim under 
paragraph (1), the Secretary shall reimburse such 
plan for 80 percent of that portion of the costs at-
tributable to such claim that exceeds $15,000, but is 
less than $90,000. Such amounts shall be adjusted 
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each year based on the percentage increase in the 
medical care component of the Consumer Price 
Index (rounded to the nearest multiple of $1,000) 
for the year involved. 
(3) USE OF PAYMENTS.—Amounts paid to a 
participating employment-based plan under this sub-
section shall be used to lower the costs borne di-
rectly by the participants and beneficiaries for health 
benefits provided under such plan in the form of 
premiums, co-payments, deductibles, co-insurance, or 
other out-of-pocket costs. Such payments shall not 
be used to reduce the costs of an employer maintain-
ing the participating employment-based plan. The 
Secretary shall develop a mechanism to monitor the 
appropriate use of such payments by such plans. 
(4) APPEALS AND PROGRAM PROTECTIONS.— 
The Secretary shall establish— 
(A) an appeals process to permit partici-
pating employment-based plans to appeal a de-
termination of the Secretary with respect to 
claims submitted under this section; and 
(B) procedures to protect against fraud, 
waste, and abuse under the program. 
(5) AUDITS.—The Secretary shall conduct an-
nual audits of claims data submitted by partici-
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pating employment-based plans under this section to 
ensure that they are in compliance with the require-
ments of this section. 
(d) RETIREE RESERVE TRUST FUND.— 
(1) ESTABLISHMENT.— 
(A) IN GENERAL.—There is established in 
the Treasury of the United States a trust fund 
to be known as the ‘‘Retiree Reserve Trust 
Fund’’ (referred to in this section as the ‘‘Trust 
Fund’’), that shall consist of such amounts as 
may be appropriated or credited to the Trust 
Fund as provided for in this subsection to en-
able the Secretary to carry out the reinsurance 
program. Such amounts shall remain available 
until expended. 
(B) FUNDING.—There are hereby appro-
priated to the Trust Fund, out of any moneys 
in the Treasury not otherwise appropriated, an 
amount requested by the Secretary as necessary 
to carry out this section, except that the total 
of all such amounts requested shall not exceed 
$10,000,000,000. 
(C) APPROPRIATIONS
FROM
THE
TRUST 
FUND.— 
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(i) IN
GENERAL.—Amounts in the 
Trust Fund are appropriated to provide 
funding to carry out the reinsurance pro-
gram and shall be used to carry out such 
program. 
(ii) 
BUDGETARY
IMPLICATIONS.— 
Amounts appropriated under clause (i), 
and outlays flowing from such appropria-
tions, shall not be taken into account for 
purposes of any budget enforcement proce-
dures including allocations under section 
302(a) and (b) of the Balanced Budget 
and Emergency Deficit Control Act and 
budget resolutions for fiscal years during 
which appropriations are made from the 
Trust Fund. 
(iii) 
LIMITATION
TO
AVAILABLE 
FUNDS.—The Secretary has the authority 
to stop taking applications for participa-
tion in the program or take such other 
steps in reducing expenditures under the 
reinsurance program in order to ensure 
that expenditures under the reinsurance 
program do not exceed the funds available 
under this subsection. 
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TITLE II—HEALTH INSURANCE 
EXCHANGE 
AND 
RELATED 
PROVISIONS 
Subtitle A—Health Insurance 
Exchange 
SEC. 201. ESTABLISHMENT OF HEALTH INSURANCE EX-
CHANGE; OUTLINE OF DUTIES; DEFINITIONS. 
(a) ESTABLISHMENT.—There is established within 
the Health Choices Administration and under the direc-
tion of the Commissioner a Health Insurance Exchange 
in order to facilitate access of individuals and employers, 
through a transparent process, to a variety of choices of 
affordable, quality health insurance coverage, including a 
public health insurance option. 
(b) OUTLINE OF DUTIES OF COMMISSIONER.—In ac-
cordance with this subtitle and in coordination with appro-
priate Federal and State officials as provided under sec-
tion 143(b), the Commissioner shall— 
(1) under section 204 establish standards for, 
accept bids from, and negotiate and enter into con-
tracts with, QHBP offering entities for the offering 
of health benefits plans through the Health Insur-
ance Exchange, with different levels of benefits re-
quired under section 203, and including with respect 
to oversight and enforcement; 
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(2) under section 205 facilitate outreach and 
enrollment in such plans of Exchange-eligible indi-
viduals and employers described in section 202; and 
(3) conduct such activities related to the Health 
Insurance Exchange as required, including establish-
ment of a risk pooling mechanism under section 206 
and consumer protections under subtitle D of title I. 
(c) EXCHANGE-PARTICIPATING HEALTH BENEFITS 
PLAN DEFINED.—In this subdivision, the term ‘‘Ex-
change-participating health benefits plan’’ means a quali-
fied health benefits plan that is offered through the Health 
Insurance Exchange. 
SEC. 202. EXCHANGE-ELIGIBLE INDIVIDUALS AND EMPLOY-
ERS. 
(a) ACCESS TO COVERAGE.—In accordance with this 
section, all individuals are eligible to obtain coverage 
through enrollment in an Exchange-participating health 
benefits plan offered through the Health Insurance Ex-
change unless such individuals are enrolled in another 
qualified health benefits plan or other acceptable coverage. 
(b) DEFINITIONS.—In this subdivision: 
(1) 
EXCHANGE-ELIGIBLE
INDIVIDUAL.—The 
term ‘‘Exchange-eligible individual’’ means an indi-
vidual who is eligible under this section to be en-
rolled through the Health Insurance Exchange in an 
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Exchange-participating health benefits plan and, 
with respect to family coverage, includes dependents 
of such individual. 
(2) 
EXCHANGE-ELIGIBLE
EMPLOYER.—The 
term ‘‘Exchange-eligible employer’’ means an em-
ployer that is eligible under this section to enroll 
through the Health Insurance Exchange employees 
of the employer (and their dependents) in Exchange- 
eligible health benefits plans. 
(3) 
EMPLOYMENT-RELATED
DEFINITIONS.— 
The terms ‘‘employer’’, ‘‘employee’’, ‘‘full-time em-
ployee’’, and ‘‘part-time employee’’ have the mean-
ings given such terms by the Commissioner for pur-
poses of this subdivision. 
(c) TRANSITION.—Individuals and employers shall 
only be eligible to enroll or participate in the Health Insur-
ance Exchange in accordance with the following transition 
schedule: 
(1) FIRST YEAR.—In Y1 (as defined in section 
100(c))— 
(A) individuals described in subsection 
(d)(1), including individuals described in para-
graphs (3) and (4) of subsection (d); and 
(B) smallest employers described in sub-
section (e)(1). 
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For purposes of subparagraph (B), in the case of an 
individual who is self-employed, who has at least 1 
employee, and who meets the requirements of section 
312, such individual shall be deemed a full-time em-
ployee described in such subparagraph. 
(2) ACCEPTABLE COVERAGE.—For purposes of 
this subdivision, the term ‘‘acceptable coverage’’ 
means any of the following: 
(A) QUALIFIED HEALTH BENEFITS PLAN 
COVERAGE.—Coverage under a qualified health 
benefits plan. 
(B) GRANDFATHERED HEALTH INSURANCE 
COVERAGE; COVERAGE UNDER CURRENT GROUP 
HEALTH
PLAN.—Coverage under a grand-
fathered health insurance coverage (as defined 
in subsection (a) of section 102) or under a 
current group health plan (described in sub-
section (b) of such section). 
(C) MEDICARE.—Coverage under part A of 
title XVIII of the Social Security Act. 
(D) MEDICAID.—Coverage for medical as-
sistance under title XIX of the Social Security 
Act, excluding such coverage that is only avail-
able because of the application of subsection 
(u), (z), or (aa) of section 1902 of such Act 
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(E) MEMBERS
OF
THE
ARMED
FORCES 
AND
DEPENDENTS
(INCLUDING
TRICARE).— 
Coverage under chapter 55 of title 10, United 
States Code, including similar coverage fur-
nished under section 1781 of title 38 of such 
Code. 
(F) VA.—Coverage under the veteran’s 
health care program under chapter 17 of title 
38, United States Code, but only if the cov-
erage for the individual involved is determined 
by the Commissioner in coordination with the 
Secretary of Treasury to be not less than a level 
specified by the Commissioner and Secretary of 
Veteran’s Affairs, in coordination with the Sec-
retary of Treasury, based on the individual’s 
priority for services as provided under section 
1705(a) of such title. 
(G) OTHER COVERAGE.—Such other health 
benefits coverage, such as a State health bene-
fits risk pool, as the Commissioner, in coordina-
tion with the Secretary of the Treasury, recog-
nizes for purposes of this paragraph. 
The Commissioner shall make determinations under 
this paragraph in coordination with the Secretary of 
the Treasury. 
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(3) TREATMENT
OF
CERTAIN
NON-TRADI-
TIONAL MEDICAID ELIGIBLE INDIVIDUALS.—An indi-
vidual who is a non-traditional Medicaid eligible in-
dividual (as defined in section 205(e)(4)(C)) in a 
State may be an Exchange-eligible individual if the 
individual was enrolled in a qualified health benefits 
plan, grandfathered health insurance coverage, or 
current group health plan during the 6 months be-
fore the individual became a non-traditional Med-
icaid eligible individual. During the period in which 
such an individual has chosen to enroll in an Ex-
change-participating health benefits plan, the indi-
vidual is not also eligible for medical assistance 
under Medicaid. 
(4) CONTINUING ELIGIBILITY PERMITTED.— 
(A) IN GENERAL.—Except as provided in 
subparagraph (B), once an individual qualifies 
as an Exchange-eligible individual under this 
subsection (including as an employee or depend-
ent of an employee of an Exchange-eligible em-
ployer) and enrolls under an Exchange-partici-
pating health benefits plan through the Health 
Insurance Exchange, the individual shall con-
tinue to be treated as an Exchange-eligible indi-
vidual until the individual is no longer enrolled 
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with an Exchange-participating health benefits 
plan. 
(B) EXCEPTIONS.— 
(i) IN GENERAL.—Subparagraph (A) 
shall not apply to an individual once the 
individual becomes eligible for coverage— 
(I) under part A of the Medicare 
program; 
(II) under the Medicaid program 
as a Medicaid eligible individual, ex-
cept as permitted under paragraph 
(3) or clause (ii); or 
(III) in such other circumstances 
as the Commissioner may provide. 
(ii) TRANSITION PERIOD.—In the case 
described in clause (i)(II), the Commis-
sioner shall permit the individual to con-
tinue treatment under subparagraph (A) 
until such limited time as the Commis-
sioner determines it is administratively fea-
sible, consistent with minimizing disruption 
in the individual’s access to health care. 
(e) EMPLOYERS.— 
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(1) SMALLEST
EMPLOYER.—Subject to para-
graph (4), smallest employers described in this para-
graph are employers with 10 or fewer employees. 
(2) SMALLER
EMPLOYERS.—Subject to para-
graph (4), smaller employers described in this para-
graph are employers that are not smallest employers 
described in paragraph (1) and have 20 or fewer em-
ployees. 
(3) LARGER EMPLOYERS.— 
(A) IN GENERAL.—Beginning with Y3, the 
Commissioner may permit employers not de-
scribed in paragraph (1) or (2) to be Exchange- 
eligible employers. 
(B) PHASE-IN.—In applying subparagraph 
(A), the Commissioner may phase-in the appli-
cation of such subparagraph based on the num-
ber of full-time employees of an employer and 
such other considerations as the Commissioner 
deems appropriate. 
(4) CONTINUING
ELIGIBILITY.—Once an em-
ployer is permitted to be an Exchange-eligible em-
ployer under this subsection and enrolls employees 
through the Health Insurance Exchange, the em-
ployer shall continue to be treated as an Exchange- 
eligible employer for each subsequent plan year re-
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gardless of the number of employees involved unless 
and until the employer meets the requirement of sec-
tion 311(a) through paragraph (1) of such section 
by offering a group health plan and not through of-
fering an Exchange-participating health benefits 
plan. 
(5) EMPLOYER PARTICIPATION AND CONTRIBU-
TIONS.— 
(A) SATISFACTION OF EMPLOYER RESPON-
SIBILITY.—For any year in which an employer 
is an Exchange-eligible employer, such employer 
may meet the requirements of section 312 with 
respect to employees of such employer by offer-
ing such employees the option of enrolling with 
Exchange-participating health benefits plans 
through the Health Insurance Exchange con-
sistent with the provisions of subtitle B of title 
III. 
(B) EMPLOYEE
CHOICE.—Any employee 
offered Exchange-participating health benefits 
plans by the employer of such employee under 
subparagraph (A) may choose coverage under 
any such plan. That choice includes, with re-
spect to family coverage, coverage of the de-
pendents of such employee. 
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(6) AFFILIATED GROUPS.—Any employer which 
is part of a group of employers who are treated as 
a single employer under subsection (b), (c), (m), or 
(o) of section 414 of the Internal Revenue Code of 
1986 shall be treated, for purposes of this subtitle, 
as a single employer. 
(7) OTHER COUNTING RULES.—The Commis-
sioner shall establish rules relating to how employees 
are counted for purposes of carrying out this sub-
section. 
(f) SPECIAL SITUATION AUTHORITY.—The Commis-
sioner shall have the authority to establish such rules as 
may be necessary to deal with special situations with re-
gard to uninsured individuals and employers participating 
as Exchange-eligible individuals and employers, such as 
transition periods for individuals and employers who gain, 
or lose, Exchange-eligible participation status, and to es-
tablish grace periods for premium payment. 
(g) SURVEYS OF INDIVIDUALS AND EMPLOYERS.— 
The Commissioner shall provide for periodic surveys of 
Exchange-eligible individuals and employers concerning 
satisfaction of such individuals and employers with the 
Health Insurance Exchange and Exchange-participating 
health benefits plans. 
(h) EXCHANGE ACCESS STUDY.— 
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(1) IN GENERAL.—The Commissioner shall con-
duct a study of access to the Health Insurance Ex-
change for individuals and for employers, including 
individuals and employers who are not eligible and 
enrolled in Exchange-participating health benefits 
plans. The goal of the study is to determine if there 
are significant groups and types of individuals and 
employers who are not Exchange eligible individuals 
or employers, but who would have improved benefits 
and affordability if made eligible for coverage in the 
Exchange. 
(2) ITEMS INCLUDED IN STUDY.—Such study 
also shall examine— 
(A) the terms, conditions, and affordability 
of group health coverage offered by employers 
and QHBP offering entities outside of the Ex-
change compared to Exchange-participating 
health benefits plans; and 
(B) the affordability-test standard for ac-
cess of certain employed individuals to coverage 
in the Health Insurance Exchange. 
(3) REPORT.—Not later than January 1 of Y3, 
in Y6, and thereafter, the Commissioner shall sub-
mit to Congress on the study conducted under this 
subsection and shall include in such report rec-
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ommendations regarding changes in standards for 
Exchange eligibility for individuals and employers. 
SEC. 203. BENEFITS PACKAGE LEVELS. 
(a) IN GENERAL.—The Commissioner shall specify 
the benefits to be made available under Exchange-partici-
pating health benefits plans during each plan year, con-
sistent with subtitle C of title I and this section. 
(b) LIMITATION ON HEALTH BENEFITS PLANS OF-
FERED BY OFFERING ENTITIES.—The Commissioner may 
not enter into a contract with a QHBP offering entity 
under section 204(c) for the offering of an Exchange-par-
ticipating health benefits plan in a service area unless the 
following requirements are met: 
(1) REQUIRED OFFERING OF BASIC PLAN.—The 
entity offers only one basic plan for such service 
area. 
(2) 
OPTIONAL
OFFERING
OF
ENHANCED 
PLAN.—If and only if the entity offers a basic plan 
for such service area, the entity may offer one en-
hanced plan for such area. 
(3) OPTIONAL OFFERING OF PREMIUM PLAN.— 
If and only if the entity offers an enhanced plan for 
such service area, the entity may offer one premium 
plan for such area. 
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(4) OPTIONAL
OFFERING
OF
PREMIUM-PLUS 
PLANS.—If and only if the entity offers a premium 
plan for such service area, the entity may offer one 
or more premium-plus plans for such area. 
All such plans may be offered under a single contract with 
the Commissioner. 
(c) SPECIFICATION
OF
BENEFIT
LEVELS
FOR 
PLANS.— 
(1) IN GENERAL.—The Commissioner shall es-
tablish the following standards consistent with this 
subsection and title I: 
(A) BASIC, ENHANCED, AND
PREMIUM 
PLANS.—Standards for 3 levels of Exchange- 
participating health benefits plans: basic, en-
hanced, and premium (in this subdivision re-
ferred to as a ‘‘basic plan’’, ‘‘enhanced plan’’, 
and ‘‘premium plan’’, respectively). 
(B) PREMIUM-PLUS
PLAN
BENEFITS.— 
Standards for additional benefits that may be 
offered, consistent with this subsection and sub-
title C of title I, under a premium plan (such 
a plan with additional benefits referred to in 
this subdivision as a ‘‘premium-plus plan’’) . 
(2) BASIC PLAN.— 
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(A) IN GENERAL.—A basic plan shall offer 
the essential benefits package required under 
title I for a qualified health benefits plan. 
(B) TIERED COST-SHARING FOR AFFORD-
ABLE CREDIT ELIGIBLE INDIVIDUALS.—In the 
case of an affordable credit eligible individual 
(as defined in section 242(a)(1)) enrolled in an 
Exchange-participating health benefits plan, the 
benefits under a basic plan are modified to pro-
vide for the reduced cost-sharing for the income 
tier applicable to the individual under section 
244(c). 
(3) ENHANCED PLAN.—An enhanced plan shall 
offer, in addition to the level of benefits under the 
basic plan, a lower level of cost-sharing as provided 
under title I consistent with section 123(b)(5)(A). 
(4) PREMIUM
PLAN.—A premium plan shall 
offer, in addition to the level of benefits under the 
basic plan, a lower level of cost-sharing as provided 
under title I consistent with section 123(b)(5)(B). 
(5) PREMIUM-PLUS
PLAN.—A premium-plus 
plan is a premium plan that also provides additional 
benefits, such as adult oral health and vision care, 
approved by the Commissioner. The portion of the 
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premium that is attributable to such additional ben-
efits shall be separately specified. 
(6) RANGE
OF
PERMISSIBLE
VARIATION
IN 
COST-SHARING.—The Commissioner shall establish a 
permissible range of variation of cost-sharing for 
each basic, enhanced, and premium plan, except with 
respect to any benefit for which there is no cost- 
sharing permitted under the essential benefits pack-
age. Such variation shall permit a variation of not 
more than plus (or minus) 10 percent in cost-shar-
ing with respect to each benefit category specified 
under section 122. 
(d) TREATMENT OF STATE BENEFIT MANDATES.— 
Insofar as a State requires a health insurance issuer offer-
ing health insurance coverage to include benefits beyond 
the essential benefits package, such requirement shall con-
tinue to apply to an Exchange-participating health bene-
fits plan, if the State has entered into an arrangement 
satisfactory to the Commissioner to reimburse the Com-
missioner for the amount of any net increase in afford-
ability premium credits under subtitle C as a result of an 
increase in premium in basic plans as a result of applica-
tion of such requirement. 
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(C) enter into contracts with such entities 
for the offering of such plans through the 
Health Insurance Exchange under terms (con-
sistent with this title) negotiated between the 
Commissioner and such entities. 
(3) FAR NOT APPLICABLE.—The provisions of 
the Federal Acquisition Regulation shall not apply to 
contracts between the Commissioner and QHBP of-
fering entities for the offering of Exchange-partici-
pating health benefits plans under this title. 
(b) STANDARDS FOR QHBP OFFERING ENTITIES TO 
OFFER EXCHANGE-PARTICIPATING HEALTH BENEFITS 
PLANS.—The standards established under subsection 
(a)(1)(A) shall require that, in order for a QHBP offering 
entity to offer an Exchange-participating health benefits 
plan, the entity must meet the following requirements: 
(1) LICENSED.—The entity shall be licensed to 
offer health insurance coverage under State law for 
each State in which it is offering such coverage. 
(2) DATA REPORTING.—The entity shall pro-
vide for the reporting of such information as the 
Commissioner may specify, including information 
necessary to administer the risk pooling mechanism 
described in section 206(b) and information to ad-
dress disparities in health and health care. 
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(3) 
IMPLEMENTING
AFFORDABILITY
CRED-
ITS.—The entity shall provide for implementation of 
the affordability credits provided for enrollees under 
subtitle C, including the reduction in cost-sharing 
under section 244(c). 
(4) ENROLLMENT.—The entity shall accept all 
enrollments under this subtitle, subject to such ex-
ceptions (such as capacity limitations) in accordance 
with the requirements under title I for a qualified 
health benefits plan. The entity shall notify the 
Commissioner if the entity projects or anticipates 
reaching such a capacity limitation that would result 
in a limitation in enrollment. 
(5) RISK POOLING PARTICIPATION.—The entity 
shall participate in such risk pooling mechanism as 
the Commissioner establishes under section 206(b). 
(6) ESSENTIAL COMMUNITY PROVIDERS.—With 
respect to the basic plan offered by the entity, the 
entity shall contract for outpatient services with cov-
ered entities (as defined in section 340B(a)(4) of the 
Public Health Service Act, as in effect as of July 1, 
2009). The Commissioner shall specify the extent to 
which and manner in which the previous sentence 
shall apply in the case of a basic plan with respect 
to which the Commissioner determines provides sub-
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stantially all benefits through a health maintenance 
organization, as defined in section 2791(b)(3) of the 
Public Health Service Act. 
(7) CULTURALLY AND LINGUISTICALLY APPRO-
PRIATE SERVICES AND COMMUNICATIONS.—The en-
tity shall provide for culturally and linguistically ap-
propriate communication and health services. 
(8) ADDITIONAL REQUIREMENTS.—The entity 
shall comply with other applicable requirements of 
this title, as specified by the Commissioner, which 
shall include standards regarding billing and collec-
tion practices for premiums and related grace peri-
ods and which may include standards to ensure that 
the entity does not use coercive practices to force 
providers not to contract with other entities offering 
coverage through the Health Insurance Exchange. 
(c) CONTRACTS.— 
(1) BID APPLICATION.—To be eligible to enter 
into a contract under this section, a QHBP offering 
entity shall submit to the Commissioner a bid at 
such time, in such manner, and containing such in-
formation as the Commissioner may require. 
(2) TERM.—Each contract with a QHBP offer-
ing entity under this section shall be for a term of 
not less than one year, but may be made automati-
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dcolon on DSK2BSOYB1PROD with BILLS
cally renewable from term to term in the absence of 
notice of termination by either party. 
(3) ENFORCEMENT OF NETWORK ADEQUACY.— 
In the case of a health benefits plan of a QHBP of-
fering entity that uses a provider network, the con-
tract under this section with the entity shall provide 
that if— 
(A) the Commissioner determines that 
such provider network does not meet such 
standards as the Commissioner shall establish 
under section 115; and 
(B) an individual enrolled in such plan re-
ceives an item or service from a provider that 
is not within such network; 
then any cost-sharing for such item or service shall 
be equal to the amount of such cost-sharing that 
would be imposed if such item or service was fur-
nished by a provider within such network. 
(4) OVERSIGHT AND ENFORCEMENT RESPON-
SIBILITIES.—The Commissioner shall establish proc-
esses, in coordination with State insurance regu-
lators, to oversee, monitor, and enforce applicable re-
quirements of this title with respect to QHBP offer-
ing entities offering Exchange-participating health 
benefits plans and such plans, including the mar-
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dcolon on DSK2BSOYB1PROD with BILLS
keting of such plans. Such processes shall include 
the following: 
(A) GRIEVANCE AND COMPLAINT MECHA-
NISMS.—The Commissioner shall establish, in 
coordination with State insurance regulators, a 
process under which Exchange-eligible individ-
uals and employers may file complaints con-
cerning violations of such standards. 
(B) ENFORCEMENT.—In carrying out au-
thorities under this subdivision relating to the 
Health Insurance Exchange, the Commissioner 
may impose one or more of the intermediate 
sanctions described in section 142(c). 
(C) TERMINATION.— 
(i) IN GENERAL.—The Commissioner 
may terminate a contract with a QHBP of-
fering entity under this section for the of-
fering of an Exchange-participating health 
benefits plan if such entity fails to comply 
with the applicable requirements of this 
title. Any determination by the Commis-
sioner to terminate a contract shall be 
made in accordance with formal investiga-
tion and compliance procedures established 
by the Commissioner under which— 
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(I) the Commissioner provides 
the entity with the reasonable oppor-
tunity to develop and implement a 
corrective action plan to correct the 
deficiencies that were the basis of the 
Commissioner’s determination; and 
(II) the Commissioner provides 
the entity with reasonable notice and 
opportunity for hearing (including the 
right to appeal an initial decision) be-
fore terminating the contract. 
(ii) EXCEPTION FOR IMMINENT AND 
SERIOUS
RISK
TO
HEALTH.—Clause (i) 
shall not apply if the Commissioner deter-
mines that a delay in termination, result-
ing from compliance with the procedures 
specified in such clause prior to termi-
nation, would pose an imminent and seri-
ous risk to the health of individuals en-
rolled under the qualified health benefits 
plan of the QHBP offering entity. 
(D) CONSTRUCTION.—Nothing in this sub-
section shall be construed as preventing the ap-
plication of other sanctions under subtitle E of 
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dcolon on DSK2BSOYB1PROD with BILLS
title I with respect to an entity for a violation 
of such a requirement. 
SEC. 205. OUTREACH AND ENROLLMENT OF EXCHANGE-EL-
IGIBLE INDIVIDUALS AND EMPLOYERS IN EX-
CHANGE-PARTICIPATING HEALTH BENEFITS 
PLAN. 
(a) IN GENERAL.— 
(1) OUTREACH.—The Commissioner shall con-
duct outreach activities consistent with subsection 
(c), including through use of appropriate entities as 
described in paragraph (4) of such subsection, to in-
form and educate individuals and employers about 
the Health Insurance Exchange and Exchange-par-
ticipating health benefits plan options. Such out-
reach shall include outreach specific to vulnerable 
populations, such as children, individuals with dis-
abilities, individuals with mental illness, and individ-
uals with other cognitive impairments. 
(2) ELIGIBILITY.—The Commissioner shall 
make timely determinations of whether individuals 
and employers are Exchange-eligible individuals and 
employers (as defined in section 202). 
(3) ENROLLMENT.—The Commissioner shall es-
tablish and carry out an enrollment process for Ex-
change-eligible individuals and employers, including 
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dcolon on DSK2BSOYB1PROD with BILLS
at community locations, in accordance with sub-
section (b). 
(b) ENROLLMENT PROCESS.— 
(1) IN GENERAL.—The Commissioner shall es-
tablish a process consistent with this title for enroll-
ments in Exchange-participating health benefits 
plans. Such process shall provide for enrollment 
through means such as the mail, by telephone, elec-
tronically, and in person. 
(2) ENROLLMENT PERIODS.— 
(A) OPEN
ENROLLMENT
PERIOD.—The 
Commissioner shall establish an annual open 
enrollment period during which an Exchange-el-
igible individual or employer may elect to enroll 
in an Exchange-participating health benefits 
plan for the following plan year and an enroll-
ment period for affordability credits under sub-
title C. Such periods shall be during September 
through November of each year, or such other 
time that would maximize timeliness of income 
verification for purposes of such subtitle. The 
open enrollment period shall not be less than 30 
days. 
(B) SPECIAL
ENROLLMENT.—The Com-
missioner shall also provide for special enroll-
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ment periods to take into account special cir-
cumstances of individuals and employers, such 
as an individual who— 
(i) loses acceptable coverage; 
(ii) experiences a change in marital or 
other dependent status; 
(iii) moves outside the service area of 
the Exchange-participating health benefits 
plan in which the individual is enrolled; or 
(iv) experiences a significant change 
in income. 
(C) 
ENROLLMENT
INFORMATION.—The 
Commissioner shall provide for the broad dis-
semination of information to prospective enroll-
ees on the enrollment process, including before 
each open enrollment period. In carrying out 
the previous sentence, the Commissioner may 
work with other appropriate entities to facilitate 
such provision of information. 
(3) AUTOMATIC ENROLLMENT FOR NON-MED-
ICAID ELIGIBLE INDIVIDUALS.— 
(A) IN
GENERAL.—The Commissioner 
shall provide for a process under which individ-
uals who are Exchange-eligible individuals de-
scribed in subparagraph (B) are automatically 
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enrolled under an appropriate Exchange-partici-
pating health benefits plan. Such process may 
involve a random assignment or some other 
form of assignment that takes into account the 
health care providers used by the individual in-
volved or such other relevant factors as the 
Commissioner may specify. 
(B) 
SUBSIDIZED
INDIVIDUALS
DE-
SCRIBED.—An individual described in this sub-
paragraph is an Exchange-eligible individual 
who is either of the following: 
(i) AFFORDABILITY CREDIT ELIGIBLE 
INDIVIDUALS.—The individual— 
(I) has applied for, and been de-
termined eligible for, affordability 
credits under subtitle C; 
(II) has not opted out from re-
ceiving such affordability credit; and 
(III) does not otherwise enroll in 
another Exchange-participating health 
benefits plan. 
(ii) INDIVIDUALS
ENROLLED
IN
A 
TERMINATED PLAN.—The individual is en-
rolled in an Exchange-participating health 
benefits plan that is terminated (during or 
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dcolon on DSK2BSOYB1PROD with BILLS
at the end of a plan year) and who does 
not otherwise enroll in another Exchange- 
participating health benefits plan. 
(4) DIRECT
PAYMENT
OF
PREMIUMS
TO 
PLANS.—Under the enrollment process, individuals 
enrolled in an Exchange-participating health benefits 
plan shall pay such plans directly, and not through 
the Commissioner or the Health Insurance Ex-
change. 
(c) COVERAGE INFORMATION AND ASSISTANCE.— 
(1) COVERAGE
INFORMATION.—The Commis-
sioner shall provide for the broad dissemination of 
information on Exchange-participating health bene-
fits plans offered under this title. Such information 
shall be provided in a comparative manner, and shall 
include information on benefits, premiums, cost- 
sharing, quality, provider networks, and consumer 
satisfaction. 
(2) CONSUMER ASSISTANCE WITH CHOICE.—To 
provide assistance to Exchange-eligible individuals 
and employers, the Commissioner shall— 
(A) provide for the operation of a toll-free 
telephone hotline to respond to requests for as-
sistance and maintain an Internet website 
through which individuals may obtain informa-
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100 
tion on coverage under Exchange-participating 
health benefits plans and file complaints; 
(B) develop and disseminate information to 
Exchange-eligible enrollees on their rights and 
responsibilities; 
(C) assist Exchange-eligible individuals in 
selecting Exchange-participating health benefits 
plans and obtaining benefits through such 
plans; and 
(D) ensure that the Internet website de-
scribed in subparagraph (A) and the informa-
tion described in subparagraph (B) is developed 
using plain language (as defined in section 
133(a)(2)). 
(3) USE OF OTHER ENTITIES.—In carrying out 
this subsection, the Commissioner may work with 
other appropriate entities to facilitate the dissemina-
tion of information under this subsection and to pro-
vide assistance as described in paragraph (2). 
(d) SPECIAL DUTIES RELATED TO MEDICAID AND 
CHIP.— 
(1) COVERAGE FOR CERTAIN NEWBORNS.— 
(A) IN GENERAL.—In the case of a child 
born in the United States who at the time of 
birth is not otherwise covered under acceptable 
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101 
coverage, for the period of time beginning on 
the date of birth and ending on the date the 
child otherwise is covered under acceptable cov-
erage (or, if earlier, the end of the month in 
which the 60-day period, beginning on the date 
of birth, ends), the child shall be deemed— 
(i) to be a non-traditional Medicaid el-
igible individual (as defined in subsection 
(e)(5)) for purposes of this subdivision and 
Medicaid; and 
(ii) to have elected to enroll in Med-
icaid through the application of paragraph 
(3). 
(B) EXTENDED
TREATMENT
AS
TRADI-
TIONAL
MEDICAID
ELIGIBLE
INDIVIDUAL.—In 
the case of a child described in subparagraph 
(A) who at the end of the period referred to in 
such subparagraph is not otherwise covered 
under acceptable coverage, the child shall be 
deemed (until such time as the child obtains 
such coverage or the State otherwise makes a 
determination of the child’s eligibility for med-
ical assistance under its Medicaid plan pursuant 
to section 1943(c)(1) of the Social Security 
Act) to be a traditional Medicaid eligible indi-
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102 
vidual described in section 1902(l)(1)(B) of 
such Act. 
(2) CHIP TRANSITION.—A child who, as of the 
day before the first day of Y1, is eligible for child 
health assistance under title XXI of the Social Secu-
rity Act (including a child receiving coverage under 
an arrangement described in section 2101(a)(2) of 
such Act) is deemed as of such first day to be an 
Exchange-eligible individual unless the individual is 
a traditional Medicaid eligible individual as of such 
day. 
(3) AUTOMATIC ENROLLMENT OF MEDICAID EL-
IGIBLE
INDIVIDUALS
INTO
MEDICAID.—The Com-
missioner shall provide for a process under which an 
individual who is described in section 202(d)(3) and 
has not elected to enroll in an Exchange-partici-
pating health benefits plan is automatically enrolled 
under Medicaid. 
(4) NOTIFICATIONS.—The Commissioner shall 
notify each State in Y1 and for purposes of section 
1902(gg)(1) of the Social Security Act (as added by 
section 1703(a)) whether the Health Insurance Ex-
change can support enrollment of children described 
in paragraph (2) in such State in such year. 
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103 
(e) MEDICAID COVERAGE FOR MEDICAID ELIGIBLE 
INDIVIDUALS.— 
(1) IN GENERAL.— 
(A) CHOICE FOR LIMITED EXCHANGE-ELI-
GIBLE INDIVIDUALS.—As part of the enrollment 
process under subsection (b), the Commissioner 
shall provide the option, in the case of an Ex-
change-eligible individual described in section 
202(d)(3), for the individual to elect to enroll 
under Medicaid instead of under an Exchange- 
participating health benefits plan. Such an indi-
vidual may change such election during an en-
rollment period under subsection (b)(2). 
(B) 
MEDICAID
ENROLLMENT
OBLIGA-
TION.—An Exchange eligible individual may 
apply, in the manner described in section 
241(b)(1), for a determination of whether the 
individual is a Medicaid-eligible individual. If 
the individual is determined to be so eligible, 
the Commissioner, through the Medicaid memo-
randum of understanding, shall provide for the 
enrollment of the individual under the State 
Medicaid plan in accordance with the Medicaid 
memorandum of understanding under para-
graph (4). In the case of such an enrollment, 
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104 
the State shall provide for the same periodic re-
determination of eligibility under Medicaid as 
would otherwise apply if the individual had di-
rectly applied for medical assistance to the 
State Medicaid agency. 
(2) NON-TRADITIONAL MEDICAID ELIGIBLE IN-
DIVIDUALS.—In the case of a non-traditional Med-
icaid 
eligible 
individual 
described 
in 
section 
202(d)(3) who elects to enroll under Medicaid under 
paragraph (1)(A), the Commissioner shall provide 
for the enrollment of the individual under the State 
Medicaid plan in accordance with the Medicaid 
memorandum of understanding under paragraph 
(4). 
(3) COORDINATED ENROLLMENT WITH STATE 
THROUGH
MEMORANDUM
OF
UNDERSTANDING.— 
The Commissioner, in consultation with the Sec-
retary of Health and Human Services, shall enter 
into a memorandum of understanding with each 
State (each in this subdivision referred to as a 
‘‘Medicaid memorandum of understanding’’) with re-
spect to coordinating enrollment of individuals in 
Exchange-participating health benefits plans and 
under the State’s Medicaid program consistent with 
this section and to otherwise coordinate the imple-
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dcolon on DSK2BSOYB1PROD with BILLS
105 
mentation of the provisions of this subdivision with 
respect to the Medicaid program. Such memo-
randum shall permit the exchange of information 
consistent with the limitations described in section 
1902(a)(7) of the Social Security Act. Nothing in 
this section shall be construed as permitting such 
memorandum to modify or vitiate any requirement 
of a State Medicaid plan. 
(4) MEDICAID
ELIGIBLE
INDIVIDUALS.—For 
purposes of this subdivision: 
(A) MEDICAID
ELIGIBLE
INDIVIDUAL.— 
The term ‘‘Medicaid eligible individual’’ means 
an individual who is eligible for medical assist-
ance under Medicaid. 
(B) TRADITIONAL MEDICAID ELIGIBLE IN-
DIVIDUAL.—The term ‘‘traditional Medicaid eli-
gible individual’’ means a Medicaid eligible indi-
vidual other than an individual who is— 
(i) a Medicaid eligible individual by 
reason of the application of subclause 
(VIII) of section 1902(a)(10)(A)(i) of the 
Social Security Act; or 
(ii) a childless adult not described in 
section 1902(a)(10)(A) or (C) of such Act 
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106 
(as in effect as of the day before the date 
of the enactment of this Act). 
(C) NON-TRADITIONAL
MEDICAID
ELIGI-
BLE
INDIVIDUAL.—The term ‘‘non-traditional 
Medicaid eligible individual’’ means a Medicaid 
eligible individual who is not a traditional Med-
icaid eligible individual. 
(f) EFFECTIVE CULTURALLY AND LINGUISTICALLY 
APPROPRIATE COMMUNICATION.—In carrying out this 
section, the Commissioner shall establish effective methods 
for communicating in plain language and a culturally and 
linguistically appropriate manner. 
SEC. 206. OTHER FUNCTIONS. 
(a) COORDINATION OF AFFORDABILITY CREDITS.— 
The Commissioner shall coordinate the distribution of af-
fordability premium and cost-sharing credits under sub-
title C to QHBP offering entities offering Exchange-par-
ticipating health benefits plans. 
(b) COORDINATION OF RISK POOLING.—The Com-
missioner shall establish a mechanism whereby there is an 
adjustment made of the premium amounts payable among 
QHBP offering entities offering Exchange-participating 
health benefits plans of premiums collected for such plans 
that takes into account (in a manner specified by the Com-
missioner) the differences in the risk characteristics of in-
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107 
dividuals and employers enrolled under the different Ex-
change-participating health benefits plans offered by such 
entities so as to minimize the impact of adverse selection 
of enrollees among the plans offered by such entities. 
(c) SPECIAL INSPECTOR GENERAL FOR THE HEALTH 
INSURANCE EXCHANGE.— 
(1) ESTABLISHMENT; APPOINTMENT.—There is 
hereby established the Office of the Special Inspec-
tor General for the Health Insurance Exchange, to 
be headed by a Special Inspector General for the 
Health Insurance Exchange (in this subsection re-
ferred to as the ‘‘Special Inspector General’’) to be 
appointed by the President, by and with the advice 
and consent of the Senate. The nomination of an in-
dividual as Special Inspector General shall be made 
as soon as practicable after the establishment of the 
program under this subtitle. 
(2) DUTIES.—The Special Inspector General 
shall— 
(A) conduct, supervise, and coordinate au-
dits, evaluations and investigations of the 
Health Insurance Exchange to protect the in-
tegrity of the Health Insurance Exchange, as 
well as the health and welfare of participants in 
the Exchange; 
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108 
(B) report both to the Commissioner and 
to the Congress regarding program and man-
agement problems and recommendations to cor-
rect them; 
(C) have other duties (described in para-
graphs (2) and (3) of section 121 of division A 
of Public Law 110–343) in relation to the du-
ties described in the previous subparagraphs; 
and 
(D) have the authorities provided in sec-
tion 6 of the Inspector General Act of 1978 in 
carrying out duties under this paragraph. 
(3) APPLICATION OF OTHER SPECIAL INSPEC-
TOR GENERAL PROVISIONS.—The provisions of sub-
sections (b) (other than paragraphs (1) and (3)), (d) 
(other than paragraph (1)), and (e) of section 121 
of division A of the Emergency Economic Stabiliza-
tion Act of 2009 (Public Law 110–343) shall apply 
to the Special Inspector General under this sub-
section in the same manner as such provisions apply 
to the Special Inspector General under such section. 
(4) REPORTS.—Not later than one year after 
the confirmation of the Special Inspector General, 
and annually thereafter, the Special Inspector Gen-
eral shall submit to the appropriate committees of 
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109 
Congress a report summarizing the activities of the 
Special Inspector General during the one year period 
ending on the date such report is submitted. 
(5) TERMINATION.—The Office of the Special 
Inspector General shall terminate five years after 
the date of the enactment of this Act. 
SEC. 207. HEALTH INSURANCE EXCHANGE TRUST FUND. 
(a) ESTABLISHMENT OF HEALTH INSURANCE EX-
CHANGE TRUST FUND.—There is created within the 
Treasury of the United States a trust fund to be known 
as the ‘‘Health Insurance Exchange Trust Fund’’ (in this 
section referred to as the ‘‘Trust Fund’’), consisting of 
such amounts as may be appropriated or credited to the 
Trust Fund under this section or any other provision of 
law. 
(b) PAYMENTS FROM TRUST FUND.—The Commis-
sioner shall pay from time to time from the Trust Fund 
such amounts as the Commissioner determines are nec-
essary to make payments to operate the Health Insurance 
Exchange, including payments under subtitle C (relating 
to affordability credits). 
(c) TRANSFERS TO TRUST FUND.— 
(1) DEDICATED PAYMENTS.—There is hereby 
appropriated to the Trust Fund amounts equivalent 
to the following: 
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110 
(A) TAXES ON INDIVIDUALS NOT OBTAIN-
ING ACCEPTABLE COVERAGE.—The amounts re-
ceived in the Treasury under section 59B of the 
Internal Revenue Code of 1986 (relating to re-
quirement of health insurance coverage for indi-
viduals). 
(B) EMPLOYMENT TAXES ON EMPLOYERS 
NOT PROVIDING ACCEPTABLE COVERAGE.—The 
amounts received in the Treasury under section 
3111(c) of the Internal Revenue Code of 1986 
(relating to employers electing to not provide 
health benefits). 
(C) EXCISE TAX ON FAILURES TO MEET 
CERTAIN
HEALTH
COVERAGE
REQUIRE-
MENTS.—The amounts received in the Treasury 
under section 4980H(b) (relating to excise tax 
with respect to failure to meet health coverage 
participation requirements). 
(2) APPROPRIATIONS TO COVER GOVERNMENT 
CONTRIBUTIONS.—There are hereby appropriated, 
out of any moneys in the Treasury not otherwise ap-
propriated, to the Trust Fund, an amount equivalent 
to the amount of payments made from the Trust 
Fund under subsection (b) plus such amounts as are 
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111 
necessary reduced by the amounts deposited under 
paragraph (1). 
(d) APPLICATION OF CERTAIN RULES.—Rules simi-
lar to the rules of subchapter B of chapter 98 of the Inter-
nal Revenue Code of 1986 shall apply with respect to the 
Trust Fund. 
SEC. 208. OPTIONAL OPERATION OF STATE-BASED HEALTH 
INSURANCE EXCHANGES. 
(a) IN GENERAL.—If— 
(1) a State (or group of States, subject to the 
approval of the Commissioner) applies to the Com-
missioner for approval of a State-based Health In-
surance Exchange to operate in the State (or group 
of States); and 
(2) the Commissioner approves such State- 
based Health Insurance Exchange, 
then, subject to subsections (c) and (d), the State-based 
Health Insurance Exchange shall operate, instead of the 
Health Insurance Exchange, with respect to such State 
(or group of States). The Commissioner shall approve a 
State-based Health Insurance Exchange if it meets the re-
quirements for approval under subsection (b). 
(b) REQUIREMENTS FOR APPROVAL.—The Commis-
sioner may not approve a State-based Health Insurance 
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112 
Exchange under this section unless the following require-
ments are met: 
(1) The State-based Health Insurance Ex-
change must demonstrate the capacity to and pro-
vide assurances satisfactory to the Commissioner 
that the State-based Health Insurance Exchange will 
carry out the functions specified for the Health In-
surance Exchange in the State (or States) involved, 
including— 
(A) negotiating and contracting with 
QHBP offering entities for the offering of Ex-
change-participating health benefits plan, which 
satisfy the standards and requirements of this 
title and title I; 
(B) enrolling Exchange-eligible individuals 
and employers in such State in such plans; 
(C) the establishment of sufficient local of-
fices to meet the needs of Exchange-eligible in-
dividuals and employers; 
(D) administering affordability credits 
under subtitle B using the same methodologies 
(and at least the same income verification 
methods) as would otherwise apply under such 
subtitle and at a cost to the Federal Govern-
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113 
ment which does exceed the cost to the Federal 
Government if this section did not apply; and 
(E) enforcement activities consistent with 
federal requirements. 
(2) There is no more than one Health Insur-
ance Exchange operating with respect to any one 
State. 
(3) The State provides assurances satisfactory 
to the Commissioner that approval of such an Ex-
change will not result in any net increase in expendi-
tures to the Federal Government. 
(4) The State provides for reporting of such in-
formation as the Commissioner determines and as-
surances satisfactory to the Commissioner that it 
will vigorously enforce violations of applicable re-
quirements. 
(5) Such other requirements as the Commis-
sioner may specify. 
(c) CEASING OPERATION.— 
(1) IN GENERAL.—A State-based Health Insur-
ance Exchange may, at the option of each State in-
volved, and only after providing timely and reason-
able notice to the Commissioner, cease operation as 
such an Exchange, in which case the Health Insur-
ance Exchange shall operate, instead of such State- 
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114 
based Health Insurance Exchange, with respect to 
such State (or States). 
(2) TERMINATION; HEALTH
INSURANCE
EX-
CHANGE RESUMPTION OF FUNCTIONS.—The Com-
missioner may terminate the approval (for some or 
all functions) of a State-based Health Insurance Ex-
change under this section if the Commissioner deter-
mines that such Exchange no longer meets the re-
quirements of subsection (b) or is no longer capable 
of carrying out such functions in accordance with 
the requirements of this subtitle. In lieu of termi-
nating such approval, the Commissioner may tempo-
rarily assume some or all functions of the State- 
based Health Insurance Exchange until such time as 
the 
Commissioner 
determines 
the 
State-based 
Health Insurance Exchange meets such require-
ments of subsection (b) and is capable of carrying 
out such functions in accordance with the require-
ments of this subtitle. 
(3) EFFECTIVENESS.—The ceasing or termi-
nation of a State-based Health Insurance Exchange 
under this subsection shall be effective in such time 
and manner as the Commissioner shall specify. 
(d) RETENTION OF AUTHORITY.— 
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115 
(1) AUTHORITY RETAINED.—Enforcement au-
thorities of the Commissioner shall be retained by 
the Commissioner. 
(2) DISCRETION TO RETAIN ADDITIONAL AU-
THORITY.—The Commissioner may specify functions 
of the Health Insurance Exchange that— 
(A) may not be performed by a State- 
based Health Insurance Exchange under this 
section; or 
(B) may be performed by the Commis-
sioner and by such a State-based Health Insur-
ance Exchange. 
(e) REFERENCES.—In the case of a State-based 
Health Insurance Exchange, except as the Commissioner 
may otherwise specify under subsection (d), any references 
in this subtitle to the Health Insurance Exchange or to 
the Commissioner in the area in which the State-based 
Health Insurance Exchange operates shall be deemed a 
reference to the State-based Health Insurance Exchange 
and the head of such Exchange, respectively. 
(f) FUNDING.—In the case of a State-based Health 
Insurance Exchange, there shall be assistance provided for 
the operation of such Exchange in the form of a matching 
grant with a State share of expenditures required. 
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116 
Subtitle B—Public Health 
Insurance Option 
SEC. 221. ESTABLISHMENT AND ADMINISTRATION OF A 
PUBLIC HEALTH INSURANCE OPTION AS AN 
EXCHANGE-QUALIFIED 
HEALTH 
BENEFITS 
PLAN. 
(a) ESTABLISHMENT.—For years beginning with Y1, 
the Secretary of Health and Human Services (in this sub-
title referred to as the ‘‘Secretary’’) shall provide for the 
offering of an Exchange-participating health benefits plan 
(in this subdivision referred to as the ‘‘public health insur-
ance option’’) that ensures choice, competition, and sta-
bility of affordable, high quality coverage throughout the 
United States in accordance with this subtitle. In design-
ing the option, the Secretary’s primary responsibility is 
to create a low-cost plan without compromising quality or 
access to care. 
(b) OFFERING
AS
AN EXCHANGE-PARTICIPATING 
HEALTH BENEFITS PLAN.— 
(1) EXCLUSIVE TO THE EXCHANGE.—The pub-
lic health insurance option shall only be made avail-
able through the Health Insurance Exchange. 
(2) ENSURING A LEVEL PLAYING FIELD.—Con-
sistent with this subtitle, the public health insurance 
option shall comply with requirements that are ap-
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117 
plicable under this title to an Exchange-participating 
health benefits plan, including requirements related 
to benefits, benefit levels, provider networks, notices, 
consumer protections, and cost sharing. 
(3) PROVISION OF BENEFIT LEVELS.—The pub-
lic health insurance option— 
(A) shall offer basic, enhanced, and pre-
mium plans; and 
(B) may offer premium-plus plans. 
(c) ADMINISTRATIVE CONTRACTING.—The Secretary 
may enter into contracts for the purpose of performing 
administrative functions (including functions described in 
subsection (a)(4) of section 1874A of the Social Security 
Act) with respect to the public health insurance option in 
the same manner as the Secretary may enter into con-
tracts under subsection (a)(1) of such section. The Sec-
retary has the same authority with respect to the public 
health insurance option as the Secretary has under sub-
sections (a)(1) and (b) of section 1874A of the Social Se-
curity Act with respect to title XVIII of such Act. Con-
tracts under this subsection shall not involve the transfer 
of insurance risk to such entity. 
(d) OMBUDSMAN.—The Secretary shall establish an 
office of the ombudsman for the public health insurance 
option which shall have duties with respect to the public 
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health insurance option similar to the duties of the Medi-
care Beneficiary Ombudsman under section 1808(c)(2) of 
the Social Security Act. 
(e) DATA COLLECTION.—The Secretary shall collect 
such data as may be required to establish premiums and 
payment rates for the public health insurance option and 
for other purposes under this subtitle, including to im-
prove quality and to reduce racial, ethnic, and other dis-
parities in health and health care. 
(f) TREATMENT OF PUBLIC HEALTH INSURANCE OP-
TION.—With respect to the public health insurance option, 
the Secretary shall be treated as a QHBP offering entity 
offering an Exchange-participating health benefits plan. 
(g) ACCESS TO FEDERAL COURTS.—The provisions 
of Medicare (and related provisions of title II of the Social 
Security Act) relating to access of Medicare beneficiaries 
to Federal courts for the enforcement of rights under 
Medicare, including with respect to amounts in con-
troversy, shall apply to the public health insurance option 
and individuals enrolled under such option under this title 
in the same manner as such provisions apply to Medicare 
and Medicare beneficiaries. 
SEC. 222. PREMIUMS AND FINANCING. 
(a) ESTABLISHMENT OF PREMIUMS.— 
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(1) IN GENERAL.—The Secretary shall establish 
geographically-adjusted premium rates for the public 
health insurance option in a manner— 
(A) that complies with the premium rules 
established by the Commissioner under section 
113 for Exchange-participating health benefit 
plans; and 
(B) at a level sufficient to fully finance the 
costs of— 
(i) health benefits provided by the 
public health insurance option; and 
(ii) administrative costs related to op-
erating the public health insurance option. 
(2) CONTINGENCY
MARGIN.—In establishing 
premium rates under paragraph (1), the Secretary 
shall include an appropriate amount for a contin-
gency margin. 
(b) ACCOUNT.— 
(1) ESTABLISHMENT.—There is established in 
the Treasury of the United States an Account for 
the receipts and disbursements attributable to the 
operation of the public health insurance option, in-
cluding the start-up funding under paragraph (2). 
Section 1854(g) of the Social Security Act shall 
apply to receipts described in the previous sentence 
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in the same manner as such section applies to pay-
ments or premiums described in such section. 
(2) START-UP FUNDING.— 
(A) IN GENERAL.—In order to provide for 
the establishment of the public health insurance 
option there is hereby appropriated to the Sec-
retary, out of any funds in the Treasury not 
otherwise appropriated, $2,000,000,000. In 
order to provide for initial claims reserves be-
fore the collection of premiums, there is hereby 
appropriated to the Secretary, out of any funds 
in the Treasury not otherwise appropriated, 
such sums as necessary to cover 90 days worth 
of claims reserves based on projected enroll-
ment. 
(B) AMORTIZATION
OF
START-UP
FUND-
ING.—The Secretary shall provide for the re-
payment of the startup funding provided under 
subparagraph (A) to the Treasury in an amor-
tized manner over the 10-year period beginning 
with Y1. 
(C) LIMITATION ON FUNDING.—Nothing in 
this section shall be construed as authorizing 
any additional appropriations to the Account, 
other than such amounts as are otherwise pro-
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vided with respect to other Exchange-partici-
pating health benefits plans. 
SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES. 
(a) RATES ESTABLISHED BY SECRETARY.— 
(1) IN GENERAL.—The Secretary shall establish 
payment rates for the public health insurance option 
for services and health care providers consistent with 
this section and may change such payment rates in 
accordance with section 224. 
(2) INITIAL PAYMENT RULES.— 
(A) IN GENERAL.—Except as provided in 
subparagraph (B) and subsection (b)(1), during 
Y1, Y2, and Y3, the Secretary shall base the 
payment rates under this section for services 
and providers described in paragraph (1) on the 
payment rates for similar services and providers 
under parts A and B of Medicare. 
(B) EXCEPTIONS.— 
(i) PRACTITIONERS’ SERVICES.—Pay-
ment rates for practitioners’ services other-
wise established under the fee schedule 
under section 1848 of the Social Security 
Act shall be applied without regard to the 
provisions under subsection (f) of such sec-
tion and the update under subsection 
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(d)(4) under such section for a year as ap-
plied under this paragraph shall be not less 
than 1 percent. 
(ii) ADJUSTMENTS.—The Secretary 
may determine the extent to which Medi-
care adjustments applicable to base pay-
ment rates under parts A and B of Medi-
care shall apply under this subtitle. 
(3) FOR NEW SERVICES.—The Secretary shall 
modify payment rates described in paragraph (2) in 
order to accommodate payments for services, such as 
well-child visits, that are not otherwise covered 
under Medicare. 
(4) PRESCRIPTION
DRUGS.—Payment rates 
under this section for prescription drugs that are not 
paid for under part A or part B of Medicare shall 
be at rates negotiated by the Secretary. 
(b) INCENTIVES FOR PARTICIPATING PROVIDERS.— 
(1) INITIAL INCENTIVE PERIOD.— 
(A) IN
GENERAL.—The Secretary shall 
provide, in the case of services described in sub-
paragraph (B) furnished during Y1, Y2, and 
Y3, for payment rates that are 5 percent great-
er than the rates established under subsection 
(a). 
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(B) SERVICES DESCRIBED.—The services 
described in this subparagraph are items and 
professional services, under the public health in-
surance option by a physician or other health 
care practitioner who participates in both Medi-
care and the public health insurance option. 
(C) SPECIAL RULES.—A pediatrician and 
any other health care practitioner who is a type 
of practitioner that does not typically partici-
pate in Medicare (as determined by the Sec-
retary) shall also be eligible for the increased 
payment rates under subparagraph (A). 
(2) SUBSEQUENT PERIODS.— Beginning with 
Y4 and for subsequent years, the Secretary shall 
continue to use an administrative process to set such 
rates in order to promote payment accuracy, to en-
sure adequate beneficiary access to providers, and to 
promote affordability and the efficient delivery of 
medical care consistent with section 221(a). Such 
rates shall not be set at levels expected to increase 
overall medical costs under the option beyond what 
would be expected if the process under subsection 
(a)(2) and paragraph (1) of this subsection were 
continued. 
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(3) ESTABLISHMENT
OF
A
PROVIDER
NET-
WORK.—Health care providers participating under 
Medicare are participating providers in the public 
health insurance option unless they opt out in a 
process established by the Secretary. 
(c) 
ADMINISTRATIVE
PROCESS
FOR
SETTING 
RATES.—Chapter 5 of title 5, United States Code shall 
apply to the process for the initial establishment of pay-
ment rates under this section but not to the specific meth-
odology for establishing such rates or the calculation of 
such rates. 
(d) CONSTRUCTION.—Nothing in this subtitle shall 
be construed as limiting the Secretary’s authority to cor-
rect for payments that are excessive or deficient, taking 
into account the provisions of section 221(a) and the 
amounts paid for similar health care providers and serv-
ices under other Exchange-participating health benefits 
plans. 
(e) CONSTRUCTION.—Nothing in this subtitle shall be 
construed as affecting the authority of the Secretary to 
establish payment rates, including payments to provide for 
the more efficient delivery of services, such as the initia-
tives provided for under section 224. 
(f) LIMITATIONS ON REVIEW.—There shall be no ad-
ministrative or judicial review of a payment rate or meth-
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odology established under this section or under section 
224. 
SEC. 224. MODERNIZED PAYMENT INITIATIVES AND DELIV-
ERY SYSTEM REFORM. 
(a) IN GENERAL.—For plan years beginning with Y1, 
the Secretary may utilize innovative payment mechanisms 
and policies to determine payments for items and services 
under the public health insurance option. The payment 
mechanisms and policies under this section may include 
patient-centered medical home and other care manage-
ment payments, accountable care organizations, value- 
based purchasing, bundling of services, differential pay-
ment rates, performance or utilization based payments, 
partial capitation, and direct contracting with providers. 
(b) REQUIREMENTS FOR INNOVATIVE PAYMENTS.— 
The Secretary shall design and implement the payment 
mechanisms and policies under this section in a manner 
that— 
(1) seeks to— 
(A) improve health outcomes; 
(B) reduce health disparities (including ra-
cial, ethnic, and other disparities); 
(C) provide efficient and affordable care; 
(D) address geographic variation in the 
provision of health services; or 
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126 
(E) prevent or manage chronic illness; and 
(2) promotes care that is integrated, patient- 
centered, quality, and efficient. 
(c) ENCOURAGING THE USE OF HIGH VALUE SERV-
ICES.—To the extent allowed by the benefit standards ap-
plied to all Exchange-participating health benefits plans, 
the public health insurance option may modify cost shar-
ing and payment rates to encourage the use of services 
that promote health and value. 
(d) NON-UNIFORMITY PERMITTED.—Nothing in this 
subtitle shall prevent the Secretary from varying payments 
based on different payment structure models (such as ac-
countable care organizations and medical homes) under 
the public health insurance option for different geographic 
areas. 
SEC. 225. PROVIDER PARTICIPATION. 
(a) IN GENERAL.—The Secretary shall establish con-
ditions of participation for health care providers under the 
public health insurance option. 
(b) LICENSURE OR CERTIFICATION.—The Secretary 
shall not allow a health care provider to participate in the 
public health insurance option unless such provider is ap-
propriately licensed or certified under State law. 
(c) PAYMENT TERMS FOR PROVIDERS.— 
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(1) PHYSICIANS.—The Secretary shall provide 
for the annual participation of physicians under the 
public health insurance option, for which payment 
may be made for services furnished during the year, 
in one of 2 classes: 
(A) PREFERRED PHYSICIANS.—Those phy-
sicians who agree to accept the payment rate 
established under section 223 (without regard 
to cost-sharing) as the payment in full. 
(B) 
PARTICIPATING, 
NON-PREFERRED 
PHYSICIANS.—Those physicians who agree not 
to impose charges (in relation to the payment 
rate described in section 223 for such physi-
cians) that exceed the ratio permitted under 
section 1848(g)(2)(C) of the Social Security 
Act. 
(2) OTHER
PROVIDERS.—The Secretary shall 
provide for the participation (on an annual or other 
basis specified by the Secretary) of health care pro-
viders (other than physicians) under the public 
health insurance option under which payment shall 
only be available if the provider agrees to accept the 
payment rate established under section 223 (without 
regard to cost-sharing) as the payment in full. 
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128 
(d) EXCLUSION OF CERTAIN PROVIDERS.—The Sec-
retary shall exclude from participation under the public 
health insurance option a health care provider that is ex-
cluded from participation in a Federal health care pro-
gram (as defined in section 1128B(f) of the Social Secu-
rity Act). 
SEC. 226. APPLICATION OF FRAUD AND ABUSE PROVI-
SIONS. 
Provisions of law (other than criminal law provisions) 
identified by the Secretary by regulation, in consultation 
with the Inspector General of the Department of Health 
and Human Services, that impose sanctions with respect 
to waste, fraud, and abuse under Medicare, such as the 
False Claims Act (31 U.S.C. 3729 et seq.), shall also 
apply to the public health insurance option. 
Subtitle C—Individual 
Affordability Credits 
SEC. 241. AVAILABILITY THROUGH HEALTH INSURANCE EX-
CHANGE. 
(a) IN GENERAL.—Subject to the succeeding provi-
sions of this subtitle, in the case of an affordable credit 
eligible individual enrolled in an Exchange-participating 
health benefits plan— 
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(1) the individual shall be eligible for, in accord-
ance with this subtitle, affordability credits con-
sisting of— 
(A) an affordability premium credit under 
section 243 to be applied against the premium 
for the Exchange-participating health benefits 
plan in which the individual is enrolled; and 
(B) an affordability cost-sharing credit 
under section 244 to be applied as a reduction 
of the cost-sharing otherwise applicable to such 
plan; and 
(2) the Commissioner shall pay the QHBP of-
fering entity that offers such plan from the Health 
Insurance Exchange Trust Fund the aggregate 
amount of affordability credits for all affordable 
credit eligible individuals enrolled in such plan. 
(b) APPLICATION.— 
(1) IN GENERAL.—An Exchange eligible indi-
vidual may apply to the Commissioner through the 
Health Insurance Exchange or through another enti-
ty under an arrangement made with the Commis-
sioner, in a form and manner specified by the Com-
missioner. The Commissioner through the Health 
Insurance Exchange or through another public enti-
ty under an arrangement made with the Commis-
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sioner shall make a determination as to eligibility of 
an individual for affordability credits under this sub-
title. The Commissioner shall establish a process 
whereby, on the basis of information otherwise avail-
able, individuals may be deemed to be affordable 
credit eligible individuals. In carrying this subtitle, 
the Commissioner shall establish effective methods 
that ensure that individuals with limited English 
proficiency are able to apply for affordability credits. 
(2) USE
OF
STATE
MEDICAID
AGENCIES.—If 
the Commissioner determines that a State Medicaid 
agency has the capacity to make a determination of 
eligibility for affordability credits under this subtitle 
and under the same standards as used by the Com-
missioner, under the Medicaid memorandum of un-
derstanding (as defined in section 205(c)(4))— 
(A) the State Medicaid agency is author-
ized to conduct such determinations for any Ex-
change-eligible individual who requests such a 
determination; and 
(B) the Commissioner shall reimburse the 
State Medicaid agency for the costs of con-
ducting such determinations. 
(3) MEDICAID SCREEN AND ENROLL OBLIGA-
TION.—In the case of an application made under 
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131 
paragraph (1), there shall be a determination of 
whether the individual is a Medicaid-eligible indi-
vidual. If the individual is determined to be so eligi-
ble, the Commissioner, through the Medicaid memo-
randum of understanding, shall provide for the en-
rollment of the individual under the State Medicaid 
plan in accordance with the Medicaid memorandum 
of understanding. In the case of such an enrollment, 
the State shall provide for the same periodic redeter-
mination of eligibility under Medicaid as would oth-
erwise apply if the individual had directly applied for 
medical assistance to the State Medicaid agency. 
(c) USE OF AFFORDABILITY CREDITS.— 
(1) IN GENERAL.—In Y1 and Y2 an affordable 
credit eligible individual may use an affordability 
credit only with respect to a basic plan. 
(2) FLEXIBILITY
IN
PLAN
ENROLLMENT
AU-
THORIZED.—Beginning with Y3, the Commissioner 
shall establish a process to allow an affordability 
credit to be used for enrollees in enhanced or pre-
mium plans. In the case of an affordable credit eligi-
ble individual who enrolls in an enhanced or pre-
mium plan, the individual shall be responsible for 
any difference between the premium for such plan 
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132 
and the affordability credit amount otherwise appli-
cable if the individual had enrolled in a basic plan. 
(d) ACCESS TO DATA.—In carrying out this subtitle, 
the Commissioner shall request from the Secretary of the 
Treasury consistent with section 6103 of the Internal Rev-
enue Code of 1986 such information as may be required 
to carry out this subtitle. 
(e) NO CASH REBATES.—In no case shall an afford-
able credit eligible individual receive any cash payment as 
a result of the application of this subtitle. 
SEC. 242. AFFORDABLE CREDIT ELIGIBLE INDIVIDUAL. 
(a) DEFINITION.— 
(1) IN GENERAL.—For purposes of this subdivi-
sion, the term ‘‘affordable credit eligible individual’’ 
means, subject to subsection (b), an individual who 
is lawfully present in a State in the United States 
(other than as a nonimmigrant described in a sub-
paragraph (excluding subparagraphs (K), (T), (U), 
and (V)) of section 101(a)(15) of the Immigration 
and Nationality Act)— 
(A) who is enrolled under an Exchange- 
participating health benefits plan and is not en-
rolled under such plan as an employee (or de-
pendent of an employee) through an employer 
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133 
qualified health benefits plan that meets the re-
quirements of section 312; 
(B) with family income below 400 percent 
of the Federal poverty level for a family of the 
size involved; and 
(C) who is not a Medicaid eligible indi-
vidual, other than an individual described in 
section 202(d)(3) or an individual during a 
transition period under section 202(d)(4)(B)(ii). 
(2) TREATMENT
OF
FAMILY.—Except as the 
Commissioner may otherwise provide, members of 
the same family who are affordable credit eligible in-
dividuals shall be treated as a single affordable cred-
it individual eligible for the applicable credit for such 
a family under this subtitle. 
(b) LIMITATIONS ON EMPLOYEE AND DEPENDENT 
DISQUALIFICATION.— 
(1) IN GENERAL.—Subject to paragraph (2), 
the term ‘‘affordable credit eligible individual’’ does 
not include a full-time employee of an employer if 
the employer offers the employee coverage (for the 
employee and dependents) as a full-time employee 
under a group health plan if the coverage and em-
ployer contribution under the plan meet the require-
ments of section 312. 
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134 
(2) EXCEPTIONS.— 
(A) 
FOR
CERTAIN
FAMILY
CIR-
CUMSTANCES.—The Commissioner shall estab-
lish such exceptions and special rules in the 
case described in paragraph (1) as may be ap-
propriate in the case of a divorced or separated 
individual or such a dependent of an employee 
who would otherwise be an affordable credit eli-
gible individual. 
(B) FOR UNAFFORDABLE EMPLOYER COV-
ERAGE.—Beginning in Y2, in the case of full- 
time employees for which the cost of the em-
ployee premium for coverage under a group 
health plan would exceed 11 percent of current 
family income (determined by the Commissioner 
on the basis of verifiable documentation and 
without regard to section 245), paragraph (1) 
shall not apply. 
(c) INCOME DEFINED.— 
(1) IN GENERAL.—In this title, the term ‘‘in-
come’’ means modified adjusted gross income (as de-
fined in section 59B of the Internal Revenue Code 
of 1986). 
(2) STUDY
OF
INCOME
DISREGARDS.—The 
Commissioner shall conduct a study that examines 
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135 
the application of income disregards for purposes of 
this subtitle. Not later than the first day of Y2, the 
Commissioner shall submit to Congress a report on 
such study and shall include such recommendations 
as the Commissioner determines appropriate. 
(d) CLARIFICATION
OF TREATMENT
OF AFFORD-
ABILITY CREDITS.—Affordability credits under this sub-
title shall not be treated, for purposes of title IV of the 
Personal Responsibility and Work Opportunity Reconcili-
ation Act of 1996, to be a benefit provided under section 
403 of such title. 
SEC. 243. AFFORDABILITY PREMIUM CREDIT. 
(a) IN GENERAL.—The affordability premium credit 
under this section for an affordable credit eligible indi-
vidual enrolled in an Exchange-participating health bene-
fits plan is in an amount equal to the amount (if any) 
by which the premium for the plan (or, if less, the ref-
erence premium amount specified in subsection (c)), ex-
ceeds the affordable premium amount specified in sub-
section (b) for the individual. 
(b) AFFORDABLE PREMIUM AMOUNT.— 
(1) IN
GENERAL.—The affordable premium 
amount specified in this subsection for an individual 
for monthly premium in a plan year shall be equal 
to 1⁄12 of the product of— 
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136 
(A) the premium percentage limit specified 
in paragraph (2) for the individual based upon 
the individual’s family income for the plan year; 
and 
(B) the individual’s family income for such 
plan year. 
(2) PREMIUM PERCENTAGE LIMITS BASED ON 
TABLE.—The Commissioner shall establish premium 
percentage limits so that for individuals whose fam-
ily income is within an income tier specified in the 
table in subsection (d) such percentage limits shall 
increase, on a sliding scale in a linear manner, from 
the initial premium percentage to the final premium 
percentage specified in such table for such income 
tier. 
(c) REFERENCE PREMIUM AMOUNT.—The reference 
premium amount specified in this subsection for a plan 
year for an individual in a premium rating area is equal 
to the average premium for the 3 basic plans in the area 
for the plan year with the lowest premium levels. In com-
puting such amount the Commissioner may exclude plans 
with extremely limited enrollments. 
(d) TABLE OF PREMIUM PERCENTAGE LIMITS AND 
ACTUARIAL VALUE PERCENTAGES BASED ON INCOME 
TIER.— 
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(1) IN GENERAL.—For purposes of this sub-
title, the table specified in this subsection is as fol-
lows: 
In the case of family in-
come (expressed as a 
percent of FPL) within 
the following income 
tier: 
The initial pre-
mium percent-
age is— 
The final pre-
mium percent-
age is— 
The actuarial 
value percent-
age is— 
133% through 150% 
1.5% 
3% 
97% 
150% through 200% 
3% 
5% 
93% 
200% through 250% 
5% 
7% 
85% 
250% through 300% 
7% 
9% 
78% 
300% through 350% 
9% 
10% 
72% 
350% through 400% 
10% 
11% 
70% 
(2) SPECIAL RULES.—For purposes of applying 
the table under paragraph (1)— 
(A) FOR LOWEST LEVEL OF INCOME.—In 
the case of an individual with income that does 
not exceed 133 percent of FPL, the individual 
shall be considered to have income that is 133% 
of FPL. 
(B) APPLICATION OF HIGHER ACTUARIAL 
VALUE
PERCENTAGE
AT
TIER
TRANSITION 
POINTS.—If two actuarial value percentages 
may be determined with respect to an indi-
vidual, the actuarial value percentage shall be 
the higher of such percentages. 
SEC. 244. AFFORDABILITY COST-SHARING CREDIT. 
(a) IN GENERAL.—The affordability cost-sharing 
credit under this section for an affordable credit eligible 
individual enrolled in an Exchange-participating health 
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138 
benefits plan is in the form of the cost-sharing reduction 
described in subsection (b) provided under this section for 
the income tier in which the individual is classified based 
on the individual’s family income. 
(b) COST-SHARING
REDUCTIONS.—The Commis-
sioner shall specify a reduction in cost-sharing amounts 
and the annual limitation on cost-sharing specified in sec-
tion 122(c)(2)(B) under a basic plan for each income tier 
specified in the table under section 243(d), with respect 
to a year, in a manner so that, as estimated by the Com-
missioner, the actuarial value of the coverage with such 
reduced cost-sharing amounts (and the reduced annual 
cost-sharing limit) is equal to the actuarial value percent-
age (specified in the table under section 243(d) for the 
income tier involved) of the full actuarial value if there 
were no cost-sharing imposed under the plan. 
(c) DETERMINATION AND PAYMENT OF COST-SHAR-
ING AFFORDABILITY CREDIT.—In the case of an afford-
able credit eligible individual in a tier enrolled in an Ex-
change-participating health benefits plan offered by a 
QHBP offering entity, the Commissioner shall provide for 
payment to the offering entity of an amount equivalent 
to the increased actuarial value of the benefits under the 
plan provided under section 203(c)(2)(B) resulting from 
the reduction in cost-sharing described in subsection (b). 
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SEC. 245. INCOME DETERMINATIONS. 
(a) IN GENERAL.—In applying this subtitle for an 
affordability credit for an individual for a plan year, the 
individual’s income shall be the income (as defined in sec-
tion 242(c)) for the individual for the most recent taxable 
year (as determined in accordance with rules of the Com-
missioner). The Federal poverty level applied shall be such 
level in effect as of the date of the application. 
(b) PROGRAM INTEGRITY; INCOME VERIFICATION 
PROCEDURES.— 
(1) PROGRAM INTEGRITY.—The Commissioner 
shall take such steps as may be appropriate to en-
sure the accuracy of determinations and redeter-
minations under this subtitle. 
(2) INCOME VERIFICATION.— 
(A) IN GENERAL.—Upon an initial applica-
tion of an individual for an affordability credit 
under this subtitle (or in applying section 
242(b)) or upon an application for a change in 
the affordability credit based upon a significant 
change in family income described in subpara-
graph (A)— 
(i) the Commissioner shall request 
from the Secretary of the Treasury the dis-
closure to the Commissioner of such infor-
mation as may be permitted to verify the 
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information contained in such application; 
and 
(ii) the Commissioner shall use the in-
formation so disclosed to verify such infor-
mation. 
(B) 
ALTERNATIVE
PROCEDURES.—The 
Commissioner shall establish procedures for the 
verification of income for purposes of this sub-
title if no income tax return is available for the 
most recent completed tax year. 
(c) SPECIAL RULES.— 
(1) CHANGES IN INCOME AS A PERCENT OF 
FPL.—In the case that an individual’s income (ex-
pressed as a percentage of the Federal poverty level 
for a family of the size involved) for a plan year is 
expected (in a manner specified by the Commis-
sioner) to be significantly different from the income 
(as so expressed) used under subsection (a), the 
Commissioner shall establish rules requiring an indi-
vidual to report, consistent with the mechanism es-
tablished under paragraph (2), significant changes 
in such income (including a significant change in 
family composition) to the Commissioner and requir-
ing the substitution of such income for the income 
otherwise applicable. 
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(2) REPORTING OF SIGNIFICANT CHANGES IN 
INCOME.—The Commissioner shall establish rules 
under which an individual determined to be an af-
fordable credit eligible individual would be required 
to inform the Commissioner when there is a signifi-
cant change in the family income of the individual 
(expressed as a percentage of the FPL for a family 
of the size involved) and of the information regard-
ing such change. Such mechanism shall provide for 
guidelines that specify the circumstances that qual-
ify as a significant change, the verifiable information 
required to document such a change, and the process 
for submission of such information. If the Commis-
sioner receives new information from an individual 
regarding the family income of the individual, the 
Commissioner shall provide for a redetermination of 
the individual’s eligibility to be an affordable credit 
eligible individual. 
(3) TRANSITION FOR CHIP.—In the case of a 
child described in section 202(d)(2), the Commis-
sioner shall establish rules under which the family 
income of the child is deemed to be no greater than 
the family income of the child as most recently de-
termined before Y1 by the State under title XXI of 
the Social Security Act. 
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(4) STUDY OF GEOGRAPHIC VARIATION IN AP-
PLICATION OF FPL.—The Commissioner shall exam-
ine the feasibility and implication of adjusting the 
application of the Federal poverty level under this 
subtitle for different geographic areas so as to re-
flect the variations in cost-of-living among different 
areas within the United States. If the Commissioner 
determines that an adjustment is feasible, the study 
should include a methodology to make such an ad-
justment. Not later than the first day of Y2, the 
Commissioner shall submit to Congress a report on 
such study and shall include such recommendations 
as the Commissioner determines appropriate. 
(d) PENALTIES FOR MISREPRESENTATION.—In the 
case of an individual intentionally misrepresents family in-
come or the individual fails (without regard to intent) to 
disclose to the Commissioner a significant change in fam-
ily income under subsection (c) in a manner that results 
in the individual becoming an affordable credit eligible in-
dividual when the individual is not or in the amount of 
the affordability credit exceeding the correct amount— 
(1) the individual is liable for repayment of the 
amount of the improper affordability credit; ;and 
(2) in the case of such an intentional misrepre-
sentation or other egregious circumstances specified 
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143 
by the Commissioner, the Commissioner may impose 
an additional penalty. 
SEC. 246. NO FEDERAL PAYMENT FOR UNDOCUMENTED 
ALIENS. 
Nothing in this subtitle shall allow Federal payments 
for affordability credits on behalf of individuals who are 
not lawfully present in the United States. 
TITLE III—SHARED 
RESPONSIBILITY 
Subtitle A—Individual 
Responsibility 
SEC. 301. INDIVIDUAL RESPONSIBILITY. 
For an individual’s responsibility to obtain acceptable 
coverage, see section 59B of the Internal Revenue Code 
of 1986 (as added by section 401 of this division). 
Subtitle B—Employer 
Responsibility 
PART 1—HEALTH COVERAGE PARTICIPATION 
REQUIREMENTS 
SEC. 311. HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS. 
An employer meets the requirements of this section 
if such employer does all of the following: 
(1) OFFER OF COVERAGE.—The employer of-
fers each employee individual and family coverage 
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144 
under a qualified health benefits plan (or under a 
current employment-based health plan (within the 
meaning of section 102(b))) in accordance with sec-
tion 312. 
(2) CONTRIBUTION
TOWARDS
COVERAGE.—If 
an employee accepts such offer of coverage, the em-
ployer makes timely contributions towards such cov-
erage in accordance with section 312. 
(3) CONTRIBUTION IN LIEU OF COVERAGE.— 
Beginning with Y2, if an employee declines such 
offer but otherwise obtains coverage in an Exchange- 
participating health benefits plan (other than by rea-
son of being covered by family coverage as a spouse 
or dependent of the primary insured), the employer 
shall make a timely contribution to the Health In-
surance Exchange with respect to each such em-
ployee in accordance with section 313. 
SEC. 312. EMPLOYER RESPONSIBILITY TO CONTRIBUTE TO-
WARDS EMPLOYEE AND DEPENDENT COV-
ERAGE. 
(a) IN GENERAL.—An employer meets the require-
ments of this section with respect to an employee if the 
following requirements are met: 
(1) OFFERING OF COVERAGE.—The employer 
offers the coverage described in section 311(1) either 
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through an Exchange-participating health benefits 
plan or other than through such a plan. 
(2) EMPLOYER
REQUIRED
CONTRIBUTION.— 
The employer timely pays to the issuer of such cov-
erage an amount not less than the employer required 
contribution specified in subsection (b) for such cov-
erage. 
(3) PROVISION
OF
INFORMATION.—The em-
ployer provides the Health Choices Commissioner, 
the Secretary of Labor, the Secretary of Health and 
Human Services, and the Secretary of the Treasury, 
as applicable, with such information as the Commis-
sioner may require to ascertain compliance with the 
requirements of this section. 
(4) AUTOENROLLMENT
OF
EMPLOYEES.—The 
employer provides for autoenrollment of the em-
ployee in accordance with subsection (c). 
(b) REDUCTION OF EMPLOYEE PREMIUMS THROUGH 
MINIMUM EMPLOYER CONTRIBUTION.— 
(1) FULL-TIME
EMPLOYEES.—The minimum 
employer contribution described in this subsection 
for coverage of a full-time employee (and, if any, the 
employee’s spouse and qualifying children (as de-
fined in section 152(c) of the Internal Revenue Code 
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146 
of 1986) under a qualified health benefits plan (or 
current employment-based health plan) is equal to— 
(A) in case of individual coverage, not less 
than 72.5 percent of the applicable premium 
(as defined in section 4980B(f)(4) of such 
Code, subject to paragraph (2)) of the lowest 
cost plan offered by the employer that is a 
qualified health benefits plan (or is such cur-
rent employment-based health plan); and 
(B) in the case of family coverage which 
includes coverage of such spouse and children, 
not less 65 percent of such applicable premium 
of such lowest cost plan. 
(2) APPLICABLE PREMIUM FOR EXCHANGE COV-
ERAGE.—In this subtitle, the amount of the applica-
ble premium of the lowest cost plan with respect to 
coverage of an employee under an Exchange-partici-
pating health benefits plan is the reference premium 
amount under section 243(c) for individual coverage 
(or, if elected, family coverage) for the premium rat-
ing area in which the individual or family resides. 
(3) MINIMUM
EMPLOYER
CONTRIBUTION
FOR 
EMPLOYEES
OTHER
THAN
FULL-TIME
EMPLOY-
EES.—In the case of coverage for an employee who 
is not a full-time employee, the amount of the min-
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imum employer contribution under this subsection 
shall be a proportion (as determined in accordance 
with rules of the Health Choices Commissioner, the 
Secretary of Labor, the Secretary of Health and 
Human Services, and the Secretary of the Treasury, 
as applicable) of the minimum employer contribution 
under this subsection with respect to a full-time em-
ployee that reflects the proportion of— 
(A) the average weekly hours of employ-
ment of the employee by the employer, to 
(B) the minimum weekly hours specified 
by the Commissioner for an employee to be a 
full-time employee. 
(4) SALARY REDUCTIONS NOT TREATED AS EM-
PLOYER CONTRIBUTIONS.—For purposes of this sec-
tion, any contribution on behalf of an employee with 
respect to which there is a corresponding reduction 
in the compensation of the employee shall not be 
treated as an amount paid by the employer. 
(c) AUTOMATIC ENROLLMENT FOR EMPLOYER SPON-
SORED HEALTH BENEFITS.— 
(1) IN GENERAL.—The requirement of this sub-
section with respect to an employer and an employee 
is that the employer automatically enroll such em-
ployee into the employment-based health benefits 
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plan for individual coverage under the plan option 
with the lowest applicable employee premium. 
(2) OPT-OUT.—In no case may an employer 
automatically enroll an employee in a plan under 
paragraph (1) if such employee makes an affirmative 
election to opt out of such plan or to elect coverage 
under an employment-based health benefits plan of-
fered by such employer. An employer shall provide 
an employee with a 30-day period to make such an 
affirmative election before the employer may auto-
matically enroll the employee in such a plan. 
(3) NOTICE REQUIREMENTS.— 
(A) IN
GENERAL.—Each employer de-
scribed in paragraph (1) who automatically en-
rolls an employee into a plan as described in 
such paragraph shall provide the employees, 
within a reasonable period before the beginning 
of each plan year (or, in the case of new em-
ployees, within a reasonable period before the 
end of the enrollment period for such a new em-
ployee), written notice of the employees’ rights 
and obligations relating to the automatic enroll-
ment requirement under such paragraph. Such 
notice must be comprehensive and understood 
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149 
by the average employee to whom the automatic 
enrollment requirement applies. 
(B) INCLUSION
OF
SPECIFIC
INFORMA-
TION.—The written notice under subparagraph 
(A) must explain an employee’s right to opt out 
of being automatically enrolled in a plan and in 
the case that more than one level of benefits or 
employee premium level is offered by the em-
ployer involved, the notice must explain which 
level of benefits and employee premium level the 
employee will be automatically enrolled in the 
absence of an affirmative election by the em-
ployee. 
SEC. 313. EMPLOYER CONTRIBUTIONS IN LIEU OF COV-
ERAGE. 
(a) IN GENERAL.—A contribution is made in accord-
ance with this section with respect to an employee if such 
contribution is equal to an amount equal to 8 percent of 
the average wages paid by the employer during the period 
of enrollment (determined by taking into account all em-
ployees of the employer and in such manner as the Com-
missioner provides, including rules providing for the ap-
propriate aggregation of related employers). Any such con-
tribution— 
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(1) shall be paid to the Health Choices Com-
missioner for deposit into the Health Insurance Ex-
change Trust Fund, and 
(2) shall not be applied against the premium of 
the employee under the Exchange-participating 
health benefits plan in which the employee is en-
rolled. 
(b) SPECIAL RULES FOR SMALL EMPLOYERS.— 
(1) IN GENERAL.—In the case of any employer 
who is a small employer for any calendar year, sub-
section (a) shall be applied by substituting the appli-
cable percentage determined in accordance with the 
following table for ‘‘8 percent’’: 
If the annual payroll of such employer for 
the preceding calendar year: 
The applicable 
percentage is: 
Does not exceed $250,000 .....................................
0 percent 
Exceeds $250,000, but does not exceed $300,000 
2 percent 
Exceeds $300,000, but does not exceed $350,000 
4 percent 
Exceeds $350,000, but does not exceed $400,000 
6 percent 
(2) SMALL EMPLOYER.—For purposes of this 
subsection, the term ‘‘small employer’’ means any 
employer for any calendar year if the annual payroll 
of such employer for the preceding calendar year 
does not exceed $400,000. 
(3) ANNUAL PAYROLL.—For purposes of this 
paragraph, the term ‘‘annual payroll’’ means, with 
respect to any employer for any calendar year, the 
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151 
aggregate wages paid by the employer during such 
calendar year. 
(4) AGGREGATION RULES.—Related employers 
and predecessors shall be treated as a single em-
ployer for purposes of this subsection. 
SEC. 314. AUTHORITY RELATED TO IMPROPER STEERING. 
The Health Choices Commissioner (in coordination 
with the Secretary of Labor, the Secretary of Health and 
Human Services, and the Secretary of the Treasury) shall 
have authority to set standards for determining whether 
employers or insurers are undertaking any actions to af-
fect the risk pool within the Health Insurance Exchange 
by inducing individuals to decline coverage under a quali-
fied health benefits plan (or current employment-based 
health plan (within the meaning of section 102(b)) offered 
by the employer and instead to enroll in an Exchange-par-
ticipating health benefits plan. An employer violating such 
standards shall be treated as not meeting the require-
ments of this section. 
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152 
PART 2—SATISFACTION OF HEALTH COVERAGE 
PARTICIPATION REQUIREMENTS 
SEC. 321. SATISFACTION OF HEALTH COVERAGE PARTICI-
PATION REQUIREMENTS UNDER THE EM-
PLOYEE 
RETIREMENT 
INCOME 
SECURITY 
ACT OF 1974. 
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 is amend-
ed by adding at the end the following new part: 
‘‘PART 8—NATIONAL HEALTH COVERAGE 
PARTICIPATION REQUIREMENTS 
‘‘SEC. 801. ELECTION OF EMPLOYER TO BE SUBJECT TO NA-
TIONAL HEALTH COVERAGE PARTICIPATION 
REQUIREMENTS. 
‘‘(a) IN GENERAL.—An employer may make an elec-
tion with the Secretary to be subject to the health coverage 
participation requirements. 
‘‘(b) TIME AND MANNER.—An election under sub-
section (a) may be made at such time and in such form 
and manner as the Secretary may prescribe. 
‘‘SEC. 802. TREATMENT OF COVERAGE RESULTING FROM 
ELECTION. 
‘‘(a) IN GENERAL.—If an employer makes an election 
to the Secretary under section 801— 
‘‘(1) such election shall be treated as the estab-
lishment and maintenance of a group health plan (as 
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153 
defined in section 733(a)) for purposes of this title, 
subject to section 151 of the America’s Affordable 
Health Choices Act of 2009, and 
‘‘(2) the health coverage participation require-
ments shall be deemed to be included as terms and 
conditions of such plan. 
‘‘(b) PERIODIC INVESTIGATIONS TO DISCOVER NON-
COMPLIANCE.—The Secretary shall regularly audit a rep-
resentative sampling of employers and group health plans 
and conduct investigations and other activities under sec-
tion 504 with respect to such sampling of plans so as to 
discover noncompliance with the health coverage participa-
tion requirements in connection with such plans. The Sec-
retary shall communicate findings of noncompliance made 
by the Secretary under this subsection to the Secretary 
of the Treasury and the Health Choices Commissioner. 
The Secretary shall take such timely enforcement action 
as appropriate to achieve compliance. 
‘‘SEC. 803. HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS. 
‘‘For purposes of this part, the term ‘health coverage 
participation requirements’ means the requirements of 
part 1 of subtitle B of title III of subdivision A of Amer-
ica’s Affordable Health Choices Act of 2009 (as in effect 
on the date of the enactment of such Act). 
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154 
‘‘SEC. 804. RULES FOR APPLYING REQUIREMENTS. 
‘‘(a) AFFILIATED GROUPS.—In the case of any em-
ployer which is part of a group of employers who are treat-
ed as a single employer under subsection (b), (c), (m), or 
(o) of section 414 of the Internal Revenue Code of 1986, 
the election under section 801 shall be made by such em-
ployer as the Secretary may provide. Any such election, 
once made, shall apply to all members of such group. 
‘‘(b) SEPARATE ELECTIONS.—Under regulations pre-
scribed by the Secretary, separate elections may be made 
under section 801 with respect to— 
‘‘(1) separate lines of business, and 
‘‘(2) full-time employees and employees who are 
not full-time employees. 
‘‘SEC. 805. TERMINATION OF ELECTION IN CASES OF SUB-
STANTIAL NONCOMPLIANCE. 
‘‘The Secretary may terminate the election of any em-
ployer under section 801 if the Secretary (in coordination 
with the Health Choices Commissioner) determines that 
such employer is in substantial noncompliance with the 
health coverage participation requirements and shall refer 
any such determination to the Secretary of the Treasury 
as appropriate. 
‘‘SEC. 806. REGULATIONS. 
‘‘The Secretary may promulgate such regulations as 
may be necessary or appropriate to carry out the provi-
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155 
sions of this part, in accordance with section 324(a) of 
the America’s Affordable Health Choices Act of 2009. The 
Secretary may promulgate any interim final rules as the 
Secretary determines are appropriate to carry out this 
part.’’. 
(b) ENFORCEMENT OF HEALTH COVERAGE PARTICI-
PATION REQUIREMENTS.—Section 502 of such Act (29 
U.S.C. 1132) is amended— 
(1) in subsection (a)(6), by striking ‘‘para-
graph’’ and all that follows through ‘‘subsection (c)’’ 
and inserting ‘‘paragraph (2), (4), (5), (6), (7), (8), 
(9), (10), or (11) of subsection (c)’’; and 
(2) in subsection (c), by redesignating the sec-
ond paragraph (10) as paragraph (12) and by in-
serting after the first paragraph (10) the following 
new paragraph: 
‘‘(11) HEALTH COVERAGE PARTICIPATION RE-
QUIREMENTS.— 
‘‘(A) CIVIL
PENALTIES.—In the case of 
any employer who fails (during any period with 
respect to which an election under section 
801(a) is in effect) to satisfy the health cov-
erage participation requirements with respect to 
any employee, the Secretary may assess a civil 
penalty against the employer of $100 for each 
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156 
day in the period beginning on the date such 
failure first occurs and ending on the date such 
failure is corrected. 
‘‘(B) HEALTH
COVERAGE
PARTICIPATION 
REQUIREMENTS.—For purposes of this para-
graph, the term ‘health coverage participation 
requirements’ has the meaning provided in sec-
tion 803. 
‘‘(C) LIMITATIONS ON AMOUNT OF PEN-
ALTY.— 
‘‘(i) PENALTY NOT TO APPLY WHERE 
FAILURE
NOT
DISCOVERED
EXERCISING 
REASONABLE
DILIGENCE.—No 
penalty 
shall be assessed under subparagraph (A) 
with respect to any failure during any pe-
riod for which it is established to the satis-
faction of the Secretary that the employer 
did not know, or exercising reasonable dili-
gence would not have known, that such 
failure existed. 
‘‘(ii) PENALTY
NOT
TO
APPLY
TO 
FAILURES CORRECTED WITHIN 30 DAYS.— 
No penalty shall be assessed under sub-
paragraph (A) with respect to any failure 
if— 
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157 
‘‘(I) such failure was due to rea-
sonable cause and not to willful ne-
glect, and 
‘‘(II) such failure is corrected 
during the 30-day period beginning on 
the 1st date that the employer knew, 
or 
exercising 
reasonable 
diligence 
would have known, that such failure 
existed. 
‘‘(iii) OVERALL LIMITATION FOR UN-
INTENTIONAL FAILURES.—In the case of 
failures which are due to reasonable cause 
and not to willful neglect, the penalty as-
sessed under subparagraph (A) for failures 
during any 1-year period shall not exceed 
the amount equal to the lesser of— 
‘‘(I) 10 percent of the aggregate 
amount paid or incurred by the em-
ployer (or predecessor employer) dur-
ing the preceding 1-year period for 
group health plans, or 
‘‘(II) $500,000. 
‘‘(D) ADVANCE NOTIFICATION OF FAILURE 
PRIOR TO ASSESSMENT.—Before a reasonable 
time prior to the assessment of any penalty 
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158 
under this paragraph with respect to any failure 
by an employer, the Secretary shall inform the 
employer in writing of such failure and shall 
provide the employer information regarding ef-
forts and procedures which may be undertaken 
by the employer to correct such failure. 
‘‘(E) COORDINATION WITH EXCISE TAX.— 
Under regulations prescribed in accordance 
with section 324 of the America’s Affordable 
Health Choices Act of 2009, the Secretary and 
the Secretary of the Treasury shall coordinate 
the assessment of penalties under this section 
in connection with failures to satisfy health cov-
erage participation requirements with the impo-
sition of excise taxes on such failures under sec-
tion 4980H(b) of the Internal Revenue Code of 
1986 so as to avoid duplication of penalties 
with respect to such failures. 
‘‘(F) DEPOSIT OF PENALTY COLLECTED.— 
Any amount of penalty collected under this 
paragraph shall be deposited as miscellaneous 
receipts in the Treasury of the United States.’’. 
(c) CLERICAL AMENDMENTS.—The table of contents 
in section 1 of such Act is amended by inserting after the 
item relating to section 734 the following new items: 
‘‘PART 8—NATIONAL HEALTH COVERAGE PARTICIPATION REQUIREMENTS 
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159 
‘‘Sec. 801. Election of employer to be subject to national health coverage par-
ticipation requirements. 
‘‘Sec. 802. Treatment of coverage resulting from election. 
‘‘Sec. 803. Health coverage participation requirements. 
‘‘Sec. 804. Rules for applying requirements. 
‘‘Sec. 805. Termination of election in cases of substantial noncompliance. 
‘‘Sec. 806. Regulations.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to periods beginning after Decem-
ber 31, 2012. 
SEC. 322. SATISFACTION OF HEALTH COVERAGE PARTICI-
PATION REQUIREMENTS UNDER THE INTER-
NAL REVENUE CODE OF 1986. 
(a) FAILURE TO ELECT, OR SUBSTANTIALLY COM-
PLY WITH, HEALTH COVERAGE PARTICIPATION RE-
QUIREMENTS.—For employment tax on employers who fail 
to elect, or substantially comply with, the health coverage 
participation requirements described in part 1, see section 
3111(c) of the Internal Revenue Code of 1986 (as added 
by section 412 of this division). 
(b) OTHER FAILURES.—For excise tax on other fail-
ures of electing employers to comply with such require-
ments, see section 4980H of the Internal Revenue Code 
of 1986 (as added by section 411 of this division). 
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160 
SEC. 323. SATISFACTION OF HEALTH COVERAGE PARTICI-
PATION REQUIREMENTS UNDER THE PUBLIC 
HEALTH SERVICE ACT. 
(a) IN GENERAL.—Part C of title XXVII of the Pub-
lic Health Service Act is amended by adding at the end 
the following new section: 
‘‘SEC. 2793. NATIONAL HEALTH COVERAGE PARTICIPATION 
REQUIREMENTS. 
‘‘(a) ELECTION OF EMPLOYER TO BE SUBJECT TO 
NATIONAL HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS.— 
‘‘(1) IN GENERAL.—An employer may make an 
election with the Secretary to be subject to the 
health coverage participation requirements. 
‘‘(2) TIME AND MANNER.—An election under 
paragraph (1) may be made at such time and in 
such form and manner as the Secretary may pre-
scribe. 
‘‘(b) TREATMENT OF COVERAGE RESULTING FROM 
ELECTION.— 
‘‘(1) IN GENERAL.—If an employer makes an 
election to the Secretary under subsection (a)— 
‘‘(A) such election shall be treated as the 
establishment and maintenance of a group 
health plan for purposes of this title, subject to 
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161 
section 151 of the America’s Affordable Health 
Choices Act of 2009, and 
‘‘(B) the health coverage participation re-
quirements shall be deemed to be included as 
terms and conditions of such plan. 
‘‘(2) PERIODIC INVESTIGATIONS TO DETERMINE 
COMPLIANCE WITH HEALTH COVERAGE PARTICIPA-
TION
REQUIREMENTS.—The Secretary shall regu-
larly audit a representative sampling of employers 
and conduct investigations and other activities with 
respect to such sampling of employers so as to dis-
cover noncompliance with the health coverage par-
ticipation requirements in connection with such em-
ployers (during any period with respect to which an 
election under subsection (a) is in effect). The Sec-
retary shall communicate findings of noncompliance 
made by the Secretary under this subsection to the 
Secretary of the Treasury and the Health Choices 
Commissioner. The Secretary shall take such timely 
enforcement action as appropriate to achieve compli-
ance. 
‘‘(c) HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS.—For purposes of this section, the term ‘health 
coverage participation requirements’ means the require-
ments of part 1 of subtitle B of title III of subdivision 
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162 
A of the America’s Affordable Health Choices Act of 2009 
(as in effect on the date of the enactment of this section). 
‘‘(d) SEPARATE ELECTIONS.—Under regulations pre-
scribed by the Secretary, separate elections may be made 
under subsection (a) with respect to full-time employees 
and employees who are not full-time employees. 
‘‘(e) TERMINATION OF ELECTION IN CASES OF SUB-
STANTIAL NONCOMPLIANCE.—The Secretary may termi-
nate the election of any employer under subsection (a) if 
the Secretary (in coordination with the Health Choices 
Commissioner) determines that such employer is in sub-
stantial noncompliance with the health coverage participa-
tion requirements and shall refer any such determination 
to the Secretary of the Treasury as appropriate. 
‘‘(f) ENFORCEMENT OF HEALTH COVERAGE PAR-
TICIPATION REQUIREMENTS.— 
‘‘(1) CIVIL PENALTIES.—In the case of any em-
ployer who fails (during any period with respect to 
which the election under subsection (a) is in effect) 
to satisfy the health coverage participation require-
ments with respect to any employee, the Secretary 
may assess a civil penalty against the employer of 
$100 for each day in the period beginning on the 
date such failure first occurs and ending on the date 
such failure is corrected. 
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‘‘(2) LIMITATIONS ON AMOUNT OF PENALTY.— 
‘‘(A) PENALTY
NOT
TO
APPLY
WHERE 
FAILURE
NOT
DISCOVERED
EXERCISING
REA-
SONABLE DILIGENCE.—No penalty shall be as-
sessed under paragraph (1) with respect to any 
failure during any period for which it is estab-
lished to the satisfaction of the Secretary that 
the employer did not know, or exercising rea-
sonable diligence would not have known, that 
such failure existed. 
‘‘(B) PENALTY NOT TO APPLY TO FAIL-
URES CORRECTED WITHIN 30 DAYS.—No pen-
alty shall be assessed under paragraph (1) with 
respect to any failure if— 
‘‘(i) such failure was due to reason-
able cause and not to willful neglect, and 
‘‘(ii) such failure is corrected during 
the 30-day period beginning on the 1st 
date that the employer knew, or exercising 
reasonable diligence would have known, 
that such failure existed. 
‘‘(C) OVERALL LIMITATION FOR UNINTEN-
TIONAL
FAILURES.—In the case of failures 
which are due to reasonable cause and not to 
willful neglect, the penalty assessed under para-
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164 
graph (1) for failures during any 1-year period 
shall not exceed the amount equal to the lesser 
of— 
‘‘(i) 10 percent of the aggregate 
amount paid or incurred by the employer 
(or predecessor employer) during the pre-
ceding taxable year for group health plans, 
or 
‘‘(ii) $500,000. 
‘‘(3) ADVANCE
NOTIFICATION
OF
FAILURE 
PRIOR TO ASSESSMENT.—Before a reasonable time 
prior to the assessment of any penalty under para-
graph (1) with respect to any failure by an em-
ployer, the Secretary shall inform the employer in 
writing of such failure and shall provide the em-
ployer information regarding efforts and procedures 
which may be undertaken by the employer to correct 
such failure. 
‘‘(4) ACTIONS
TO
ENFORCE
ASSESSMENTS.— 
The Secretary may bring a civil action in any Dis-
trict Court of the United States to collect any civil 
penalty under this subsection. 
‘‘(5) COORDINATION
WITH
EXCISE
TAX.— 
Under regulations prescribed in accordance with sec-
tion 324 of the America’s Affordable Health Choices 
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165 
Act of 2009, the Secretary and the Secretary of the 
Treasury shall coordinate the assessment of pen-
alties under paragraph (1) in connection with fail-
ures to satisfy health coverage participation require-
ments with the imposition of excise taxes on such 
failures under section 4980H(b) of the Internal Rev-
enue Code of 1986 so as to avoid duplication of pen-
alties with respect to such failures. 
‘‘(6) DEPOSIT OF PENALTY COLLECTED.—Any 
amount of penalty collected under this subsection 
shall be deposited as miscellaneous receipts in the 
Treasury of the United States. 
‘‘(g) REGULATIONS.—The Secretary may promulgate 
such regulations as may be necessary or appropriate to 
carry out the provisions of this section, in accordance with 
section 324(a) of the America’s Affordable Health Choices 
Act of 2009. The Secretary may promulgate any interim 
final rules as the Secretary determines are appropriate to 
carry out this section.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply to periods beginning after De-
cember 31, 2012. 
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166 
SEC. 324. ADDITIONAL RULES RELATING TO HEALTH COV-
ERAGE PARTICIPATION REQUIREMENTS. 
(a) ASSURING COORDINATION.—The officers con-
sisting of the Secretary of Labor, the Secretary of the 
Treasury, the Secretary of Health and Human Services, 
and the Health Choices Commissioner shall ensure, 
through the execution of an interagency memorandum of 
understanding among such officers, that— 
(1) regulations, rulings, and interpretations 
issued by such officers relating to the same matter 
over which two or more of such officers have respon-
sibility under subpart B of part 6 of subtitle B of 
title I of the Employee Retirement Income Security 
Act of 1974, section 4980H of the Internal Revenue 
Code of 1986, and section 2793 of the Public Health 
Service Act are administered so as to have the same 
effect at all times; and 
(2) coordination of policies relating to enforcing 
the same requirements through such officers in 
order to have a coordinated enforcement strategy 
that avoids duplication of enforcement efforts and 
assigns priorities in enforcement. 
(b) MULTIEMPLOYER PLANS.—In the case of a group 
health plan that is a multiemployer plan (as defined in 
section 3(37) of the Employee Retirement Income Secu-
rity Act of 1974), the regulations prescribed in accordance 
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167 
with subsection (a) by the officers referred to in subsection 
(a) shall provide for the application of the health coverage 
participation requirements to the plan sponsor and con-
tributing sponsors of such plan. 
TITLE IV—AMENDMENTS TO IN-
TERNAL REVENUE CODE OF 
1986 
Subtitle A—Shared Responsibility 
PART 1—INDIVIDUAL RESPONSIBILITY 
SEC. 401. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE 
HEALTH CARE COVERAGE. 
(a) IN GENERAL.—Subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following new part: 
‘‘PART VIII—HEALTH CARE RELATED TAXES 
‘‘SUBPART A. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE HEALTH CARE 
COVERAGE. 
‘‘Subpart A—Tax on Individuals Without Acceptable 
Health Care Coverage 
‘‘Sec. 59B. Tax on individuals without acceptable health care coverage. 
‘‘SEC. 59B. TAX ON INDIVIDUALS WITHOUT ACCEPTABLE 
HEALTH CARE COVERAGE. 
‘‘(a) TAX IMPOSED.—In the case of any individual 
who does not meet the requirements of subsection (d) at 
any time during the taxable year, there is hereby imposed 
a tax equal to 2.5 percent of the excess of— 
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‘‘(1) the taxpayer’s modified adjusted gross in-
come for the taxable year, over 
‘‘(2) the amount of gross income specified in 
section 6012(a)(1) with respect to the taxpayer. 
‘‘(b) LIMITATIONS.— 
‘‘(1) TAX LIMITED TO AVERAGE PREMIUM.— 
‘‘(A) IN
GENERAL.—The tax imposed 
under subsection (a) with respect to any tax-
payer for any taxable year shall not exceed the 
applicable national average premium for such 
taxable year. 
‘‘(B) APPLICABLE
NATIONAL
AVERAGE 
PREMIUM.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A), the ‘applicable national 
average premium’ means, with respect to 
any taxable year, the average premium (as 
determined by the Secretary, in coordina-
tion with the Health Choices Commis-
sioner) for self-only coverage under a basic 
plan which is offered in a Health Insur-
ance Exchange for the calendar year in 
which such taxable year begins. 
‘‘(ii) FAILURE TO PROVIDE COVERAGE 
FOR MORE THAN ONE INDIVIDUAL.—In the 
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169 
case of any taxpayer who fails to meet the 
requirements of subsection (e) with respect 
to more than one individual during the tax-
able year, clause (i) shall be applied by 
substituting ‘family coverage’ for ‘self-only 
coverage’. 
‘‘(2) PRORATION FOR PART YEAR FAILURES.— 
The tax imposed under subsection (a) with respect 
to any taxpayer for any taxable year shall not exceed 
the amount which bears the same ratio to the 
amount of tax so imposed (determined without re-
gard to this paragraph and after application of para-
graph (1)) as— 
‘‘(A) the aggregate periods during such 
taxable year for which such individual failed to 
meet the requirements of subsection (d), bears 
to 
‘‘(B) the entire taxable year. 
‘‘(c) EXCEPTIONS.— 
‘‘(1) DEPENDENTS.—Subsection (a) shall not 
apply to any individual for any taxable year if a de-
duction is allowable under section 151 with respect 
to such individual to another taxpayer for any tax-
able year beginning in the same calendar year as 
such taxable year. 
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170 
‘‘(2) NONRESIDENT
ALIENS.—Subsection (a) 
shall not apply to any individual who is a non-
resident alien. 
‘‘(3) INDIVIDUALS RESIDING OUTSIDE UNITED 
STATES.—Any qualified individual (as defined in 
section 911(d)) (and any qualifying child residing 
with such individual) shall be treated for purposes of 
this section as covered by acceptable coverage during 
the period described in subparagraph (A) or (B) of 
section 911(d)(1), whichever is applicable. 
‘‘(4) INDIVIDUALS
RESIDING
IN
POSSESSIONS 
OF THE UNITED STATES.—Any individual who is a 
bona fide resident of any possession of the United 
States (as determined under section 937(a)) for any 
taxable year (and any qualifying child residing with 
such individual) shall be treated for purposes of this 
section as covered by acceptable coverage during 
such taxable year. 
‘‘(5) RELIGIOUS CONSCIENCE EXEMPTION.— 
‘‘(A) IN
GENERAL.—Subsection (a) shall 
not apply to any individual (and any qualifying 
child residing with such individual) for any pe-
riod if such individual has in effect an exemp-
tion which certifies that such individual is a 
member of a recognized religious sect or divi-
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171 
sion thereof described in section 1402(g)(1) and 
an adherent of established tenets or teachings 
of such sect or division as described in such sec-
tion. 
‘‘(B) EXEMPTION.—An application for the 
exemption described in subparagraph (A) shall 
be filed with the Secretary at such time and in 
such form and manner as the Secretary may 
prescribe. Any such exemption granted by the 
Secretary shall be effective for such period as 
the Secretary determines appropriate. 
‘‘(d) ACCEPTABLE COVERAGE REQUIREMENT.— 
‘‘(1) IN GENERAL.—The requirements of this 
subsection are met with respect to any individual for 
any period if such individual (and each qualifying 
child of such individual) is covered by acceptable 
coverage at all times during such period. 
‘‘(2) ACCEPTABLE
COVERAGE.—For purposes 
of this section, the term ‘acceptable coverage’ means 
any of the following: 
‘‘(A) QUALIFIED HEALTH BENEFITS PLAN 
COVERAGE.—Coverage under a qualified health 
benefits plan (as defined in section 100(c) of 
the America’s Affordable Health Choices Act of 
2009). 
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172 
‘‘(B) GRANDFATHERED
HEALTH
INSUR-
ANCE
COVERAGE; COVERAGE
UNDER
GRAND-
FATHERED
EMPLOYMENT-BASED
HEALTH 
PLAN.—Coverage under a grandfathered health 
insurance coverage (as defined in subsection (a) 
of section 102 of the America’s Affordable 
Health Choices Act of 2009) or under a current 
employment-based health plan (within the 
meaning of subsection (b) of such section). 
‘‘(C) MEDICARE.—Coverage under part A 
of title XVIII of the Social Security Act. 
‘‘(D) MEDICAID.—Coverage for medical as-
sistance under title XIX of the Social Security 
Act. 
‘‘(E) MEMBERS OF THE ARMED FORCES 
AND
DEPENDENTS
(INCLUDING
TRICARE).— 
Coverage under chapter 55 of title 10, United 
States Code, including similar coverage fur-
nished under section 1781 of title 38 of such 
Code. 
‘‘(F) VA.—Coverage under the veteran’s 
health care program under chapter 17 of title 
38, United States Code, but only if the cov-
erage for the individual involved is determined 
by the Secretary in coordination with the 
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173 
Health Choices Commissioner to be not less 
than the level specified by the Secretary of the 
Treasury, in coordination with the Secretary of 
Veteran’s Affairs and the Health Choices Com-
missioner, based on the individual’s priority for 
services as provided under section 1705(a) of 
such title. 
‘‘(G) 
OTHER
COVERAGE.—Such 
other 
health benefits coverage as the Secretary, in co-
ordination with the Health Choices Commis-
sioner, recognizes for purposes of this sub-
section. 
‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.— 
‘‘(1) QUALIFYING CHILD.—For purposes of this 
section, the term ‘qualifying child’ has the meaning 
given such term by section 152(c). With respect to 
any period during which health coverage for a child 
must be provided by an individual pursuant to a 
child support order, such child shall be treated as a 
qualifying child of such individual (and not as a 
qualifying child of any other individual). 
‘‘(2) BASIC PLAN.—For purposes of this sec-
tion, the term ‘basic plan’ has the meaning given 
such term under section 100(c) of the America’s Af-
fordable Health Choices Act of 2009. 
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174 
‘‘(3) HEALTH
INSURANCE
EXCHANGE.—For 
purposes of this section, the term ‘Health Insurance 
Exchange’ has the meaning given such term under 
section 100(c) of the America’s Affordable Health 
Choices Act of 2009, including any State-based 
health insurance exchange approved for operation 
under section 208 of such Act. 
‘‘(4) FAMILY COVERAGE.—For purposes of this 
section, the term ‘family coverage’ means any cov-
erage other than self-only coverage. 
‘‘(5) MODIFIED
ADJUSTED
GROSS
INCOME.— 
For purposes of this section, the term ‘modified ad-
justed gross income’ means adjusted gross income— 
‘‘(A) determined without regard to section 
911, and 
‘‘(B) increased by the amount of interest 
received or accrued by the taxpayer during the 
taxable year which is exempt from tax. 
‘‘(6) NOT TREATED AS TAX IMPOSED BY THIS 
CHAPTER
FOR
CERTAIN
PURPOSES.—The tax im-
posed under this section shall not be treated as tax 
imposed by this chapter for purposes of determining 
the amount of any credit under this chapter or for 
purposes of section 55. 
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175 
‘‘(f) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the purposes of this section, 
including regulations or other guidance (developed in co-
ordination with the Health Choices Commissioner) which 
provide— 
‘‘(1) exemption from the tax imposed under 
subsection (a) in cases of de minimis lapses of ac-
ceptable coverage, and 
‘‘(2) a process for applying for a waiver of the 
application of subsection (a) in cases of hardship.’’. 
(b) INFORMATION REPORTING.— 
(1) IN GENERAL.—Subpart B of part III of 
subchapter A of chapter 61 of such Code is amended 
by inserting after section 6050W the following new 
section: 
‘‘SEC. 6050X. RETURNS RELATING TO HEALTH INSURANCE 
COVERAGE. 
‘‘(a) REQUIREMENT OF REPORTING.—Every person 
who provides acceptable coverage (as defined in section 
59B(d)) to any individual during any calendar year shall, 
at such time as the Secretary may prescribe, make the 
return described in subsection (b) with respect to such in-
dividual. 
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176 
‘‘(b) FORM AND MANNER OF RETURNS.—A return 
is described in this subsection if such return— 
‘‘(1) is in such form as the Secretary may pre-
scribe, and 
‘‘(2) contains— 
‘‘(A) the name, address, and TIN of the 
primary insured and the name of each other in-
dividual obtaining coverage under the policy, 
‘‘(B) the period for which each such indi-
vidual was provided with the coverage referred 
to in subsection (a), and 
‘‘(C) such other information as the Sec-
retary may require. 
‘‘(c) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
QUIRED.—Every person required to make a return under 
subsection (a) shall furnish to each primary insured whose 
name is required to be set forth in such return a written 
statement showing— 
‘‘(1) the name and address of the person re-
quired to make such return and the phone number 
of the information contact for such person, and 
‘‘(2) the information required to be shown on 
the return with respect to such individual. 
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177 
The written statement required under the preceding sen-
tence shall be furnished on or before January 31 of the 
year following the calendar year for which the return 
under subsection (a) is required to be made. 
‘‘(d) COVERAGE
PROVIDED
BY
GOVERNMENTAL 
UNITS.—In the case of coverage provided by any govern-
mental unit or any agency or instrumentality thereof, the 
officer or employee who enters into the agreement to pro-
vide such coverage (or the person appropriately designated 
for purposes of this section) shall make the returns and 
statements required by this section.’’. 
(2) PENALTY FOR FAILURE TO FILE.— 
(A) RETURN.—Subparagraph (B) of sec-
tion 6724(d)(1) of such Code is amended by 
striking ‘‘or’’ at the end of clause (xxii), by 
striking ‘‘and’’ at the end of clause (xxiii) and 
inserting ‘‘or’’, and by adding at the end the 
following new clause: 
‘‘(xxiv) section 6050X (relating to re-
turns relating to health insurance cov-
erage), and’’. 
(B) STATEMENT.—Paragraph (2) of sec-
tion 6724(d) of such Code is amended by strik-
ing ‘‘or’’ at the end of subparagraph (EE), by 
striking the period at the end of subparagraph 
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178 
(FF) and inserting ‘‘, or’’, and by inserting 
after subparagraph (FF) the following new sub-
paragraph: 
‘‘(GG) section 6050X (relating to returns 
relating to health insurance coverage).’’. 
(c) RETURN REQUIREMENT.—Subsection (a) of sec-
tion 6012 of such Code is amended by inserting after 
paragraph (9) the following new paragraph: 
‘‘(10) Every individual to whom section 59B(a) 
applies and who fails to meet the requirements of 
section 59B(d) with respect to such individual or 
any qualifying child (as defined in section 152(c)) of 
such individual.’’. 
(d) CLERICAL AMENDMENTS.— 
(1) The table of parts for subchapter A of chap-
ter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new 
item: 
‘‘PART VIII. HEALTH CARE RELATED TAXES.’’. 
(2) The table of sections for subpart B of part 
III of subchapter A of chapter 61 is amended by 
adding at the end the following new item: 
‘‘Sec. 6050X. Returns relating to health insurance coverage.’’. 
(e) SECTION 15 NOT TO APPLY.—The amendment 
made by subsection (a) shall not be treated as a change 
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179 
in a rate of tax for purposes of section 15 of the Internal 
Revenue Code of 1986. 
(f) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning 
after December 31, 2012. 
(2) RETURNS.—The amendments made by sub-
section (b) shall apply to calendar years beginning 
after December 31, 2012. 
PART 2—EMPLOYER RESPONSIBILITY 
SEC. 411. ELECTION TO SATISFY HEALTH COVERAGE PAR-
TICIPATION REQUIREMENTS. 
(a) IN GENERAL.—Chapter 43 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new section: 
‘‘SEC. 4980H. ELECTION WITH RESPECT TO HEALTH COV-
ERAGE PARTICIPATION REQUIREMENTS. 
‘‘(a) ELECTION OF EMPLOYER RESPONSIBILITY TO 
PROVIDE HEALTH COVERAGE.— 
‘‘(1) IN GENERAL.—Subsection (b) shall apply 
to any employer with respect to whom an election 
under paragraph (2) is in effect. 
‘‘(2) TIME AND MANNER.—An employer may 
make an election under this paragraph at such time 
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180 
and in such form and manner as the Secretary may 
prescribe. 
‘‘(3) AFFILIATED GROUPS.—In the case of any 
employer which is part of a group of employers who 
are treated as a single employer under subsection 
(b), (c), (m), or (o) of section 414, the election 
under paragraph (2) shall be made by such person 
as the Secretary may provide. Any such election, 
once made, shall apply to all members of such 
group. 
‘‘(4) SEPARATE
ELECTIONS.—Under regula-
tions prescribed by the Secretary, separate elections 
may be made under paragraph (2) with respect to— 
‘‘(A) separate lines of business, and 
‘‘(B) full-time employees and employees 
who are not full-time employees. 
‘‘(5) TERMINATION OF ELECTION IN CASES OF 
SUBSTANTIAL
NONCOMPLIANCE.—The 
Secretary 
may terminate the election of any employer under 
paragraph (2) if the Secretary (in coordination with 
the Health Choices Commissioner) determines that 
such employer is in substantial noncompliance with 
the health coverage participation requirements. 
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181 
‘‘(b) EXCISE TAX WITH RESPECT TO FAILURE TO 
MEET HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS.— 
‘‘(1) IN GENERAL.—In the case of any employer 
who fails (during any period with respect to which 
the election under subsection (a) is in effect) to sat-
isfy the health coverage participation requirements 
with respect to any employee to whom such election 
applies, there is hereby imposed on each such failure 
with respect to each such employee a tax of $100 for 
each day in the period beginning on the date such 
failure first occurs and ending on the date such fail-
ure is corrected. 
‘‘(2) LIMITATIONS ON AMOUNT OF TAX.— 
‘‘(A) TAX NOT TO APPLY WHERE FAILURE 
NOT
DISCOVERED
EXERCISING
REASONABLE 
DILIGENCE.—No tax shall be imposed by para-
graph (1) on any failure during any period for 
which it is established to the satisfaction of the 
Secretary that the employer neither knew, nor 
exercising reasonable diligence would have 
known, that such failure existed. 
‘‘(B) TAX
NOT
TO
APPLY
TO
FAILURES 
CORRECTED WITHIN 30 DAYS.—No tax shall be 
imposed by paragraph (1) on any failure if— 
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182 
‘‘(i) such failure was due to reason-
able cause and not to willful neglect, and 
‘‘(ii) such failure is corrected during 
the 30-day period beginning on the 1st 
date that the employer knew, or exercising 
reasonable diligence would have known, 
that such failure existed. 
‘‘(C) OVERALL LIMITATION FOR UNINTEN-
TIONAL
FAILURES.—In the case of failures 
which are due to reasonable cause and not to 
willful neglect, the tax imposed by subsection 
(a) for failures during the taxable year of the 
employer shall not exceed the amount equal to 
the lesser of— 
‘‘(i) 10 percent of the aggregate 
amount paid or incurred by the employer 
(or predecessor employer) during the pre-
ceding taxable year for employment-based 
health plans, or 
‘‘(ii) $500,000. 
‘‘(D) COORDINATION
WITH
OTHER
EN-
FORCEMENT
PROVISIONS.—The tax imposed 
under paragraph (1) with respect to any failure 
shall be reduced (but not below zero) by the 
amount of any civil penalty collected under sec-
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183 
tion 502(c)(11) of the Employee Retirement In-
come Security Act of 1974 or section 2793(g) 
of the Public Health Service Act with respect to 
such failure. 
‘‘(c) HEALTH COVERAGE PARTICIPATION REQUIRE-
MENTS.—For purposes of this section, the term ‘health 
coverage participation requirements’ means the require-
ments of part I of subtitle B of title III of the America’s 
Affordable Health Choices Act of 2009 (as in effect on 
the date of the enactment of this section).’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for chapter 43 of such Code is amended by adding at the 
end the following new item: 
‘‘Sec. 4980H. Election with respect to health coverage participation require-
ments.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to periods beginning after Decem-
ber 31, 2012. 
SEC. 412. RESPONSIBILITIES OF NONELECTING EMPLOY-
ERS. 
(a) IN GENERAL.—Section 3111 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(c) as subsection (d) and by inserting after subsection (b) 
the following new subsection: 
‘‘(c) EMPLOYERS
ELECTING
TO
NOT
PROVIDE 
HEALTH BENEFITS.— 
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184 
‘‘(1) IN GENERAL.—In addition to other taxes, 
there is hereby imposed on every nonelecting em-
ployer an excise tax, with respect to having individ-
uals in his employ, equal to 8 percent of the wages 
(as defined in section 3121(a)) paid by him with re-
spect to employment (as defined in section 3121(b)). 
‘‘(2) SPECIAL
RULES
FOR
SMALL
EMPLOY-
ERS.— 
‘‘(A) IN GENERAL.—In the case of any em-
ployer who is small employer for any calendar 
year, paragraph (1) shall be applied by sub-
stituting the applicable percentage determined 
in accordance with the following table for ‘8 
percent’: 
‘‘If the annual payroll of such employer for 
the preceding calendar year: 
The applicable 
percentage is: 
Does not exceed $250,000 .....................................
0 percent 
Exceeds $250,000, but does not exceed $300,000 
2 percent 
Exceeds $300,000, but does not exceed $350,000 
4 percent 
Exceeds $350,000, but does not exceed $400,000 
6 percent 
‘‘(B) SMALL EMPLOYER.—For purposes of 
this paragraph, the term ‘small employer’ 
means any employer for any calendar year if 
the annual payroll of such employer for the pre-
ceding calendar year does not exceed $400,000. 
‘‘(C) ANNUAL PAYROLL.—For purposes of 
this paragraph, the term ‘annual payroll’ 
means, with respect to any employer for any 
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185 
calendar year, the aggregate wages (as defined 
in section 3121(a)) paid by him with respect to 
employment (as defined in section 3121(b)) 
during such calendar year. 
‘‘(3) NONELECTING EMPLOYER.—For purposes 
of paragraph (1), the term ‘nonelecting employer’ 
means any employer for any period with respect to 
which such employer does not have an election under 
section 4980H(a) in effect. 
‘‘(4) SPECIAL
RULE
FOR
SEPARATE
ELEC-
TIONS.—In the case of an employer who makes a 
separate election described in section 4980H(a)(4) 
for any period, paragraph (1) shall be applied for 
such period by taking into account only the wages 
paid to employees who are not subject to such elec-
tion. 
‘‘(5) AGGREGATION; PREDECESSORS.—For pur-
poses of this subsection— 
‘‘(A) all persons treated as a single em-
ployer under subsection (b), (c), (m), or (o) of 
section 414 shall be treated as 1 employer, and 
‘‘(B) any reference to any person shall be 
treated as including a reference to any prede-
cessor of such person.’’. 
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186 
(b) DEFINITIONS.—Section 3121 of such Code is 
amended by adding at the end the following new sub-
section: 
‘‘(aa) SPECIAL RULES
FOR TAX
ON EMPLOYERS 
ELECTING NOT TO PROVIDE HEALTH BENEFITS.—For 
purposes of section 3111(c)— 
‘‘(1) Paragraphs (1), (5), and (19) of sub-
section (b) shall not apply. 
‘‘(2) Paragraph (7) of subsection (b) shall apply 
by treating all services as not covered by the retire-
ment systems referred to in subparagraphs (C) and 
(F) thereof. 
‘‘(3) Subsection (e) shall not apply and the 
term ‘State’ shall include the District of Columbia.’’. 
(c) CONFORMING AMENDMENT.—Subsection (d) of 
section 3111 of such Code, as redesignated by this section, 
is amended by striking ‘‘this section’’ and inserting ‘‘sub-
sections (a) and (b)’’. 
(d) APPLICATION TO RAILROADS.— 
(1) IN GENERAL.—Section 3221 of such Code 
is amended by redesignating subsection (c) as sub-
section (d) and by inserting after subsection (b) the 
following new subsection: 
‘‘(c) EMPLOYERS
ELECTING
TO
NOT
PROVIDE 
HEALTH BENEFITS.— 
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187 
‘‘(1) IN GENERAL.—In addition to other taxes, 
there is hereby imposed on every nonelecting em-
ployer an excise tax, with respect to having individ-
uals in his employ, equal to 8 percent of the com-
pensation paid during any calendar year by such em-
ployer for services rendered to such employer. 
‘‘(2) EXCEPTION
FOR
SMALL
EMPLOYERS.— 
Rules similar to the rules of section 3111(c)(2) shall 
apply for purposes of this subsection. 
‘‘(3) NONELECTING EMPLOYER.—For purposes 
of paragraph (1), the term ‘nonelecting employer’ 
means any employer for any period with respect to 
which such employer does not have an election under 
section 4980H(a) in effect. 
‘‘(4) SPECIAL
RULE
FOR
SEPARATE
ELEC-
TIONS.—In the case of an employer who makes a 
separate election described in section 4980H(a)(4) 
for any period, subsection (a) shall be applied for 
such period by taking into account only the wages 
paid to employees who are not subject to such elec-
tion.’’. 
(2) DEFINITIONS.—Subsection (e) of section 
3231 of such Code is amended by adding at the end 
the following new paragraph: 
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188 
‘‘(13) SPECIAL RULES FOR TAX ON EMPLOYERS 
ELECTING NOT TO PROVIDE HEALTH BENEFITS.— 
For purposes of section 3221(c)— 
‘‘(A) Paragraph (1) shall be applied with-
out regard to the third sentence thereof. 
‘‘(B) Paragraph (2) shall not apply.’’. 
(3) CONFORMING AMENDMENT.—Subsection (d) 
of section 3221 of such Code, as redesignated by 
this section, is amended by striking ‘‘subsections (a) 
and (b), see section 3231(e)(2)’’ and inserting ‘‘this 
section, see paragraphs (2) and (13)(B) of section 
3231(e)’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to periods beginning after Decem-
ber 31, 2012. 
Subtitle B—Credit for Small Busi-
ness Employee Health Coverage 
Expenses 
SEC. 
421. 
CREDIT 
FOR 
SMALL 
BUSINESS 
EMPLOYEE 
HEALTH COVERAGE EXPENSES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business-related credits) is amended by 
adding at the end the following new section: 
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189 
‘‘SEC. 45R. SMALL BUSINESS EMPLOYEE HEALTH COV-
ERAGE CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 38, in 
the case of a qualified small employer, the small business 
employee health coverage credit determined under this sec-
tion for the taxable year is an amount equal to the applica-
ble percentage of the qualified employee health coverage 
expenses of such employer for such taxable year. 
‘‘(b) APPLICABLE PERCENTAGE.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the applicable percentage is 50 percent. 
‘‘(2) PHASEOUT
BASED
ON
AVERAGE
COM-
PENSATION OF EMPLOYEES.—In the case of an em-
ployer whose average annual employee compensation 
for the taxable year exceeds $20,000, the percentage 
specified in paragraph (1) shall be reduced by a 
number of percentage points which bears the same 
ratio to 50 as such excess bears to $20,000. 
‘‘(c) LIMITATIONS.— 
‘‘(1) PHASEOUT BASED ON EMPLOYER SIZE.— 
In the case of an employer who employs more than 
10 qualified employees during the taxable year, the 
credit determined under subsection (a) shall be re-
duced by an amount which bears the same ratio to 
the amount of such credit (determined without re-
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190 
gard to this paragraph and after the application of 
the other provisions of this section) as— 
‘‘(A) the excess of— 
‘‘(i) the number of qualified employees 
employed by the employer during the tax-
able year, over 
‘‘(ii) 10, bears to 
‘‘(B) 15. 
‘‘(2) CREDIT NOT ALLOWED WITH RESPECT TO 
CERTAIN HIGHLY COMPENSATED EMPLOYEES.—No 
credit shall be allowed under subsection (a) with re-
spect to qualified employee health coverage expenses 
paid or incurred with respect to any employee for 
any taxable year if the aggregate compensation paid 
by the employer to such employee during such tax-
able year exceeds $80,000. 
‘‘(d) QUALIFIED EMPLOYEE HEALTH COVERAGE EX-
PENSES.—For purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘qualified em-
ployee health coverage expenses’ means, with respect 
to any employer for any taxable year, the aggregate 
amount paid or incurred by such employer during 
such taxable year for coverage of any qualified em-
ployee of the employer (including any family cov-
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191 
erage which covers such employee) under qualified 
health coverage. 
‘‘(2) QUALIFIED
HEALTH
COVERAGE.—The 
term ‘qualified health coverage’ means acceptable 
coverage (as defined in section 59B(d)) which— 
‘‘(A) is provided pursuant to an election 
under section 4980H(a), and 
‘‘(B) satisfies the requirements referred to 
in section 4980H(c). 
‘‘(e) OTHER DEFINITIONS.—For purposes of this 
section— 
‘‘(1) QUALIFIED SMALL EMPLOYER.—For pur-
poses of this section, the term ‘qualified small em-
ployer’ means any employer for any taxable year 
if— 
‘‘(A) the number of qualified employees 
employed by such employer during the taxable 
year does not exceed 25, and 
‘‘(B) the average annual employee com-
pensation of such employer for such taxable 
year does not exceed the sum of the dollar 
amounts in effect under subsection (b)(2). 
‘‘(2) QUALIFIED EMPLOYEE.—The term ‘quali-
fied employee’ means any employee of an employer 
for any taxable year of the employer if such em-
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