‘‘(1) enter into agreements with small employ-
ers (and, at the discretion of its Board, with individ-
uals and other employers) to provide health insur-
ance benefits to employees and retirees of such em-
ployers, 
‘‘(2) where it is feasible and advisable, enter 
into agreements with 3 or more unaffiliated, quali-
fied licensed health plans, to offer benefits to mem-
bers, 
‘‘(3) offer to members at least 1 open enroll-
ment period of at least 30 days per calendar year, 
‘‘(4)(A) serve a geographical area which, under 
the State certification procedures referred to in sub-
section (a)(2), is significant, and 
‘‘(B) market to all eligible members in that 
area, and 
‘‘(5) carry out other functions provided for 
under this section. 
‘‘(e) LIMITATION ON ACTIVITIES.—A purchasing coa-
lition shall not—
‘‘(1) perform any activity (including certifi-
cation or enforcement) relating to compliance or li-
censing of health plans, 
‘‘(2) assume insurance or financial risk in rela-
tion to any health plan, or
‘‘(3) perform other activities identified by the 
State as being inconsistent with the performance of 
its duties under this section. 
‘‘(f) ADDITIONAL REQUIREMENTS FOR PURCHASING 
COALITIONS.—As provided by the Secretary in regula-
tions, a purchasing coalition shall be subject to require-
ments similar to the requirements of a group health plan 
under this chapter. 
‘‘(g) RELATION TO OTHER LAWS.—
‘‘(1) 
PREEMPTION
OF
STATE
FICTITIOUS 
GROUP LAWS.—Requirements (commonly referred to 
as fictitious group laws) relating to grouping and 
similar requirements for health insurance coverage 
are preempted to the extent such requirements im-
pede the establishment and operation of qualified 
health benefit purchasing coalitions. 
‘‘(2) ALLOWING
SAVINGS
TO
BE
PASSED 
THROUGH.—Any State law that prohibits health in-
surance issuers from reducing premiums on health 
insurance coverage sold through a qualified health 
benefit purchasing coalition to reflect administrative 
savings is preempted. This paragraph shall not be 
construed to preempt State laws that impose restric-
tions on premiums based on health status, claims
history, industry, age, gender, or other underwriting 
factors. 
‘‘(3) NO WAIVER OF HIPAA REQUIREMENTS.—
Nothing in this section shall be construed to change 
the obligation of health insurance issuers to comply 
with the requirements of title XXVII of the Public 
Health Service Act with respect to health insurance 
coverage offered to small employers in the small 
group market through a qualified health benefit pur-
chasing coalition. 
‘‘(h) DEFINITION OF SMALL EMPLOYER.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘small employer’ 
means, with respect to any calendar year, any em-
ployer if such employer employed an average of at 
least 2 and not more than 50 qualified employees on 
business days during either of the 2 preceding cal-
endar years. For purposes of the preceding sentence, 
a preceding calendar year may be taken into account 
only if the employer was in existence throughout 
such year. 
‘‘(2) EMPLOYERS NOT IN EXISTENCE IN PRE-
CEDING YEAR.—In the case of an employer which 
was not in existence throughout the 1st preceding 
calendar year, the determination under paragraph
(1) shall be based on the average number of quali-
fied employees that it is reasonably expected such 
employer will employ on business days in the current 
calendar year.’’. 
(2) CONFORMING AMENDMENT.—The table of 
subchapters for chapter 100 of such Code is amend-
ed by adding at the end the following item:
‘‘Subchapter D.
Qualified health benefit purchasing coalition.’’.
(c) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2002. 
SEC. 5. STATE GRANT PROGRAM FOR MARKET INNOVA-
TION. 
(a) IN GENERAL.—The Secretary of Health and 
Human Services (in this section referred to as the ‘‘Sec-
retary’’) shall establish a program (in this section referred 
to as the ‘‘program’’) to award demonstration grants 
under this section to States to allow States to demonstrate 
the effectiveness of innovative ways to increase access to 
health insurance through market reforms and other inno-
vative means. Such innovative means may include (and are 
not limited to) any of the following: 
(1) Alternative group purchasing or pooling ar-
rangements, such as a purchasing cooperatives for 
small businesses, reinsurance pools, or high risk 
pools.
(2) Individual or small group market reforms. 
(3) Consumer education and outreach. 
(4) Subsidies to individuals, employers, or both, 
in obtaining health insurance. 
(b) SCOPE; DURATION.—The program shall be lim-
ited to not more than 10 States and to a total period of 
5 years, beginning on the date the first demonstration 
grant is made. 
(c) CONDITIONS FOR DEMONSTRATION GRANTS.—
(1) IN GENERAL.—The Secretary may not pro-
vide for a demonstration grant to a State under the 
program unless the Secretary finds that under the 
proposed demonstration grant—
(A) the State will provide for demonstrated 
increase of access for some portion of the exist-
ing uninsured population through a market in-
novation (other than merely through a financial 
expansion of a program initiated before the 
date of the enactment of this Act); 
(B) the State will comply with applicable 
Federal laws; 
(C) the State will not discriminate among 
participants on the basis of any health status-
related factor (as defined in section 2791(d)(9) 
of the Public Health Service Act), except to the
extent a State wishes to focus on populations 
that otherwise would not obtain health insur-
ance because of such factors; and 
(D) the State will provide for such evalua-
tion, in coordination with the evaluation re-
quired under subsection (d), as the Secretary 
may specify. 
(2) APPLICATION.—The Secretary shall not 
provide a demonstration grant under the program to 
a State unless—
(A) the State submits to the Secretary 
such an application, in such a form and man-
ner, as the Secretary specifies; 
(B) the application includes information 
regarding how the demonstration grant will ad-
dress issues such as governance, targeted popu-
lation, expected cost, and the continuation after 
the completion of the demonstration grant pe-
riod; and 
(C) the Secretary determines that the dem-
onstration grant will be used consistent with 
this section. 
(3) FOCUS.—A demonstration grant proposal 
under section need not cover all uninsured individ-
uals in a State or all health care benefits with re-
spect to such individuals. 
(d) EVALUATION.—The Secretary shall enter into a 
contract with an appropriate entity outside the Depart-
ment of Health and Human Services to conduct an overall 
evaluation of the program at the end of the program pe-
riod. Such evaluation shall include an analysis of improve-
ments in access, costs, quality of care, or choice of cov-
erage, under different demonstration grants. 
(e) OPTION TO PROVIDE FOR INITIAL PLANNING 
GRANTS.—Notwithstanding the previous provisions of this 
section, under the program the Secretary may provide for 
a portion of the amounts appropriated under subsection 
(f) (not to exceed $5,000,000) to be made available to any 
State for initial planning grants to permit States to de-
velop demonstration grant proposals under the previous 
provisions of this section. 
(f) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated $100,000,000 for each 
fiscal year to carry out this section. Amounts appropriated 
under this subsection shall remain available until ex-
pended. 
(g) STATE DEFINED.—For purposes of this section, 
the term ‘‘State’’ has the meaning given such term for 
purposes of title XIX of the Social Security Act.
SEC. 6. GRANT PROGRAM TO FACILITATE HEALTH BENE-
FITS INFORMATION FOR SMALL EMPLOYERS. 
(a) IN GENERAL.—The Small Business Administra-
tion shall award grants to 1 or more States, local govern-
ments, and non-profit organizations for the purposes of—
(1) demonstrating new and effective ways to 
provide information about the benefits of health in-
surance to small employers, including tax benefits, 
increased productivity of employees, and decreased 
turnover of employees, 
(2) making employers aware of their current 
rights in the marketplace under State and Federal 
health insurance reforms, and 
(3) making employers aware of the tax treat-
ment of insurance premiums. 
(b) AUTHORIZATION.—There is authorized to be ap-
propriated $10,000,000 for each of the first 5 fiscal years 
beginning after the date of the enactment of this Act for 
grants under subsection (a).
Æ