I 
111TH CONGRESS 
2D SESSION 
H. R. 4529 
To provide for the reform of health care, the Social Security system, the 
tax code for individuals and business, job training, and the budget process. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 27, 2010 
Mr. RYAN of Wisconsin (for himself, Mr. BARTLETT, Mrs. BLACKBURN, Mr. 
BURGESS, Mr. CAMPBELL, Mr. HENSARLING, Mr. NUNES, and Mr. 
PRICE of Georgia) introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committees on 
Energy and Commerce, Education and Labor, Rules, the Budget, and the 
Judiciary, for a period to be subsequently determined by the Speaker, in 
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned 
A BILL 
To provide for the reform of health care, the Social Security 
system, the tax code for individuals and business, job 
training, and the budget process. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Roadmap for America’s Future Act of 2010’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
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Sec. 1. Short title; table of contents. 
Sec. 2. Findings and purpose. 
TITLE I—HEALTH CARE REFORM 
Subtitle A—Expanding Patient’s Health Care Choices 
PART 1—STATE-BASED HEALTH CARE EXCHANGES 
Sec. 101. State-based health care exchanges. 
Sec. 102. Requirements. 
Sec. 103. State Exchange incentives. 
PART 2—FAIR TAX TREATMENT FOR ALL AMERICANS TO AFFORD HEALTH 
CARE 
Sec. 111. Reference. 
SUBPART A—REFUNDABLE AND ADVANCEABLE CREDIT FOR CERTAIN HEALTH 
INSURANCE COVERAGE 
Sec. 112. Refundable and advanceable credit for certain health insurance cov-
erage. 
Sec. 113. Requiring employer transparency about employee benefits. 
Sec. 114. Changes to existing tax preferences for medical coverage, etc., for in-
dividuals eligible for qualified health insurance credit. 
SUBPART B—HEALTH SAVINGS ACCOUNTS 
Sec. 121. Improvements to health savings accounts. 
Sec. 122. Exception to requirement for employers to make comparable health 
savings account contributions. 
Subtitle B—Health Plan Choice; Small Business Health Fairness; Tax 
Amendments 
Sec. 131. Cooperative governing of individual health insurance coverage. 
Sec. 132. Small business health fairness. 
Sec. 133. Repeal of certain tax exemptions for health insurance payments. 
Subtitle C—Health Care Services Commission 
PART I—ESTABLISHMENT AND GENERAL DUTIES 
Sec. 141. Establishment. 
Sec. 142. General authorities and duties. 
Sec. 143. Dissemination. 
PART II—FORUM FOR QUALITY AND EFFECTIVENESS IN HEALTH CARE 
Sec. 151. Establishment of office. 
Sec. 152. Membership. 
Sec. 153. Duties. 
Sec. 154. Adoption and enforcement of guidelines and standards. 
Sec. 155. Additional requirements. 
PART III—GENERAL PROVISIONS 
Sec. 161. Certain administrative authorities. 
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Sec. 162. Funding. 
Sec. 163. Definitions. 
PART IV—TERMINATIONS AND TRANSITION 
Sec. 171. Termination of Agency for Healthcare Research and Quality. 
Sec. 172. Transition. 
PART V—INDEPENDENT HEALTH RECORD TRUST 
Sec. 181. Short title of part. 
Sec. 182. Purpose. 
Sec. 183. Definitions. 
Sec. 184. Establishment, certification, and membership of independent health 
record trusts. 
Sec. 185. Duties of IHRT to IHRT participants. 
Sec. 186. Availability and use of information from records in IHRT consistent 
with privacy protections and agreements. 
Sec. 187. Voluntary nature of trust participation and information sharing. 
Sec. 188. Financing of activities. 
Sec. 189. Regulatory oversight. 
TITLE II—FAIRNESS FOR EVERY AMERICAN PATIENT 
Subtitle A—Medicaid Modernization 
Sec. 201. Medicaid modernization. 
Sec. 202. Outreach. 
Sec. 203. Transition rules; miscellaneous provisions. 
Subtitle B—Supplemental Health Care Assistance for Low-Income Families 
Sec. 211. Supplemental health care assistance for low-income families. 
TITLE III—MEDICARE REFORM 
Subtitle A—New Medicare Program 
Sec. 301. Benefit changes. 
Sec. 302. Increase in Medicare eligibility age. 
Sec. 303. Unified Medicare Trust Fund. 
Subtitle B—Changes in Current Medicare Program 
Sec. 311. Income-related reduction in part D premium subsidy. 
Sec. 312. Reduction in hospital marketbasket increases. 
Sec. 313. Elimination of indexing of income thresholds for part B income-re-
lated premiums. 
Sec. 314. Reinstatement of the Medicare trigger. 
Sec. 315. Eliminating inefficiencies and increasing choice in Medicare Advan-
tage. 
Subtitle C—Medical Liability Reform 
PART 1—ENACTING REAL MEDICAL LIABILITY REFORM 
Sec. 321. Encouraging speedy resolution of claims. 
Sec. 322. Compensating patient injury. 
Sec. 323. Maximizing patient recovery. 
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Sec. 324. Additional health benefits. 
Sec. 325. Punitive damages. 
Sec. 326. Authorization of payment of future damages to claimants in health 
care lawsuits. 
Sec. 327. Definitions. 
Sec. 328. Effect on other laws. 
Sec. 329. State flexibility and protection of States’ rights. 
Sec. 330. Applicability; effective date. 
PART 2—ENDING LAWSUIT ABUSE 
Sec. 331. State grants to create health court solutions. 
TITLE IV—SOCIAL SECURITY REFORM 
Sec. 401. Short title. 
Sec. 402. Establishment of Personal Social Security Savings Program. 
Sec. 403. Monthly insurance benefits for participating individuals. 
Sec. 404. Tax treatment of accounts. 
Sec. 405. Self-Liquidating Social Security Transition Fund. 
Sec. 406. Budgetary treatment of Social Security. 
Sec. 407. Accounting for the Old-Age, Survivors, and Disability Insurance Pro-
gram and the Personal Social Security Savings Program. 
Sec. 408. Progressive indexing of benefits for old-age, wife’s, and husband’s in-
surance benefits. 
Sec. 409. Adjustments to schedule for increases in normal retirement age. 
TITLE V—SIMPLIFIED INCOME TAX 
Sec. 501. Short title. 
Sec. 502. Repeal of alternative minimum tax for noncorporate taxpayers. 
Sec. 503. Simplified income tax system. 
Sec. 504. Exclusion for capital gains, dividends, and interest. 
Sec. 505. Repeal of estate and gift taxes. 
TITLE VI—BUSINESS CONSUMPTION TAX 
Sec. 601. Short title. 
Sec. 602. Repeal of corporate income tax; new tax paid by corporations and 
other businesses. 
Sec. 603. Repeal of chapter 6. 
TITLE VII—JOB TRAINING RESULTS ACT OF 2010 
Sec. 701. Short title. 
Sec. 702. Purpose. 
Sec. 703. Improvement of job training programs; performance metrics for WIA 
job training programs. 
Sec. 704. Other job training programs. 
Sec. 705. Transparency. 
Sec. 706. Evaluations. 
Sec. 707. Encouraging innovation. 
Sec. 708. Making WIA Training Vouchers more accessible and flexible. 
Sec. 709. Life long learning awareness campaigns. 
Sec. 710. GAO reports. 
TITLE VIII—SPENDING LIMITS AND DEFICIT CONTROL 
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Sec. 800. Short title. 
Subtitle A—Spending Limits and Deficit Control 
Sec. 801. Discretionary spending limits. 
Sec. 802. Total spending limits. 
Subtitle B—Reports and Orders 
Sec. 811. Reports and orders. 
Sec. 812. Spending limits enforcement. 
Sec. 813. Spending reduction orders. 
Sec. 814. Alternate spending reduction legislation in the House of Representa-
tives. 
Sec. 815. Alternate spending reduction legislation in the Senate. 
Subtitle C—Long-Term Budgeting 
Sec. 821. CBO and OMB projections. 
Sec. 822. GAO and OMB statements of the Federal Government’s financial 
condition. 
Sec. 823. Five-year fiscal sustainability review. 
Sec. 824. Long-term reconciliation. 
Sec. 825. Long-term spending increase point of order. 
SEC. 2. FINDINGS AND PURPOSE. 
(a) FINDINGS.—The Congress finds as follows: 
(1) The Congressional Budget Office, the Gov-
ernment Accountability Office, and the Federal Re-
serve have all found that Social Security, Medicare, 
and Medicaid, as currently structured, will result in 
unsustainable levels of spending, deficits, and debt. 
(2) Although Americans remain committed to 
the missions of these initiatives, the goals can no 
longer be met on models created nearly 80 years 
ago—with large, centralized institutions, especially 
government, serving as sole providers for an increas-
ingly dependent population. 
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(3) The continuing failure to enact solutions 
makes these problems more intractable with each 
succeeding year. 
(4) Among the inescapable signs are the fol-
lowing: an unsustainable path of Government spend-
ing; levels of projected debt that threaten to bank-
rupt the country; trillions of dollars of unfunded li-
abilities in the Government’s major benefit pro-
grams; and the erosion of Americans’ security and 
confidence in health care and retirement. 
(5) These conditions pose significant potential 
burdens not only for the Government, but for the 
United States economy as well, threatening its abil-
ity to continue raising standards of living, and its 
leadership in an increasingly international market-
place. 
(6) A comprehensive plan is needed, and this 
legislation aims to gain control of Federal spending, 
deficits, and debt while energizing the productive ca-
pacities of Americans to generate sustained eco-
nomic growth. 
(b) PURPOSE.—The purpose of this Act is as follows: 
(1) HEALTH CARE REFORM.—To provide access 
to health care coverage for uninsured Americans by 
establishing a new tax credit; to reform health insur-
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ance markets, high-risk pools, and electronic health 
records; and to create a new agency to promote the 
dissemination of industry-defined health care price 
and quality data. 
(2) MEDICAID AND SCHIP REFORM.—To ensure 
health care coverage for those who need it most and 
can be sustained, reforms the Medicaid and SCHIP 
to expand coverage options for beneficiaries, gives 
greater flexibility, and slows the growth in spending. 
(3) MEDICARE REFORM.—To ensure the Medi-
care benefit continues to provide health care cov-
erage for seniors by establishing modernizing the 
program to slowly phase in reforms for those young-
er than 55 years of age, and to make the program 
permanently solvent and fiscally sustainable. 
(4) SOCIAL SECURITY REFORM.—To reform So-
cial Security to ensure retirement security for future 
generations and to make it solvent for the foresee-
able future; to address inequities in the system and 
provide millions of Americans with the opportunity 
to build a retirement nest egg that they can pass on 
to their heirs. 
(5) INDIVIDUAL
INCOME
TAX
REFORM.—To 
offer taxpayers a choice in paying their Federal in-
come taxes; to allow individuals to choose between 
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the current tax code or a highly simplified tax sys-
tem with virtually no deductions or credits (apart 
from an individual health care credit), two low tax 
rates and a generous standard deduction and per-
sonal exemption; to fully repeal the alternative min-
imum tax (AMT), eliminate the tax on interest, cap-
ital gains and dividends in order to promote saving; 
and to repeal the estate tax. 
(6) BUSINESS TAX REFORM.—To eliminate the 
United States corporate income tax and establishes 
a border-adjustable business consumption tax in its 
place; to provide a new method of business taxation 
that will level the playing field for United States 
businesses to compete with foreign businesses and 
will promote sustained economic growth, investment 
and job creation in America. 
(7) JOB TRAINING.—To assist working Ameri-
cans in an increasingly global economy, reforms 49 
job training programs across eight agencies to en-
hance transparency, accountability, and perform-
ance. 
(8) BUDGET PROCESS.—To keep total spending 
of the Government under control, nondefense discre-
tionary spending limits are set forth, a limit on total 
outlays as a percentage of the gross domestic 
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produce is established, and the process is reformed 
to put a greater focus on long-term budgetary 
trends. 
TITLE I—HEALTH CARE REFORM 
Subtitle A—Expanding Patient’s 
Health Care Choices 
PART 1—STATE-BASED HEALTH CARE 
EXCHANGES 
SEC. 101. STATE-BASED HEALTH CARE EXCHANGES. 
(a) STATE-BASED HEALTH CARE EXCHANGES.— 
(1) IN GENERAL.—The Secretary of Health and 
Human Services (referred to in this part as the 
‘‘Secretary’’) shall establish a process for the review 
of applications submitted by States for the establish-
ment and implementation of State-based health care 
Exchanges (referred to in this part as a ‘‘State Ex-
change’’) and for the certification of such Ex-
changes. The Secretary shall certify a State Ex-
change if the Secretary determines that such Ex-
change meets the requirements of this part. 
(2) CONTINUED CERTIFICATION.—The certifi-
cation of a State Exchange under subsection (a) 
shall remain in effect until the Secretary determines 
that the Exchange has failed to meet any of the re-
quirements under this part. 
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SEC. 102. REQUIREMENTS. 
(a) 
GENERAL
REQUIREMENTS
FOR
CERTIFI-
CATION.—An application for certification under section 
101(a) shall demonstrate compliance with the following: 
(1) PURPOSE.—The primary purpose of a State 
Exchange shall be the facilitation of the individual 
purchase of innovative private health insurance and 
the creation of a market where private health plans 
compete for enrollees based on price and quality. 
(2) ADMINISTRATION.—A State shall ensure 
the operation of the State Exchange through direct 
contracts with the health insurance plans that are 
participating in the State Exchange or through a 
contract with a third party administrator for the op-
eration of the Exchange. 
(3) PLAN PARTICIPATION.—A State shall not 
restrict or otherwise limit the ability of a health in-
surance plan to participate in, and offer health in-
surance coverage through, the State Exchange, so 
long as the health insurance issuers involved are 
duly licensed under State insurance laws applicable 
to all health insurance issuers in the State and oth-
erwise comply with the requirements of this part. 
(4) PREMIUMS.— 
(A) AMOUNT.—A State shall not determine 
premium or cost sharing amounts for health in-
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surance coverage offered through the State Ex-
change. 
(B) COLLECTION METHOD.—A State shall 
ensure the existence of an effective and efficient 
method for the collection of premiums for 
health insurance coverage offered through the 
State Exchange. 
(b) BENEFIT PARITY WITH MEMBERS
OF CON-
GRESS.—With respect to health insurance issuers offering 
health insurance coverage through the State Exchange, 
the State shall not impose any requirement that such 
issuers provide coverage that includes benefits different 
than requirements on plans offered to Members of Con-
gress under chapter 89 of title 5, United States Code. 
(c) FACILITATING
UNIVERSAL
COVERAGE
FOR 
AMERICANS.— 
(1) AUTOMATIC ENROLLMENT.—The State Ex-
change shall ensure that health insurance coverage 
offered through the Exchange provides for the appli-
cation of uniform mechanisms that are designed to 
encourage and facilitate the enrollment of all eligible 
individuals in Exchange-based health insurance cov-
erage. Such mechanisms shall include automatic en-
rollment through various venues, which may include 
emergency rooms, the submission of State tax forms, 
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places of employment in the State, and State depart-
ments of motor vehicles. 
(2) OTHER ENROLLMENT OPPORTUNITIES.— 
(A) IN
GENERAL.—The State Exchange 
shall ensure that health insurance coverage of-
fered through the Exchange permits enrollment, 
and changes in enrollment, of individuals at the 
time such individuals become eligible individuals 
in the State. 
(B) ANNUAL
OPEN
ENROLLMENT
PERI-
ODS.—The State Exchange shall ensure that 
health insurance coverage offered through the 
Exchange permits eligible individuals to annu-
ally change enrollment among the coverage of-
fered through the Exchange, subject to sub-
paragraph (A). 
(C) INCENTIVES
FOR
CONTINUOUS
AN-
NUAL
COVERAGE.—The State Exchange shall 
include an incentive for eligible individuals to 
remain insured from plan year to plan year, 
and may include incentives such as State tax 
incentives or premium-based incentives. 
(3) GUARANTEED ACCESS FOR INDIVIDUALS.— 
The State Exchange shall ensure that, with respect 
to health insurance coverage offered through the Ex-
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change, all eligible individuals are able to enroll in 
the coverage of their choice provided that such indi-
viduals agree to make applicable premium and cost 
sharing payments. 
(4) LIMITATION ON PRE-EXISTING CONDITION 
EXCLUSIONS.—The State Exchange shall ensure 
that health insurance coverage offered through the 
Exchange meets the requirements of section 9801 of 
the Internal Revenue Code of 1986 in the same 
manner as if such coverage was a group health plan. 
(5) OPT-OUT.—Nothing in this part shall be 
construed to require that an individual be enrolled in 
health insurance coverage. 
(d) LIMITATION ON EXORBITANT PREMIUMS.— 
(1) ESTABLISHMENT
OF
MECHANISM.—With 
respect to health insurance coverage offered through 
the State Exchange, the Exchange shall establish a 
mechanisms to protect enrollees from the imposition 
of excessive premiums, to reduce adverse selection, 
and to share risk. 
(2) MECHANISM
OPTIONS.—The mechanisms 
referred to in paragraph (1) may include the fol-
lowing: 
(A) INDEPENDENT RISK ADJUSTMENT.— 
The implementation of risk-adjustment among 
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health insurance coverage offered through the 
State Exchange through a contract entered into 
with a private, independent board. Such board 
shall include representation of health insurance 
issuers and State officials but shall be inde-
pendently controlled. The State Exchange shall 
ensure that risk-adjustment implemented under 
this subparagraph shall be based on a blend of 
patient diagnoses and estimated costs. 
(B) HEALTH SECURITY POOLS.—The es-
tablishment (or continued operation under sec-
tion 2745 of the Public Health Service Act) of 
a health security pool to guarantee high-risk in-
dividuals access to affordable, quality health 
care. 
(C) REINSURANCE.—The implementation 
of a successful reinsurance mechanisms to guar-
antee high-risk individuals access to affordable, 
quality health care. 
(e) MEDICAID
AND SCHIP BENEFICIARIES.—The 
State Exchange shall include procedures to permit eligible 
individuals who are receiving (or who are eligible to re-
ceive) health care under title XIX or XXI of the Social 
Security Act to enroll in health insurance coverage offered 
through the Exchange. 
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(f) DISSEMINATION OF COVERAGE INFORMATION.— 
The State Exchange shall ensure that each health insur-
ance issuer that provides health insurance coverage 
through the Exchange disseminate to eligible individuals 
and employers within the State information concerning 
health insurance coverage options, including the plans of-
fered and premiums and benefits for such plans. 
(g) REGIONAL OPTIONS.— 
(1) INTERSTATE
COMPACTS.—Two or more 
States that establish a State Exchange may enter 
into interstate compacts providing for the regula-
tions of health insurance coverage offered within 
such States. 
(2) MODEL
LEGISLATION.—States adopting 
model legislation as developed by the National Asso-
ciation of Insurance Commissioners shall be eligible 
to enter into an interstate compact as provided for 
in this section. 
(3) MULTI-STATE POOLING ARRANGEMENTS.— 
State Exchanges may implement a multi-state health 
care coverage pooling arrangement under this part. 
(h) ELIGIBLE INDIVIDUAL.—In this part, the term 
‘‘eligible individual’’ means an individual who is— 
(1) a citizen or national of the United States or 
an alien lawfully admitted to the United States for 
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permanent residence or otherwise residing in the 
United States under color of law; 
(2) a resident of the State involved; 
(3) not incarcerated; and 
(4) not eligible for coverage under parts A and 
B (or C) of the Medicare program under title XVIII 
of the Social Security Act. 
SEC. 103. STATE EXCHANGE INCENTIVES. 
(a) GRANTS.—The Secretary may award grants, pur-
suant to subsection (b), to States for the development, im-
plementation, and evaluation of certified State Exchanges 
and to provide more options and choice for individuals 
purchasing health insurance coverage. 
(b) ONE-TIME INCREASE IN MEDICAID PAYMENT.— 
In the case of a State awarded a grant to carry out this 
section, the total amount of the Federal payment deter-
mined for the State under section 1913 of the Social Secu-
rity Act (as amended by section 201 of this Act) for fiscal 
year 2011 shall be increased by an amount equal to 1 per-
cent of the total amount of payments made to the State 
for fiscal year 2010 under section 1903(a) of the Social 
Security Act (42 U.S.C. 1396b(a)) for purposes of car-
rying out a grant awarded under this section. Amounts 
paid to a State pursuant to this subsection shall remain 
available until expended. 
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PART 2—FAIR TAX TREATMENT FOR ALL 
AMERICANS TO AFFORD HEALTH CARE 
SEC. 111. REFERENCE. 
Except as otherwise expressly provided, whenever in 
this part an amendment or repeal is expressed in terms 
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a 
section or other provision of the Internal Revenue Code 
of 1986. 
Subpart A—Refundable and Advanceable Credit for 
Certain Health Insurance Coverage 
SEC. 112. REFUNDABLE AND ADVANCEABLE CREDIT FOR 
CERTAIN HEALTH INSURANCE COVERAGE. 
(a) ADVANCEABLE CREDIT.—Subpart A of part IV 
of subchapter A of chapter 1 (relating to nonrefundable 
personal credits) is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 25E. QUALIFIED HEALTH INSURANCE CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year the sum of 
the monthly limitations determined under subsection (b) 
for the taxpayer and the taxpayer’s spouse and depend-
ents. 
‘‘(b) MONTHLY LIMITATION.— 
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‘‘(i) APPLICABLE ADULT AMOUNT.— 
The applicable adult amount is $2,300. 
‘‘(ii) APPLICABLE CHILD AMOUNT.— 
The applicable child amount is $1,700. 
‘‘(iii) 
APPLICABLE
AGGREGATE 
AMOUNT.—The 
applicable 
aggregate 
amount is $5,700. 
‘‘(B) COST-OF-LIVING ADJUSTMENTS.— 
‘‘(i) IN GENERAL.—In the case of any 
taxable year beginning in a calendar year 
after 2011, each dollar amount contained 
in subparagraph (A) shall be increased by 
an amount equal to such dollar amount 
multiplied by the blended cost-of-living ad-
justment. 
‘‘(ii) BLENDED
COST-OF-LIVING
AD-
JUSTMENT.—For purposes of clause (i), 
the 
blended 
cost-of-living 
adjustment 
means one-half of the sum of— 
‘‘(I) the cost-of-living adjustment 
determined under section 1(f)(3) for 
the calendar year in which the taxable 
year begins by substituting ‘calendar 
year 2010’ for ‘calendar year 1992’ in 
subparagraph (B) thereof, plus 
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‘‘(II) the cost-of-living adjust-
ment 
determined 
under 
section 
213(d)(10)(B)(ii) for the calendar 
year in which the taxable year begins 
by substituting ‘2010’ for ‘1996’ in 
subclause (II) thereof. 
‘‘(iii) ROUNDING.—Any increase de-
termined under clause (i) shall be rounded 
to the nearest multiple of $10. 
‘‘(C) 
REVENUE
NEUTRALITY
ADJUST-
MENTS.— 
‘‘(i) IN GENERAL.—In the case of any 
taxable year beginning in a calendar year 
after 2011, each dollar amount contained 
in subparagraph (A), as adjusted under 
subparagraph (B), shall be further ad-
justed (if necessary) such that the aggre-
gate of such dollar amounts allowed as 
credits under this section for such taxable 
year equals but does not exceed the total 
increase in revenues in the Treasury re-
sulting from the amendments made by sec-
tions 124 and 201 of the Roadmap for 
America’s Future Act of 2010 for such 
taxable year as estimated by the Secretary. 
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‘‘(ii) DATE
OF
ADJUSTMENT.—The 
Secretary shall announce the adjustments 
for any taxable year under this subpara-
graph not later than the preceding October 
1. 
‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—In 
the case of a taxable year to which section 26(a)(2) does 
not apply, the credit allowed under subsection (a) for the 
taxable year shall not exceed the excess of— 
‘‘(1) the sum of the regular tax liability (as de-
fined in section 26(b)) plus the tax imposed by sec-
tion 55, over 
‘‘(2) the sum of the credits allowable under this 
subpart (other than this section) and section 27 for 
the taxable year. 
‘‘(d) EXCESS CREDIT REFUNDABLE
TO CERTAIN 
TAX-FAVORED ACCOUNTS.—If— 
‘‘(1) the credit which would be allowable under 
subsection (a) if only qualified refund eligible health 
insurance were taken into account under this sec-
tion, exceeds 
‘‘(2) the limitation imposed by section 26 or 
subsection (c) for the taxable year, 
such excess shall be paid by the Secretary into the des-
ignated account of the taxpayer. 
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‘‘(e) ELIGIBLE INDIVIDUAL.—For purposes of this 
section— 
‘‘(1) IN
GENERAL.—The term ‘eligible indi-
vidual’ means, with respect to any month, an indi-
vidual who— 
‘‘(A) is the taxpayer, the taxpayer’s 
spouse, or the taxpayer’s dependent, and 
‘‘(B) is covered under qualified health in-
surance as of the 1st day of such month. 
‘‘(2) MEDICARE
COVERAGE, MEDICAID
DIS-
ABILITY
COVERAGE, AND
MILITARY
COVERAGE.— 
The term ‘eligible individual’ shall not include any 
individual who for any month is— 
‘‘(A) entitled to benefits under part A of 
title XVIII of the Social Security Act or en-
rolled under part B of such title, and the indi-
vidual is not a participant or beneficiary in a 
group health plan or large group health plan 
that is a primary plan (as defined in section 
1862(b)(2)(A) of such Act), 
‘‘(B) enrolled by reason of disability in the 
program under title XIX of such Act, or 
‘‘(C) entitled to benefits under chapter 55 
of title 10, United States Code, including under 
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the TRICARE program (as defined in section 
1072(7) of such title). 
‘‘(3) IDENTIFICATION
REQUIREMENTS.—The 
term ‘eligible individual’ shall not include any indi-
vidual for any month unless the policy number asso-
ciated with the qualified health insurance and the 
TIN of each eligible individual covered under such 
health insurance for such month are included on the 
return of tax for the taxable year in which such 
month occurs. 
‘‘(4) PRISONERS.—The term ‘eligible individual’ 
shall not include any individual for a month if, as 
of the first day of such month, such individual is im-
prisoned under Federal, State, or local authority. 
‘‘(5) ALIENS.—The term ‘eligible individual’ 
shall not include any alien individual who is not a 
lawful permanent resident of the United States. 
‘‘(f) HEALTH INSURANCE.—For purposes of this sec-
tion— 
‘‘(1) QUALIFIED
HEALTH
INSURANCE.—The 
term ‘qualified health insurance’ means any insur-
ance constituting medical care which (as determined 
under regulations prescribed by the Secretary)— 
‘‘(A) has a reasonable annual and lifetime 
benefit maximum, and 
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‘‘(B) provides coverage for inpatient and 
outpatient care, emergency benefits, and physi-
cian care. 
Such term does not include any insurance substan-
tially all of the coverage of which is coverage de-
scribed in section 223(c)(1)(B). 
‘‘(2) QUALIFIED
REFUND
ELIGIBLE
HEALTH 
INSURANCE.—The term ‘qualified refund eligible 
health insurance’ means any qualified health insur-
ance which is coverage under a group health plan 
(as defined in section 5000(b)(1)). 
‘‘(g) DESIGNATED ACCOUNTS.— 
‘‘(1) DESIGNATED ACCOUNT.—For purposes of 
this section, the term ‘designated account’ means 
any specified account established and maintained by 
the provider of the taxpayer’s qualified refund eligi-
ble health insurance— 
‘‘(A) which is designated by the taxpayer 
(in such form and manner as the Secretary may 
provide) on the return of tax for the taxable 
year, 
‘‘(B) which, under the terms of the ac-
count, accepts the payment described in sub-
section (d) on behalf of the taxpayer, and 
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‘‘(C) which, under such terms, provides for 
the payment of expenses by the taxpayer or on 
behalf of such taxpayer by the trustee or custo-
dian of such account, including payment to 
such provider. 
‘‘(2) SPECIFIED
ACCOUNT.—For purposes of 
this paragraph, the term ‘specified account’ means— 
‘‘(A) any health savings account under sec-
tion 223 or Archer MSA under section 220, or 
‘‘(B) any health insurance reserve account. 
‘‘(3) 
HEALTH
INSURANCE
RESERVE
AC-
COUNT.—For purposes of this subsection, the term 
‘health insurance reserve account’ means a trust cre-
ated or organized in the United States as a health 
insurance reserve account exclusively for the purpose 
of paying the qualified medical expenses (within the 
meaning of section 223(d)(2)) of the account bene-
ficiary (as defined in section 223(d)(3)), but only if 
the written governing instrument creating the trust 
meets the requirements described in subparagraphs 
(B), (C), (D), and (E) of section 223(d)(1). Rules 
similar to the rules under subsections (g) and (h) of 
section 408 shall apply for purposes of this subpara-
graph. 
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‘‘(4) TREATMENT OF PAYMENT.—Any payment 
under subsection (d) to a designated account shall 
not be taken into account with respect to any dollar 
limitation which applies with respect to contributions 
to such account (or to tax benefits with respect to 
such contributions). 
‘‘(h) OTHER DEFINITIONS.—For purposes of this 
section— 
‘‘(1) DEPENDENT.—The term ‘dependent’ has 
the meaning given such term by section 152 (deter-
mined without regard to subsections (b)(1), (b)(2), 
and (d)(1)(B) thereof). An individual who is a child 
to whom section 152(e) applies shall be treated as 
a dependent of the custodial parent for a coverage 
month unless the custodial and noncustodial parent 
provide otherwise. 
‘‘(2) ADULT.—The term ‘adult’ means an indi-
vidual who is not a child. 
‘‘(3) CHILD.—The term ‘child’ means a quali-
fying child (as defined in section 152(c)). 
‘‘(i) SPECIAL RULES.— 
‘‘(1) COORDINATION
WITH
MEDICAL
DEDUC-
TION.—Any amount paid by a taxpayer for insur-
ance which is taken into account for purposes of de-
termining the credit allowable to the taxpayer under 
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subsection (a) shall not be taken into account in 
computing the amount allowable to the taxpayer as 
a deduction under section 213(a) or 162(l). 
‘‘(2) COORDINATION WITH HEALTH CARE TAX 
CREDIT.—No credit shall be allowed under sub-
section (a) for any taxable year to any taxpayer and 
qualifying family members with respect to whom a 
credit under section 35 is allowed for such taxable 
year. 
‘‘(3) DENIAL OF CREDIT TO DEPENDENTS.—No 
credit shall be allowed under this section to any indi-
vidual with respect to whom a deduction under sec-
tion 151 is allowable to another taxpayer for a tax-
able year beginning in the calendar year in which 
such individual’s taxable year begins. 
‘‘(4) MARRIED COUPLES MUST FILE JOINT RE-
TURN.— 
‘‘(A) IN
GENERAL.—If the taxpayer is 
married at the close of the taxable year, the 
credit shall be allowed under subsection (a) only 
if the taxpayer and his spouse file a joint return 
for the taxable year. 
‘‘(B) MARITAL STATUS; CERTAIN MARRIED 
INDIVIDUALS LIVING APART.—Rules similar to 
the rules of paragraphs (3) and (4) of section 
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21(e) shall apply for purposes of this para-
graph. 
‘‘(5) VERIFICATION
OF
COVERAGE, ETC.—No 
credit shall be allowed under this section with re-
spect to any individual unless such individual’s cov-
erage (and such related information as the Secretary 
may require) is verified in such manner as the Sec-
retary may prescribe. 
‘‘(6) INSURANCE WHICH COVERS OTHER INDI-
VIDUALS; TREATMENT OF PAYMENTS.—Rules similar 
to the rules of paragraphs (7) and (8) of section 
35(g) shall apply for purposes of this section. 
‘‘(j) COORDINATION WITH ADVANCE PAYMENTS.— 
‘‘(1) REDUCTION IN CREDIT FOR ADVANCE PAY-
MENTS.—With respect to any taxable year, the 
amount which would (but for this subsection) be al-
lowed as a credit to the taxpayer under subsection 
(a) shall be reduced (but not below zero) by the ag-
gregate amount paid on behalf of such taxpayer 
under section 7527A for months beginning in such 
taxable year. 
‘‘(2) RECAPTURE
OF
EXCESS
ADVANCE
PAY-
MENTS.—If the aggregate amount paid on behalf of 
the taxpayer under section 7527A for months begin-
ning in the taxable year exceeds the sum of the 
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monthly limitations determined under subsection (b) 
for the taxpayer and the taxpayer’s spouse and de-
pendents for such months, then the tax imposed by 
this chapter for such taxable year shall be increased 
by the sum of— 
‘‘(A) such excess, plus 
‘‘(B) interest on such excess determined at 
the underpayment rate established under sec-
tion 6621 for the period from the date of the 
payment under section 7527A to the date such 
excess is paid. 
For purposes of subparagraph (B), an equal part of 
the aggregate amount of the excess shall be deemed 
to be attributable to payments made under section 
7527A on the first day of each month beginning in 
such taxable year, unless the taxpayer establishes 
the date on which each such payment giving rise to 
such excess occurred, in which case subparagraph 
(B) shall be applied with respect to each date so es-
tablished. The Secretary may rescind or waive all or 
any portion of any amount imposed by reason of 
subparagraph (B) if such excess was not the result 
of the actions of the taxpayer.’’. 
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(b) ADVANCE PAYMENT OF CREDIT.—Chapter 77 
(relating to miscellaneous provisions) is amended by in-
serting after section 7527 the following new section: 
‘‘SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR QUALI-
FIED 
REFUND 
ELIGIBLE 
HEALTH 
INSUR-
ANCE. 
‘‘(a) IN GENERAL.—The Secretary shall establish a 
program for making payments on behalf of individuals to 
providers of qualified refund eligible health insurance (as 
defined in section 25E(f)(2)) for such individuals. 
‘‘(b) LIMITATION.—The Secretary may make pay-
ments under subsection (a) only to the extent that the Sec-
retary determines that the amount of such payments made 
on behalf of any taxpayer for any month does not exceed 
the sum of the monthly limitations determined under sec-
tion 25E(b) for the taxpayer and taxpayer’s spouse and 
dependents for such month.’’. 
(c) INFORMATION REPORTING.— 
(1) IN GENERAL.—Subpart B of part III of 
subchapter A of chapter 61 (relating to information 
concerning transactions with other persons) is 
amended by inserting after section 6050W the fol-
lowing new section: 
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‘‘SEC. 6050X. RETURNS RELATING TO CREDIT FOR QUALI-
FIED 
REFUND 
ELIGIBLE 
HEALTH 
INSUR-
ANCE. 
‘‘(a) REQUIREMENT OF REPORTING.—Every person 
who is entitled to receive payments for any month of any 
calendar year under section 7527A (relating to advance 
payment of credit for qualified refund eligible health insur-
ance) with respect to any individual shall, at such time 
as the Secretary may prescribe, make the return described 
in subsection (b) with respect to each such individual. 
‘‘(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, with respect to each individual 
referred to in subsection (a)— 
‘‘(A) the name, address, and TIN of each 
such individual, 
‘‘(B) the months for which amounts pay-
ments under section 7527A were received, 
‘‘(C) the amount of each such payment, 
‘‘(D) the type of insurance coverage pro-
vided by such person with respect to such indi-
vidual and the policy number associated with 
such coverage, 
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‘‘(E) the name, address, and TIN of the 
spouse and each dependent covered under such 
coverage, and 
‘‘(F) such other information as the Sec-
retary may prescribe. 
‘‘(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 individual whose name 
is required to be set forth in such return a written state-
ment showing— 
‘‘(1) the contact information of the person re-
quired to make such return, and 
‘‘(2) the information required to be shown on 
the return with respect to such individual. 
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) RETURNS WHICH WOULD BE REQUIRED TO BE 
MADE BY 2 OR MORE PERSONS.—Except to the extent 
provided in regulations prescribed by the Secretary, in the 
case of any amount received by any person on behalf of 
another person, only the person first receiving such 
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amount shall be required to make the return under sub-
section (a).’’. 
(2) ASSESSABLE PENALTIES.— 
(A) 
Subparagraph 
(B) 
of 
section 
6724(d)(1) (relating to definitions) 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 inserting after clause 
(xxiii) the following new clause: 
‘‘(xxiv) section 6050X (relating to re-
turns relating to credit for qualified refund 
eligible health insurance), and’’. 
(B) Paragraph (2) of section 6724(d) is 
amended by striking ‘‘or’’ at the end of sub-
paragraph (EE), by striking the period at the 
end of subparagraph (FF) and inserting ‘‘, or’’ 
and by inserting after subparagraph (FF) the 
following new subparagraph: 
‘‘(GG) section 6050X (relating to returns 
relating to credit for qualified refund eligible 
health insurance).’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting 
‘‘25E,’’ before ‘‘35,’’. 
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(2)(A) Section 24(b)(3)(B) is amended by in-
serting ‘‘, 25E,’’ after ‘‘25D’’. 
(B) Section 25(e)(1)(C)(ii) is amended by in-
serting ‘‘25E,’’ after ‘‘25D,’’. 
(C) Section 25B(g)(2) is amended by inserting 
‘‘25E,’’ after ‘‘25D,’’. 
(D) Section 26(a)(1) is amended by inserting 
‘‘25E,’’ after ‘‘25D,’’. 
(E) Section 30(c)(2)(B)(ii) is amended by in-
serting ‘‘25E,’’ after ‘‘25D,’’. 
(F) Section 30D(c)(2)(B)(ii) is amended by 
striking ‘‘and 25D’’ and inserting ‘‘, 25D, and 
25E’’. 
(G) Section 904(i) is amended by inserting 
‘‘25E,’’ after ‘‘25B,’’. 
(H) Section 1400C(d)(2) is amended by insert-
ing ‘‘25E,’’ after ‘‘25D,’’. 
(3) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 25D the 
following new item: 
‘‘Sec. 25E. Qualified health insurance credit.’’. 
(4) The table of sections for chapter 77 is 
amended by inserting after the item relating to sec-
tion 7527 the following new item: 
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‘‘Sec. 7527A. Advance payment of credit for qualified refund eligible health in-
surance.’’. 
(5) 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 credit for qualified refund eligible health in-
surance.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2010. 
SEC. 113. REQUIRING EMPLOYER TRANSPARENCY ABOUT 
EMPLOYEE BENEFITS. 
(a) IN GENERAL.—Section 6051(a) (relating to W– 
2 requirement) is amended by striking ‘‘and’’ at the end 
of paragraph (12), by striking the period at the end of 
paragraph (13) and inserting ‘‘, and’’ and by inserting 
after paragraph (13) the following new paragraph: 
‘‘(14) the aggregate cost (within the meaning of 
section 4980B(f)(4)) for coverage of the employee 
under an accident or health plan which is excludable 
from the gross income of the employee under section 
106(a) (other than coverage under a health flexible 
spending arrangement).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to statements for calendar years 
beginning after 2010. 
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SEC. 114. CHANGES TO EXISTING TAX PREFERENCES FOR 
MEDICAL COVERAGE, ETC., FOR INDIVIDUALS 
ELIGIBLE FOR QUALIFIED HEALTH INSUR-
ANCE CREDIT. 
(a) EXCLUSION FOR CONTRIBUTIONS BY EMPLOYER 
TO ACCIDENT AND HEALTH PLANS.— 
(1) IN GENERAL.—Section 106 (relating to con-
tributions by employer to accident and health plans) 
is amended by adding at the end the following new 
subsection: 
‘‘(f) NO EXCLUSION
FOR INDIVIDUALS ELIGIBLE 
FOR QUALIFIED HEALTH INSURANCE CREDIT.—Sub-
section (a) shall not apply with respect to any employer- 
provided coverage under an accident or health plan for any 
individual for any month unless such individual is de-
scribed in paragraph (2) or (5) of section 25E(e) for such 
month. The amount includible in gross income by reason 
of this subsection shall be determined under rules similar 
to the rules of section 4980B(f)(4).’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Section 106(b)(1) is amended— 
(i) by inserting ‘‘gross income does 
not include’’ before ‘‘amounts contrib-
uted’’, and 
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(ii) by striking ‘‘shall be treated as 
employer-provided coverage for medical ex-
penses under an accident or health plan’’. 
(B) Section 106(d)(1) is amended— 
(i) by inserting ‘‘gross income does 
not include’’ before ‘‘amounts contrib-
uted’’, and 
(ii) by striking ‘‘shall be treated as 
employer-provided coverage for medical ex-
penses under an accident or health plan’’. 
(b) AMOUNTS RECEIVED UNDER ACCIDENT
AND 
HEALTH PLANS.—Section 105 (relating to amounts re-
ceived under accident and health plans) is amended by 
adding at the end the following new subsection: 
‘‘(k) NO EXCLUSION FOR INDIVIDUALS ELIGIBLE 
FOR QUALIFIED HEALTH INSURANCE CREDIT.—Sub-
section (b) shall not apply with respect to any employer- 
provided coverage under an accident or health plan for any 
individual for any month unless such individual is de-
scribed in paragraph (2) or (5) of section 25E(e) for such 
month.’’. 
(c) SPECIAL RULES FOR HEALTH INSURANCE COSTS 
OF SELF-EMPLOYED INDIVIDUALS.—Subsection (l) of sec-
tion 162 (relating to special rules for health insurance 
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costs of self-employed individuals) is amended by adding 
at the end the following new paragraph: 
‘‘(6) NO DEDUCTION TO INDIVIDUALS ELIGIBLE 
FOR
QUALIFIED
HEALTH
INSURANCE.—Paragraph 
(1) shall not apply for any individual for any month 
unless such individual is described in paragraph (2) 
or (5) of section 25E(e) for such month.’’. 
(d) EARNED INCOME CREDIT UNAFFECTED BY RE-
PEALED
EXCLUSIONS.—Subparagraph (B) of section 
32(c)(2) is amended by redesignating clauses (v) and (vi) 
as clauses (vi) and (vii), respectively, and by inserting 
after clause (iv) the following new clause: 
‘‘(v) the earned income of an indi-
vidual shall be computed without regard to 
sections 105(k) and 106(f),’’. 
(e) MODIFICATION OF DEDUCTION FOR MEDICAL 
EXPENSES.—Subsection (d) of section 213 is amended by 
adding at the end the following new paragraph: 
‘‘(12) PREMIUMS FOR QUALIFIED HEALTH IN-
SURANCE.—The term ‘medical care’ does not include 
any amount paid as a premium for coverage of an 
eligible individual (as defined in section 25E(e)) 
under qualified health insurance (as defined in sec-
tion 25E(f)) for any month.’’. 
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(f) REPORTING REQUIREMENT.—Subsection (a) of 
section 6051 is amended by striking ‘‘and’’ at the end of 
paragraph (12), by striking the period at the end of para-
graph (13) and inserting ‘‘and’’, and by inserting after 
paragraph (13) the following new paragraph: 
‘‘(14) the total amount of employer-provided 
coverage under an accident or health plan which is 
includible in gross income by reason of sections 
105(k) and 106(f).’’. 
(g) RETIRED PUBLIC SAFETY OFFICERS.—Section 
402(l)(4)(D) is amended by adding at the end the fol-
lowing: ‘‘Such term shall not include any premium for cov-
erage by an accident or health insurance plan for any 
month unless such individual is described in paragraph (2) 
or (5) of section 25E(e) for such month.’’. 
(h) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2010. 
(i) NO INTENT TO ENCOURAGE STATE TAXATION OF 
HEALTH BENEFITS.—No intent to encourage any State 
to treat health benefits as taxable income for the purpose 
of increasing State income taxes may be inferred from the 
provisions of, and amendments made by, this section. 
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Subpart B—Health Savings Accounts 
SEC. 121. IMPROVEMENTS TO HEALTH SAVINGS ACCOUNTS. 
(a) INCREASE IN MONTHLY CONTRIBUTION LIMIT.— 
(1) IN
GENERAL.—Paragraph (2) of section 
223(b) (relating to limitations) is amended to read 
as follows: 
‘‘(2) MONTHLY LIMITATION.— 
‘‘(A) IN GENERAL.—In the case of an eligi-
ble individual who has coverage under a high 
deductible health plan, the monthly limitation 
for any month of such coverage is 1⁄12 of the 
sum of— 
‘‘(i) the greater of— 
‘‘(I) the sum of the annual de-
ductible and the other annual out-of- 
pocket expenses (other than for pre-
miums) required to be paid under the 
plan by the eligible individual for cov-
ered benefits, or 
‘‘(II) in the case of an eligible in-
dividual who has— 
‘‘(aa) 
self-only 
coverage 
under a high deductible health 
plan as of the first day of such 
month, $3,000, or 
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‘‘(bb) family coverage under 
a high deductible health plan as 
of the first day of such month, 
$5,950, and 
‘‘(ii) in the case of an eligible indi-
vidual who has coverage under a qualified 
long-term care insurance contract (as de-
fined in section 7702B(b)), the lesser of— 
‘‘(I) the annual premium for 
such coverage, or 
‘‘(II) $1,000. 
‘‘(B) SPECIAL RULES RELATING TO OUT- 
OF-POCKET EXPENSES.— 
‘‘(i) 
REDUCTION
FOR
SEPARATE 
PLAN.—The annual out-of-pocket expenses 
taken into account under subparagraph 
(A)(i)(I) with respect to any eligible indi-
vidual shall be reduced by any out-of-pock-
et expense payable under a separate plan 
covering the individual. 
‘‘(ii) SECRETARIAL AUTHORITY.—The 
Secretary may by regulations provide that 
annual out-of-pocket expenses will not be 
taken into account under subparagraph 
(A)(i)(I) to the extent that there is only a 
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remote likelihood that such amounts will 
be required to be paid.’’. 
(2) APPLICATION OF SPECIAL RULES FOR MAR-
RIED
INDIVIDUALS.—Paragraph (5) of section 
223(b) (relating to limitations) is amended to read 
as follows: 
‘‘(5) SPECIAL RULES FOR MARRIED INDIVID-
UALS.— 
‘‘(A) IN GENERAL.—In the case of individ-
uals who are married to each other and who are 
both eligible individuals, the limitation under 
paragraph (1) for each spouse shall be equal to 
the spouse’s applicable share of the combined 
marital limit. 
‘‘(B) COMBINED
MARITAL
LIMIT.—For 
purposes of subparagraph (A), the combined 
marital limit is the excess (if any) of— 
‘‘(i) the lesser of— 
‘‘(I) subject to subparagraph (C), 
the sum of the limitations computed 
separately under paragraph (1) for 
each spouse (including any additional 
contribution amount under paragraph 
(3)), or 
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‘‘(II) the dollar amount in effect 
under 
subsection 
(c)(2)(A)(ii)(II), 
over 
‘‘(ii) the aggregate amount paid to 
Archer MSAs of such spouses for the tax-
able year. 
‘‘(C) 
SPECIAL
RULE
WHERE
BOTH 
SPOUSES HAVE FAMILY COVERAGE.—For pur-
poses of subparagraph (B)(i)(I), if either spouse 
has family coverage which covers both spouses, 
both spouses shall be treated as having only 
such coverage (and if both spouses each have 
such coverage under different plans, shall be 
treated as having only family coverage with the 
plan with respect to which the lowest amount is 
determined under paragraph (2)(A)(i)(I)). 
‘‘(D) APPLICABLE SHARE.—For purposes 
of subparagraph (A), a spouse’s applicable 
share is 1⁄2 of the combined marital limit unless 
both spouses agree on a different division. 
‘‘(E) COUPLES
NOT
MARRIED
ENTIRE 
YEAR.—The Secretary shall prescribe rules for 
the application of this paragraph in the case of 
any taxable year for which the individuals were 
not married to each other during all months in-
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cluded in the taxable year, including rules 
which allow individuals in appropriate cases to 
take into account coverage prior to marriage in 
computing the combined marital limit for pur-
poses of this paragraph.’’. 
(3) SELF-ONLY COVERAGE.—Paragraph (4) of 
section 223(c) (relating to definitions and special 
rules) is amended to read as follows: 
‘‘(4) COVERAGE.— 
‘‘(A) FAMILY COVERAGE.—The term ‘fam-
ily coverage’ means any coverage other than 
self-only coverage. 
‘‘(B) SELF-ONLY
COVERAGE.—If more 
than 1 individual is covered by a high deduct-
ible health plan but only 1 of the individuals is 
an eligible individual, the coverage shall be 
treated as self-only coverage.’’. 
(4) CONFORMING AMENDMENTS.— 
(A) Section 223(b)(3)(A) is amended by 
striking ‘‘subparagraphs (A) and (B) of’’. 
(B) Section 223(c)(2)(A) is amended— 
(i) by striking ‘‘$1,000’’ in clause 
(i)(I) and inserting ‘‘$1,150’’, and 
(ii) by striking ‘‘$5,000’’ in clause 
(ii)(I) and inserting ‘‘$5,800’’. 
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(C) Section 223(d)(1)(A)(ii)(I) is amended 
by striking ‘‘subsection (b)(2)(B)(ii)’’ and in-
serting ‘‘subsection (c)(2)(A)(ii)(II)’’. 
(D) Clause (ii) of section 223(c)(2)(D) is 
amended to read as follows: 
‘‘(ii) CERTAIN
ITEMS
DISREGARDED 
IN
COMPUTING
MONTHLY
LIMITATION.— 
Such plan’s annual deductible, and such 
plan’s annual out-of-pocket limitation, for 
services provided outside of such network 
shall not be taken into account for pur-
poses of subsection (b)(2).’’ 
(E) Subsection (g) of section 223 is 
amended to read as follows: 
‘‘(g) COST-OF-LIVING ADJUSTMENTS.— 
‘‘(1) IN GENERAL.—In the case of any taxable 
year beginning in a calendar year after 2010, each 
dollar amount contained in subsections (b)(2)(A) 
and (c)(2)(A) shall be increased by an amount equal 
to such dollar amount multiplied by the blended 
cost-of-living adjustment. 
‘‘(2) 
BLENDED
COST-OF-LIVING
ADJUST-
MENT.—For purposes of paragraph (1), the blended 
cost-of-living adjustment means one-half of the sum 
of— 
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‘‘(A) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins by sub-
stituting ‘calendar year 2008’ for ‘calendar year 
1992’ in subparagraph (B) thereof, plus 
‘‘(B) the cost-of-living adjustment deter-
mined under section 213(d)(10)(B)(ii) for the 
calendar year in which the taxable year begins 
by substituting ‘2008’ for ‘1996’ in subclause 
(II) thereof. 
‘‘(3) ROUNDING.—Any increase determined 
under paragraph (2) shall be rounded to the nearest 
multiple of $50.’’. 
(b) USE OF ACCOUNT FOR INDIVIDUAL HIGH DE-
DUCTIBLE
HEALTH
PLAN
PREMIUMS.—Section 
223(d)(2)(C) (relating to exceptions) is amended by strik-
ing ‘‘or’’ at the end of clause (iii), by striking the period 
at the end of clause (iv) and inserting ‘‘, or’’, and by add-
ing at the end the following new clause: 
‘‘(v) a high deductible health plan, but 
only if— 
‘‘(I) the plan is not a group 
health plan (as defined in section 
5000(b)(1) without regard to section 
5000(d)), and 
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‘‘(II) the expenses are for cov-
erage for a month with respect to 
which the account beneficiary is an el-
igible individual by reason of the cov-
erage under the plan. 
For purposes of clause (v), an arrangement 
which constitutes individual health insurance 
shall not be treated as a group health plan, not-
withstanding that an employer or employee or-
ganization negotiates the cost of benefits of 
such arrangement.’’. 
(c) SAFE HARBOR FOR ABSENCE OF MAINTENANCE 
OF CHRONIC DISEASE.—Section 223(c)(2)(C) (safe har-
bor for absence of preventive care deductible) is amend-
ed— 
(1) by inserting ‘‘or maintenance of chronic dis-
ease, or both’’ after ‘‘the Secretary)’’, and 
(2) by inserting ‘‘OR MAINTENANCE OF CHRON-
IC
DISEASE’’ in the heading after ‘‘PREVENTIVE 
CARE’’. 
(d) CLARIFICATION OF TREATMENT OF CAPITATED 
PRIMARY CARE PAYMENTS AS AMOUNTS PAID FOR MED-
ICAL CARE.—Section 213(d) (relating to definitions) is 
amended by adding at the end the following new para-
graph: 
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‘‘(12) TREATMENT
OF
CAPITATED
PRIMARY 
CARE PAYMENTS.—Capitated primary care payments 
shall be treated as amounts paid for medical care.’’. 
(e) SPECIAL RULE FOR INDIVIDUALS ELIGIBLE FOR 
VETERANS
OR
INDIAN
HEALTH
BENEFITS.—Section 
223(c)(1) (defining eligible individual) is amended by add-
ing at the end the following new subparagraph: 
‘‘(C) SPECIAL RULE FOR INDIVIDUALS ELI-
GIBLE FOR VETERANS OR INDIAN HEALTH BEN-
EFITS.—For purposes of subparagraph (A)(ii), 
an individual shall not be treated as covered 
under a health plan described in such subpara-
graph merely because the individual receives 
periodic hospital care or medical services under 
any law administered by the Secretary of Vet-
erans Affairs or the Bureau of Indian Affairs.’’. 
(f) CERTAIN PHYSICIAN FEES TO BE TREATED AS 
MEDICAL CARE.— 
(1) IN GENERAL.—Section 213(d), is amended 
by adding at the end the following new paragraph: 
‘‘(12) PRE-PAID PHYSICIAN FEES.—The term 
‘medical care’ shall include amounts paid by patients 
to their primary physician in advance for the right 
to receive medical services on an as-needed basis.’’. 
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(2) EFFECTIVE DATE.—The amendment made 
by this section shall apply to taxable years beginning 
after the date of the enactment of this Act. 
(g) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after Decem-
ber 31, 2010. 
(2) CAPITATED
PRIMARY
CARE
PAYMENTS.— 
The amendment made by subsection (d) shall apply 
to amounts paid before, on, or after the date of the 
enactment of this Act. 
SEC. 122. EXCEPTION TO REQUIREMENT FOR EMPLOYERS 
TO MAKE COMPARABLE HEALTH SAVINGS AC-
COUNT CONTRIBUTIONS. 
(a) GREATER
EMPLOYER-PROVIDED
CONTRIBU-
TIONS
TO HSAS
FOR CHRONICALLY ILL EMPLOYEES 
TREATED
AS
MEETING
COMPARABILITY
REQUIRE-
MENTS.—Subsection (b) of section 4980G (relating to fail-
ure of employer to make comparable health savings ac-
count contributions) is amended to read as follows: 
‘‘(b) RULES AND REQUIREMENTS.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), rules and requirements similar to the 
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rules and requirements of section 4980E shall apply 
for purposes of this section. 
‘‘(2) TREATMENT
OF
EMPLOYER-PROVIDED 
CONTRIBUTIONS
TO
HSAS
FOR
CHRONICALLY
ILL 
EMPLOYEES.—For purposes of this section— 
‘‘(A) IN GENERAL.—Any contribution by 
an employer to a health savings account of an 
employee who is (or the spouse or any depend-
ent of the employee who is) a chronically ill in-
dividual in an amount which is greater than a 
contribution to a health savings account of a 
comparable participating employee who is not a 
chronically ill individual shall not fail to be con-
sidered a comparable contribution. 
‘‘(B) 
NONDISCRIMINATION
REQUIRE-
MENT.—Subparagraph (A) shall not apply un-
less the excess employer contributions described 
in subparagraph (A) are the same for all chron-
ically ill individuals who are similarly situated. 
‘‘(C) CHRONICALLY ILL INDIVIDUAL.—For 
purposes of this paragraph, the term ‘chron-
ically ill individual’ means any individual whose 
qualified medical expenses for any taxable year 
are more than 50 percent greater than the av-
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erage qualified medical expenses of all employ-
ees of the employer for such year.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2010. 
Subtitle B—Health Plan Choice; 
Small Business Health Fairness; 
Tax Amendments 
SEC. 
131. 
COOPERATIVE 
GOVERNING 
OF 
INDIVIDUAL 
HEALTH INSURANCE COVERAGE. 
(a) IN GENERAL.—Title XXVII of the Public Health 
Service Act (42 U.S.C. 300gg et seq.) is amended by add-
ing at the end the following new part: 
‘‘PART D—COOPERATIVE GOVERNING OF 
INDIVIDUAL HEALTH INSURANCE COVERAGE 
‘‘SEC. 2795. DEFINITIONS. 
‘‘In this part: 
‘‘(1) PRIMARY
STATE.—The term ‘primary 
State’ means, with respect to individual health insur-
ance coverage offered by a health insurance issuer, 
the State designated by the issuer as the State 
whose covered laws shall govern the health insurance 
issuer in the sale of such coverage under this part. 
An issuer, with respect to a particular policy, may 
only designate one such State as its primary State 
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with respect to all such coverage it offers. Such an 
issuer may not change the designated primary State 
with respect to individual health insurance coverage 
once the policy is issued, except that such a change 
may be made upon renewal of the policy. With re-
spect to such designated State, the issuer is deemed 
to be doing business in that State. 
‘‘(2) SECONDARY STATE.—The term ‘secondary 
State’ means, with respect to individual health insur-
ance coverage offered by a health insurance issuer, 
any State that is not the primary State. In the case 
of a health insurance issuer that is selling a policy 
in, or to a resident of, a secondary State, the issuer 
is deemed to be doing business in that secondary 
State. 
‘‘(3) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning given such 
term in section 2791(b)(2), except that such an 
issuer must be licensed in the primary State and be 
qualified to sell individual health insurance coverage 
in that State. 
‘‘(4) INDIVIDUAL
HEALTH
INSURANCE
COV-
ERAGE.—The term ‘individual health insurance cov-
erage’ means health insurance coverage offered in 
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the individual market, as defined in section 
2791(e)(1). 
‘‘(5) APPLICABLE
STATE
AUTHORITY.—The 
term ‘applicable State authority’ means, with respect 
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of 
this title for the State with respect to the issuer. 
‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 
term ‘hazardous financial condition’ means that, 
based on its present or reasonably anticipated finan-
cial condition, a health insurance issuer is unlikely 
to be able— 
‘‘(A) to meet obligations to policyholders 
with respect to known claims and reasonably 
anticipated claims; or 
‘‘(B) to pay other obligations in the normal 
course of business. 
‘‘(7) COVERED LAWS.— 
‘‘(A) IN
GENERAL.—The term ‘covered 
laws’ means the laws, rules, regulations, agree-
ments, and orders governing the insurance busi-
ness pertaining to— 
‘‘(i) individual health insurance cov-
erage issued by a health insurance issuer; 
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‘‘(ii) the offer, sale, rating (including 
medical 
underwriting), 
renewal, 
and 
issuance of individual health insurance cov-
erage to an individual; 
‘‘(iii) the provision to an individual in 
relation to individual health insurance cov-
erage of health care and insurance related 
services; 
‘‘(iv) the provision to an individual in 
relation to individual health insurance cov-
erage of management, operations, and in-
vestment activities of a health insurance 
issuer; and 
‘‘(v) the provision to an individual in 
relation to individual health insurance cov-
erage of loss control and claims adminis-
tration for a health insurance issuer with 
respect to liability for which the issuer pro-
vides insurance. 
‘‘(B) EXCEPTION.—Such term does not in-
clude any law, rule, regulation, agreement, or 
order governing the use of care or cost manage-
ment techniques, including any requirement re-
lated to provider contracting, network access or 
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adequacy, health care data collection, or quality 
assurance. 
‘‘(8) STATE.—The term ‘State’ means the 50 
States and includes the District of Columbia, Puerto 
Rico, the Virgin Islands, Guam, American Samoa, 
and the Northern Mariana Islands. 
‘‘(9) UNFAIR
CLAIMS
SETTLEMENT
PRAC-
TICES.—The term ‘unfair claims settlement prac-
tices’ means only the following practices: 
‘‘(A) Knowingly misrepresenting to claim-
ants and insured individuals relevant facts or 
policy provisions relating to coverage at issue. 
‘‘(B) Failing to acknowledge with reason-
able promptness pertinent communications with 
respect to claims arising under policies. 
‘‘(C) Failing to adopt and implement rea-
sonable standards for the prompt investigation 
and settlement of claims arising under policies. 
‘‘(D) Failing to effectuate prompt, fair, 
and equitable settlement of claims submitted in 
which liability has become reasonably clear. 
‘‘(E) Refusing to pay claims without con-
ducting a reasonable investigation. 
‘‘(F) Failing to affirm or deny coverage of 
claims within a reasonable period of time after 
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having completed an investigation related to 
those claims. 
‘‘(G) A pattern or practice of compelling 
insured individuals or their beneficiaries to in-
stitute suits to recover amounts due under its 
policies by offering substantially less than the 
amounts ultimately recovered in suits brought 
by them. 
‘‘(H) A pattern or practice of attempting 
to settle or settling claims for less than the 
amount that a reasonable person would believe 
the insured individual or his or her beneficiary 
was entitled by reference to written or printed 
advertising material accompanying or made 
part of an application. 
‘‘(I) Attempting to settle or settling claims 
on the basis of an application that was materi-
ally altered without notice to, or knowledge or 
consent of, the insured. 
‘‘(J) Failing to provide forms necessary to 
present claims within 15 calendar days of a re-
quests with reasonable explanations regarding 
their use. 
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‘‘(K) Attempting to cancel a policy in less 
time than that prescribed in the policy or by the 
law of the primary State. 
‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 
and abuse’ means an act or omission committed by 
a person who, knowingly and with intent to defraud, 
commits, or conceals any material information con-
cerning, one or more of the following: 
‘‘(A) Presenting, causing to be presented 
or preparing with knowledge or belief that it 
will be presented to or by an insurer, a rein-
surer, broker or its agent, false information as 
part of, in support of or concerning a fact ma-
terial to one or more of the following: 
‘‘(i) An application for the issuance or 
renewal of an insurance policy or reinsur-
ance contract. 
‘‘(ii) The rating of an insurance policy 
or reinsurance contract. 
‘‘(iii) A claim for payment or benefit 
pursuant to an insurance policy or reinsur-
ance contract. 
‘‘(iv) Premiums paid on an insurance 
policy or reinsurance contract. 
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‘‘(v) Payments made in accordance 
with the terms of an insurance policy or 
reinsurance contract. 
‘‘(vi) A document filed with the com-
missioner or the chief insurance regulatory 
official of another jurisdiction. 
‘‘(vii) The financial condition of an in-
surer or reinsurer. 
‘‘(viii) The formation, acquisition, 
merger, 
reconsolidation, 
dissolution 
or 
withdrawal from one or more lines of in-
surance or reinsurance in all or part of a 
State by an insurer or reinsurer. 
‘‘(ix) The issuance of written evidence 
of insurance. 
‘‘(x) The reinstatement of an insur-
ance policy. 
‘‘(B) Solicitation or acceptance of new or 
renewal insurance risks on behalf of an insurer 
reinsurer or other person engaged in the busi-
ness of insurance by a person who knows or 
should know that the insurer or other person 
responsible for the risk is insolvent at the time 
of the transaction. 
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‘‘(C) Transaction of the business of insur-
ance in violation of laws requiring a license, cer-
tificate of authority or other legal authority for 
the transaction of the business of insurance. 
‘‘(D) Attempt to commit, aiding or abet-
ting in the commission of, or conspiracy to com-
mit the acts or omissions specified in this para-
graph. 
‘‘SEC. 2796. APPLICATION OF LAW. 
‘‘(a) IN GENERAL.—The covered laws of the primary 
State shall apply to individual health insurance coverage 
offered by a health insurance issuer in the primary State 
and in any secondary State, but only if the coverage and 
issuer comply with the conditions of this section with re-
spect to the offering of coverage in any secondary State. 
‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC-
ONDARY STATE.—Except as provided in this section, a 
health insurance issuer with respect to its offer, sale, rat-
ing (including medical underwriting), renewal, and 
issuance of individual health insurance coverage in any 
secondary State is exempt from any covered laws of the 
secondary State (and any rules, regulations, agreements, 
or orders sought or issued by such State under or related 
to such covered laws) to the extent that such laws would— 
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‘‘(1) make unlawful, or regulate, directly or in-
directly, the operation of the health insurance issuer 
operating in the secondary State, except that any 
secondary State may require such an issuer— 
‘‘(A) to pay, on a nondiscriminatory basis, 
applicable premium and other taxes (including 
high risk pool assessments) which are levied on 
insurers and surplus lines insurers, brokers, or 
policyholders under the laws of the State; 
‘‘(B) to register with and designate the 
State insurance commissioner as its agent solely 
for the purpose of receiving service of legal doc-
uments or process; 
‘‘(C) to submit to an examination of its fi-
nancial condition by the State insurance com-
missioner in any State in which the issuer is 
doing business to determine the issuer’s finan-
cial condition, if— 
‘‘(i) the State insurance commissioner 
of the primary State has not done an ex-
amination within the period recommended 
by the National Association of Insurance 
Commissioners; and 
‘‘(ii) any such examination is con-
ducted in accordance with the examiners’ 
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handbook of the National Association of 
Insurance Commissioners and is coordi-
nated to avoid unjustified duplication and 
unjustified repetition; 
‘‘(D) to comply with a lawful order 
issued— 
‘‘(i) in a delinquency proceeding com-
menced by the State insurance commis-
sioner if there has been a finding of finan-
cial impairment under subparagraph (C); 
or 
‘‘(ii) in a voluntary dissolution pro-
ceeding; 
‘‘(E) to comply with an injunction issued 
by a court of competent jurisdiction, upon a pe-
tition by the State insurance commissioner al-
leging that the issuer is in hazardous financial 
condition; 
‘‘(F) to participate, on a nondiscriminatory 
basis, in any insurance insolvency guaranty as-
sociation or similar association to which a 
health insurance issuer in the State is required 
to belong; 
‘‘(G) to comply with any State law regard-
ing fraud and abuse (as defined in section 
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2795(10)), except that if the State seeks an in-
junction regarding the conduct described in this 
subparagraph, such injunction must be obtained 
from a court of competent jurisdiction; 
‘‘(H) to comply with any State law regard-
ing unfair claims settlement practices (as de-
fined in section 2795(9)); or 
‘‘(I) to comply with the applicable require-
ments for independent review under section 
2798 with respect to coverage offered in the 
State; 
‘‘(2) require any individual health insurance 
coverage issued by the issuer to be countersigned by 
an insurance agent or broker residing in that Sec-
ondary State; or 
‘‘(3) otherwise discriminate against the issuer 
issuing insurance in both the primary State and in 
any secondary State. 
‘‘(c) CLEAR
AND CONSPICUOUS DISCLOSURE.—A 
health insurance issuer shall provide the following notice, 
in 12-point bold type, in any insurance coverage offered 
in a secondary State under this part by such a health in-
surance issuer and at renewal of the policy, with the 5 
blank spaces therein being appropriately filled with the 
name of the health insurance issuer, the name of primary 
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State, the name of the secondary State, the name of the 
secondary State, and the name of the secondary State, re-
spectively, for the coverage concerned: 
‘‘ ‘Notice 
‘‘ ‘This policy is issued by lllll and is 
governed by the laws and regulations of the 
State of lllll, and it has met all the laws 
of that State as determined by that State’s De-
partment of Insurance. This policy may be 
less expensive than others because it is not 
subject to all of the insurance laws and regu-
lations of the State of lllll, including 
coverage of some services or benefits man-
dated by the law of the State of lllll. Ad-
ditionally, this policy is not subject to all of 
the consumer protection laws or restrictions 
on rate changes of the State of lllll. As 
with all insurance products, before pur-
chasing this policy, you should carefully re-
view the policy and determine what health 
care services the policy covers and what bene-
fits it provides, including any exclusions, limi-
tations, or conditions for such services or ben-
efits.’. 
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‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS 
AND PREMIUM INCREASES.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, a health insurance issuer that provides indi-
vidual health insurance coverage to an individual 
under this part in a primary or secondary State may 
not upon renewal— 
‘‘(A) move or reclassify the individual in-
sured under the health insurance coverage from 
the class such individual is in at the time of 
issue of the contract based on the health-status 
related factors of the individual; or 
‘‘(B) increase the premiums assessed the 
individual for such coverage based on a health 
status-related factor or change of a health sta-
tus-related factor or the past or prospective 
claim experience of the insured individual. 
‘‘(2) CONSTRUCTION.—Nothing in paragraph 
(1) shall be construed to prohibit a health insurance 
issuer— 
‘‘(A) from terminating or discontinuing 
coverage or a class of coverage in accordance 
with subsections (b) and (c) of section 2742; 
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‘‘(B) from raising premium rates for all 
policy holders within a class based on claims ex-
perience; 
‘‘(C) from changing premiums or offering 
discounted premiums to individuals who engage 
in wellness activities at intervals prescribed by 
the issuer, if such premium changes or incen-
tives— 
‘‘(i) are disclosed to the consumer in 
the insurance contract; 
‘‘(ii) are based on specific wellness ac-
tivities that are not applicable to all indi-
viduals; and 
‘‘(iii) are not obtainable by all individ-
uals to whom coverage is offered; 
‘‘(D) from reinstating lapsed coverage; or 
‘‘(E) from retroactively adjusting the rates 
charged an insured individual if the initial rates 
were set based on material misrepresentation by 
the individual at the time of issue. 
‘‘(e) PRIOR OFFERING
OF POLICY
IN PRIMARY 
STATE.—A health insurance issuer may not offer for sale 
individual health insurance coverage in a secondary State 
unless that coverage is currently offered for sale in the 
primary State. 
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‘‘(f) LICENSING
OF AGENTS
OR BROKERS
FOR 
HEALTH INSURANCE ISSUERS.—Any State may require 
that a person acting, or offering to act, as an agent or 
broker for a health insurance issuer with respect to the 
offering of individual health insurance coverage obtain a 
license from that State, with commissions or other com-
pensation subject to the provisions of the laws of that 
State, except that a State may not impose any qualifica-
tion or requirement which discriminates against a non-
resident agent or broker. 
‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN-
SURANCE COMMISSIONER.—Each health insurance issuer 
issuing individual health insurance coverage in both pri-
mary and secondary States shall submit— 
‘‘(1) to the insurance commissioner of each 
State in which it intends to offer such coverage, be-
fore it may offer individual health insurance cov-
erage in such State— 
‘‘(A) a copy of the plan of operation or fea-
sibility study or any similar statement of the 
policy being offered and its coverage (which 
shall include the name of its primary State and 
its principal place of business); 
‘‘(B) written notice of any change in its 
designation of its primary State; and 
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‘‘(C) written notice from the issuer of the 
issuer’s compliance with all the laws of the pri-
mary State; and 
‘‘(2) to the insurance commissioner of each sec-
ondary State in which it offers individual health in-
surance coverage, a copy of the issuer’s quarterly fi-
nancial statement submitted to the primary State, 
which statement shall be certified by an independent 
public accountant and contain a statement of opin-
ion on loss and loss adjustment expense reserves 
made by— 
‘‘(A) a member of the American Academy 
of Actuaries; or 
‘‘(B) a qualified loss reserve specialist. 
‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.— 
Nothing in this section shall be construed to affect the 
authority of any Federal or State court to enjoin— 
‘‘(1) the solicitation or sale of individual health 
insurance coverage by a health insurance issuer to 
any person or group who is not eligible for such in-
surance; or 
‘‘(2) the solicitation or sale of individual health 
insurance coverage that violates the requirements of 
the law of a secondary State which are described in 
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subparagraphs 
(A) 
through 
(H) 
of 
section 
2796(b)(1). 
‘‘(i) POWER OF SECONDARY STATES TO TAKE AD-
MINISTRATIVE ACTION.—Nothing in this section shall be 
construed to affect the authority of any State to enjoin 
conduct in violation of that State’s laws described in sec-
tion 2796(b)(1). 
‘‘(j) STATE POWERS TO ENFORCE STATE LAWS.— 
‘‘(1) IN GENERAL.—Subject to the provisions of 
subsection (b)(1)(G) (relating to injunctions) and 
paragraph (2), nothing in this section shall be con-
strued to affect the authority of any State to make 
use of any of its powers to enforce the laws of such 
State with respect to which a health insurance issuer 
is not exempt under subsection (b). 
‘‘(2) COURTS OF COMPETENT JURISDICTION.— 
If a State seeks an injunction regarding the conduct 
described in paragraphs (1) and (2) of subsection 
(h), such injunction must be obtained from a Fed-
eral or State court of competent jurisdiction. 
‘‘(k) STATES’ AUTHORITY TO SUE.—Nothing in this 
section shall affect the authority of any State to bring ac-
tion in any Federal or State court. 
‘‘(l) GENERALLY APPLICABLE LAWS.—Nothing in 
this section shall be construed to affect the applicability 
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of State laws generally applicable to persons or corpora-
tions. 
‘‘(m) GUARANTEED AVAILABILITY OF COVERAGE TO 
HIPAA ELIGIBLE INDIVIDUALS.—To the extent that a 
health insurance issuer is offering coverage in a primary 
State that does not accommodate residents of secondary 
States or does not provide a working mechanism for resi-
dents of a secondary State, and the issuer is offering cov-
erage under this part in such secondary State which has 
not adopted a qualified high risk pool as its acceptable 
alternative mechanism (as defined in section 2744(c)(2)), 
the issuer shall, with respect to any individual health in-
surance coverage offered in a secondary State under this 
part, comply with the guaranteed availability requirements 
for eligible individuals in section 2741. 
‘‘SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR 
BEFORE ISSUER MAY SELL INTO SECONDARY 
STATES. 
‘‘A health insurance issuer may not offer, sell, or 
issue individual health insurance coverage in a secondary 
State if the State insurance commissioner does not use 
a risk-based capital formula for the determination of cap-
ital and surplus requirements for all health insurance 
issuers. 
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‘‘SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCE-
DURES. 
‘‘(a) RIGHT TO EXTERNAL APPEAL.—A health insur-
ance issuer may not offer, sell, or issue individual health 
insurance coverage in a secondary State under the provi-
sions of this title unless— 
‘‘(1) both the secondary State and the primary 
State have legislation or regulations in place estab-
lishing an independent review process for individuals 
who are covered by individual health insurance cov-
erage, or 
‘‘(2) in any case in which the requirements of 
subparagraph (A) are not met with respect to the ei-
ther of such States, the issuer provides an inde-
pendent review mechanism substantially identical (as 
determined by the applicable State authority of such 
State) to that prescribed in the ‘Health Carrier Ex-
ternal Review Model Act’ of the National Association 
of Insurance Commissioners for all individuals who 
purchase insurance coverage under the terms of this 
part, except that, under such mechanism, the review 
is conducted by an independent medical reviewer, or 
a panel of such reviewers, with respect to whom the 
requirements of subsection (b) are met. 
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‘‘(b) QUALIFICATIONS OF INDEPENDENT MEDICAL 
REVIEWERS.—In the case of any independent review 
mechanism referred to in subsection (a)(2)— 
‘‘(1) IN GENERAL.—In referring a denial of a 
claim to an independent medical reviewer, or to any 
panel of such reviewers, to conduct independent 
medical review, the issuer shall ensure that— 
‘‘(A) each independent medical reviewer 
meets the qualifications described in paragraphs 
(2) and (3); 
‘‘(B) with respect to each review, each re-
viewer meets the requirements of paragraph (4) 
and the reviewer, or at least 1 reviewer on the 
panel, meets the requirements described in 
paragraph (5); and 
‘‘(C) compensation provided by the issuer 
to each reviewer is consistent with paragraph 
(6). 
‘‘(2) LICENSURE AND EXPERTISE.—Each inde-
pendent medical reviewer shall be a physician 
(allopathic or osteopathic) or health care profes-
sional who— 
‘‘(A) is appropriately credentialed or li-
censed in 1 or more States to deliver health 
care services; and 
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‘‘(B) typically treats the condition, makes 
the diagnosis, or provides the type of treatment 
under review. 
‘‘(3) INDEPENDENCE.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), each independent medical reviewer 
in a case shall— 
‘‘(i) not be a related party (as defined 
in paragraph (7)); 
‘‘(ii) not have a material familial, fi-
nancial, or professional relationship with 
such a party; and 
‘‘(iii) not otherwise have a conflict of 
interest with such a party (as determined 
under regulations). 
‘‘(B) EXCEPTION.—Nothing in subpara-
graph (A) shall be construed to— 
‘‘(i) prohibit an individual, solely on 
the basis of affiliation with the issuer, 
from serving as an independent medical re-
viewer if— 
‘‘(I) a non-affiliated individual is 
not reasonably available; 
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‘‘(B) PRACTICING
DEFINED.—For pur-
poses of this paragraph, the term ‘practicing’ 
means, with respect to an individual who is a 
physician or other health care professional, that 
the individual provides health care services to 
individual patients on average at least 2 days 
per week. 
‘‘(5) PEDIATRIC EXPERTISE.—In the case of an 
external review relating to a child, a reviewer shall 
have expertise under paragraph (2) in pediatrics. 
‘‘(6) LIMITATIONS
ON
REVIEWER
COMPENSA-
TION.—Compensation provided by the issuer to an 
independent medical reviewer in connection with a 
review under this section shall— 
‘‘(A) not exceed a reasonable level; and 
‘‘(B) not be contingent on the decision ren-
dered by the reviewer. 
‘‘(7) RELATED PARTY DEFINED.—For purposes 
of this section, the term ‘related party’ means, with 
respect to a denial of a claim under a coverage relat-
ing to an enrollee, any of the following: 
‘‘(A) The issuer involved, or any fiduciary, 
officer, director, or employee of the issuer. 
‘‘(B) The enrollee (or authorized represent-
ative). 
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‘‘(C) The health care professional that pro-
vides the items or services involved in the de-
nial. 
‘‘(D) The institution at which the items or 
services (or treatment) involved in the denial 
are provided. 
‘‘(E) The manufacturer of any drug or 
other item that is included in the items or serv-
ices involved in the denial. 
‘‘(F) Any other party determined under 
any regulations to have a substantial interest in 
the denial involved. 
‘‘(8) DEFINITIONS.—For purposes of this sub-
section: 
‘‘(A) ENROLLEE.—The term ‘enrollee’ 
means, with respect to health insurance cov-
erage offered by a health insurance issuer, an 
individual enrolled with the issuer to receive 
such coverage. 
‘‘(B) HEALTH CARE PROFESSIONAL.—The 
term ‘health care professional’ means an indi-
vidual who is licensed, accredited, or certified 
under State law to provide specified health care 
services and who is operating within the scope 
of such licensure, accreditation, or certification. 
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‘‘SEC. 2799. ENFORCEMENT. 
‘‘(a) IN GENERAL.—Subject to subsection (b), with 
respect to specific individual health insurance coverage the 
primary State for such coverage has sole jurisdiction to 
enforce the primary State’s covered laws in the primary 
State and any secondary State. 
‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 
subsection (a) shall be construed to affect the authority 
of a secondary State to enforce its laws as set forth in 
the exception specified in section 2796(b)(1). 
‘‘(c) COURT INTERPRETATION.—In reviewing action 
initiated by the applicable secondary State authority, the 
court of competent jurisdiction shall apply the covered 
laws of the primary State. 
‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 
of individual health insurance coverage offered in a sec-
ondary State that fails to comply with the covered laws 
of the primary State, the applicable State authority of the 
secondary State may notify the applicable State authority 
of the primary State.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to individual health insurance 
coverage offered, issued, or sold after the date that is one 
year after the date of the enactment of this Act. 
(c) GAO ONGOING STUDY AND REPORTS.— 
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(1) STUDY.—The Comptroller General of the 
United States shall conduct an ongoing study con-
cerning the effect of the amendment made by sub-
section (a) on— 
(A) the number of uninsured and under-in-
sured; 
(B) the availability and cost of health in-
surance policies for individuals with pre-existing 
medical conditions; 
(C) the availability and cost of health in-
surance policies generally; 
(D) the elimination or reduction of dif-
ferent types of benefits under health insurance 
policies offered in different States; and 
(E) cases of fraud or abuse relating to 
health insurance coverage offered under such 
amendment and the resolution of such cases. 
(2) ANNUAL REPORTS.—The Comptroller Gen-
eral shall submit to Congress an annual report, after 
the end of each of the 5 years following the effective 
date of the amendment made by subsection (a), on 
the ongoing study conducted under paragraph (1). 
(d) SEVERABILITY.—If any provision of this subtitle 
or the application of such provision to any person or cir-
cumstance is held to be unconstitutional, the remainder 
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of this subtitle and the application of the provisions of 
such to any other person or circumstance shall not be af-
fected. 
SEC. 132. SMALL BUSINESS HEALTH FAIRNESS. 
(a) RULES
GOVERNING
ASSOCIATION
HEALTH 
PLANS.— 
(1) IN GENERAL.—Subtitle B of title I of the 
Employee Retirement Income Security Act of 1974 
is amended by adding after part 7 the following new 
part: 
‘‘PART 8—RULES GOVERNING ASSOCIATION 
HEALTH PLANS 
‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 
‘‘(a) IN GENERAL.—For purposes of this part, the 
term ‘association health plan’ means a group health plan 
whose sponsor is (or is deemed under this part to be) de-
scribed in subsection (b). 
‘‘(b) SPONSORSHIP.—The sponsor of a group health 
plan is described in this subsection if such sponsor— 
‘‘(1) is organized and maintained in good faith, 
with a constitution and bylaws specifically stating its 
purpose and providing for periodic meetings on at 
least an annual basis, as a bona fide trade associa-
tion, a bona fide industry association (including a 
rural electric cooperative association or a rural tele-
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phone cooperative association), a bona fide profes-
sional association, or a bona fide chamber of com-
merce (or similar bona fide business association, in-
cluding a corporation or similar organization that 
operates on a cooperative basis (within the meaning 
of section 1381 of the Internal Revenue Code of 
1986)), for substantial purposes other than that of 
obtaining or providing medical care; 
‘‘(2) is established as a permanent entity which 
receives the active support of its members and re-
quires for membership payment on a periodic basis 
of dues or payments necessary to maintain eligibility 
for membership in the sponsor; and 
‘‘(3) does not condition membership, such dues 
or payments, or coverage under the plan on the 
basis of health status-related factors with respect to 
the employees of its members (or affiliated mem-
bers), or the dependents of such employees, and does 
not condition such dues or payments on the basis of 
group health plan participation. 
Any sponsor consisting of an association of entities which 
meet the requirements of paragraphs (1), (2), and (3) 
shall be deemed to be a sponsor described in this sub-
section. 
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‘‘SEC. 
802. 
CERTIFICATION 
OF 
ASSOCIATION 
HEALTH 
PLANS. 
‘‘(a) IN GENERAL.—The applicable authority shall 
prescribe by regulation a procedure under which, subject 
to subsection (b), the applicable authority shall certify as-
sociation health plans which apply for certification as 
meeting the requirements of this part. 
‘‘(b) STANDARDS.—Under the procedure prescribed 
pursuant to subsection (a), in the case of an association 
health plan that provides at least one benefit option which 
does not consist of health insurance coverage, the applica-
ble authority shall certify such plan as meeting the re-
quirements of this part only if the applicable authority is 
satisfied that the applicable requirements of this part are 
met (or, upon the date on which the plan is to commence 
operations, will be met) with respect to the plan. 
‘‘(c) REQUIREMENTS APPLICABLE
TO CERTIFIED 
PLANS.—An association health plan with respect to which 
certification under this part is in effect shall meet the ap-
plicable requirements of this part, effective on the date 
of certification (or, if later, on the date on which the plan 
is to commence operations). 
‘‘(d) REQUIREMENTS
FOR
CONTINUED
CERTIFI-
CATION.—The applicable authority may provide by regula-
tion for continued certification of association health plans 
under this part. 
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‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED 
PLANS.—The applicable authority shall establish a class 
certification procedure for association health plans under 
which all benefits consist of health insurance coverage. 
Under such procedure, the applicable authority shall pro-
vide for the granting of certification under this part to 
the plans in each class of such association health plans 
upon appropriate filing under such procedure in connec-
tion with plans in such class and payment of the pre-
scribed fee under section 807(a). 
‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION 
HEALTH PLANS.—An association health plan which offers 
one or more benefit options which do not consist of health 
insurance coverage may be certified under this part only 
if such plan consists of any of the following: 
‘‘(1) a plan which offered such coverage on the 
date of the enactment of this part, 
‘‘(2) a plan under which the sponsor does not 
restrict membership to one or more trades and busi-
nesses or industries and whose eligible participating 
employers represent a broad cross-section of trades 
and businesses or industries, or 
‘‘(3) a plan whose eligible participating employ-
ers represent one or more trades or businesses, or 
one or more industries, consisting of any of the fol-
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lowing: agriculture; equipment and automobile deal-
erships; barbering and cosmetology; certified public 
accounting practices; child care; construction; dance, 
theatrical and orchestra productions; disinfecting 
and pest control; financial services; fishing; food 
service establishments; hospitals; labor organiza-
tions; logging; manufacturing (metals); mining; med-
ical and dental practices; medical laboratories; pro-
fessional consulting services; sanitary services; trans-
portation (local and freight); warehousing; whole-
saling/distributing; or any other trade or business or 
industry which has been indicated as having average 
or above-average risk or health claims experience by 
reason of State rate filings, denials of coverage, pro-
posed premium rate levels, or other means dem-
onstrated by such plan in accordance with regula-
tions. 
‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 
BOARDS OF TRUSTEES. 
‘‘(a) SPONSOR.—The requirements of this subsection 
are met with respect to an association health plan if the 
sponsor has met (or is deemed under this part to have 
met) the requirements of section 801(b) for a continuous 
period of not less than 3 years ending with the date of 
the application for certification under this part. 
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‘‘(b) BOARD OF TRUSTEES.—The requirements of 
this subsection are met with respect to an association 
health plan if the following requirements are met: 
‘‘(1) FISCAL CONTROL.—The plan is operated, 
pursuant to a trust agreement, by a board of trust-
ees which has complete fiscal control over the plan 
and which is responsible for all operations of the 
plan. 
‘‘(2) RULES
OF
OPERATION
AND
FINANCIAL 
CONTROLS.—The board of trustees has in effect 
rules of operation and financial controls, based on a 
3-year plan of operation, adequate to carry out the 
terms of the plan and to meet all requirements of 
this title applicable to the plan. 
‘‘(3) RULES
GOVERNING
RELATIONSHIP
TO 
PARTICIPATING
EMPLOYERS
AND
TO
CONTRAC-
TORS.— 
‘‘(A) BOARD MEMBERSHIP.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii) and (iii), the members 
of the board of trustees are individuals se-
lected from individuals who are the owners, 
officers, directors, or employees of the par-
ticipating employers or who are partners in 
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the participating employers and actively 
participate in the business. 
‘‘(ii) LIMITATION.— 
‘‘(I) GENERAL RULE.—Except as 
provided in subclauses (II) and (III), 
no such member is an owner, officer, 
director, or employee of, or partner in, 
a contract administrator or other 
service provider to the plan. 
‘‘(II) LIMITED
EXCEPTION
FOR 
PROVIDERS OF SERVICES SOLELY ON 
BEHALF OF THE SPONSOR.—Officers 
or employees of a sponsor which is a 
service provider (other than a contract 
administrator) to the plan may be 
members of the board if they con-
stitute not more than 25 percent of 
the membership of the board and they 
do not provide services to the plan 
other than on behalf of the sponsor. 
‘‘(III) 
TREATMENT
OF
PRO-
VIDERS
OF
MEDICAL
CARE.—In the 
case of a sponsor which is an associa-
tion whose membership consists pri-
marily of providers of medical care, 
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subclause (I) shall not apply in the 
case of any service provider described 
in subclause (I) who is a provider of 
medical care under the plan. 
‘‘(iii) CERTAIN
PLANS
EXCLUDED.— 
Clause (i) shall not apply to an association 
health plan which is in existence on the 
date of the enactment of this part. 
‘‘(B) SOLE
AUTHORITY.—The board has 
sole authority under the plan to approve appli-
cations for participation in the plan and to con-
tract with a service provider to administer the 
day-to-day affairs of the plan. 
‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 
the case of a group health plan which is established and 
maintained by a franchiser for a franchise network con-
sisting of its franchisees— 
‘‘(1) the requirements of subsection (a) and sec-
tion 801(a) shall be deemed met if such require-
ments would otherwise be met if the franchiser were 
deemed to be the sponsor referred to in section 
801(b), such network were deemed to be an associa-
tion described in section 801(b), and each franchisee 
were deemed to be a member (of the association and 
the sponsor) referred to in section 801(b); and 
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‘‘(2) the requirements of section 804(a)(1) shall 
be deemed met. 
The Secretary may by regulation define for purposes of 
this subsection the terms ‘franchiser’, ‘franchise network’, 
and ‘franchisee’. 
‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE-
MENTS. 
‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 
requirements of this subsection are met with respect to 
an association health plan if, under the terms of the 
plan— 
‘‘(1) each participating employer must be— 
‘‘(A) a member of the sponsor, 
‘‘(B) the sponsor, or 
‘‘(C) an affiliated member of the sponsor 
with respect to which the requirements of sub-
section (b) are met, 
except that, in the case of a sponsor which is a pro-
fessional association or other individual-based asso-
ciation, if at least one of the officers, directors, or 
employees of an employer, or at least one of the in-
dividuals who are partners in an employer and who 
actively participates in the business, is a member or 
such an affiliated member of the sponsor, partici-
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pating employers may also include such employer; 
and 
‘‘(2) all individuals commencing coverage under 
the plan after certification under this part must 
be— 
‘‘(A) active or retired owners (including 
self-employed individuals), officers, directors, or 
employees of, or partners in, participating em-
ployers; or 
‘‘(B) the beneficiaries of individuals de-
scribed in subparagraph (A). 
‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM-
PLOYEES.—In the case of an association health plan in 
existence on the date of the enactment of this part, an 
affiliated member of the sponsor of the plan may be of-
fered coverage under the plan as a participating employer 
only if— 
‘‘(1) the affiliated member was an affiliated 
member on the date of certification under this part; 
or 
‘‘(2) during the 12-month period preceding the 
date of the offering of such coverage, the affiliated 
member has not maintained or contributed to a 
group health plan with respect to any of its employ-
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ees who would otherwise be eligible to participate in 
such association health plan. 
‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re-
quirements of this subsection are met with respect to an 
association health plan if, under the terms of the plan, 
no participating employer may provide health insurance 
coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer 
under the plan, if such exclusion of the employee from cov-
erage under the plan is based on a health status-related 
factor with respect to the employee and such employee 
would, but for such exclusion on such basis, be eligible 
for coverage under the plan. 
‘‘(d) PROHIBITION
OF DISCRIMINATION AGAINST 
EMPLOYERS
AND EMPLOYEES ELIGIBLE TO PARTICI-
PATE.—The requirements of this subsection are met with 
respect to an association health plan if— 
‘‘(1) under the terms of the plan, all employers 
meeting the preceding requirements of this section 
are eligible to qualify as participating employers for 
all geographically available coverage options, unless, 
in the case of any such employer, participation or 
contribution requirements of the type referred to in 
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section 2711 of the Public Health Service Act are 
not met; 
‘‘(2) upon request, any employer eligible to par-
ticipate is furnished information regarding all cov-
erage options available under the plan; and 
‘‘(3) the applicable requirements of sections 
701, 702, and 703 are met with respect to the plan. 
‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 
DOCUMENTS, CONTRIBUTION RATES, AND 
BENEFIT OPTIONS. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if the 
following requirements are met: 
‘‘(1) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the plan in-
clude a written instrument, meeting the require-
ments of an instrument required under section 
402(a)(1), which— 
‘‘(A) provides that the board of trustees 
serves as the named fiduciary required for plans 
under section 402(a)(1) and serves in the ca-
pacity of a plan administrator (referred to in 
section 3(16)(A)); 
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‘‘(B) provides that the sponsor of the plan 
is to serve as plan sponsor (referred to in sec-
tion 3(16)(B)); and 
‘‘(C) incorporates the requirements of sec-
tion 806. 
‘‘(2) CONTRIBUTION
RATES
MUST
BE
NON-
DISCRIMINATORY.— 
‘‘(A) The contribution rates for any par-
ticipating small employer do not vary on the 
basis of any health status-related factor in rela-
tion to employees of such employer or their 
beneficiaries and do not vary on the basis of the 
type of business or industry in which such em-
ployer is engaged. 
‘‘(B) Nothing in this title or any other pro-
vision of law shall be construed to preclude an 
association health plan, or a health insurance 
issuer offering health insurance coverage in 
connection with an association health plan, 
from— 
‘‘(i) setting contribution rates based 
on the claims experience of the plan; or 
‘‘(ii) varying contribution rates for 
small employers in a State to the extent 
that such rates could vary using the same 
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methodology employed in such State for 
regulating premium rates in the small 
group market with respect to health insur-
ance coverage offered in connection with 
bona fide associations (within the meaning 
of section 2791(d)(3) of the Public Health 
Service Act), 
subject to the requirements of section 702(b) 
relating to contribution rates. 
‘‘(3) FLOOR FOR NUMBER OF COVERED INDI-
VIDUALS
WITH
RESPECT
TO
CERTAIN
PLANS.—If 
any benefit option under the plan does not consist 
of health insurance coverage, the plan has as of the 
beginning of the plan year not fewer than 1,000 par-
ticipants and beneficiaries. 
‘‘(4) MARKETING REQUIREMENTS.— 
‘‘(A) IN
GENERAL.—If a benefit option 
which consists of health insurance coverage is 
offered under the plan, State-licensed insurance 
agents shall be used to distribute to small em-
ployers coverage which does not consist of 
health insurance coverage in a manner com-
parable to the manner in which such agents are 
used to distribute health insurance coverage. 
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‘‘(B) 
STATE-LICENSED
INSURANCE 
AGENTS.—For purposes of subparagraph (A), 
the term ‘State-licensed insurance agents’ 
means one or more agents who are licensed in 
a State and are subject to the laws of such 
State relating to licensure, qualification, test-
ing, examination, and continuing education of 
persons authorized to offer, sell, or solicit 
health insurance coverage in such State. 
‘‘(5) 
REGULATORY
REQUIREMENTS.—Such 
other requirements as the applicable authority deter-
mines are necessary to carry out the purposes of this 
part, which shall be prescribed by the applicable au-
thority by regulation. 
‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO 
DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 
nothing in this part or any provision of State law (as de-
fined in section 514(c)(1)) shall be construed to preclude 
an association health plan, or a health insurance issuer 
offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion 
in selecting the specific items and services consisting of 
medical care to be included as benefits under such plan 
or coverage, except (subject to section 514) in the case 
of (1) any law to the extent that it is not preempted under 
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section 731(a)(1) with respect to matters governed by sec-
tion 711, 712, or 713, or (2) any law of the State with 
which filing and approval of a policy type offered by the 
plan was initially obtained to the extent that such law pro-
hibits an exclusion of a specific disease from such cov-
erage. 
‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 
FOR 
SOLVENCY 
FOR 
PLANS 
PROVIDING 
HEALTH BENEFITS IN ADDITION TO HEALTH 
INSURANCE COVERAGE. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if— 
‘‘(1) the benefits under the plan consist solely 
of health insurance coverage; or 
‘‘(2) if the plan provides any additional benefit 
options which do not consist of health insurance cov-
erage, the plan— 
‘‘(A) establishes and maintains reserves 
with respect to such additional benefit options, 
in amounts recommended by the qualified actu-
ary, consisting of— 
‘‘(i) a reserve sufficient for unearned 
contributions; 
‘‘(ii) a reserve sufficient for benefit li-
abilities which have been incurred, which 
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have not been satisfied, and for which risk 
of loss has not yet been transferred, and 
for expected administrative costs with re-
spect to such benefit liabilities; 
‘‘(iii) a reserve sufficient for any other 
obligations of the plan; and 
‘‘(iv) a reserve sufficient for a margin 
of error and other fluctuations, taking into 
account the specific circumstances of the 
plan; and 
‘‘(B) establishes and maintains aggregate 
and specific excess/stop loss insurance and sol-
vency indemnification, with respect to such ad-
ditional benefit options for which risk of loss 
has not yet been transferred, as follows: 
‘‘(i) The plan shall secure aggregate 
excess/stop loss insurance for the plan with 
an attachment point which is not greater 
than 125 percent of expected gross annual 
claims. The applicable authority may by 
regulation provide for upward adjustments 
in the amount of such percentage in speci-
fied circumstances in which the plan spe-
cifically provides for and maintains re-
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serves in excess of the amounts required 
under subparagraph (A). 
‘‘(ii) The plan shall secure specific ex-
cess/stop loss insurance for the plan with 
an attachment point which is at least equal 
to an amount recommended by the plan’s 
qualified actuary. The applicable authority 
may by regulation provide for adjustments 
in the amount of such insurance in speci-
fied circumstances in which the plan spe-
cifically provides for and maintains re-
serves in excess of the amounts required 
under subparagraph (A). 
‘‘(iii) The plan shall secure indem-
nification insurance for any claims which 
the plan is unable to satisfy by reason of 
a plan termination. 
Any person issuing to a plan insurance described in clause 
(i), (ii), or (iii) of subparagraph (B) shall notify the Sec-
retary of any failure of premium payment meriting can-
cellation of the policy prior to undertaking such a cancella-
tion. Any regulations prescribed by the applicable author-
ity pursuant to clause (i) or (ii) of subparagraph (B) may 
allow for such adjustments in the required levels of excess/ 
stop loss insurance as the qualified actuary may rec-
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ommend, taking into account the specific circumstances 
of the plan. 
‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS 
RESERVES.—In the case of any association health plan de-
scribed in subsection (a)(2), the requirements of this sub-
section are met if the plan establishes and maintains sur-
plus in an amount at least equal to— 
‘‘(1) $500,000, or 
‘‘(2) such greater amount (but not greater than 
$2,000,000) as may be set forth in regulations pre-
scribed by the applicable authority, considering the 
level of aggregate and specific excess/stop loss insur-
ance provided with respect to such plan and other 
factors related to solvency risk, such as the plan’s 
projected levels of participation or claims, the nature 
of the plan’s liabilities, and the types of assets avail-
able to assure that such liabilities are met. 
‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 
any association health plan described in subsection (a)(2), 
the applicable authority may provide such additional re-
quirements relating to reserves, excess/stop loss insurance, 
and indemnification insurance as the applicable authority 
considers appropriate. Such requirements may be provided 
by regulation with respect to any such plan or any class 
of such plans. 
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‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR-
ANCE.—The applicable authority may provide for adjust-
ments to the levels of reserves otherwise required under 
subsections (a) and (b) with respect to any plan or class 
of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans. 
‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 
applicable authority may permit an association health plan 
described in subsection (a)(2) to substitute, for all or part 
of the requirements of this section (except subsection 
(a)(2)(B)(iii)), such security, guarantee, hold-harmless ar-
rangement, or other financial arrangement as the applica-
ble authority determines to be adequate to enable the plan 
to fully meet all its financial obligations on a timely basis 
and is otherwise no less protective of the interests of par-
ticipants and beneficiaries than the requirements for 
which it is substituted. The applicable authority may take 
into account, for purposes of this subsection, evidence pro-
vided by the plan or sponsor which demonstrates an as-
sumption of liability with respect to the plan. Such evi-
dence may be in the form of a contract of indemnification, 
lien, bonding, insurance, letter of credit, recourse under 
applicable terms of the plan in the form of assessments 
of participating employers, security, or other financial ar-
rangement. 
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‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT 
OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 
‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO-
CIATION HEALTH PLAN FUND.— 
‘‘(A) IN GENERAL.—In the case of an as-
sociation health plan described in subsection 
(a)(2), the requirements of this subsection are 
met if the plan makes payments into the Asso-
ciation Health Plan Fund under this subpara-
graph when they are due. Such payments shall 
consist of annual payments in the amount of 
$5,000, and, in addition to such annual pay-
ments, such supplemental payments as the Sec-
retary may determine to be necessary under 
paragraph (2). Payments under this paragraph 
are payable to the Fund at the time determined 
by the Secretary. Initial payments are due in 
advance of certification under this part. Pay-
ments shall continue to accrue until a plan’s as-
sets are distributed pursuant to a termination 
procedure. 
‘‘(B) PENALTIES FOR FAILURE TO MAKE 
PAYMENTS.—If any payment is not made by a 
plan when it is due, a late payment charge of 
not more than 100 percent of the payment 
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100 
which was not timely paid shall be payable by 
the plan to the Fund. 
‘‘(C) CONTINUED
DUTY
OF
THE
SEC-
RETARY.—The Secretary shall not cease to 
carry out the provisions of paragraph (2) on ac-
count of the failure of a plan to pay any pay-
ment when due. 
‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE 
EXCESS/STOP LOSS INSURANCE COVERAGE AND IN-
DEMNIFICATION
INSURANCE
COVERAGE
FOR
CER-
TAIN PLANS.—In any case in which the applicable 
authority determines that there is, or that there is 
reason to believe that there will be: (A) a failure to 
take necessary corrective actions under section 
809(a) with respect to an association health plan de-
scribed in subsection (a)(2); or (B) a termination of 
such a plan under section 809(b) or 810(b)(8) (and, 
if the applicable authority is not the Secretary, cer-
tifies such determination to the Secretary), the Sec-
retary shall determine the amounts necessary to 
make payments to an insurer (designated by the 
Secretary) to maintain in force excess/stop loss in-
surance coverage or indemnification insurance cov-
erage for such plan, if the Secretary determines that 
there is a reasonable expectation that, without such 
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101 
payments, claims would not be satisfied by reason of 
termination of such coverage. The Secretary shall, to 
the extent provided in advance in appropriation 
Acts, pay such amounts so determined to the insurer 
designated by the Secretary. 
‘‘(3) ASSOCIATION HEALTH PLAN FUND.— 
‘‘(A) IN GENERAL.—There is established 
on the books of the Treasury a fund to be 
known as the ‘Association Health Plan Fund’. 
The Fund shall be available for making pay-
ments pursuant to paragraph (2). The Fund 
shall be credited with payments received pursu-
ant to paragraph (1)(A), penalties received pur-
suant to paragraph (1)(B); and earnings on in-
vestments of amounts of the Fund under sub-
paragraph (B). 
‘‘(B) INVESTMENT.—Whenever the Sec-
retary determines that the moneys of the fund 
are in excess of current needs, the Secretary 
may request the investment of such amounts as 
the Secretary determines advisable by the Sec-
retary of the Treasury in obligations issued or 
guaranteed by the United States. 
‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 
of this section— 
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102 
‘‘(1) AGGREGATE
EXCESS/STOP
LOSS
INSUR-
ANCE.—The term ‘aggregate excess/stop loss insur-
ance’ means, in connection with an association 
health plan, a contract— 
‘‘(A) under which an insurer (meeting such 
minimum standards as the applicable authority 
may prescribe by regulation) provides for pay-
ment to the plan with respect to aggregate 
claims under the plan in excess of an amount 
or amounts specified in such contract; 
‘‘(B) which is guaranteed renewable; and 
‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan. 
‘‘(2) SPECIFIC
EXCESS/STOP
LOSS
INSUR-
ANCE.—The term ‘specific excess/stop loss insur-
ance’ means, in connection with an association 
health plan, a contract— 
‘‘(A) under which an insurer (meeting such 
minimum standards as the applicable authority 
may prescribe by regulation) provides for pay-
ment to the plan with respect to claims under 
the plan in connection with a covered individual 
in excess of an amount or amounts specified in 
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103 
such contract in connection with such covered 
individual; 
‘‘(B) which is guaranteed renewable; and 
‘‘(C) which allows for payment of pre-
miums by any third party on behalf of the in-
sured plan. 
‘‘(h) INDEMNIFICATION INSURANCE.—For purposes 
of this section, the term ‘indemnification insurance’ 
means, in connection with an association health plan, a 
contract— 
‘‘(1) under which an insurer (meeting such min-
imum standards as the applicable authority may pre-
scribe by regulation) provides for payment to the 
plan with respect to claims under the plan which the 
plan is unable to satisfy by reason of a termination 
pursuant to section 809(b) (relating to mandatory 
termination); 
‘‘(2) which is guaranteed renewable and 
noncancellable for any reason (except as the applica-
ble authority may prescribe by regulation); and 
‘‘(3) which allows for payment of premiums by 
any third party on behalf of the insured plan. 
‘‘(i) RESERVES.—For purposes of this section, the 
term ‘reserves’ means, in connection with an association 
health plan, plan assets which meet the fiduciary stand-
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104 
ards under part 4 and such additional requirements re-
garding liquidity as the applicable authority may prescribe 
by regulation. 
‘‘(j) SOLVENCY STANDARDS WORKING GROUP.— 
‘‘(1) IN GENERAL.—Within 90 days after the 
date of the enactment of this part, the applicable au-
thority shall establish a Solvency Standards Working 
Group. In prescribing the initial regulations under 
this section, the applicable authority shall take into 
account the recommendations of such Working 
Group. 
‘‘(2) MEMBERSHIP.—The Working Group shall 
consist of not more than 15 members appointed by 
the applicable authority. The applicable authority 
shall include among persons invited to membership 
on the Working Group at least one of each of the 
following: 
‘‘(A) a representative of the National Asso-
ciation of Insurance Commissioners; 
‘‘(B) a representative of the American 
Academy of Actuaries; 
‘‘(C) a representative of the State govern-
ments, or their interests; 
‘‘(D) a representative of existing self-in-
sured arrangements, or their interests; 
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‘‘(E) a representative of associations of the 
type referred to in section 801(b)(1), or their 
interests; and 
‘‘(F) a representative of multiemployer 
plans that are group health plans, or their in-
terests. 
‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE-
LATED REQUIREMENTS. 
‘‘(a) FILING FEE.—Under the procedure prescribed 
pursuant to section 802(a), an association health plan 
shall pay to the applicable authority at the time of filing 
an application for certification under this part a filing fee 
in the amount of $5,000, which shall be available in the 
case of the Secretary, to the extent provided in appropria-
tion Acts, for the sole purpose of administering the certifi-
cation procedures applicable with respect to association 
health plans. 
‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA-
TION FOR CERTIFICATION.—An application for certifi-
cation under this part meets the requirements of this sec-
tion only if it includes, in a manner and form which shall 
be prescribed by the applicable authority by regulation, at 
least the following information: 
‘‘(1) IDENTIFYING INFORMATION.—The names 
and addresses of— 
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‘‘(A) the sponsor; and 
‘‘(B) the members of the board of trustees 
of the plan. 
‘‘(2) STATES IN WHICH PLAN INTENDS TO DO 
BUSINESS.—The States in which participants and 
beneficiaries under the plan are to be located and 
the number of them expected to be located in each 
such State. 
‘‘(3) BONDING REQUIREMENTS.—Evidence pro-
vided by the board of trustees that the bonding re-
quirements of section 412 will be met as of the date 
of the application or (if later) commencement of op-
erations. 
‘‘(4) PLAN DOCUMENTS.—A copy of the docu-
ments governing the plan (including any bylaws and 
trust agreements), the summary plan description, 
and other material describing the benefits that will 
be provided to participants and beneficiaries under 
the plan. 
‘‘(5) 
AGREEMENTS
WITH
SERVICE
PRO-
VIDERS.—A copy of any agreements between the 
plan and contract administrators and other service 
providers. 
‘‘(6) FUNDING REPORT.—In the case of asso-
ciation health plans providing benefits options in ad-
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dition to health insurance coverage, a report setting 
forth information with respect to such additional 
benefit options determined as of a date within the 
120-day period ending with the date of the applica-
tion, including the following: 
‘‘(A) RESERVES.—A statement, certified 
by the board of trustees of the plan, and a 
statement of actuarial opinion, signed by a 
qualified actuary, that all applicable require-
ments of section 806 are or will be met in ac-
cordance with regulations which the applicable 
authority shall prescribe. 
‘‘(B) 
ADEQUACY
OF
CONTRIBUTION 
RATES.—A statement of actuarial opinion, 
signed by a qualified actuary, which sets forth 
a description of the extent to which contribution 
rates are adequate to provide for the payment 
of all obligations and the maintenance of re-
quired reserves under the plan for the 12- 
month period beginning with such date within 
such 120-day period, taking into account the 
expected coverage and experience of the plan. If 
the contribution rates are not fully adequate, 
the statement of actuarial opinion shall indicate 
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the extent to which the rates are inadequate 
and the changes needed to ensure adequacy. 
‘‘(C) CURRENT AND PROJECTED VALUE OF 
ASSETS AND LIABILITIES.—A statement of ac-
tuarial opinion signed by a qualified actuary, 
which sets forth the current value of the assets 
and liabilities accumulated under the plan and 
a projection of the assets, liabilities, income, 
and expenses of the plan for the 12-month pe-
riod referred to in subparagraph (B). The in-
come statement shall identify separately the 
plan’s administrative expenses and claims. 
‘‘(D) 
COSTS
OF
COVERAGE
TO
BE 
CHARGED
AND
OTHER
EXPENSES.—A state-
ment of the costs of coverage to be charged, in-
cluding an itemization of amounts for adminis-
tration, reserves, and other expenses associated 
with the operation of the plan. 
‘‘(E) OTHER
INFORMATION.—Any other 
information as may be determined by the appli-
cable authority, by regulation, as necessary to 
carry out the purposes of this part. 
‘‘(c) FILING
NOTICE
OF
CERTIFICATION
WITH 
STATES.—A certification granted under this part to an 
association health plan shall not be effective unless written 
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notice of such certification is filed with the applicable 
State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are 
located. For purposes of this subsection, an individual 
shall be considered to be located in the State in which a 
known address of such individual is located or in which 
such individual is employed. 
‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case 
of any association health plan certified under this part, 
descriptions of material changes in any information which 
was required to be submitted with the application for the 
certification under this part shall be filed in such form 
and manner as shall be prescribed by the applicable au-
thority by regulation. The applicable authority may re-
quire by regulation prior notice of material changes with 
respect to specified matters which might serve as the basis 
for suspension or revocation of the certification. 
‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS-
SOCIATION HEALTH PLANS.—An association health plan 
certified under this part which provides benefit options in 
addition to health insurance coverage for such plan year 
shall meet the requirements of section 103 by filing an 
annual report under such section which shall include infor-
mation described in subsection (b)(6) with respect to the 
plan year and, notwithstanding section 104(a)(1)(A), shall 
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be filed with the applicable authority not later than 90 
days after the close of the plan year (or on such later date 
as may be prescribed by the applicable authority). The ap-
plicable authority may require by regulation such interim 
reports as it considers appropriate. 
‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The 
board of trustees of each association health plan which 
provides benefits options in addition to health insurance 
coverage and which is applying for certification under this 
part or is certified under this part shall engage, on behalf 
of all participants and beneficiaries, a qualified actuary 
who shall be responsible for the preparation of the mate-
rials comprising information necessary to be submitted by 
a qualified actuary under this part. The qualified actuary 
shall utilize such assumptions and techniques as are nec-
essary to enable such actuary to form an opinion as to 
whether the contents of the matters reported under this 
part— 
‘‘(1) are in the aggregate reasonably related to 
the experience of the plan and to reasonable expecta-
tions; and 
‘‘(2) represent such actuary’s best estimate of 
anticipated experience under the plan. 
The opinion by the qualified actuary shall be made with 
respect to, and shall be made a part of, the annual report. 
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‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER-
MINATION. 
‘‘Except as provided in section 809(b), an association 
health plan which is or has been certified under this part 
may terminate (upon or at any time after cessation of ac-
cruals in benefit liabilities) only if the board of trustees, 
not less than 60 days before the proposed termination 
date— 
‘‘(1) provides to the participants and bene-
ficiaries a written notice of intent to terminate stat-
ing that such termination is intended and the pro-
posed termination date; 
‘‘(2) develops a plan for winding up the affairs 
of the plan in connection with such termination in 
a manner which will result in timely payment of all 
benefits for which the plan is obligated; and 
‘‘(3) submits such plan in writing to the appli-
cable authority. 
Actions required under this section shall be taken in such 
form and manner as may be prescribed by the applicable 
authority by regulation. 
‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI-
NATION. 
‘‘(a) ACTIONS
TO
AVOID
DEPLETION
OF
RE-
SERVES.—An association health plan which is certified 
under this part and which provides benefits other than 
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health insurance coverage shall continue to meet the re-
quirements of section 806, irrespective of whether such 
certification continues in effect. The board of trustees of 
such plan shall determine quarterly whether the require-
ments of section 806 are met. In any case in which the 
board determines that there is reason to believe that there 
is or will be a failure to meet such requirements, or the 
applicable authority makes such a determination and so 
notifies the board, the board shall immediately notify the 
qualified actuary engaged by the plan, and such actuary 
shall, not later than the end of the next following month, 
make such recommendations to the board for corrective 
action as the actuary determines necessary to ensure com-
pliance with section 806. Not later than 30 days after re-
ceiving from the actuary recommendations for corrective 
actions, the board shall notify the applicable authority (in 
such form and manner as the applicable authority may 
prescribe by regulation) of such recommendations of the 
actuary for corrective action, together with a description 
of the actions (if any) that the board has taken or plans 
to take in response to such recommendations. The board 
shall thereafter report to the applicable authority, in such 
form and frequency as the applicable authority may speci-
fy to the board, regarding corrective action taken by the 
board until the requirements of section 806 are met. 
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‘‘(b) MANDATORY TERMINATION.—In any case in 
which— 
‘‘(1) the applicable authority has been notified 
under subsection (a) (or by an issuer of excess/stop 
loss insurance or indemnity insurance pursuant to 
section 806(a)) of a failure of an association health 
plan which is or has been certified under this part 
and is described in section 806(a)(2) to meet the re-
quirements of section 806 and has not been notified 
by the board of trustees of the plan that corrective 
action has restored compliance with such require-
ments; and 
‘‘(2) the applicable authority determines that 
there is a reasonable expectation that the plan will 
continue to fail to meet the requirements of section 
806, 
the board of trustees of the plan shall, at the direction 
of the applicable authority, terminate the plan and, in the 
course of the termination, take such actions as the appli-
cable authority may require, including satisfying any 
claims referred to in section 806(a)(2)(B)(iii) and recov-
ering for the plan any liability under subsection 
(a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 
that the affairs of the plan will be, to the maximum extent 
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possible, wound up in a manner which will result in timely 
provision of all benefits for which the plan is obligated. 
‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL-
VENT ASSOCIATION HEALTH PLANS PRO-
VIDING HEALTH BENEFITS IN ADDITION TO 
HEALTH INSURANCE COVERAGE. 
‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR 
INSOLVENT PLANS.—Whenever the Secretary determines 
that an association health plan which is or has been cer-
tified under this part and which is described in section 
806(a)(2) will be unable to provide benefits when due or 
is otherwise in a financially hazardous condition, as shall 
be defined by the Secretary by regulation, the Secretary 
shall, upon notice to the plan, apply to the appropriate 
United States district court for appointment of the Sec-
retary as trustee to administer the plan for the duration 
of the insolvency. The plan may appear as a party and 
other interested persons may intervene in the proceedings 
at the discretion of the court. The court shall appoint such 
Secretary trustee if the court determines that the trustee-
ship is necessary to protect the interests of the partici-
pants and beneficiaries or providers of medical care or to 
avoid any unreasonable deterioration of the financial con-
dition of the plan. The trusteeship of such Secretary shall 
continue until the conditions described in the first sen-
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tence of this subsection are remedied or the plan is termi-
nated. 
‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon 
appointment as trustee under subsection (a), shall have 
the power— 
‘‘(1) to do any act authorized by the plan, this 
title, or other applicable provisions of law to be done 
by the plan administrator or any trustee of the plan; 
‘‘(2) to require the transfer of all (or any part) 
of the assets and records of the plan to the Sec-
retary as trustee; 
‘‘(3) to invest any assets of the plan which the 
Secretary holds in accordance with the provisions of 
the plan, regulations prescribed by the Secretary, 
and applicable provisions of law; 
‘‘(4) to require the sponsor, the plan adminis-
trator, any participating employer, and any employee 
organization representing plan participants to fur-
nish any information with respect to the plan which 
the Secretary as trustee may reasonably need in 
order to administer the plan; 
‘‘(5) to collect for the plan any amounts due the 
plan and to recover reasonable expenses of the trust-
eeship; 
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‘‘(6) to commence, prosecute, or defend on be-
half of the plan any suit or proceeding involving the 
plan; 
‘‘(7) to issue, publish, or file such notices, state-
ments, and reports as may be required by the Sec-
retary by regulation or required by any order of the 
court; 
‘‘(8) to terminate the plan (or provide for its 
termination in accordance with section 809(b)) and 
liquidate the plan assets, to restore the plan to the 
responsibility of the sponsor, or to continue the 
trusteeship; 
‘‘(9) to provide for the enrollment of plan par-
ticipants and beneficiaries under appropriate cov-
erage options; and 
‘‘(10) to do such other acts as may be nec-
essary to comply with this title or any order of the 
court and to protect the interests of plan partici-
pants and beneficiaries and providers of medical 
care. 
‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac-
ticable after the Secretary’s appointment as trustee, the 
Secretary shall give notice of such appointment to— 
‘‘(1) the sponsor and plan administrator; 
‘‘(2) each participant; 
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‘‘(3) each participating employer; and 
‘‘(4) if applicable, each employee organization 
which, for purposes of collective bargaining, rep-
resents plan participants. 
‘‘(d) ADDITIONAL DUTIES.—Except to the extent in-
consistent with the provisions of this title, or as may be 
otherwise ordered by the court, the Secretary, upon ap-
pointment as trustee under this section, shall be subject 
to the same duties as those of a trustee under section 704 
of title 11, United States Code, and shall have the duties 
of a fiduciary for purposes of this title. 
‘‘(e) OTHER PROCEEDINGS.—An application by the 
Secretary under this subsection may be filed notwith-
standing the pendency in the same or any other court of 
any bankruptcy, mortgage foreclosure, or equity receiver-
ship proceeding, or any proceeding to reorganize, conserve, 
or liquidate such plan or its property, or any proceeding 
to enforce a lien against property of the plan. 
‘‘(f) JURISDICTION OF COURT.— 
‘‘(1) IN GENERAL.—Upon the filing of an appli-
cation for the appointment as trustee or the issuance 
of a decree under this section, the court to which the 
application is made shall have exclusive jurisdiction 
of the plan involved and its property wherever lo-
cated with the powers, to the extent consistent with 
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the purposes of this section, of a court of the United 
States having jurisdiction over cases under chapter 
11 of title 11, United States Code. Pending an adju-
dication under this section such court shall stay, and 
upon appointment by it of the Secretary as trustee, 
such court shall continue the stay of, any pending 
mortgage foreclosure, equity receivership, or other 
proceeding to reorganize, conserve, or liquidate the 
plan, the sponsor, or property of such plan or spon-
sor, and any other suit against any receiver, conser-
vator, or trustee of the plan, the sponsor, or prop-
erty of the plan or sponsor. Pending such adjudica-
tion and upon the appointment by it of the Sec-
retary as trustee, the court may stay any proceeding 
to enforce a lien against property of the plan or the 
sponsor or any other suit against the plan or the 
sponsor. 
‘‘(2) VENUE.—An action under this section 
may be brought in the judicial district where the 
sponsor or the plan administrator resides or does 
business or where any asset of the plan is situated. 
A district court in which such action is brought may 
issue process with respect to such action in any 
other judicial district. 
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‘‘(g) PERSONNEL.—In accordance with regulations 
which shall be prescribed by the Secretary, the Secretary 
shall appoint, retain, and compensate accountants, actu-
aries, and other professional service personnel as may be 
necessary in connection with the Secretary’s service as 
trustee under this section. 
‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 
‘‘(a) IN GENERAL.—Notwithstanding section 514, a 
State may impose by law a contribution tax on an associa-
tion health plan described in section 806(a)(2), if the plan 
commenced operations in such State after the date of the 
enactment of this part. 
‘‘(b) CONTRIBUTION TAX.—For purposes of this sec-
tion, the term ‘contribution tax’ imposed by a State on 
an association health plan means any tax imposed by such 
State if— 
‘‘(1) such tax is computed by applying a rate to 
the amount of premiums or contributions, with re-
spect to individuals covered under the plan who are 
residents of such State, which are received by the 
plan from participating employers located in such 
State or from such individuals; 
‘‘(2) the rate of such tax does not exceed the 
rate of any tax imposed by such State on premiums 
or contributions received by insurers or health main-
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tenance organizations for health insurance coverage 
offered in such State in connection with a group 
health plan; 
‘‘(3) such tax is otherwise nondiscriminatory; 
and 
‘‘(4) the amount of any such tax assessed on 
the plan is reduced by the amount of any tax or as-
sessment otherwise imposed by the State on pre-
miums, contributions, or both received by insurers or 
health maintenance organizations for health insur-
ance coverage, aggregate excess/stop loss insurance 
(as defined in section 806(g)(1)), specific excess/stop 
loss insurance (as defined in section 806(g)(2)), 
other insurance related to the provision of medical 
care under the plan, or any combination thereof pro-
vided by such insurers or health maintenance organi-
zations in such State in connection with such plan. 
‘‘SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION. 
‘‘(a) DEFINITIONS.—For purposes of this part— 
‘‘(1) GROUP HEALTH PLAN.—The term ‘group 
health plan’ has the meaning provided in section 
733(a)(1) (after applying subsection (b) of this sec-
tion). 
‘‘(2) MEDICAL CARE.—The term ‘medical care’ 
has the meaning provided in section 733(a)(2). 
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‘‘(3) HEALTH
INSURANCE
COVERAGE.—The 
term ‘health insurance coverage’ has the meaning 
provided in section 733(b)(1). 
‘‘(4) HEALTH INSURANCE ISSUER.—The term 
‘health insurance issuer’ has the meaning provided 
in section 733(b)(2). 
‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap-
plicable authority’ means the Secretary, except that, 
in connection with any exercise of the Secretary’s 
authority regarding which the Secretary is required 
under section 506(d) to consult with a State, such 
term means the Secretary, in consultation with such 
State. 
‘‘(6) HEALTH STATUS-RELATED FACTOR.—The 
term ‘health status-related factor’ has the meaning 
provided in section 733(d)(2). 
‘‘(7) INDIVIDUAL MARKET.— 
‘‘(A) IN GENERAL.—The term ‘individual 
market’ means the market for health insurance 
coverage offered to individuals other than in 
connection with a group health plan. 
‘‘(B) 
TREATMENT
OF
VERY
SMALL 
GROUPS.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), such term includes coverage offered in 
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connection with a group health plan that 
has fewer than 2 participants as current 
employees or participants described in sec-
tion 732(d)(3) on the first day of the plan 
year. 
‘‘(ii) STATE
EXCEPTION.—Clause (i) 
shall not apply in the case of health insur-
ance coverage offered in a State if such 
State regulates the coverage described in 
such clause in the same manner and to the 
same extent as coverage in the small group 
market (as defined in section 2791(e)(5) of 
the Public Health Service Act) is regulated 
by such State. 
‘‘(8) PARTICIPATING
EMPLOYER.—The term 
‘participating employer’ means, in connection with 
an association health plan, any employer, if any indi-
vidual who is an employee of such employer, a part-
ner in such employer, or a self-employed individual 
who is such employer (or any dependent, as defined 
under the terms of the plan, of such individual) is 
or was covered under such plan in connection with 
the status of such individual as such an employee, 
partner, or self-employed individual in relation to the 
plan. 
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‘‘(9) APPLICABLE
STATE
AUTHORITY.—The 
term ‘applicable State authority’ means, with respect 
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of 
title XXVII of the Public Health Service Act for the 
State involved with respect to such issuer. 
‘‘(10) QUALIFIED ACTUARY.—The term ‘quali-
fied actuary’ means an individual who is a member 
of the American Academy of Actuaries. 
‘‘(11) AFFILIATED MEMBER.—The term ‘affili-
ated member’ means, in connection with a sponsor— 
‘‘(A) a person who is otherwise eligible to 
be a member of the sponsor but who elects an 
affiliated status with the sponsor, 
‘‘(B) in the case of a sponsor with mem-
bers which consist of associations, a person who 
is a member of any such association and elects 
an affiliated status with the sponsor, or 
‘‘(C) in the case of an association health 
plan in existence on the date of the enactment 
of this part, a person eligible to be a member 
of the sponsor or one of its member associa-
tions. 
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‘‘(12) LARGE EMPLOYER.—The term ‘large em-
ployer’ means, in connection with a group health 
plan with respect to a plan year, an employer who 
employed an average of at least 51 employees on 
business days during the preceding calendar year 
and who employs at least 2 employees on the first 
day of the plan year. 
‘‘(13) SMALL EMPLOYER.—The term ‘small em-
ployer’ means, in connection with a group health 
plan with respect to a plan year, an employer who 
is not a large employer. 
‘‘(b) RULES OF CONSTRUCTION.— 
‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur-
poses of determining whether a plan, fund, or pro-
gram is an employee welfare benefit plan which is an 
association health plan, and for purposes of applying 
this title in connection with such plan, fund, or pro-
gram so determined to be such an employee welfare 
benefit plan— 
‘‘(A) in the case of a partnership, the term 
‘employer’ (as defined in section 3(5)) includes 
the partnership in relation to the partners, and 
the term ‘employee’ (as defined in section 3(6)) 
includes any partner in relation to the partner-
ship; and 
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‘‘(B) in the case of a self-employed indi-
vidual, the term ‘employer’ (as defined in sec-
tion 3(5)) and the term ‘employee’ (as defined 
in section 3(6)) shall include such individual. 
‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED 
AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 
case of any plan, fund, or program which was estab-
lished or is maintained for the purpose of providing 
medical care (through the purchase of insurance or 
otherwise) for employees (or their dependents) cov-
ered thereunder and which demonstrates to the Sec-
retary that all requirements for certification under 
this part would be met with respect to such plan, 
fund, or program if such plan, fund, or program 
were a group health plan, such plan, fund, or pro-
gram shall be treated for purposes of this title as an 
employee welfare benefit plan on and after the date 
of such demonstration.’’. 
(2) CONFORMING
AMENDMENTS
TO
PREEMP-
TION RULES.— 
(A) Section 514(b)(6) of such Act (29 
U.S.C. 1144(b)(6)) is amended by adding at 
the end the following new subparagraph: 
‘‘(E) The preceding subparagraphs of this paragraph 
do not apply with respect to any State law in the case 
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126 
of an association health plan which is certified under part 
8.’’. 
(B) Section 514 of such Act (29 U.S.C. 
1144) is amended— 
(i) in subsection (b)(4), by striking 
‘‘Subsection (a)’’ and inserting ‘‘Sub-
sections (a) and (d)’’; 
(ii) in subsection (b)(5), by striking 
‘‘subsection (a)’’ in subparagraph (A) and 
inserting ‘‘subsection (a) of this section 
and subsections (a)(2)(B) and (b) of sec-
tion 805’’, and by striking ‘‘subsection (a)’’ 
in subparagraph (B) and inserting ‘‘sub-
section (a) of this section or subsection 
(a)(2)(B) or (b) of section 805’’; 
(iii) by redesignating subsection (d) as 
subsection (e); and 
(iv) by inserting after subsection (c) 
the following new subsection: 
‘‘(d)(1) Except as provided in subsection (b)(4), the 
provisions of this title shall supersede any and all State 
laws insofar as they may now or hereafter preclude, or 
have the effect of precluding, a health insurance issuer 
from offering health insurance coverage in connection with 
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127 
an association health plan which is certified under part 
8. 
‘‘(2) Except as provided in paragraphs (4) and (5) 
of subsection (b) of this section— 
‘‘(A) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan certified under part 8 to a partici-
pating employer operating in such State, the provi-
sions of this title shall supersede any and all laws 
of such State insofar as they may preclude a health 
insurance issuer from offering health insurance cov-
erage of the same policy type to other employers op-
erating in the State which are eligible for coverage 
under such association health plan, whether or not 
such other employers are participating employers in 
such plan. 
‘‘(B) In any case in which health insurance cov-
erage of any policy type is offered in a State under 
an association health plan certified under part 8 and 
the filing, with the applicable State authority (as de-
fined in section 812(a)(9)), of the policy form in 
connection with such policy type is approved by such 
State authority, the provisions of this title shall su-
persede any and all laws of any other State in which 
health insurance coverage of such type is offered, in-
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128 
sofar as they may preclude, upon the filing in the 
same form and manner of such policy form with the 
applicable State authority in such other State, the 
approval of the filing in such other State. 
‘‘(3) Nothing in subsection (b)(6)(E) or the preceding 
provisions of this subsection shall be construed, with re-
spect to health insurance issuers or health insurance cov-
erage, to supersede or impair the law of any State— 
‘‘(A) providing solvency standards or similar 
standards regarding the adequacy of insurer capital, 
surplus, reserves, or contributions, or 
‘‘(B) relating to prompt payment of claims. 
‘‘(4) For additional provisions relating to association 
health plans, see subsections (a)(2)(B) and (b) of section 
805. 
‘‘(5) For purposes of this subsection, the term ‘asso-
ciation health plan’ has the meaning provided in section 
801(a), and the terms ‘health insurance coverage’, ‘par-
ticipating employer’, and ‘health insurance issuer’ have 
the meanings provided such terms in section 812, respec-
tively.’’. 
(C) Section 514(b)(6)(A) of such Act (29 
U.S.C. 1144(b)(6)(A)) is amended— 
(i) in clause (i)(II), by striking ‘‘and’’ 
at the end; 
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129 
(ii) in clause (ii), by inserting ‘‘and 
which does not provide medical care (with-
in the meaning of section 733(a)(2)),’’ 
after ‘‘arrangement,’’, and by striking 
‘‘title.’’ and inserting ‘‘title, and’’; and 
(iii) by adding at the end the fol-
lowing new clause: 
‘‘(iii) subject to subparagraph (E), in the case 
of any other employee welfare benefit plan which is 
a multiple employer welfare arrangement and which 
provides medical care (within the meaning of section 
733(a)(2)), any law of any State which regulates in-
surance may apply.’’. 
(D) Section 514(e) of such Act (as redesig-
nated by subparagraph (B)(iii)) is amended— 
(i) by striking ‘‘Nothing’’ and insert-
ing ‘‘(1) Except as provided in paragraph 
(2), nothing’’; and 
(ii) by adding at the end the following 
new paragraph: 
‘‘(2) Nothing in any other provision of law enacted 
on or after the date of the enactment of part 8 shall be 
construed to alter, amend, modify, invalidate, impair, or 
supersede any provision of this title, except by specific 
cross-reference to the affected section.’’. 
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130 
(3) PLAN SPONSOR.—Section 3(16)(B) of such 
Act (29 U.S.C. 102(16)(B)) is amended by adding 
at the end the following new sentence: ‘‘Such term 
also includes a person serving as the sponsor of an 
association health plan under part 8.’’. 
(4) DISCLOSURE OF SOLVENCY PROTECTIONS 
RELATED TO SELF-INSURED AND FULLY INSURED 
OPTIONS
UNDER
ASSOCIATION
HEALTH
PLANS.— 
Section 102(b) of such Act (29 U.S.C. 102(b)) is 
amended by adding at the end the following: ‘‘An as-
sociation health plan shall include in its summary 
plan description, in connection with each benefit op-
tion, a description of the form of solvency or guar-
antee fund protection secured pursuant to this Act 
or applicable State law, if any.’’. 
(5) SAVINGS CLAUSE.—Section 731(c) of such 
Act is amended by inserting ‘‘or part 8’’ after ‘‘this 
part’’. 
(6) REPORT
TO
THE
CONGRESS
REGARDING 
CERTIFICATION
OF
SELF-INSURED
ASSOCIATION 
HEALTH PLANS.—Not later than January 1, 2012, 
the Secretary of Labor shall report to the Committee 
on Education and the Workforce of the House of 
Representatives and the Committee on Health, Edu-
cation, Labor, and Pensions of the Senate the effect 
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131 
association health plans have had, if any, on reduc-
ing the number of uninsured individuals. 
(7) CLERICAL AMENDMENT.—The table of con-
tents in section 1 of the Employee Retirement In-
come Security Act of 1974 is amended by inserting 
after the item relating to section 734 the following 
new items: 
‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS 
‘‘801. Association health plans. 
‘‘802. Certification of association health plans. 
‘‘803. Requirements relating to sponsors and boards of trustees. 
‘‘804. Participation and coverage requirements. 
‘‘805. Other requirements relating to plan documents, contribution rates, and 
benefit options. 
‘‘806. Maintenance of reserves and provisions for solvency for plans providing 
health benefits in addition to health insurance coverage. 
‘‘807. Requirements for application and related requirements. 
‘‘808. Notice requirements for voluntary termination. 
‘‘809. Corrective actions and mandatory termination. 
‘‘810. Trusteeship by the Secretary of insolvent association health plans pro-
viding health benefits in addition to health insurance coverage. 
‘‘811. State assessment authority. 
‘‘812. Definitions and rules of construction.’’. 
(b) CLARIFICATION OF TREATMENT OF SINGLE EM-
PLOYER ARRANGEMENTS.—Section 3(40)(B) of the Em-
ployee Retirement Income Security Act of 1974 (29 
U.S.C. 1002(40)(B)) is amended— 
(1) in clause (i), by inserting after ‘‘control 
group,’’ the following: ‘‘except that, in any case in 
which the benefit referred to in subparagraph (A) 
consists of medical care (as defined in section 
812(a)(2)), two or more trades or businesses, wheth-
er or not incorporated, shall be deemed a single em-
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132 
ployer for any plan year of such plan, or any fiscal 
year of such other arrangement, if such trades or 
businesses are within the same control group during 
such year or at any time during the preceding 1-year 
period,’’; 
(2) in clause (iii), by striking ‘‘(iii) the deter-
mination’’ and inserting the following: 
‘‘(iii)(I) in any case in which the benefit re-
ferred to in subparagraph (A) consists of medical 
care (as defined in section 812(a)(2)), the deter-
mination of whether a trade or business is under 
‘common control’ with another trade or business 
shall be determined under regulations of the Sec-
retary applying principles consistent and coextensive 
with the principles applied in determining whether 
employees of two or more trades or businesses are 
treated as employed by a single employer under sec-
tion 4001(b), except that, for purposes of this para-
graph, an interest of greater than 25 percent may 
not be required as the minimum interest necessary 
for common control, or 
‘‘(II) in any other case, the determination’’; 
(3) by redesignating clauses (iv) and (v) as 
clauses (v) and (vi), respectively; and 
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133 
(4) by inserting after clause (iii) the following 
new clause: 
‘‘(iv) in any case in which the benefit referred 
to in subparagraph (A) consists of medical care (as 
defined in section 812(a)(2)), in determining, after 
the application of clause (i), whether benefits are 
provided to employees of two or more employers, the 
arrangement shall be treated as having only one par-
ticipating employer if, after the application of clause 
(i), the number of individuals who are employees and 
former employees of any one participating employer 
and who are covered under the arrangement is 
greater than 75 percent of the aggregate number of 
all individuals who are employees or former employ-
ees of participating employers and who are covered 
under the arrangement,’’. 
(c) ENFORCEMENT PROVISIONS RELATING TO ASSO-
CIATION HEALTH PLANS.— 
(1) CRIMINAL PENALTIES FOR CERTAIN WILL-
FUL
MISREPRESENTATIONS.—Section 501 of the 
Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1131) is amended— 
(A) by inserting ‘‘(a)’’ after ‘‘Sec. 501.’’; 
and 
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134 
(B) by adding at the end the following new 
subsection: 
‘‘(b) Any person who willfully falsely represents, to 
any employee, any employee’s beneficiary, any employer, 
the Secretary, or any State, a plan or other arrangement 
established or maintained for the purpose of offering or 
providing any benefit described in section 3(1) to employ-
ees or their beneficiaries as— 
‘‘(1) being an association health plan which has 
been certified under part 8; 
‘‘(2) having been established or maintained 
under or pursuant to one or more collective bar-
gaining agreements which are reached pursuant to 
collective bargaining described in section 8(d) of the 
National Labor Relations Act (29 U.S.C. 158(d)) or 
paragraph Fourth of section 2 of the Railway Labor 
Act (45 U.S.C. 152, paragraph Fourth) or which are 
reached pursuant to labor-management negotiations 
under similar provisions of State public employee re-
lations laws; or 
‘‘(3) being a plan or arrangement described in 
section 3(40)(A)(i), 
shall, upon conviction, be imprisoned not more than 5 
years, be fined under title 18, United States Code, or 
both.’’. 
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135 
(2) CEASE ACTIVITIES ORDERS.—Section 502 
of such Act (29 U.S.C. 1132) is amended by adding 
at the end the following new subsection: 
‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE-
SIST ORDERS.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
upon application by the Secretary showing the oper-
ation, promotion, or marketing of an association 
health plan (or similar arrangement providing bene-
fits consisting of medical care (as defined in section 
733(a)(2))) that— 
‘‘(A) is not certified under part 8, is sub-
ject under section 514(b)(6) to the insurance 
laws of any State in which the plan or arrange-
ment offers or provides benefits, and is not li-
censed, registered, or otherwise approved under 
the insurance laws of such State; or 
‘‘(B) is an association health plan certified 
under part 8 and is not operating in accordance 
with the requirements under part 8 for such 
certification, 
a district court of the United States shall enter an 
order requiring that the plan or arrangement cease 
activities. 
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136 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply in the case of an association health plan or 
other arrangement if the plan or arrangement shows 
that— 
‘‘(A) all benefits under it referred to in 
paragraph (1) consist of health insurance cov-
erage; and 
‘‘(B) with respect to each State in which 
the plan or arrangement offers or provides ben-
efits, the plan or arrangement is operating in 
accordance with applicable State laws that are 
not superseded under section 514. 
‘‘(3) ADDITIONAL
EQUITABLE
RELIEF.—The 
court may grant such additional equitable relief, in-
cluding any relief available under this title, as it 
deems necessary to protect the interests of the pub-
lic and of persons having claims for benefits against 
the plan.’’. 
(3) RESPONSIBILITY
FOR
CLAIMS
PROCE-
DURE.—Section 503 of such Act (29 U.S.C. 1133) 
is amended by inserting ‘‘(a) IN GENERAL.—’’ be-
fore ‘‘In accordance’’, and by adding at the end the 
following new subsection: 
‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of 
each association health plan which is or has been certified 
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137 
under part 8 shall require the board of trustees or the 
named fiduciary (as applicable) to ensure that the require-
ments of this section are met in connection with claims 
filed under the plan.’’. 
(d) COOPERATION BETWEEN FEDERAL AND STATE 
AUTHORITIES.—Section 506 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1136) is amended 
by adding at the end the following new subsection: 
‘‘(d) CONSULTATION WITH STATES WITH RESPECT 
TO ASSOCIATION HEALTH PLANS.— 
‘‘(1) AGREEMENTS
WITH
STATES.—The Sec-
retary shall consult with the State recognized under 
paragraph (2) with respect to an association health 
plan regarding the exercise of— 
‘‘(A) the Secretary’s authority under sec-
tions 502 and 504 to enforce the requirements 
for certification under part 8; and 
‘‘(B) the Secretary’s authority to certify 
association health plans under part 8 in accord-
ance with regulations of the Secretary applica-
ble to certification under part 8. 
‘‘(2) RECOGNITION
OF
PRIMARY
DOMICILE 
STATE.—In carrying out paragraph (1), the Sec-
retary shall ensure that only one State will be recog-
nized, with respect to any particular association 
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138 
health plan, as the State with which consultation is 
required. In carrying out this paragraph— 
‘‘(A) in the case of a plan which provides 
health insurance coverage (as defined in section 
812(a)(3)), such State shall be the State with 
which filing and approval of a policy type of-
fered by the plan was initially obtained, and 
‘‘(B) in any other case, the Secretary shall 
take into account the places of residence of the 
participants and beneficiaries under the plan 
and the State in which the trust is main-
tained.’’. 
(e) EFFECTIVE
DATE
AND
TRANSITIONAL
AND 
OTHER RULES.— 
(1) EFFECTIVE DATE.—The amendments made 
by this section shall take effect 1 year after the date 
of the enactment of this Act. The Secretary of Labor 
shall first issue all regulations necessary to carry out 
such amendments within 1 year after the date of the 
enactment of this Act. 
(2) 
TREATMENT
OF
CERTAIN
EXISTING 
HEALTH BENEFITS PROGRAMS.— 
(A) IN GENERAL.—In any case in which, 
as of the date of the enactment of this Act, an 
arrangement is maintained in a State for the 
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139 
purpose of providing benefits consisting of med-
ical care for the employees and beneficiaries of 
its participating employers, at least 200 partici-
pating employers make contributions to such 
arrangement, such arrangement has been in ex-
istence for at least 10 years, and such arrange-
ment is licensed under the laws of one or more 
States to provide such benefits to its partici-
pating employers, upon the filing with the ap-
plicable 
authority 
(as 
defined 
in 
section 
812(a)(5) of the Employee Retirement Income 
Security Act of 1974 (as amended by this sub-
title)) by the arrangement of an application for 
certification of the arrangement under part 8 of 
subtitle B of title I of such Act— 
(i) such arrangement shall be deemed 
to be a group health plan for purposes of 
title I of such Act; 
(ii) the requirements of sections 
801(a) and 803(a) of the Employee Retire-
ment Income Security Act of 1974 shall be 
deemed met with respect to such arrange-
ment; 
(iii) 
the 
requirements 
of 
section 
803(b) of such Act shall be deemed met, if 
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140 
the arrangement is operated by a board of 
directors which— 
(I) is elected by the participating 
employers, with each employer having 
one vote; and 
(II) has complete fiscal control 
over the arrangement and which is re-
sponsible for all operations of the ar-
rangement; 
(iv) 
the 
requirements 
of 
section 
804(a) of such Act shall be deemed met 
with respect to such arrangement; and 
(v) the arrangement may be certified 
by any applicable authority with respect to 
its operations in any State only if it oper-
ates in such State on the date of certifi-
cation. 
The provisions of this subparagraph shall cease 
to apply with respect to any such arrangement 
at such time after the date of the enactment of 
this Act as the applicable requirements of this 
subparagraph are not met with respect to such 
arrangement. 
(B) DEFINITIONS.—For purposes of this 
paragraph, the terms ‘‘group health plan’’, 
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141 
‘‘medical care’’, and ‘‘participating employer’’ 
shall have the meanings provided in section 812 
of the Employee Retirement Income Security 
Act of 1974, except that the reference in para-
graph (7) of such section to an ‘‘association 
health plan’’ shall be deemed a reference to an 
arrangement referred to in this paragraph. 
SEC. 133. REPEAL OF CERTAIN TAX EXEMPTIONS FOR 
HEALTH INSURANCE PAYMENTS. 
(a) FICA DEFINITION OF WAGES.—Paragraphs (2) 
and (4) of sections 3121(a)of the Internal Revenue Code 
of 1986 (relating to tax on employers and employees) are 
hereby repealed. 
(b) CONFORMING AMENDMENTS.—Section 3401 of 
the Internal Revenue Code of 1986 (relating to the collec-
tion of wages at source) is amended by striking paragraph 
(20) and redesignating paragraphs (21), (22), and (23)as 
paragraphs (20), (21), and (22), respectively. 
(c) APPLICABLE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2010. 
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142 
Subtitle C—Health Care Services 
Commission 
PART I—ESTABLISHMENT AND GENERAL DUTIES 
SEC. 141. ESTABLISHMENT. 
(a) IN GENERAL.—There is hereby established a 
Health Care Services Commission (in this subtitle referred 
to as the ‘‘Commission’’) to be composed of five commis-
sioners (in this subtitle referred to as the ‘‘Commis-
sioners’’) to be appointed by the President by and with 
the advice and consent of the Senate. Not more than three 
of such commissioners shall be members of the same polit-
ical party, and in making appointments members of dif-
ferent political parties shall be appointed alternately as 
nearly as may be practicable. No commissioner shall en-
gage in any other business, vocation, or employment than 
that of serving as commissioner. Each commissioner shall 
hold office for a term of five years and until his successor 
is appointed and has qualified, except that he shall not 
so continue to serve beyond the expiration of the next ses-
sion of Congress subsequent to the expiration of said fixed 
term of office, and except (1) any commissioner appointed 
to fill a vacancy occurring prior to the expiration of the 
term for which his predecessor was appointed shall be ap-
pointed for the remainder of such term, and (2) the terms 
of office of the commissioners first taking office after the 
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143 
enactment of this subtitle shall expire as designated by 
the President at the time of nomination, one at the end 
of one year, one at the end of two years, one at the end 
of three years, one at the end of four years, and one at 
the end of five years, after the date of the enactment of 
this Act. 
(b) PURPOSE.—The purpose of the Commission is to 
enhance the quality, appropriateness, and effectiveness of 
health care services, and access to such services, through 
the establishment of a broad base of scientific research 
and through the promotion of improvements in clinical 
practice and in the organization, financing, and delivery 
of health care services. 
(c) APPOINTMENT
OF CHAIRMAN.—The President 
shall, from among the Commissioners appointed under 
subsection (a), designate an individual to serve as the 
Chairman of the Commission. 
SEC. 142. GENERAL AUTHORITIES AND DUTIES. 
(a) IN GENERAL.—In carrying out section 141(b), 
the Commissioners shall conduct and support research, 
demonstration projects, evaluations, training, guideline de-
velopment, and the dissemination of information, on 
health care services and on systems for the delivery of 
such services, including activities with respect to— 
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144 
(1) the effectiveness, efficiency, and quality of 
health care services; 
(2) subject to subsection (b), the outcomes of 
health care services and procedures; 
(3) clinical practice, including primary care and 
practice-oriented research; 
(4) health care technologies, facilities, and 
equipment; 
(5) health care costs, productivity, and market 
forces; 
(6) health promotion and disease prevention; 
(7) health statistics and epidemiology; and 
(8) medical liability. 
(b) REQUIREMENTS
WITH
RESPECT
TO
RURAL 
AREAS AND UNDERSERVED POPULATIONS.—In carrying 
out subsection (a), the Commissioners shall undertake and 
support research, demonstration projects, and evaluations 
with respect to— 
(1) the delivery of health care services in rural 
areas (including frontier areas); and 
(2) the health of low-income groups, minority 
groups, and the elderly. 
SEC. 143. DISSEMINATION. 
(a) IN GENERAL.—The Commissioners shall— 
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(1) promptly publish, make available, and oth-
erwise disseminate, in a form understandable and on 
as broad a basis as practicable so as to maximize its 
use, the results of research, demonstration projects, 
and evaluations conducted or supported under this 
subtitle and the guidelines, standards, and review 
criteria developed under this subtitle; 
(2) promptly make available to the public data 
developed in such research, demonstration projects, 
and evaluations; and 
(3) as appropriate, provide technical assistance 
to State and local government and health agencies 
and conduct liaison activities to such agencies to fos-
ter dissemination. 
(b) PROHIBITION AGAINST RESTRICTIONS.—Except 
as provided in subsection (c), the Commissioners may not 
restrict the publication or dissemination of data from, or 
the results of, projects conducted or supported under this 
subtitle. 
(c) LIMITATION
ON USE
OF CERTAIN INFORMA-
TION.—No information, if an establishment or person sup-
plying the information or described in it is identifiable, 
obtained in the course of activities undertaken or sup-
ported under this subtitle may be used for any purpose 
other than the purpose for which it was supplied unless 
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such establishment or person has consented (as deter-
mined under regulations of the Secretary) to its use for 
such other purpose. Such information may not be pub-
lished or released in other form if the person who supplied 
the information or who is described in it is identifiable 
unless such person has consented (as determined under 
regulations of the Secretary) to its publication or release 
in other form. 
(d) CERTAIN
INTERAGENCY
AGREEMENT.—The 
Commissioners and the Director of the National Library 
of Medicine shall enter into an agreement providing for 
the implementation of subsection (a)(1). 
PART II—FORUM FOR QUALITY AND 
EFFECTIVENESS IN HEALTH CARE 
SEC. 151. ESTABLISHMENT OF OFFICE. 
There is established within the Commission an office 
to be known as the Office of the Forum for Quality and 
Effectiveness in Health Care. The office shall be headed 
by a director (referred to in this subtitle as the ‘‘Direc-
tor’’), who shall be appointed by the Commissioners. 
SEC. 152. MEMBERSHIP. 
(a) IN GENERAL.—The Office of the Forum for Qual-
ity and Effectiveness in Health Care shall be composed 
of 15 individuals nominated by private sector health care 
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organizations and appointed by the Commission and shall 
include representation from at least the following: 
(1) Health insurance industry. 
(2) Health care provider groups. 
(3) Non-profit organizations. 
(4) Rural health organizations. 
(b) TERMS.— 
(1) IN GENERAL.—Except as provided in sub-
paragraph (B), members of the Office of the Forum 
for Quality and Effectiveness in Health Care shall 
serve for a term of 5 years. 
(2) STAGGERED ROTATION.—Of the members 
first appointed to the Office of the Forum for Qual-
ity and Effectiveness in Health Care, the Commis-
sion shall appoint 5 members to serve for a term of 
2 years, 5 members to serve for a term of 3 years, 
and 5 members to serve for a term of 4 years. 
(c) TREATMENT OF OTHER EMPLOYMENT.—Each 
member of the Office of the Forum for Quality and Effec-
tiveness in Health Care shall serve the Office independ-
ently from any other position of employment. 
SEC. 153. DUTIES. 
(a) ESTABLISHMENT
OF FORUM PROGRAM.—The 
Commissioners, acting through the Director, shall estab-
lish a program to be known as the Forum for Quality and 
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Effectiveness in Health Care. For the purpose of pro-
moting transparency in price, quality, appropriateness, 
and effectiveness of health care, the Director, using the 
process set forth in section 154, shall arrange for the de-
velopment and periodic review and updating of standards 
of quality, performance measures, and medical review cri-
teria through which health care providers and other appro-
priate entities may assess or review the provision of health 
care and assure the quality of such care. 
(b) CERTAIN REQUIREMENTS.—Guidelines, stand-
ards, performance measures, and review criteria under 
subsection (a) shall— 
(1) be based on the best available research and 
professional judgment regarding the effectiveness 
and appropriateness of health care services and pro-
cedures; and 
(2) be presented in formats appropriate for use 
by physicians, health care practitioners, providers, 
medical educators, and medical review organizations 
and in formats appropriate for use by consumers of 
health care. 
(c) AUTHORITY FOR CONTRACTS.—In carrying out 
this part, the Director may enter into contracts with pub-
lic or nonprofit private entities. 
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(d) PUBLIC DISCLOSURE OF RECOMMENDATIONS.— 
For each fiscal year beginning with 2010, the Director 
shall make publicly available the following: 
(1) quarterly reports for public comment that 
include proposed recommendations for guidelines, 
standards, performance measures, and review cri-
teria under subsection (a) and any updates to such 
guidelines, standards, performance measures, and 
review criteria; and 
(2) after consideration of such comments, a 
final report that contains final recommendations for 
such guidelines, standards, performance measures, 
review criteria, and updates. 
(e) DATE CERTAIN FOR INITIAL GUIDELINES AND 
STANDARDS.—The Commissioners, by not later than Jan-
uary 1, 2012, shall assure the development of an initial 
set of guidelines, standards, performance measures, and 
review criteria under subsection (a). 
SEC. 154. ADOPTION AND ENFORCEMENT OF GUIDELINES 
AND STANDARDS. 
(a) ADOPTION OF RECOMMENDATIONS OF FORUM 
FOR QUALITY AND EFFECTIVENESS IN HEALTH CARE.— 
For each fiscal year, the Commissioners shall adopt the 
recommendations made for such year in the final report 
under subsection (d)(2) of section 153 for guidelines, 
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standards, performance measures, and review criteria de-
scribed in subsection (a) of such section. 
(b) ENFORCEMENT
AUTHORITY.—The Commis-
sioners , in consultation with the Secretary of Health and 
Human Services, have the authority to make recommenda-
tions to the Secretary to enforce compliance of health care 
providers with the guidelines, standards, performance 
measures, and review criteria adopted under subsection 
(a). Such recommendations may include the following, 
with respect to a health care provider who is not in compli-
ance with such guidelines, standards, measures, and cri-
teria: 
(1) Exclusion from participation in Federal 
health care programs (as defined in section 
1128B(f) of the Social Security Act). 
(2) Imposition of a civil money penalty on such 
provider. 
SEC. 155. ADDITIONAL REQUIREMENTS. 
(a) PROGRAM AGENDA.—The Commissioners shall 
provide for an agenda for the development of the guide-
lines, standards, performance measures, and review cri-
teria described in section 153(a), including with respect 
to the standards, performance measures, and review cri-
teria, identifying specific aspects of health care for which 
the standards, performance measures, and review criteria 
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are to be developed and those that are to be given priority 
in the development of the standards, performance meas-
ures, and review criteria. 
PART III—GENERAL PROVISIONS 
SEC. 161. CERTAIN ADMINISTRATIVE AUTHORITIES. 
The Commissioners, in carrying out this subtitle, may 
accept voluntary and uncompensated services. 
SEC. 162. FUNDING. 
For the purpose of carrying out this subtitle, there 
are authorized to be appropriated such sums as may be 
necessary for fiscal years 2011 through 2015. 
SEC. 163. DEFINITIONS. 
For purposes of this subtitle: 
(1) The term ‘‘Commissioners’’ means the Com-
missioners of the Health Care Services Commission. 
(2) The term ‘‘Commission’’ means the Health 
Care Services Commission. 
(3) The term ‘‘Director’’ means the Director of 
the Office of the Forum for Quality and Effective-
ness in Health Care. 
(4) The term ‘‘Secretary’’ means the Secretary 
of Health and Human Services. 
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152 
PART IV—TERMINATIONS AND TRANSITION 
SEC. 171. TERMINATION OF AGENCY FOR HEALTHCARE RE-
SEARCH AND QUALITY. 
As of the date of the enactment of this Act, the Agen-
cy for Healthcare Research and Quality is terminated, and 
title IX of the Public Health Service Act is repealed. 
SEC. 172. TRANSITION. 
All orders, grants, contracts, privileges, and other de-
terminations or actions of the Agency for Healthcare Re-
search and Quality that are effective as of the date before 
the date of the enactment of this Act, shall be transferred 
to the Secretary and shall continue in effect according to 
their terms unless changed pursuant to law. 
PART V—INDEPENDENT HEALTH RECORD TRUST 
SEC. 181. SHORT TITLE OF PART. 
This part may be cited as the ‘‘Independent Health 
Record Trust Act of 2008’’. 
SEC. 182. PURPOSE. 
It is the purpose of this part to provide for the estab-
lishment of a nationwide health information technology 
network that— 
(1) improves health care quality, reduces med-
ical errors, increases the efficiency of care, and ad-
vances the delivery of appropriate, evidence-based 
health care services; 
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(2) promotes wellness, disease prevention, and 
the management of chronic illnesses by increasing 
the availability and transparency of information re-
lated to the health care needs of an individual; 
(3) ensures that appropriate information nec-
essary to make medical decisions is available in a us-
able form at the time and in the location that the 
medical service involved is provided; 
(4) produces greater value for health care ex-
penditures by reducing health care costs that result 
from inefficiency, medical errors, inappropriate care, 
and incomplete information; 
(5) promotes a more effective marketplace, 
greater competition, greater systems analysis, in-
creased choice, enhanced quality, and improved out-
comes in health care services; 
(6) improves the coordination of information 
and the provision of such services through an effec-
tive infrastructure for the secure and authorized ex-
change and use of health information; and 
(7) ensures that the health information privacy, 
security, and confidentiality of individually identifi-
able health information is protected. 
SEC. 183. DEFINITIONS. 
In this part: 
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(1) ACCESS.—The term ‘‘access’’ means, with 
respect to an electronic health record, entering infor-
mation into such account as well as retrieving infor-
mation from such account. 
(2) ACCOUNT.—The term ‘‘account’’ means an 
electronic health record of an individual contained in 
an independent health record trust. 
(3) AFFIRMATIVE
CONSENT.—The term ‘‘af-
firmative consent’’ means, with respect to an elec-
tronic health record of an individual contained in an 
IHRT, express consent given by the individual for 
the use of such record in response to a clear and 
conspicuous request for such consent or at the indi-
vidual’s own initiative. 
(4) AUTHORIZED EHR DATA USER.—The term 
‘‘authorized EHR data user’’ means, with respect to 
an electronic health record of an IHRT participant 
contained as part of an IHRT, any entity (other 
than the participant) authorized (in the form of af-
firmative consent) by the participant to access the 
electronic health record. 
(5) CONFIDENTIALITY.—The term ‘‘confiden-
tiality’’ means, with respect to individually identifi-
able health information of an individual, the obliga-
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tion of those who receive such information to respect 
the health information privacy of the individual. 
(6) ELECTRONIC HEALTH RECORD.—The term 
‘‘electronic health record’’ means a longitudinal col-
lection of information concerning a single individual, 
including medical records and personal health infor-
mation, that is stored electronically. 
(7) HEALTH
INFORMATION
PRIVACY.—The 
term ‘‘health information privacy’’ means, with re-
spect to individually identifiable health information 
of an individual, the right of such individual to con-
trol the acquisition, uses, or disclosures of such in-
formation. 
(8) HEALTH PLAN.—The term ‘‘health plan’’ 
means a group health plan (as defined in section 
2208(1) of the Public Health Service Act (42 U.S.C. 
300bb–8(1))) as well as a plan that offers health in-
surance coverage in the individual market. 
(9) HIPAA PRIVACY REGULATIONS.—The term 
‘‘HIPAA privacy regulations’’ means the regulations 
promulgated under section 264(c) of the Health In-
surance Portability and Accountability Act of 1996 
(42 U.S.C. 1320d–2 note). 
(10) INDEPENDENT HEALTH RECORD TRUST; 
IHRT.—The terms ‘‘independent health record trust’’ 
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and ‘‘IHRT’’ mean a legal arrangement under the 
administration of an IHRT operator that meets the 
requirements of this part with respect to electronic 
health records of individuals participating in the 
trust or IHRT. 
(11) IHRT OPERATOR.—The term ‘‘IHRT op-
erator’’ means, with respect to an IHRT, the organi-
zation that is responsible for the administration and 
operation of the IHRT in accordance with this part. 
(12) IHRT PARTICIPANT.—The term ‘‘IHRT 
participant’’ means, with respect to an IHRT, an in-
dividual who has a participation agreement in effect 
with respect to the maintenance of the individual’s 
electronic health record by the IHRT. 
(13) INDIVIDUALLY IDENTIFIABLE HEALTH IN-
FORMATION.—The term ‘‘individually identifiable 
health information’’ has the meaning given such 
term in section 1171(6) of the Social Security Act 
(42 U.S.C. 1320d(6)). 
(14) SECURITY.—The term ‘‘security’’ means, 
with respect to individually identifiable health infor-
mation of an individual, the physical, technological, 
or administrative safeguards or tools used to protect 
such information from unwarranted access or disclo-
sure. 
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SEC. 184. ESTABLISHMENT, CERTIFICATION, AND MEMBER-
SHIP OF INDEPENDENT HEALTH RECORD 
TRUSTS. 
(a) ESTABLISHMENT.—Not later than one year after 
the date of the enactment of this Act, the Federal Trade 
Commission, in consultation with the National Committee 
on Vital and Health Statistics, shall prescribe standards 
for the establishment, certification, operation, and inter-
operability of IHRTs to carry out the purposes described 
in section 182 in accordance with the provisions of this 
part. 
(b) CERTIFICATION.— 
(1) CERTIFICATION
BY
FTC.—The Federal 
Trade Commission shall provide for the certification 
of IHRTs. No IHRT may be certified unless the 
IHRT is determined to meet the standards for cer-
tification established under subsection (a). 
(2) DECERTIFICATION.—The Federal Trade 
Commission shall establish a process for the revoca-
tion of certification of an IHRT under this section 
in the case that the IHRT violates the standards es-
tablished under subsection (a). 
(c) MEMBERSHIP.— 
(1) IN GENERAL.—To be eligible to be a partic-
ipant in an IHRT, an individual shall— 
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(A) submit to the IHRT information as re-
quired by the IHRT to establish an electronic 
health record with the IHRT; and 
(B) enter into a privacy protection agree-
ment described in section 186(b)(1) with the 
IHRT. 
The process to determine eligibility of an individual 
under this subsection shall allow for the establish-
ment by such individual of an electronic health 
record as expeditiously as possible if such individual 
is determined so eligible. 
(2) NO LIMITATION ON MEMBERSHIP.—Nothing 
in this subsection shall be construed to permit an 
IHRT to restrict membership, including on the basis 
of health condition. 
SEC. 185. DUTIES OF IHRT TO IHRT PARTICIPANTS. 
(a) FIDUCIARY DUTY OF IHRT; PENALTIES FOR 
VIOLATIONS OF FIDUCIARY DUTY.— 
(1) FIDUCIARY
DUTY.—With respect to the 
electronic health record of an IHRT participant 
maintained by an IHRT, the IHRT shall have a fi-
duciary duty to act for the benefit and in the inter-
ests of such participant and of the IHRT as a whole. 
Such duty shall include obtaining the affirmative 
consent of such participant prior to the release of in-
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formation in such participant’s electronic health 
record in accordance with the requirements of this 
part. 
(2) PENALTIES.—If the IHRT knowingly or 
recklessly breaches the fiduciary duty described in 
paragraph (1), the IHRT shall be subject to the fol-
lowing penalties: 
(A) Loss of certification of the IHRT. 
(B) A fine that is not in excess of $50,000. 
(C) A term of imprisonment for the indi-
viduals involved of not more than 5 years. 
(b) ELECTRONIC HEALTH RECORD DEEMED TO BE 
HELD IN TRUST BY IHRT.—With respect to an indi-
vidual, an electronic health record maintained by an IHRT 
shall be deemed to be held in trust by the IHRT for the 
benefit of the individual and the IHRT shall have no legal 
or equitable interest in such electronic health record. 
SEC. 186. AVAILABILITY AND USE OF INFORMATION FROM 
RECORDS IN IHRT CONSISTENT WITH PRI-
VACY PROTECTIONS AND AGREEMENTS. 
(a) PROTECTED ELECTRONIC HEALTH RECORDS 
USE AND ACCESS.— 
(1) GENERAL RIGHTS REGARDING USES OF IN-
FORMATION.— 
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(A) IN
GENERAL.—With respect to the 
electronic health record of an IHRT participant 
maintained by an IHRT, subject to paragraph 
(2)(C), primary uses and secondary uses (de-
scribed in subparagraphs (B) and (C), respec-
tively) of information within such record (other 
than by such participant) shall be permitted 
only upon the authorization of such use, prior 
to such use, by such participant. 
(B) PRIMARY USES.—For purposes of sub-
paragraph (A) and with respect to an electronic 
health record of an individual, a primary use is 
a use for purposes of the individual’s self-care 
or care by health care professionals. 
(C) SECONDARY USES.—For purposes of 
subparagraph (B) and with respect to an elec-
tronic health record of an individual, a sec-
ondary use is any use not described in subpara-
graph (B) and includes a use for purposes of 
public health research or other related activi-
ties. Additional authorization is required for a 
secondary use extending beyond the original 
purpose of the secondary use authorized by the 
IHRT participant involved. Nothing in this 
paragraph shall be construed as requiring au-
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