suspended, pursuant to an election 
made on or before the date the indi-
vidual elects a qualified HSA distribu-
tion or, if later, on the date of the in-
dividual enrolls in a high deductible 
health plan, that does not pay or re-
imburse, at any time, any medical ex-
pense incurred during the suspension 
period except as defined in the pre-
ceding subclauses of this clause.’’. 
(b) QUALIFIED HSA DISTRIBUTION SHALL NOT AF-
FECT FLEXIBLE SPENDING ARRANGEMENT.—Paragraph 
(1) of section 106(e) is amended to read as follows: 
‘‘(1) IN GENERAL.—A plan shall not fail to be 
treated as a health flexible spending arrangement 
under this section, section 105, or section 125, or as 
a health reimbursement arrangement under this sec-
tion or section 105, merely because such plan pro-
vides for a qualified HSA distribution.’’. 
(c) FSA BALANCES AT YEAR END SHALL NOT FOR-
FEIT.—Paragraph (2) of section 125(d) is amended by 
adding at the end the following new subparagraph: 
‘‘(E) EXCEPTION FOR QUALIFIED HSA DIS-
TRIBUTIONS.—Subparagraph 
(A) 
shall 
not 
apply to the extent that there is an amount re-
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maining in a health flexible spending account at 
the end of a plan year that an individual elects 
to contribute to a health savings account pursu-
ant to a qualified HSA distribution (as defined 
in section 106(e)(2)).’’. 
(d) SIMPLIFICATION OF LIMITATIONS ON FSA AND 
HRA ROLLOVERS.—Paragraph (2) of section 106(e) is 
amended to read as follows: 
‘‘(2) QUALIFIED HSA DISTRIBUTION.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
HSA distribution’ means a distribution from a 
health flexible spending arrangement or health 
reimbursement arrangement to the extent that 
such distribution does not exceed the lesser 
of— 
‘‘(i) the balance in such arrangement 
as of the date of such distribution, or 
‘‘(ii) the amount determined under 
subparagraph (B). 
Such term shall not include more than 1 dis-
tribution with respect to any arrangement. 
‘‘(B) DOLLAR LIMITATIONS.— 
‘‘(i) DISTRIBUTIONS FROM A HEALTH 
FLEXIBLE
SPENDING
ARRANGEMENT.—A 
qualified HSA distribution from a health 
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flexible spending arrangement shall not ex-
ceed the applicable amount. 
‘‘(ii) DISTRIBUTIONS FROM A HEALTH 
REIMBURSEMENT
ARRANGEMENT.—A 
qualified HSA distribution from a health 
reimbursement arrangement shall not ex-
ceed— 
‘‘(I) the applicable amount di-
vided by 12, multiplied by 
‘‘(II) the number of months dur-
ing which the individual is a partici-
pant in the health reimbursement ar-
rangement. 
‘‘(iii) 
APPLICABLE
AMOUNT.—For 
purposes of this subparagraph, the applica-
ble amount is— 
‘‘(I) $2,250 in the case of an eli-
gible individual who has self-only cov-
erage under a high deductible health 
plan at the time of such distribution, 
and 
‘‘(II) $4,500 in the case of an eli-
gible individual who has family cov-
erage under a high deductible health 
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plan at the time of such distribu-
tion.’’. 
(e) ELIMINATION OF ADDITIONAL TAX FOR FAILURE 
TO MAINTAIN HIGH DEDUCTIBLE HEALTH PLAN COV-
ERAGE.—Subsection (e) of section 106 is amended— 
(1) by striking paragraph (3) and redesignating 
paragraphs (4) and (5) as paragraphs (3) and (4), 
respectively, and 
(2) by striking subparagraph (A) of paragraph 
(3), as so redesignated, and redesignating subpara-
graphs (B) and (C) of such paragraph as subpara-
graphs (A) and (B) thereof, respectively. 
(f) LIMITED PURPOSE FSAS
AND HRAS.—Sub-
section (e) of section 106, as amended by this section, is 
amended by adding at the end the following new para-
graph: 
‘‘(5) LIMITED PURPOSE FSAS AND HRAS.—A 
plan shall not fail to be a health flexible spending 
arrangement or health reimbursement arrangement 
under this section or section 105 merely because the 
plan converts coverage for individuals who enroll in 
a high deductible health plan described in section 
223(c)(2) 
to 
coverage 
described 
in 
section 
223(c)(1)(B)(iv). Coverage for such individuals may 
be converted as of the date of enrollment in the high 
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deductible health plan, without regard to the period 
of coverage under the health flexible spending ar-
rangement or health reimbursement arrangement, 
and without requiring any change in coverage to in-
dividuals who do not enroll in a high deductible 
health plan.’’. 
(g) DISTRIBUTION AMOUNTS ADJUSTED FOR COST- 
OF-LIVING.—Subsection (e) of section 106, as amended 
by this section, is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(6) COST-OF-LIVING ADJUSTMENT.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year beginning after December 31, 
2013, each of the dollar amounts in paragraph 
(2)(B)(iii) shall be increased by an amount 
equal to such dollar amount, multiplied by the 
cost-of-living adjustment determined under sec-
tion 1(f)(3) for the calendar year in which such 
taxable year begins by substituting ‘calendar 
year 2012’ for ‘calendar year 1992’ in subpara-
graph (B) thereof. 
‘‘(B) ROUNDING.—If any increase under 
paragraph (1) is not a multiple of $50, such in-
crease shall be rounded to the nearest multiple 
of $50.’’. 
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(h) DISCLAIMER OF DISQUALIFYING COVERAGE.— 
Subparagraph (B) of section 223(c)(1), as amended by 
this section, is amended— 
(1) by striking ‘‘and’’ at the end of clause (iii), 
(2) by striking the period at the end of clause 
(iv) and inserting ‘‘, and’’, and 
(3) by inserting after clause (iv) the following 
new clause: 
‘‘(v) any coverage (including prospec-
tive coverage) under a health plan that is 
not a high deductible health plan which is 
disclaimed in writing, at the time of the 
creation or organization of the health sav-
ings account, including by execution of a 
trust 
described 
in 
subsection 
(d)(1) 
through a governing instrument that in-
cludes such a disclaimer, or by acceptance 
of an amendment to such a trust that in-
cludes such a disclaimer.’’. 
(i) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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SEC. 518. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIP-
TION AND OVER-THE-COUNTER MEDICINES 
AND DRUGS. 
(a) REFERENCE TO REPEAL OF DISTRIBUTIONS FOR 
MEDICINE QUALIFIED ONLY IF FOR PRESCRIBED DRUG 
OR INSULIN.—Section 101 of this Act provides for the re-
peal of section 9003 of the Patient Protection and Afford-
able Care Act (Public Law 111–148) and the amendments 
made by such section. The Internal Revenue Code of 1986 
shall be applied as if such section 9003 and amendments 
had never been enacted. 
(b) ALLOWANCE OF DISTRIBUTIONS FOR ALL MEDI-
CINES AND DRUGS.— 
(1) HSAS.—Subparagraph (A) of section 
223(d)(2) is amended by adding at the end the fol-
lowing: ‘‘Such term shall include an amount paid for 
any prescription or over-the-counter medicine or 
drug.’’. 
(2) ARCHER MSAS.—Subparagraph (A) of sec-
tion 220(d)(2) is amended by adding at the end the 
following: ‘‘Such term shall include an amount paid 
for any prescription or over-the-counter medicine or 
drug.’’. 
(3) HEALTH
FLEXIBLE
SPENDING
ARRANGE-
MENTS
AND
HEALTH
REIMBURSEMENT
ARRANGE-
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MENTS.—Section 106 is amended by adding at the 
end the following new subsection: 
‘‘(f) REIMBURSEMENTS FOR ALL MEDICINES AND 
DRUGS.—For purposes of this section and section 105, 
reimbursement for expenses incurred for any prescription 
or over-the-counter medicine or drug shall be treated as 
a reimbursement for medical expenses.’’. 
(4) EFFECTIVE DATES.— 
(A) DISTRIBUTIONS
FROM
SAVINGS
AC-
COUNTS.—The amendments made by para-
graphs (1) and (2) shall apply to amounts paid 
with respect to taxable years beginning after 
December 31, 2013. 
(B) REIMBURSEMENTS.—The amendment 
made by paragraph (3) shall apply to expenses 
incurred with respect to taxable years beginning 
after December 31, 2013. 
SEC. 519. PURCHASE OF HEALTH INSURANCE FROM HSA 
ACCOUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d) 
is amended to read as follows: 
‘‘(2) QUALIFIED MEDICAL EXPENSES.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
medical expenses’ means, with respect to an ac-
count beneficiary, amounts paid by such bene-
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ficiary for medical care (as defined in section 
213(d)) for any individual covered by a high de-
ductible health plan of the account beneficiary, 
but only to the extent such amounts are not 
compensated for by insurance or otherwise. 
‘‘(B) HEALTH
INSURANCE
MAY
NOT
BE 
PURCHASED FROM ACCOUNT.—Except as pro-
vided in subparagraph (C), subparagraph (A) 
shall not apply to any payment for insurance. 
‘‘(C) 
EXCEPTIONS.—Subparagraph 
(B) 
shall not apply to any expense for coverage 
under— 
‘‘(i) a health plan during any period 
of continuation coverage required under 
any Federal law, 
‘‘(ii) a qualified long-term care insur-
ance contract (as defined in section 
7702B(b)), 
‘‘(iii) a health plan during any period 
in which the individual is receiving unem-
ployment compensation under any Federal 
or State law, 
‘‘(iv) a high deductible health plan, or 
‘‘(v) any health insurance under title 
XVIII of the Social Security Act, other 
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than a Medicare supplemental policy (as 
defined in section 1882 of such Act).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply with respect to insurance pur-
chased after the date of the enactment of this Act in tax-
able years beginning after such date. 
SEC. 520. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES 
INCURRED BEFORE ESTABLISHMENT OF AC-
COUNT. 
(a) IN GENERAL.—Paragraph (2) of section 223(d), 
as amended by section 619, is amended by adding at the 
end the following new subparagraph: 
‘‘(D) CERTAIN
MEDICAL
EXPENSES
IN-
CURRED BEFORE ESTABLISHMENT OF ACCOUNT 
TREATED AS QUALIFIED.—An expense shall not 
fail to be treated as a qualified medical expense 
solely because such expense was incurred before 
the establishment of the health savings account 
if such expense was incurred— 
‘‘(i) during either— 
‘‘(I) the taxable year in which the 
health savings account was estab-
lished, or 
‘‘(II) the preceding taxable year 
in the case of a health savings ac-
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count established after the taxable 
year in which such expense was in-
curred but before the time prescribed 
by law for filing the return for such 
taxable year (not including extensions 
thereof), and 
‘‘(ii) for medical care of an individual 
during a period that such individual was 
covered by a high deductible health plan 
and met the requirements of subsection 
(c)(1)(A)(ii) (after application of sub-
section (c)(1)(B)).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 521. PREVENTIVE CARE PRESCRIPTION DRUG CLARI-
FICATION. 
(a) CLARIFY
USE
OF
DRUGS
IN
PREVENTIVE 
CARE.—Subparagraph (C) of section 223(c)(2) is amend-
ed by adding at the end the following: ‘‘Preventive care 
shall include prescription and over-the-counter drugs and 
medicines which have the primary purpose of preventing 
the onset of, further deterioration from, or complications 
associated with chronic conditions, illnesses, or diseases.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 522. EQUIVALENT BANKRUPTCY PROTECTIONS FOR 
HEALTH SAVINGS ACCOUNTS AS RETIRE-
MENT FUNDS. 
(a) IN GENERAL.—Section 522 of title 11, United 
States Code, is amended by adding at the end the fol-
lowing new subsection: 
‘‘(r) 
TREATMENT
OF
HEALTH
SAVINGS
AC-
COUNTS.—For purposes of this section, any health savings 
account (as described in section 223 of the Internal Rev-
enue Code of 1986) shall be treated in the same manner 
as an individual retirement account described in section 
408 of such Code.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to cases commencing under title 
11, United States Code, after the date of the enactment 
of this Act. 
SEC. 523. ADMINISTRATIVE ERROR CORRECTION BEFORE 
DUE DATE OF RETURN. 
(a) IN GENERAL.—Paragraph (4) of section 223(f) 
is amended by adding at the end the following new sub-
paragraph: 
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‘‘(D) EXCEPTION
FOR
ADMINISTRATIVE 
ERRORS CORRECTED BEFORE DUE DATE OF RE-
TURN.—Subparagraph (A) shall not apply if 
any payment or distribution is made to correct 
an administrative, clerical or payroll contribu-
tion error and if— 
‘‘(i) such distribution is received by 
the individual on or before the last day 
prescribed by law (including extensions of 
time) for filing such individual’s return for 
such taxable year, and 
‘‘(ii) such distribution is accompanied 
by the amount of net income attributable 
to such contribution. 
Any net income described in clause (ii) shall be 
included in the gross income of the individual 
for the taxable year in which it is received.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 524. REAUTHORIZATION OF MEDICAID HEALTH OP-
PORTUNITY ACCOUNTS. 
(a) IN GENERAL.—Section 1938 of the Social Secu-
rity Act (42 U.S.C. 1396u–8) is amended— 
(1) in subsection (a)— 
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(A) by striking paragraph (2) and insert-
ing the following: 
‘‘(2) INITIAL
DEMONSTRATION.—The dem-
onstration program under this section shall begin 90 
days after the date of the enactment of this para-
graph. The Secretary shall approve States to con-
duct demonstration programs under this section for 
a 5-year period, with each State demonstration pro-
gram covering 1 or more geographic areas specified 
by the State. With respect to a State, after the ini-
tial 5-year period of any demonstration program 
conducted under this section by the State, unless the 
Secretary finds, taking into account cost-effective-
ness and quality of care, that the State demonstra-
tion program has been unsuccessful, the demonstra-
tion program may be extended or made permanent 
in the State.’’; and 
(B) in paragraph (3), in the matter pre-
ceding subparagraph (A)— 
(i) by striking ‘‘not’’; and 
(ii) by striking ‘‘unless’’ and inserting 
‘‘if’’; 
(2) in subsection (b)— 
(A) in paragraph (3), by inserting ‘‘clauses 
(i) through (vii), (viii) (without regard to the 
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amendment made by section 2004(c)(2) of Pub-
lic Law 111–148), (x), or (xi) of’’ after ‘‘de-
scribed in’’; and 
(B) by striking paragraphs (4), (5), and 
(6); 
(3) in subsection (c)— 
(A) by striking paragraphs (3) and (4); 
(B) 
by 
redesignating 
paragraphs 
(5) 
through (8) as paragraphs (3) through (6), re-
spectively; and 
(C) in paragraph (4) (as redesignated by 
subparagraph (B)), by striking ‘‘Subject to sub-
paragraphs (D) and (E)’’ and inserting ‘‘Sub-
ject to subparagraph (D)’’; and 
(4) in subsection (d)— 
(A) in paragraph (2), by striking subpara-
graph (E); and 
(B) in paragraph (3)— 
(i) in subparagraph (A)(ii), by strik-
ing ‘‘Subject to subparagraph (B)(ii), in’’ 
and inserting ‘‘In’’; and 
(ii) by striking subparagraph (B) and 
inserting the following: 
‘‘(B) MAINTENANCE OF HEALTH OPPOR-
TUNITY
ACCOUNT
AFTER
BECOMING
INELI-
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GIBLE FOR PUBLIC BENEFIT.—Notwithstanding 
any other provision of law, if an account holder 
of a health opportunity account becomes ineli-
gible for benefits under this title because of an 
increase in income or assets— 
‘‘(i) no additional contribution shall be 
made into the account under paragraph 
(2)(A)(i); and 
‘‘(ii) the account shall remain avail-
able to the account holder for 3 years after 
the date on which the individual becomes 
ineligible for such benefits for withdrawals 
under the same terms and conditions as if 
the account holder remained eligible for 
such benefits, and such withdrawals shall 
be treated as medical assistance in accord-
ance with subsection (c)(4).’’. 
(b) CONFORMING
AMENDMENT.—Section 613 of 
Public Law 111–3 is repealed. 
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Subtitle B—Other Provisions 
SEC. 531. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL 
FITNESS PROGRAMS TREATED AS MEDICAL 
CARE. 
(a) IN GENERAL.—Subsection (d) of section 213 is 
amended by adding at the end the following new para-
graph: 
‘‘(12) EXERCISE
EQUIPMENT
AND
PHYSICAL 
FITNESS PROGRAMS.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ shall include amounts paid— 
‘‘(i) to purchase or use equipment 
used in a program (including a self-di-
rected program) of physical exercise, 
‘‘(ii) to participate, or receive instruc-
tion, in a program of physical exercise, and 
‘‘(iii) for membership dues in a fitness 
club the primary purpose of which is to 
provide access to equipment and facilities 
for physical exercise. 
‘‘(B) LIMITATION.—Amounts treated as 
medical care under subparagraph (A) shall not 
exceed $1,000 with respect to any individual for 
any taxable year.’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 532. CERTAIN NUTRITIONAL AND DIETARY SUPPLE-
MENTS TO BE TREATED AS MEDICAL CARE. 
(a) IN GENERAL.—Subsection (d) of section 213, as 
amended by section 631, is amended by adding at the end 
the following new paragraph: 
‘‘(13) NUTRITIONAL
AND
DIETARY
SUPPLE-
MENTS.— 
‘‘(A) IN
GENERAL.—The term ‘medical 
care’ shall include amounts paid to purchase 
herbs, vitamins, minerals, homeopathic rem-
edies, meal replacement products, and other di-
etary and nutritional supplements. 
‘‘(B) LIMITATION.—Amounts treated as 
medical care under subparagraph (A) shall not 
exceed $1,000 with respect to any individual for 
any taxable year. 
‘‘(C) MEAL
REPLACEMENT
PRODUCT.— 
For purposes of this paragraph, the term ‘meal 
replacement product’ means any product that— 
‘‘(i) is permitted to bear labeling mak-
ing a claim described in section 403(r)(3) 
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of the Federal Food, Drug, and Cosmetic 
Act, and 
‘‘(ii) is permitted to claim under such 
section that such product is low in fat and 
is a good source of protein, fiber, and mul-
tiple essential vitamins and minerals.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
SEC. 533. CERTAIN PROVIDER FEES TO BE TREATED AS 
MEDICAL CARE. 
(a) IN GENERAL.—Subsection (d) of section 213, as 
amended by sections 631 and 632, is amended by adding 
at the end the following new paragraph: 
‘‘(14) PERIODIC
PROVIDER
FEES.—The term 
‘medical care’ shall include periodic fees paid to a 
primary physician, physician assistant, or nurse 
practitioner for the right to receive medical services 
on an as-needed basis.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
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TITLE 
VI—COVERING 
PEOPLE 
WITH PRE-EXISTING CONDI-
TIONS, 
REMOVING 
ANNUAL 
AND 
LIFETIME 
COVERAGE 
CAPS, AND EXPANDING AC-
CESS TO CARE 
Subtitle A—Making Health Care 
Coverage Affordable for Every 
American 
CHAPTER 1—ENSURING COVERAGE FOR 
INDIVIDUALS 
WITH 
PREEXISTING 
CONDITIONS AND MULTIPLE HEALTH 
CARE NEEDS 
SEC. 601. ESTABLISH UNIVERSAL ACCESS PROGRAMS TO 
IMPROVE HIGH RISK POOLS AND REINSUR-
ANCE MARKETS. 
(a) STATE REQUIREMENT.— 
(1) IN GENERAL.—Not later than January 1, 
2014, each State shall— 
(A) subject to paragraph (3), operate— 
(i) a qualified State reinsurance pro-
gram described in subsection (b); or 
(ii) qualifying State high risk pool de-
scribed in subsection (c)(1); and 
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(B) subject to paragraph (3), apply to the 
operation of such a program from State funds 
an amount equivalent to the portion of State 
funds derived from State premium assessments 
(as defined by the Secretary) that are not oth-
erwise used on State health care programs. 
(2) RELATION TO CURRENT QUALIFIED HIGH 
RISK POOL PROGRAM.— 
(A) STATES NOT OPERATING A QUALIFIED 
HIGH RISK POOL.—In the case of a State that 
is not operating a current section 2745 quali-
fied high risk pool as of the date of the enact-
ment of this Act— 
(i) the State may only meet the re-
quirement of paragraph (1) through the 
operation of a qualified State reinsurance 
program described in subsection (b); and 
(ii) the State’s operation of such a re-
insurance program shall be treated, for 
purposes of section 2745 of the Public 
Health Service Act, as the operation of a 
qualified high risk pool described in such 
section. 
(B) STATE OPERATING A QUALIFIED HIGH 
RISK POOL.—In the case of a State that is op-
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erating a current section 2745 qualified high 
risk pool as of the date of the enactment of this 
Act— 
(i) as of January 1, 2014, such a pool 
shall not be treated as a qualified high risk 
pool under section 2745 of the Public 
Health Service Act unless the pool is a 
qualifying State high risk pool described in 
subsection (c)(1); and 
(ii) the State may use premium as-
sessment funds described in paragraph 
(1)(B) to transition from operation of such 
a pool to operation of a qualified State re-
insurance program described in subsection 
(b). 
(3) APPLICATION OF FUNDS.—If the program 
or pool operated under paragraph (1)(A) is in strong 
fiscal health, as determined in accordance with 
standards established by the National Association of 
Insurance Commissioners and as approved by the 
State Insurance Commissioner involved, the require-
ment of paragraph (1)(B) shall be deemed to be 
met. 
(b) QUALIFIED STATE REINSURANCE PROGRAM.— 
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(1) IN GENERAL.—For purposes of this section, 
a ‘‘qualified State reinsurance program’’ means a 
program operated by a State program that provides 
reinsurance for health insurance coverage offered in 
the small group market in accordance with the 
model for such a program established (as of the date 
of the enactment of this Act). 
(2) FORM OF PROGRAM.—A qualified State re-
insurance program may provide reinsurance— 
(A) on a prospective or retrospective basis; 
and 
(B) on a basis that protects health insur-
ance issuers against the annual aggregate 
spending of their enrollees as well as purchase 
protection against individual catastrophic costs. 
(3) SATISFACTION OF HIPAA REQUIREMENT.— 
A qualified State reinsurance program shall be 
deemed, for purposes of section 2745 of the Public 
Health Service Act, to be a qualified high risk pool 
under such section. 
(c) QUALIFYING STATE HIGH RISK POOL.— 
(1) IN GENERAL.—A qualifying State high risk 
pool described in this subsection means a current 
section 2745 qualified high risk pool that meets the 
following requirements: 
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(A) The pool must provide at least two 
coverage options, one of which must be a high 
deductible health plan coupled with a health 
savings account. 
(B) The pool must be funded with a stable 
funding source. 
(C) The pool must eliminate any waiting 
lists so that all eligible residents who are seek-
ing coverage through the pool should be allowed 
to receive coverage through the pool. 
(D) The pool must allow for coverage of 
individuals who, but for the 24-month disability 
waiting period under section 226(b) of the So-
cial Security Act, would be eligible for Medicare 
during the period of such waiting period. 
(E) The pool must limit the pool premiums 
to no more than 150 percent of the average 
premium for applicable standard risk rates in 
that State. 
(F) The pool must conduct education and 
outreach initiatives so that residents and bro-
kers understand that the pool is available to eli-
gible residents. 
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(G) The pool must provide coverage for 
preventive services and disease management for 
chronic diseases. 
(2) VERIFICATION OF CITIZENSHIP OR ALIEN 
QUALIFICATION.— 
(A) IN
GENERAL.—Notwithstanding any 
other provision of law, only citizens and nation-
als of the United States shall be eligible to par-
ticipate in a qualifying State high risk pool that 
receives funds under section 2745 of the Public 
Health Service Act or this section. 
(B) CONDITION OF PARTICIPATION.—As a 
condition of a State receiving such funds, the 
Secretary shall require the State to certify, to 
the satisfaction of the Secretary, that such 
State requires all applicants for coverage in the 
qualifying State high risk pool to provide satis-
factory documentation of citizenship or nation-
ality in a manner consistent with section 
1903(x) of the Social Security Act. 
(C) RECORDS.—The Secretary shall keep 
sufficient records such that a determination of 
citizenship or nationality only has to be made 
once for any individual under this paragraph. 
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(3) RELATION TO SECTION 2745.—As of Janu-
ary 1, 2014, a pool shall not qualify as qualified 
high risk pool under section 2745 of the Public 
Health Service Act unless the pool is a qualifying 
State high risk pool described in paragraph (1). 
(d) WAIVERS.—In order to accommodate new and in-
novative programs, the Secretary may waive such require-
ments of this section for qualified State reinsurance pro-
grams and for qualifying State high risk pools as the Sec-
retary deems appropriate. 
(e) FUNDING.—In addition to any other amounts ap-
propriated, there is appropriated to carry out section 2745 
of the Public Health Service Act (including through a pro-
gram or pool described in subsection (a)(1))— 
(1) $15,000,000,000 for the period of fiscal 
years 2014 through 2023; and 
(2) an additional $10,000,000,000 for the pe-
riod of fiscal years 2019 through 2023. 
(f) DEFINITIONS.—In this section: 
(1) HEALTH INSURANCE COVERAGE; HEALTH 
INSURANCE ISSUER.—The terms ‘‘health insurance 
coverage’’ and ‘‘health insurance issuer’’ have the 
meanings given such terms in section 2791 of the 
Public Health Service Act. 
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(2) CURRENT SECTION 2745 QUALIFIED HIGH 
RISK POOL.—The term ‘‘current section 2745 quali-
fied high risk pool’’ has the meaning given the term 
‘‘qualified high risk pool’’ under section 2745(g) of 
the Public Health Service Act as in effect as of the 
date of the enactment of this Act. 
(3) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
(4) STANDARD RISK RATE.—The term ‘‘stand-
ard risk rate’’ means a rate that— 
(A) is determined under the State high 
risk pool by considering the premium rates 
charged by other health insurance issuers offer-
ing health insurance coverage to individuals in 
the insurance market served; 
(B) is established using reasonable actu-
arial techniques; and 
(C) reflects anticipated claims experience 
and expenses for the coverage involved. 
(5) STATE.—The term ‘‘State’’ means any of 
the 50 States or the District of Columbia. 
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SEC. 602. ELIMINATION OF CERTAIN REQUIREMENTS FOR 
GUARANTEED AVAILABILITY IN INDIVIDUAL 
MARKET. 
(a) IN GENERAL.—Section 2741(b) of the Public 
Health Service Act (42 U.S.C. 300gg–41(b)) is amend-
ed— 
(1) in paragraph (1)— 
(A) by striking ‘‘(1)(A)’’ and inserting 
‘‘(1)’’; and 
(B) by striking ‘‘and (B)’’ and all that fol-
lows up to the semicolon at the end; 
(2) by adding ‘‘and’’ at the end of paragraph 
(2); 
(3) in paragraph (3)— 
(A) by striking ‘‘(1)(A)’’ and inserting 
‘‘(1)’’; and 
(B) by striking the semicolon at the end 
and inserting a period; and 
(4) by striking paragraphs (4) and (5). 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on the date of the enact-
ment of this Act. 
SEC. 603. NO ANNUAL OR LIFETIME SPENDING CAPS. 
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, a health insurance issuer (including an entity 
licensed to sell insurance with respect to a State or group 
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health plan) may not apply an annual or lifetime aggre-
gate spending cap on any health insurance coverage or 
plan offered by such issuer. The restriction of the previous 
sentence shall not apply with respect to a health insurance 
coverage or plan if, as of the date of the enactment of 
this Act, it would result in a significant decrease in access 
to benefits under the plan or would significantly increase 
premiums under the plan. 
(b) APPLICATION.—Subsection (a) shall be enforced 
as if it were included as a provision in parts A and B 
of title XXVII of the Public Health Service Act (as such 
title is in effect after the date of repeal of Public Law 
111–148 under section 101). 
SEC. 604. PREVENTING UNJUST CANCELLATION OF INSUR-
ANCE COVERAGE. 
(a) CLARIFICATION REGARDING APPLICATION
OF 
GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH 
INSURANCE COVERAGE.—Section 2742 of the Public 
Health Service Act (42 U.S.C. 300gg–42) is amended— 
(1) in its heading, by inserting ‘‘, CONTINU-
ATION IN FORCE, INCLUDING PROHIBITION OF 
RESCISSION,’’ 
after 
‘‘GUARANTEED
RENEW-
ABILITY’’; 
(2) in subsection (a), by inserting ‘‘, including 
without rescission,’’ after ‘‘continue in force’’; and 
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(3) in subsection (b)(2), by inserting before the 
period at the end the following: ‘‘, including inten-
tional concealment of material facts regarding a 
health condition related to the condition for which 
coverage is being claimed’’. 
(b) OPPORTUNITY FOR INDEPENDENT, EXTERNAL 
THIRD PARTY REVIEW IN CERTAIN CASES.—Subpart 1 
of part B of title XXVII of the Public Health Service Act 
is amended by adding at the end the following new section: 
‘‘SEC. 2746. OPPORTUNITY FOR INDEPENDENT, EXTERNAL 
THIRD PARTY REVIEW IN CERTAIN CASES. 
‘‘(a) NOTICE AND REVIEW RIGHT.—If a health in-
surance issuer determines to nonrenew or not continue in 
force, including rescind, health insurance coverage for an 
individual in the individual market on the basis described 
in section 2742(b)(2) before such nonrenewal, discontinu-
ation, or rescission, may take effect the issuer shall pro-
vide the individual with notice of such proposed non-
renewal, discontinuation, or rescission and an opportunity 
for a review of such determination by an independent, ex-
ternal third party under procedures specified by the Sec-
retary. 
‘‘(b) INDEPENDENT DETERMINATION.—If the indi-
vidual requests such review by an independent, external 
third party of a nonrenewal, discontinuation, or rescission 
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of health insurance coverage, the coverage shall remain in 
effect until such third party determines that the coverage 
may be nonrenewed, discontinued, or rescinded under sec-
tion 2742(b)(2).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply after the date of the enactment 
of this Act with respect to health insurance coverage 
issued before, on, or after such date. 
CHAPTER 2—REDUCING HEALTH CARE 
PREMIUMS AND THE NUMBER OF UN-
INSURED AMERICANS 
SEC. 611. STATE INNOVATION PROGRAMS. 
(a) PROGRAMS
THAT
REDUCE
THE
COST
OF 
HEALTH INSURANCE PREMIUMS.— 
(1) PAYMENTS TO STATES.— 
(A) FOR PREMIUM REDUCTIONS IN THE 
SMALL GROUP MARKET.—If the Secretary de-
termines that a State has reduced the average 
per capita premium for health insurance cov-
erage in the small group market in year 3, in 
year 6, or year 9 (as defined in subsection (c)) 
below the premium baseline for such year (as 
defined paragraph (2)), the Secretary shall pay 
the State an amount equal to the product of— 
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(i) bonus premium percentage (as de-
fined in paragraph (3)) for the State, mar-
ket, and year; and 
(ii) the maximum State premium pay-
ment amount (as defined in paragraph (4)) 
for the State, market, and year. 
(B) FOR PREMIUM REDUCTIONS IN THE 
INDIVIDUAL MARKET.—If the Secretary deter-
mines that a State has reduced the average per 
capita premium for health insurance coverage 
in the individual market in year 3, in year 6, 
or in year 9 below the premium baseline for 
such year, the Secretary shall pay the State an 
amount equal to the product of— 
(i) bonus premium percentage for the 
State, market, and year; and 
(ii) the maximum State premium pay-
ment amount for the State, market, and 
year. 
(2) PREMIUM BASELINE.—For purposes of this 
subsection, the term ‘‘premium baseline’’ means, for 
a market in a State— 
(A) for year 1, the average per capita pre-
miums for health insurance coverage in such 
market in the State in such year; or 
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100 
(B) for a subsequent year, the baseline for 
the market in the State for the previous year 
under this paragraph increased by a percentage 
specified in accordance with a formula estab-
lished by the Secretary, in consultation with the 
Congressional Budget Office and the Bureau of 
the Census, that takes into account at least the 
following: 
(i) GROWTH FACTOR.—The inflation 
in the costs of inputs to health care serv-
ices in the year. 
(ii) 
HISTORIC
PREMIUM
GROWTH 
RATES.—Historic growth rates, during the 
10 years before year 1, of per capita pre-
miums for health insurance coverage. 
(iii) 
DEMOGRAPHIC
CONSIDER-
ATIONS.—Historic average changes in the 
demographics of the population covered 
that impact on the rate of growth of per 
capita health care costs. 
(3) BONUS PREMIUM PERCENTAGE DEFINED.— 
(A) IN GENERAL.—For purposes of this 
subsection, the term ‘‘bonus premium percent-
age’’ means, for the small group market or indi-
vidual market in a State for a year, such per-
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101 
centage as determined in accordance with the 
following table based on the State’s premium 
performance level (as defined in subparagraph 
(B)) for such market and year: 
The bonus 
premium per-
centage for a 
State is— 
For year 3 if the 
premium perform-
ance level of the 
State is— 
For year 6 if the 
premium perform-
ance level of the 
State is— 
For year 9 if the 
premium perform-
ance level of the 
State is— 
100 percent 
at least 8.5% 
at least 11% 
at least 13.5% 
50 percent 
at least 6.38%, 
but less than 8.5% 
at least 10.38%, 
but less than 11% 
at least 12.88%, 
but less than 
13.5% 
25 percent 
at least 4.25%, 
but less than 
6.38% 
at least 9.75%, 
but less than 
10.38% 
at least 12.25%, 
but less than 
12.88% 
0 percent 
less than 4.25% 
less than 9.75% 
less than 12.25%. 
(B) PREMIUM PERFORMANCE LEVEL.—For 
purposes of this subsection, the term ‘‘premium 
performance level’’ means, for a State, market, 
and year, the percentage reduction in the aver-
age per capita premiums for health insurance 
coverage for the State, market, and year, as 
compared to the premium baseline for such 
State, market, and year. 
(4) 
MAXIMUM
STATE
PREMIUM
PAYMENT 
AMOUNT
DEFINED.—For purposes of this sub-
section, the term ‘‘maximum State premium pay-
ment amount’’ means, for a State for the small 
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102 
group market or the individual market for a year, 
the product of— 
(A) the proportion (as determined by the 
Secretary), of the number of nonelderly individ-
uals lawfully residing in all the States who are 
enrolled in health insurance coverage in the re-
spective market in the year, who are residents 
of the State; and 
(B) the amount available for obligation 
from amounts appropriated under subsection 
(d) for such market with respect to perform-
ance in such year. 
(5) METHODOLOGY
FOR
CALCULATING
AVER-
AGE PER CAPITA PREMIUMS.— 
(A) 
ESTABLISHMENT.—The 
Secretary 
shall establish, by rule and consistent with this 
subsection, a methodology for computing the 
average per capita premiums for health insur-
ance coverage for the small group market and 
for the individual market in each State for each 
year beginning with year 1. 
(B) ADJUSTMENTS.—Under such method-
ology, the Secretary shall provide for the fol-
lowing adjustments (in a manner determined 
appropriate by the Secretary): 
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103 
(i) EXCLUSION OF ILLEGAL ALIENS.— 
An adjustment so as not to take into ac-
count enrollees who are not lawfully 
present in the United States and their pre-
mium costs. 
(ii) TREATING STATE PREMIUM SUB-
SIDIES
AS
PREMIUM
COSTS.—An adjust-
ment so as to increase per capita pre-
miums to remove the impact of premium 
subsidies made directly by a State to re-
duce health insurance premiums. 
(6) CONDITIONS OF PAYMENT.—As a condition 
of receiving a payment under paragraph (1), a State 
must agree to submit aggregate, non-individually 
identifiable data to the Secretary, in a form and 
manner specified by the Secretary, for use by the 
Secretary to determine the State’s premium baseline 
and premium performance level for purposes of this 
subsection. 
(b) PROGRAMS THAT REDUCE THE NUMBER OF UN-
INSURED.— 
(1) IN GENERAL.—If the Secretary determines 
that a State has reduced the percentage of unin-
sured nonelderly residents in year 5, year 7, or year 
9, below the uninsured baseline (as defined in para-
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104 
graph (2)) for the State for the year, the Secretary 
shall pay the State an amount equal to the product 
of— 
(A) bonus uninsured percentage (as de-
fined in paragraph (3)) for the State and year; 
and 
(B) the maximum uninsured payment 
amount (as defined in paragraph (4)) for the 
State and year. 
(2) UNINSURED BASELINE.— 
(A) IN GENERAL.—For purposes of this 
subsection, and subject to subparagraph (B), 
the term ‘‘uninsured baseline’’ means, for a 
State, the percentage of nonelderly residents in 
the State who are uninsured in year 1. 
(B) ADJUSTMENT.—The Secretary may, at 
the written request of a State, adjust the unin-
sured baseline for States for a year to take into 
account unanticipated and exceptional changes, 
such as an unanticipated migration, of non-
elderly individuals into, or out of, States in a 
manner that does not reflect substantially the 
proportion of uninsured nonelderly residents in 
the States involved in year 1. Any such adjust-
ment shall only be done in a manner that does 
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105 
not result in the average of the uninsured base-
lines for nonelderly residents for all States 
being changed. 
(3) BONUS UNINSURED PERCENTAGE.— 
(A) BONUS
UNINSURED
PERCENTAGE.— 
For purposes of this subsection, the term 
‘‘bonus uninsured percentage’’ means, for a 
State for a year, such percentage as determined 
in accordance with the following table, based on 
the uninsured performance level (as defined in 
subparagraph (B)) for such State and year: 
The bonus un-
insured per-
centage for a 
State is— 
For year 5 if the 
uninsured per-
formance level of 
the State is— 
For year 7 if the 
uninsured per-
formance level of 
the State is— 
For year 9 if the 
uninsured per-
formance level of 
the State is— 
100 percent 
at least 10% 
at least 15% 
at least 20% 
50 percent 
at least 7.5% but 
less than 10% 
at least 13.75% 
but less than 15% 
at least 18.75% 
but less than 20% 
25 percent 
at least 5% but 
less than 7.5% 
at least 12.5% but 
less than 13.75% 
at least 17.5% but 
less than 18.75% 
0 percent 
less than 5% 
less than 12.5% 
less than 17.5%. 
(B) UNINSURED PERFORMANCE LEVEL.— 
For purposes of this subsection, the term ‘‘un-
insured performance level’’ means, for a State 
for a year, the reduction (expressed as a per-
centage) in the percentage of uninsured non-
elderly residents in such State in the year as 
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106 
compared to the uninsured baseline for such 
State for such year. 
(4) MAXIMUM
STATE
UNINSURED
PAYMENT 
AMOUNT
DEFINED.—For purposes of this sub-
section, the term ‘‘maximum State uninsured pay-
ment amount’’ means, for a State for a year, the 
product of— 
(A) the proportion (as determined by the 
Secretary), of the number of uninsured non-
elderly individuals lawfully residing in all the 
States in the year, who are residents of the 
State; and 
(B) the amount available for obligation 
under this subsection from amounts appro-
priated under subsection (d) with respect to 
performance in such year. 
(5) METHODOLOGY FOR COMPUTING THE PER-
CENTAGE OF UNINSURED NONELDERLY RESIDENTS 
IN A STATE.— 
(A) 
ESTABLISHMENT.—The 
Secretary 
shall establish, by rule and consistent with this 
subsection, a methodology for computing the 
percentage of nonelderly residents in a State 
who are uninsured in each year beginning with 
year 1. 
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107 
(B) RULES.— 
(i) TREATMENT
OF
UNINSURED.— 
Such methodology shall treat as uninsured 
those residents who do not have health in-
surance coverage or other creditable cov-
erage (as defined in section 9801(c)(1) of 
the Internal Revenue Code of 1986), ex-
cept that such methodology shall rely upon 
data on the nonelderly and uninsured pop-
ulations within each State in such year 
provided through population surveys con-
ducted by federal agencies. 
(ii) LIMITATION TO NONELDERLY.— 
Such methodology shall exclude individuals 
who are 65 years of age or older. 
(iii) 
EXCLUSION
OF
ILLEGAL 
ALIENS.—Such methodology shall exclude 
individuals not lawfully present in the 
United States. 
(6) CONDITIONS OF PAYMENT.—As a condition 
of receiving a payment under paragraph (1), a State 
must agree to submit aggregate, non-individually 
identifiable data to the Secretary, in a form and 
manner specified by the Secretary, for use by the 
Secretary in determining the State’s uninsured base-
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108 
line and uninsured performance level for purposes of 
this subsection. 
(c) DEFINITIONS.—For purposes of this section: 
(1) GROUP HEALTH PLAN.—The term ‘‘group 
health plan’’ has the meaning given such term in 
section 9832(a) of the Internal Revenue Code of 
1986. 
(2) HEALTH INSURANCE COVERAGE.—The term 
‘‘health insurance coverage’’ has the meaning given 
such term in section 9832(b)(1) of the Internal Rev-
enue Code of 1986. 
(3) INDIVIDUAL MARKET.—Except as the Sec-
retary may otherwise provide in the case of group 
health plans that have fewer than 2 participants as 
current employees on the first day of a plan year, 
the term ‘‘individual market’’ means the market for 
health insurance coverage offered to individuals 
other than in connection with a group health plan. 
(4) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Health and Human Services. 
(5) SMALL GROUP MARKET.—The term ‘‘small 
group market’’ means the market for health insur-
ance coverage under which individuals obtain health 
insurance coverage (directly or through any arrange-
ment) on behalf of themselves (and their depend-
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109 
ents) through a group health plan maintained by an 
employer who employed on average at least 2 but 
not more than 50 employees on business days during 
a calendar year. 
(6) STATE.—The term ‘‘State’’ means any of 
the 50 States and the District of Columbia. 
(7) YEARS.—The terms ‘‘year 1’’, ‘‘year 2’’, 
‘‘year 3’’, and similar subsequently numbered years 
mean 2014, 2015, 2016, and subsequent sequen-
tially numbered years. 
(d) APPROPRIATIONS; PAYMENTS.— 
(1) PAYMENTS FOR REDUCTIONS IN COST OF 
HEALTH INSURANCE COVERAGE.— 
(A) SMALL GROUP MARKET.— 
(i) IN GENERAL.—From any funds in 
the Treasury not otherwise appropriated, 
there is appropriated for payments under 
subsection (a)(1)(A)— 
(I) $18,000,000,000 with respect 
to performance in year 3; 
(II) $5,000,000,000 with respect 
to performance in year 6; and 
(III) $2,000,000,000 with re-
spect to performance in year 9. 
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(ii) AVAILABILITY OF APPROPRIATED 
FUNDS.—Funds appropriated under clause 
(i) shall remain available until expended. 
(B) INDIVIDUAL MARKET.— 
(i) IN
GENERAL.—Subject to clause 
(ii), from any funds in the Treasury not 
otherwise appropriated, there is appro-
priated for payments under subsection 
(a)(1)(B)— 
(I) $7,000,000,000 with respect 
to performance in year 3; 
(II) $2,000,000,000 with respect 
to performance in year 6; and 
(III) $1,000,000,000 with re-
spect to performance in year 9. 
(ii) AVAILABILITY OF APPROPRIATED 
FUNDS.—Of the funds appropriated under 
clause (i) that are not expended or obli-
gated by the end of the year following the 
year for which the funds are appro-
priated— 
(I) 75 percent shall remain avail-
able until expended for payments 
under subsection (a)(1)(B); and 
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(II) 25 percent shall remain 
available until expended for payments 
under subsection (a)(1)(A). 
(2) PAYMENTS FOR REDUCTIONS IN THE PER-
CENTAGE OF UNINSURED.— 
(A) IN GENERAL.—From any funds in the 
Treasury not otherwise appropriated, there is 
appropriated for payments under subsection 
(b)(1)— 
(i) $10,000,000,000 with respect to 
performance in year 5; 
(ii) $3,000,000,000 with respect to 
performance in year 7; and 
(iii) $2,000,000,000 with respect to 
performance in year 9. 
(B) 
AVAILABILITY
OF
APPROPRIATED 
FUNDS.—Funds appropriated under subpara-
graph (A) shall remain available until expended. 
(3) PAYMENT
TIMING.—Payments under this 
section shall be made in a form and manner speci-
fied by the Secretary in the year after the perform-
ance year involved. 
SEC. 612. HEALTH PLAN FINDERS. 
(a) STATE PLAN FINDERS.—Not later than 12 
months after the date of the enactment of this Act, each 
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State may contract with a private entity to develop and 
operate a plan finder website (referred to in this section 
as a ‘‘State plan finder’’) which shall provide information 
to individuals in such State on plans of health insurance 
coverage that are available to individuals in such State (in 
this section referred to as a ‘‘health insurance plan’’). 
Such State may not operate a plan finder itself. 
(b) MULTI-STATE PLAN FINDERS.— 
(1) IN GENERAL.—A private entity may operate 
a multi-State finder that operates under this section 
in the States involved in the same manner as a State 
plan finder would operate in a single State. 
(2) SHARING OF INFORMATION.—States shall 
regulate the manner in which data is shared between 
plan finders to ensure consistency and accuracy in 
the information about health insurance plans con-
tained in such finders. 
(c) REQUIREMENTS FOR PLAN FINDERS.—Each plan 
finder shall meet the following requirements: 
(1) The plan finder shall ensure that each 
health insurance plan in the plan finder meets the 
requirements for such plans under subsection (d). 
(2) The plan finder shall present complete in-
formation on the costs and benefits of health insur-
ance plans (including information on monthly pre-
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mium, copayments, and deductibles) in a uniform 
manner that— 
(A) uses the standard definitions developed 
under paragraph (3); and 
(B) is designed to allow consumers to eas-
ily compare such plans. 
(3) The plan finder shall be available on the 
Internet and accessible to all individuals in the State 
or, in the case of a multi-State plan finder, in all 
States covered by the multi-State plan finder. 
(4) The plan finder shall allow consumers to 
search and sort data on the health insurance plans 
in the plan finder on criteria such as coverage of 
specific benefits (such as coverage of disease man-
agement services or pediatric care services), as well 
as data available on quality. 
(5) The plan finder shall meet all relevant State 
laws and regulations, including laws and regulations 
related to the marketing of insurance products. In 
the case of a multi-State plan finder, the finder shall 
meet such laws and regulations for all of the States 
involved. 
(6) The plan finder shall meet solvency, finan-
cial, and privacy requirements established by the 
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State or States in which the plan finder operates or 
the Secretary for multi-State finders. 
(7) The plan finder and the employees of the 
plan finder shall be appropriately licensed in the 
State or States in which the plan finder operates, if 
such licensure is required by such State or States. 
(8) Notwithstanding subsection (f)(1), the plan 
finder shall assist individuals who are eligible for the 
Medicaid program under title XIX of the Social Se-
curity Act or State Children’s Health Insurance Pro-
gram under title XXI of such Act by including infor-
mation on Medicaid options, eligibility, and how to 
enroll. 
(d) REQUIREMENTS FOR PLANS PARTICIPATING IN 
A PLAN FINDER.— 
(1) IN GENERAL.—Each State shall ensure that 
health insurance plans participating in the State 
plan finder or in a multi-State plan finder meet the 
requirements of paragraph (2) (relating to adequacy 
of insurance coverage, consumer protection, and fi-
nancial strength). 
(2) SPECIFIC
REQUIREMENTS.—In order to 
participate in a plan finder, a health insurance plan 
must meet all of the following requirements, as de-
termined by each State in which such plan operates: 
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(A) The health insurance plan shall be ac-
tuarially sound. 
(B) The health insurance plan may not 
have a history of abusive policy rescissions. 
(C) The health insurance plan shall meet 
financial and solvency requirements. 
(D) The health insurance plan shall dis-
close— 
(i) all financial arrangements involv-
ing the sale and purchase of health insur-
ance, such as the payment of fees and 
commissions; and 
(ii) such arrangements may not be 
abusive. 
(E) The health insurance plan shall main-
tain electronic health records that comply with 
the requirements of the American Recovery and 
Reinvestment Act of 2009 (Public Law 111–5) 
related to electronic health records. 
(F) The health insurance plan shall make 
available to plan enrollees via the finder, wheth-
er by information provided to the finder or by 
a website link directing the enrollee from the 
finder to the health insurance plan website, 
data that includes the price and cost to the in-
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dividual of services offered by a provider ac-
cording to the terms and conditions of the 
health plan. Data described in this paragraph is 
not made public by the finder, only made avail-
able to the individual once enrolled in the 
health plan. 
(e) PROHIBITIONS.— 
(1) DIRECT
ENROLLMENT.—The State plan 
finder may not directly enroll individuals in health 
insurance plans. 
(2) CONFLICTS OF INTEREST.— 
(A) 
COMPANIES.—A 
health 
insurance 
issuer offering a health insurance plan through 
a plan finder may not— 
(i) be the private entity developing 
and maintaining a plan finder under sub-
sections (a) and (b); or 
(ii) have an ownership interest in such 
private entity or in the plan finder. 
(B) 
INDIVIDUALS.—An 
individual 
em-
ployed by a health insurance issuer offering a 
health insurance plan through a plan finder 
may not serve as a director or officer for— 
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(i) the private entity developing and 
maintaining a plan finder under sub-
sections (a) and (b); or 
(ii) the plan finder. 
(f) CONSTRUCTION.—Nothing in this section shall be 
construed to allow the Secretary authority to regulate ben-
efit packages or to prohibit health insurance brokers and 
agents from— 
(1) utilizing the plan finder for any purpose; or 
(2) marketing or offering health insurance 
products. 
(g) PLAN FINDER DEFINED.—For purposes of this 
section, the term ‘‘plan finder’’ means a State plan finder 
under subsection (a) or a multi-State plan finder under 
subsection (b). 
(h) STATE DEFINED.—In this section, the term 
‘‘State’’ has the meaning given such term for purposes of 
title XIX of the Social Security Act. 
SEC. 613. ADMINISTRATIVE SIMPLIFICATION. 
(a) OPERATING RULES FOR HEALTH INFORMATION 
TRANSACTIONS.— 
(1) DEFINITION OF OPERATING RULES.—Sec-
tion 1171 of the Social Security Act (42 U.S.C. 
1320d) is amended by adding at the end the fol-
lowing: 
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‘‘(9) OPERATING RULES.—The term ‘operating 
rules’ means the necessary business rules and guide-
lines for the electronic exchange of information that 
are not defined by a standard or its implementation 
specifications as adopted for purposes of this part.’’. 
(2) OPERATING
RULES
AND
COMPLIANCE.— 
Section 1173 of the Social Security Act (42 U.S.C. 
1320d–2) is amended— 
(A) in subsection (a)(2), by adding at the 
end the following new subparagraph: 
‘‘(J) Electronic funds transfers.’’; and 
(B) by adding at the end the following new 
subsections: 
‘‘(g) OPERATING RULES.— 
‘‘(1) IN GENERAL.—The Secretary shall adopt 
a single set of operating rules for each transaction 
described in subsection (a)(2) with the goal of cre-
ating as much uniformity in the implementation of 
the electronic standards as possible. Such operating 
rules shall be consensus-based and reflect the nec-
essary business rules affecting health plans and 
health care providers and the manner in which they 
operate pursuant to standards issued under Health 
Insurance Portability and Accountability Act of 
1996. 
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‘‘(2) OPERATING
RULES
DEVELOPMENT.—In 
adopting operating rules under this subsection, the 
Secretary shall rely on recommendations for oper-
ating rules developed by a qualified nonprofit entity, 
as selected by the Secretary, that meets the fol-
lowing requirements: 
‘‘(A) The entity focuses its mission on ad-
ministrative simplification. 
‘‘(B) The entity demonstrates an estab-
lished multi-stakeholder and consensus-based 
process for development of operating rules, in-
cluding representation by or participation from 
health plans, health care providers, vendors, rel-
evant Federal agencies, and other standard de-
velopment organizations. 
‘‘(C) The entity has established a public 
set of guiding principles that ensure the oper-
ating rules and process are open and trans-
parent. 
‘‘(D) The entity coordinates its activities 
with the HIT Policy Committee and the HIT 
Standards Committee (as established under 
title XXX of the Public Health Service Act) 
and complements the efforts of the Office of the 
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National Healthcare Coordinator and its related 
health information exchange goals. 
‘‘(E) The entity incorporates national 
standards, including the transaction standards 
issued under Health Insurance Portability and 
Accountability Act of 1996. 
‘‘(F) The entity supports nondiscrimina-
tion and conflict of interest policies that dem-
onstrate a commitment to open, fair, and non-
discriminatory practices. 
‘‘(G) The entity allows for public review 
and updates of the operating rules. 
‘‘(3) REVIEW
AND
RECOMMENDATIONS.—The 
National Committee on Vital and Health Statistics 
shall— 
‘‘(A) review the operating rules developed 
by a nonprofit entity described under paragraph 
(2); 
‘‘(B) determine whether such rules rep-
resent a consensus view of the health care in-
dustry and are consistent with and do not alter 
current standards; 
‘‘(C) evaluate whether such rules are con-
sistent with electronic standards adopted for 
health information technology; and 
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121 
‘‘(D) submit to the Secretary a rec-
ommendation as to whether the Secretary 
should adopt such rules. 
‘‘(4) IMPLEMENTATION.— 
‘‘(A) IN
GENERAL.—The Secretary shall 
adopt operating rules under this subsection, by 
regulation in accordance with subparagraph 
(C), following consideration of the rules devel-
oped by the non-profit entity described in para-
graph (2) and the recommendation submitted 
by the National Committee on Vital and Health 
Statistics under paragraph (3)(D) and having 
ensured consultation with providers. 
‘‘(B) ADOPTION
REQUIREMENTS; EFFEC-
TIVE DATES.— 
‘‘(i) ELIGIBILITY
FOR
A
HEALTH 
PLAN AND HEALTH CLAIM STATUS.—The 
set of operating rules for transactions for 
eligibility for a health plan and health 
claim status shall be adopted not later 
than July 1, 2015, in a manner ensuring 
that such rules are effective not later than 
January 1, 2017, and may allow for the 
use of a machine readable identification 
card. 
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122 
‘‘(ii) ELECTRONIC FUNDS TRANSFERS 
AND HEALTH CARE PAYMENT AND REMIT-
TANCE
ADVICE.—The set of operating 
rules for electronic funds transfers and 
health care payment and remittance advice 
shall be adopted not later than July 1, 
2016, in a manner ensuring that such 
rules are effective not later than January 
1, 2018. 
‘‘(iii) OTHER
COMPLETED
TRANS-
ACTIONS.—The set of operating rules for 
the remainder of the completed trans-
actions described in subsection (a)(2), in-
cluding health claims or equivalent encoun-
ter 
information, 
enrollment 
and 
disenrollment in a health plan, health plan 
premium payments, and referral certifi-
cation and authorization, shall be adopted 
not later than July 1, 2018, in a manner 
ensuring that such rules are effective not 
later than January 1, 2020. 
‘‘(C) EXPEDITED RULEMAKING.—The Sec-
retary shall promulgate an interim final rule 
applying any standard or operating rule rec-
ommended by the National Committee on Vital 
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and Health Statistics pursuant to paragraph 
(3). The Secretary shall accept public comments 
on any interim final rule published under this 
subparagraph for 60 days after the date of such 
publication. 
‘‘(h) COMPLIANCE.— 
‘‘(1) HEALTH PLAN CERTIFICATION.— 
‘‘(A) ELIGIBILITY FOR A HEALTH PLAN, 
HEALTH
CLAIM
STATUS, ELECTRONIC
FUNDS 
TRANSFERS, HEALTH CARE PAYMENT AND RE-
MITTANCE ADVICE.—Not later than December 
31, 2017, a health plan shall file a statement 
with the Secretary, in such form as the Sec-
retary may require, certifying that the data and 
information systems for such plan are in com-
pliance with any applicable standards (as de-
scribed under paragraph (7) of section 1171) 
and operating rules (as described under para-
graph (9) of such section) for electronic funds 
transfers, eligibility for a health plan, health 
claim status, and health care payment and re-
mittance advice, respectively. 
‘‘(B) 
OTHER
COMPLETED
TRANS-
ACTIONS.—Not later than December 31, 2019, 
a health plan shall file a statement with the 
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Secretary, in such form as the Secretary may 
require, certifying that the data and informa-
tion systems for such plan are in compliance 
with any applicable standards and operating 
rules for the remainder of the completed trans-
actions described in subsection (a)(2), including 
health claims or equivalent encounter informa-
tion, enrollment and disenrollment in a health 
plan, health plan premium payments, and refer-
ral certification and authorization, respectively. 
A health plan shall provide the same level of 
documentation to certify compliance with such 
transactions as is required to certify compliance 
with the transactions specified in subparagraph 
(A). 
‘‘(2) DOCUMENTATION
OF
COMPLIANCE.—A 
health plan shall provide the Secretary, in such form 
as the Secretary may require, with adequate docu-
mentation of compliance with the standards and op-
erating rules described under paragraph (1). A 
health plan shall not be considered to have provided 
adequate documentation and shall not be certified as 
being in compliance with such standards, unless the 
health plan— 
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‘‘(A) demonstrates to the Secretary that 
the plan conducts the electronic transactions 
specified in paragraph (1) in a manner that 
fully complies with the regulations of the Sec-
retary; and 
‘‘(B) provides documentation showing that 
the plan has completed end-to-end testing for 
such transactions with their partners, such as 
hospitals and physicians. 
‘‘(3) SERVICE CONTRACTS.—A health plan shall 
be required to comply with any applicable certifi-
cation and compliance requirements (and provide the 
Secretary with adequate documentation of such com-
pliance) under this subsection for any entities that 
provide services pursuant to a contract with such 
health plan. 
‘‘(4) CERTIFICATION
BY
OUTSIDE
ENTITY.— 
The Secretary may contract with an independent, 
outside entity to certify that a health plan has com-
plied with the requirements under this subsection, 
provided that the certification standards employed 
by such entities are in accordance with any stand-
ards or rules issued by the Secretary. 
‘‘(5) COMPLIANCE WITH REVISED STANDARDS 
AND RULES.—A health plan (including entities de-
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scribed under paragraph (3)) shall comply with the 
certification and documentation requirements under 
this subsection for any interim final rule promul-
gated by the Secretary under subsection (i) that 
amends any standard or operating rule described 
under paragraph (1) of this subsection. A health 
plan shall comply with such requirements not later 
than the effective date of the applicable interim final 
rule. 
‘‘(6) AUDITS
OF
HEALTH
PLANS.—The Sec-
retary shall conduct periodic audits to ensure that 
health plans (including entities described under 
paragraph (3)) are in compliance with any standards 
and operating rules that are described under para-
graph (1). 
‘‘(i) REVIEW AND AMENDMENT OF STANDARDS AND 
RULES.— 
‘‘(1) ESTABLISHMENT.—Not later than Janu-
ary 1, 2018, the Secretary shall establish a review 
committee (as described under paragraph (4)). 
‘‘(2) EVALUATIONS AND REPORTS.— 
‘‘(A) HEARINGS.—Not later than April 1, 
2018, and not less than biennially thereafter, 
the Secretary, acting through the review com-
mittee, shall conduct hearings to evaluate and 
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127 
review the existing standards and operating 
rules established under this section. 
‘‘(B) REPORT.—Not later than July 1, 
2018, and not less than biennially thereafter, 
the 
review 
committee 
shall 
provide 
rec-
ommendations for updating and improving such 
standards and rules. The review committee 
shall recommend a single set of operating rules 
per transaction standard and maintain the goal 
of creating as much uniformity as possible in 
the implementation of the electronic standards. 
‘‘(3) INTERIM FINAL RULEMAKING.— 
‘‘(A) IN GENERAL.—Any recommendations 
to amend existing standards and operating 
rules that have been approved by the review 
committee and reported to the Secretary under 
paragraph (2)(B) shall be adopted by the Sec-
retary through promulgation of an interim final 
rule not later than 90 days after receipt of the 
committee’s report. 
‘‘(B) PUBLIC COMMENT.— 
‘‘(i) PUBLIC COMMENT PERIOD.—The 
Secretary shall accept public comments on 
any interim final rule published under this 
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128 
paragraph for 60 days after the date of 
such publication. 
‘‘(ii) EFFECTIVE DATE.—The effective 
date of any amendment to existing stand-
ards or operating rules that is adopted 
through an interim final rule published 
under this paragraph shall be 25 months 
following the close of such public comment 
period. 
‘‘(4) REVIEW COMMITTEE.— 
‘‘(A) DEFINITION.—For the purposes of 
this subsection, the term ‘review committee’ 
means a committee within the Department of 
Health and Human services that has been des-
ignated by the Secretary to carry out this sub-
section, including— 
‘‘(i) the National Committee on Vital 
and Health Statistics; or 
‘‘(ii) any appropriate committee as de-
termined by the Secretary. 
‘‘(B) COORDINATION
OF
HIT
STAND-
ARDS.—In developing recommendations under 
this subsection, the review committee shall con-
sider the standards approved by the Office of 
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129 
the National Coordinator for Health Informa-
tion Technology. 
‘‘(j) PENALTIES.— 
‘‘(1) PENALTY FEE.— 
‘‘(A) IN GENERAL.—Not later than April 
1, 2018, and annually thereafter, the Secretary 
shall assess a penalty fee (as determined under 
subparagraph (B)) against a health plan that 
has failed to meet the requirements under sub-
section (h) with respect to certification and doc-
umentation of compliance with the standards 
(and their operating rules) as described under 
paragraph (1) of such subsection. 
‘‘(B) FEE AMOUNT.—Subject to subpara-
graphs (C), (D), and (E), the Secretary shall 
assess a penalty fee against a health plan in the 
amount of $1 per covered life until certification 
is complete. The penalty shall be assessed per 
person covered by the plan for which its data 
systems for major medical policies are not in 
compliance and shall be imposed against the 
health plan for each day that the plan is not in 
compliance with the requirements under sub-
section (h). 
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130 
‘‘(C) ADDITIONAL
PENALTY
FOR
MIS-
REPRESENTATION.—A health plan that know-
ingly provides inaccurate or incomplete informa-
tion in a statement of certification or docu-
mentation of compliance under subsection (h) 
shall be subject to a penalty fee that is double 
the amount that would otherwise be imposed 
under this subsection. 
‘‘(D) 
ANNUAL
FEE
INCREASE.—The 
amount of the penalty fee imposed under this 
subsection shall be increased on an annual basis 
by the annual percentage increase in total na-
tional health care expenditures, as determined 
by the Secretary. 
‘‘(E) PENALTY LIMIT.—A penalty fee as-
sessed against a health plan under this sub-
section shall not exceed, on an annual basis— 
‘‘(i) an amount equal to $20 per cov-
ered life under such plan; or 
‘‘(ii) an amount equal to $40 per cov-
ered life under the plan if such plan has 
knowingly provided inaccurate or incom-
plete information (as described under sub-
paragraph (C)). 
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‘‘(F) DETERMINATION OF COVERED INDI-
VIDUALS.—The Secretary shall determine the 
number of covered lives under a health plan 
based upon the most recent statements and fil-
ings that have been submitted by such plan to 
the Securities and Exchange Commission. 
‘‘(2) NOTICE AND DISPUTE PROCEDURE.—The 
Secretary shall establish a procedure for assessment 
of penalty fees under this subsection that provides a 
health plan with reasonable notice and a dispute res-
olution procedure prior to provision of a notice of as-
sessment by the Secretary of the Treasury (as de-
scribed under paragraph (4)(B)). 
‘‘(3) PENALTY FEE REPORT.—Not later than 
May 1, 2018, and annually thereafter, the Secretary 
shall provide the Secretary of the Treasury with a 
report identifying those health plans that have been 
assessed a penalty fee under this subsection. 
‘‘(4) COLLECTION OF PENALTY FEE.— 
‘‘(A) IN GENERAL.—The Secretary of the 
Treasury, acting through the Financial Man-
agement Service, shall administer the collection 
of penalty fees from health plans that have been 
identified by the Secretary in the penalty fee re-
port provided under paragraph (3). 
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‘‘(B) NOTICE.—Not later than August 1, 
2018, and annually thereafter, the Secretary of 
the Treasury shall provide notice to each health 
plan that has been assessed a penalty fee by the 
Secretary under this subsection. Such notice 
shall include the amount of the penalty fee as-
sessed by the Secretary and the due date for 
payment of such fee to the Secretary of the 
Treasury (as described in subparagraph (C)). 
‘‘(C) PAYMENT DUE DATE.—Payment by a 
health plan for a penalty fee assessed under 
this subsection shall be made to the Secretary 
of the Treasury not later than November 1, 
2018, and annually thereafter. 
‘‘(D) 
UNPAID
PENALTY
FEES.—Any 
amount of a penalty fee assessed against a 
health plan under this subsection for which pay-
ment has not been made by the due date pro-
vided under subparagraph (C) shall be— 
‘‘(i) increased by the interest accrued 
on such amount, as determined pursuant 
to the underpayment rate established 
under section 6601 of the Internal Rev-
enue Code of 1986; and 
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‘‘(ii) treated as a past-due, legally en-
forceable debt owed to a Federal agency 
for purposes of section 6402(d) of the In-
ternal Revenue Code of 1986. 
‘‘(E) ADMINISTRATIVE
FEES.—Any fee 
charged or allocated for collection activities con-
ducted by the Financial Management Service 
will be passed on to a health plan on a pro-rata 
basis and added to any penalty fee collected 
from the plan.’’. 
(b) PROMULGATION OF RULES.— 
(1) UNIQUE HEALTH PLAN IDENTIFIER.—The 
Secretary shall promulgate a final rule to establish 
a unique health plan identifier (as described in sec-
tion 1173(b) of the Social Security Act (42 U.S.C. 
1320d–2(b))) based on the input of the National 
Committee of Vital and Health Statistics. The Sec-
retary may do so on an interim final basis and such 
rule shall be effective not later than October 1, 
2016. 
(2) ELECTRONIC FUNDS TRANSFER.—The Sec-
retary shall promulgate a final rule to establish a 
standard for electronic funds transfers (as described 
in section 1173(a)(2)(J) of the Social Security Act, 
as added by subsection (a)(2)(A)). The Secretary 
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134 
may do so on an interim final basis and shall adopt 
such standard not later than January 1, 2016, in a 
manner ensuring that such standard is effective not 
later than January 1, 2018. 
(c) EXPANSION OF ELECTRONIC TRANSACTIONS IN 
MEDICARE.—Section 1862(a) of the Social Security Act 
(42 U.S.C. 1395y(a)) is amended— 
(1) in paragraph (23), by striking the ‘‘or’’ at 
the end; 
(2) in paragraph (24), by striking the period 
and inserting ‘‘; or’’; and 
(3) by inserting after paragraph (24) the fol-
lowing new paragraph: 
‘‘(25) not later than January 1, 2018, for 
which the payment is other than by electronic funds 
transfer (EFT) or an electronic remittance in a form 
as specified in ASC X12 835 Health Care Payment 
and Remittance Advice or subsequent standard.’’. 
(d) MEDICARE
AND MEDICAID COMPLIANCE RE-
PORTS.—Not later than July 1, 2017, the Secretary of 
Health and Human Services shall submit a report to the 
chairs and ranking members of the Committee on Ways 
and Means and the Committee on Energy and Commerce 
of the House of Representatives and the chairs and rank-
ing members of the Committee on Health, Education, 
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Labor, and Pensions and the Committee on Finance of 
the Senate on the extent to which the Medicare program 
and providers that serve beneficiaries under that program, 
and State Medicaid programs and providers that serve 
beneficiaries under those programs, transact electronically 
in accordance with transaction standards issued under the 
Health Insurance Portability and Accountability Act of 
1996, part C of title XI of the Social Security Act, and 
regulations promulgated under such Acts. 
Subtitle B—Improving Access to 
Health Care 
CHAPTER 
1—EXPANDING 
ACCESS 
AND 
LOWERING COSTS FOR SMALL BUSI-
NESSES 
SEC. 620. SHORT TITLE. 
This chapter may be cited as the ‘‘Small Business 
Health Fairness Act of 2013’’. 
SEC. 
621. 
RULES 
GOVERNING 
ASSOCIATION 
HEALTH 
PLANS. 
(a) IN GENERAL.—Subtitle B of title I of the Em-
ployee Retirement Income Security Act of 1974 is amend-
ed by adding after part 7 the following new part: 
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‘‘PART 8—RULES GOVERNING ASSOCIATION 
HEALTH PLANS 
‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 
‘‘(a) IN GENERAL.—For purposes of this part, the 
term ‘association health plan’ means a group health plan 
whose sponsor is (or is deemed under this part to be) de-
scribed in subsection (b). 
‘‘(b) SPONSORSHIP.—The sponsor of a group health 
plan is described in this subsection if such sponsor— 
‘‘(1) is organized and maintained in good faith, 
with a constitution and bylaws specifically stating its 
purpose and providing for periodic meetings on at 
least an annual basis, as a bona fide trade associa-
tion, a bona fide industry association (including a 
rural electric cooperative association or a rural tele-
phone cooperative association), a bona fide profes-
sional association, or a bona fide chamber of com-
merce (or similar bona fide business association, in-
cluding a corporation or similar organization that 
operates on a cooperative basis (within the meaning 
of section 1381 of the Internal Revenue Code of 
1986)), for substantial purposes other than that of 
obtaining or providing medical care; 
‘‘(2) is established as a permanent entity which 
receives the active support of its members and re-
quires for membership payment on a periodic basis 
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of dues or payments necessary to maintain eligibility 
for membership in the sponsor; and 
‘‘(3) does not condition membership, such dues 
or payments, or coverage under the plan on the 
basis of health status-related factors with respect to 
the employees of its members (or affiliated mem-
bers), or the dependents of such employees, and does 
not condition such dues or payments on the basis of 
group health plan participation. 
Any sponsor consisting of an association of entities which 
meet the requirements of paragraphs (1), (2), and (3) 
shall be deemed to be a sponsor described in this sub-
section. 
‘‘SEC. 
802. 
CERTIFICATION 
OF 
ASSOCIATION 
HEALTH 
PLANS. 
‘‘(a) IN GENERAL.—The applicable authority shall 
prescribe by regulation a procedure under which, subject 
to subsection (b), the applicable authority shall certify as-
sociation health plans which apply for certification as 
meeting the requirements of this part. 
‘‘(b) STANDARDS.—Under the procedure prescribed 
pursuant to subsection (a), in the case of an association 
health plan that provides at least one benefit option which 
does not consist of health insurance coverage, the applica-
ble authority shall certify such plan as meeting the re-
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quirements of this part only if the applicable authority is 
satisfied that the applicable requirements of this part are 
met (or, upon the date on which the plan is to commence 
operations, will be met) with respect to the plan. 
‘‘(c) REQUIREMENTS APPLICABLE
TO CERTIFIED 
PLANS.—An association health plan with respect to which 
certification under this part is in effect shall meet the ap-
plicable requirements of this part, effective on the date 
of certification (or, if later, on the date on which the plan 
is to commence operations). 
‘‘(d) REQUIREMENTS
FOR
CONTINUED
CERTIFI-
CATION.—The applicable authority may provide by regula-
tion for continued certification of association health plans 
under this part. 
‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED 
PLANS.—The applicable authority shall establish a class 
certification procedure for association health plans under 
which all benefits consist of health insurance coverage. 
Under such procedure, the applicable authority shall pro-
vide for the granting of certification under this part to 
the plans in each class of such association health plans 
upon appropriate filing under such procedure in connec-
tion with plans in such class and payment of the pre-
scribed fee under section 807(a). 
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139 
‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION 
HEALTH PLANS.—An association health plan which offers 
one or more benefit options which do not consist of health 
insurance coverage may be certified under this part only 
if such plan consists of any of the following: 
‘‘(1) a plan which offered such coverage on the 
date of the enactment of the Small Business Health 
Fairness Act of 2013, 
‘‘(2) a plan under which the sponsor does not 
restrict membership to one or more trades and busi-
nesses or industries and whose eligible participating 
employers represent a broad cross-section of trades 
and businesses or industries, or 
‘‘(3) a plan whose eligible participating employ-
ers represent one or more trades or businesses, or 
one or more industries, consisting of any of the fol-
lowing: agriculture; equipment and automobile deal-
erships; barbering and cosmetology; certified public 
accounting practices; child care; construction; dance, 
theatrical and orchestra productions; disinfecting 
and pest control; financial services; fishing; food 
service establishments; hospitals; labor organiza-
tions; logging; manufacturing (metals); mining; med-
ical and dental practices; medical laboratories; pro-
fessional consulting services; sanitary services; trans-
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portation (local and freight); warehousing; whole-
saling/distributing; or any other trade or business or 
industry which has been indicated as having average 
or above-average risk or health claims experience by 
reason of State rate filings, denials of coverage, pro-
posed premium rate levels, or other means dem-
onstrated by such plan in accordance with regula-
tions. 
‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 
BOARDS OF TRUSTEES. 
‘‘(a) SPONSOR.—The requirements of this subsection 
are met with respect to an association health plan if the 
sponsor has met (or is deemed under this part to have 
met) the requirements of section 801(b) for a continuous 
period of not less than 3 years ending with the date of 
the application for certification under this part. 
‘‘(b) BOARD OF TRUSTEES.—The requirements of 
this subsection are met with respect to an association 
health plan if the following requirements are met: 
‘‘(1) FISCAL CONTROL.—The plan is operated, 
pursuant to a trust agreement, by a board of trust-
ees which has complete fiscal control over the plan 
and which is responsible for all operations of the 
plan. 
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141 
‘‘(2) RULES
OF
OPERATION
AND
FINANCIAL 
CONTROLS.—The board of trustees has in effect 
rules of operation and financial controls, based on a 
3-year plan of operation, adequate to carry out the 
terms of the plan and to meet all requirements of 
this title applicable to the plan. 
‘‘(3) RULES
GOVERNING
RELATIONSHIP
TO 
PARTICIPATING
EMPLOYERS
AND
TO
CONTRAC-
TORS.— 
‘‘(A) BOARD MEMBERSHIP.— 
‘‘(i) IN
GENERAL.—Except as pro-
vided in clauses (ii) and (iii), the members 
of the board of trustees are individuals se-
lected from individuals who are the owners, 
officers, directors, or employees of the par-
ticipating employers or who are partners in 
the participating employers and actively 
participate in the business. 
‘‘(ii) LIMITATION.— 
‘‘(I) GENERAL RULE.—Except as 
provided in subclauses (II) and (III), 
no such member is an owner, officer, 
director, or employee of, or partner in, 
a contract administrator or other 
service provider to the plan. 
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142 
‘‘(II) LIMITED
EXCEPTION
FOR 
PROVIDERS OF SERVICES SOLELY ON 
BEHALF OF THE SPONSOR.—Officers 
or employees of a sponsor which is a 
service provider (other than a contract 
administrator) to the plan may be 
members of the board if they con-
stitute not more than 25 percent of 
the membership of the board and they 
do not provide services to the plan 
other than on behalf of the sponsor. 
‘‘(III) 
TREATMENT
OF
PRO-
VIDERS
OF
MEDICAL
CARE.—In the 
case of a sponsor which is an associa-
tion whose membership consists pri-
marily of providers of medical care, 
subclause (I) shall not apply in the 
case of any service provider described 
in subclause (I) who is a provider of 
medical care under the plan. 
‘‘(iii) CERTAIN
PLANS
EXCLUDED.— 
Clause (i) shall not apply to an association 
health plan which is in existence on the 
date of the enactment of the Small Busi-
ness Health Fairness Act of 2013. 
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143 
‘‘(B) SOLE
AUTHORITY.—The board has 
sole authority under the plan to approve appli-
cations for participation in the plan and to con-
tract with a service provider to administer the 
day-to-day affairs of the plan. 
‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 
the case of a group health plan which is established and 
maintained by a franchiser for a franchise network con-
sisting of its franchisees— 
‘‘(1) the requirements of subsection (a) and sec-
tion 801(a) shall be deemed met if such require-
ments would otherwise be met if the franchiser were 
deemed to be the sponsor referred to in section 
801(b), such network were deemed to be an associa-
tion described in section 801(b), and each franchisee 
were deemed to be a member (of the association and 
the sponsor) referred to in section 801(b); and 
‘‘(2) the requirements of section 804(a)(1) shall 
be deemed met. 
The Secretary may by regulation define for purposes of 
this subsection the terms ‘franchiser’, ‘franchise network’, 
and ‘franchisee’. 
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144 
‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE-
MENTS. 
‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 
requirements of this subsection are met with respect to 
an association health plan if, under the terms of the 
plan— 
‘‘(1) each participating employer must be— 
‘‘(A) a member of the sponsor, 
‘‘(B) the sponsor, or 
‘‘(C) an affiliated member of the sponsor 
with respect to which the requirements of sub-
section (b) are met, 
except that, in the case of a sponsor which is a pro-
fessional association or other individual-based asso-
ciation, if at least one of the officers, directors, or 
employees of an employer, or at least one of the in-
dividuals who are partners in an employer and who 
actively participates in the business, is a member or 
such an affiliated member of the sponsor, partici-
pating employers may also include such employer; 
and 
‘‘(2) all individuals commencing coverage under 
the plan after certification under this part must 
be— 
‘‘(A) active or retired owners (including 
self-employed individuals), officers, directors, or 
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145 
employees of, or partners in, participating em-
ployers; or 
‘‘(B) the beneficiaries of individuals de-
scribed in subparagraph (A). 
‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM-
PLOYEES.—In the case of an association health plan in 
existence on the date of the enactment of the Small Busi-
ness Health Fairness Act of 2013, an affiliated member 
of the sponsor of the plan may be offered coverage under 
the plan as a participating employer only if— 
‘‘(1) the affiliated member was an affiliated 
member on the date of certification under this part; 
or 
‘‘(2) during the 12-month period preceding the 
date of the offering of such coverage, the affiliated 
member has not maintained or contributed to a 
group health plan with respect to any of its employ-
ees who would otherwise be eligible to participate in 
such association health plan. 
‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re-
quirements of this subsection are met with respect to an 
association health plan if, under the terms of the plan, 
no participating employer may provide health insurance 
coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
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146 
contemporaneously provided to employees of the employer 
under the plan, if such exclusion of the employee from cov-
erage under the plan is based on a health status-related 
factor with respect to the employee and such employee 
would, but for such exclusion on such basis, be eligible 
for coverage under the plan. 
‘‘(d) PROHIBITION
OF DISCRIMINATION AGAINST 
EMPLOYERS
AND EMPLOYEES ELIGIBLE TO PARTICI-
PATE.—The requirements of this subsection are met with 
respect to an association health plan if— 
‘‘(1) under the terms of the plan, all employers 
meeting the preceding requirements of this section 
are eligible to qualify as participating employers for 
all geographically available coverage options, unless, 
in the case of any such employer, participation or 
contribution requirements of the type referred to in 
section 2711 of the Public Health Service Act are 
not met; 
‘‘(2) upon request, any employer eligible to par-
ticipate is furnished information regarding all cov-
erage options available under the plan; and 
‘‘(3) the applicable requirements of sections 
701, 702, and 703 are met with respect to the plan. 
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147 
‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 
DOCUMENTS, CONTRIBUTION RATES, AND 
BENEFIT OPTIONS. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if the 
following requirements are met: 
‘‘(1) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the plan in-
clude a written instrument, meeting the require-
ments of an instrument required under section 
402(a)(1), which— 
‘‘(A) provides that the board of trustees 
serves as the named fiduciary required for plans 
under section 402(a)(1) and serves in the ca-
pacity of a plan administrator (referred to in 
section 3(16)(A)); 
‘‘(B) provides that the sponsor of the plan 
is to serve as plan sponsor (referred to in sec-
tion 3(16)(B)); and 
‘‘(C) incorporates the requirements of sec-
tion 806. 
‘‘(2) CONTRIBUTION
RATES
MUST
BE
NON-
DISCRIMINATORY.— 
‘‘(A) The contribution rates for any par-
ticipating small employer do not vary on the 
basis of any health status-related factor in rela-
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148 
tion to employees of such employer or their 
beneficiaries and do not vary on the basis of the 
type of business or industry in which such em-
ployer is engaged. 
‘‘(B) Nothing in this title or any other pro-
vision of law shall be construed to preclude an 
association health plan, or a health insurance 
issuer offering health insurance coverage in 
connection with an association health plan, 
from— 
‘‘(i) setting contribution rates based 
on the claims experience of the plan; or 
‘‘(ii) varying contribution rates for 
small employers in a State to the extent 
that such rates could vary using the same 
methodology employed in such State for 
regulating premium rates in the small 
group market with respect to health insur-
ance coverage offered in connection with 
bona fide associations (within the meaning 
of section 2791(d)(3) of the Public Health 
Service Act), 
subject to the requirements of section 702(b) 
relating to contribution rates. 
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149 
‘‘(3) FLOOR FOR NUMBER OF COVERED INDI-
VIDUALS
WITH
RESPECT
TO
CERTAIN
PLANS.—If 
any benefit option under the plan does not consist 
of health insurance coverage, the plan has as of the 
beginning of the plan year not fewer than 1,000 par-
ticipants and beneficiaries. 
‘‘(4) MARKETING REQUIREMENTS.— 
‘‘(A) IN
GENERAL.—If a benefit option 
which consists of health insurance coverage is 
offered under the plan, State-licensed insurance 
agents shall be used to distribute to small em-
ployers coverage which does not consist of 
health insurance coverage in a manner com-
parable to the manner in which such agents are 
used to distribute health insurance coverage. 
‘‘(B) 
STATE-LICENSED
INSURANCE 
AGENTS.—For purposes of subparagraph (A), 
the term ‘State-licensed insurance agents’ 
means one or more agents who are licensed in 
a State and are subject to the laws of such 
State relating to licensure, qualification, test-
ing, examination, and continuing education of 
persons authorized to offer, sell, or solicit 
health insurance coverage in such State. 
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150 
‘‘(5) 
REGULATORY
REQUIREMENTS.—Such 
other requirements as the applicable authority deter-
mines are necessary to carry out the purposes of this 
part, which shall be prescribed by the applicable au-
thority by regulation. 
‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO 
DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 
nothing in this part or any provision of State law (as de-
fined in section 514(c)(1)) shall be construed to preclude 
an association health plan, or a health insurance issuer 
offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion 
in selecting the specific items and services consisting of 
medical care to be included as benefits under such plan 
or coverage, except (subject to section 514) in the case 
of (1) any law to the extent that it is not preempted under 
section 731(a)(1) with respect to matters governed by sec-
tion 711, 712, or 713, or (2) any law of the State with 
which filing and approval of a policy type offered by the 
plan was initially obtained to the extent that such law pro-
hibits an exclusion of a specific disease from such cov-
erage. 
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151 
‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 
FOR 
SOLVENCY 
FOR 
PLANS 
PROVIDING 
HEALTH BENEFITS IN ADDITION TO HEALTH 
INSURANCE COVERAGE. 
‘‘(a) IN GENERAL.—The requirements of this section 
are met with respect to an association health plan if— 
‘‘(1) the benefits under the plan consist solely 
of health insurance coverage; or 
‘‘(2) if the plan provides any additional benefit 
options which do not consist of health insurance cov-
erage, the plan— 
‘‘(A) establishes and maintains reserves 
with respect to such additional benefit options, 
in amounts recommended by the qualified actu-
ary, consisting of— 
‘‘(i) a reserve sufficient for unearned 
contributions; 
‘‘(ii) a reserve sufficient for benefit li-
abilities which have been incurred, which 
have not been satisfied, and for which risk 
of loss has not yet been transferred, and 
for expected administrative costs with re-
spect to such benefit liabilities; 
‘‘(iii) a reserve sufficient for any other 
obligations of the plan; and 
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152 
‘‘(iv) a reserve sufficient for a margin 
of error and other fluctuations, taking into 
account the specific circumstances of the 
plan; and 
‘‘(B) establishes and maintains aggregate 
and specific excess/stop loss insurance and sol-
vency indemnification, with respect to such ad-
ditional benefit options for which risk of loss 
has not yet been transferred, as follows: 
‘‘(i) The plan shall secure aggregate 
excess/stop loss insurance for the plan with 
an attachment point which is not greater 
than 125 percent of expected gross annual 
claims. The applicable authority may by 
regulation provide for upward adjustments 
in the amount of such percentage in speci-
fied circumstances in which the plan spe-
cifically provides for and maintains re-
serves in excess of the amounts required 
under subparagraph (A). 
‘‘(ii) The plan shall secure specific ex-
cess/stop loss insurance for the plan with 
an attachment point which is at least equal 
to an amount recommended by the plan’s 
qualified actuary. The applicable authority 
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153 
may by regulation provide for adjustments 
in the amount of such insurance in speci-
fied circumstances in which the plan spe-
cifically provides for and maintains re-
serves in excess of the amounts required 
under subparagraph (A). 
‘‘(iii) The plan shall secure indem-
nification insurance for any claims which 
the plan is unable to satisfy by reason of 
a plan termination. 
Any person issuing to a plan insurance described in clause 
(i), (ii), or (iii) of subparagraph (B) shall notify the Sec-
retary of any failure of premium payment meriting can-
cellation of the policy prior to undertaking such a cancella-
tion. Any regulations prescribed by the applicable author-
ity pursuant to clause (i) or (ii) of subparagraph (B) may 
allow for such adjustments in the required levels of excess/ 
stop loss insurance as the qualified actuary may rec-
ommend, taking into account the specific circumstances 
of the plan. 
‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS 
RESERVES.—In the case of any association health plan de-
scribed in subsection (a)(2), the requirements of this sub-
section are met if the plan establishes and maintains sur-
plus in an amount at least equal to— 
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154 
‘‘(1) $500,000, or 
‘‘(2) such greater amount (but not greater than 
$2,000,000) as may be set forth in regulations pre-
scribed by the applicable authority, considering the 
level of aggregate and specific excess/stop loss insur-
ance provided with respect to such plan and other 
factors related to solvency risk, such as the plan’s 
projected levels of participation or claims, the nature 
of the plan’s liabilities, and the types of assets avail-
able to assure that such liabilities are met. 
‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 
any association health plan described in subsection (a)(2), 
the applicable authority may provide such additional re-
quirements relating to reserves, excess/stop loss insurance, 
and indemnification insurance as the applicable authority 
considers appropriate. Such requirements may be provided 
by regulation with respect to any such plan or any class 
of such plans. 
‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR-
ANCE.—The applicable authority may provide for adjust-
ments to the levels of reserves otherwise required under 
subsections (a) and (b) with respect to any plan or class 
of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans. 
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155 
‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 
applicable authority may permit an association health plan 
described in subsection (a)(2) to substitute, for all or part 
of the requirements of this section (except subsection 
(a)(2)(B)(iii)), such security, guarantee, hold-harmless ar-
rangement, or other financial arrangement as the applica-
ble authority determines to be adequate to enable the plan 
to fully meet all its financial obligations on a timely basis 
and is otherwise no less protective of the interests of par-
ticipants and beneficiaries than the requirements for 
which it is substituted. The applicable authority may take 
into account, for purposes of this subsection, evidence pro-
vided by the plan or sponsor which demonstrates an as-
sumption of liability with respect to the plan. Such evi-
dence may be in the form of a contract of indemnification, 
lien, bonding, insurance, letter of credit, recourse under 
applicable terms of the plan in the form of assessments 
of participating employers, security, or other financial ar-
rangement. 
‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT 
OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 
‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO-
CIATION HEALTH PLAN FUND.— 
‘‘(A) IN GENERAL.—In the case of an as-
sociation health plan described in subsection 
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156 
(a)(2), the requirements of this subsection are 
met if the plan makes payments into the Asso-
ciation Health Plan Fund under this subpara-
graph when they are due. Such payments shall 
consist of annual payments in the amount of 
$5,000, and, in addition to such annual pay-
ments, such supplemental payments as the Sec-
retary may determine to be necessary under 
paragraph (2). Payments under this paragraph 
are payable to the Fund at the time determined 
by the Secretary. Initial payments are due in 
advance of certification under this part. Pay-
ments shall continue to accrue until a plan’s as-
sets are distributed pursuant to a termination 
procedure. 
‘‘(B) PENALTIES FOR FAILURE TO MAKE 
PAYMENTS.—If any payment is not made by a 
plan when it is due, a late payment charge of 
not more than 100 percent of the payment 
which was not timely paid shall be payable by 
the plan to the Fund. 
‘‘(C) CONTINUED
DUTY
OF
THE
SEC-
RETARY.—The Secretary shall not cease to 
carry out the provisions of paragraph (2) on ac-
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186 
(B) in clause (ii), by inserting ‘‘and which 
does not provide medical care (within the mean-
ing of section 733(a)(2)),’’ after ‘‘arrange-
ment,’’ and by striking ‘‘title.’’ and inserting 
‘‘title, and’’; and 
(C) by adding at the end the following 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.’’. 
(4) Section 514(e) of such Act (as redesignated 
by paragraph (2)(C)) is amended— 
(A) by striking ‘‘Nothing’’ and inserting 
‘‘(1) Except as provided in paragraph (2), noth-
ing’’; and 
(B) 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 the Small Busi-
ness Health Fairness Act of 2013 shall be construed to 
alter, amend, modify, invalidate, impair, or supersede any 
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