135 
shall be determined under regulations of the Sec-
retary applying principles consistent and coextensive 
with the principles applied in determining whether 
employees of two or more trades or businesses are 
treated as employed by a single employer under sec-
tion 4001(b), except that, for purposes of this para-
graph, an interest of greater than 25 percent may 
not be required as the minimum interest necessary 
for common control, or 
‘‘(II) in any other case, the determination’’; 
(3) by redesignating clauses (iv) and (v) as 
clauses (v) and (vi), respectively; and 
(4) by inserting after clause (iii) the following 
new clause: 
‘‘(iv) in any case in which the benefit referred 
to in subparagraph (A) consists of medical care (as 
defined in section 812(a)(2)), in determining, after 
the application of clause (i), whether benefits are 
provided to employees of two or more employers, the 
arrangement shall be treated as having only one par-
ticipating employer if, after the application of clause 
(i), the number of individuals who are employees and 
former employees of any one participating employer 
and who are covered under the arrangement is 
greater than 75 percent of the aggregate number of 
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136 
all individuals who are employees or former employ-
ees of participating employers and who are covered 
under the arrangement,’’. 
SEC. 403. ENFORCEMENT PROVISIONS RELATING TO ASSO-
CIATION HEALTH PLANS. 
(a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL 
MISREPRESENTATIONS.—Section 501 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1131) 
is amended by adding at the end the following new sub-
section: 
‘‘(c) Any person who willfully falsely represents, to 
any employee, any employee’s beneficiary, any employer, 
the Secretary, or any State, a plan or other arrangement 
established or maintained for the purpose of offering or 
providing any benefit described in section 3(1) to employ-
ees or their beneficiaries as— 
‘‘(1) being an association health plan which has 
been certified under part 8; 
‘‘(2) having been established or maintained 
under or pursuant to one or more collective bar-
gaining agreements which are reached pursuant to 
collective bargaining described in section 8(d) of the 
National Labor Relations Act (29 U.S.C. 158(d)) or 
paragraph Fourth of section 2 of the Railway Labor 
Act (45 U.S.C. 152, paragraph Fourth) or which are 
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137 
reached pursuant to labor-management negotiations 
under similar provisions of State public employee re-
lations laws; or 
‘‘(3) being a plan or arrangement described in 
section 3(40)(A)(i), 
shall, upon conviction, be imprisoned not more than 5 
years, be fined under title 18, United States Code, or 
both.’’. 
(b) CEASE ACTIVITIES ORDERS.—Section 502 of 
such Act (29 U.S.C. 1132) is amended by adding at the 
end the following new subsection: 
‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE-
SIST ORDERS.— 
‘‘(1) IN GENERAL.—Subject to paragraph (2), 
upon application by the Secretary showing the oper-
ation, promotion, or marketing of an association 
health plan (or similar arrangement providing bene-
fits consisting of medical care (as defined in section 
733(a)(2))) that— 
‘‘(A) is not certified under part 8, is sub-
ject under section 514(b)(6) to the insurance 
laws of any State in which the plan or arrange-
ment offers or provides benefits, and is not li-
censed, registered, or otherwise approved under 
the insurance laws of such State; or 
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138 
‘‘(B) is an association health plan certified 
under part 8 and is not operating in accordance 
with the requirements under part 8 for such 
certification, 
a district court of the United States shall enter an 
order requiring that the plan or arrangement cease 
activities. 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply in the case of an association health plan or 
other arrangement if the plan or arrangement shows 
that— 
‘‘(A) all benefits under it referred to in 
paragraph (1) consist of health insurance cov-
erage; and 
‘‘(B) with respect to each State in which 
the plan or arrangement offers or provides ben-
efits, the plan or arrangement is operating in 
accordance with applicable State laws that are 
not superseded under section 514. 
‘‘(3) ADDITIONAL
EQUITABLE
RELIEF.—The 
court may grant such additional equitable relief, in-
cluding any relief available under this title, as it 
deems necessary to protect the interests of the pub-
lic and of persons having claims for benefits against 
the plan.’’. 
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139 
(c) RESPONSIBILITY
FOR CLAIMS PROCEDURE.— 
Section 503 of such Act (29 U.S.C. 1133) is amended— 
(1) by inserting ‘‘(a) IN GENERAL.—’’ before 
‘‘In accordance’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of 
each association health plan which is or has been certified 
under part 8 shall require the board of trustees or the 
named fiduciary (as applicable) to ensure that the require-
ments of this section are met in connection with claims 
filed under the plan.’’. 
SEC. 404. COOPERATION BETWEEN FEDERAL AND STATE 
AUTHORITIES. 
Section 506 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1136) is amended by adding 
at the end the following new subsection: 
‘‘(d) CONSULTATION WITH STATES WITH RESPECT 
TO ASSOCIATION HEALTH PLANS.— 
‘‘(1) AGREEMENTS
WITH
STATES.—The Sec-
retary shall consult with the State recognized under 
paragraph (2) with respect to an association health 
plan regarding the exercise of— 
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140 
‘‘(A) the Secretary’s authority under sec-
tions 502 and 504 to enforce the requirements 
for certification under part 8; and 
‘‘(B) the Secretary’s authority to certify 
association health plans under part 8 in accord-
ance with regulations of the Secretary applica-
ble to certification under part 8. 
‘‘(2) RECOGNITION
OF
PRIMARY
DOMICILE 
STATE.—In carrying out paragraph (1), the Sec-
retary shall ensure that only one State will be recog-
nized, with respect to any particular association 
health plan, as the State with which consultation is 
required. In carrying out this paragraph— 
‘‘(A) in the case of a plan which provides 
health insurance coverage (as defined in section 
812(a)(3)), such State shall be the State with 
which filing and approval of a policy type of-
fered by the plan was initially obtained; and 
‘‘(B) in any other case, the Secretary shall 
take into account the places of residence of the 
participants and beneficiaries under the plan 
and the State in which the trust is main-
tained.’’. 
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141 
SEC. 405. EFFECTIVE DATE AND TRANSITIONAL AND 
OTHER RULES. 
(a) EFFECTIVE DATE.—The amendments made by 
this subtitle shall take effect 1 year after the date of the 
enactment of this Act. The Secretary of Labor shall first 
issue all regulations necessary to carry out the amend-
ments made by this subtitle within 1 year after the date 
of the enactment of this Act. 
(b) TREATMENT
OF CERTAIN EXISTING HEALTH 
BENEFITS PROGRAMS.— 
(1) IN GENERAL.—In any case in which, as of 
the date of the enactment of this Act, an arrange-
ment is maintained in a State for the purpose of 
providing benefits consisting of medical care for the 
employees and beneficiaries of its participating em-
ployers, at least 200 participating employers make 
contributions to such arrangement, such arrange-
ment has been in existence for at least 10 years, and 
such arrangement is licensed under the laws of one 
or more States to provide such benefits to its par-
ticipating employers, upon the filing with the appli-
cable authority (as defined in section 812(a)(5) of 
the Employee Retirement Income Security Act of 
1974 (as amended by this subtitle)) by the arrange-
ment of an application for certification of the ar-
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142 
rangement under part 8 of subtitle B of title I of 
such Act— 
(A) such arrangement shall be deemed to 
be a group health plan for purposes of title I 
of such Act; 
(B) the requirements of sections 801(a) 
and 803(a) of the Employee Retirement Income 
Security Act of 1974 shall be deemed met with 
respect to such arrangement; 
(C) the requirements of section 803(b) of 
such Act shall be deemed met, if the arrange-
ment is operated by a board of directors 
which— 
(i) is elected by the participating em-
ployers, with each employer having one 
vote; and 
(ii) has complete fiscal control over 
the arrangement and which is responsible 
for all operations of the arrangement; 
(D) the requirements of section 804(a) of 
such Act shall be deemed met with respect to 
such arrangement; and 
(E) the arrangement may be certified by 
any applicable authority with respect to its op-
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143 
erations in any State only if it operates in such 
State on the date of certification. 
The provisions of this subsection shall cease to apply 
with respect to any such arrangement at such time 
after the date of the enactment of this Act as the 
applicable requirements of this subsection are not 
met with respect to such arrangement. 
(2) DEFINITIONS.—For purposes of this sub-
section, the terms ‘‘group health plan’’, ‘‘medical 
care’’, and ‘‘participating employer’’ shall have the 
meanings provided in section 812 of the Employee 
Retirement Income Security Act of 1974, except 
that the reference in subsection (a)(8) of such sec-
tion to an ‘‘association health plan’’ shall be deemed 
a reference to an arrangement referred to in this 
subsection. 
TITLE V—MEDICAID REFORM 
SEC. 501. INCREASING STATE FLEXIBILITY TO CONDUCT 
MEDICAID WAIVERS. 
Section 1115(a)(1) of the Social Security Act (42 
U.S.C. 1315(a)(1)) is amended— 
(1) by striking ‘‘1602, or 1902’’ and inserting 
‘‘or 1602’’; and 
(2) by inserting ‘‘and shall waive compliance 
with section 1902,’’ after ‘‘as the case may be,’’. 
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144 
TITLE VI—MISCELLANEOUS 
PROVISIONS 
SEC. 601. CERTAIN MEDICAL STOP-LOSS INSURANCE OB-
TAINED BY CERTAIN PLAN SPONSORS OF 
GROUP 
HEALTH 
PLANS 
NOT 
INCLUDED 
UNDER THE DEFINITION OF HEALTH INSUR-
ANCE COVERAGE. 
(a) PHSA.—Section 2791(b)(1) of the Public Health 
Service Act (42 U.S.C. 300gg–91(b)(1)) is amended by 
adding at the end the following new sentence: ‘‘Such term 
shall not include a stop loss policy obtained by a self-in-
sured health plan or a plan sponsor of a group health plan 
that self-insures the health risks of its plan participants 
to reimburse the plan or sponsor for losses that the plan 
or sponsor incurs in providing health or medical benefits 
to such plan participants in excess of a predetermined level 
set forth in the stop loss policy obtained by such plan or 
sponsor.’’. 
(b) ERISA.—Section 733(b)(1) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 
1191b(b)(1)) is amended by adding at the end the fol-
lowing new sentence: ‘‘Such term shall not include a stop 
loss policy obtained by a self-insured health plan or a plan 
sponsor of a group health plan that self-insures the health 
risks of its plan participants to reimburse the plan or 
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145 
sponsor for losses that the plan or sponsor incurs in pro-
viding health or medical benefits to such plan participants 
in excess of a predetermined level set forth in the stop 
loss policy obtained by such plan or sponsor.’’. 
(c) IRC.—Section 9832(b)(1)(A) of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new sentence: ‘‘Such term shall not include a 
stop loss policy obtained by a self-insured health plan or 
a plan sponsor of a group health plan that self-insures 
the health risks of its plan participants to reimburse the 
plan or sponsor for losses that the plan or sponsor incurs 
in providing health or medical benefits to such plan par-
ticipants in excess of a predetermined level set forth in 
the stop loss policy obtained by such plan or sponsor.’’. 
SEC. 602. RESTORING THE APPLICATION OF ANTITRUST 
LAWS TO HEALTH SECTOR INSURERS. 
(a) AMENDMENT TO MCCARRAN-FERGUSON ACT.— 
Section 3 of the Act of March 9, 1945 (15 U.S.C. 1013), 
commonly known as the McCarran-Ferguson Act, is 
amended by adding at the end the following: 
‘‘(c)(1) Nothing contained in this Act shall modify, 
impair, or supersede the operation of any of the antitrust 
laws with respect to the business of health insurance (in-
cluding the business of dental insurance). For purposes 
of the preceding sentence, the term ‘antitrust laws’ has 
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146 
the meaning given it in subsection (a) of the first section 
of the Clayton Act, except that such term includes section 
5 of the Federal Trade Commission Act to the extent that 
such section 5 applies to unfair methods of competition. 
‘‘(2) For purposes of paragraph (1), the term 
‘business of health insurance (including the business 
of dental insurance)’ does not include— 
‘‘(A) the business of life insurance (includ-
ing annuities); or 
‘‘(B) the business of property or casualty 
insurance, including but not limited to, any in-
surance or benefits defined as ‘excepted bene-
fits’ under paragraph (1), subparagraph (B) or 
(C) of paragraph (2), or paragraph (3) of sec-
tion 9832(c) of the Internal Revenue Code of 
1986 (26 U.S.C. 9832(c)) whether offered sepa-
rately or in combination with insurance or bene-
fits described in paragraph (2)(A) of such sec-
tion.’’. 
(b) RELATED PROVISION.—For purposes of section 
5 of the Federal Trade Commission Act (15 U.S.C. 45) 
to the extent such section applies to unfair methods of 
competition, section 3(c) of the McCarran-Ferguson Act 
shall apply with respect to the business of health insurance 
without regard to whether such business is carried on for 
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