To establish a small business health benefits program.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Health Plans Act of 
2006''.

SEC. 2. SMALL BUSINESS HEALTH BENEFITS PROGRAM (SBHBP).

    (a) Establishment.--The Secretary of Health and Human Services 
shall establish a small business health benefits program under which 
small employers may offer health insurance coverage to employees and 
their dependents.
    (b) Program Elements.--Under the SBHBP:
            (1) Access to insurance.--Small employers are provided 
        access, for years beginning on or after January 1, 2007, to 
        qualified health pooling arrangements under which their 
        employees may elect self-only or family health insurance 
        coverage under at least 2 health insurance coverage policies, 
        regardless of whether premium assistance referred to in 
        paragraph (2) is available with respect to such employer.
            (2) Premium assistance for small employers.--Premium 
        assistance is available under subsection (c) to assist small 
        employers in the payment of premiums for the health insurance 
        coverage provided.
            (3) Employer share of premiums.--
                    (A) In general.--Small employers are provided 
                access to health insurance coverage, and may be 
                eligible for premium assistance under subsection (c), 
                only if they pay (before the application of any premium 
                assistance under subsection (c)) at least 50 percent of 
                the premiums for coverage of their employees, but such 
                employers are not required to pay for the portion of 
                the premiums for dependents of employees.
                    (B) Construction.--Nothing in this section shall be 
                construed as preventing an employee from applying the 
                payment described in subparagraph (A) towards the 
                payment of premiums for family health insurance 
                coverage.
            (4) Health insurance coverage.--
                    (A) In general.--Health insurance coverage offered 
                thereunder shall meet the following requirements:
                            (i) The Secretary determines that the 
                        coverage is substantially similar to health 
                        benefits coverage in any of the four largest 
                        health benefit plans (determined by enrollment) 
                        offered under chapter 89 of title 5, United 
                        States Code.
                            (ii) The coverage complies with State laws 
                        and regulations (including applicable benefit 
                        mandates and other consumer protections) for 
                        group health insurance coverage for the State 
                        in which the coverage is offered.
                            (iii) The coverage does not discriminate, 
                        through underwriting, the imposition of a pre-
                        existing condition exclusion (as defined in 
                        section 701(b)(1)(A) of the Employee Retirement 
                        Income Security Act of 1974 or section 
                        9801(b)(1)(A) of the Internal Revenue Code of 
                        1986), differential benefits, differential 
                        premiums, or otherwise, against an employee or 
                        dependent on the basis of health status.
                            (iv) The Secretary determines that the 
                        coverage provided to employees is coordinated, 
                        in accordance with regulations prescribed by 
                        the Secretary, with other coverage provided 
                        under governmental health benefits programs 
                        under which health benefits coverage is 
                        available to such employees.
                    (B) Standards for participating health insurers.--
                In administering the program, the Secretary shall 
                promote participation by health insurers that 
                establish--
                            (i) integration of health information 
                        technology tools to promote quality;
                            (ii) chronic disease management;
                            (iii) preventive health care services; and
                            (iv) evidence-based medicine considerations 
                        of prescription drugs and other treatment that 
                        take into account the individual medical 
                        circumstances of individuals enrolled in the 
                        program.
            (5) Enrollment.--In administering the program, the 
        Secretary shall provide that employee enrollment (and changes 
        in enrollment) are limited to an annual open enrollment period, 
        except in the case of qualifying events (such as change in 
        family status) specified by the Secretary and consistent with 
        section 701(f) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1181(f)).
    (c) Premium Assistance.--Under the SBHBP, the Secretary shall 
establish a program of premium assistance for small employers. Such 
program shall provide for a sliding scale of assistance to such 
employers taking into account the following:
            (1) The number of employees of the employer.
            (2) The average wage level of such employees relative to 
        the average wage level for employees in the same geographic 
        area.
            (3) The profit margin of the employer.
    (d) Reinsurance for Catastrophic Costs for Certain Health Insurance 
Issuers.--
            (1) In general.--In the case of health insurance coverage 
        offered under the SBHBP by a health insurance issuer that 
        participates in a qualified health pooling arrangement, the 
        Secretary shall provide for reinsurance coverage for 75 percent 
        of covered claims that exceed, for an individual for a year, an 
        amount determined by the Secretary for such year which is not 
        less than the minimum amount specified in paragraph (2).
            (2) Minimum amount.--The minimum amount specified in this 
        paragraph is--
                    (A) for the first year in which this section is in 
                effect, $100,000; or
                    (B) for a subsequent year is the minimum amount 
                specified in this paragraph for a previous year, 
                increased by the Secretary's estimate of the average 
                annual percentage increase in health insurance coverage 
                with a median level of premiums for the previous year.
        Any amount determined under subparagraph (B) which is not a 
        multiple of $1,000 shall be rounded to the nearest multiple of 
        $1,000.
    (e) Qualified Health Pooling Arrangement.--For purposes of this 
section, the term ``qualified health pooling arrangement'' means, with 
respect to employees employed in any State for any year--
            (1) except as provided in subparagraph (B), an arrangement 
        established by (and operating under the oversight of) such 
        State for purposes of this section, in accordance with 
        regulations of the Secretary, which provides for pooling of 
        health insurance coverage offered for such year in such State, 
        and
            (2) in any case in which there is not in effect for any 
        year an arrangement described in subparagraph (A) established 
        by such State, the national health pooling arrangement 
        established under section 3.
The Secretary shall determine, within a reasonable time prior to each 
year, whether there is a qualified health pooling arrangement described 
in paragraph (1) with respect to employees employed in any State.
    (f) Small Employer Defined.--
            (1) In general.--For purposes of this Act, except as 
        otherwise provided in this subsection, the term ``small 
        employer'' means an employer with 50 or fewer employees, as 
        determined under regulations promulgated by the Secretary.
            (2) Continuation of participation.--An employer whose 
        employees are provided health insurance coverage under the 
        SBHBP while the employer is a small employer as defined in 
        paragraph (1) and who thereafter has more than 50 employees 
        shall continue to be treated as a small employer.
            (3) Employers not in existence in preceding year.--In the 
        case of an employer which was not in existence for the full 
        year prior to the date on which the employer applies to 
        participate in SBHBP, the determination of whether such 
        employer meets the requirements of paragraph (1) shall be based 
        on the average number of employees that it is reasonably 
        expected such employer will employ on business days in the 
        employer's first full year.
            (4) Waiver.--The Secretary may waive the limitations 
        relating to the size of an employer which may participate under 
        SBHBP on a case by case basis if the Secretary determines that 
        such employer makes a compelling case for such a waiver. In 
        making determinations under this paragraph, the Secretary shall 
        consider the effects of the employment of temporary and 
        seasonal workers and other related factors.
    (g) Other Definitions.--For purposes of this Act:
            (1) The terms ``employee'' and ``dependent'' have the 
        meanings given such terms by the Secretary in regulations and 
        shall be based upon the definitions of such terms used for 
        purposes of the Federal employee health benefits program 
        established under chapter 89 of title 5, United States Code.
            (2) The terms ``health insurance coverage'' and ``health 
        insurance issuer'' have the meanings given such terms in 
        section 2791(b) of the Public Health Service Act (42 U.S.C. 
        300gg-91(b)).
            (3) The term ``Secretary'' means the Secretary of Health 
        and Human Services.
            (4) The term ``SBHBP'' means the small business health 
        benefits program established under this section.
            (5) The term ``State'' has the meaning given such term in 
        section 2791(d)(14) of the Public Health Service Act (42 U.S.C. 
        300gg-91(d)(14)).
    (h) Grants for Establishment of State Qualified Health Pooling 
Arrangements.--
            (1) In general.--The Secretary shall provide grants to 
        States for the establishment and initial administration of 
        qualified health pooling arrangements described in subsection 
        (e)(1).
            (2) Authorization of appropriations.--There are authorized 
        to be appropriated such sums as may be necessary to carry out 
        this subsection.

SEC. 3. ESTABLISHMENT OF NATIONAL HEALTH POOLING ARRANGEMENT.

    (a) In General.--The Secretary of Health and Human Services and the 
Secretary of Labor, acting jointly and in consultation with the 
Director of the Office of Personnel Management, shall provide for--
            (1) the offering on a timely basis consistent with section 
        2 of a national health pooling arrangement to eligible small 
        employers; and
            (2) appropriate oversight over any such arrangement.
    (b) Specific Requirements.--In carrying out subsection (a), the 
Secretaries shall--
            (1) model the national health pooling arrangement on the 
        Federal employees health benefits program under chapter 89 of 
        title 5, United States Code, to the extent practicable and 
        consistent with the other requirements of this Act; and
            (2) consistent with paragraph (1), negotiate the most 
        affordable and substantial coverage possible for small 
        employers.
    (c) Definitions.--For purposes of this section--
            (1) the term ``Secretaries'' means the Secretary of Health 
        and Human Services and the Secretary of Labor; and
            (2) the term ``national health pooling arrangement'' means 
        an arrangement which provides for pooling of health insurance 
        coverage offered for any year in all States which do not have 
        in effect for such year an arrangement for pooling of health 
        insurance coverage offered in such States.

Summary: Small Business Health Plans Act of 2006 - Directs the Secretary of Health and Human Services (HHS) to establish a small business health benefits program (SBHBP) under which small businesses may offer health insurance coverage to employees and their dependents. Outlines program elements and coverage requirements.

Requires the Secretary to establish a program of premium assistance for small employers under the SBHBP. Allows for reinsurance for catastrophic costs for certain health insurance issuers.

Defines a "small employer" for SBHBP purposes as an employer with 50 or fewer employees.

Directs the Secretary and the Secretary of Labor to provide for the establishment of a national health pooling arrangement for eligible small employers under the SBHBP.