Title: Obamacare Replacement Act
Policy area: Health

Summary:
Obamacare Replacement Act
This bill amends the Internal Revenue Code, the Public Health Service Act, the Employee Retirement Income Security Act of 1974 (ERISA), and the Social Security Act to repeal certain provisions regarding health insurance, including: the requirement for individuals to maintain minimum essential coverage, limitations on insurers varying premiums by age or health status, requirements for health insurance to cover preexisting conditions, and the prohibition on lifetime or annual limits on benefits.
The bill allows a refundable tax credit for a percentage of health insurance premiums and a tax credit for health savings account (HSA) contributions.
The bill eliminates HSA contribution limits and allows all individuals to make contributions to HSAs. HSAs may be used to pay for over-the-counter medications and health insurance. HSA distributions for abortion are subject to income tax.
The tax deduction for medical care is expanded to include exercise equipment and services, nutritional supplements, and certain primary care fees. Physicians may deduct uncompensated and charity care.
The bill provides for the establishment and governance of: (1) independent health pools, which offer health insurance coverage to their members; and (2) association health plans, which are group health plans sponsored by business associations.
Individual health insurance coverage is governed by the laws of a state designated by the health insurance issuer.
The Centers for Medicare and Medicaid Services must (currently, may) waive Medicaid requirements to enable states to carry out experimental, pilot, or demonstration projects.
Stop-loss insurance obtained by certain health plans or plan sponsors is exempt from requirements for health insurance.
The bill amends the McCarran-Ferguson Act to declare that nothing in that Act affects antitrust laws regarding health insurance.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1072 Introduced in House (IH)]

<DOC>






115th CONGRESS
  1st Session
                                H. R. 1072

To repeal provisions of the Patient Protection and Affordable Care Act 
  and provide private health insurance reform, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 15, 2017

 Mr. Sanford (for himself, Mr. Duncan of South Carolina, Mr. Meadows, 
Mr. Gosar, Mr. Garrett, and Mr. Mooney of West Virginia) introduced the 
   following bill; which was referred to the Committee on Energy and 
    Commerce, and in addition to the Committees on Ways and Means, 
  Education and the Workforce, and the Judiciary, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
To repeal provisions of the Patient Protection and Affordable Care Act 
  and provide private health insurance reform, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Obamacare Replacement Act''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
                            TITLE I--REPEALS

Sec. 101. Repeal of individual and employer mandates.
Sec. 102. Repeal of Public Health Service Act provisions.
Sec. 103. Repeal of Patient Protection and Affordable Care Act 
                            provisions.
Sec. 104. Conforming and technical amendments.
                       TITLE II--TAXATION REFORM

 Subtitle A--Equalizing Tax Treatment of Non-Employer Provided Health 
                               Insurance

Sec. 201. Tax deduction for health insurance premiums.
Sec. 202. Refundable tax credit for payroll taxes attributable to 
                            health insurance premiums.
                  Subtitle B--Health Savings Accounts

Sec. 211. Repeal of contribution limitations.
Sec. 212. Freedom from mandate.
Sec. 213. Allowance of distributions for prescription and over-the-
                            counter medicines and drugs.
Sec. 214. Purchase of health insurance from HSA.
Sec. 215. Special rule for certain medical expenses incurred before 
                            establishment of account.
Sec. 216. Administrative error correction before due date of return.
Sec. 217. Allowing HSA rollover to child or parent of account holder.
Sec. 218. Credit for contributions to an HSA.
Sec. 219. Equivalent bankruptcy protections for health savings accounts 
                            as retirement funds.
Sec. 220. Distributions for abortion expenses from health savings 
                            accounts included in gross income.
                      Subtitle C--Medical Expenses

Sec. 221. Certain exercise equipment and physical fitness programs 
                            treated as medical care.
Sec. 222. Certain nutritional and dietary supplements to be treated as 
                            medical care.
Sec. 223. Certain provider fees to be treated as medical care.
Sec. 224. Clarification of treatment of capitated primary care payments 
                            as amounts paid for medical care.
                       Subtitle D--Miscellaneous

Sec. 231. Contributions of medicare beneficiaries participating in 
                            medicare advantage MSA.
Sec. 232. Physician charity and uncompensated care deduction.
             TITLE III--INDIVIDUAL HEALTH INSURANCE REFORM

Sec. 301. Pool reform for individual membership expansion.
Sec. 302. Cooperative governing of individual health insurance 
                            coverage.
                   TITLE IV--ASSOCIATION HEALTH PLANS

Sec. 401. Rules governing association health plans.
Sec. 402. Clarification of treatment of single employer arrangements.
Sec. 403. Enforcement provisions relating to association health plans.
Sec. 404. Cooperation between Federal and State authorities.
Sec. 405. Effective date and transitional and other rules.
                        TITLE V--MEDICAID REFORM

Sec. 501. Increasing State flexibility to conduct Medicaid waivers.
                   TITLE VI--MISCELLANEOUS PROVISIONS

Sec. 601. Certain medical stop-loss insurance obtained by certain plan 
                            sponsors of group health plans not included 
                            under the definition of health insurance 
                            coverage.
Sec. 602. Restoring the application of antitrust laws to health sector 
                            insurers.

                            TITLE I--REPEALS

SEC. 101. REPEAL OF INDIVIDUAL AND EMPLOYER MANDATES.

    (a) Repeal of Individual Mandate.--Section 5000A of the Internal 
Revenue Code of 1986 is amended by adding at the end the following:
    ``(h) Termination.--This section shall not apply with respect to 
any month beginning after the date of enactment of the Obamacare 
Replacement Act.''.
    (b) Repeal of Employer Mandate.--Section 4980H of the Internal 
Revenue Code of 1986 is amended by adding at the end the following:
    ``(e) Termination.--This section shall not apply with respect to 
any month beginning after the date of enactment of the Obamacare 
Replacement Act.''.

SEC. 102. REPEAL OF PUBLIC HEALTH SERVICE ACT PROVISIONS.

    (a) Repeal.--The following provisions of title XXVII of the Public 
Health Service Act (42 U.S.C. 300gg et seq.) are repealed:
            (1) Section 2701 (42 U.S.C. 300gg).
            (2) Section 2702 (42 U.S.C. 300gg-1).
            (3) Section 2703 (42 U.S.C. 300gg-2).
            (4) Section 2704 (42 U.S.C. 300gg-3).
            (5) Section 2705 (42 U.S.C. 300gg-4).
            (6) Section 2707 (42 U.S.C. 300gg-6).
            (7) Section 2708 (42 U.S.C. 300gg-7).
            (8) Section 2711 (42 U.S.C. 300gg-11).
            (9) Section 2712 (42 U.S.C. 300gg-12).
            (10) Section 2713 (42 U.S.C. 300gg-13).
            (11) Section 2715 (42 U.S.C. 300gg-15).
            (12) Section 2715A (42 U.S.C. 300gg-15a).
            (13) Section 2716 (42 U.S.C. 300gg-16).
            (14) Section 2718 (42 U.S.C. 300gg-18).
            (15) Section 2719 (42 U.S.C. 300gg-19).
            (16) Section 2719A (42 U.S.C. 300gg-19a).
            (17) Section 2794 (42 U.S.C. 300gg-94), relating to 
        ensuring that consumers get value for their dollars.
    (b) Reinstating Pre-PPACA Law.--Sections 2701, 2702, 2711, and 2712 
of the Public Health Service Act as in effect on the day before the 
date of enactment of the Patient Protection and Affordable Care Act 
(Public Law 111-148) shall be restored or revived as if such Act had 
not been enacted (subject to paragraphs (1), (2), (6), and (7) of 
subsection (c)).
    (c) Redesignations and Transfers.--The following provisions of 
title XXVII of the Public Health Service Act (42 U.S.C. 300gg et seq.) 
shall be redesignated and transferred as follows:
            (1) Section 2701, as restored or revived under subsection 
        (b), shall be transferred so as to appear as the first section 
        in subpart I of part A.
            (2) Section 2702, as restored or revived under subsection 
        (b), shall be transferred so as to appear after such section 
        2701.
            (3) Section 2706 (42 U.S.C. 300gg-5) shall be redesignated 
        as section 2703 and transferred so as to appear after such 
        section 2702.
            (4) Section 2709 (42 U.S.C. 300gg-8), relating to coverage 
        for individuals participating in approved clinical trials, 
        shall be redesignated as section 2704 and transferred so as to 
        appear after section 2703 (as so redesignated).
            (5) Section 2709 (42 U.S.C. 300gg-9), relating to 
        disclosure of information, shall be redesignated as section 
        2705 and transferred so as to appear after section 2704 (as so 
        redesignated).
            (6) Section 2711, as restored or revived under subsection 
        (b), shall be redesignated as section 2706 and transferred so 
        as to appear after section 2705 (as so redesignated).
            (7) Section 2712, as restored or revived under subsection 
        (b), shall be redesignated as section 2707 and transferred so 
        as to appear after section 2706 (as so redesignated).
            (8) Section 2714 (42 U.S.C. 300gg-14) shall be redesignated 
        as section 2711 and transferred so as to appear as the first 
        section under subpart II of part A.
            (9) Section 2717 (42 U.S.C. 300gg-17) shall be redesignated 
        as section 2712 and transferred so as to appear after section 
        2711 (as so redesignated).
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        repeals under subsection (a) shall take effect on the date of 
        enactment of this Act and shall apply to plan years beginning 
        after such date of enactment.
            (2) Delayed effective dates.--The repeals under paragraphs 
        (2), (3), (4), and (5) of subsection (a), the provisions 
        restored or revived under subsection (b), and the conforming 
        amendment in section 104(a)(2) shall be effective for plan 
        years beginning on January 1, 2019, and (notwithstanding 
        subsection (c)) the provisions of law repealed by such 
        paragraphs of subsection (a) or amended by such conforming 
        amendment shall continue to remain in effect until such date.

SEC. 103. REPEAL OF PATIENT PROTECTION AND AFFORDABLE CARE ACT 
              PROVISIONS.

    (a) In General.--Section 1312(c) of the Patient Protection and 
Affordable Care Act (42 U.S.C. 18032(c)) is repealed.
    (b) Repeal of 3-Month Grace Period for Non-payment Premiums.--
Clause (iv) of section 1412(c)(2)(B) of the Patient Protection and 
Affordable Care Act is amended by striking ``nonpayment of premiums by 
the insured'' and all that follows and inserting ``nonpayment of 
premiums by the insured, notify the Secretary of such nonpayment.''.
    (c) Effective Date.--This section, and the amendments made by this 
section, shall take effect on the date of enactment of this Act and 
shall apply to plan years and taxable years beginning after such date 
of enactment.

SEC. 104. CONFORMING AND TECHNICAL AMENDMENTS.

    (a) PHSA Provisions.--Title XXVII of the Public Health Service Act 
(42 U.S.C. 300gg et seq.) is amended--
            (1) in section 2724(c) (42 U.S.C. 300gg-23(c)), by striking 
        ``(other than section 2704)'' and inserting ``(other than 
        section 2725)'';
            (2) in section 2741(b)(3) (42 U.S.C. 300gg-41(a)(3)), by 
        striking ``2712'' and inserting ``2707'';
            (3) in section 2751(a) (42 U.S.C. 300gg-51(a)), by striking 
        ``2704'' and inserting ``2725'';
            (4) in section 2752 (42 U.S.C. 300gg-52), by striking 
        ``2706'' and inserting ``2727''; and
            (5) in section 2753 (42 U.S.C. 300gg-54), relating to 
        coverage of dependent students on medically necessary leave of 
        absence, by striking ``2707'' and inserting ``2728''.
    (b) PPACA Provisions.--The Patient Protection and Affordable Care 
Act (Public Law 111-148) is amended--
            (1) in section 1103(b)(1) (42 U.S.C. 18003(b)(1))--
                    (A) by striking ``the percentage of total premium 
                revenue expended on nonclinical costs (as reported 
                under section 2718(a) of the Public Health Service 
                Act),''; and
                    (B) by striking ``and be consistent with the 
                standards adopted for the uniform explanation of 
                coverage as provided for in section 2715 of the Public 
                Health Service Act'';
            (2) in section 1251(a) (42 U.S.C. 18011(a)), by striking 
        paragraphs (3) and (4), and inserting the following:
            ``(3) Application of certain provisions.--Section 2711 of 
        the Public Health Service Act (relating to extension of 
        dependent coverage) shall apply to grandfathered health plans 
        for plan years beginning with the first plan year to which such 
        provisions would otherwise apply.'';
            (3) in section 1301(a)(4) (42 U.S.C. 18021(a)(4)), by 
        striking ``section 2701(a)(2) of the Public Health Service 
        Act'' and inserting ``section 2701(a)(2) of the Public Health 
        Service Act as in effect on the day before the date of 
        enactment of the Obamacare Replacement Act or as determined by 
        the Secretary'';
            (4) in section 1302(e)(1)(B)(i) (42 U.S.C. 
        18022(e)(1)(B)(i)), by striking ``(except as provided for in 
        section 2713)'';
            (5) in section 1311 (42 U.S.C. 18031)--
                    (A) in subsection (c)--
                            (i) in paragraph (1)(B), by striking ``(in 
                        a manner consistent with applicable network 
                        adequacy provisions under section 2702(c) of 
                        the Public Health Service Act)''; and
                            (ii) in paragraph (5), by striking ``to the 
                        uniform outline of coverage the plan is 
                        required to provide under section 2716 of the 
                        Public Health Service Act and'';
                    (B) in subsection (d)(4)(E), by striking ``, 
                including the use of the uniform outline of coverage 
                established under section 2715 of the Public Health 
                Service Act'';
                    (C) in subsection (e)(2), by striking ``, and the 
                information and the recommendations'' and all that 
                follows through ``premium increases),''; and
                    (D) in subsection (f)(2)(B), by inserting before 
                the period ``as in effect on the day before the date of 
                enactment of the Obamacare Replacement Act or as 
                determined by the Secretary''; and
            (6) in section 1334(a)(2), by inserting before the period 
        ``as in effect on the day before the date of enactment of the 
        Obamacare Replacement Act''.
    (c) ERISA Provisions.--Section 715 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1185d) is amended--
            (1) in subsection (a)--
                    (A) by striking ``(a) General Rule'' and all that 
                follows through ``the provisions of part A'' in 
                paragraph (1) and inserting ``The provisions of part 
                A''; and
                    (B) by striking ``as if included in this subpart; 
                and'' in paragraph (1) and all that follows through 
                ``to the extent that'' in paragraph (2) and inserting 
                ``as if included in this subpart. To the extent that''; 
                and
            (2) by striking subsection (b).
    (d) IRC Provisions.--The Internal Revenue Code of 1986 is amended--
            (1) section 36B(b)(3)(C) is amended--
                    (A) in the first sentence, by striking  ``and the 
                premium was adjusted only for the age of each such 
                individual in the manner allowed under section 2701 of 
                the Public Health Service Act''; and
                    (B) by striking the second sentence;
            (2) in section 833(c), by striking paragraph (5); and
            (3) in section 9815--
                    (A) in subsection (a)--
                            (i) by striking ``(a) General Rule'' and 
                        all that follows through ``the provisions of 
                        part A'' in paragraph (1) and inserting ``The 
                        provisions of part A''; and
                            (ii) by striking ``as if included in this 
                        subpart; and'' in paragraph (1) and all that 
                        follows through ``to the extent that'' in 
                        paragraph (2) and inserting ``as if included in 
                        this subpart. To the extent that''; and
                    (B) by striking subsection (b).
    (e) Social Security Act.--Section 1937(b)(6)(A) of the Social 
Security Act (42 U.S.C. 1396u-7(b)(6)(A)) is amended by striking 
``2705(a)'' and inserting ``2726(a)''.
    (f) Effective Date.--Except as provided in section 102(d)(2), this 
section and the amendments made by this section shall take effect on 
the date of enactment of this Act and shall apply to plan years and 
taxable years beginning after such date of enactment.

                       TITLE II--TAXATION REFORM

 Subtitle A--Equalizing Tax Treatment of Non-Employer Provided Health 
                               Insurance

SEC. 201. TAX DEDUCTION FOR HEALTH INSURANCE PREMIUMS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by redesignating section 224 
as section 225 and by inserting after section 222 the following new 
section:

``SEC. 224. HEALTH INSURANCE PREMIUMS.

    ``(a) In General.--There shall be allowed as a deduction the amount 
of premiums paid by the taxpayer for health insurance coverage (as 
defined in section 9832) of the taxpayer, the taxpayer's spouse, or any 
dependent (as defined in section 152, determined without regard to 
subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of the taxpayer.
    ``(b) Coordination Provisions.--
            ``(1) Premium assistance credit.--Subsection (a) shall not 
        apply with respect to so much of any premium for which a credit 
        has been allowed under section 36B.
            ``(2) Archer msas and hsas.--Subsection (a) shall not apply 
        with respect to any amount which is treated as a qualified 
        medical expense under either section 220(d) or 223(c).
            ``(3) Deduction for medical expenses.--For purposes of 
        determining the amount of the deduction under section 213, any 
        amount for which a deduction is allowed under subsection (a) 
        shall not be treated as an expense paid for medical care.''.
    (b) Deduction Available Above the Line.--Section 62(a) of the 
Internal Revenue Code of 1986 is amended by inserting after paragraph 
(21) the following new paragraph:
            ``(22) Health insurance premiums.--The deduction allowed by 
        section 224.''.
    (c) Conforming Amendments.--
            (1) Section 35(g)(2) of the Internal Revenue Code of 1986 
        is amended by striking ``or 213'' and inserting ``213, or 
        224''.
            (2) Section 162(l)(3) of such Code is amended by inserting 
        ``or 224(a)'' after ``213(a)''.
            (3) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by redesignating the item 
        relating to section 224 as relating to section 225 and by 
        inserting after the item relating to section 223 the following 
        new item:

``Sec. 224. Health insurance premiums.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

SEC. 202. REFUNDABLE TAX CREDIT FOR PAYROLL TAXES ATTRIBUTABLE TO 
              HEALTH INSURANCE PREMIUMS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 36C. REFUND OF PAYROLL TAXES ATTRIBUTABLE TO HEALTH INSURANCE 
              PREMIUMS.

    ``(a) Allowance of Credit.--There shall be allowed as a credit 
against the tax imposed by this subtitle for any taxable year an amount 
equal to the applicable percentage of the premiums paid by the taxpayer 
for health insurance coverage (as defined in section 9832) of the 
taxpayer, the taxpayer's spouse, or any dependent (as defined in 
section 152, determined without regard to subsections (b)(1), (b)(2), 
and (d)(1)(B) thereof) of the taxpayer.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
term `applicable percentage' means the percentage equal to the sum of 
the rates of in effect under subsections (a) and (b) of section 3101.
    ``(c) Limitation.--The amount of the credit allowed under 
subsection (a) shall not exceed the excess of--
            ``(1) the social security taxes (as defined in section 
        24(d)) of the taxpayer for the taxable year, reduced by
            ``(2) the sum of the credits allowed under section 24(d) 
        and 32 for the taxable year.''.
    (b) Conforming Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``, 36C'' after ``36B''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by inserting after the item relating to section 36B 
        the following new item:

``Sec. 36C. Refund of payroll taxes attributable to health insurance 
                            premiums.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2017.

                  Subtitle B--Health Savings Accounts

SEC. 211. REPEAL OF CONTRIBUTION LIMITATIONS.

    (a) In General.--Subsection (b) of section 223 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(b) Denial of Deduction to Dependents.--No deduction shall be 
allowed under this section to any individual with respect to whom a 
deduction under section 151 is allowable to another taxpayer for a 
taxable year beginning in the calendar year in which such individual's 
taxable year begins.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (A) of section 223(d)(1) of the Internal 
        Revenue Code of 1986 is amended--
                    (A) by striking ``subsection (f)(5)'' and inserting 
                ``subsection (f)(4)'', and
                    (B) by striking ``accepted--'' and all that follows 
                and inserting ``accepted unless it is in cash.''.
            (2) Subsection (f) of section 223 of such Code is amended 
        by striking paragraph (3) and by redesignating paragraphs (4) 
        through (8) as paragraphs (3) through (7), respectively.
            (3) Subsection (g) of section 223 of such Code is amended--
                    (A) by striking ``subsections (b)(2) and 
                (c)(2)(A)'' both places it appears and inserting 
                ``subsection (c)(2)(A)'', and
                    (B) by amending subparagraph (B) to read as 
                follows:
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                such taxable year begins determined by substituting 
                `calendar year 2003' for `calendar year 1992'.''.
            (4) Section 26(b)(2) of such Code is amended--
                    (A) by striking ``, 223(b)(8)(B)(i)(II),'' in 
                subparagraph (S), and
                    (B) by striking ``223(f)(4)'' in subparagraph (U) 
                and inserting ``223(f)(3)''.
            (5) Paragraph (1) of section 106(d) of such Code is amended 
        by striking ``under an accident or health plan'' and all that 
        follows and inserting ``under an accident or health plan.''.
            (6) Subparagraph (C) of section 106(e)(4) of such Code is 
        amended by striking ``223(f)(5)'' and inserting ``223(f)(4)''.
            (7) Subparagraph (C) of section 408(d)(9) of such Code is 
        amended--
                    (A) by striking ``Limitations.--'' in the heading 
                and all that follows through ``(ii) One-time 
                transfer.--'' in clause (ii), and inserting ``One-time 
                transfer.--'',
                    (B) by redesignating subclauses (I) and (II) as 
                clauses (i) and (ii) and moving such clauses 2 ems to 
                the left, and
                    (C) by striking ``subclause (II)'' in clause (i), 
                as so redesignated, and inserting ``clause (ii)''.
            (8) Section 4973 of such Code is amended by striking 
        subsection (g) and by redesignating subsection (h) as 
        subsection (g).
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 212. FREEDOM FROM MANDATE.

    (a) In General.--Section 223 of the Internal Revenue Code of 1986, 
as amended by section 211, is further amended by striking subsections 
(c) and (g) and by redesignating subsections (d), (e), (f), and (h) as 
subsections (c), (d), (e), and (f), respectively.
    (b) Conforming Amendments.--
            (1) Subsection (a) of section 223 of the Internal Revenue 
        Code of 1986 is amended to read as follows:
    ``(a) Deduction Allowed.--In the case of an individual, there shall 
be allowed as a deduction for the taxable year an amount equal to the 
aggregate amount paid in cash during such taxable year by or on behalf 
of such individual to a health savings account of such individual.''.
            (2) Subsection (c)(1)(A) of section 223 of such Code, as 
        amended by section 211 and redesignated by subsection (a), is 
        further amended by striking ``subsection (f)(4)'' and inserting 
        ``subsection (e)(4)''.
            (3) Subparagraph (U) of section 26(b)(2) of such Code, as 
        amended by section 211, is further amended by striking 
        ``section 223(f)(3)'' and inserting ``section 223(e)(3)''.
            (4) Sections 35(g)(3), 220(f)(5)(A), 848(e)(1)(B)(v), 
        4973(a)(5), and 6051(a)(12) of such Code are each amended by 
        striking ``section 223(d)'' each place it appears and inserting 
        ``section 223(c)''.
            (5) Section 106(d)(1) of such Code is amended--
                    (A) by striking ``who is an eligible individual (as 
                defined in section 223(c)(1))'', and
                    (B) by striking ``section 223(d)'' and inserting 
                ``section 223(c)''.
            (6) Section 106(e) of such Code is amended--
                    (A) by striking paragraphs (3) and (4) and by 
                redesignating paragraph (5) as paragraph (4),
                    (B) by inserting after paragraph (2) the following 
                new paragraph:
            ``(3) Treatment as rollover contribution.--A qualified HSA 
        distribution shall be treated as a rollover contribution 
        described in section 223(e)(4).'', and
                    (C) by striking ``to any eligible individual 
                covered under a high deductible health plan of the 
                employer'' in paragraph (4)(B)(ii) (as so redesignated) 
                and inserting ``to any employee with respect to whom a 
                health savings account has been established''.
            (7) Section 408(d)(9)(A) of such Code is amended by 
        striking ``who is an eligible individual (as defined in section 
        223(c)) and''.
            (8) Section 877A(g)(6) of such Code is amended by striking 
        ``223(f)(4)'' and inserting ``223(e)(4)''.
            (9) Section 4975 of such Code is amended--
                    (A) in subsection (c)(6)--
                            (i) by striking ``section 223(d)'' and 
                        inserting ``section 223(c)'', and
                            (ii) by striking ``section 223(e)(2)'' and 
                        inserting ``section 223(d)(2)'', and
                    (B) in subsection (e)(1)(E), by striking ``section 
                223(d)'' and inserting ``section 223(c)''.
            (10) Subsection (b) of section 4980G of such Code is 
        amended to read as follows:
    ``(b) Rules and Requirements.--
            ``(1) In general.--An employer meets the requirements of 
        this subsection for any calendar year if the employer makes 
        available comparable contributions to the health savings 
        accounts of all comparable participating employees for each 
        coverage period during such calendar year.
            ``(2) Comparable contributions.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the term `comparable contributions' means 
                contributions--
                            ``(i) which are the same amount, or
                            ``(ii) if the employees are covered by a 
                        health plan, which are the same percentage of 
                        the annual deductible limit under the plan 
                        covering the employees.
                    ``(B) Part-year employees.--In the case of an 
                employee who is employed by the employer for only a 
                portion of the calendar year, a contribution to the 
                health savings account of such employee shall be 
                treated as comparable if it is an amount which bears 
                the same ratio to the comparable amount (determined 
                without regard to this subparagraph) as such portion 
                bears to the entire calendar year.
            ``(3) Comparable participating employees.--For purposes of 
        paragraph (1), the term `comparable participating employees' 
        means all employees who are covered (if at all) under the same 
        health plan of the employer and have the same category of 
        coverage. For purposes of the preceding sentence, the 
        categories of coverage are self-only and family coverage.
            ``(4) Part-time employees.--
                    ``(A) In general.--Paragraph (3) shall be applied 
                separately with respect to part-time employees and 
                other employees.
                    ``(B) Part-time employee.--For purposes of 
                subparagraph (A), the term `part-time employee' means 
                any employee who is customarily employed for fewer than 
                30 hours per week.''.
            (11) Section 4980G(d) of such Code is amended by striking 
        ``section 4980E'' and inserting ``this section''.
            (12) Section 6693(a)(2)(C) of such Code is amended by 
        striking ``section 223(h)'' and inserting ``section 223(f)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 213. ALLOWANCE OF DISTRIBUTIONS FOR PRESCRIPTION AND OVER-THE-
              COUNTER MEDICINES AND DRUGS.

    (a) HSAs.--Paragraph (2)(A) of section 223(c) of the Internal 
Revenue Code of 1986, as redesignated by section 212, is amended by 
striking the last sentence thereof and inserting the following: ``Such 
term shall include an amount paid for any prescription or over-the-
counter medicine or drug.''.
    (b) Archer MSAs.--Section 220(d)(2)(A) of the Internal Revenue Code 
of 1986 is amended by striking the last sentence thereof and inserting 
the following: ``Such term shall include an amount paid for any 
prescription or over-the-counter medicine or drug.''.
    (c) Health Flexible Spending Arrangements and Health Reimbursement 
Arrangements.--Subsection (f) of section 106 of the Internal Revenue 
Code of 1986 is amended to read as follows:
    ``(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.''.
    (d) Effective Dates.--
            (1) Distributions from savings accounts.--The amendments 
        made by subsections (a) and (b) shall apply to amounts paid in 
        taxable years beginning after the date of the enactment of this 
        Act.
            (2) Reimbursements.--The amendment made by subsection (c) 
        shall apply to expenses incurred in plan years beginning after 
        the date of the enactment of this Act.

SEC. 214. PURCHASE OF HEALTH INSURANCE FROM HSA.

    (a) In General.--Paragraph (2) of section 223(c) of the Internal 
Revenue Code of 1986, as redesignated by section 212, is amended by 
striking subparagraphs (B) and (C).
    (b) Conforming Amendment.--Paragraph (2) of section 223(c) of the 
Internal Revenue Code of 1986, as amended by the preceding sections of 
this subtitle, is further amended by striking ``and any dependent (as 
defined in section 152, determined without regard to subsections 
(b)(1), (b)(2), and (d)(1)(B) thereof) of such individual'' and 
inserting ``any dependent (as defined in section 152, determined 
without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of 
such individual, and any child (as defined in section 152(f)(1)) of 
such individual who has not attained the age of 27 before the end of 
such individual's taxable year''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to insurance purchased after the date of the 
enactment of this Act in taxable years beginning after such date.

SEC. 215. SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE 
              ESTABLISHMENT OF ACCOUNT.

    (a) In General.--Paragraph (2) of section 223(c) of the Internal 
Revenue Code of 1986, as amended and redesignated by the preceding 
sections of this subtitle, is further amended by adding at the end the 
following new subparagraph:
                    ``(B) Certain medical expenses incurred 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 established, 
                                or
                                    ``(II) the preceding taxable year, 
                                in the case of a health savings account 
                                established after the taxable year in 
                                which such expense was incurred but 
                                before the time prescribed by law for 
                                filing the return for such taxable year 
                                (not including extensions thereof), and
                            ``(ii) for medical care which (but for the 
                        fact that it was incurred before the 
                        establishment of the account) otherwise meets 
                        the requirements of the preceding 
                        subparagraphs.''.
    (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. 216. ADMINISTRATIVE ERROR CORRECTION BEFORE DUE DATE OF RETURN.

    (a) In General.--Paragraph (3) of section 223(f) of the Internal 
Revenue Code of 1986, as in effect on the day before the date of the 
enactment of this Act, is amended by adding at the end the following 
new subparagraph:
                    ``(D) Exception for administrative errors corrected 
                before due date of return.--Subparagraph (A) shall not 
                apply if any payment or distribution is made to correct 
                an administrative, clerical, or payroll contribution 
                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. 217. ALLOWING HSA ROLLOVER TO CHILD OR PARENT OF ACCOUNT HOLDER.

    (a) In General.--Paragraph (7)(A) of section 223(e) of the Internal 
Revenue Code of 1986, as redesignated by the preceding sections of this 
subtitle, is amended--
            (1) by inserting ``, child, parent, or grandparent'' after 
        ``surviving spouse'',
            (2) by inserting ``, child, parent, or grandparent, as the 
        case may be,'' after ``the spouse'',
            (3) by inserting ``, child, parent, or grandparent'' after 
        ``spouse'' in the heading thereof, and
            (4) by adding at the end the following: ``In the case of a 
        child who acquires such beneficiary's interest and with respect 
        to whom a deduction under section 151 is allowable to another 
        taxpayer for a taxable year beginning in the calendar year in 
        which such individual's taxable year begins, such health 
        savings account shall be treated as a health savings account of 
        such child.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 218. CREDIT FOR CONTRIBUTIONS TO AN HSA.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 25D the following new section:

``SEC. 25E. CONTRIBUTIONS TO A HEALTH SAVINGS ACCOUNT.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to so much of the qualified HSA 
contributions of the individual as does not exceed $5,000 ($10,000 in 
the case of a joint return).
    ``(b) Qualified HSA Contribution.--
            ``(1) In general.--For purposes of this section, the term 
        `qualified HSA contribution' means an amount paid in cash 
        during the taxable year by or on behalf of an individual to a 
        health savings account (as defined in section 223(c)) of such 
        individual.
            ``(2) Exception for amounts not used for qualified medical 
        expenses.--The amount taken into account as qualified HSA 
        contributions of the individual under paragraph (1) for a 
        taxable year shall be reduced by the amount of any distribution 
        from such health savings account during such taxable year which 
        is not used exclusively to pay the qualified medical expenses 
        of the account beneficiary (within the meaning of section 
        223(e)(2)).
    ``(c) Coordination With Deduction.--For coordination rule, see 
section 223(b)(1).''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 25D the 
following new item:

``Sec. 25E. Contributions to a health savings account.''.
    (c) Conforming Amendment.--Subsection (b) of section 223 of the 
Internal Revenue Code of 1986, as amended by section 211, is further 
amended to read as follows:
    ``(b) Special Rules.--
            ``(1) Coordination with credit.--The amount taken into 
        account under subsection (a) with respect to any individual 
        shall be reduced (but not below zero) by the amount of any 
        credit allowed under section 25E for qualified HSA 
        contributions with respect to the individual.
            ``(2) Denial of deduction to dependents.--No deduction 
        shall be allowed under this section to any individual with 
        respect to whom a deduction under section 151 is allowable to 
        another taxpayer for a taxable year beginning in the calendar 
        year in which such individual's taxable year begins.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 219. EQUIVALENT BANKRUPTCY PROTECTIONS FOR HEALTH SAVINGS ACCOUNTS 
              AS RETIREMENT FUNDS.

    (a) In General.--Section 522 of title 11, United States Code, is 
amended by adding at the end the following new subsection:
    ``(r) Treatment of Health Savings Accounts.--For purposes of this 
section, any health savings account (as described in section 223 of the 
Internal Revenue 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. 220. DISTRIBUTIONS FOR ABORTION EXPENSES FROM HEALTH SAVINGS 
              ACCOUNTS INCLUDED IN GROSS INCOME.

    (a) In General.--Subsection (e) of section 223 of the Internal 
Revenue Code of 1986, as amended by the preceding provisions of this 
subtitle, is amended by adding at the end the following new paragraph:
            ``(8) Exception for certain abortion expenses.--
                    ``(A) In general.--Notwithstanding paragraph (1), 
                any amount used to pay for an abortion (other than an 
                abortion described in subparagraph (B)) or health 
                insurance that covers abortions (other than abortions 
                so described) shall be included in the gross income of 
                such beneficiary.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                to--
                            ``(i) an abortion--
                                    ``(I) in the case of a pregnancy 
                                that is the result of an act of rape or 
                                incest, or
                                    ``(II) in the case where a woman 
                                suffers from a physical disorder, 
                                physical injury, or physical illness 
                                that would, as certified by a 
                                physician, place the woman in danger of 
                                death unless an abortion is performed, 
                                including a life-endangering physical 
                                condition caused by or arising from the 
                                pregnancy, and
                            ``(ii) the treatment of any infection, 
                        injury, disease, or disorder that has been 
                        caused by or exacerbated by the performance of 
                        an abortion.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

                      Subtitle C--Medical Expenses

SEC. 221. CERTAIN EXERCISE EQUIPMENT AND PHYSICAL FITNESS PROGRAMS 
              TREATED AS MEDICAL CARE.

    (a) In General.--Subsection (d) of section 213 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(12) Exercise equipment and physical fitness activity.--
                    ``(A) In general.--The term `medical care' shall 
                include amounts paid--
                            ``(i) for equipment for use in a program 
                        (including a self-directed program) of physical 
                        exercise or physical activity,
                            ``(ii) to participate, or receive 
                        instruction, in a program of physical exercise, 
                        nutrition, or health coaching (including a 
                        self-directed program), and
                            ``(iii) for membership at a fitness 
                        facility.
                    ``(B) Overall dollar limitation.--
                            ``(i) In general.--Amounts treated as 
                        medical care under subparagraph (A) shall not 
                        exceed $1,000 with respect to any individual 
                        for any taxable year.
                            ``(ii) Exception.--Clause (i) shall not 
                        apply for purposes of determining whether 
                        expenses reimbursed through a health flexible 
                        spending arrangement subject to section 
                        125(i)(1) are incurred for medical care.
                    ``(C) Limitations related to sports and fitness 
                equipment.--Amounts paid for equipment described in 
                subparagraph (A)(i) shall be treated as medical care 
                only--
                            ``(i) if such equipment is utilized 
                        exclusively for participation in fitness, 
                        exercise, sport, or other physical activity 
                        programs,
                            ``(ii) if such equipment is not apparel or 
                        footwear, and
                            ``(iii) in the case of any item of sports 
                        equipment (other than exercise equipment), to 
                        the extent the amount paid for such item does 
                        not exceed $250.
                    ``(D) Fitness facility.--For purposes of 
                subparagraph (A)(iii), the term `fitness facility' 
                means a facility--
                            ``(i) which provides instruction in a 
                        program of physical exercise, offers facilities 
                        for the preservation, maintenance, 
                        encouragement, or development of physical 
                        fitness, or serves as the site of such a 
                        program of a State or local government,
                            ``(ii) which is not a private club owned 
                        and operated by its members,
                            ``(iii) which does not offer golf, hunting, 
                        sailing, or riding facilities,
                            ``(iv) whose health or fitness facility is 
                        not incidental to its overall function and 
                        purpose, and
                            ``(v) which is fully compliant with the 
                        State of jurisdiction and Federal anti-
                        discrimination laws.''.
    (b) Limitation Not To Apply for Certain Purposes.--
            (1) Health savings accounts.--Subparagraph (A) of section 
        223(c)(2) of the Internal Revenue Code of 1986, as amended and 
        redesignated by subtitle B, is further amended by inserting ``, 
        determined without regard to paragraph (12)(B) thereof)'' after 
        ``medical care (as defined in section 213(d)''.
            (2) Archer msas.--Subparagraph (A) of section 220(d)(2) of 
        the Internal Revenue Code of 1986, as amended by subtitle B, is 
        further amended by inserting ``, determined without regard to 
        paragraph (12)(B) thereof'' after ``medical care (as defined in 
        section 213(d)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 222. CERTAIN NUTRITIONAL AND DIETARY SUPPLEMENTS TO BE TREATED AS 
              MEDICAL CARE.

    (a) In General.--Subsection (d) of section 213 of the Internal 
Revenue Code of 1986, as amended by section 221, is further amended by 
adding at the end the following new paragraph:
            ``(13) Nutritional and dietary supplements.--
                    ``(A) In general.--The term `medical care' shall 
                include amounts paid to purchase herbs, vitamins, 
                minerals, homeopathic remedies, meal replacement 
                products, and other dietary 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 making 
                        a claim described in section 403(r)(3) 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 multiple 
                        essential vitamins and minerals.
                    ``(D) Exception.--Subparagraph (B) shall not apply 
                for purposes of determining whether expenses reimbursed 
                through a health flexible spending arrangement subject 
                to section 125(i)(1) are incurred for medical care.''.
    (b) Limitation Not To Apply for Certain Purposes.--
            (1) Health savings accounts.--Subparagraph (A) of section 
        223(c)(2) of the Internal Revenue Code of 1986, as amended and 
        redesignated by this Act, is amended by striking ``paragraph 
        (12)(B)'' and inserting ``paragraphs (12)(B) and (13)(B)''.
            (2) Archer msas.--Subparagraph (A) of section 220(d)(2), as 
        amended by this Act, is amended by striking ``paragraph 
        (12)(B)'' and inserting ``paragraphs (12)(B) and (13)(B)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 223. CERTAIN PROVIDER FEES TO BE TREATED AS MEDICAL CARE.

    (a) In General.--Subsection (d) of section 213 of the Internal 
Revenue Code of 1986, as amended by sections 221 and 222, is amended by 
adding at the end the following new paragraph:
            ``(14) Periodic provider fees.--The term `medical care' 
        shall include--
                    ``(A) periodic fees paid to a primary care 
                physician for a defined set of medical services or the 
                right to receive medical services on an as-needed 
                basis, and
                    ``(B) pre-paid primary care services designed to 
                screen for, diagnose, cure, mitigate, treat, or prevent 
                disease and promote wellness.''.
    (b) Exception for Flexible Spending Accounts.--Section 125 of the 
Internal Revenue Code of 1986 is amended by redesignating subsections 
(k) and (l) as subsections (l) and (m), respectively, and by inserting 
after subsection (j) the following new subsection:
    ``(k) Special Rule With Respect to Health Flexible Spending 
Arrangements.--For purposes of applying this section with respect to 
any health flexible spending arrangement, amounts described in section 
213(d)(14) shall not be considered insurance.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 224. CLARIFICATION OF TREATMENT OF CAPITATED PRIMARY CARE PAYMENTS 
              AS AMOUNTS PAID FOR MEDICAL CARE.

    (a) In General.--Subsection (d) of section 213 of the Internal 
Revenue Code of 1986, as amended by the preceding provisions of this 
Act, is amended by adding at the end the following new paragraph:
            ``(15) Treatment of capitated primary care payments.--
        Capitated primary care payments shall be treated as amounts 
        paid for medical care.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

                       Subtitle D--Miscellaneous

SEC. 231. CONTRIBUTIONS OF MEDICARE BENEFICIARIES PARTICIPATING IN 
              MEDICARE ADVANTAGE MSA.

    (a) In General.--Section 138(b) of the Internal Revenue Code of 
1986 is amended by striking paragraph (2) and by redesignating 
paragraphs (3) and (4) as paragraphs (2) and (3), respectively.
    (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. 232. PHYSICIAN CHARITY AND UNCOMPENSATED CARE DEDUCTION.

    (a) In General.--Part VI of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new section:

``SEC. 199A. PHYSICIAN CHARITY AND UNCOMPENSATED CARE.

    ``(a) In General.--In the case of a physician, there shall be 
allowed as a deduction for the taxable year an amount equal to the sum 
of--
            ``(1) the amount such physician would have otherwise 
        charged for qualified charity care provided by such physician 
        during such taxable year, and
            ``(2) the amount of any debt owed to such physician for 
        physicians' services which becomes worthless during such 
        taxable year.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Physician.--The term `physician' has the meaning 
        given to such term in section 1861(r) of the Social Security 
        Act (42 U.S.C. 1395x(r)).
            ``(2) Qualified charity care.--The term `qualified charity 
        care' means physicians' services provided on a volunteer or pro 
        bono basis (not including any services for which an amount was 
        charged but not paid).
            ``(3) Physicians' services.--The term `physicians' 
        services' has the meaning given such term in section 1861(q) of 
        the Social Security Act (42 U.S.C. 1395x(q)).
    ``(c) Limitations.--
            ``(1) Service charge limitation.--The amount determined 
        under subsection (a) with respect to any services or debt--
                    ``(A) shall be reduced by any reimbursement 
                received by the physician for such services or debt, 
                and
                    ``(B) shall not exceed the economic index referred 
                to in the fourth sentence of section 1842(b)(3) of the 
                Social Security Act (42 U.S.C. 1395u(b)(3)) applicable 
                to the qualified charity care provided or the services 
                provided with respect to which the debt relates.
        In the case of physicians' services to which such economic 
        index is not applicable, the Secretary, in consultation with 
        the Secretary of Health and Human Services, shall use data on 
        uncompensated care for purposes of the limitation under 
        subparagraph (B), and may adjust such data so as to be an 
        appropriate proxy, including (in the case of qualified charity 
        care) a downward adjustment to eliminate bad debt data from 
        uncompensated care data.
            ``(2) Overall limitation.--The amount allowed as a 
        deduction under subsection (a) for any taxable year shall not 
        exceed an amount equal to 10 percent of the gross income of the 
        taxpayer for the taxable year derived from the taxpayer's 
        provision of physicians' services.
    ``(d) Denial of Double Benefit.--No deduction shall be allowed 
under section 166 or any other provision of this title for the amount 
of any bad debt taken into account under subsection (a)(2) (as reduced, 
if applicable, under subsection (c)).''.
    (b) Clerical Amendment.--The table of sections for part VI of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new item:

``Sec. 199A. Physician charity and uncompensated care.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

             TITLE III--INDIVIDUAL HEALTH INSURANCE REFORM

SEC. 301. POOL REFORM FOR INDIVIDUAL MEMBERSHIP EXPANSION.

    The Public Health Service Act is amended by inserting after title 
XXXIII the following new title:

     ``TITLE XXXIV--POOL REFORM FOR INDIVIDUAL MEMBERSHIP EXPANSION

``SEC. 3400. PURPOSE.

    ``The purpose of this title is to provide, through the 
establishment of independent health pools (referred to in this title as 
`IHP'), for the reform of, and expansion of enrollment in, health 
insurance coverage for individuals and small employers.

``SEC. 3401. DEFINITION OF INDEPENDENT HEALTH POOL.

    ``(a) In General.--For purposes of this title, the terms 
`individual health pool' and `IHP' mean a legal nonprofit entity that 
meets the following requirements:
            ``(1) Organization.--The IHP--
                    ``(A) has been formed and maintained in good faith 
                for a purpose that includes the formation of a risk 
                pool in order to offer health insurance coverage to its 
                members;
                    ``(B) does not condition membership in the IHP on 
                any health status-related factor relating to an 
                individual (including an employee of an employer or a 
                dependent of an employee);
                    ``(C) does not make health insurance coverage 
                offered through the IHP available other than in 
                connection with a member of the IHP;
                    ``(D) is not a health insurance issuer; and
                    ``(E) does not receive any consideration directly 
                or indirectly from any health insurance issuer in 
                connection with the enrollment of any individuals, or 
                employees of employers, in any health insurance 
                coverage, except in conjunction with services offered 
                through the IHP.
            ``(2) Offering health benefits coverage.--
                    ``(A) Different groups.--The IHP, in conjunction 
                with those health insurance issuers that offer health 
                benefits coverage through the IHP, makes available 
                health benefits coverage in the manner described in 
                subsection (b) to all members of the IHP and the 
                dependents of such members (and, in the case of small 
                employers, employees and their dependents) in the 
                manner described in subsection (c)(2) at rates that are 
                established by the health insurance issuer on a policy 
                or product specific basis and that may vary for 
                individuals covered through an IHP.
                    ``(B) Nondiscrimination in coverage offered.--
                            ``(i) In general.--Subject to clause (ii), 
                        the IHP may not offer health benefits coverage 
                        to a member of an IHP unless the same coverage 
                        is offered to all such members of the IHP.
                            ``(ii) Construction.--Nothing in this title 
                        shall be construed as requiring or permitting a 
                        health insurance issuer to provide coverage 
                        outside the service area of the issuer, as 
                        approved under State law, or preventing a 
                        health insurance issuer from underwriting or 
                        from excluding or limiting the coverage on any 
                        individual, subject to the requirement of 
                        section 2741 (relating to guaranteed 
                        availability of individual health insurance 
                        coverage to certain individuals with prior 
                        group coverage).
                    ``(C) No assumption of insurance risk by ihp.--The 
                IHP provides health benefits coverage only through 
                contracts with health insurance issuers and does not 
                assume insurance risk with respect to such coverage.
            ``(3) Geographic areas.--Nothing in this title shall be 
        construed as preventing the establishment and operation of more 
        than one IHP in a geographic area or as limiting the number of 
        IHPs that may operate in any area.
            ``(4) Provision of administrative services to purchasers.--
        The IHP may provide administrative services for members. Such 
        services may include accounting, billing, and enrollment 
        information.
    ``(b) Health Benefits Coverage Requirements.--
            ``(1) Compliance with consumer protection requirements.--
        Except as provided in section 3402, any health benefits 
        coverage offered through an IHP--
                    ``(A) shall be issued by a health insurance issuer 
                that meets all applicable State standards relating to 
                consumer protection;
                    ``(B) shall be approved or otherwise permitted to 
                be offered under State law; and
                    ``(C) may not impose any exclusion of a specific 
                disease from such coverage.
            ``(2) Wellness bonuses for health promotion.--Nothing in 
        this title shall be construed as precluding a health insurance 
        issuer offering health benefits coverage through an IHP from 
        establishing premium discounts or rebates for members or from 
        modifying otherwise applicable copayments or deductibles in 
        return for adherence to programs of health promotion and 
        disease prevention so long as such programs are agreed to in 
        advance by the IHP and comply with all other provisions of this 
        title and do not discriminate among similarly situated members.
    ``(c) Members; Health Insurance Issuers.--
            ``(1) Members.--
                    ``(A) In general.--Under rules established to carry 
                out this title, with respect to an individual or small 
                employer who is a member of an IHP, the individual may 
                enroll for health benefits coverage (including coverage 
                for dependents of such individual) or the employer may 
                enroll employees for health benefits coverage 
                (including coverage for dependents of such employees) 
                offered by a health insurance issuer through the IHP.
                    ``(B) Rules for enrollment.--Nothing in this 
                paragraph shall preclude an IHP from establishing rules 
                of enrollment and reenrollment of members. Such rules 
                shall be applied consistently to all members within the 
                IHP and shall not be based in any manner on health 
                status-related factors.
            ``(2) Health insurance issuers.--The contract between an 
        IHP and a health insurance issuer shall provide, with respect 
        to a member enrolled with health benefits coverage offered by 
        the issuer through the IHP, for the payment to the issuer of 
        the premiums (if any) collected by the IHP for health insurance 
        coverage offered by the issuer.

``SEC. 3402. APPLICATION OF CERTAIN LAWS AND REQUIREMENTS.

    ``(a) Preemption of State Laws Restricting Formation of IHPs.--Any 
State law or regulation relating to the composition or organization of 
an IHP is preempted to the extent the law or regulation is inconsistent 
with the provisions of this title.
    ``(b) Preemption of State Requirements Relating to Health Benefit 
Coverage.--
            ``(1) Benefit requirements.--
                    ``(A) In general.--Subject to subparagraph (B), 
                State laws are superseded, and shall not apply to 
                health benefits coverage made available through an IHP, 
                insofar as such laws impose benefit requirements for 
                such coverage, including requirements relating to 
                coverage of specific providers, specific services or 
                conditions, or the amount, duration, or scope of 
                benefits.
                    ``(B) Exception for federally imposed requirements 
                and for requirements prohibiting disease-specific 
                exclusions.--Subparagraph (A) shall not apply to a 
                requirement to the extent the requirement--
                            ``(i) implements title XXVII or other 
                        Federal law; or
                            ``(ii) prohibits imposition of an exclusion 
                        of a specific disease from health benefits 
                        coverage.
            ``(2) Other requirements preventing offering of coverage 
        through an ihp.--State laws are superseded, and shall not apply 
        to health benefits coverage made available through an IHP, 
        insofar as such laws impose any other requirements (including 
        limitations on compensation arrangements) that, directly or 
        indirectly, preclude (or have the effect of precluding) the 
        offering of such coverage through an IHP, if the IHP meets the 
        requirements of this title.
    ``(c) Preemption of State Premium Rating Requirements.--State laws 
are superseded, and shall not apply to the premiums imposed for health 
benefits coverage made available through an IHP, insofar as such laws 
impose restrictions on the variation of premiums among such coverage 
offered to members of the IHP.

``SEC. 3403. DEFINITIONS.

    ``For purposes of this title:
            ``(1) Dependent.--The term `dependent', as applied to 
        health insurance coverage offered by a health insurance issuer 
        licensed (or otherwise regulated) in a State, shall have the 
        meaning applied to such term with respect to such coverage 
        under the laws of the State relating to such coverage and such 
        an issuer. Such term may include the spouse and children of the 
        individual involved.
            ``(2) Health benefits coverage.--The term `health benefits 
        coverage' has the meaning given the term `health insurance 
        coverage' in section 2791(b)(1), and does not include excepted 
        benefits (as defined in section 2791(c)).
            ``(3) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2).
            ``(4) Health status-related factor.--The term `health 
        status-related factor' has the meaning given such term in 
        section 2791(d)(9).
            ``(5) Member.--The term `member' means, with respect to an 
        IHP, an individual or small employer who is a member of the 
        legal entity described in section 3401(a)(1) to which the IHP 
        is offering coverage.
            ``(6) Small employer.--The term `small employer' has the 
        meaning given such term in section 712(c)(1)(B) of the Employee 
        Retirement and Income Security Act of 1974.''.

SEC. 302. COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE 
              COVERAGE.

    (a) In General.--Title XXVII of the Public Health Service Act (42 
U.S.C. 300gg et seq.) is amended by adding at the end the following new 
part:

``PART D--COOPERATIVE GOVERNING OF INDIVIDUAL HEALTH INSURANCE COVERAGE

``SEC. 2795. DEFINITIONS.

    ``In this part:
            ``(1) Primary state.--The term `primary State' means, with 
        respect to individual health insurance coverage offered by a 
        health insurance issuer, the State designated by the issuer as 
        the State whose covered laws shall govern the health insurance 
        issuer in the sale of such coverage under this part. An issuer, 
        with respect to a particular policy, may only designate one 
        such State as its primary State with respect to all such 
        coverage it offers. Such an issuer may not change the 
        designated primary State with respect to individual health 
        insurance coverage once the policy is issued, except that such 
        a change may be made upon renewal of the policy. With respect 
        to such designated State, the issuer is deemed to be doing 
        business in that State.
            ``(2) Secondary state.--The term `secondary State' means, 
        with respect to individual health insurance coverage offered by 
        a health insurance issuer, any State that is not the primary 
        State. In the case of a health insurance issuer that is selling 
        a policy in, or to a resident of, a secondary State, the issuer 
        is deemed to be doing business in that secondary State.
            ``(3) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791(b)(2), 
        except that such an issuer must be licensed in the primary 
        State and be qualified to sell individual health insurance 
        coverage in that State.
            ``(4) Individual health insurance coverage.--The term 
        `individual health insurance coverage' means health insurance 
        coverage offered in the individual market, as defined in 
        section 2791(e)(1).
            ``(5) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of this title for the State with respect to the 
        issuer.
            ``(6) Hazardous financial condition.--The term `hazardous 
        financial condition' means that, based on its present or 
        reasonably anticipated financial condition, a health insurance 
        issuer is unlikely to be able--
                    ``(A) to meet obligations to policyholders with 
                respect to known claims and reasonably anticipated 
                claims; or
                    ``(B) to pay other obligations in the normal course 
                of business.
            ``(7) Covered laws.--
                    ``(A) In general.--The term `covered laws' means 
                the laws, rules, regulations, agreements, and orders 
                governing the insurance business pertaining to--
                            ``(i) individual health insurance coverage 
                        issued by a health insurance issuer;
                            ``(ii) the offer, sale, rating (including 
                        medical underwriting), renewal, and issuance of 
                        individual health insurance coverage to an 
                        individual;
                            ``(iii) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of health care and insurance related 
                        services;
                            ``(iv) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of management, operations, and 
                        investment activities of a health insurance 
                        issuer; and
                            ``(v) the provision to an individual in 
                        relation to individual health insurance 
                        coverage of loss control and claims 
                        administration for a health insurance issuer 
                        with respect to liability for which the issuer 
                        provides insurance.
                    ``(B) Exception.--Such term does not include any 
                law, rule, regulation, agreement, or order governing 
                the use of care or cost management techniques, 
                including any requirement related to provider 
                contracting, network access or adequacy, health care 
                data collection, or quality assurance.
            ``(8) State.--The term `State' means the 50 States and 
        includes the District of Columbia, Puerto Rico, the Virgin 
        Islands, Guam, American Samoa, and the Northern Mariana 
        Islands.
            ``(9) Unfair claims settlement practices.--The term `unfair 
        claims settlement practices' means only the following 
        practices:
                    ``(A) Knowingly misrepresenting to claimants and 
                insured individuals relevant facts or policy provisions 
                relating to coverage at issue.
                    ``(B) Failing to acknowledge with reasonable 
                promptness pertinent communications with respect to 
                claims arising under policies.
                    ``(C) Failing to adopt and implement reasonable 
                standards for the prompt investigation and settlement 
                of claims arising under policies.
                    ``(D) Failing to effectuate prompt, fair, and 
                equitable settlement of claims submitted in which 
                liability has become reasonably clear.
                    ``(E) Refusing to pay claims without conducting a 
                reasonable investigation.
                    ``(F) Failing to affirm or deny coverage of claims 
                within a reasonable period of time after having 
                completed an investigation related to those claims.
                    ``(G) A pattern or practice of compelling insured 
                individuals or their beneficiaries to institute suits 
                to recover amounts due under its policies by offering 
                substantially less than the amounts ultimately 
                recovered in suits brought by them.
                    ``(H) A pattern or practice of attempting to settle 
                or settling claims for less than the amount that a 
                reasonable person would believe the insured individual 
                or his or her beneficiary was entitled by reference to 
                written or printed advertising material accompanying or 
                made part of an application.
                    ``(I) Attempting to settle or settling claims on 
                the basis of an application that was materially altered 
                without notice to, or knowledge or consent of, the 
                insured.
                    ``(J) Failing to provide forms necessary to present 
                claims within 15 calendar days of requests with 
                reasonable explanations regarding their use.
                    ``(K) Attempting to cancel a policy in less time 
                than that prescribed in the policy or by the law of the 
                primary State.
            ``(10) Fraud and abuse.--The term `fraud and abuse' means 
        an act or omission committed by a person who, knowingly and 
        with intent to defraud, commits, or conceals any material 
        information concerning, one or more of the following:
                    ``(A) Presenting, causing to be presented, or 
                preparing with knowledge or belief that it will be 
                presented to or by an insurer, a reinsurer, or broker 
                or its agent, false information as part of, in support 
                of, or concerning a fact material to one or more of the 
                following:
                            ``(i) An application for the issuance or 
                        renewal of an insurance policy or reinsurance 
                        contract.
                            ``(ii) The rating of an insurance policy or 
                        reinsurance contract.
                            ``(iii) A claim for payment or benefit 
                        pursuant to an insurance policy or reinsurance 
                        contract.
                            ``(iv) Premiums paid on an insurance policy 
                        or reinsurance contract.
                            ``(v) Payments made in accordance with the 
                        terms of an insurance policy or reinsurance 
                        contract.
                            ``(vi) A document filed with the 
                        commissioner or the chief insurance regulatory 
                        official of another jurisdiction.
                            ``(vii) The financial condition of an 
                        insurer or reinsurer.
                            ``(viii) The formation, acquisition, 
                        merger, reconsolidation, dissolution or 
                        withdrawal from one or more lines of insurance 
                        or reinsurance in all or part of a State by an 
                        insurer or reinsurer.
                            ``(ix) The issuance of written evidence of 
                        insurance.
                            ``(x) The reinstatement of an insurance 
                        policy.
                    ``(B) Solicitation or acceptance of new or renewal 
                insurance risks on behalf of an insurer, reinsurer, or 
                other person engaged in the business of insurance by a 
                person who knows or should know that the insurer or 
                other person responsible for the risk is insolvent at 
                the time of the transaction.
                    ``(C) Transaction of the business of insurance in 
                violation of laws requiring a license, certificate of 
                authority, or other legal authority for the transaction 
                of the business of insurance.
                    ``(D) Attempt to commit, aiding or abetting in the 
                commission of, or conspiracy to commit the acts or 
                omissions specified in this paragraph.

``SEC. 2796. APPLICATION OF LAW.

    ``(a) In General.--The covered laws of the primary State shall 
apply to individual health insurance coverage offered by a health 
insurance issuer in the primary State and in any secondary State, but 
only if the coverage and issuer comply with the conditions of this 
section with respect to the offering of coverage in any secondary 
State.
    ``(b) Exemptions From Covered Laws in a Secondary State.--Except as 
provided in this section, a health insurance issuer with respect to its 
offer, sale, rating (including medical underwriting), renewal, and 
issuance of individual health insurance coverage in any secondary State 
is exempt from any covered laws of the secondary State (and any rules, 
regulations, agreements, or orders sought or issued by such State under 
or related to such covered laws) to the extent that such laws would--
            ``(1) make unlawful, or regulate, directly or indirectly, 
        the operation of the health insurance issuer operating in the 
        secondary State, except that any secondary State may require 
        such an issuer--
                    ``(A) to pay, on a nondiscriminatory basis, 
                applicable premium and other taxes (including high risk 
                pool assessments) which are levied on insurers and 
                surplus lines insurers, brokers, or policyholders under 
                the laws of the State;
                    ``(B) to register with and designate the State 
                insurance commissioner as its agent solely for the 
                purpose of receiving service of legal documents or 
                process;
                    ``(C) to submit to an examination of its financial 
                condition by the State insurance commissioner in any 
                State in which the issuer is doing business to 
                determine the issuer's financial condition, if--
                            ``(i) the State insurance commissioner of 
                        the primary State has not done an examination 
                        within the period recommended by the National 
                        Association of Insurance Commissioners; and
                            ``(ii) any such examination is conducted in 
                        accordance with the examiners' handbook of the 
                        National Association of Insurance Commissioners 
                        and is coordinated to avoid unjustified 
                        duplication and unjustified repetition;
                    ``(D) to comply with a lawful order issued--
                            ``(i) in a delinquency proceeding commenced 
                        by the State insurance commissioner if there 
                        has been a finding of financial impairment 
                        under subparagraph (C); or
                            ``(ii) in a voluntary dissolution 
                        proceeding;
                    ``(E) to comply with an injunction issued by a 
                court of competent jurisdiction, upon a petition by the 
                State insurance commissioner alleging that the issuer 
                is in hazardous financial condition;
                    ``(F) to participate, on a nondiscriminatory basis, 
                in any insurance insolvency guaranty association or 
                similar association to which a health insurance issuer 
                in the State is required to belong;
                    ``(G) to comply with any State law regarding fraud 
                and abuse (as defined in section 2795(10)), except that 
                if the State seeks an injunction regarding the conduct 
                described in this subparagraph, such injunction must be 
                obtained from a court of competent jurisdiction;
                    ``(H) to comply with any State law regarding unfair 
                claims settlement practices (as defined in section 
                2795(9)); or
                    ``(I) to comply with the applicable requirements 
                for independent review under section 2798 with respect 
                to coverage offered in the State;
            ``(2) require any individual health insurance coverage 
        issued by the issuer to be countersigned by an insurance agent 
        or broker residing in that secondary State; or
            ``(3) otherwise discriminate against the issuer issuing 
        insurance in both the primary State and in any secondary State.
    ``(c) Clear and Conspicuous Disclosure.--A health insurance issuer 
shall provide the following notice, in 12-point bold type, in any 
insurance coverage offered in a secondary State under this part by such 
a health insurance issuer and at renewal of the policy, with the 5 
blank spaces therein being appropriately filled with the name of the 
health insurance issuer, the name of the primary State, the name of the 
secondary State, the name of the secondary State, and the name of the 
secondary State, respectively, for the coverage concerned:

                               ```Notice

    ```This policy is issued by _____ and is governed by the laws and 
regulations of the _____, and it has met all the laws of that State as 
determined by that State's Department of Insurance. This policy may be 
less expensive than others because it is not subject to all of the 
insurance laws and regulations of the _____, including coverage of some 
services or benefits mandated by the law of the _____. Additionally, 
this policy is not subject to all of the consumer protection laws or 
restrictions on rate changes of the _____. As with all insurance 
products, before purchasing this policy, you should carefully review 
the policy and determine what health care services the policy covers 
and what benefits it provides, including any exclusions, limitations, 
or conditions for such services or benefits.'.
    ``(d) Prohibition on Certain Reclassifications and Premium 
Increases.--
            ``(1) In general.--For purposes of this section, a health 
        insurance issuer that provides individual health insurance 
        coverage to an individual under this part in a primary or 
        secondary State may not upon renewal--
                    ``(A) move or reclassify the individual insured 
                under the health insurance coverage from the class such 
                individual is in at the time of issue of the contract 
                based on the health-status related factors of the 
                individual; or
                    ``(B) increase the premiums assessed the individual 
                for such coverage based on a health status-related 
                factor or change of a health status-related factor or 
                the past or prospective claim experience of the insured 
                individual.
            ``(2) Construction.--Nothing in paragraph (1) shall be 
        construed to prohibit a health insurance issuer--
                    ``(A) from terminating or discontinuing coverage or 
                a class of coverage in accordance with subsections (b) 
                and (c) of section 2742;
                    ``(B) from raising premium rates for all policy 
                holders within a class based on claims experience;
                    ``(C) from changing premiums or offering discounted 
                premiums to individuals who engage in wellness 
                activities at intervals prescribed by the issuer, if 
                such premium changes or incentives--
                            ``(i) are disclosed to the consumer in the 
                        insurance contract;
                            ``(ii) are based on specific wellness 
                        activities that are not applicable to all 
                        individuals; and
                            ``(iii) are not obtainable by all 
                        individuals to whom coverage is offered;
                    ``(D) from reinstating lapsed coverage; or
                    ``(E) from retroactively adjusting the rates 
                charged an insured individual if the initial rates were 
                set based on material misrepresentation by the 
                individual at the time of issue.
    ``(e) Prior Offering of Policy in Primary State.--A health 
insurance issuer may not offer for sale individual health insurance 
coverage in a secondary State unless that coverage is currently offered 
for sale in the primary State.
    ``(f) Licensing of Agents or Brokers for Health Insurance 
Issuers.--Any State may require that a person acting, or offering to 
act, as an agent or broker for a health insurance issuer with respect 
to the offering of individual health insurance coverage obtain a 
license from that State, with commissions or other compensation subject 
to the provisions of the laws of that State, except that a State may 
not impose any qualification or requirement which discriminates against 
a nonresident agent or broker.
    ``(g) Documents for Submission to State Insurance Commissioner.--
Each health insurance issuer issuing individual health insurance 
coverage in both primary and secondary States shall submit--
            ``(1) to the insurance commissioner of each State in which 
        it intends to offer such coverage, before it may offer 
        individual health insurance coverage in such State--
                    ``(A) a copy of the plan of operation or 
                feasibility study or any similar statement of the 
                policy being offered and its coverage (which shall 
                include the name of its primary State and its principal 
                place of business);
                    ``(B) written notice of any change in its 
                designation of its primary State; and
                    ``(C) written notice from the issuer of the 
                issuer's compliance with all the laws of the primary 
                State; and
            ``(2) to the insurance commissioner of each secondary State 
        in which it offers individual health insurance coverage, a copy 
        of the issuer's quarterly financial statement submitted to the 
        primary State, which statement shall be certified by an 
        independent public accountant and contain a statement of 
        opinion on loss and loss adjustment expense reserves made by--
                    ``(A) a member of the American Academy of 
                Actuaries; or
                    ``(B) a qualified loss reserve specialist.
    ``(h) Power of Courts To Enjoin Conduct.--Nothing in this section 
shall be construed to affect the authority of any Federal or State 
court to enjoin--
            ``(1) the solicitation or sale of individual health 
        insurance coverage by a health insurance issuer to any person 
        or group who is not eligible for such insurance; or
            ``(2) the solicitation or sale of individual health 
        insurance coverage that violates the requirements of the law of 
        a secondary State which are described in subparagraphs (A) 
        through (H) of section 2796(b)(1).
    ``(i) Power of Secondary States To Take Administrative Action.--
Nothing in this section shall be construed to affect the authority of 
any State to enjoin conduct in violation of that State's laws described 
in section 2796(b)(1).
    ``(j) State Powers To Enforce State Laws.--
            ``(1) In general.--Subject to the provisions of subsection 
        (b)(1)(G) (relating to injunctions) and paragraph (2), nothing 
        in this section shall be construed to affect the authority of 
        any State to make use of any of its powers to enforce the laws 
        of such State with respect to which a health insurance issuer 
        is not exempt under subsection (b).
            ``(2) Courts of competent jurisdiction.--If a State seeks 
        an injunction regarding the conduct described in paragraphs (1) 
        and (2) of subsection (h), such injunction must be obtained 
        from a Federal or State court of competent jurisdiction.
    ``(k) States' Authority To Sue.--Nothing in this section shall 
affect the authority of any State to bring action in any Federal or 
State court.
    ``(l) Generally Applicable Laws.--Nothing in this section shall be 
construed to affect the applicability of State laws generally 
applicable to persons or corporations.
    ``(m) Guaranteed Availability of Coverage to HIPAA Eligible 
Individuals.--To the extent that a health insurance issuer is offering 
coverage in a primary State that does not accommodate residents of 
secondary States or does not provide a working mechanism for residents 
of a secondary State, and the issuer is offering coverage under this 
part in such secondary State which has not adopted a qualified high 
risk pool as its acceptable alternative mechanism (as defined in 
section 2744(c)(2)), the issuer shall, with respect to any individual 
health insurance coverage offered in a secondary State under this part, 
comply with the guaranteed availability requirements for eligible 
individuals in section 2741.

``SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR BEFORE ISSUER MAY 
              SELL INTO SECONDARY STATES.

    ``A health insurance issuer may not offer, sell, or issue 
individual health insurance coverage in a secondary State if the State 
insurance commissioner does not use a risk-based capital formula for 
the determination of capital and surplus requirements for all health 
insurance issuers.

``SEC. 2798. INDEPENDENT EXTERNAL APPEALS PROCEDURES.

    ``(a) Right to External Appeal.--A health insurance issuer may not 
offer, sell, or issue individual health insurance coverage in a 
secondary State under the provisions of this title unless--
            ``(1) both the secondary State and the primary State have 
        legislation or regulations in place establishing an independent 
        review process for individuals who are covered by individual 
        health insurance coverage; or
            ``(2) in any case in which the requirements of paragraph 
        (1) are not met with respect to the either of such States, the 
        issuer provides an independent review mechanism substantially 
        identical (as determined by the applicable State authority of 
        such State) to that prescribed in the `Health Carrier External 
        Review Model Act' of the National Association of Insurance 
        Commissioners for all individuals who purchase insurance 
        coverage under the terms of this part, except that, under such 
        mechanism, the review is conducted by an independent medical 
        reviewer, or a panel of such reviewers, with respect to whom 
        the requirements of subsection (b) are met.
    ``(b) Qualifications of Independent Medical Reviewers.--In the case 
of any independent review mechanism referred to in subsection (a)(2):
            ``(1) In general.--In referring a denial of a claim to an 
        independent medical reviewer, or to any panel of such 
        reviewers, to conduct independent medical review, the issuer 
        shall ensure that--
                    ``(A) each independent medical reviewer meets the 
                qualifications described in paragraphs (2) and (3);
                    ``(B) with respect to each review, each reviewer 
                meets the requirements of paragraph (4) and the 
                reviewer, or at least 1 reviewer on the panel, meets 
                the requirements described in paragraph (5); and
                    ``(C) compensation provided by the issuer to each 
                reviewer is consistent with paragraph (6).
            ``(2) Licensure and expertise.--Each independent medical 
        reviewer shall be a physician (allopathic or osteopathic) or 
        health care professional who--
                    ``(A) is appropriately credentialed or licensed in 
                one or more States to deliver health care services; and
                    ``(B) typically treats the condition, makes the 
                diagnosis, or provides the type of treatment under 
                review.
            ``(3) Independence.--
                    ``(A) In general.--Subject to subparagraph (B), 
                each independent medical reviewer in a case shall--
                            ``(i) not be a related party (as defined in 
                        paragraph (7));
                            ``(ii) not have a material familial, 
                        financial, or professional relationship with 
                        such a party; and
                            ``(iii) not otherwise have a conflict of 
                        interest with such a party (as determined under 
                        regulations).
                    ``(B) Exception.--Nothing in subparagraph (A) shall 
                be construed to--
                            ``(i) prohibit an individual, solely on the 
                        basis of affiliation with the issuer, from 
                        serving as an independent medical reviewer if--
                                    ``(I) a non-affiliated individual 
                                is not reasonably available;
                                    ``(II) the affiliated individual is 
                                not involved in the provision of items 
                                or services in the case under review;
                                    ``(III) the fact of such an 
                                affiliation is disclosed to the issuer 
                                and the enrollee (or authorized 
                                representative) and neither party 
                                objects; and
                                    ``(IV) the affiliated individual is 
                                not an employee of the issuer and does 
                                not provide services exclusively or 
                                primarily to or on behalf of the 
                                issuer;
                            ``(ii) prohibit an individual who has staff 
                        privileges at the institution where the 
                        treatment involved takes place from serving as 
                        an independent medical reviewer merely on the 
                        basis of such affiliation if the affiliation is 
                        disclosed to the issuer and the enrollee (or 
                        authorized representative), and neither party 
                        objects; or
                            ``(iii) prohibit receipt of compensation by 
                        an independent medical reviewer from an entity 
                        if the compensation is provided consistent with 
                        paragraph (6).
            ``(4) Practicing health care professional in same field.--
                    ``(A) In general.--In a case involving treatment, 
                or the provision of items or services--
                            ``(i) by a physician, a reviewer shall be a 
                        practicing physician (allopathic or 
                        osteopathic) of the same or similar specialty, 
                        as a physician who, acting within the 
                        appropriate scope of practice within the State 
                        in which the service is provided or rendered, 
                        typically treats the condition, makes the 
                        diagnosis, or provides the type of treatment 
                        under review; or
                            ``(ii) by a non-physician health care 
                        professional, the reviewer, or at least one 
                        member of the review panel, shall be a 
                        practicing non-physician health care 
                        professional of the same or similar specialty 
                        as the non-physician health care professional 
                        who, acting within the appropriate scope of 
                        practice within the State in which the service 
                        is provided or rendered, typically treats the 
                        condition, makes the diagnosis, or provides the 
                        type of treatment under review.
                    ``(B) Practicing defined.--For purposes of this 
                paragraph, the term `practicing' means, with respect to 
                an individual who is a physician or other health care 
                professional, that the individual provides health care 
                services to individual patients on average at least 2 
                days per week.
            ``(5) Pediatric expertise.--In the case of an external 
        review relating to a child, a reviewer shall have expertise 
        under paragraph (2) in pediatrics.
            ``(6) Limitations on reviewer compensation.--Compensation 
        provided by the issuer to an independent medical reviewer in 
        connection with a review under this section shall--
                    ``(A) not exceed a reasonable level; and
                    ``(B) not be contingent on the decision rendered by 
                the reviewer.
            ``(7) Related party defined.--For purposes of this section, 
        the term `related party' means, with respect to a denial of a 
        claim under a coverage relating to an enrollee, any of the 
        following:
                    ``(A) The issuer involved, or any fiduciary, 
                officer, director, or employee of the issuer.
                    ``(B) The enrollee (or authorized representative).
                    ``(C) The health care professional that provides 
                the items or services involved in the denial.
                    ``(D) The institution at which the items or 
                services (or treatment) involved in the denial are 
                provided.
                    ``(E) The manufacturer of any drug or other item 
                that is included in the items or services involved in 
                the denial.
                    ``(F) Any other party determined under any 
                regulations to have a substantial interest in the 
                denial involved.
            ``(8) Definitions.--For purposes of this subsection--
                    ``(A) Enrollee.--The term `enrollee' means, with 
                respect to health insurance coverage offered by a 
                health insurance issuer, an individual enrolled with 
                the issuer to receive such coverage.
                    ``(B) Health care professional.--The term `health 
                care professional' means an individual who is licensed, 
                accredited, or certified under State law to provide 
                specified health care services and who is operating 
                within the scope of such licensure, accreditation, or 
                certification.

``SEC. 2799. ENFORCEMENT.

    ``(a) In General.--Subject to subsection (b), with respect to 
specific individual health insurance coverage the primary State for 
such coverage has sole jurisdiction to enforce the primary State's 
covered laws in the primary State and any secondary State.
    ``(b) Secondary State's Authority.--Nothing in subsection (a) shall 
be construed to affect the authority of a secondary State to enforce 
its laws as set forth in the exception specified in section 2796(b)(1).
    ``(c) Court Interpretation.--In reviewing action initiated by the 
applicable secondary State authority, the court of competent 
jurisdiction shall apply the covered laws of the primary State.
    ``(d) Notice of Compliance Failure.--In the case of individual 
health insurance coverage offered in a secondary State that fails to 
comply with the covered laws of the primary State, the applicable State 
authority of the secondary State may notify the applicable State 
authority of the primary State.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to individual health insurance coverage offered, issued, or sold 
after the date that is one year after the date of the enactment of this 
Act.
    (c) GAO Ongoing Study and Reports.--
            (1) Study.--The Comptroller General of the United States 
        shall conduct an ongoing study concerning the effect of the 
        amendment made by subsection (a) on--
                    (A) the number of uninsured and underinsured;
                    (B) the availability and cost of health insurance 
                policies for individuals with pre-existing medical 
                conditions;
                    (C) the availability and cost of health insurance 
                policies generally;
                    (D) the elimination or reduction of different types 
                of benefits under health insurance policies offered in 
                different States; and
                    (E) cases of fraud or abuse relating to health 
                insurance coverage offered under such amendment and the 
                resolution of such cases.
            (2) Annual reports.--The Comptroller General shall submit 
        to Congress an annual report, after the end of each of the 5 
        years following the effective date of the amendment made by 
        subsection (a), on the ongoing study conducted under paragraph 
        (1).

                   TITLE IV--ASSOCIATION HEALTH PLANS

SEC. 401. RULES GOVERNING ASSOCIATION HEALTH PLANS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding after part 7 the 
following new part:

           ``PART 8--RULES GOVERNING ASSOCIATION HEALTH PLANS

``SEC. 801. ASSOCIATION HEALTH PLANS.

    ``(a) In General.--For purposes of this part, the term `association 
health plan' means a group health plan whose sponsor is (or is deemed 
under this part to be) described 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 association, a bona fide industry association 
        (including a rural electric cooperative association or a rural 
        telephone cooperative association), a bona fide professional 
        association, or a bona fide chamber of commerce (or similar 
        bona fide business association, including 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 requires for membership 
        payment on a periodic basis of dues or payments necessary to 
        maintain eligibility for membership in the sponsor; and
            ``(3) does not condition membership, such dues or payments, 
        or coverage under the plan on the basis of health status-
        related factors with respect to the employees of its members 
        (or affiliated members), 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 subsection.

``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 association 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 applicable authority shall certify such plan as meeting 
the requirements 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 applicable 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 Certification.--The applicable 
authority may provide by regulation 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 provide 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 connection with plans in such class and 
payment of the prescribed fee under section 807(a).
    ``(f) Certification of Self-Insured Association Health Plans.--An 
association health plan which offers one or more benefit options which 
do not consist of health insurance coverage may be certified under this 
part only if such plan consists of--
            ``(1) a plan which offered such coverage on the date of the 
        enactment of the Obamacare Replacement Act;
            ``(2) a plan under which the sponsor does not restrict 
        membership to one or more trades and businesses 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 employers 
        represent one or more trades or businesses, or one or more 
        industries, consisting of any of the following: agriculture; 
        equipment and automobile dealerships; 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 organizations; 
        logging; manufacturing (metals); mining; medical and dental 
        practices; medical laboratories; professional consulting 
        services; sanitary services; transportation (local and 
        freight); warehousing; wholesaling/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, proposed premium rate levels, or other means 
        demonstrated by such plan in accordance with regulations.

``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 trustees which has complete 
        fiscal control over the plan and which is responsible for all 
        operations of the plan.
            ``(2) Rules of operation and financial controls.--The board 
        of trustees has in effect rules of operation and financial 
        controls, based on a 3-year plan of operation, adequate to 
        carry out the terms of the plan and to meet all requirements of 
        this title applicable to the plan.
            ``(3) Rules governing relationship to participating 
        employers and to contractors.--
                    ``(A) Board membership.--
                            ``(i) In general.--Except as provided in 
                        clauses (ii) and (iii), the members of the 
                        board of trustees are individuals selected from 
                        individuals who are the owners, officers, 
                        directors, or employees of the participating 
                        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.
                                    ``(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 constitute 
                                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 providers of 
                                medical care.--In the case of a sponsor 
                                which is an association whose 
                                membership consists primarily 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 Obamacare Replacement Act.
                    ``(B) Sole authority.--The board has sole authority 
                under the plan to approve applications for 
                participation in the plan and to contract 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 consisting of its franchisees--
            ``(1) the requirements of subsection (a) and section 801(a) 
        shall be deemed met if such requirements 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 association 
        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'.

``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

    ``(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 subsection (b) are 
                met,
        except that, in the case of a sponsor which is a professional 
        association or other individual-based association, if at least 
        one of the officers, directors, or employees of an employer, or 
        at least one of the individuals who are partners in an employer 
        and who actively participates in the business, is a member or 
        such an affiliated member of the sponsor, participating 
        employers may also include such employer; and
            ``(2) all individuals commencing coverage under the plan 
        after certification under this part must be--
                    ``(A) active or retired owners (including self-
                employed individuals), officers, directors, or 
                employees of, or partners in, participating employers; 
                or
                    ``(B) the beneficiaries of individuals described in 
                subparagraph (A).
    ``(b) Coverage of Previously Uninsured Employees.--In the case of 
an association health plan in existence on the date of the enactment of 
the Obamacare Replacement Act, 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 employees who would otherwise be eligible to 
        participate in such association health plan.
    ``(c) Individual Market Unaffected.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan, no participating employer may provide health 
insurance coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer under the plan, 
if such exclusion of the employee from coverage 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 Participate.--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 participate is 
        furnished information regarding all coverage options available 
        under the plan; and
            ``(3) the applicable requirements of sections 701, 702, and 
        703 are met with respect to the plan.

``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION 
              RATES, AND BENEFIT OPTIONS.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if the following requirements are 
met:
            ``(1) Contents of governing instruments.--The instruments 
        governing the plan include a written instrument, meeting the 
        requirements 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 capacity 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 section 
                3(16)(B)); and
                    ``(C) incorporates the requirements of section 806.
            ``(2) Contribution rates must be nondiscriminatory.--
                    ``(A) The contribution rates for any participating 
                small employer do not vary on the basis of any health 
                status-related factor in relation 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 
                employer is engaged.
                    ``(B) Nothing in this title or any other provision 
                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 insurance coverage offered in connection 
                        with bona fide associations (within the meaning 
                        of section 2791(d)(3) of the Public Health 
                        Service Act),
                subject to the requirements of section 702(b) relating 
                to contribution rates.
            ``(3) Floor for number of covered individuals 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 
        participants 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 employers coverage which does 
                not consist of health insurance coverage in a manner 
                comparable 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, testing, 
                examination, and continuing education of persons 
                authorized to offer, sell, or solicit health insurance 
                coverage in such State.
            ``(5) Regulatory requirements.--Such other requirements as 
        the applicable authority determines are necessary to carry out 
        the purposes of this part, which shall be prescribed by the 
        applicable authority 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 defined 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 
section 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 prohibits an exclusion of a 
specific disease from such coverage.

``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 coverage, the plan--
                    ``(A) establishes and maintains reserves with 
                respect to such additional benefit options, in amounts 
                recommended by the qualified health actuary, consisting 
                of--
                            ``(i) a reserve sufficient for unearned 
                        contributions;
                            ``(ii) a reserve sufficient for benefit 
                        liabilities 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 respect to 
                        such benefit liabilities;
                            ``(iii) a reserve sufficient for any other 
                        obligations of the plan; and
                            ``(iv) a reserve sufficient for a margin of 
                        error and other fluctuations, taking into 
                        account the specific circumstances of the plan; 
                        and
                    ``(B) establishes and maintains aggregate and 
                specific excess/stop loss insurance and solvency 
                indemnification, with respect to such additional 
                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 specified circumstances in which 
                        the plan specifically provides for and 
                        maintains reserves in excess of the amounts 
                        required under subparagraph (A).
                            ``(ii) The plan shall secure specific 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is at least equal to an 
                        amount recommended by the plan's qualified 
                        health actuary. The applicable authority may by 
                        regulation provide for adjustments in the 
                        amount of such insurance in specified 
                        circumstances in which the plan specifically 
                        provides for and maintains reserves in excess 
                        of the amounts required under subparagraph (A).
                            ``(iii) The plan shall secure 
                        indemnification 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 Secretary of any failure 
of premium payment meriting cancellation of the policy prior to 
undertaking such a cancellation. Any regulations prescribed by the 
applicable authority 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 health actuary may recommend, 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 described in subsection (a)(2), the 
requirements of this subsection are met if the plan establishes and 
maintains surplus in an amount at least equal to--
            ``(1) $500,000; or
            ``(2) such greater amount (but not greater than $2,000,000) 
        as may be set forth in regulations prescribed by the applicable 
        authority, considering the level of aggregate and specific 
        excess/stop loss insurance 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 available 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 requirements 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 Insurance.--The applicable 
authority may provide for adjustments to the levels of reserves 
otherwise required under subsections (a) and (b) with respect to any 
plan or class of plans to take into account excess/stop loss insurance 
provided with respect to such plan or plans.
    ``(e) Alternative Means of Compliance.--The applicable authority 
may permit an association health plan described in subsection (a)(2) to 
substitute, for all or part of the requirements of this section (except 
subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless 
arrangement, or other financial arrangement as the applicable 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 participants and beneficiaries than the 
requirements for which it is substituted. The applicable authority may 
take into account, for purposes of this subsection, evidence provided 
by the plan or sponsor which demonstrates an assumption of liability 
with respect to the plan. Such evidence 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 
arrangement.
    ``(f) Measures To Ensure Continued Payment of Benefits by Certain 
Plans in Distress.--
            ``(1) Payments by certain plans to association health plan 
        fund.--
                    ``(A) In general.--In the case of an association 
                health plan described in subsection (a)(2), the 
                requirements of this subsection are met if the plan 
                makes payments into the Association Health Plan Fund 
                under this subparagraph when they are due. Such 
                payments shall consist of annual payments in the amount 
                of $5,000, and, in addition to such annual payments, 
                such supplemental payments as the Secretary 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. 
                Payments shall continue to accrue until a plan's assets 
                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 secretary.--The 
                Secretary shall not cease to carry out the provisions 
                of paragraph (2) on account of the failure of a plan to 
                pay any payment when due.
            ``(2) Payments by secretary to continue excess/stop loss 
        insurance coverage and indemnification insurance coverage for 
        certain plans.--In any case in which the applicable authority 
        determines that there is, or that there is reason to believe 
        that there will be: (A) a failure to take necessary corrective 
        actions under section 809(a) with respect to an association 
        health plan described in subsection (a)(2); or (B) a 
        termination of such a plan under section 809(b) or 810(b)(8) 
        (and, if the applicable authority is not the Secretary, 
        certifies such determination to the Secretary), the Secretary 
        shall determine the amounts necessary to make payments to an 
        insurer (designated by the Secretary) to maintain in force 
        excess/stop loss insurance coverage or indemnification 
        insurance coverage for such plan, if the Secretary determines 
        that there is a reasonable expectation that, without such 
        payments, claims would not be satisfied by reason of 
        termination of such coverage. The Secretary shall, to the 
        extent provided in advance in appropriation Acts, pay such 
        amounts so determined to the insurer designated by the 
        Secretary.
            ``(3) Association health plan fund.--
                    ``(A) In general.--There is established in the 
                Treasury a fund to be known as the `Association Health 
                Plan Fund'. The Fund shall be available for making 
                payments pursuant to paragraph (2). The Fund shall be 
                credited with payments received pursuant to paragraph 
                (1)(A), penalties received pursuant to paragraph 
                (1)(B), and earnings on investments of amounts of the 
                Fund under subparagraph (B).
                    ``(B) Investment.--Whenever the Secretary 
                determines that the moneys of the fund are in excess of 
                current needs, the Secretary may request the investment 
                of such amounts as the Secretary determines advisable 
                by the Secretary of the Treasury in obligations issued 
                or guaranteed by the United States.
    ``(g) Excess/Stop Loss Insurance.--For purposes of this section:
            ``(1) Aggregate excess/stop loss insurance.--The term 
        `aggregate excess/stop loss insurance' means, in connection 
        with an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to aggregate claims under the plan in excess of 
                an amount or amounts specified in such contract;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
            ``(2) Specific excess/stop loss insurance.--The term 
        `specific excess/stop loss insurance' means, in connection with 
        an association health plan, a contract--
                    ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to claims under the plan in connection with a 
                covered individual in excess of an amount or amounts 
                specified in such contract in connection with such 
                covered individual;
                    ``(B) which is guaranteed renewable; and
                    ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
    ``(h) Indemnification Insurance.--For purposes of this section, the 
term `indemnification insurance' means, in connection with an 
association health plan, a contract--
            ``(1) under which an insurer (meeting such minimum 
        standards as the applicable authority may prescribe by 
        regulation) provides for payment to the plan with respect to 
        claims under the plan which the plan is unable to satisfy by 
        reason of a termination pursuant to section 809(b) (relating to 
        mandatory termination);
            ``(2) which is guaranteed renewable and noncancellable for 
        any reason (except as the applicable authority may prescribe by 
        regulation); and
            ``(3) which allows for payment of premiums by any third 
        party on behalf of the insured plan.
    ``(i) Reserves.--For purposes of this section, the term `reserves' 
means, in connection with an association health plan, plan assets which 
meet the fiduciary standards under part 4 and such additional 
requirements regarding liquidity as the applicable authority may 
prescribe by regulation.
    ``(j) Solvency Standards Working Group.--
            ``(1) In general.--Within 90 days after the date of the 
        enactment of the Obamacare Replacement Act, the applicable 
        authority shall establish a Solvency Standards Working Group. 
        In prescribing the initial regulations under this section, the 
        applicable authority shall take into account the 
        recommendations of such Working Group.
            ``(2) Membership.--The Working Group shall consist of not 
        more than 15 members appointed by the applicable authority. The 
        applicable authority shall include among persons invited to 
        membership on the Working Group at least one of each of the 
        following:
                    ``(A) A representative of the National Association 
                of Insurance Commissioners.
                    ``(B) A representative of the American Academy of 
                Actuaries.
                    ``(C) A representative of the State governments, or 
                their interests.
                    ``(D) A representative of existing self-insured 
                arrangements, or their interests.
                    ``(E) A representative of associations of the type 
                referred to in section 801(b)(1), or their interests.
                    ``(F) A representative of multiemployer plans that 
                are group health plans, or their interests.

``SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS.

    ``(a) Filing Fee.--Under the procedure prescribed pursuant to 
section 802(a), an association health plan shall pay to the applicable 
authority at the time of filing an application for certification under 
this part a filing fee in the amount of $5,000, which shall be 
available in the case of the Secretary, to the extent provided in 
appropriation Acts, for the sole purpose of administering the 
certification procedures applicable with respect to association health 
plans.
    ``(b) Information To Be Included in Application for 
Certification.--An application for certification under this part meets 
the requirements of this section only if it includes, in a manner and 
form which shall be prescribed by the applicable authority by 
regulation, at least the following information:
            ``(1) Identifying information.--The names and addresses 
        of--
                    ``(A) the sponsor; and
                    ``(B) the members of the board of trustees of the 
                plan.
            ``(2) States in which plan intends to do business.--The 
        States in which participants and beneficiaries under the plan 
        are to be located and the number of them expected to be located 
        in each such State.
            ``(3) Bonding requirements.--Evidence provided by the board 
        of trustees that the bonding requirements of section 412 will 
        be met as of the date of the application or (if later) 
        commencement of operations.
            ``(4) Plan documents.--A copy of the documents governing 
        the plan (including any bylaws and trust agreements), the 
        summary plan description, and other material describing the 
        benefits that will be provided to participants and 
        beneficiaries under the plan.
            ``(5) Agreements with service providers.--A copy of any 
        agreements between the plan and contract administrators and 
        other service providers.
            ``(6) Funding report.--In the case of association health 
        plans providing benefits options in addition to health 
        insurance coverage, a report setting forth information with 
        respect to such additional benefit options determined as of a 
        date within the 120-day period ending with the date of the 
        application, including the following:
                    ``(A) Reserves.--A statement, certified by the 
                board of trustees of the plan, and a statement of 
                actuarial opinion, signed by a qualified health 
                actuary, that all applicable requirements of section 
                806 are or will be met in accordance with regulations 
                which the applicable authority shall prescribe.
                    ``(B) Adequacy of contribution rates.--A statement 
                of actuarial opinion, signed by a qualified health 
                actuary, which sets forth a description of the extent 
                to which contribution rates are adequate to provide for 
                the payment of all obligations and the maintenance of 
                required reserves under the plan for the 12-month 
                period beginning with such date within such 120-day 
                period, taking into account the expected coverage and 
                experience of the plan. If the contribution rates are 
                not fully adequate, the statement of actuarial opinion 
                shall indicate the extent to which the rates are 
                inadequate and the changes needed to ensure adequacy.
                    ``(C) Current and projected value of assets and 
                liabilities.--A statement of actuarial opinion signed 
                by a qualified health actuary, which sets forth the 
                current value of the assets and liabilities accumulated 
                under the plan and a projection of the assets, 
                liabilities, income, and expenses of the plan for the 
                12-month period referred to in subparagraph (B). The 
                income statement shall identify separately the plan's 
                administrative expenses and claims.
                    ``(D) Costs of coverage to be charged and other 
                expenses.--A statement of the costs of coverage to be 
                charged, including an itemization of amounts for 
                administration, reserves, and other expenses associated 
                with the operation of the plan.
                    ``(E) Other information.--Any other information as 
                may be determined by the applicable authority, by 
                regulation, as necessary to carry out the purposes of 
                this part.
    ``(c) Filing Notice of Certification With States.--A certification 
granted under this part to an association health plan shall not be 
effective unless written notice of such certification is filed with the 
applicable State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are located. For 
purposes of this subsection, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed.
    ``(d) Notice of Material Changes.--In the case of any association 
health plan certified under this part, descriptions of material changes 
in any information which was required to be submitted with the 
application for the certification under this part shall be filed in 
such form and manner as shall be prescribed by the applicable authority 
by regulation. The applicable authority may require by regulation prior 
notice of material changes with respect to specified matters which 
might serve as the basis for suspension or revocation of the 
certification.
    ``(e) Reporting Requirements for Certain Association Health 
Plans.--An association health plan certified under this part which 
provides benefit options in addition to health insurance coverage for 
such plan year shall meet the requirements of section 103 by filing an 
annual report under such section which shall include information 
described in subsection (b)(6) with respect to the plan year and, 
notwithstanding section 104(a)(1), shall be filed with the applicable 
authority not later than 90 days after the close of the plan year (or 
on such later date as may be prescribed by the applicable authority). 
The applicable authority may require by regulation such interim reports 
as it considers appropriate.
    ``(f) Engagement of Qualified Health Actuary.--The board of 
trustees of each association health plan which provides benefits 
options in addition to health insurance coverage and which is applying 
for certification under this part or is certified under this part shall 
engage, on behalf of all participants and beneficiaries, a qualified 
health actuary who shall be responsible for the preparation of the 
materials comprising information necessary to be submitted by a 
qualified health actuary under this part. The qualified health actuary 
shall utilize such assumptions and techniques as are necessary to 
enable such actuary to form an opinion as to whether the contents of 
the matters reported under this part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the plan and to reasonable expectations; and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the plan.
The opinion by the qualified health actuary shall be made with respect 
to, and shall be made a part of, the annual report.

``SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

    ``Except as provided in section 809(b), an association health plan 
which is or has been certified under this part may terminate (upon or 
at any time after cessation of accruals in benefit liabilities) only if 
the board of trustees, not less than 60 days before the proposed 
termination date--
            ``(1) provides to the participants and beneficiaries a 
        written notice of intent to terminate stating that such 
        termination is intended and the proposed termination date;
            ``(2) develops a plan for winding up the affairs of the 
        plan in connection with such termination in a manner which will 
        result in timely payment of all benefits for which the plan is 
        obligated; and
            ``(3) submits such plan in writing to the applicable 
        authority.
Actions required under this section shall be taken in such form and 
manner as may be prescribed by the applicable authority by regulation.

``SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

    ``(a) Actions To Avoid Depletion of Reserves.--An association 
health plan which is certified under this part and which provides 
benefits other than health insurance coverage shall continue to meet 
the requirements of section 806, irrespective of whether such 
certification continues in effect. The board of trustees of such plan 
shall determine quarterly whether the requirements of section 806 are 
met. In any case in which the board determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the applicable authority makes such a determination and so notifies 
the board, the board shall immediately notify the qualified health 
actuary engaged by the plan, and such actuary shall, not later than the 
end of the following month, make such recommendations to the board for 
corrective action as the actuary determines necessary to ensure 
compliance with section 806. Not later than 30 days after receiving 
from the actuary recommendations for corrective actions, the board 
shall notify the applicable authority (in such form and manner as the 
applicable authority may prescribe by regulation) of such 
recommendations of the actuary for corrective action, together with a 
description of the actions (if any) that the board has taken or plans 
to take in response to such recommendations. The board shall thereafter 
report to the applicable authority, in such form and frequency as the 
applicable authority may specify to the board, regarding corrective 
action taken by the board until the requirements of section 806 are 
met.
    ``(b) Mandatory Termination.--In any case in which--
            ``(1) the applicable authority has been notified under 
        subsection (a) (or by an issuer of excess/stop loss insurance 
        or indemnity insurance pursuant to section 806(a)) of a failure 
        of an association health plan which is or has been certified 
        under this part and is described in section 806(a)(2) to meet 
        the requirements of section 806 and has not been notified by 
        the board of trustees of the plan that corrective action has 
        restored compliance with such requirements; and
            ``(2) the applicable authority determines that there is a 
        reasonable expectation that the plan will continue to fail to 
        meet the requirements of section 806,
the board of trustees of the plan shall, at the direction of the 
applicable authority, terminate the plan and, in the course of the 
termination, take such actions as the applicable authority may require, 
including satisfying any claims referred to in section 
806(a)(2)(B)(iii) and recovering for the plan any liability under 
subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 
that the affairs of the plan will be, to the maximum extent possible, 
wound up in a manner which will result in timely provision of all 
benefits for which the plan is obligated.

``SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION 
              HEALTH PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO 
              HEALTH INSURANCE COVERAGE.

    ``(a) Appointment of Secretary as Trustee for Insolvent Plans.--
Whenever the Secretary determines that an association health plan which 
is or has been certified under this part and which is described in 
section 806(a)(2) will be unable to provide benefits when due or is 
otherwise in a financially hazardous condition, as shall be defined by 
the Secretary by regulation, the Secretary shall, upon notice to the 
plan, apply to the appropriate United States district court for 
appointment of the Secretary as trustee to administer the plan for the 
duration of the insolvency. The plan may appear as a party and other 
interested persons may intervene in the proceedings at the discretion 
of the court. The court shall appoint such Secretary trustee if the 
court determines that the trusteeship is necessary to protect the 
interests of the participants and beneficiaries or providers of medical 
care or to avoid any unreasonable deterioration of the financial 
condition of the plan. The trusteeship of such Secretary shall continue 
until the conditions described in the first sentence of this subsection 
are remedied or the plan is terminated.
    ``(b) Powers as Trustee.--The Secretary, upon appointment as 
trustee under subsection (a), shall have the power--
            ``(1) to do any act authorized by the plan, this title, or 
        other applicable provisions of law to be done by the plan 
        administrator or any trustee of the plan;
            ``(2) to require the transfer of all (or any part) of the 
        assets and records of the plan to the Secretary as trustee;
            ``(3) to invest any assets of the plan which the Secretary 
        holds in accordance with the provisions of the plan, 
        regulations prescribed by the Secretary, and applicable 
        provisions of law;
            ``(4) to require the sponsor, the plan administrator, any 
        participating employer, and any employee organization 
        representing plan participants to furnish any information with 
        respect to the plan which the Secretary as trustee may 
        reasonably need in order to administer the plan;
            ``(5) to collect for the plan any amounts due the plan and 
        to recover reasonable expenses of the trusteeship;
            ``(6) to commence, prosecute, or defend on behalf of the 
        plan any suit or proceeding involving the plan;
            ``(7) to issue, publish, or file such notices, statements, 
        and reports as may be required by the Secretary by regulation 
        or required by any order of the court;
            ``(8) to terminate the plan (or provide for its termination 
        in accordance with section 809(b)) and liquidate the plan 
        assets, to restore the plan to the responsibility of the 
        sponsor, or to continue the trusteeship;
            ``(9) to provide for the enrollment of plan participants 
        and beneficiaries under appropriate coverage options; and
            ``(10) to do such other acts as may be necessary to comply 
        with this title or any order of the court and to protect the 
        interests of plan participants and beneficiaries and providers 
        of medical care.
    ``(c) Notice of Appointment.--As soon as practicable after the 
Secretary's appointment as trustee, the Secretary shall give notice of 
such appointment to--
            ``(1) the sponsor and plan administrator;
            ``(2) each participant;
            ``(3) each participating employer; and
            ``(4) if applicable, each employee organization which, for 
        purposes of collective bargaining, represents plan 
        participants.
    ``(d) Additional Duties.--Except to the extent inconsistent with 
the provisions of this title, or as may be otherwise ordered by the 
court, the Secretary, upon appointment as trustee under this section, 
shall be subject to the same duties as those of a trustee under section 
704 of title 11, United States Code, and shall have the duties of a 
fiduciary for purposes of this title.
    ``(e) Other Proceedings.--An application by the Secretary under 
this subsection may be filed notwithstanding the pendency in the same 
or any other court of any bankruptcy, mortgage foreclosure, or equity 
receivership proceeding, or any proceeding to reorganize, conserve, or 
liquidate such plan or its property, or any proceeding to enforce a 
lien against property of the plan.
    ``(f) Jurisdiction of Court.--
            ``(1) In general.--Upon the filing of an application for 
        the appointment as trustee or the issuance of a decree under 
        this section, the court to which the application is made shall 
        have exclusive jurisdiction of the plan involved and its 
        property wherever located with the powers, to the extent 
        consistent with the purposes of this section, of a court of the 
        United States having jurisdiction over cases under chapter 11 
        of title 11, United States Code. Pending an adjudication under 
        this section such court shall stay, and upon appointment by it 
        of the Secretary as trustee, such court shall continue the stay 
        of, any pending mortgage foreclosure, equity receivership, or 
        other proceeding to reorganize, conserve, or liquidate the 
        plan, the sponsor, or property of such plan or sponsor, and any 
        other suit against any receiver, conservator, or trustee of the 
        plan, the sponsor, or property of the plan or sponsor. Pending 
        such adjudication and upon the appointment by it of the 
        Secretary as trustee, the court may stay any proceeding to 
        enforce a lien against property of the plan or the sponsor or 
        any other suit against the plan or the sponsor.
            ``(2) Venue.--An action under this section may be brought 
        in the judicial district where the sponsor or the plan 
        administrator resides or does business or where any asset of 
        the plan is situated. A district court in which such action is 
        brought may issue process with respect to such action in any 
        other judicial district.
    ``(g) Personnel.--In accordance with regulations which shall be 
prescribed by the Secretary, the Secretary shall appoint, retain, and 
compensate accountants, actuaries, and other professional service 
personnel as may be necessary in connection with the Secretary's 
service as trustee under this section.

``SEC. 811. STATE ASSESSMENT AUTHORITY.

    ``(a) In General.--Notwithstanding section 514, a State may impose 
by law a contribution tax on an association health plan described in 
section 806(a)(2), if the plan commenced operations in such State after 
the date of the enactment of the Obamacare Replacement Act.
    ``(b) Contribution Tax.--For purposes of this section, the term 
`contribution tax' imposed by a State on an association health plan 
means any tax imposed by such State if--
            ``(1) such tax is computed by applying a rate to the amount 
        of premiums or contributions, with respect to individuals 
        covered under the plan who are residents of such State, which 
        are received by the plan from participating employers located 
        in such State or from such individuals;
            ``(2) the rate of such tax does not exceed the rate of any 
        tax imposed by such State on premiums or contributions received 
        by insurers or health maintenance organizations for health 
        insurance coverage offered in such State in connection with a 
        group health plan;
            ``(3) such tax is otherwise nondiscriminatory; and
            ``(4) the amount of any such tax assessed on the plan is 
        reduced by the amount of any tax or assessment otherwise 
        imposed by the State on premiums, contributions, or both 
        received by insurers or health maintenance organizations for 
        health insurance coverage, aggregate excess/stop loss insurance 
        (as defined in section 806(g)(1)), specific excess/stop loss 
        insurance (as defined in section 806(g)(2)), other insurance 
        related to the provision of medical care under the plan, or any 
        combination thereof provided by such insurers or health 
        maintenance organizations in such State in connection with such 
        plan.

``SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION.

    ``(a) Definitions.--For purposes of this part--
            ``(1) Group health plan.--The term `group health plan' has 
        the meaning provided in section 733(a)(1) (after applying 
        subsection (b) of this section).
            ``(2) Medical care.--The term `medical care' has the 
        meaning provided in section 733(a)(2).
            ``(3) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning provided in section 
        733(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning provided in section 733(b)(2).
            ``(5) Applicable authority.--The term `applicable 
        authority' means the Secretary, except that, in connection with 
        any exercise of the Secretary's authority regarding which the 
        Secretary is required under section 506(d) to consult with a 
        State, such term means the Secretary, in consultation with such 
        State.
            ``(6) Health status-related factor.--The term `health 
        status-related factor' has the meaning provided in section 
        733(d)(2).
            ``(7) Individual market.--
                    ``(A) In general.--The term `individual market' 
                means the market for health insurance coverage offered 
                to individuals other than in connection with a group 
                health plan.
                    ``(B) Treatment of very small groups.--
                            ``(i) In general.--Subject to clause (ii), 
                        such term includes coverage offered in 
                        connection with a group health plan that has 
                        fewer than 2 participants as current employees 
                        or participants described in section 732(d)(3) 
                        on the first day of the plan year.
                            ``(ii) State exception.--Clause (i) shall 
                        not apply in the case of health insurance 
                        coverage offered in a State if such State 
                        regulates the coverage described in such clause 
                        in the same manner and to the same extent as 
                        coverage in the small group market (as defined 
                        in section 2791(e)(5) of the Public Health 
                        Service Act) is regulated by such State.
            ``(8) Participating employer.--The term `participating 
        employer' means, in connection with an association health plan, 
        any employer, if any individual who is an employee of such 
        employer, a partner in such employer, or a self-employed 
        individual who is such employer (or any dependent, as defined 
        under the terms of the plan, of such individual) is or was 
        covered under such plan in connection with the status of such 
        individual as such an employee, partner, or self-employed 
        individual in relation to the plan.
            ``(9) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of title XXVII of the Public Health Service Act 
        for the State involved with respect to such issuer.
            ``(10) Qualified health actuary.--The term `qualified 
        health actuary' means an individual who is a member of the 
        American Academy of Actuaries with expertise in health care.
            ``(11) Affiliated member.--The term `affiliated member' 
        means, in connection with a sponsor--
                    ``(A) a person who is otherwise eligible to be a 
                member of the sponsor but who elects an affiliated 
                status with the sponsor,
                    ``(B) in the case of a sponsor with members which 
                consist of associations, a person who is a member of 
                any such association and elects an affiliated status 
                with the sponsor, or
                    ``(C) in the case of an association health plan in 
                existence on the date of the enactment of the Obamacare 
                Replacement Act, a person eligible to be a member of 
                the sponsor or one of its member associations.
            ``(12) Large employer.--The term `large employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who employed an average of at least 51 
        employees on business days during the preceding calendar year 
        and who employs at least 2 employees on the first day of the 
        plan year.
            ``(13) Small employer.--The term `small employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who is not a large employer.
    ``(b) Rules of Construction.--
            ``(1) Employers and employees.--For purposes of determining 
        whether a plan, fund, or program is an employee welfare benefit 
        plan which is an association health plan, and for purposes of 
        applying this title in connection with such plan, fund, or 
        program so determined to be such an employee welfare benefit 
        plan--
                    ``(A) in the case of a partnership, the term 
                `employer' (as defined in section 3(5)) includes the 
                partnership in relation to the partners, and the term 
                `employee' (as defined in section 3(6)) includes any 
                partner in relation to the partnership; and
                    ``(B) in the case of a self-employed individual, 
                the term `employer' (as defined in section 3(5)) and 
                the term `employee' (as defined in section 3(6)) shall 
                include such individual.
            ``(2) Plans, funds, and programs treated as employee 
        welfare benefit plans.--In the case of any plan, fund, or 
        program which was established or is maintained for the purpose 
        of providing medical care (through the purchase of insurance or 
        otherwise) for employees (or their dependents) covered 
        thereunder and which demonstrates to the Secretary that all 
        requirements for certification under this part would be met 
        with respect to such plan, fund, or program if such plan, fund, 
        or program were a group health plan, such plan, fund, or 
        program shall be treated for purposes of this title as an 
        employee welfare benefit plan on and after the date of such 
        demonstration.
            ``(3) Exception for certain benefits.--The requirements of 
        this part shall not apply to a group health plan in relation to 
        its provision of excepted benefits, as defined in section 
        733(c).''.
    (b) Conforming Amendments to Preemption Rules.--
            (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is 
        amended by adding at the end the following new subparagraph:
    ``(E) The preceding subparagraphs of this paragraph do not apply 
with respect to any State law in the case of an association health plan 
which is certified under part 8.''.
            (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
                    (A) in subsection (b)(4), by striking ``Subsection 
                (a)'' and inserting ``Subsections (a) and (d)'';
                    (B) in subsection (b)(5), by striking ``subsection 
                (a)'' in subparagraph (A) and inserting ``subsection 
                (a) of this section and subsections (a)(2)(B) and (b) 
                of section 805'', and by striking ``subsection (a)'' in 
                subparagraph (B) and inserting ``subsection (a) of this 
                section or subsection (a)(2)(B) or (b) of section 
                805'';
                    (C) by redesignating subsection (d) as subsection 
                (e); and
                    (D) by inserting after subsection (c) the following 
                new subsection:
    ``(d)(1) Except as provided in subsection (b)(4), the provisions of 
this title shall supersede any and all State laws insofar as they may 
now or hereafter preclude, or have the effect of precluding, a health 
insurance issuer from offering health insurance coverage in connection 
with an association health plan which is certified under part 8.
    ``(2) Except as provided in paragraphs (4) and (5) of subsection 
(b) of this section--
            ``(A) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan 
        certified under part 8 to a participating employer operating in 
        such State, the provisions of this title shall supersede any 
        and all laws of such State insofar as they may preclude a 
        health insurance issuer from offering health insurance coverage 
        of the same policy type to other employers operating in the 
        State which are eligible for coverage under such association 
        health plan, whether or not such other employers are 
        participating employers in such plan.
            ``(B) In any case in which health insurance coverage of any 
        policy type is offered in a State under an association health 
        plan certified under part 8 and the filing, with the applicable 
        State authority (as defined in section 812(a)(9)), of the 
        policy form in connection with such policy type is approved by 
        such State authority, the provisions of this title shall 
        supersede any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as they may 
        preclude, upon the filing in the same form and manner of such 
        policy form with the applicable State authority in such other 
        State, the approval of the filing in such other State.
    ``(3) Nothing in subsection (b)(6)(E) or the preceding provisions 
of this subsection shall be construed, with respect to health insurance 
issuers or health insurance coverage, to supersede or impair the law of 
any State--
            ``(A) providing solvency standards or similar standards 
        regarding the adequacy of insurer capital, surplus, reserves, 
        or contributions, or
            ``(B) relating to prompt payment of claims.
    ``(4) For additional provisions relating to association health 
plans, see subsections (a)(2)(B) and (b) of section 805.
    ``(5) For purposes of this subsection, the term `association health 
plan' has the meaning provided in section 801(a), and the terms `health 
insurance coverage', `participating employer', and `health insurance 
issuer' have the meanings provided such terms in section 812, 
respectively.''.
            (3) Section 514(b)(6)(A) of such Act (29 U.S.C. 
        1144(b)(6)(A)) is amended--
                    (A) in clause (i)(II), by striking ``and'' at the 
                end;
                    (B) in clause (ii)--
                            (i) by inserting ``and which does not 
                        provide medical care (within the meaning of 
                        section 733(a)(2)),'' after ``arrangement,''; 
                        and
                            (ii) 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 insurance 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), nothing''; 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 Obamacare Replacement Act shall be 
construed to alter, amend, modify, invalidate, impair, or supersede any 
provision of this title, except by specific cross-reference to the 
affected section.''.
    (c) Plan Sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
102(16)(B)) is amended by adding at the end the following new sentence: 
``Such term also includes a person serving as the sponsor of an 
association health plan under part 8 of subtitle B.''.
    (d) Disclosure of Solvency Protections Related to Self-Insured and 
Fully Insured Options Under Association Health Plans.--Section 102(b) 
of such Act (29 U.S.C. 1022(b)) is amended by adding at the end the 
following: ``An association health plan shall include in its summary 
plan description, in connection with each benefit option, a description 
of the form of solvency or guarantee fund protection secured pursuant 
to this Act or applicable State law, if any.''.
    (e) Savings Clause.--Section 731(c) of such Act is amended by 
inserting ``or part 8'' after ``this part''.
    (f) Report to the Congress Regarding Certification of Self-Insured 
Association Health Plans.--Not later than January 1, 2018, the 
Secretary of Labor shall report to the Committee on Education and the 
Workforce of the House of Representatives and the Committee on Health, 
Education, Labor, and Pensions of the Senate the effect association 
health plans have had, if any, on reducing the number of uninsured 
individuals.
    (g) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 734 the following new items:

           ``Part 8--Rules Governing Association Health Plans

``801. Association health plans.
``802. Certification of association health plans.
``803. Requirements relating to sponsors and boards of trustees.
``804. Participation and coverage requirements.
``805. Other requirements relating to plan documents, contribution 
                            rates, and benefit options.
``806. Maintenance of reserves and provisions for solvency for plans 
                            providing health benefits in addition to 
                            health insurance coverage.
``807. Requirements for application and related requirements.
``808. Notice requirements for voluntary termination.
``809. Corrective actions and mandatory termination.
``810. Trusteeship by the Secretary of insolvent association health 
                            plans providing health benefits in addition 
                            to health insurance coverage.
``811. State assessment authority.
``812. Definitions and rules of construction.''.

SEC. 402. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting after ``control group,'' 
        the following: ``except that, in any case in which the benefit 
        referred to in subparagraph (A) consists of medical care (as 
        defined in section 812(a)(2)), two or more trades or 
        businesses, whether or not incorporated, shall be deemed a 
        single employer for any plan year of such plan, or any fiscal 
        year of such other arrangement, if such trades or businesses 
        are within the same control group during such year or at any 
        time during the preceding 1-year period,'';
            (2) in clause (iii), by striking ``(iii) the 
        determination'' and inserting the following:
            ``(iii)(I) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), the determination of whether a trade or 
        business is under `common control' with another trade or 
        business shall be determined under regulations of the Secretary 
        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 section 4001(b), except that, for purposes of 
        this paragraph, 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 participating employer if, after the application of 
        clause (i), the number of individuals who are employees and 
        former employees of any one participating employer and who are 
        covered under the arrangement is greater than 75 percent of the 
        aggregate number of all individuals who are employees or former 
        employees of participating employers and who are covered under 
        the arrangement,''.

SEC. 403. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION 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 
subsection:
    ``(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 
employees 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 bargaining agreements which 
        are reached pursuant to collective bargaining described in 
        section 8(d) of the National Labor Relations Act (29 U.S.C. 
        158(d)) or paragraph Fourth of section 2 of the Railway Labor 
        Act (45 U.S.C. 152, paragraph Fourth) or which are reached 
        pursuant to labor-management negotiations under similar 
        provisions of State public employee relations 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 Desist Orders.--
            ``(1) In general.--Subject to paragraph (2), upon 
        application by the Secretary showing the operation, promotion, 
        or marketing of an association health plan (or similar 
        arrangement providing benefits consisting of medical care (as 
        defined in section 733(a)(2))) that--
                    ``(A) is not certified under part 8, is subject 
                under section 514(b)(6) to the insurance laws of any 
                State in which the plan or arrangement offers or 
                provides benefits, and is not licensed, registered, or 
                otherwise approved under the insurance laws of such 
                State; or
                    ``(B) is an association health plan certified under 
                part 8 and is not operating in accordance with the 
                requirements under part 8 for such certification,
        a district court of the United States shall enter an order 
        requiring that the plan or arrangement cease activities.
            ``(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 coverage; and
                    ``(B) with respect to each State in which the plan 
                or arrangement offers or provides benefits, 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, including any relief 
        available under this title, as it deems necessary to protect 
        the interests of the public and of persons having claims for 
        benefits against the plan.''.
    (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 subsection:
    ``(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 requirements 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 Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(d) Consultation With States With Respect to Association Health 
Plans.--
            ``(1) Agreements with states.--The Secretary shall consult 
        with the State recognized under paragraph (2) with respect to 
        an association health plan regarding the exercise of--
                    ``(A) the Secretary's authority under sections 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 accordance 
                with regulations of the Secretary applicable to 
                certification under part 8.
            ``(2) Recognition of primary domicile state.--In carrying 
        out paragraph (1), the Secretary shall ensure that only one 
        State will be recognized, 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 offered 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 maintained.''.

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 amendments 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 arrangement is maintained in a 
        State for the purpose of providing benefits consisting of 
        medical care for the employees and beneficiaries of its 
        participating employers, at least 200 participating employers 
        make contributions to such arrangement, such arrangement 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 participating employers, upon the filing 
        with the applicable authority (as defined in section 812(a)(5) 
        of the Employee Retirement Income Security Act of 1974 (as 
        amended by this subtitle)) by the arrangement of an application 
        for certification of the arrangement 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 arrangement is operated by 
                a board of directors which--
                            (i) is elected by the participating 
                        employers, with each employer having one vote; 
                        and
                            (ii) has complete fiscal control over the 
                        arrangement and which is 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 operations 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 subsection, 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 
        section 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,''.

                   TITLE VI--MISCELLANEOUS PROVISIONS

SEC. 601. CERTAIN MEDICAL STOP-LOSS INSURANCE OBTAINED BY CERTAIN PLAN 
              SPONSORS OF GROUP HEALTH PLANS NOT INCLUDED UNDER THE 
              DEFINITION OF HEALTH INSURANCE 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-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 
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 Retirement Income 
Security Act of 1974 (29 U.S.C. 1191b(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-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 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 Revenue 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 participants 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 (including the business of dental 
insurance). For purposes of the preceding sentence, the term `antitrust 
laws' has 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 (including 
                annuities); or
                    ``(B) the business of property or casualty 
                insurance, including but not limited to, any insurance 
                or benefits defined as `excepted benefits' under 
                paragraph (1), subparagraph (B) or (C) of paragraph 
                (2), or paragraph (3) of section 9832(c) of the 
                Internal Revenue Code of 1986 (26 U.S.C. 9832(c)) 
                whether offered separately or in combination with 
                insurance or benefits described in paragraph (2)(A) of 
                such section.''.
    (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 profit, 
notwithstanding the definition of ``Corporation'' contained in section 
4 of the Federal Trade Commission Act.
                                 <all>