HR 2990 IH

To amend the Internal Revenue Code of 1986 to allow individuals greater access to health insurance through a health care tax deduction, a long-term care deduction, and other health-related tax incentives, to amend the Employee Retirement Income Security Act of 1974 to provide access to and choice in health care through association health plans, to amend the Public Health Service Act to create new pooling opportunities for small employers to obtain greater access to health coverage through HealthMarts, and for other purposes.

September 30, 1999

Mr. TALENT (for himself, Mr. SHADEGG, Mr. HASTERT, Mr. ARMEY, and Mr. ARCHER) introduced the following bill; which was referred to the Committee on Commerce, and in addition to the Committees on Ways and Means, and Education and the Workforce, 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

To amend the Internal Revenue Code of 1986 to allow individuals greater access to health insurance through a health care tax deduction, a long-term care deduction, and other health-related tax incentives, to amend the Employee Retirement Income Security Act of 1974 to provide access to and choice in health care through association health plans, to amend the Public Health Service Act to create new pooling opportunities for small employers to obtain greater access to health coverage through HealthMarts, 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; TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Quality Care for the Uninsured Act of 1999'.

(b) TABLE OF CONTENTS- The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Purposes.

Sec. 3. Findings relating to health care choice.

TITLE I--TAX-RELATED HEALTH CARE PROVISIONS

Sec. 101. Deduction for health and long-term care insurance costs of individuals not participating in employer-subsidized health plans.

Sec. 102. Deduction for 100 percent of health insurance costs of self-employed individuals.

Sec. 103. Expansion of availability of medical savings accounts.

Sec. 104. Long-term care insurance permitted to be offered under cafeteria plans and flexible spending arrangements.

Sec. 105. Additional personal exemption for taxpayer caring for elderly family member in taxpayer's home.

Sec. 106. Expanded human clinical trials qualifying for orphan drug credit.

Sec. 107. Inclusion of certain vaccines against streptococcus pneumoniae to list of taxable vaccines; reduction in per dose tax rate.

Sec. 108. Credit for clinical testing research expenses attributable to certain qualified academic institutions including teaching hospitals.

TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS

Sec. 201. Rules.

`Part 8--Rules Governing Association Health Plans

Sec. 202. Clarification of treatment of single employer arrangements.

Sec. 203. Clarification of treatment of certain collectively bargained arrangements.

Sec. 204. Enforcement provisions.

Sec. 205. Cooperation between Federal and State authorities.

Sec. 206. Effective date and transitional and other rules.

TITLE III--GREATER ACCESS AND CHOICE THROUGH HEALTHMARTS

Sec. 301. Expansion of consumer choice through HealthMarts.

`TITLE XXVIII--HEALTHMARTS

TITLE IV--COMMUNITY HEALTH ORGANIZATIONS

Sec. 401. Promotion of provision of insurance by community health organizations.

(c) CONSTITUTIONAL AUTHORITY TO ENACT THIS LEGISLATION- The constitutional authority upon which this Act rests is the power of Congress to regulate commerce with foreign nations and among the several States, set forth in article I, section 8 of the United States Constitution.

SEC. 2. PURPOSES.

The purposes of this Act are--

(1) to make it possible for individuals, employees, and the self-employed to purchase and own their own health insurance without suffering any negative tax consequences;

(2) to assist individuals in obtaining and in paying for basic health care services;

(3) to render patients and deliverers sensitive to the cost of health care, giving them both the incentive and the ability to restrain undesired increases in health care costs;

(4) to foster the development of numerous, varied, and innovative systems of providing health care which will compete against each other in terms of price, service, and quality, and thus allow the American people to benefit from competitive forces which will reward efficient and effective deliverers and eliminate those which provide unsatisfactory quality of care or are inefficient; and

(5) to encourage the development of systems of delivering health care which are capable of supplying a broad range of health care services in a comprehensive and systematic manner.

SEC. 3. FINDINGS RELATING TO HEALTH CARE CHOICE.

(a) Congress finds that the majority of Americans are receiving health care of a quality unmatched elsewhere in the world but that 43 million Americans remain without private health insurance. Congress further finds that small business faces significant challenges in the purchase of health insurance, including higher costs and lack of choice of coverage. Congress further finds that such challenges lead to fewer Americans who are able to take advantage of private health insurance, leading to higher cost and lower quality care.

(b) Congress finds that reduction of the number of uninsured Americans is an important public policy goal. Congress further finds that the use of alternative pooling mechanisms such as Association Health Plans, HealthMarts and other innovative means could provide significant opportunities for small business and individuals to purchase health insurance. Congress further finds that the use of such mechanisms could provide significant opportunities to expand private health coverage for individuals who are employees of small business, self-employed, or do not work for employers who provide health insurance.

(c) Congress finds that the current Tax Code provides significant incentives for employers to provide health insurance coverage for their employees by providing a deduction for the employer for the cost of health insurance coverage and an exclusion from income for the employee for employer-provided health care. Congress further finds that some individuals may prefer to decline coverage under their employer's group health plan and obtain individual health insurance coverage, and some employers may wish to give employees the opportunity to do so. Congress further finds that the Internal Revenue Service has ruled that this tax treatment for the employer and employee for employer-provided health care applies even if the employer pays for individual health insurance polices for its employees. Therefore, the Tax Code makes it possible for employers to provide

employees choice among health insurance coverage while retaining favorable tax treatment. Congress further finds that the present-law exclusion for employer-provided health care, together with the tax provisions in the bill, will provide more equitable tax treatment for health insurance expenses, encourage uninsured individuals to purchase insurance, expand health care options, and encourage individuals to better manage their health care needs and expenses.

(d) Congress finds that continually increasing and complex government regulation of the health care delivery system has proven ineffective in restraining costs and is itself expensive and counterproductive in fulfilling its purposes and detrimental to the care of patients.

TITLE I--TAX-RELATED HEALTH CARE PROVISIONS

SEC. 101. DEDUCTION FOR HEALTH AND LONG-TERM CARE INSURANCE COSTS OF INDIVIDUALS NOT PARTICIPATING IN EMPLOYER-SUBSIDIZED HEALTH PLANS.

(a) IN GENERAL- Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 222 as section 223 and by inserting after section 221 the following new section:

`SEC. 222. HEALTH AND LONG-TERM CARE INSURANCE COSTS.

`(a) IN GENERAL- In the case of an individual, there shall be allowed as a deduction an amount equal to the applicable percentage of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents.

`(b) APPLICABLE PERCENTAGE- For purposes of subsection (a), the applicable percentage shall be determined in accordance with the following table:

`For taxable years beginning

--The applicable

in calendar year--

--percentage is--

2002, 2003, and 2004

--25

2005

--35

2006

--65

2007 and thereafter

--100.

`(c) LIMITATION BASED ON OTHER COVERAGE-

`(1) COVERAGE UNDER CERTAIN SUBSIDIZED EMPLOYER PLANS-

`(A) IN GENERAL- Subsection (a) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any health plan maintained by any employer of the taxpayer or of the spouse of the taxpayer if 50 percent or more of the cost of coverage under such plan (determined under section 4980B and without regard to payments made with respect to any coverage described in subsection (e)) is paid or incurred by the employer.

`(B) EMPLOYER CONTRIBUTIONS TO CAFETERIA PLANS, FLEXIBLE SPENDING ARRANGEMENTS, AND MEDICAL SAVINGS ACCOUNTS- Employer contributions to a cafeteria plan, a flexible spending or similar arrangement, or a medical savings account which are excluded from gross income under section 106 shall be treated for purposes of subparagraph (A) as paid by the employer.

`(C) AGGREGATION OF PLANS OF EMPLOYER- A health plan which is not otherwise described in subparagraph (A) shall be treated as described in such subparagraph if such plan would be so described if all health plans of persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 were treated as one health plan.

`(D) SEPARATE APPLICATION TO HEALTH INSURANCE AND LONG-TERM CARE INSURANCE- Subparagraphs (A) and (C) shall be applied separately with respect to--

`(i) plans which include primarily coverage for qualified long-term care services or are qualified long-term care insurance contracts, and

`(ii) plans which do not include such coverage and are not such contracts.

`(2) COVERAGE UNDER CERTAIN FEDERAL PROGRAMS-

`(A) IN GENERAL- Subsection (a) shall not apply to any amount paid for any coverage for an individual for any calendar month if, as of the first day of such month, the individual is covered under any medical care program described in--

`(i) title XVIII, XIX, or XXI of the Social Security Act,

`(ii) chapter 55 of title 10, United States Code,

`(iii) chapter 17 of title 38, United States Code,

`(iv) chapter 89 of title 5, United States Code, or

`(v) the Indian Health Care Improvement Act.

`(B) EXCEPTIONS-

`(i) QUALIFIED LONG-TERM CARE- Subparagraph (A) shall not apply to amounts paid for coverage under a qualified long-term care insurance contract.

`(ii) CONTINUATION COVERAGE OF FEHBP- Subparagraph (A)(iv) shall not apply to coverage which is comparable to continuation coverage under section 4980B.

`(d) LONG-TERM CARE DEDUCTION LIMITED TO QUALIFIED LONG-TERM CARE INSURANCE CONTRACTS- In the case of a qualified long-term care insurance contract, only eligible long-term care premiums (as defined in section 213(d)(10)) may be taken into account under subsection (a).

`(e) DEDUCTION NOT AVAILABLE FOR PAYMENT OF ANCILLARY COVERAGE PREMIUMS- Any amount paid as a premium for insurance which provides for--

`(1) coverage for accidents, disability, dental care, vision care, or a specified illness, or

`(2) making payments of a fixed amount per day (or other period) by reason of being hospitalized,

shall not be taken into account under subsection (a).

`(f) SPECIAL RULES-

`(1) COORDINATION WITH DEDUCTION FOR HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS- The amount taken into account by the taxpayer in computing the deduction under section 162(l) shall not be taken into account under this section.

`(2) COORDINATION WITH MEDICAL EXPENSE DEDUCTION- The amount taken into account by the taxpayer in computing the deduction under this section shall not be taken into account under section 213.

`(g) REGULATIONS- The Secretary shall prescribe such regulations as may be appropriate to carry out this section, including regulations requiring employers to report to their employees and the Secretary such information as the Secretary determines to be appropriate.'.

(b) DEDUCTION ALLOWED WHETHER OR NOT TAXPAYER ITEMIZES OTHER DEDUCTIONS- Subsection (a) of section 62 of such Code is amended by inserting after paragraph (17) the following new item:

`(18) HEALTH AND LONG-TERM CARE INSURANCE COSTS- The deduction allowed by section 222.'.

(c) CLERICAL AMENDMENT- The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following new items:

`Sec. 222. Health and long-term care insurance costs.

`Sec. 223. Cross reference.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 102. DEDUCTION FOR 100 PERCENT OF HEALTH INSURANCE COSTS OF SELF-EMPLOYED INDIVIDUALS.

(a) IN GENERAL- Paragraph (1) of section 162(l) of the Internal Revenue Code of 1986 is amended to read as follows:

`(1) ALLOWANCE OF DEDUCTION- In the case of an individual who is an employee within the meaning of section 401(c)(1), there shall be allowed as a deduction under this section an amount equal to 100 percent of the amount paid during the taxable year for insurance which constitutes medical care for the taxpayer and the taxpayer's spouse and dependents.'.

(b) CLARIFICATION OF LIMITATIONS ON OTHER COVERAGE- The first sentence of section 162(l)(2)(B) of such Code is amended to read as follows: `Paragraph (1) shall not apply to any taxpayer for any calendar month for which the taxpayer participates in any subsidized health plan maintained by any employer (other than an employer described in section 401(c)(4)) of the taxpayer or the spouse of the taxpayer.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

SEC. 103. EXPANSION OF AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.

(a) REPEAL OF LIMITATIONS ON NUMBER OF MEDICAL SAVINGS ACCOUNTS-

(1) IN GENERAL- Subsections (i) and (j) of section 220 of the Internal Revenue Code of 1986 are hereby repealed.

(2) CONFORMING AMENDMENTS-

(A) Paragraph (1) of section 220(c) of such Code is amended by striking subparagraph (D).

(B) Section 138 of such Code is amended by striking subsection (f).

(b) AVAILABILITY NOT LIMITED TO ACCOUNTS FOR EMPLOYEES OF SMALL EMPLOYERS AND SELF-EMPLOYED INDIVIDUALS-

(1) IN GENERAL- Section 220(c)(1)(A) of such Code (relating to eligible individual) is amended to read as follows:

`(A) IN GENERAL- The term `eligible individual' means, with respect to any month, any individual if--

`(i) such individual is covered under a high deductible health plan as of the 1st day of such month, and

`(ii) such individual is not, while covered under a high deductible health plan, covered under any health plan--

`(I) which is not a high deductible health plan, and

`(II) which provides coverage for any benefit which is covered under the high deductible health plan.'.

(2) CONFORMING AMENDMENTS-

(A) Section 220(c)(1) of such Code is amended by striking subparagraph (C).

(B) Section 220(c) of such Code is amended by striking paragraph (4) (defining small employer) and by redesignating paragraph (5) as paragraph (4).

(C) Section 220(b) of such Code is amended by striking paragraph (4) (relating to deduction limited by compensation) and by redesignating paragraphs (5), (6), and (7) as paragraphs (4), (5), and (6), respectively.

(c) INCREASE IN AMOUNT OF DEDUCTION ALLOWED FOR CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS-

(1) IN GENERAL- Paragraph (2) of section 220(b) of such Code is amended to read as follows:

`(2) MONTHLY LIMITATION- The monthly limitation for any month is the amount equal to 1/12 of the annual deductible (as of the first day of such month) of the individual's coverage under the high deductible health plan.'.

(2) CONFORMING AMENDMENT- Clause (ii) of section 220(d)(1)(A) of such Code is amended by striking `75 percent of'.

(d) BOTH EMPLOYERS AND EMPLOYEES MAY CONTRIBUTE TO MEDICAL SAVINGS ACCOUNTS- Paragraph (5) of section 220(b) of such Code is amended to read as follows:

`(5) COORDINATION WITH EXCLUSION FOR EMPLOYER CONTRIBUTIONS- The limitation which would (but for this paragraph) apply under this subsection to the taxpayer for any taxable year shall be reduced (but not below zero) by

the amount which would (but for section 106(b)) be includible in the taxpayer's gross income for such taxable year.'.

(e) REDUCTION OF PERMITTED DEDUCTIBLES UNDER HIGH DEDUCTIBLE HEALTH PLANS-

(1) IN GENERAL- Subparagraph (A) of section 220(c)(2) of such Code (defining high deductible health plan) is amended--

(A) by striking `$1,500' in clause (i) and inserting `$1,000', and

(B) by striking `$3,000' in clause (ii) and inserting `$2,000'.

(2) CONFORMING AMENDMENT- Subsection (g) of section 220 of such Code is amended to read as follows:

`(g) COST-OF-LIVING ADJUSTMENT-

`(1) IN GENERAL- In the case of any taxable year beginning in a calendar year after 1998, each dollar amount in subsection (c)(2) shall be increased by an amount equal to--

`(A) such dollar amount, multiplied by

`(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins by substituting `calendar year 1997' for `calendar year 1992' in subparagraph (B) thereof.

`(2) SPECIAL RULES- In the case of the $1,000 amount in subsection (c)(2)(A)(i) and the $2,000 amount in subsection (c)(2)(A)(ii), paragraph (1)(B) shall be applied by substituting `calendar year 1999' for `calendar year 1997'.

`(3) ROUNDING- If any increase under paragraph (1) or (2) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

(f) MEDICAL SAVINGS ACCOUNTS MAY BE OFFERED UNDER CAFETERIA PLANS- Subsection (f) of section 125 of such Code is amended by striking `106(b),'.

(g) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

SEC. 104. LONG-TERM CARE INSURANCE PERMITTED TO BE OFFERED UNDER CAFETERIA PLANS AND FLEXIBLE SPENDING ARRANGEMENTS.

(a) CAFETERIA PLANS-

(1) IN GENERAL- Subsection (f) of section 125 of the Internal Revenue Code of 1986 (defining qualified benefits) is amended by inserting before the period at the end `; except that such term shall include the payment of premiums for any qualified long-term care insurance contract (as defined in section 7702B) to the extent the amount of such payment does not exceed the eligible long-term care premiums (as defined in section 213(d)(10)) for such contract'.

(b) FLEXIBLE SPENDING ARRANGEMENTS- Section 106 of such Code (relating to contributions by employer to accident and health plans) is amended by striking subsection (c).

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2001.

SEC. 105. ADDITIONAL PERSONAL EXEMPTION FOR TAXPAYER CARING FOR ELDERLY FAMILY MEMBER IN TAXPAYER'S HOME.

(a) IN GENERAL- Section 151 of the Internal Revenue Code of 1986 (relating to allowance of deductions for personal exemptions) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection:

`(e) ADDITIONAL EXEMPTION FOR CERTAIN ELDERLY FAMILY MEMBERS RESIDING WITH TAXPAYER-

`(1) IN GENERAL- An exemption of the exemption amount for each qualified family member of the taxpayer.

`(2) QUALIFIED FAMILY MEMBER- For purposes of this subsection, the term `qualified family member' means, with respect to any taxable year, any individual--

`(A) who is an ancestor of the taxpayer or of the taxpayer's spouse or who is the spouse of any such ancestor,

`(B) who is a member for the entire taxable year of a household maintained by the taxpayer, and

`(C) who has been certified, before the due date for filing the return of tax for the taxable year (without extensions), by a physician (as defined in section 1861(r)(1) of the Social Security Act) as being an individual with long-term care needs described in paragraph (3) for a period--

`(i) which is at least 180 consecutive days, and

`(ii) a portion of which occurs within the taxable year.

Such term shall not include any individual otherwise meeting the requirements of the preceding sentence unless within the 39 1/2 month period ending on such due date (or such other period as the Secretary prescribes) a physician (as so defined) has certified that such individual meets such requirements.

`(3) INDIVIDUALS WITH LONG-TERM CARE NEEDS- An individual is described in this paragraph if the individual--

`(A) is unable to perform (without substantial assistance from another individual) at least two activities of daily living (as defined in section 7702B(c)(2)(B)) due to a loss of functional capacity, or

`(B) requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment and is unable to perform, without reminding or cuing assistance, at least one activity of daily living (as so defined) or to the extent provided in regulations prescribed by the Secretary (in consultation with the Secretary of Health and Human Services), is unable to engage in age appropriate activities.

`(4) SPECIAL RULES- Rules similar to the rules of paragraphs (1), (2), (3), (4), and (5) of section 21(e) shall apply for purposes of this subsection.'.

(b) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

SEC. 106. EXPANDED HUMAN CLINICAL TRIALS QUALIFYING FOR ORPHAN DRUG CREDIT.

(a) IN GENERAL- Subclause (I) of section 45C(b)(2)(A)(ii) of the Internal Revenue Code of 1986 is amended to read as follows:

`(I) after the date that the application is filed for designation under such section 526, and'.

(b) CONFORMING AMENDMENT- Clause (i) of section 45C(b)(2)(A) of such Code is amended by inserting `which is' before `being' and by inserting before the comma at the end `and which is designated under section 526 of such Act'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to amounts paid or incurred after December 31, 2000.

SEC. 107. INCLUSION OF CERTAIN VACCINES AGAINST STREPTOCOCCUS PNEUMONIAE TO LIST OF TAXABLE VACCINES; REDUCTION IN PER DOSE TAX RATE.

(a) INCLUSION OF VACCINES-

(1) IN GENERAL- Section 4132(a)(1) of the Internal Revenue Code of 1986 (defining taxable vaccine) is amended by adding at the end the following new subparagraph:

`(L) Any conjugate vaccine against streptococcus pneumoniae.'.

(2) EFFECTIVE DATE-

(A) SALES- The amendment made by this subsection shall apply to vaccine sales beginning on the day after the date on which the Centers for Disease Control makes a final recommendation for routine administration to children of any conjugate vaccine against streptococcus pneumoniae, but shall not take effect if subsection (c) does not take effect.

(B) DELIVERIES- For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date.

(b) REDUCTION IN PER DOSE TAX RATE-

(1) IN GENERAL- Section 4131(b)(1) of such Code (relating to amount of tax) is amended by striking `75 cents' and inserting `50 cents'.

(2) EFFECTIVE DATE-

(A) SALES- The amendment made by this subsection shall apply to vaccine sales after December 31, 2004, but shall not take effect if subsection (c) does not take effect.

(B) DELIVERIES- For purposes of subparagraph (A), in the case of sales on or before the date described in such subparagraph for which delivery is made after such date, the delivery date shall be considered the sale date.

(3) LIMITATION ON CERTAIN CREDITS OR REFUNDS- For purposes of applying section 4132(b) of the Internal Revenue Code of 1986 with respect to any claim for credit or refund filed after August 31, 2004, the amount of tax taken into account shall not exceed the tax computed under the rate in effect on January 1, 2005.

(c) VACCINE TAX AND TRUST FUND AMENDMENTS-

(1) Sections 1503 and 1504 of the Vaccine Injury Compensation Program Modification Act (and the amendments made by such sections) are hereby repealed.

(2) Subparagraph (A) of section 9510(c)(1) of such Code is amended by striking `August 5, 1997' and inserting `October 21, 1998'.

(3) The amendments made by this subsection shall take effect as if included in the provisions of the Tax and Trade Relief Extension Act of 1998 to which they relate.

(d) REPORT- Not later than December 31, 1999, the Comptroller General of the United States shall prepare and submit a report to the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate on the operation of the Vaccine Injury Compensation Trust Fund and on the adequacy of such Fund to meet future claims made under the Vaccine Injury Compensation Program.

SEC. 108. CREDIT FOR CLINICAL TESTING RESEARCH EXPENSES ATTRIBUTABLE TO CERTAIN QUALIFIED ACADEMIC INSTITUTIONS INCLUDING TEACHING HOSPITALS.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business related credits) is amended by inserting after section 41 the following:

`SEC. 41A. CREDIT FOR MEDICAL INNOVATION EXPENSES.

`(a) GENERAL RULE- For purposes of section 38, the medical innovation credit determined under this section for the taxable year shall be an amount equal to 40 percent of the excess (if any) of--

`(1) the qualified medical innovation expenses for the taxable year, over

`(2) the medical innovation base period amount.

`(b) QUALIFIED MEDICAL INNOVATION EXPENSES- For purposes of this section--

`(1) IN GENERAL- The term `qualified medical innovation expenses' means the amounts which are paid or incurred by the taxpayer during the taxable year directly or indirectly to any qualified academic institution for clinical testing research activities.

`(2) CLINICAL TESTING RESEARCH ACTIVITIES-

`(A) IN GENERAL- The term `clinical testing research activities' means human clinical testing conducted at any qualified academic institution in the development of any product, which occurs before--

`(i) the date on which an application with respect to such product is approved under section

505(b), 506, or 507 of the Federal Food, Drug, and Cosmetic Act (as in effect on the date of the enactment of this section),

`(ii) the date on which a license for such product is issued under section 351 of the Public Health Service Act (as so in effect), or

`(iii) the date classification or approval of such product which is a device intended for human use is given under section 513, 514, or 515 of the Federal Food, Drug, and Cosmetic Act (as so in effect).

`(B) PRODUCT- The term `product' means any drug, biologic, or medical device.

`(3) QUALIFIED ACADEMIC INSTITUTION- The term `qualified academic institution' means any of the following institutions:

`(A) EDUCATIONAL INSTITUTION- A qualified organization described in section 170(b)(1)(A)(iii) which is owned by, or affiliated with, an institution of higher education (as defined in section 3304(f)).

`(B) TEACHING HOSPITAL- A teaching hospital which--

`(i) is publicly supported or owned by an organization described in section 501(c)(3), and

`(ii) is affiliated with an organization meeting the requirements of subparagraph (A).

`(C) FOUNDATION- A medical research organization described in section 501(c)(3) (other than a private foundation) which is affiliated with, or owned by--

`(i) an organization meeting the requirements of subparagraph (A), or

`(ii) a teaching hospital meeting the requirements of subparagraph (B).

`(D) CHARITABLE RESEARCH HOSPITAL- A hospital that is designated as a cancer center by the National Cancer Institute.

`(4) EXCLUSION FOR AMOUNTS FUNDED BY GRANTS, ETC- The term `qualified medical innovation expenses' shall not include any amount to the extent such amount is funded by any grant, contract, or otherwise by another person (or any governmental entity).

`(c) MEDICAL INNOVATION BASE PERIOD AMOUNT- For purposes of this section, the term `medical innovation base period amount' means the average annual qualified medical innovation expenses paid by the taxpayer during the 3-taxable year period ending with the taxable year immediately preceding the first taxable year of the taxpayer beginning after December 31, 2000.

`(d) SPECIAL RULES-

`(1) LIMITATION ON FOREIGN TESTING- No credit shall be allowed under this section with respect to any clinical testing research activities conducted outside the United States.

`(2) CERTAIN RULES MADE APPLICABLE- Rules similar to the rules of subsections (f) and (g) of section 41 shall apply for purposes of this section.

`(3) ELECTION- This section shall apply to any taxpayer for any taxable year only if such taxpayer elects to have this section apply for such taxable year.

`(4) COORDINATION WITH CREDIT FOR INCREASING RESEARCH EXPENDITURES AND WITH CREDIT FOR CLINICAL TESTING EXPENSES FOR CERTAIN DRUGS FOR RARE DISEASES- Any qualified medical innovation expense for a taxable year to which an election under this section applies shall not be taken into account for purposes of determining the credit allowable under section 41 or 45C for such taxable year.'.

(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT-

(1) IN GENERAL- Section 38(b) of such Code (relating to current year business credits) is amended by striking `plus' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting `, plus', and by adding at the end the following:

`(13) the medical innovation expenses credit determined under section 41A(a).'.

(2) TRANSITION RULE- Section 39(d) of such Code is amended by adding at the end the following new paragraph:

`(9) NO CARRYBACK OF SECTION 41A CREDIT BEFORE ENACTMENT- No portion of the unused business credit for any taxable year which is attributable to the medical innovation credit determined under section 41A may be carried back to a taxable year beginning before January 1, 2001.'.

(c) DENIAL OF DOUBLE BENEFIT- Section 280C of such Code is amended by adding at the end the following new subsection:

`(d) CREDIT FOR INCREASING MEDICAL INNOVATION EXPENSES-

`(1) IN GENERAL- No deduction shall be allowed for that portion of the qualified medical innovation expenses (as defined in section 41A(b)) otherwise allowable as a deduction for the taxable year which is equal to the amount of the credit determined for such taxable year under section 41A(a).

`(2) CERTAIN RULES TO APPLY- Rules similar to the rules of paragraphs (2), (3), and (4) of subsection (c) shall apply for purposes of this subsection.'.

(d) DEDUCTION FOR UNUSED PORTION OF CREDIT- Section 196(c) of such Code (defining qualified business credits) is amended by redesignating paragraphs (5) through (8) as paragraphs (6) through (9), respectively, and by inserting after paragraph (4) the following new paragraph:

`(5) the medical innovation expenses credit determined under section 41A(a) (other than such credit determined under the rules of section 280C(d)(2)),'.

(e) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of such

Code is amended by adding after the item relating to section 41 the following:

`Sec. 41A. Credit for medical innovation expenses.'.

(f) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2000.

TITLE II--GREATER ACCESS AND CHOICE THROUGH ASSOCIATION HEALTH PLANS

SEC. 201. RULES.

(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--

`(1) whose sponsor is (or is deemed under this part to be) described in subsection (b); and

`(2) under which at least one option of health insurance coverage offered by a health insurance issuer (which may include, among other options, managed care options, point of service options, and preferred provider options) is provided to participants and beneficiaries, unless, for any plan year, such coverage remains unavailable to the plan despite good faith efforts exercised by the plan to secure such coverage.

`(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 collects from its members on a periodic basis 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, through negotiated rulemaking, 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--

`(1) such certification--

`(A) is administratively feasible;

`(B) is not adverse to the interests of the individuals covered under the plan; and

`(C) is protective of the rights and benefits of the individuals covered under the plan; and

`(2) 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, through negotiated rulemaking, 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 any of the following:

`(1) a plan which offered such coverage on the date of the enactment of the Quality Care for the Uninsured Act of 1999,

`(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, which have been indicated as having average or above-average health insurance risk or health claims experience by reason of State rate filings, denials of coverage, proposed premium rate levels, and other means demonstrated by such plan in accordance with regulations which the Secretary shall prescribe through negotiated rulemaking, including (but not limited to) the following: agriculture; automobile dealerships; barbering and cosmetology; child care; construction; dance, theatrical, and orchestra productions; disinfecting and pest control; eating and drinking establishments; fishing; hospitals; labor organizations; logging; manufacturing (metals); mining; medical and dental practices; medical laboratories; sanitary services; transportation (local and freight); and warehousing.

`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) IN GENERAL- Except as provided in subparagraphs (B) and (C), 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.

`(B) LIMITATION-

`(i) GENERAL RULE- Except as provided in clauses (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, clause (i) shall not apply in the case of any service provider described in subparagraph (A) who is a provider of medical care under the plan.

`(C) CERTAIN PLANS EXCLUDED- Subparagraph (A) shall not apply to an association health plan which is in existence on the date of the enactment of the Quality Care for the Uninsured Act of 1999.

`(D) 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)(1) 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, through negotiated rulemaking, define for purposes of this subsection the terms `franchiser', `franchise network', and `franchisee'.

`(d) CERTAIN COLLECTIVELY BARGAINED PLANS-

`(1) IN GENERAL- In the case of a group health plan described in paragraph (2)--

`(A) the requirements of subsection (a) and section 801(a)(1) shall be deemed met;

`(B) the joint board of trustees shall be deemed a board of trustees with respect to which the requirements of subsection (b) are met; and

`(C) the requirements of section 804 shall be deemed met.

`(2) REQUIREMENTS- A group health plan is described in this paragraph if--

`(A) the plan is a multiemployer plan; or

`(B) the plan is in existence on April 1, 1997, and would be described in section 3(40)(A)(i) but solely for the failure to meet the requirements of section 3(40)(C)(ii).

`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 Quality Care for the Uninsured Act of 1999, 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 the claims experience of such employer 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 through negotiated rulemaking.

`(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 any law to the extent that it (1) prohibits an exclusion of a specific disease from such coverage, or (2) is not preempted under section 731(a)(1) with respect to matters governed by section 711 or 712.

`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 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, through negotiated rulemaking, 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 actuary (but not more than $175,000). The applicable authority may by regulation, through negotiated rulemaking, 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 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 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 through negotiated rulemaking, based on the level of aggregate and specific excess/stop loss insurance provided with respect to such plan.

`(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 and excess/stop loss insurance as the applicable authority considers appropriate. Such requirements may be provided by regulation, through negotiated rulemaking, 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, except that the Secretary shall reduce part or all of such annual payments, or shall provide a rebate of part or all of such a payment, to the extent that the Secretary determines that the balance in such Fund is sufficient (taking into account such a reduction or rebate) to meet all reasonable actuarial requirements. Such determination shall occur not less than once annually. In addition to any such annual payments, such payments may include such supplemental payments as the Secretary may determine to be necessary to meet reasonable actuarial requirements to carry out 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 on the books of 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 through negotiated rulemaking) 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 through negotiated rulemaking) 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 through negotiated rulemaking) 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 through negotiated rulemaking); 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 through negotiated rulemaking.

`(j) SOLVENCY STANDARDS WORKING GROUP-

`(1) IN GENERAL- Within 90 days after the date of the enactment of the Quality Care for the Uninsured Act of 1999, 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 18 members appointed by the applicable authority as follows:

`(A) 3 representatives of the National Association of Insurance Commissioners;

`(B) 3 representatives of the American Academy of Actuaries;

`(C) 3 representatives of the State governments, or their interests;

`(D) 3 representatives of existing self-insured arrangements, or their interests;

`(E) 3 representatives of associations of the type referred to in section 801(b)(1), or their interests; and

`(F) 3 representatives 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 through negotiated rulemaking, 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 actuary, that all applicable requirements of section 806 are or will be met in accordance with regulations which the applicable authority shall prescribe through negotiated rulemaking.

`(B) ADEQUACY OF CONTRIBUTION RATES- A statement of actuarial opinion, signed by a qualified actuary, which sets forth a description of the extent to which contribution rates are adequate to provide for the payment of all obligations and the maintenance of 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 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 through negotiated rulemaking, 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 through negotiated rulemaking. The applicable authority may require by regulation, through negotiated rulemaking, 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)(A), 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 through negotiated rulemaking such interim reports as it considers appropriate.

`(f) ENGAGEMENT OF QUALIFIED ACTUARY- The board of trustees of each association health plan which provides benefits options in addition to health insurance coverage and which is applying for certification under this part or is certified under this part shall engage, on behalf of all participants and beneficiaries, a qualified actuary who shall be responsible for the preparation of the materials comprising information necessary to be submitted by a qualified actuary under this part. The qualified 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 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--

`(1) not less than 60 days before the proposed termination date, 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 through negotiated rulemaking.

`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 actuary engaged by the plan, and such actuary shall, not later than the end of the next following month, make such recommendations to the board for corrective action as the actuary determines necessary to ensure 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 through negotiated rulemaking) 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) 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 through negotiated rulemaking, 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 through negotiated rulemaking, 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 through negotiated rulemaking or required by any order of the court;

`(8) to terminate the plan (or provide for its termination 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 through negotiated rulemaking, 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 Quality Care for the Uninsured Act of 1999.

`(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. SPECIAL RULES FOR CHURCH PLANS.

`(a) ELECTION FOR CHURCH PLANS- Notwithstanding section 4(b)(2), if a church, a convention or association of

churches, or an organization described in section 3(33)(C)(i) maintains a church plan which is a group health plan (as defined in section 733(a)(1)), and such church, convention, association, or organization makes an election with respect to such plan under this subsection (in such form and manner as the Secretary may by regulation prescribe), then the provisions of this section shall apply to such plan, with respect to benefits provided under such plan consisting of medical care, as if section 4(b)(2) did not contain an exclusion for church plans. Nothing in this subsection shall be construed to render any other section of this title applicable to church plans, except to the extent that such other section is incorporated by reference in this section.

`(b) EFFECT OF ELECTION-

`(1) PREEMPTION OF STATE INSURANCE LAWS REGULATING COVERED CHURCH PLANS- Subject to paragraphs (2) and (3), this section shall supersede any and all State laws which regulate insurance insofar as they may now or hereafter regulate church plans to which this section applies or trusts established under such church plans.

`(2) GENERAL STATE INSURANCE REGULATION UNAFFECTED-

`(A) IN GENERAL- Except as provided in subparagraph (B) and paragraph (3), nothing in this section shall be construed to exempt or relieve any person from any provision of State law which regulates insurance.

`(B) CHURCH PLANS NOT TO BE DEEMED INSURANCE COMPANIES OR INSURERS- Neither a church plan to which this section applies, nor any trust established under such a church plan, shall be deemed to be an insurance company or other insurer or to be engaged in the business of insurance for purposes of any State law purporting to regulate insurance companies or insurance contracts.

`(3) PREEMPTION OF CERTAIN STATE LAWS RELATING TO PREMIUM RATE REGULATION AND BENEFIT MANDATES- The provisions of subsections (a)(2)(B) and (b) of section 805 shall apply with respect to a church plan to which this section applies in the same manner and to the same extent as such provisions apply with respect to association health plans.

`(4) DEFINITIONS- For purposes of this subsection--

`(A) STATE LAW- The term `State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. A law of the United States applicable only to the District of Columbia shall be treated as a State law rather than a law of the United States.

`(B) STATE- The term `State' includes a State, any political subdivision thereof, or any agency or instrumentality of either, which purports to regulate, directly or indirectly, the terms and conditions of church plans covered by this section.

`(c) REQUIREMENTS FOR COVERED CHURCH PLANS-

`(1) FIDUCIARY RULES AND EXCLUSIVE PURPOSE- A fiduciary shall discharge his duties with respect to a church plan to which this section applies--

`(A) for the exclusive purpose of:

`(i) providing benefits to participants and their beneficiaries; and

`(ii) defraying reasonable expenses of administering the plan;

`(B) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; and

`(C) in accordance with the documents and instruments governing the plan.

The requirements of this paragraph shall not be treated as not satisfied solely because the plan assets are commingled with other church assets, to the extent that such plan assets are separately accounted for.

`(2) CLAIMS PROCEDURE- In accordance with regulations of the Secretary, every church plan to which this section applies shall--

`(A) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant;

`(B) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate fiduciary of the decision denying the claim; and

`(C) provide a written statement to each participant describing the procedures established pursuant to this paragraph.

`(3) ANNUAL STATEMENTS- In accordance with regulations of the Secretary, every church plan to which this section applies shall file with the Secretary an annual statement--

`(A) stating the names and addresses of the plan and of the church, convention, or association maintaining the plan (and its principal place of business);

`(B) certifying that it is a church plan to which this section applies and that it complies with the requirements of paragraphs (1) and (2);

`(C) identifying the States in which participants and beneficiaries under the plan are or likely will be located during the 1-year period covered by the statement; and

`(D) containing a copy of a statement of actuarial opinion signed by a qualified actuary that the plan maintains capital, reserves, insurance, other financial arrangements, or any combination thereof adequate to enable the plan to fully meet all of its financial obligations on a timely basis.

`(4) DISCLOSURE- At the time that the annual statement is filed by a church plan with the Secretary pursuant to paragraph (3), a copy of such statement shall be made available by the Secretary to the State insurance commissioner (or similar official) of any State. The name of each church plan and sponsoring organization filing an annual statement in compliance with paragraph (3) shall be published annually in the Federal Register.

`(c) ENFORCEMENT- The Secretary may enforce the provisions of this section in a manner consistent with section 502, to the extent applicable with respect to actions under section 502(a)(5), and with section 3(33)(D), except that, other than for the purpose of seeking a temporary restraining order, a civil action may be brought with respect to the plan's failure to meet any requirement of this section only if the plan fails to correct its failure within the correction period described in section 3(33)(D). The other provisions of part 5 (except sections 501(a), 503, 512, 514, and 515) shall apply with respect to the enforcement and administration of this section.

`(d) DEFINITIONS AND OTHER RULES- For purposes of this section--

`(1) IN GENERAL- Except as otherwise provided in this section, any term used in this section which is defined in any provision of this title shall have the definition provided such term by such provision.

`(2) SEMINARY STUDENTS- Seminary students who are enrolled in an institution of higher learning described in section 3(33)(C)(iv) and who are treated as participants under the terms of a church plan to which this section applies shall be deemed to be employees as defined in section 3(6) if the number of such students constitutes an insignificant portion of the total number of individuals who are treated as participants under the terms of the plan.

`SEC. 813. 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-

`(A) IN GENERAL- Except as provided in subparagraph (B), the term `applicable authority' means, in connection with an association health plan--

`(i) the State recognized pursuant to subsection (c) of section 506 as the State to which authority has been delegated in connection with such plan; or

`(ii) if there is no State referred to in clause (i), the Secretary.

`(B) EXCEPTIONS-

`(i) JOINT AUTHORITIES- Where such term appears in section 808(3), section 807(e) (in the first instance), section 809(a) (in the second instance), section 809(a) (in the fourth instance), and section 809(b)(1), such term means, in connection with an association health plan, the Secretary and the State referred to in subparagraph (A)(i) (if any) in connection with such plan.

`(ii) REGULATORY AUTHORITIES- Where such term appears in section 802(a) (in the first instance), section 802(d), section 802(e), section 803(d), section 805(a)(5), section 806(a)(2), section 806(b), section 806(c), section 806(d), paragraphs (1)(A) and (2)(A) of section 806(g), section 806(h), section 806(i), section 806(j), section 807(a) (in the second instance), section 807(b), section 807(d), section 807(e) (in the second instance), section 808 (in the matter after paragraph (3)), and section 809(a) (in the third instance), such term means, in connection with an association health plan, the Secretary.

`(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 ACTUARY- The term `qualified actuary' means an individual who is a member of the American Academy of Actuaries or meets such reasonable standards and qualifications as the Secretary may provide by regulation through negotiated rulemaking.

`(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 Quality Care for the Uninsured Act of 1999, 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.'.

(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 under an association health plan in a State and the filing, with the applicable State authority, 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) For additional provisions relating to association health plans, see subsections (a)(2)(B) and (b) of section 805.

`(4) 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 811, 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), by inserting `and which does not provide medical care (within the meaning of section 733(a)(2)),' after `arrangement,', and by striking `title.' and inserting `title, and'; and

(C) by adding at the end the following new clause:

`(iii) subject to subparagraph (E), in the case of any other employee welfare benefit plan which is a multiple employer welfare arrangement and which provides medical care (within the meaning of section 733(a)(2)), any law of any State which regulates 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 Quality Care for the Uninsured Act of 1999 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.'.

(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. 102(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, 2004, 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

`Sec. 801. Association health plans.

`Sec. 802. Certification of association health plans.

`Sec. 803. Requirements relating to sponsors and boards of trustees.

`Sec. 804. Participation and coverage requirements.

`Sec. 805. Other requirements relating to plan documents, contribution rates, and benefit options.

`Sec. 806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to health insurance coverage.

`Sec. 807. Requirements for application and related requirements.

`Sec. 808. Notice requirements for voluntary termination.

`Sec. 809. Corrective actions and mandatory termination.

`Sec. 810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition to health insurance coverage.

`Sec. 811. State assessment authority.

`Sec. 812. Special rules for church plans.

`Sec. 813. Definitions and rules of construction.'.

SEC. 202. 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 `for any plan year of any such plan, or any fiscal year of any such other arrangement;' after `single employer', and by inserting `during such year or at any time during the preceding 1-year period' after `control group';

(2) in clause (iii)--

(A) by striking `common control shall not be based on an interest of less than 25 percent' and inserting `an interest of greater than 25 percent may not be required as the minimum interest necessary for common control'; and

(B) by striking `similar to' and inserting `consistent and coextensive with';

(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 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. 203. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY BARGAINED ARRANGEMENTS.

(a) IN GENERAL- Section 3(40)(A)(i) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(40)(A)(i)) is amended to read as follows:

`(i)(I) 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, and (II) in accordance with subparagraphs (C), (D), and (E);'.

(b) LIMITATIONS- Section 3(40) of such Act (29 U.S.C. 1002(40)) is amended by adding at the end the following new subparagraphs:

`(C) For purposes of subparagraph (A)(i)(II), a plan or other arrangement shall be treated as established or maintained in accordance with this subparagraph only if the following requirements are met:

`(i) The plan or other arrangement, and the employee organization or any other entity sponsoring the plan or other arrangement, do not--

`(I) utilize the services of any licensed insurance agent or broker for soliciting or enrolling employers or individuals as participating employers or covered individuals under the plan or other arrangement; or

`(II) pay any type of compensation to a person, other than a full time employee of the employee organization (or a member of the organization to the extent provided in regulations prescribed by the Secretary through negotiated rulemaking), that is related either to the volume or number of employers or individuals solicited or enrolled as participating employers or covered individuals under the plan or other arrangement, or to the dollar amount or size of the contributions made by participating employers or covered individuals to the plan or other arrangement;

except to the extent that the services used by the plan, arrangement, organization, or other entity consist solely of preparation of documents necessary for compliance with the reporting and disclosure requirements of part 1 or administrative, investment, or consulting services unrelated to solicitation or enrollment of covered individuals.

`(ii) As of the end of the preceding plan year, the number of covered individuals under the plan or other arrangement who are neither--

`(I) employed within a bargaining unit covered by any of the collective bargaining agreements with a participating employer (nor covered on the basis of an individual's employment in such a bargaining unit); nor

`(II) present employees (or former employees who were covered while employed) of the sponsoring employee organization, of an employer who is or was a party to any of the collective bargaining agreements, or of the plan or other arrangement or a related plan or arrangement (nor covered on the basis of such present or former employment);

does not exceed 15 percent of the total number of individuals who are covered under the plan or arrangement and who are present or former employees who are or were covered under the plan or arrangement pursuant to a collective bargaining agreement with a participating employer. The requirements of the preceding provisions of this clause shall be treated as satisfied if, as of the end of the preceding plan year, such covered individuals are comprised solely of individuals who were covered individuals under the plan or other arrangement as of the date of the enactment of the Quality Care for the Uninsured Act of 1999 and, as of the end of the preceding plan year, the number of such covered individuals does not exceed 25 percent of the total number of present and former employees enrolled under the plan or other arrangement.

`(iii) The employee organization or other entity sponsoring the plan or other arrangement certifies to the Secretary each year, in a form and manner which shall be prescribed by the Secretary through negotiated rulemaking

that the plan or other arrangement meets the requirements of clauses (i) and (ii).

`(D) For purposes of subparagraph (A)(i)(II), a plan or arrangement shall be treated as established or maintained in accordance with this subparagraph only if--

`(i) all of the benefits provided under the plan or arrangement consist of health insurance coverage; or

`(ii)(I) the plan or arrangement is a multiemployer plan; and

`(II) the requirements of clause (B) of the proviso to clause (5) of section 302(c) of the Labor Management Relations Act, 1947 (29 U.S.C. 186(c)) are met with respect to such plan or other arrangement.

`(E) For purposes of subparagraph (A)(i)(II), a plan or arrangement shall be treated as established or maintained in accordance with this subparagraph only if--

`(i) the plan or arrangement is in effect as of the date of the enactment of the Quality Care for the Uninsured Act of 1999; or

`(ii) the employee organization or other entity sponsoring the plan or arrangement--

`(I) has been in existence for at least 3 years; or

`(II) demonstrates to the satisfaction of the Secretary that the requirements of subparagraphs (C) and (D) are met with respect to the plan or other arrangement.'.

(c) CONFORMING AMENDMENTS TO DEFINITIONS OF PARTICIPANT AND BENEFICIARY- Section 3(7) of such Act (29 U.S.C. 1002(7)) is amended by adding at the end the following new sentence: `Such term includes an individual who is a covered individual described in paragraph (40)(C)(ii).'.

SEC. 204. ENFORCEMENT PROVISIONS.

(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--

(1) by inserting `(a)' after `SEC. 501.'; and

(2) by adding at the end the following new subsection:

`(b) Any person who willfully falsely represents, to any employee, any employee's beneficiary, any employer, the Secretary, or any State, a plan or other arrangement established or maintained for the purpose of offering or providing any benefit described in section 3(1) to 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 with respect to which the requirements of subparagraph (C), (D), or (E) of section 3(40) are met;

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)(1) 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) 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) 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) (as amended by title I) is amended by adding at the end the following new subsection:

`(c) 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. 205. 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:

`(c) RESPONSIBILITY OF STATES WITH RESPECT TO ASSOCIATION HEALTH PLANS-

`(1) AGREEMENTS WITH STATES- A State may enter into an agreement with the Secretary for delegation to the State of some or all of--

`(A) the Secretary's authority under sections 502 and 504 to enforce the requirements for certification under part 8;

`(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; or

`(C) any combination of the Secretary's authority authorized to be delegated under subparagraphs (A) and (B).

`(2) DELEGATIONS- Any department, agency, or instrumentality of a State to which authority is delegated pursuant to an agreement entered into under this paragraph may, if authorized under State law and to the extent consistent with such agreement, exercise the powers of the Secretary under this title which relate to such authority.

`(3) RECOGNITION OF PRIMARY DOMICILE STATE- In entering into any agreement with a State under subparagraph (A), the Secretary shall ensure that, as a result of such agreement and all other agreements entered into under subparagraph (A), only one State will be recognized, with respect to any particular association health plan, as the State to which all authority has been delegated pursuant to such agreements in connection with such plan. In carrying out this paragraph, 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. 206. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES.

(a) EFFECTIVE DATE- The amendments made by sections 201, 204, and 205 shall take effect on January 1, 2001. The amendments made by sections 202 and 203 shall take effect on 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 title before January 1, 2001. Such regulations shall be issued through negotiated rulemaking.

(b) EXCEPTION- Section 801(a)(2) of the Employee Retirement Income Security Act of 1974 (added by section 201) does not apply in connection with an association health plan (certified under part 8 of subtitle B of title I of such Act) existing on the date of the enactment of this Act, if no benefits provided thereunder as of the date of the enactment of this Act consist of health insurance coverage (as defined in section 733(b)(1) of such Act).

(c) 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 813(a)(5) of the Employee Retirement Income Security Act of 1974 (as amended by this Act)) 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)(1) and 803(a)(1) 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 813 of the Employee Retirement Income Security Act of 1974, except that the reference in paragraph (7) of such section to an `association health plan' shall be deemed a reference to an arrangement referred to in this subsection.

(d) PROMOTING USE OF CERTAIN ADDITIONAL ASSOCIATIONS IN PROVIDING INDIVIDUAL HEALTH INSURANCE COVERAGE- Section 2742(b)(5) of the Public Health Service Act (42 U.S.C. 300gg-42(b)(5)) is amended--

(1) by striking `paragraph' and inserting `subparagraph';

(2) by inserting `(A)' after `- '; and

(3) by adding at the end the following new subparagraph:

`(B)(i) In the case of health insurance coverage that is made available in the individual market only through one or more associations described in clause (ii), the membership of the individual in the association (on the basis of which the coverage is provided) ceases but only if such coverage is terminated under this subparagraph uniformly without regard to any health status-related factor of covered individuals and only if the individual is entitled, upon application and without furnishing evidence of insurability, to health insurance conversion coverage that meets and is subject to all the rules and regulations of the State in which application is made.

`(ii) An association described in this clause is an organization that meets the requirements for a bona fide organization described in subparagraphs (A), (B), (C), (E) and (F) of section 2791(d)(3) and, except in the case of an association that enrolls individual members who each pay their own individual membership dues, which provides that all members and dependents of members are eligible for coverage offered through the association regardless of any health status-related factor.'.

TITLE III--GREATER ACCESS AND CHOICE THROUGH HEALTHMARTS

SEC. 301. EXPANSION OF CONSUMER CHOICE THROUGH HEALTHMARTS.

(a) IN GENERAL- The Public Health Service Act is amended by adding at the end the following new title:

`TITLE XXVIII--HEALTHMARTS

`SEC. 2801. DEFINITION OF HEALTHMART.

`(a) IN GENERAL- For purposes of this title, the term `HealthMart' means a legal entity that meets the following requirements:

`(1) ORGANIZATION- The HealthMart is a nonprofit organization operated under the direction of a board of directors which is composed of representatives of not fewer than 2 and in equal numbers from each of the following:

`(A) Small employers.

`(B) Employees of small employers.

`(C) Health care providers, which may be physicians, other health care professionals, health care facilities, or any combination thereof.

`(D) Entities, such as insurance companies, health maintenance organizations, and licensed provider-sponsored organizations, that underwrite or administer health benefits coverage.

`(2) OFFERING HEALTH BENEFITS COVERAGE-

`(A) IN GENERAL- The HealthMart, in conjunction with those health insurance issuers that offer health benefits coverage through the HealthMart, makes available health benefits coverage in the manner described in subsection (b) to all small employers and eligible employees in the manner described in subsection (c)(2) at rates (including employer's and employee's share) that are established by the health insurance issuer on a policy or product specific basis and that may vary only as permissible under State law. A HealthMart is deemed to be a group health plan for purposes of applying section 702 of the Employee Retirement Income Security Act of 1974, section 2702 of this Act, and section 9802(b) of the Internal Revenue Code of 1986 (which limit variation among similarly situated individuals of required premiums for health benefits coverage on the basis of health status-related factors).

`(B) NONDISCRIMINATION IN COVERAGE OFFERED-

`(i) IN GENERAL- Subject to clause (ii), the HealthMart may not offer health benefits coverage to an eligible employee in a geographic area (as specified under paragraph (3)(A)) unless the same coverage is offered to all such employees in the same geographic area. Section 2711(a)(1)(B) of this Act limits denial of enrollment of certain eligible individuals under health benefits coverage in the small group market.

`(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.

`(C) NO FINANCIAL UNDERWRITING- The HealthMart provides health benefits coverage only through contracts with health insurance issuers and does not assume insurance risk with respect to such coverage.

(D) MINIMUM COVERAGE- By the end of the first year of its operation and thereafter, the HealthMart maintains not fewer than 10 purchasers and 100 members.

`(3) GEOGRAPHIC AREAS-

`(A) SPECIFICATION OF GEOGRAPHIC AREAS- The HealthMart shall specify the geographic area (or areas) in which it makes available health benefits coverage offered by health insurance issuers to small employers. Such an area shall encompass at least one entire county or equivalent area.

`(B) MULTISTATE AREAS- In the case of a HealthMart that serves more than one State, such geographic areas may be areas that include portions of two or more contiguous States.

`(C) MULTIPLE HEALTHMARTS PERMITTED IN SINGLE GEOGRAPHIC AREA- Nothing in this title shall be construed as preventing the establishment and operation of more than one HealthMart in a geographic area or as limiting the number of HealthMarts that may operate in any area.

`(4) PROVISION OF ADMINISTRATIVE SERVICES TO PURCHASERS-

`(A) IN GENERAL- The HealthMart provides administrative services for purchasers. Such services may include accounting, billing, enrollment information, and employee coverage status reports.

`(B) CONSTRUCTION- Nothing in this subsection shall be construed as preventing a HealthMart from serving as an administrative service organization to any entity.

`(5) DISSEMINATION OF INFORMATION- The HealthMart collects and disseminates (or arranges for the collection and dissemination of) consumer-oriented information on the scope, cost, and enrollee satisfaction of all coverage options offered through the HealthMart to its members and eligible individuals. Such information shall be defined by the HealthMart and shall be in a manner appropriate to the type of coverage offered. To the extent practicable, such information shall include information on provider performance, locations and hours of operation of providers, outcomes, and similar matters. Nothing in this section shall be construed as preventing the dissemination of such information or other information by the HealthMart or by health insurance issuers through electronic or other means.

`(6) FILING INFORMATION- The Health-Mart--

`(A) files with the applicable Federal authority information that demonstrates the HealthMart's compliance with the applicable requirements of this title; or

`(B) in accordance with rules established under section 2803(a), files with a State such information as the State may require to demonstrate such compliance.

`(b) HEALTH BENEFITS COVERAGE REQUIREMENTS-

`(1) COMPLIANCE WITH CONSUMER PROTECTION REQUIREMENTS- Any health benefits coverage offered through a HealthMart shall--

`(A) be underwritten by a health insurance issuer that--

`(i) is licensed (or otherwise regulated) under State law (or is a community health organization that is offering health insurance coverage pursuant to section 330B(a));

`(ii) meets all applicable State standards relating to consumer protection, subject to section 2802(b); and

`(iii) offers the coverage under a contract with the HealthMart;

`(B) subject to paragraph (2), be approved or otherwise permitted to be offered under State law; and

`(C) provide full portability of creditable coverage for individuals who remain members of the same HealthMart notwithstanding that they change the employer through which they are members in accordance with the provisions of the parts 6 and 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 and titles XXII and XXVII of this Act, so long as both employers are purchasers in the HealthMart.

`(2) ALTERNATIVE PROCESS FOR APPROVAL OF HEALTH BENEFITS COVERAGE IN CASE OF DISCRIMINATION OR DELAY-

`(A) IN GENERAL- The requirement of paragraph (1)(B) shall not apply to a policy or product of health benefits coverage offered in a State if the health insurance issuer seeking to offer such policy or product files an application to waive such requirement with the applicable Federal authority, and the authority determines, based on the application and other evidence presented to the authority, that--

`(i) either (or both) of the grounds described in subparagraph (B) for approval of the application has been met; and

`(ii) the coverage meets the applicable State standards (other than those that have been preempted under section 2802).

`(B) GROUNDS- The grounds described in this subparagraph with respect to a policy or product of health benefits coverage are as follows:

`(i) FAILURE TO ACT ON POLICY, PRODUCT, OR RATE APPLICATION ON A TIMELY BASIS- The State has failed to complete action on the policy or product (or rates for the policy or product) within 90 days of the date of the State's receipt of a substantially complete application. No period before the date of the enactment of this section shall be included in determining such 90-day period.

`(ii) DENIAL OF APPLICATION BASED ON DISCRIMINATORY TREATMENT- The State has denied such an application and--

`(I) the standards or review process imposed by the State as a condition of approval of the policy or product imposes either any material requirements, procedures, or standards to such policy or product that are not generally applicable to other policies and products offered or any requirements that are preempted under section 2802; or

`(II) the State requires the issuer, as a condition of approval of the policy or product, to offer any policy or product other than such policy or product.

`(C) ENFORCEMENT- In the case of a waiver granted under subparagraph (A) to an issuer with respect to a State, the Secretary may enter into an agreement with the State under which the State agrees to provide for monitoring and enforcement activities with respect to compliance of such an issuer and its health insurance coverage with the applicable State standards described in subparagraph (A)(ii). Such monitoring and enforcement shall be conducted by the State in the same manner as the State enforces such standards with respect to other health insurance issuers and plans, without discrimination based on the type of issuer to which the standards apply. Such an agreement shall specify or establish mechanisms by which compliance activities are undertaken, while not lengthening the time required to review and process applications for waivers under subparagraph (A).

`(3) EXAMPLES OF TYPES OF COVERAGE- The health benefits coverage made available through a HealthMart may include, but is not limited to, any of the following if it meets the other applicable requirements of this title:

`(A) Coverage through a health maintenance organization.

`(B) Coverage in connection with a preferred provider organization.

`(C) Coverage in connection with a licensed provider-sponsored organization.

`(D) Indemnity coverage through an insurance company.

`(E) Coverage offered in connection with a contribution into a medical savings account or flexible spending account.

`(F) Coverage that includes a point-of-service option.

`(G) Coverage offered by a community health organization (as defined in section 330B(e)).

`(H) Any combination of such types of coverage.

`(4) WELLNESS BONUSES FOR HEALTH PROMOTION- Nothing in this title shall be construed as precluding a health insurance issuer offering health benefits coverage through a HealthMart 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 HealthMart and comply with all other provisions of this title and do not discriminate among similarly situated members.

`(c) PURCHASERS; MEMBERS; HEALTH INSURANCE ISSUERS-

`(1) PURCHASERS-

`(A) IN GENERAL- Subject to the provisions of this title, a HealthMart shall permit any small employer to contract with the HealthMart for the purchase of health benefits coverage for its employees and dependents of those employees and may not vary conditions of eligibility (including premium rates and membership fees) of a small employer to be a purchaser.

`(B) ROLE OF ASSOCIATIONS, BROKERS, AND LICENSED HEALTH INSURANCE AGENTS- Nothing in this section shall be construed as preventing an association, broker, licensed health insurance agent, or other entity from assisting or representing a HealthMart or small employers from entering into appropriate arrangements to carry out this title.

`(C) PERIOD OF CONTRACT- The HealthMart may not require a contract under subparagraph (A) between a HealthMart and a purchaser to be effective for a period of longer than 12 months. The previous sentence shall not be construed as preventing such a contract from being extended for additional 12-month periods or preventing the purchaser from voluntarily electing a contract period of longer than 12 months.

`(D) EXCLUSIVE NATURE OF CONTRACT- Such a contract shall provide that the purchaser agrees not to obtain or sponsor health benefits coverage, on behalf of any eligible employees (and their dependents), other than through the HealthMart. The previous sentence shall not apply to an eligible individual who resides in an area for which no coverage is offered by any health insurance issuer through the HealthMart.

`(2) MEMBERS-

`(A) IN GENERAL- Under rules established to carry out this title, with respect to a small employer that has a purchaser contract with a HealthMart, individuals who are employees of the employer may enroll for health benefits coverage (including coverage for dependents of such enrolling employees) offered by a health insurance issuer through the HealthMart.

`(B) NONDISCRIMINATION IN ENROLLMENT- A HealthMart may not deny enrollment as a member to an individual who is an employee (or dependent of such an employee) eligible to be so enrolled based on health status-related factors, except as may be permitted consistent with section 2742(b).

`(C) ANNUAL OPEN ENROLLMENT PERIOD- In the case of members enrolled in health benefits coverage offered by a health insurance issuer through a HealthMart, subject to subparagraph (D), the HealthMart shall provide for an annual open enrollment period of 30 days during which such members may change the coverage option in which the members are enrolled.

`(D) RULES OF ELIGIBILITY- Nothing in this paragraph shall preclude a HealthMart from establishing rules of employee eligibility for enrollment and reenrollment of members during the annual open enrollment period under subparagraph (C). Such rules shall be applied consistently to all purchasers and members within the HealthMart and shall not be based in any manner on health status-related factors and may not conflict with sections 2701 and 2702 of this Act.

`(3) HEALTH INSURANCE ISSUERS-

`(A) PREMIUM COLLECTION- The contract between a HealthMart and a health insurance issuer shall provide, with respect to a member enrolled with health benefits coverage offered by the issuer through the HealthMart, for the payment of the premiums collected by the HealthMart (or the issuer) for such coverage (less a pre-determined administrative charge negotiated by the HealthMart and the issuer) to the issuer.

`(B) SCOPE OF SERVICE AREA- Nothing in this title shall be construed as requiring the service area of a health insurance issuer with respect to health insurance coverage to cover the entire geographic area served by a HealthMart.

`(C) AVAILABILITY OF COVERAGE OPTIONS- A HealthMart shall enter into contracts with one or more health insurance issuers in a manner that assures that at least 2 health insurance coverage options are made available in the geographic area specified under subsection (a)(3)(A).

`(d) PREVENTION OF CONFLICTS OF INTEREST-

`(1) FOR BOARDS OF DIRECTORS- A member of a board of directors of a HealthMart may not serve as an employee or paid consultant to the HealthMart, but may receive reasonable reimbursement for travel expenses for purposes of attending meetings of the board or committees thereof.

`(2) FOR BOARDS OF DIRECTORS OR EMPLOYEES- An individual is not eligible to serve in a paid or unpaid capacity on the board of directors of a HealthMart or as an employee of the HealthMart, if the individual is employed by, represents in any capacity, owns, or controls any ownership interest in a organization from whom the HealthMart receives contributions, grants, or other funds not connected with a contract for coverage through the HealthMart.

`(3) EMPLOYMENT AND EMPLOYEE REPRESENTATIVES-

`(A) IN GENERAL- An individual who is serving on a board of directors of a HealthMart as a representative described in subparagraph (A) or (B) of section 2801(a)(1) shall not be employed by or affiliated with a health insurance issuer or be licensed as or employed by or affiliated with a health care provider.

`(B) CONSTRUCTION- For purposes of subparagraph (A), the term `affiliated' does not include membership in a health benefits plan or the obtaining of health benefits coverage offered by a health insurance issuer.

`(e) CONSTRUCTION-

`(1) NETWORK OF AFFILIATED HEALTHMARTS- Nothing in this section shall be construed as preventing one or more HealthMarts serving different areas (whether or not contiguous) from providing for some or all of the following (through a single administrative organization or otherwise):

`(A) Coordinating the offering of the same or similar health benefits coverage in different areas served by the different HealthMarts.

`(B) Providing for crediting of deductibles and other cost-sharing for individuals who are provided health benefits coverage through the HealthMarts (or affiliated HealthMarts) after--

`(i) a change of employers through which the coverage is provided; or

`(ii) a change in place of employment to an area not served by the previous HealthMart.

`(2) PERMITTING HEALTHMARTS TO ADJUST DISTRIBUTIONS AMONG ISSUERS TO REFLECT RELATIVE RISK OF ENROLLEES- Nothing in this section shall be construed as precluding a HealthMart from providing for adjustments in amounts distributed among the health insurance issuers offering health benefits coverage through the HealthMart based on factors such as the relative health care risk of members enrolled under the coverage offered by the different issuers.

`(3) APPLICATION OF UNIFORM MINIMUM PARTICIPATION AND CONTRIBUTION RULES- Nothing in this section shall be construed as precluding a HealthMart from establishing minimum participation and contribution rules (described in section 2711(e)(1)) for small employers that apply to become purchasers in the HealthMart, so long as such rules are applied uniformly for all health insurance issuers.

`SEC. 2802. APPLICATION OF CERTAIN LAWS AND REQUIREMENTS.

`(a) AUTHORITY OF STATES- Nothing in this section shall be construed as preempting State laws relating to the following:

`(1) The regulation of underwriters of health coverage, including licensure and solvency requirements.

`(2) The application of premium taxes and required payments for guaranty funds or for contributions to high-risk pools.

`(3) The application of fair marketing requirements and other consumer protections (other than those specifically relating to an item described in subsection (b)).

`(4) The application of requirements relating to the adjustment of rates for health insurance coverage.

`(b) TREATMENT OF BENEFIT AND GROUPING REQUIREMENTS- State laws insofar as they relate to any of the following are superseded and shall not apply to health benefits coverage made available through a HealthMart:

`(1) Benefit requirements for health benefits coverage offered through a HealthMart, including (but not limited to) requirements relating to coverage of specific providers, specific services or conditions, or the amount, duration, or scope of benefits, but not including requirements to the extent required to implement title XXVII or other Federal law and to the extent the requirement prohibits an exclusion of a specific disease from such coverage.

`(2) Requirements (commonly referred to as fictitious group laws) relating to grouping and similar requirements for such coverage to the extent such requirements impede the establishment and operation of HealthMarts pursuant to this title.

`(3) 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 a HealthMart, if the HealthMart meets the requirements of this title.

Any State law or regulation relating to the composition or organization of a HealthMart is preempted to the extent the law or regulation is inconsistent with the provisions of this title.

`(c) APPLICATION OF ERISA FIDUCIARY AND DISCLOSURE REQUIREMENTS- The board of directors of a HealthMart is deemed to be a plan administrator of an employee welfare benefit plan which is a group health plan for purposes of applying parts 1 and 4 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 and those provisions of part 5 of such subtitle which are applicable to enforcement of such parts 1 and 4, and the HealthMart shall be treated as such a plan and the enrollees shall be treated as participants and beneficiaries for purposes of applying such provisions pursuant to this subsection.

`(d) APPLICATION OF ERISA RENEWABILITY PROTECTION- A HealthMart is deemed to be a group health plan that is a multiple employer welfare arrangement for purposes of applying section 703 of the Employee Retirement Income Security Act of 1974.

`(e) APPLICATION OF RULES FOR NETWORK PLANS AND FINANCIAL CAPACITY- The provisions of subsections (c) and (d) of section 2711 apply to health benefits coverage offered by a health insurance issuer through a HealthMart.

`(f) CONSTRUCTION RELATING TO OFFERING REQUIREMENT- Nothing in section 2711(a) of this Act or 703 of the Employee Retirement Income Security Act of 1974 shall be construed as permitting the offering outside the HealthMart of health benefits coverage that is only made available through a HealthMart under this section because of the application of subsection (b).

`(g) APPLICATION TO GUARANTEED RENEWABILITY REQUIREMENTS IN CASE OF DISCONTINUATION OF AN ISSUER- For purposes of applying section 2712 in the case of health insurance coverage offered by a health insurance issuer through a HealthMart, if the contract between the HealthMart and the issuer is terminated and the HealthMart continues to make

available any health insurance coverage after the date of such termination, the following rules apply:

`(1) RENEWABILITY- The HealthMart shall fulfill the obligation under such section of the issuer renewing and continuing in force coverage by offering purchasers (and members and their dependents) all available health benefits coverage that would otherwise be available to similarly-situated purchasers and members from the remaining participating health insurance issuers in the same manner as would be required of issuers under section 2712(c).

`(2) APPLICATION OF ASSOCIATION RULES- The HealthMart shall be considered an association for purposes of applying section 2712(e).

`(h) CONSTRUCTION IN RELATION TO CERTAIN OTHER LAWS- Nothing in this title shall be construed as modifying or affecting the applicability to HealthMarts or health benefits coverage offered by a health insurance issuer through a HealthMart of parts 6 and 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 or titles XXII and XXVII of this Act.

`SEC. 2803. ADMINISTRATION.

`(a) IN GENERAL- The applicable Federal authority shall administer this title through the division established under subsection (b) and is authorized to issue such regulations as may be required to carry out this title. Such regulations shall be subject to Congressional review under the provisions of chapter 8 of title 5, United States Code. The applicable Federal authority shall incorporate the process of `deemed file and use' with respect to the information filed under section 2801(a)(6)(A) and shall determine whether information filed by a HealthMart demonstrates compliance with the applicable requirements of this title. Such authority shall exercise its authority under this title in a manner that fosters and promotes the development of HealthMarts in order to improve access to health care coverage and services.

`(b) ADMINISTRATION THROUGH HEALTH CARE MARKETPLACE DIVISION-

`(1) IN GENERAL- The applicable Federal authority shall carry out its duties under this title through a separate Health Care Marketplace Division, the sole duty of which (including the staff of which) shall be to administer this title.

`(2) ADDITIONAL DUTIES- In addition to other responsibilities provided under this title, such Division is responsible for--

`(A) oversight of the operations of HealthMarts under this title; and

`(B) the periodic submittal to Congress of reports on the performance of HealthMarts under this title under subsection (c).

`(c) PERIODIC REPORTS- The applicable Federal authority shall submit to Congress a report every 30 months, during the 10-year period beginning on the effective date of the rules promulgated by the applicable Federal authority to carry out this title, on the effectiveness of this title in promoting coverage of uninsured individuals. Such authority may provide for the production of such reports through one or more contracts with appropriate private entities.

`SEC. 2804. DEFINITIONS.

`For purposes of this title:

`(1) APPLICABLE FEDERAL AUTHORITY- The term `applicable Federal authority' means the Secretary of Health and Human Services.

`(2) ELIGIBLE EMPLOYEE OR INDIVIDUAL- The term `eligible' means, with respect to an employee or other individual and a HealthMart, an employee or individual who is eligible under section 2801(c)(2) to enroll or be enrolled in health benefits coverage offered through the HealthMart.

`(3) EMPLOYER; EMPLOYEE; DEPENDENT- Except as the applicable Federal authority may otherwise provide, the terms `employer', `employee', and `dependent', as applied to health insurance coverage offered by a health insurance issuer licensed (or otherwise regulated) in a State, shall have the meanings applied to such terms with respect to such coverage under the laws of the State relating to such coverage and such an issuer.

`(4) HEALTH BENEFITS COVERAGE- The term `health benefits coverage' has the meaning given the term group health insurance coverage in section 2791(b)(4).

`(5) HEALTH INSURANCE ISSUER- The term `health insurance issuer' has the meaning given such term in section 2791(b)(2) and includes a community health organization that is offering coverage pursuant to section 330B(a).

`(6) HEALTH STATUS-RELATED FACTOR- The term `health status-related factor' has the meaning given such term in section 2791(d)(9).

`(7) HEALTHMART- The term `HealthMart' is defined in section 2801(a).

`(8) MEMBER- The term `member' means, with respect to a HealthMart, an individual enrolled for health benefits coverage through the HealthMart under section 2801(c)(2).

`(9) PURCHASER- The term `purchaser' means, with respect to a HealthMart, a small employer that has contracted under section 2801(c)(1)(A) with the HealthMart for the purchase of health benefits coverage.

`(10) SMALL EMPLOYER- The term `small employer' has the meaning given such term for purposes of title XXVII.'.

(b) EFFECTIVE DATE- The amendment made by subsection (a) shall take effect on January 1, 2000. The Secretary of Health and Human Services shall first issue all regulations necessary to carry out such amendment before such date.

TITLE IV--COMMUNITY HEALTH ORGANIZATIONS

SEC. 401. PROMOTION OF PROVISION OF INSURANCE BY COMMUNITY HEALTH ORGANIZATIONS.

(a) WAIVER OF STATE LICENSURE REQUIREMENT FOR COMMUNITY HEALTH ORGANIZATIONS IN CERTAIN CASES- Subpart I of part D of title III of the Public Health Service Act is amended by adding at the end the following new section:

`WAIVER OF STATE LICENSURE REQUIREMENT FOR COMMUNITY HEALTH ORGANIZATIONS IN CERTAIN CASES

`SEC. 330D. (a) WAIVER AUTHORIZED-

`(1) IN GENERAL- A community health organization may offer health insurance coverage in a State notwithstanding that it is not licensed in such a State to offer such coverage if--

`(A) the organization files an application for waiver of the licensure requirement with the Secretary of Health and Human Services (in this section referred to as the `Secretary') by not later than November 1, 2005; and

`(B) the Secretary determines, based on the application and other evidence presented to the Secretary, that any of the grounds for approval of the application described in subparagraph (A), (B), or (C) of paragraph (2) has been met.

`(2) GROUNDS FOR APPROVAL OF WAIVER-

`(A) FAILURE TO ACT ON LICENSURE APPLICATION ON A TIMELY BASIS- The ground for approval of such a waiver application described in this subparagraph is that the State has failed to complete action on a licensing application of the organization within 90 days of the date of the State's receipt of a substantially complete application. No period before the date of the enactment of this section shall be included in determining such 90-day period.

`(B) DENIAL OF APPLICATION BASED ON DISCRIMINATORY TREATMENT- The ground for approval of such a waiver application described in this subparagraph is that the State has denied such a licensing application and the standards or review process imposed by the State as a condition of approval of the license or as the basis for such denial by the State imposes any material requirements, procedures, or standards (other than solvency requirements) to such organizations that are not generally applicable to other entities engaged in a substantially similar business.

`(C) DENIAL OF APPLICATION BASED ON APPLICATION OF SOLVENCY REQUIREMENTS- With respect to waiver applications filed on or after the date of publication of solvency standards established by the Secretary under subsection (d), the ground for approval of such a waiver application described in this subparagraph is that the State has denied such a licensing application based (in whole or in part) on the organization's failure to meet applicable State solvency requirements and such requirements are not the same as the solvency standards established by the Secretary. For purposes of this subparagraph, the term solvency requirements means requirements relating to solvency and other matters covered under the standards established by the Secretary under subsection (d).

`(3) TREATMENT OF WAIVER- In the case of a waiver granted under this subsection for a community health organization with respect to a State--

`(A) LIMITATION TO STATE- The waiver shall be effective only with respect to that State and does not apply to any other State.

`(B) LIMITATION TO 36-MONTH PERIOD- The waiver shall be effective only for a 36-month period but may be renewed for up to 36 additional months if the Secretary determines that such an extension is appropriate.

`(C) CONDITIONED ON COMPLIANCE WITH CONSUMER PROTECTION AND QUALITY STANDARDS- The continuation of the waiver is conditioned upon the organization's compliance with the requirements described in paragraph (5).

`(D) PREEMPTION OF STATE LAW- Any provisions of law of that State which relate to the licensing of the organization and which prohibit the organization from providing health insurance coverage shall be superseded.

`(4) PROMPT ACTION ON APPLICATION- The Secretary shall grant or deny such a waiver application within 60 days after the date the Secretary determines that a substantially complete waiver application has been filed. Nothing in this section shall be construed as preventing an organization which has had such a waiver application denied from submitting a subsequent waiver application.

`(5) APPLICATION AND ENFORCEMENT OF STATE CONSUMER PROTECTION AND QUALITY STANDARDS- A waiver granted under this subsection to an organization with respect to licensing under State law is conditioned upon the organization's compliance with all consumer protection and quality standards insofar as such standards--

`(A) would apply in the State to the community health organization if it were licensed as an entity offering health insurance coverage under State law; and

`(B) are generally applicable to other risk-bearing managed care organizations and plans in the State.

`(6) REPORT- By not later than December 31, 2004, the Secretary shall submit to the Committee on Commerce of the House of Representatives and the Committee on Labor and Human Resources of the Senate a report regarding whether the waiver process under this subsection should be continued after December 31, 2005.

`(b) ASSUMPTION OF FULL FINANCIAL RISK- To qualify for a waiver under subsection (a), the community health organization shall assume full financial risk on a prospective basis for the provision of covered health care services, except that the organization--

`(1) may obtain insurance or make other arrangements for the cost of providing to any enrolled member such services the aggregate value of which exceeds such aggregate level as the Secretary specifies from time to time;

`(2) may obtain insurance or make other arrangements for the cost of such services provided to its enrolled

members other than through the organization because medical necessity required their provision before they could be secured through the organization;

`(3) may obtain insurance or make other arrangements for not more than 90 percent of the amount by which its costs for any of its fiscal years exceed 105 percent of its income for such fiscal year; and

`(4) may make arrangements with physicians or other health care professionals, health care institutions, or any combination of such individuals or institutions to assume all or part of the financial risk on a prospective basis for the provision of health services by the physicians or other health professionals or through the institutions.

`(c) CERTIFICATION OF PROVISION AGAINST RISK OF INSOLVENCY FOR UNLICENSED CHOS-

`(1) IN GENERAL- Each community health organization that is not licensed by a State and for which a waiver application has been approved under subsection (a)(1), shall meet standards established by the Secretary under subsection (d) relating to the financial solvency and capital adequacy of the organization.

`(2) CERTIFICATION PROCESS FOR SOLVENCY STANDARDS FOR CHOS- The Secretary shall establish a process for the receipt and approval of applications of a community health organization described in paragraph (1) for certification (and periodic recertification) of the organization as meeting such solvency standards. Under such process, the Secretary shall act upon such a certification application not later than 60 days after the date the application has been received.

`(d) ESTABLISHMENT OF SOLVENCY STANDARDS FOR COMMUNITY HEALTH ORGANIZATIONS-

`(1) IN GENERAL- The Secretary shall establish, on an expedited basis and by rule pursuant to section 553 of title 5, United States Code and through the Health Resources and Services Administration, standards described in subsection (c)(1) (relating to financial solvency and capital adequacy) that entities must meet to obtain a waiver under subsection (a)(2)(C). In establishing such standards, the Secretary shall consult with interested organizations, including the National Association of Insurance Commissioners, the Academy of Actuaries, and organizations representing Federally qualified health centers.

`(2) FACTORS TO CONSIDER FOR SOLVENCY STANDARDS- In establishing solvency standards for community health organizations under paragraph (1), the Secretary shall take into account--

`(A) the delivery system assets of such an organization and ability of such an organization to provide services to enrollees;

`(B) alternative means of protecting against insolvency, including reinsurance, unrestricted surplus, letters of credit, guarantees, organizational insurance coverage, partnerships with other licensed entities, and valuation attributable to the ability of such an organization to meet its service obligations through direct delivery of care; and

`(C) any standards developed by the National Association of Insurance Commissioners specifically for risk-based health care delivery organizations.

`(3) ENROLLEE PROTECTION AGAINST INSOLVENCY- Such standards shall include provisions to prevent enrollees from being held liable to any person or entity for the organization's debts in the event of the organization's insolvency.

`(4) DEADLINE- Such standards shall be promulgated in a manner so they are first effective by not later than April 1, 2000.

`(e) DEFINITIONS- In this section:

`(1) COMMUNITY HEALTH ORGANIZATION- The term `community health organization' means an organization that is a Federally-qualified health center or is controlled by one or more Federally-qualified health centers.

`(2) FEDERALLY-QUALIFIED HEALTH CENTER- The term `Federally-qualified health center' has the meaning given such term in section 1905(l)(2)(B) of the Social Security Act.

`(3) HEALTH INSURANCE COVERAGE- The term `health insurance coverage' has the meaning given such term in section 2791(b)(1).

`(4) CONTROL- The term `control' means the possession, whether direct or indirect, of the power to direct or cause the direction of the management and policies of the organization through membership, board representation, or an ownership interest equal to or greater than 50.1 percent.'.

END