S.Amdt. 3197

SA 3197. Mr. ENZI submitted an amendment intended to be proposed to
amendment SA 2786 proposed by Mr. Reid (for himself, Mr. Baucus, Mr.
Dodd, and Mr. Harkin) to the bill H.R. 3590, to amend the Internal
Revenue Code of 1986 to modify the first-time homebuyers credit in the
case of members of the Armed Forces and certain other Federal
employees, and for other purposes; which was ordered to lie on the
table; as follows:

Strike the matter proposed to be inserted and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Small Business Health Plans
Act of 2009''.

[[Page S13050]]

TITLE I--ENHANCED MARKETPLACE POOLS

SEC. 101. RULES GOVERNING ENHANCED MARKETPLACE POOLS.

(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 ENHANCED MARKETPLACE POOLS

``SEC. 801. SMALL BUSINESS HEALTH PLANS.

``(a) In General.--For purposes of this part, the term
`small business health plan' means a fully insured group
health plan whose sponsor is (or is deemed under this part to
be) described in subsection (b).
``(b) Sponsorship.--The sponsor of a group health plan is
described in this subsection if such sponsor--
``(1) is organized and maintained in good faith, with a
constitution and bylaws specifically stating its purpose and
providing for periodic meetings on at least an annual basis,
as a bona fide trade association, a bona fide industry
association (including a rural electric cooperative
association or a rural telephone cooperative association), a
bona fide professional association, or a bona fide chamber of
commerce (or similar bona fide business association,
including a corporation or similar organization that operates
on a cooperative basis (within the meaning of section 1381 of
the Internal Revenue Code of 1986)), for substantial purposes
other than that of obtaining medical care;
``(2) is established as a permanent entity which receives
the active support of its members and requires for membership
payment on a periodic basis of dues or payments necessary to
maintain eligibility for membership;
``(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; and
``(4) does not condition membership on the basis of a
minimum group size.

Any sponsor consisting of an association of entities which
meet the requirements of paragraphs (1), (2), (3), and (4)
shall be deemed to be a sponsor described in this subsection.

``SEC. 802. ALTERNATIVE MARKET POOLING ORGANIZATIONS.

``(a) In General.--The Secretary, not later than 1 year
after the date of enactment of this part, shall promulgate
regulations that apply the rules and standards of this part,
as necessary, to circumstances in which a pooling entity
other (hereinafter `Alternative Market Pooling
Organizations') is not made up principally of employers and
their employees, or not a professional organization or such
small business health plan entity identified in section 801.
``(b) Adaption of Standards.--In developing and
promulgating regulations pursuant to subsection (a), the
Secretary, in consultation with the Secretary of Health and
Human Services, small business health plans, small and large
employers, large and small insurance issuers, consumer
representatives, and state insurance commissioners, shall--
``(1) adapt the standards of this part, to the maximum
degree practicable, to assure balanced and comparable
oversight standards for both small business health plans and
alternative market pooling organizations;
``(2) permit the participation as alternative market
pooling organizations unions, churches and other faith-based
organizations, or other organizations composed of individuals
and groups which may have little or no association with
employment, provided however, that such alternative market
pooling organizations meet, and continue meeting on an
ongoing basis, to satisfy standards, rules, and requirements
materially equivalent to those set forth in this part with
respect to small business health plans;
``(3) conduct periodic verification of such compliance by
alternative market pooling organizations, in consultation
with the Secretary of Health and Human Services and the
National Association of Insurance Commissioners, except that
such periodic verification shall not materially impede market
entry or participation as pooling entities comparable to that
of small business health plans;
``(4) assure that consistent, clear, and regularly
monitored standards are applied with respect to alternative
market pooling organizations to avert material risk-selection
within or among the composition of such organizations;
``(5) the expedited and deemed certification procedures
provided in section 805(d) shall not apply to alternative
market pooling organizations until sooner of the promulgation
of regulations under this subsection or the expiration of one
year following enactment of this Act; and
``(6) make such other appropriate adjustments to the
requirements of this part as the Secretary may reasonably
deem appropriate to fit the circumstances of an individual
alternative market pooling organization or category of such
organization, including but not limited to the application of
the membership payment requirements of section 801(b)(2) to
alternative market pooling organizations composed primarily
of church- or faith-based membership.

``SEC. 803. CERTIFICATION OF SMALL BUSINESS HEALTH PLANS.

``(a) In General.--Not later than 6 months after the date
of enactment of this part, the applicable authority shall
prescribe by interim final rule a procedure under which the
applicable authority shall certify small business health
plans which apply for certification as meeting the
requirements of this part.
``(b) Requirements Applicable to Certified Plans.--A small
business 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).
``(c) Requirements for Continued Certification.--The
applicable authority may provide by regulation for continued
certification of small business health plans under this part.
Such regulation shall provide for the revocation of a
certification if the applicable authority finds that the
small business health plan involved is failing to comply with
the requirements of this part.
``(d) Expedited and Deemed Certification.--
``(1) In general.--If the Secretary fails to act on an
application for certification under this section within 90
days of receipt of such application, the applying small
business health plan shall be deemed certified until such
time as the Secretary may deny for cause the application for
certification.
``(2) Civil penalty.--The Secretary may assess a civil
penalty against the board of trustees and plan sponsor
(jointly and severally) of a small business health plan that
is deemed certified under paragraph (1) of up to $500,000 in
the event the Secretary determines that the application for
certification of such small business health plan was
willfully or with gross negligence incomplete or inaccurate.

``SEC. 804. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF
TRUSTEES.

``(a) Sponsor.--The requirements of this subsection are met
with respect to a small business 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 a small business health
plan if the following requirements are met:
``(1) Fiscal control.--The plan is operated, pursuant to a
plan document, by a board of trustees which pursuant to a
trust agreement has complete fiscal control over the plan and
which is responsible for all operations of the plan.
``(2) Rules of operation and financial controls.--The board
of trustees has in effect rules of operation and financial
controls, based on a 3-year plan of operation, adequate to
carry out the terms of the plan and to meet all requirements
of this title applicable to the plan.
``(3) Rules governing relationship to participating
employers and to contractors.--
``(A) Board membership.--
``(i) In general.--Except as provided in clauses (ii) and
(iii), the members of the board of trustees are individuals
selected from individuals who are the owners, officers,
directors, or employees of the participating employers or who
are partners in the participating employers and actively
participate in the business.
``(ii) Limitation.--

``(I) General rule.--Except as provided in subclauses (II)
and (III), no such member is an owner, officer, director, or
employee of, or partner in, a contract administrator or other
service provider to the plan.
``(II) Limited exception for providers of services solely
on behalf of the sponsor.--Officers or employees of a sponsor
which is a service provider (other than a contract
administrator) to the plan may be members of the board if
they constitute not more than 25 percent of the membership of
the board and they do not provide services to the plan other
than on behalf of the sponsor.
``(III) Treatment of providers of medical care.--In the
case of a sponsor which is an association whose membership
consists primarily of providers of medical care, subclause
(I) shall not apply in the case of any service provider
described in subclause (I) who is a provider of medical care
under the plan.

``(iii) Certain plans excluded.--Clause (i) shall not apply
to a small business health plan which is in existence on the
date of the enactment of the Small Business Health Plans Act
of 2009.
``(B) Sole authority.--The board has sole authority under
the plan to approve applications for participation in the
plan and to contract with insurers.
``(c) Treatment of Franchises.--In the case of a group
health plan which is established and maintained by a
franchiser for a franchisor or for its franchisees--
``(1) the requirements of subsection (a) and section 801(a)
shall be deemed met if such requirements would otherwise be
met if the franchisor were deemed to be the sponsor referred
to in section 801(b) and each franchisee were deemed to be a
member (of the sponsor) referred to in section 801(b); and
``(2) the requirements of section 804(a)(1) shall be deemed
met.

For purposes of this subsection the terms `franchisor' and
`franchisee' shall have the

[[Page S13051]]

meanings given such terms for purposes of sections 436.2(a)
through 436.2(c) of title 16, Code of Federal Regulations
(including any such amendments to such regulation after the
date of enactment of this part).

``SEC. 805. PARTICIPATION AND COVERAGE REQUIREMENTS.

``(a) Covered Employers and Individuals.--The requirements
of this subsection are met with respect to a small business
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, 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 dependents of individuals described in
subparagraph (A).
``(b) Individual Market Unaffected.--The requirements of
this subsection are met with respect to a small business
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.
``(c) Prohibition of Discrimination Against Employers and
Employees Eligible To Participate.--The requirements of this
subsection are met with respect to a small business 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) information regarding all coverage options available
under the plan is made readily available to any employer
eligible to participate; and
``(3) the applicable requirements of sections 701, 702, and
703 are met with respect to the plan.

``SEC. 806. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS,
CONTRIBUTION RATES, AND BENEFIT OPTIONS.

``(a) In General.--The requirements of this section are met
with respect to a small business health plan if the following
requirements are met:
``(1) Contents of governing instruments.--
``(A) In general.--The instruments governing the plan
include a written instrument, meeting the requirements of an
instrument required under section 402(a)(1), which--
``(i) 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)); and
``(ii) provides that the sponsor of the plan is to serve as
plan sponsor (referred to in section 3(16)(B)).
``(B) Description of material provisions.--The terms of the
health insurance coverage (including the terms of any
individual certificates that may be offered to individuals in
connection with such coverage) describe the material benefit
and rating, and other provisions set forth in this section
and such material provisions are included in the summary plan
description.
``(2) Contribution rates must be nondiscriminatory.--
``(A) In general.--The contribution rates for any
participating small employer shall not vary on the basis of
any health status-related factor in relation to employees of
such employer or their beneficiaries and shall not vary on
the basis of the type of business or industry in which such
employer is engaged, subject to subparagraph (B) and the
terms of this title.
``(B) Effect of title.--Nothing in this title or any other
provision of law shall be construed to preclude a health
insurance issuer offering health insurance coverage in
connection with a small business health plan that meets the
requirements of this part, and at the request of such small
business health plan, from--
``(i) setting contribution rates for the small business
health plan based on the claims experience of the small
business health plan so long as any variation in such rates
for participating small employers complies with the
requirements of clause (ii), except that small business
health plans shall not be subject, in non-adopting states, to
subparagraphs (A)(ii) and (C) of section 2912(a)(2) of the
Public Health Service Act, and in adopting states, to any
State law that would have the effect of imposing requirements
as outlined in such subparagraphs (A)(ii) and (C); or
``(ii) varying contribution rates for participating small
employers in a small business health plan in a State to the
extent that such rates could vary using the same methodology
employed in such State for regulating small group premium
rates, subject to the terms of part I of subtitle A of title
XXIX of the Public Health Service Act (relating to rating
requirements), as added by title II of the Small Business
Health Plans Act of 2009.
``(3) Exceptions regarding self-employed and large
employers.--
``(A) Self employed.--
``(i) In general.--Small business health plans with
participating employers who are self-employed individuals
(and their dependents) shall enroll such self-employed
participating employers in accordance with rating rules that
do not violate the rating rules for self-employed individuals
in the State in which such self-employed participating
employers are located.
``(ii) Guarantee issue.--Small business health plans with
participating employers who are self-employed individuals
(and their dependents) may decline to guarantee issue to such
participating employers in States in which guarantee issue is
not otherwise required for the self-employed in that State.
``(B) Large employers.--Small business health plans with
participating employers that are larger than small employers
(as defined in section 808(a)(10)) shall enroll such large
participating employers in accordance with rating rules that
do not violate the rating rules for large employers in the
State in which such large participating employers are
located.
``(4) Regulatory requirements.--Such other requirements as
the applicable authority determines are necessary to carry
out the purposes of this part, which shall be prescribed by
the applicable authority by regulation.
``(b) Ability of Small Business Health Plans To Design
Benefit Options.--Nothing in this part or any provision of
State law (as defined in section 514(c)(1)) shall be
construed to preclude a small business health plan or a
health insurance issuer offering health insurance coverage in
connection with a small business health plan from exercising
its sole discretion in selecting the specific benefits and
services consisting of medical care to be included as
benefits under such plan or coverage, except that such
benefits and services must meet the terms and specifications
of part II of subtitle A of title XXIX of the Public Health
Service Act (relating to lower cost plans), as added by title
II of the Small Business Health Plans Act of 2009.
``(c) Domicile and Non-Domicile States.--
``(1) Domicile state.--Coverage shall be issued to a small
business health plan in the State in which the sponsor's
principal place of business is located.
``(2) Non-domicile states.--With respect to a State (other
than the domicile State) in which participating employers of
a small business health plan are located but in which the
insurer of the small business health plan in the domicile
State is not yet licensed, the following shall apply:
``(A) Temporary preemption.--If, upon the expiration of the
90-day period following the submission of a licensure
application by such insurer (that includes a certified copy
of an approved licensure application as submitted by such
insurer in the domicile State) to such State, such State has
not approved or denied such application, such State's health
insurance licensure laws shall be temporarily preempted and
the insurer shall be permitted to operate in such State,
subject to the following terms:
``(i) Application of non-domicile state law.--Except with
respect to licensure and with respect to the terms of
subtitle A of title XXIX of the Public Health Service Act
(relating to rating and benefits as added by the Small
Business Health Plans Act of 2009), the laws and authority of
the non-domicile State shall remain in full force and effect.
``(ii) Revocation of preemption.--The preemption of a non-
domicile State's health insurance licensure laws pursuant to
this subparagraph, shall be terminated upon the occurrence of
either of the following:

``(I) Approval or denial of application.--The approval of
denial of an insurer's licensure application, following the
laws and regulations of the non-domicile State with respect
to licensure.
``(II) Determination of material violation.--A
determination by a non-domicile State that an insurer
operating in a non-domicile State pursuant to the preemption
provided for in this subparagraph is in material violation of
the insurance laws (other than licensure and with respect to
the terms of subtitle A of title XXIX of the Public Health
Service Act (relating to rating and benefits added by the
Small Business Health Plans Act of 2009)) of such State.

``(B) No prohibition on promotion.--Nothing in this
paragraph shall be construed to prohibit a small business
health plan or an insurer from promoting coverage prior to
the expiration of the 90-day period provided for in
subparagraph (A), except that no enrollment or collection of
contributions shall occur before the expiration of such 90-
day period.
``(C) Licensure.--Except with respect to the application of
the temporary preemption provision of this paragraph, nothing
in this part shall be construed to limit the requirement that
insurers issuing coverage to small business health plans
shall be licensed in

[[Page S13052]]

each State in which the small business health plans operate.
``(D) Servicing by licensed insurers.--Notwithstanding
subparagraph (C), the requirements of this subsection may
also be satisfied if the participating employers of a small
business health plan are serviced by a licensed insurer in
that State, even where such insurer is not the insurer of
such small business health plan in the State in which such
small business health plan is domiciled.

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

``(a) Filing Fee.--Under the procedure prescribed pursuant
to section 802(a), a small business 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 small business health
plans.
``(b) Information To Be Included in Application for
Certification.--An application for certification under this
part meets the requirements of this section only if it
includes, in a manner and form which shall be prescribed by
the applicable authority by regulation, at least the
following information:
``(1) Identifying information.--The names and addresses
of--
``(A) the sponsor; and
``(B) the members of the board of trustees of the plan.
``(2) States in which plan intends to do business.--The
States in which participants and beneficiaries under the plan
are to be located and the number of them expected to be
located in each such State.
``(3) Bonding requirements.--Evidence provided by the board
of trustees that the bonding requirements of section 412 will
be met as of the date of the application or (if later)
commencement of operations.
``(4) Plan documents.--A copy of the documents governing
the plan (including any bylaws and trust agreements), the
summary plan description, and other material describing the
benefits that will be provided to participants and
beneficiaries under the plan.
``(5) Agreements with service providers.--A copy of any
agreements between the plan, health insurance issuer, and
contract administrators and other service providers.
``(c) Filing Notice of Certification With States.--A
certification granted under this part to a small business
health plan shall not be effective unless written notice of
such certification is filed with the applicable State
authority of each State in which the small business health
plans operate.
``(d) Notice of Material Changes.--In the case of any small
business health plan certified under this part, descriptions
of material changes in any information which was required to
be submitted with the application for the certification under
this part shall be filed in such form and manner as shall be
prescribed by the applicable authority by regulation. The
applicable authority may require by regulation prior notice
of material changes with respect to specified matters which
might serve as the basis for suspension or revocation of the
certification.

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

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

Actions required under this section shall be taken in such
form and manner as may be prescribed by the applicable
authority by regulation.

``SEC. 809. IMPLEMENTATION AND APPLICATION AUTHORITY BY
SECRETARY.

``The Secretary shall, through promulgation and
implementation of such regulations as the Secretary may
reasonably determine necessary or appropriate, and in
consultation with a balanced spectrum of effected entities
and persons, modify the implementation and application of
this part to accommodate with minimum disruption such changes
to State or Federal law provided in this part and the (and
the amendments made by such Act) or in regulations issued
thereto.

``SEC. 810. DEFINITIONS AND RULES OF CONSTRUCTION.

``(a) Definitions.--For purposes of this part--
``(1) 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, or
``(B) in the case of a sponsor with members which consist
of associations, a person who is a member or employee of any
such association and elects an affiliated status with the
sponsor.
``(2) Applicable authority.--The term `applicable
authority' means the Secretary of Labor, except that, in
connection with any exercise of the Secretary's authority
with respect to which the Secretary is required under section
506(d) to consult with a State, such term means the
Secretary, in consultation with such State.
``(3) 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.
``(4) Group health plan.--The term `group health plan' has
the meaning provided in section 733(a)(1) (after applying
subsection (b) of this section).
``(5) Health insurance coverage.--The term `health
insurance coverage' has the meaning provided in section
733(b)(1), except that such term shall not include excepted
benefits (as defined in section 733(c)).
``(6) Health insurance issuer.--The term `health insurance
issuer' has the meaning provided in section 733(b)(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) Medical care.--The term `medical care' has the
meaning provided in section 733(a)(2).
``(9) Participating employer.--The term `participating
employer' means, in connection with a small business 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.
``(10) Small employer.--The term `small employer' means, in
connection with a group health plan with respect to a plan
year, a small employer as defined in section 2791(e)(4).
``(11) Trade association and professional association.--The
terms `trade association' and `professional association' mean
an entity that meets the requirements of section 1.501(c)(6)-
1 of title 26, Code of Federal Regulations (as in effect on
the date of enactment of this Act).
``(b) Rule of Construction.--For purposes of determining
whether a plan, fund, or program is an employee welfare
benefit plan which is a small business 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--
``(1) 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
``(2) 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.
``(c) Renewal.--Notwithstanding any provision of law to the
contrary, a participating employer in a small business health
plan shall not be deemed to be a plan sponsor in applying
requirements relating to coverage renewal.
``(d) Health Savings Accounts.--Nothing in this part shall
be construed to create any mandates for coverage of benefits
for HSA-qualified health plans that would require
reimbursements in violation of section 223(c)(2) of the
Internal Revenue Code of 1986.''.
(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 a small
business 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:

[[Page S13053]]

``(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 a health
insurance issuer from offering health insurance coverage in
connection with a small business health plan which is
certified under part 8.
``(2) In any case in which health insurance coverage of any
policy type is offered under a small business 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 establish
rating and benefit requirements that would otherwise apply to
such coverage, provided the requirements of subtitle A of
title XXIX of the Public Health Service Act (as added by
title II of the Health Insurance Marketplace Modernization
and Affordability Act of 2007) (concerning health plan rating
and benefits) are met.''.
(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 a small business health plan under part 8.''.
(d) Savings Clause.--Section 731(c) of such Act is amended
by inserting ``or part 8'' after ``this part''.
(e) 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 Small Business Health Plans

``801. Small business health plans.
``802. Alternative market pooling organizations.
``803. Certification of small business health plans.
``804. Requirements relating to sponsors and boards of trustees.
``805. Participation and coverage requirements.
``806. Other requirements relating to plan documents, contribution
rates, and benefit options.
``807. Requirements for application and related requirements.
``808. Notice requirements for voluntary termination.
``809. Implementation and application authority by Secretary.
``810. Definitions and rules of construction.''.

SEC. 102. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

Section 506 of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1136) is amended by adding at the end the
following new subsection:
``(d) Consultation With States With Respect to Small
Business Health Plans.--
``(1) Agreements with states.--The Secretary shall consult
with the State recognized under paragraph (2) with respect to
a small business health plan regarding the exercise of--
``(A) the Secretary's authority under sections 502 and 504
to enforce the requirements for certification under part 8;
and
``(B) the Secretary's authority to certify small business
health plans under part 8 in accordance with regulations of
the Secretary applicable to certification under part 8.
``(2) Recognition of domicile state.--In carrying out
paragraph (1), the Secretary shall ensure that only one State
will be recognized, with respect to any particular small
business health plan, as the State with which consultation is
required. In carrying out this paragraph such State shall be
the domicile State, as defined in section 805(c).''.

SEC. 103. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES.

(a) Effective Date.--The amendments made by this title
shall take effect 12 months after the date of the enactment
of this Act. The Secretary of Labor shall first issue all
regulations necessary to carry out the amendments made by
this title within 6 months after the date of the enactment of
this Act.
(b) Treatment of Certain Existing Health Benefits
Programs.--
(1) In general.--In any case in which, as of the date of
the enactment of this Act, an arrangement is maintained in a
State for the purpose of providing benefits consisting of
medical care for the employees and beneficiaries of its
participating employers, at least 200 participating employers
make contributions to such arrangement, such arrangement has
been in existence for at least 10 years, and such arrangement
is licensed under the laws of one or more States to provide
such benefits to its participating employers, upon the filing
with the applicable authority (as defined in section
808(a)(2) of the Employee Retirement Income Security Act of
1974 (as amended by this subtitle)) by the arrangement of an
application for certification of the arrangement under part 8
of subtitle B of title I of such Act--
(A) such arrangement shall be deemed to be a group health
plan for purposes of title I of such Act;
(B) the requirements of sections 801(a) and 803(a) of the
Employee Retirement Income Security Act of 1974 shall be
deemed met with respect to such arrangement;
(C) the requirements of section 803(b) of such Act shall be
deemed met, if the arrangement is operated by a board of
trustees which has control over 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 or at such time that the arrangement provides
coverage to participants and beneficiaries in any State other
than the States in which coverage is provided on such date of
enactment.
(2) Definitions.--For purposes of this subsection, the
terms ``group health plan'', ``medical care'', and
``participating employer'' shall have the meanings provided
in section 808 of the Employee Retirement Income Security Act
of 1974, except that the reference in paragraph (7) of such
section to an ``small business health plan'' shall be deemed
a reference to an arrangement referred to in this subsection.

TITLE II--MARKET RELIEF

SEC. 301. MARKET RELIEF.

The Public Health Service Act (42 U.S.C. 201 et seq.) is
amended by adding at the end the following:

``TITLE XXIX--HEALTH CARE INSURANCE MARKETPLACE MODERNIZATION

``SEC. 2901. GENERAL INSURANCE DEFINITIONS.

``In this title, the terms `health insurance coverage',
`health insurance issuer', `group health plan', and
`individual health insurance' shall have the meanings given
such terms in section 2791.

``SEC. 2902. IMPLEMENTATION AND APPLICATION AUTHORITY BY
SECRETARY.

``The Secretary shall, through promulgation and
implementation of such regulations as the Secretary may
reasonably determine necessary or appropriate, and in
consultation with a balanced spectrum of effected entities
and persons, modify the implementation and application of
this title to accommodate with minimum disruption such
changes to State or Federal law provided in this title and
the (and the amendments made by such Act) or in regulations
issued thereto.

``Subtitle A--Market Relief

``PART I--RATING REQUIREMENTS

``SEC. 2911. DEFINITIONS.

``In this part:
``(1) Adopting state.--The term `adopting State' means a
State that, with respect to the small group market, has
enacted small group rating rules that meet the minimum
standards set forth in section 2912(a)(1) or, as applicable,
transitional small group rating rules set forth in section
2912(b).
``(2) 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
insurance laws of such State.
``(3) Base premium rate.--The term `base premium rate'
means, for each class of business with respect to a rating
period, the lowest premium rate charged or that could have
been charged under a rating system for that class of business
by the small employer carrier to small employers with similar
case characteristics for health benefit plans with the same
or similar coverage.
``(4) Eligible insurer.--The term `eligible insurer' means
a health insurance issuer that is licensed in a State and
that--
``(A) notifies the Secretary, not later than 30 days prior
to the offering of coverage described in this subparagraph,
that the issuer intends to offer health insurance coverage
consistent with the Model Small Group Rating Rules or, as
applicable, transitional small group rating rules in a State;
``(B) notifies the insurance department of a nonadopting
State (or other State agency), not later than 30 days prior
to the offering of coverage described in this subparagraph,
that the issuer intends to offer small group health insurance
coverage in that State consistent with the Model Small Group
Rating Rules, and provides with such notice a copy of any
insurance policy that it intends to offer in the State, its
most recent annual and quarterly financial reports, and any
other information required to be filed with the insurance
department of the State (or other State agency); and
``(C) includes in the terms of the health insurance
coverage offered in nonadopting States (including in the
terms of any individual certificates that may be offered to
individuals in connection with such group health coverage)
and filed with the State pursuant to subparagraph (B), a
description in the insurer's contract of the Model Small
Group Rating Rules and an affirmation that such Rules are
included in the terms of such contract.
``(5) Health insurance coverage.--The term `health
insurance coverage' means any coverage issued in the small
group health insurance market, except that such term shall
not include excepted benefits (as defined in section
2791(c)).
``(6) Index rate.--The term `index rate' means for each
class of business with respect to the rating period for small
employers with similar case characteristics, the arithmetic
average of the applicable base premium rate and the
corresponding highest premium rate.
``(7)  Model small group rating rules.--The term `Model
Small Group Rating Rules' means the rules set forth in
section 2912(a)(2).

[[Page S13054]]

``(8) Nonadopting state.--The term `nonadopting State'
means a State that is not an adopting State.
``(9) Small group insurance market.--The term `small group
insurance market' shall have the meaning given the term
`small group market' in section 2791(e)(5).
``(10) State law.--The term `State law' means all laws,
decisions, rules, regulations, or other State actions
(including actions by a State agency) having the effect of
law, of any State.
``(11) Variation limits.--
``(A) Composite variation limit.--
``(i) In general.--The term `composite variation limit'
means the total variation in premium rates charged by a
health insurance issuer in the small group market as
permitted under applicable State law based on the following
factors or case characteristics:

``(I) Age.
``(II) Duration of coverage.
``(III) Claims experience.
``(IV) Health status.

``(ii) Use of factors.--With respect to the use of the
factors described in clause (i) in setting premium rates, a
health insurance issuer shall use one or both of the factors
described in subclauses (I) or (IV) of such clause and may
use the factors described in subclauses (II) or (III) of such
clause.
``(B) Total variation limit.--The term `total variation
limit' means the total variation in premium rates charged by
a health insurance issuer in the small group market as
permitted under applicable State law based on all factors and
case characteristics (as described in section 2912(a)(1)).

``SEC. 2912. RATING RULES.

``(a) Establishment of Minimum Standards for Premium
Variations and Model Small Group Rating Rules.--Not later
than 6 months after the date of enactment of this title, the
Secretary shall promulgate regulations establishing the
following Minimum Standards and Model Small Group Rating
Rules:
``(1) Minimum standards for premium variations.--
``(A) Composite variation limit.--The composite variation
limit shall not be less than 3:1.
``(B) Total variation limit.--The total variation limit
shall not be less than 5:1.
``(C) Prohibition on use of certain case characteristics.--
For purposes of this paragraph, in calculating the total
variation limit, the State shall not use case characteristics
other than those used in calculating the composite variation
limit and industry, geographic area, group size,
participation rate, class of business, and participation in
wellness programs.
``(2) Model small group rating rules.--The following apply
to an eligible insurer in a non-adopting State:
``(A) Premium rates.--Premium rates for small group health
benefit plans to which this title applies shall comply with
the following provisions relating to premiums, except as
provided for under subsection (b):
``(i) Variation in premium rates.--The plan may not vary
premium rates by more than the minimum standards provided for
under paragraph (1).
``(ii) Index rate.--The index rate for a rating period for
any class of business shall not exceed the index rate for any
other class of business by more than 20 percent, excluding
those classes of business related to association groups under
this title.
``(iii) Class of businesses.--With respect to a class of
business, the premium rates charged during a rating period to
small employers with similar case characteristics for the
same or similar coverage or the rates that could be charged
to such employers under the rating system for that class of
business, shall not vary from the index rate by more than 25
percent of the index rate under clause (ii).
``(iv) Increases for new rating periods.--The percentage
increase in the premium rate charged to a small employer for
a new rating period may not exceed the sum of the following:

``(I) The percentage change in the new business premium
rate measured from the first day of the prior rating period
to the first day of the new rating period. In the case of a
health benefit plan into which the small employer carrier is
no longer enrolling new small employers, the small employer
carrier shall use the percentage change in the base premium
rate, except that such change shall not exceed, on a
percentage basis, the change in the new business premium rate
for the most similar health benefit plan into which the small
employer carrier is actively enrolling new small employers.
``(II) Any adjustment, not to exceed 15 percent annually
and adjusted pro rata for rating periods of less then 1 year,
due to the claim experience, health status or duration of
coverage of the employees or dependents of the small employer
as determined from the small employer carrier's rate manual
for the class of business involved.
``(III) Any adjustment due to change in coverage or change
in the case characteristics of the small employer as
determined from the small employer carrier's rate manual for
the class of business.

``(v) Uniform application of adjustments.--Adjustments in
premium rates for claim experience, health status, or
duration of coverage shall not be charged to individual
employees or dependents. Any such adjustment shall be applied
uniformly to the rates charged for all employees and
dependents of the small employer.
``(vi) Prohibition on use of certain case characteristic.--
A small employer carrier shall not utilize case
characteristics, other than those permitted under paragraph
(1)(C), without the prior approval of the applicable State
authority.
``(vii) Consistent application of factors.--Small employer
carriers shall apply rating factors, including case
characteristics, consistently with respect to all small
employers in a class of business. Rating factors shall
produce premiums for identical groups which differ only by
the amounts attributable to plan design and do not reflect
differences due to the nature of the groups assumed to select
particular health benefit plans.
``(viii) Treatment of plans as having same rating period.--
A small employer carrier shall treat all health benefit plans
issued or renewed in the same calendar month as having the
same rating period.
``(ix) Require compliance.--Premium rates for small
business health benefit plans shall comply with the
requirements of this subsection notwithstanding any
assessments paid or payable by a small employer carrier as
required by a State's small employer carrier reinsurance
program.
``(B) Establishment of separate class of business.--Subject
to subparagraph (C), a small employer carrier may establish a
separate class of business only to reflect substantial
differences in expected claims experience or administrative
costs related to the following:
``(i) The small employer carrier uses more than one type of
system for the marketing and sale of health benefit plans to
small employers.
``(ii) The small employer carrier has acquired a class of
business from another small employer carrier.
``(iii) The small employer carrier provides coverage to one
or more association groups that meet the requirements of this
title.
``(C) Limitation.--A small employer carrier may establish
up to 9 separate classes of business under subparagraph (B),
excluding those classes of business related to association
groups under this title.
``(D) Limitation on transfers.--A small employer carrier
shall not transfer a small employer involuntarily into or out
of a class of business. A small employer carrier shall not
offer to transfer a small employer into or out of a class of
business unless such offer is made to transfer all small
employers in the class of business without regard to case
characteristics, claim experience, health status or duration
of coverage since issue.
``(b) Transitional Model Small Group Rating Rules.--
``(1) In general.--Not later than 6 months after the date
of enactment of this title and to the extent necessary to
provide for a graduated transition to the minimum standards
for premium variation as provided for in subsection (a)(1),
the Secretary, in consultation with the National Association
of Insurance Commissioners (NAIC), shall promulgate State-
specific transitional small group rating rules in accordance
with this subsection, which shall be applicable with respect
to non-adopting States and eligible insurers operating in
such States for a period of not to exceed 3 years from the
date of the promulgation of the minimum standards for premium
variation pursuant to subsection (a).
``(2) Compliance with transitional model small group rating
rules.--During the transition period described in paragraph
(1), a State that, on the date of enactment of this title,
has in effect a small group rating rules methodology that
allows for a variation that is less than the variation
provided for under subsection (a)(1) (concerning minimum
standards for premium variation), shall be deemed to be an
adopting State if the State complies with the transitional
small group rating rules as promulgated by the Secretary
pursuant to paragraph (1).
``(3) Transitioning of old business.--
``(A) In general.--In developing the transitional small
group rating rules under paragraph (1), the Secretary shall,
after consultation with the National Association of Insurance
Commissioners and representatives of insurers operating in
the small group health insurance market in non-adopting
States, promulgate special transition standards with respect
to independent rating classes for old and new business, to
the extent reasonably necessary to protect health insurance
consumers and to ensure a stable and fair transition for old
and new market entrants.
``(B) Period for operation of independent rating classes.--
In developing the special transition standards pursuant to
subparagraph (A), the Secretary shall permit a carrier in a
non-adopting State, at its option, to maintain independent
rating classes for old and new business for a period of up to
5 years, with the commencement of such 5-year period to begin
at such time, but not later than the date that is 3 years
after the date of enactment of this title, as the carrier
offers a book of business meeting the minimum standards for
premium variation provided for in subsection (a)(1) or the
transitional small group rating rules under paragraph (1).
``(4) Other transitional authority.--In developing the
transitional small group rating rules under paragraph (1),
the Secretary shall provide for the application of the
transitional small group rating rules in transition States as
the Secretary may determine necessary for a an effective
transition.
``(c) Market Re-Entry.--

[[Page S13055]]

``(1) In general.--Notwithstanding any other provision of
law, a health insurance issuer that has voluntarily withdrawn
from providing coverage in the small group market prior to
the date of enactment of the Small Business Health Plans Act
of 2009 shall not be excluded from re-entering such market on
a date that is more than 180 days after such date of
enactment.
``(2) Termination.--The provision of this subsection shall
terminate on the date that is 24 months after the date of
enactment of the Small Business Health Plans Act of 2009.

``SEC. 2913. APPLICATION AND PREEMPTION.

``(a) Superseding of State Law.--
``(1) In general.--This part shall supersede any and all
State laws of a non-adopting State insofar as such State laws
(whether enacted prior to or after the date of enactment of
this subtitle) relate to rating in the small group insurance
market as applied to an eligible insurer, or small group
health insurance coverage issued by an eligible insurer,
including with respect to coverage issued to a small employer
through a small business health plan, in a State.
``(2) Nonadopting states.--This part shall supersede any
and all State laws of a nonadopting State insofar as such
State laws (whether enacted prior to or after the date of
enactment of this subtitle)--
``(A) prohibit an eligible insurer from offering,
marketing, or implementing small group health insurance
coverage consistent with the Model Small Group Rating Rules
or transitional model small group rating rules; or
``(B) have the effect of retaliating against or otherwise
punishing in any respect an eligible insurer for offering,
marketing, or implementing small group health insurance
coverage consistent with the Model Small Group Rating Rules
or transitional model small group rating rules.
``(b) Savings Clause and Construction.--
``(1) Nonapplication to adopting states.--Subsection (a)
shall not apply with respect to adopting states.
``(2) Nonapplication to certain insurers.--Subsection (a)
shall not apply with respect to insurers that do not qualify
as eligible insurers that offer small group health insurance
coverage in a nonadopting State.
``(3) Nonapplication where obtaining relief under state
law.--Subsection (a)(1) shall not supercede any State law in
a nonadopting State to the extent necessary to permit
individuals or the insurance department of the State (or
other State agency) to obtain relief under State law to
require an eligible insurer to comply with the Model Small
Group Rating Rules or transitional model small group rating
rules.
``(4) No effect on preemption.--In no case shall this part
be construed to limit or affect in any manner the preemptive
scope of sections 502 and 514 of the Employee Retirement
Income Security Act of 1974. In no case shall this part be
construed to create any cause of action under Federal or
State law or enlarge or affect any remedy available under the
Employee Retirement Income Security Act of 1974.
``(5) Preemption limited to rating.--Subsection (a) shall
not preempt any State law that does not have a reference to
or a connection with State rating rules that would otherwise
apply to eligible insurers.
``(c) Effective Date.--This section shall apply, at the
election of the eligible insurer, beginning in the first plan
year or the first calendar year following the issuance of the
final rules by the Secretary under the Model Small Group
Rating Rules or, as applicable, the Transitional Model Small
Group Rating Rules, but in no event earlier than the date
that is 12 months after the date of enactment of this title.

``SEC. 2914. CIVIL ACTIONS AND JURISDICTION.

``(a) In General.--The courts of the United States shall
have exclusive jurisdiction over civil actions involving the
interpretation of this part.
``(b) Actions.--An eligible insurer may bring an action in
the district courts of the United States for injunctive or
other equitable relief against any officials or agents of a
nonadopting State in connection with any conduct or action,
or proposed conduct or action, by such officials or agents
which violates, or which would if undertaken violate, section
2913.
``(c) Direct Filing in Court of Appeals.--At the election
of the eligible insurer, an action may be brought under
subsection (b) directly in the United States Court of Appeals
for the circuit in which the nonadopting State is located by
the filing of a petition for review in such Court.
``(d) Expedited Review.--
``(1) District court.--In the case of an action brought in
a district court of the United States under subsection (b),
such court shall complete such action, including the issuance
of a judgment, prior to the end of the 120-day period
beginning on the date on which such action is filed, unless
all parties to such proceeding agree to an extension of such
period.
``(2) Court of appeals.--In the case of an action brought
directly in a United States Court of Appeal under subsection
(c), or in the case of an appeal of an action brought in a
district court under subsection (b), such Court shall
complete all action on the petition, including the issuance
of a judgment, prior to the end of the 60-day period
beginning on the date on which such petition is filed with
the Court, unless all parties to such proceeding agree to an
extension of such period.
``(e) Standard of Review.--A court in an action filed under
this section, shall render a judgment based on a review of
the merits of all questions presented in such action and
shall not defer to any conduct or action, or proposed conduct
or action, of a nonadopting State.

``SEC. 2915. ONGOING REVIEW.

``Not later than 5 years after the date on which the Model
Small Group Rating Rules are issued under this part, and
every 5 years thereafter, the Secretary, in consultation with
the National Association of Insurance Commissioners, shall
prepare and submit to the appropriate committees of Congress
a report that assesses the effect of the Model Small Group
Rating Rules on access, cost, and market functioning in the
small group market. Such report may, if the Secretary, in
consultation with the National Association of Insurance
Commissioners, determines such is appropriate for improving
access, costs, and market functioning, contain legislative
proposals for recommended modification to such Model Small
Group Rating Rules.

``PART II--AFFORDABLE PLANS

``SEC. 2921. DEFINITIONS.

``In this part:
``(1) Adopting state.--The term `adopting State' means a
State that has enacted a law providing that small group,
individual, and large group health insurers in such State may
offer and sell products in accordance with the List of
Required Benefits and the Terms of Application as provided
for in section 2922(b).
``(2) Eligible insurer.--The term `eligible insurer' means
a health insurance issuer that is licensed in a nonadopting
State and that--
``(A) notifies the Secretary, not later than 30 days prior
to the offering of coverage described in this subparagraph,
that the issuer intends to offer health insurance coverage
consistent with the List of Required Benefits and Terms of
Application in a nonadopting State;
``(B) notifies the insurance department of a nonadopting
State (or other applicable State agency), not later than 30
days prior to the offering of coverage described in this
subparagraph, that the issuer intends to offer health
insurance coverage in that State consistent with the List of
Required Benefits and Terms of Application, and provides with
such notice a copy of any insurance policy that it intends to
offer in the State, its most recent annual and quarterly
financial reports, and any other information required to be
filed with the insurance department of the State (or other
State agency) by the Secretary in regulations; and
``(C) includes in the terms of the health insurance
coverage offered in nonadopting States (including in the
terms of any individual certificates that may be offered to
individuals in connection with such group health coverage)
and filed with the State pursuant to subparagraph (B), a
description in the insurer's contract of the List of Required
Benefits and a description of the Terms of Application,
including a description of the benefits to be provided, and
that adherence to such standards is included as a term of
such contract.
``(3) Health insurance coverage.--The term `health
insurance coverage' means any coverage issued in the small
group, individual, or large group health insurance markets,
including with respect to small business health plans, except
that such term shall not include excepted benefits (as
defined in section 2791(c)).
``(4) List of required benefits.--The term `List of
Required Benefits' means the List issued under section
2922(a).
``(5) Nonadopting state.--The term `nonadopting State'
means a State that is not an adopting State.
``(6) State law.--The term `State law' means all laws,
decisions, rules, regulations, or other State actions
(including actions by a State agency) having the effect of
law, of any State.
``(7) State provider freedom of choice law.--The term
`State Provider Freedom of Choice Law' means a State law
requiring that a health insurance issuer, with respect to
health insurance coverage, not discriminate with respect to
participation, reimbursement, or indemnification as to any
provider who is acting within the scope of the provider's
license or certification under applicable State law.
``(8) Terms of application.--The term `Terms of
Application' means terms provided under section 2922(a).

``SEC. 2922. OFFERING AFFORDABLE PLANS.

``(a) List of Required Benefits.--Not later than 3 months
after the date of enactment of this title, the Secretary, in
consultation with the National Association of Insurance
Commissioners, shall issue by interim final rule a list (to
be known as the `List of Required Benefits') of covered
benefits, services, or categories of providers that are
required to be provided by health insurance issuers, in each
of the small group, individual, and large group markets, in
at least 26 States as a result of the application of State
covered benefit, service, and category of provider mandate
laws. With respect to plans sold to or through small business
health plans, the List of Required Benefits applicable to the
small group market shall apply.
``(b) Terms of Application.--
``(1) State with mandates.--With respect to a State that
has a covered benefit, service, or category of provider
mandate in effect that is covered under the List of Required

[[Page S13056]]

Benefits under subsection (a), such State mandate shall,
subject to paragraph (3) (concerning uniform application),
apply to a coverage plan or plan in, as applicable, the small
group, individual, or large group market or through a small
business health plan in such State.
``(2) States without mandates.--With respect to a State
that does not have a covered benefit, service, or category of
provider mandate in effect that is covered under the List of
Required Benefits under subsection (a), such mandate shall
not apply, as applicable, to a coverage plan or plan in the
small group, individual, or large group market or through a
small business health plan in such State.
``(3) Uniform application of laws.--
``(A) In general.--With respect to a State described in
paragraph (1), in applying a covered benefit, service, or
category of provider mandate that is on the List of Required
Benefits under subsection (a) the State shall permit a
coverage plan or plan offered in the small group, individual,
or large group market or through a small business health plan
in such State to apply such benefit, service, or category of
provider coverage in a manner consistent with the manner in
which such coverage is applied under one of the three most
heavily subscribed national health plans offered under the
Federal Employee Health Benefits Program under chapter 89 of
title 5, United States Code (as determined by the Secretary
in consultation with the Director of the Office of Personnel
Management), and consistent with the Publication of Benefit
Applications under subsection (c). In the event a covered
benefit, service, or category of provider appearing in the
List of Required Benefits is not offered in one of the three
most heavily subscribed national health plans offered under
the Federal Employees Health Benefits Program, such covered
benefit, service, or category of provider requirement shall
be applied in a manner consistent with the manner in which
such coverage is offered in the remaining most heavily
subscribed plan of the remaining Federal Employees Health
Benefits Program plans, as determined by the Secretary, in
consultation with the Director of the Office of Personnel
Management.
``(B) Exception regarding state provider freedom of choice
laws.--Notwithstanding subparagraph (A), in the event a
category of provider mandate is included in the List of
Covered Benefits, any State Provider Freedom of Choice Law
(as defined in section 2921(7)) that is in effect in any
State in which such category of provider mandate is in effect
shall not be preempted, with respect to that category of
provider, by this part.
``(c) Publication of Benefit Applications.--Not later than
3 months after the date of enactment of this title, and on
the first day of every calendar year thereafter, the
Secretary, in consultation with the Director of the Office of
Personnel Management, shall publish in the Federal Register a
description of such covered benefits, services, and
categories of providers covered in that calendar year by each
of the three most heavily subscribed nationally available
Federal Employee Health Benefits Plan options which are also
included on the List of Required Benefits.
``(d) Effective Dates.--
``(1) Small business health plans.--With respect to health
insurance provided to participating employers of small
business health plans, the requirements of this part
(concerning lower cost plans) shall apply beginning on the
date that is 12 months after the date of enactment of this
title.
``(2) Non-association coverage.--With respect to health
insurance provided to groups or individuals other than
participating employers of small business health plans, the
requirements of this part shall apply beginning on the date
that is 15 months after the date of enactment of this title.
``(e) Updating of List of Required Benefits.--Not later
than 2 years after the date on which the list of required
benefits is issued under subsection (a), and every 2 years
thereafter, the Secretary, in consultation with the National
Association of Insurance Commissioners, shall update the list
based on changes in the laws and regulations of the States.
The Secretary shall issue the updated list by regulation, and
such updated list shall be effective upon the first plan year
following the issuance of such regulation.

``SEC. 2923. APPLICATION AND PREEMPTION.

``(a) Superseding of State Law.--
``(1) In general.--This part shall supersede any and all
State laws insofar as such laws relate to mandates relating
to covered benefits, services, or categories of provider in
the health insurance market as applied to an eligible
insurer, or health insurance coverage issued by an eligible
insurer, including with respect to coverage issued to a small
business health plan, in a nonadopting State.
``(2) Nonadopting states.--This part shall supersede any
and all State laws of a nonadopting State (whether enacted
prior to or after the date of enactment of this title)
insofar as such laws--
``(A) prohibit an eligible insurer from offering,
marketing, or implementing health insurance coverage
consistent with the Benefit Choice Standards, as provided for
in section 2922(a); or
``(B) have the effect of retaliating against or otherwise
punishing in any respect an eligible insurer for offering,
marketing, or implementing health insurance coverage
consistent with the Benefit Choice Standards.
``(b) Savings Clause and Construction.--
``(1) Nonapplication to adopting states.--Subsection (a)
shall not apply with respect to adopting States.
``(2) Nonapplication to certain insurers.--Subsection (a)
shall not apply with respect to insurers that do not qualify
as eligible insurers who offer health insurance coverage in a
nonadopting State.
``(3) Nonapplication where obtaining relief under state
law.--Subsection (a)(1) shall not supersede any State law of
a nonadopting State to the extent necessary to permit
individuals or the insurance department of the State (or
other State agency) to obtain relief under State law to
require an eligible insurer to comply with the Benefit Choice
Standards.
``(4) No effect on preemption.--In no case shall this part
be construed to limit or affect in any manner the preemptive
scope of sections 502 and 514 of the Employee Retirement
Income Security Act of 1974. In no case shall this part be
construed to create any cause of action under Federal or
State law or enlarge or affect any remedy available under the
Employee Retirement Income Security Act of 1974.
``(5) Preemption limited to benefits.--Subsection (a) shall
not preempt any State law that does not have a reference to
or a connection with State mandates regarding covered
benefits, services, or categories of providers that would
otherwise apply to eligible insurers.

``SEC. 2924. CIVIL ACTIONS AND JURISDICTION.

``(a) In General.--The courts of the United States shall
have exclusive jurisdiction over civil actions involving the
interpretation of this part.
``(b) Actions.--An eligible insurer may bring an action in
the district courts of the United States for injunctive or
other equitable relief against any officials or agents of a
nonadopting State in connection with any conduct or action,
or proposed conduct or action, by such officials or agents
which violates, or which would if undertaken violate, section
2923.
``(c) Direct Filing in Court of Appeals.--At the election
of the eligible insurer, an action may be brought under
subsection (b) directly in the United States Court of Appeals
for the circuit in which the nonadopting State is located by
the filing of a petition for review in such Court.
``(d) Expedited Review.--
``(1) District court.--In the case of an action brought in
a district court of the United States under subsection (b),
such court shall complete such action, including the issuance
of a judgment, prior to the end of the 120-day period
beginning on the date on which such action is filed, unless
all parties to such proceeding agree to an extension of such
period.
``(2) Court of appeals.--In the case of an action brought
directly in a United States Court of Appeal under subsection
(c), or in the case of an appeal of an action brought in a
district court under subsection (b), such Court shall
complete all action on the petition, including the issuance
of a judgment, prior to the end of the 60-day period
beginning on the date on which such petition is filed with
the Court, unless all parties to such proceeding agree to an
extension of such period.
``(e) Standard of Review.--A court in an action filed under
this section, shall render a judgment based on a review of
the merits of all questions presented in such action and
shall not defer to any conduct or action, or proposed conduct
or action, of a nonadopting State.

``SEC. 2925. RULES OF CONSTRUCTION.

``(a) In General.--Notwithstanding any other provision of
Federal or State law, a health insurance issuer in an
adopting State or an eligible insurer in a non-adopting State
may amend its existing policies to be consistent with the
terms of this subtitle (concerning rating and benefits).
``(b) Health Savings Accounts.--Nothing in this subtitle
shall be construed to create any mandates for coverage of
benefits for HSA-qualified health plans that would require
reimbursements in violation of section 223(c)(2) of the
Internal Revenue Code of 1986.''.

TITLE III--HARMONIZATION OF HEALTH INSURANCE STANDARDS

SEC. 301. HEALTH INSURANCE STANDARDS HARMONIZATION.

Title XXIX of the Public Health Service Act (as added by
section 201) is amended by adding at the end the following:

``Subtitle B--Standards Harmonization

``SEC. 2931. DEFINITIONS.

``In this subtitle:
``(1) Adopting state.--The term `adopting State' means a
State that has enacted the harmonized standards adopted under
this subtitle in their entirety and as the exclusive laws of
the State that relate to the harmonized standards.
``(2) Eligible insurer.--The term `eligible insurer' means
a health insurance issuer that is licensed in a nonadopting
State and that--
``(A) notifies the Secretary, not later than 30 days prior
to the offering of coverage described in this subparagraph,
that the issuer intends to offer health insurance coverage
consistent with the harmonized standards in a nonadopting
State;
``(B) notifies the insurance department of a nonadopting
State (or other State agency), not later than 30 days prior
to the offering of coverage described in this subparagraph,
that the issuer intends to offer health insurance coverage in
that State consistent with

[[Page S13057]]

the harmonized standards published pursuant to section
2933(d), and provides with such notice a copy of any
insurance policy that it intends to offer in the State, its
most recent annual and quarterly financial reports, and any
other information required to be filed with the insurance
department of the State (or other State agency) by the
Secretary in regulations; and
``(C) includes in the terms of the health insurance
coverage offered in nonadopting States (including in the
terms of any individual certificates that may be offered to
individuals in connection with such health coverage) and
filed with the State pursuant to subparagraph (B), a
description of the harmonized standards published pursuant to
section 2933(g)(2) and an affirmation that such standards are
a term of the contract.
``(3) Harmonized standards.--The term `harmonized
standards' means the standards certified by the Secretary
under section 2933(d).
``(4) Health insurance coverage.--The term `health
insurance coverage' means any coverage issued in the health
insurance market, except that such term shall not include
excepted benefits (as defined in section 2791(c).
``(5) Nonadopting state.--The term `nonadopting State'
means a State that fails to enact, within 18 months of the
date on which the Secretary certifies the harmonized
standards under this subtitle, the harmonized standards in
their entirety and as the exclusive laws of the State that
relate to the harmonized standards.
``(6) State law.--The term `State law' means all laws,
decisions, rules, regulations, or other State actions
(including actions by a State agency) having the effect of
law, of any State.

``SEC. 2932. HARMONIZED STANDARDS.

``(a) Board.--
``(1) Establishment.--Not later than 3 months after the
date of enactment of this title, the Secretary, in
consultation with the NAIC, shall establish the Health
Insurance Consensus Standards Board (referred to in this
subtitle as the `Board') to develop recommendations that
harmonize inconsistent State health insurance laws in
accordance with the procedures described in subsection (b).
``(2) Composition.--
``(A) In general.--The Board shall be composed of the
following voting members to be appointed by the Secretary
after considering the recommendations of professional
organizations representing the entities and constituencies
described in this paragraph:
``(i) Four State insurance commissioners as recommended by
the National Association of Insurance Commissioners, of which
2 shall be Democrats and 2 shall be Republicans, and of which
one shall be designated as the chairperson and one shall be
designated as the vice chairperson.
``(ii) Four representatives of State government, two of
which shall be governors of States and two of which shall be
State legislators, and two of which shall be Democrats and
two of which shall be Republicans.
``(iii) Four representatives of health insurers, of which
one shall represent insurers that offer coverage in the small
group market, one shall represent insurers that offer
coverage in the large group market, one shall represent
insurers that offer coverage in the individual market, and
one shall represent carriers operating in a regional market.
``(iv) Two representatives of insurance agents and brokers.
``(v) Two independent representatives of the American
Academy of Actuaries who have familiarity with the actuarial
methods applicable to health insurance.
``(B) Ex officio member.--A representative of the Secretary
shall serve as an ex officio member of the Board.
``(3) Advisory panel.--The Secretary shall establish an
advisory panel to provide advice to the Board, and shall
appoint its members after considering the recommendations of
professional organizations representing the entities and
constituencies identified in this paragraph:
``(A) Two representatives of small business health plans.
``(B) Two representatives of employers, of which one shall
represent small employers and one shall represent large
employers.
``(C) Two representatives of consumer organizations.
``(D) Two representatives of health care providers.
``(4) Qualifications.--The membership of the Board shall
include individuals with national recognition for their
expertise in health finance and economics, actuarial science,
health plans, providers of health services, and other related
fields, who provide a mix of different professionals, broad
geographic representation, and a balance between urban and
rural representatives.
``(5) Ethical disclosure.--The Secretary shall establish a
system for public disclosure by members of the Board of
financial and other potential conflicts of interest relating
to such members. Members of the Board shall be treated as
employees of Congress for purposes of applying title I of the
Ethics in Government Act of 1978 (Public Law 95-521).
``(6) Director and staff.--Subject to such review as the
Secretary deems necessary to assure the efficient
administration of the Board, the chair and vice-chair of the
Board may--
``(A) employ and fix the compensation of an Executive
Director (subject to the approval of the Comptroller General)
and such other personnel as may be necessary to carry out its
duties (without regard to the provisions of title 5, United
States Code, governing appointments in the competitive
service);
``(B) seek such assistance and support as may be required
in the performance of its duties from appropriate Federal
departments and agencies;
``(C) enter into contracts or make other arrangements, as
may be necessary for the conduct of the work of the Board
(without regard to section 3709 of the Revised Statutes (41
U.S.C. 5));
``(D) make advance, progress, and other payments which
relate to the work of the Board;
``(E) provide transportation and subsistence for persons
serving without compensation; and
``(F) prescribe such rules as it deems necessary with
respect to the internal organization and operation of the
Board.
``(7) Terms.--The members of the Board shall serve for the
duration of the Board. Vacancies in the Board shall be filled
as needed in a manner consistent with the composition
described in paragraph (2).
``(b) Development of Harmonized Standards.--
``(1) In general.--In accordance with the process described
in subsection (c), the Board shall identify and recommend
nationally harmonized standards for each of the following
process categories:
``(A) Form filing and rate filing.--Form and rate filing
standards shall be established which promote speed to market
and include the following defined areas for States that
require such filings:
``(i) Procedures for form and rate filing pursuant to a
streamlined administrative filing process.
``(ii) Timeframes for filings to be reviewed by a State if
review is required before they are deemed approved.
``(iii) Timeframes for an eligible insurer to respond to
State requests following its review.
``(iv) A process for an eligible insurer to self-certify.
``(v) State development of form and rate filing templates
that include only non-preempted State law and Federal law
requirements for eligible insurers with timely updates.
``(vi) Procedures for the resubmission of forms and rates.
``(vii) Disapproval rationale of a form or rate filing
based on material omissions or violations of non-preempted
State law or Federal law with violations cited and explained.
``(viii) For States that may require a hearing, a rationale
for hearings based on violations of non-preempted State law
or insurer requests.
``(B) Market conduct review.--Market conduct review
standards shall be developed which provide for the following:
``(i) Mandatory participation in national databases.
``(ii) The confidentiality of examination materials.
``(iii) The identification of the State agency with primary
responsibility for examinations.
``(iv) Consultation and verification of complaint data with
the eligible insurer prior to State actions.
``(v) Consistency of reporting requirements with the
recordkeeping and administrative practices of the eligible
insurer.
``(vi) Examinations that seek to correct material errors
and harmful business practices rather than infrequent errors.
``(vii) Transparency and publishing of the State's
examination standards.
``(viii) Coordination of market conduct analysis.
``(ix) Coordination and nonduplication between State
examinations of the same eligible insurer.
``(x) Rationale and protocols to be met before a full
examination is conducted.
``(xi) Requirements on examiners prior to beginning
examinations such as budget planning and work plans.
``(xii) Consideration of methods to limit examiners' fees
such as caps, competitive bidding, or other alternatives.
``(xiii) Reasonable fines and penalties for material errors
and harmful business practices.
``(C) Prompt payment of claims.--The Board shall establish
prompt payment standards for eligible insurers based on
standards similar to those applicable to the Social Security
Act as set forth in section 1842(c)(2) of such Act (42 U.S.C.
1395u(c)(2)). Such prompt payment standards shall be
consistent with the timing and notice requirements of the
claims procedure rules to be specified under subparagraph
(D), and shall include appropriate exceptions such as for
fraud, nonpayment of premiums, or late submission of claims.
``(D) Internal review.--The Board shall establish standards
for claims procedures for eligible insurers that are
consistent with the requirements relating to initial claims
for benefits and appeals of claims for benefits under the
Employee Retirement Income Security Act of 1974 as set forth
in section 503 of such Act (29 U.S.C. 1133) and the
regulations thereunder.
``(2) Recommendations.--The Board shall recommend
harmonized standards for each element of the categories
described in subparagraph (A) through (D) of paragraph (1)
within each such market. Notwithstanding

[[Page S13058]]

the previous sentence, the Board shall not recommend any
harmonized standards that disrupt, expand, or duplicate the
benefit, service, or provider mandate standards provided in
the Benefit Choice Standards pursuant to section 2922(a).
``(c) Process for Identifying Harmonized Standards.--
``(1) In general.--The Board shall develop recommendations
to harmonize inconsistent State insurance laws with respect
to each of the process categories described in subparagraphs
(A) through (D) of subsection (b)(1).
``(2) Requirements.--In adopting standards under this
section, the Board shall consider the following:
``(A) Any model acts or regulations of the National
Association of Insurance Commissioners in each of the process
categories described in subparagraphs (A) through (D) of
subsection (b)(1).
``(B) Substantially similar standards followed by a
plurality of States, as reflected in existing State laws,
relating to the specific process categories described in
subparagraphs (A) through (D) of subsection (b)(1).
``(C) Any Federal law requirement related to specific
process categories described in subparagraphs (A) through (D)
of subsection (b)(1).
``(D) In the case of the adoption of any standard that
differs substantially from those referred to in subparagraphs
(A), (B), or (C), the Board shall provide evidence to the
Secretary that such standard is necessary to protect health
insurance consumers or promote speed to market or
administrative efficiency.
``(E) The criteria specified in clauses (i) through (iii)
of subsection (d)(2)(B).
``(d) Recommendations and Certification by Secretary.--
``(1) Recommendations.--Not later than 18 months after the
date on which all members of the Board are selected under
subsection (a), the Board shall recommend to the Secretary
the certification of the harmonized standards identified
pursuant to subsection (c).
``(2) Certification.--
``(A) In general.--Not later than 120 days after receipt of
the Board's recommendations under paragraph (1), the
Secretary shall certify the recommended harmonized standards
as provided for in subparagraph (B), and issue such standards
in the form of an interim final regulation.
``(B) Certification process.--The Secretary shall establish
a process for certifying the recommended harmonized standard,
by category, as recommended by the Board under this section.
Such process shall--
``(i) ensure that the certified standards for a particular
process area achieve regulatory harmonization with respect to
health plans on a national basis;
``(ii) ensure that the approved standards are the minimum
necessary, with regard to substance and quantity of
requirements, to protect health insurance consumers and
maintain a competitive regulatory environment; and
``(iii) ensure that the approved standards will not limit
the range of group health plan designs and insurance
products, such as catastrophic coverage only plans, health
savings accounts, and health maintenance organizations, that
might otherwise be available to consumers.
``(3) Application and effective date.--The standards
certified by the Secretary under paragraph (2) shall apply
and become effective on the date that is 18 months after the
date on which the Secretary certifies the harmonized
standards.
``(e) Termination.--The Board shall terminate and be
dissolved after making the recommendations to the Secretary
pursuant to subsection (d)(1).
``(f) Ongoing Review.--Not earlier than 3 years after the
termination of the Board under subsection (e), and not
earlier than every 3 years thereafter, the Secretary, in
consultation with the National Association of Insurance
Commissioners and the entities and constituencies represented
on the Board and the Advisory Panel, shall prepare and submit
to the appropriate committees of Congress a report that
assesses the effect of the harmonized standards applied under
this section on access, cost, and health insurance market
functioning. The Secretary may, based on such report and
applying the process established for certification under
subsection (d)(2)(B), in consultation with the National
Association of Insurance Commissioners and the entities and
constituencies represented on the Board and the Advisory
Panel, update the harmonized standards through notice and
comment rulemaking.
``(g) Publication.--
``(1) Listing.--The Secretary shall maintain an up to date
listing of all harmonized standards certified under this
section on the Internet website of the Department of Health
and Human Services.
``(2) Sample contract language.--The Secretary shall
publish on the Internet website of the Department of Health
and Human Services sample contract language that incorporates
the harmonized standards certified under this section, which
may be used by insurers seeking to qualify as an eligible
insurer. The types of harmonized standards that shall be
included in sample contract language are the standards that
are relevant to the contractual bargain between the insurer
and insured.
``(h) State Adoption and Enforcement.--Not later than 18
months after the certification by the Secretary of harmonized
standards under this section, the States may adopt such
harmonized standards (and become an adopting State) and, in
which case, shall enforce the harmonized standards pursuant
to State law.

``SEC. 2933. APPLICATION AND PREEMPTION.

``(a) Superseding of State Law.--
``(1) In general.--The harmonized standards certified under
this subtitle and applied as provided for in section
2933(d)(3), shall supersede any and all State laws of a non-
adopting State insofar as such State laws relate to the areas
of harmonized standards as applied to an eligible insurer, or
health insurance coverage issued by a eligible insurer,
including with respect to coverage issued to a small business
health plan, in a nonadopting State.
``(2) Nonadopting states.--This subtitle shall supersede
any and all State laws of a nonadopting State (whether
enacted prior to or after the date of enactment of this
title) insofar as they may--
``(A) prohibit an eligible insurer from offering,
marketing, or implementing health insurance coverage
consistent with the harmonized standards; or
``(B) have the effect of retaliating against or otherwise
punishing in any respect an eligible insurer for offering,
marketing, or implementing health insurance coverage
consistent with the harmonized standards under this subtitle.
``(b) Savings Clause and Construction.--
``(1) Nonapplication to adopting states.--Subsection (a)
shall not apply with respect to adopting States.
``(2) Nonapplication to certain insurers.--Subsection (a)
shall not apply with respect to insurers that do not qualify
as eligible insurers who offer health insurance coverage in a
nonadopting State.
``(3) Nonapplication where obtaining relief under state
law.--Subsection (a)(1) shall not supersede any State law of
a nonadopting State to the extent necessary to permit
individuals or the insurance department of the State (or
other State agency) to obtain relief under State law to
require an eligible insurer to comply with the harmonized
standards under this subtitle.
``(4) No effect on preemption.--In no case shall this
subtitle be construed to limit or affect in any manner the
preemptive scope of sections 502 and 514 of the Employee
Retirement Income Security Act of 1974. In no case shall this
subtitle be construed to create any cause of action under
Federal or State law or enlarge or affect any remedy
available under the Employee Retirement Income Security Act
of 1974.
``(c) Effective Date.--This section shall apply beginning
on the date that is 18 months after the date on harmonized
standards are certified by the Secretary under this subtitle.

``SEC. 2934. CIVIL ACTIONS AND JURISDICTION.

``(a) In General.--The district courts of the United States
shall have exclusive jurisdiction over civil actions
involving the interpretation of this subtitle.
``(b) Actions.--An eligible insurer may bring an action in
the district courts of the United States for injunctive or
other equitable relief against any officials or agents of a
nonadopting State in connection with any conduct or action,
or proposed conduct or action, by such officials or agents
which violates, or which would if undertaken violate, section
2933.
``(c) Direct Filing in Court of Appeals.--At the election
of the eligible insurer, an action may be brought under
subsection (b) directly in the United States Court of Appeals
for the circuit in which the nonadopting State is located by
the filing of a petition for review in such Court.
``(d) Expedited Review.--
``(1) District court.--In the case of an action brought in
a district court of the United States under subsection (b),
such court shall complete such action, including the issuance
of a judgment, prior to the end of the 120-day period
beginning on the date on which such action is filed, unless
all parties to such proceeding agree to an extension of such
period.
``(2) Court of appeals.--In the case of an action brought
directly in a United States Court of Appeal under subsection
(c), or in the case of an appeal of an action brought in a
district court under subsection (b), such Court shall
complete all action on the petition, including the issuance
of a judgment, prior to the end of the 60-day period
beginning on the date on which such petition is filed with
the Court, unless all parties to such proceeding agree to an
extension of such period.
``(e) Standard of Review.--A court in an action filed under
this section, shall render a judgment based on a review of
the merits of all questions presented in such action and
shall not defer to any conduct or action, or proposed conduct
or action, of a nonadopting State.

``SEC. 2935. AUTHORIZATION OF APPROPRIATIONS; RULE OF
CONSTRUCTION.

``(a) Authorization of Appropriations.--There are
authorized to be appropriated such sums as may be necessary
to carry out this subtitle.
``(b) Health Savings Accounts.--Nothing in this subtitle
shall be construed to create any mandates for coverage of any
benefits below the deductible levels set for any health
savings account-qualified health plan pursuant to section 223
of the Internal Revenue Code of 1986.''.
______