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Union Calendar No. 78
108th CONGRESS
1st Session
H. R. 660
[Report No. 108-156]
To amend title I of the Employee Retirement Income Security Act of 1974
to improve access and choice for entrepreneurs with small businesses
with respect to medical care for their employees.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 11, 2003
Mr. Fletcher (for himself, Mr. Sam Johnson of Texas, Mr. Dooley of
California, Ms. Velazquez, Mr. Acevedo-Vila, Mr. Aderholt, Mr. Akin,
Mr. Baca, Mr. Ballenger, Mr. Beauprez, Mrs. Biggert, Mr. Boehner, Mr.
Burgess, Mr. Calvert, Mrs. Capito, Mr. Carter, Mrs. Christensen, Mr.
Collins, Mr. Costello, Mr. Cramer, Mr. Cunningham, Mrs. Jo Ann Davis of
Virginia, Mr. DeMint, Mr. Mario Diaz-Balart of Florida, Mr. Duncan, Mr.
Everett, Mr. Franks of Arizona, Mr. Fossella, Mr. Gillmor, Mr.
Goodlatte, Mr. Gonzalez, Mr. Graves, Ms. Granger, Mr. Greenwood, Mr.
Grijalva, Ms. Hart, Mr. Hastert, Mr. Herger, Mr. Houghton, Mr. Isakson,
Mr. Issa, Mr. Jenkins, Mr. Jones of North Carolina, Mr. Keller, Mrs.
Kelly, Mr. Kennedy of Minnesota, Mr. Kolbe, Mr. Lucas of Kentucky, Mr.
Manzullo, Mr. McHugh, Mr. McInnis, Mr. McKeon, Mrs. Musgrave, Mrs.
Northup, Mr. Peterson of Pennsylvania, Mr. Petri, Mr. Platts, Mr.
Radanovich, Mr. Rehberg, Mr. Ryan of Wisconsin, Mr. Schrock, Mr.
Sensenbrenner, Mr. Sessions, Mr. Shays, Mr. Shimkus, Mr. Simmons, Mr.
Smith of Texas, Mr. Souder, Mr. Tancredo, Mr. Tiahrt, Mr. Toomey, Mr.
Upton, Mr. Weldon of Florida, Mr. Whitfield, Mr. Wilson of South
Carolina, and Mr. Wolf) introduced the following bill; which was
referred to the Committee on Education and the Workforce
June 16, 2003
Additional sponsors: Mr. Hostettler, Mrs. Napolitano, Mr. Crane, Mr.
Chocola, Mr. Foley, Mr. Rogers of Michigan, Mr. Carson of Oklahoma, Mr.
Cole, Mr. Rogers of Kentucky, Mr. Weller, Mr. Bartlett of Maryland, Mr.
King of Iowa, Mr. Shuster, Mr. Case, Ms. Loretta Sanchez of California,
Ms. Ginny Brown-Waite of Florida, Mr. Faleomavaega, Mr. Cox, Mrs.
Blackburn, Mr. Gingrey, Mr. Tiberi, Mr. Weldon of Pennsylvania, Mr.
Barrett of South Carolina, Mr. Gary G. Miller of California, Mr. Deal
of Georgia, Mrs. Cubin, Mr. Bonner, Mr. McIntyre, Mr. Latham, Mr. Brown
of South Carolina, Mr. Cantor, Mr. Shaw, Mr. Kirk, Mr. Burton of
Indiana, Mr. Wicker, Mr. Wynn, Mr. Hefley, Mr. Rogers of Alabama, Mr.
English, Mr. Ehlers, Mr. Davis of Tennessee, Mr. Stearns, Mr.
Pickering, Mr. Burns, Mr. Moran of Virginia, Mr. Sullivan, Ms. Harris,
Mr. Feeney, Mr. Smith of Michigan, Mr. Thompson of Mississippi, Mr.
LaHood, Mr. Miller of Florida, Mr. Bonilla, Mr. Pitts, Mr. Israel, Mr.
Nethercutt, Mr. Thomas, Mr. Turner of Texas, Mr. Taylor of North
Carolina, Mr. Crenshaw, Mr. Lipinski, Mr. Doolittle, Mr. Hensarling,
Mr. DeLay, Mr. Brady of Texas, Mr. Barton of Texas, Mr. Thornberry, Mr.
Culberson, Mr. Paul, Mr. Renzi, Ms. Ros-Lehtinen, Mrs. Bono, Mr.
Hobson, Mr. Hyde, Mr. Hulshof, Mr. Istook, Mr. Shadegg, Mr. Chabot,
Mrs. Myrick, Mr. Gibbons, Mr. Janklow, Mr. Cooper, Mr. Pearce, Mr.
Blunt, Mr. Bradley of New Hampshire, Mr. Turner of Ohio, Ms. Pryce of
Ohio, Mr. Mica, Mr. Neugebauer, Mr. Ney, and Mr. Gutknecht
Deleted sponsors: Mr. Baca (added February 11, 2003; deleted April 7,
2003) Mrs. Christensen (added February 11, 2003; deleted April 2,
2003), Mr. Grijalva (added February 11, 2003; deleted June 10, 2003),
Mr. Souder (added February 11, 2003; deleted May 13, 2003), Ms. Eddie
Bernice Johnson of Texas (added March 6, 2003; deleted June 11, 2003),
and Mr. Pastor (added April 3, 2003; deleted June 10, 2003)
June 16, 2003
Reported with an amendment, committed to the Committee of the Whole
House on the State of the Union, and ordered to be printed
[Strike out all after the enacting clause and insert the part printed
in italic]
[For text of introduced bill, see copy of bill as introduced on
February 11, 2003]
_______________________________________________________________________
A BILL
To amend title I of the Employee Retirement Income Security Act of 1974
to improve access and choice for entrepreneurs with small businesses
with respect to medical care for their employees.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Small Business
Health Fairness Act of 2003''.
(b) Table of Contents.--The table of contents is as follows:
Sec. 1. Short title and table of contents.
Sec. 2. Rules governing association health plans.
``Part 8--Rules Governing Association Health Plans
``Sec. 801. Association health plans.
``Sec. 802. Certification of association health plans.
``Sec. 803. Requirements relating to sponsors and boards of
trustees.
``Sec. 804. Participation and coverage requirements.
``Sec. 805. Other requirements relating to plan documents,
contribution rates, and benefit options.
``Sec. 806. Maintenance of reserves and provisions for solvency
for plans providing health benefits in
addition to health insurance coverage.
``Sec. 807. Requirements for application and related
requirements.
``Sec. 808. Notice requirements for voluntary termination.
``Sec. 809. Corrective actions and mandatory termination.
``Sec. 810. Trusteeship by the Secretary of insolvent
association health plans providing health
benefits in addition to health insurance
coverage.
``Sec. 811. State assessment authority.
``Sec. 812. Definitions and rules of construction.
Sec. 3. Clarification of treatment of single employer arrangements.
Sec. 4. Enforcement provisions relating to association health plans.
Sec. 5. Cooperation between Federal and State authorities.
Sec. 6. Effective date and transitional and other rules.
SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS.
(a) In General.--Subtitle B of title I of the Employee Retirement
Income Security Act of 1974 is amended by adding after part 7 the
following new part:
``Part 8--Rules Governing Association Health Plans
``SEC. 801. ASSOCIATION HEALTH PLANS.
``(a) In General.--For purposes of this part, the term `association
health plan' means a group health plan whose sponsor is (or is deemed
under this part to be) described in subsection (b).
``(b) Sponsorship.--The sponsor of a group health plan is described
in this subsection if such sponsor--
``(1) is organized and maintained in good faith, with a
constitution and bylaws specifically stating its purpose and
providing for periodic meetings on at least an annual basis, as
a bona fide trade association, a bona fide industry association
(including a rural electric cooperative association or a rural
telephone cooperative association), a bona fide professional
association, or a bona fide chamber of commerce (or similar
bona fide business association, including a corporation or
similar organization that operates on a cooperative basis
(within the meaning of section 1381 of the Internal Revenue
Code of 1986)), for substantial purposes other than that of
obtaining or providing medical care;
``(2) is established as a permanent entity which receives
the active support of its members and requires for membership
payment on a periodic basis of dues or payments necessary to
maintain eligibility for membership in the sponsor; and
``(3) does not condition membership, such dues or payments,
or coverage under the plan on the basis of health status-
related factors with respect to the employees of its members
(or affiliated members), or the dependents of such employees,
and does not condition such dues or payments on the basis of
group health plan participation.
Any sponsor consisting of an association of entities which meet the
requirements of paragraphs (1), (2), and (3) shall be deemed to be a
sponsor described in this subsection.
``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.
``(a) In General.--The applicable authority shall prescribe by
regulation a procedure under which, subject to subsection (b), the
applicable authority shall certify association health plans which apply
for certification as meeting the requirements of this part.
``(b) Standards.--Under the procedure prescribed pursuant to
subsection (a), in the case of an association health plan that provides
at least one benefit option which does not consist of health insurance
coverage, the applicable authority shall certify such plan as meeting
the requirements of this part only if the applicable authority is
satisfied that the applicable requirements of this part are met (or,
upon the date on which the plan is to commence operations, will be met)
with respect to the plan.
``(c) Requirements Applicable to Certified Plans.--An association
health plan with respect to which certification under this part is in
effect shall meet the applicable requirements of this part, effective
on the date of certification (or, if later, on the date on which the
plan is to commence operations).
``(d) Requirements for Continued Certification.--The applicable
authority may provide by regulation for continued certification of
association health plans under this part.
``(e) Class Certification for Fully Insured Plans.--The applicable
authority shall establish a class certification procedure for
association health plans under which all benefits consist of health
insurance coverage. Under such procedure, the applicable authority
shall provide for the granting of certification under this part to the
plans in each class of such association health plans upon appropriate
filing under such procedure in connection with plans in such class and
payment of the prescribed fee under section 807(a).
``(f) Certification of Self-Insured Association Health Plans.--An
association health plan which offers one or more benefit options which
do not consist of health insurance coverage may be certified under this
part only if such plan consists of any of the following:
``(1) a plan which offered such coverage on the date of the
enactment of the Small Business Health Fairness Act of 2003,
``(2) a plan under which the sponsor does not restrict
membership to one or more trades and businesses or industries
and whose eligible participating employers represent a broad
cross-section of trades and businesses or industries, or
``(3) a plan whose eligible participating employers
represent one or more trades or businesses, or one or more
industries, consisting of any of the following: agriculture;
equipment and automobile dealerships; barbering and
cosmetology; certified public accounting practices; child care;
construction; dance, theatrical and orchestra productions;
disinfecting and pest control; financial services; fishing;
foodservice establishments; hospitals; labor organizations;
logging; manufacturing (metals); mining; medical and dental
practices; medical laboratories; professional consulting
services; sanitary services; transportation (local and
freight); warehousing; wholesaling/distributing; or any other
trade or business or industry which has been indicated as
having average or above-average risk or health claims
experience by reason of State rate filings, denials of
coverage, proposed premium rate levels, or other means
demonstrated by such plan in accordance with regulations.
``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES.
``(a) Sponsor.--The requirements of this subsection are met with
respect to an association health plan if the sponsor has met (or is
deemed under this part to have met) the requirements of section 801(b)
for a continuous period of not less than 3 years ending with the date
of the application for certification under this part.
``(b) Board of Trustees.--The requirements of this subsection are
met with respect to an association health plan if the following
requirements are met:
``(1) Fiscal control.--The plan is operated, pursuant to a
trust agreement, by a board of trustees which has complete
fiscal control over the plan and which is responsible for all
operations of the plan.
``(2) Rules of operation and financial controls.--The board
of trustees has in effect rules of operation and financial
controls, based on a 3-year plan of operation, adequate to
carry out the terms of the plan and to meet all requirements of
this title applicable to the plan.
``(3) Rules governing relationship to participating
employers and to contractors.--
``(A) Board membership.--
``(i) In general.--Except as provided in
clauses (ii) and (iii), the members of the
board of trustees are individuals selected from
individuals who are the owners, officers,
directors, or employees of the participating
employers or who are partners in the
participating employers and actively
participate in the business.
``(ii) Limitation.--
``(I) General rule.--Except as
provided in subclauses (II) and (III),
no such member is an owner, officer,
director, or employee of, or partner
in, a contract administrator or other
service provider to the plan.
``(II) Limited exception for
providers of services solely on behalf
of the sponsor.--Officers or employees
of a sponsor which is a service
provider (other than a contract
administrator) to the plan may be
members of the board if they constitute
not more than 25 percent of the
membership of the board and they do not
provide services to the plan other than
on behalf of the sponsor.
``(III) Treatment of providers of
medical care.--In the case of a sponsor
which is an association whose
membership consists primarily of
providers of medical care, subclause
(I) shall not apply in the case of any
service provider described in subclause
(I) who is a provider of medical care
under the plan.
``(iii) Certain plans excluded.--Clause (i)
shall not apply to an association health plan
which is in existence on the date of the
enactment of the Small Business Health Fairness
Act of 2003.
``(B) Sole authority.--The board has sole authority
under the plan to approve applications for
participation in the plan and to contract with a
service provider to administer the day-to-day affairs
of the plan.
``(c) Treatment of Franchise Networks.--In the case of a group
health plan which is established and maintained by a franchiser for a
franchise network consisting of its franchisees--
``(1) the requirements of subsection (a) and section 801(a)
shall be deemed met if such requirements would otherwise be met
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