< Back to H.R. 3682 (112th Congress, 2011–2013)

Text of the Patient Centered Healthcare Savings Act of 2011

This bill was introduced on December 15, 2011, in a previous session of Congress, but was not enacted. The text of the bill below is as of Dec 15, 2011 (Introduced).

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I

112th CONGRESS

1st Session

H. R. 3682

IN THE HOUSE OF REPRESENTATIVES

December 15, 2011

introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, Education and the Workforce, the Judiciary, Natural Resources, House Administration, Rules, and Appropriations, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To repeal the Patient Protection and Affordable Care Act and provide for comprehensive health reform, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Patient Centered Healthcare Savings Act of 2011.

(b)

Table of contents

The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Title I—Repealing of PPACA

Sec. 101. Repeal of the health care reform package.

Title II—Medical Liability Reform

Sec. 201. Findings and purpose.

Sec. 202. Encouraging speedy resolution of claims.

Sec. 203. Compensating patient injury.

Sec. 204. Maximizing patient recovery.

Sec. 205. Punitive damages.

Sec. 206. Authorization of payment of future damages to claimants in HEALTH care lawsuits.

Sec. 207. Definitions.

Sec. 208. Effect on other laws.

Sec. 209. State flexibility and protection of States’ rights.

Sec. 210. Applicability; effective date.

Title III—Allowing People To Purchase Health Insurance Across State Lines

Sec. 301. Specification of constitutional authority for enactment of law.

Sec. 302. Findings.

Sec. 303. Cooperative governing of individual health insurance coverage.

Sec. 304. Severability.

Title IV—Increasing Transparency and Competition in Healthcare

Sec. 401. Access to Medicare data to improve transparency.

Title V—Expanding the Effectiveness of Health Savings Accounts

Sec. 501. Amendment of 1986 Code.

Subtitle A—Provisions relating to tax-Preferred health accounts

Sec. 511. Allow both spouses to make catch-up contributions to the same HSA account.

Sec. 512. Provisions relating to Medicare.

Sec. 513. Individuals eligible for veterans benefits for a service-connected disability.

Sec. 514. Individuals eligible for Indian Health Service assistance.

Sec. 515. Individuals eligible for TRICARE coverage.

Sec. 516. Health FSA carryforwards.

Sec. 517. FSA and HRA interaction with HSAs.

Sec. 518. Allowance of distributions for prescription and over-the-counter medicines and drugs.

Sec. 519. Purchase of health insurance from HSA account.

Sec. 520. Special rule for certain medical expenses incurred before establishment of account.

Sec. 521. Preventive care prescription drug clarification.

Sec. 522. Equivalent bankruptcy protections for health savings accounts as retirement funds.

Sec. 523. Administrative error correction before due date of return.

Sec. 524. Reauthorization of medicaid health opportunity accounts.

Subtitle B—Other provisions

Sec. 531. Certain exercise equipment and physical fitness programs treated as medical care.

Sec. 532. Certain nutritional and dietary supplements to be treated as medical care.

Sec. 533. Certain provider fees to be treated as medical care.

Title VI—Covering People with Pre-Existing Conditions, Removing Annual and Lifetime Coverage Caps, and Expanding Access to Care

Subtitle A—Making Health Care Coverage Affordable for Every American

Chapter 1—Ensuring coverage for individuals with preexisting conditions and multiple health care needs

Sec. 601. Establish universal access programs to improve high risk pools and reinsurance markets.

Sec. 602. Elimination of certain requirements for guaranteed availability in individual market.

Sec. 603. No annual or lifetime spending caps.

Sec. 604. Preventing unjust cancellation of insurance coverage.

Chapter 2—Reducing health care premiums and the number of uninsured Americans

Sec. 611. State innovation programs.

Sec. 612. Health plan finders.

Sec. 613. Administrative simplification.

Subtitle B—Improving Access to Health Care

Chapter 1—Expanding Access and Lowering Costs for Small Businesses

Sec. 620. Short title.

Sec. 621. Rules governing association health plans.

Sec. 622. Clarification of treatment of single employer arrangements.

Sec. 623. Enforcement provisions relating to association health plans.

Sec. 624. Cooperation between Federal and State authorities.

Sec. 625. Effective date and transitional and other rules.

Chapter 2—Targeted Efforts to Expand Access

Sec. 631. Extending coverage of dependents.

Sec. 632. Allowing auto-enrollment for employer sponsored coverage.

Title VII—Stopping Medicare, Waste, Fraud, and Abuse and Increasing Penalties for Abusers

Sec. 701. Increased civil money penalties and criminal fines for Medicare fraud and abuse.

Sec. 702. Increased sentences for felonies involving Medicare fraud and abuse.

Sec. 703. Other DME supplier anti-fraud and abuse provisions.

Sec. 704. Retention of certain fraud and abuse provisions.

Sec. 705. Ensuring timely enforcement of Medicare secondary payer requirements in liability cases.

I

Repealing of PPACA

101.

Repeal of the health care reform package

(a)

PPACA

The Patient Protection and Affordable Care Act is repealed, and the provisions of law amended or repealed by such Act are restored or revived as if such Act had not been enacted.

(b)

HCERA

Title I and subtitle B of title II of the Health Care and Education Reconciliation Act of 2010 are repealed, and the provisions of law amended or repealed by such title or subtitle are restored or revived as if such title or subtitle had not been enacted.

II

Medical Liability Reform

201.

Findings and purpose

(a)

Findings

(1)

Effect on health care access and costs

Congress finds that our current civil justice system is adversely affecting patient access to health care services, better patient care, and cost-efficient health care, in that the health care liability system is a costly and ineffective mechanism for resolving claims of health care liability and compensating injured patients, and is a deterrent to the sharing of information among health care professionals which impedes efforts to improve patient safety and quality of care.

(2)

Effect on interstate commerce

Congress finds that the health care and insurance industries are industries affecting interstate commerce and the health care liability litigation systems existing throughout the United States are activities that affect interstate commerce by contributing to the high costs of health care and premiums for health care liability insurance purchased by health care system providers.

(3)

Effect on federal spending

Congress finds that the health care liability litigation systems existing throughout the United States have a significant effect on the amount, distribution, and use of Federal funds because of—

(A)

the large number of individuals who receive health care benefits under programs operated or financed by the Federal Government;

(B)

the large number of individuals who benefit because of the exclusion from Federal taxes of the amounts spent to provide them with health insurance benefits; and

(C)

the large number of health care providers who provide items or services for which the Federal Government makes payments.

(b)

Purpose

It is the purpose of this title to implement reasonable, comprehensive, and effective health care liability reforms designed to—

(1)

improve the availability of health care services in cases in which health care liability actions have been shown to be a factor in the decreased availability of services;

(2)

reduce the incidence of defensive medicine and lower the cost of health care liability insurance, all of which contribute to the escalation of health care costs;

(3)

ensure that persons with meritorious health care injury claims receive fair and adequate compensation, including reasonable noneconomic damages;

(4)

improve the fairness and cost-effectiveness of our current health care liability system to resolve disputes over, and provide compensation for, health care liability by reducing uncertainty in the amount of compensation provided to injured individuals; and

(5)

provide an increased sharing of information in the health care system which will reduce unintended injury and improve patient care.

202.

Encouraging speedy resolution of claims

The time for the commencement of a health care lawsuit shall be 3 years after the date of manifestation of injury or 1 year after the claimant discovers, or through the use of reasonable diligence should have discovered, the injury, whichever occurs first. In no event shall the time for commencement of a health care lawsuit exceed 3 years after the date of manifestation of injury unless tolled for any of the following—

(1)

upon proof of fraud;

(2)

intentional concealment; or

(3)

the presence of a foreign body, which has no therapeutic or diagnostic purpose or effect, in the person of the injured person.

Actions by a minor shall be commenced within 3 years from the date of the alleged manifestation of injury except that actions by a minor under the full age of 6 years shall be commenced within 3 years of manifestation of injury or prior to the minor’s 8th birthday, whichever provides a longer period. Such time limitation shall be tolled for minors for any period during which a parent or guardian and a health care provider or health care organization have committed fraud or collusion in the failure to bring an action on behalf of the injured minor.
203.

Compensating patient injury

(a)

Unlimited Amount of Damages for Actual Economic Losses in Health Care Lawsuits

In any health care lawsuit, nothing in this title shall limit a claimant’s recovery of the full amount of the available economic damages, notwithstanding the limitation in subsection (b).

(b)

Additional Noneconomic Damages

In any health care lawsuit, the amount of noneconomic damages, if available, may be as much as $250,000, regardless of the number of parties against whom the action is brought or the number of separate claims or actions brought with respect to the same injury.

(c)

No Discount of Award for Noneconomic Damages

For purposes of applying the limitation in subsection (b), future noneconomic damages shall not be discounted to present value. The jury shall not be informed about the maximum award for noneconomic damages. An award for noneconomic damages in excess of $250,000 shall be reduced either before the entry of judgment, or by amendment of the judgment after entry of judgment, and such reduction shall be made before accounting for any other reduction in damages required by law. If separate awards are rendered for past and future noneconomic damages and the combined awards exceed $250,000, the future noneconomic damages shall be reduced first.

(d)

Fair Share Rule

In any health care lawsuit, each party shall be liable for that party’s several share of any damages only and not for the share of any other person. Each party shall be liable only for the amount of damages allocated to such party in direct proportion to such party’s percentage of responsibility. Whenever a judgment of liability is rendered as to any party, a separate judgment shall be rendered against each such party for the amount allocated to such party. For purposes of this section, the trier of fact shall determine the proportion of responsibility of each party for the claimant’s harm.

204.

Maximizing patient recovery

(a)

Court Supervision of Share of Damages Actually Paid to Claimants

In any health care lawsuit, the court shall supervise the arrangements for payment of damages to protect against conflicts of interest that may have the effect of reducing the amount of damages awarded that are actually paid to claimants. In particular, in any health care lawsuit in which the attorney for a party claims a financial stake in the outcome by virtue of a contingent fee, the court shall have the power to restrict the payment of a claimant’s damage recovery to such attorney, and to redirect such damages to the claimant based upon the interests of justice and principles of equity. In no event shall the total of all contingent fees for representing all claimants in a health care lawsuit exceed the following limits:

(1)

Forty percent of the first $50,000 recovered by the claimant(s).

(2)

Thirty-three and one-third percent of the next $50,000 recovered by the claimant(s).

(3)

Twenty-five percent of the next $500,000 recovered by the claimant(s).

(4)

Fifteen percent of any amount by which the recovery by the claimant(s) is in excess of $600,000.

(b)

Applicability

The limitations in this section shall apply whether the recovery is by judgment, settlement, mediation, arbitration, or any other form of alternative dispute resolution. In a health care lawsuit involving a minor or incompetent person, a court retains the authority to authorize or approve a fee that is less than the maximum permitted under this section. The requirement for court supervision in the first two sentences of subsection (a) applies only in civil actions.

205.

Punitive damages

(a)

In General

Punitive damages may, if otherwise permitted by applicable State or Federal law, be awarded against any person in a health care lawsuit only if it is proven by clear and convincing evidence that such person acted with malicious intent to injure the claimant, or that such person deliberately failed to avoid unnecessary injury that such person knew the claimant was substantially certain to suffer. In any health care lawsuit where no judgment for compensatory damages is rendered against such person, no punitive damages may be awarded with respect to the claim in such lawsuit. No demand for punitive damages shall be included in a health care lawsuit as initially filed. A court may allow a claimant to file an amended pleading for punitive damages only upon a motion by the claimant and after a finding by the court, upon review of supporting and opposing affidavits or after a hearing, after weighing the evidence, that the claimant has established by a substantial probability that the claimant will prevail on the claim for punitive damages. At the request of any party in a health care lawsuit, the trier of fact shall consider in a separate proceeding—

(1)

whether punitive damages are to be awarded and the amount of such award; and

(2)

the amount of punitive damages following a determination of punitive liability.

If a separate proceeding is requested, evidence relevant only to the claim for punitive damages, as determined by applicable State law, shall be inadmissible in any proceeding to determine whether compensatory damages are to be awarded.
(b)

Determining Amount of Punitive Damages

(1)

Factors considered

In determining the amount of punitive damages, if awarded, in a health care lawsuit, the trier of fact shall consider only the following—

(A)

the severity of the harm caused by the conduct of such party;

(B)

the duration of the conduct or any concealment of it by such party;

(C)

the profitability of the conduct to such party;

(D)

the number of products sold or medical procedures rendered for compensation, as the case may be, by such party, of the kind causing the harm complained of by the claimant;

(E)

any criminal penalties imposed on such party, as a result of the conduct complained of by the claimant; and

(F)

the amount of any civil fines assessed against such party as a result of the conduct complained of by the claimant.

(2)

Maximum award

The amount of punitive damages, if awarded, in a health care lawsuit may be as much as $250,000 or as much as two times the amount of economic damages awarded, whichever is greater. The jury shall not be informed of this limitation.

(c)

No Punitive Damages for Products That Comply With FDA Standards

(1)

In general

(A)

No punitive damages may be awarded against the manufacturer or distributor of a medical product, or a supplier of any component or raw material of such medical product, based on a claim that such product caused the claimant’s harm where—

(i)
(I)

such medical product was subject to premarket approval, clearance, or licensure by the Food and Drug Administration with respect to the safety of the formulation or performance of the aspect of such medical product which caused the claimant’s harm or the adequacy of the packaging or labeling of such medical product; and

(II)

such medical product was so approved, cleared, or licensed; or

(ii)

such medical product is generally recognized among qualified experts as safe and effective pursuant to conditions established by the Food and Drug Administration and applicable Food and Drug Administration regulations, including without limitation those related to packaging and labeling, unless the Food and Drug Administration has determined that such medical product was not manufactured or distributed in substantial compliance with applicable Food and Drug Administration statutes and regulations.

(B)

Rule of construction

Subparagraph (A) may not be construed as establishing the obligation of the Food and Drug Administration to demonstrate affirmatively that a manufacturer, distributor, or supplier referred to in such subparagraph meets any of the conditions described in such subparagraph.

(2)

Liability of health care providers

A health care provider who prescribes, or who dispenses pursuant to a prescription, a medical product approved, licensed, or cleared by the Food and Drug Administration shall not be named as a party to a product liability lawsuit involving such product and shall not be liable to a claimant in a class action lawsuit against the manufacturer, distributor, or seller of such product. Nothing in this paragraph prevents a court from consolidating cases involving health care providers and cases involving products liability claims against the manufacturer, distributor, or product seller of such medical product.

(3)

Packaging

In a health care lawsuit for harm which is alleged to relate to the adequacy of the packaging or labeling of a drug which is required to have tamper-resistant packaging under regulations of the Secretary of Health and Human Services (including labeling regulations related to such packaging), the manufacturer or product seller of the drug shall not be held liable for punitive damages unless such packaging or labeling is found by the trier of fact by clear and convincing evidence to be substantially out of compliance with such regulations.

(4)

Exception

Paragraph (1) shall not apply in any health care lawsuit in which—

(A)

a person, before or after premarket approval, clearance, or licensure of such medical product, knowingly misrepresented to or withheld from the Food and Drug Administration information that is required to be submitted under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.) or section 351 of the Public Health Service Act (42 U.S.C. 262) that is material and is causally related to the harm which the claimant allegedly suffered; or

(B)

a person made an illegal payment to an official of the Food and Drug Administration for the purpose of either securing or maintaining approval, clearance, or licensure of such medical product.

206.

Authorization of payment of future damages to claimants in HEALTH care lawsuits

(a)

In General

In any health care lawsuit, if an award of future damages, without reduction to present value, equaling or exceeding $50,000 is made against a party with sufficient insurance or other assets to fund a periodic payment of such a judgment, the court shall, at the request of any party, enter a judgment ordering that the future damages be paid by periodic payments, in accordance with the Uniform Periodic Payment of Judgments Act promulgated by the National Conference of Commissioners on Uniform State Laws.

(b)

Applicability

This section applies to all actions which have not been first set for trial or retrial before the effective date of this Act.

207.

Definitions

In this title:

(1)

Alternative dispute resolution system; ADR

The term alternative dispute resolution system or ADR means a system that provides for the resolution of health care lawsuits in a manner other than through a civil action brought in a State or Federal court.

(2)

Claimant

The term claimant means any person who brings a health care lawsuit, including a person who asserts or claims a right to legal or equitable contribution, indemnity, or subrogation, arising out of a health care liability claim or action, and any person on whose behalf such a claim is asserted or such an action is brought, whether deceased, incompetent, or a minor.

(3)

Compensatory damages

The term compensatory damages means objectively verifiable monetary losses incurred as a result of the provision of, use of, or payment for (or failure to provide, use, or pay for) health care services or medical products, such as past and future medical expenses, loss of past and future earnings, cost of obtaining domestic services, loss of employment, and loss of business or employment opportunities, damages for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), hedonic damages, injury to reputation, and all other nonpecuniary losses of any kind or nature. The term compensatory damages includes economic damages and noneconomic damages, as such terms are defined in this section.

(4)

Contingent fee

The term contingent fee includes all compensation to any person or persons which is payable only if a recovery is effected on behalf of one or more claimants.

(5)

Economic damages

The term economic damages means objectively verifiable monetary losses incurred as a result of the provision of, use of, or payment for (or failure to provide, use, or pay for) health care services or medical products, such as past and future medical expenses, loss of past and future earnings, cost of obtaining domestic services, loss of employment, and loss of business or employment opportunities.

(6)

Health care lawsuit

The term health care lawsuit means any health care liability claim concerning the provision of health care goods or services or any medical product affecting interstate commerce, or any health care liability action concerning the provision of health care goods or services or any medical product affecting interstate commerce, brought in a State or Federal court or pursuant to an alternative dispute resolution system, against a health care provider, a health care organization, or the manufacturer, distributor, supplier, marketer, promoter, or seller of a medical product, regardless of the theory of liability on which the claim is based, or the number of claimants, plaintiffs, defendants, or other parties, or the number of claims or causes of action, in which the claimant alleges a health care liability claim. Such term does not include a claim or action which is based on criminal liability; which seeks civil fines or penalties paid to Federal, State, or local government; or which is grounded in antitrust.

(7)

Health care liability action

The term health care liability action means a civil action brought in a State or Federal court or pursuant to an alternative dispute resolution system, against a health care provider, a health care organization, or the manufacturer, distributor, supplier, marketer, promoter, or seller of a medical product, regardless of the theory of liability on which the claim is based, or the number of plaintiffs, defendants, or other parties, or the number of causes of action, in which the claimant alleges a health care liability claim.

(8)

Health care liability claim

The term health care liability claim means a demand by any person, whether or not pursuant to ADR, against a health care provider, health care organization, or the manufacturer, distributor, supplier, marketer, promoter, or seller of a medical product, including, but not limited to, third-party claims, cross-claims, counter-claims, or contribution claims, which are based upon the provision of, use of, or payment for (or the failure to provide, use, or pay for) health care services or medical products, regardless of the theory of liability on which the claim is based, or the number of plaintiffs, defendants, or other parties, or the number of causes of action.

(9)

Health care organization

The term health care organization means any person or entity which is obligated to provide or pay for health benefits under any health plan, including any person or entity acting under a contract or arrangement with a health care organization to provide or administer any health benefit.

(10)

Health care provider

The term health care provider means any person or entity required by State or Federal laws or regulations to be licensed, registered, or certified to provide health care services, and being either so licensed, registered, or certified, or exempted from such requirement by other statute or regulation.

(11)

Health care goods or services

The term health care goods or services means any goods or services provided by a health care organization, provider, or by any individual working under the supervision of a health care provider, that relates to the diagnosis, prevention, or treatment of any human disease or impairment, or the assessment or care of the health of human beings.

(12)

Malicious intent to injure

The term malicious intent to injure means intentionally causing or attempting to cause physical injury other than providing health care goods or services.

(13)

Medical product

The term medical product means a drug, device, or biological product intended for humans, and the terms drug, device, and biological product have the meanings given such terms in sections 201(g)(1) and 201(h) of the Federal Food, Drug and Cosmetic Act (21 U.S.C. 321(g)(1) and (h)) and section 351(a) of the Public Health Service Act (42 U.S.C. 262(a)), respectively, including any component or raw material used therein, but excluding health care services.

(14)

Noneconomic damages

The term noneconomic damages means damages for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), hedonic damages, injury to reputation, and all other nonpecuniary losses of any kind or nature.

(15)

Punitive damages

The term punitive damages means damages awarded, for the purpose of punishment or deterrence, and not solely for compensatory purposes, against a health care provider, health care organization, or a manufacturer, distributor, or supplier of a medical product. Punitive damages are neither economic nor noneconomic damages.

(16)

Recovery

The term recovery means the net sum recovered after deducting any disbursements or costs incurred in connection with prosecution or settlement of the claim, including all costs paid or advanced by any person. Costs of health care incurred by the plaintiff and the attorneys’ office overhead costs or charges for legal services are not deductible disbursements or costs for such purpose.

(17)

State

The term State means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, the Trust Territory of the Pacific Islands, and any other territory or possession of the United States, or any political subdivision thereof.

208.

Effect on other laws

(a)

Vaccine Injury

(1)

To the extent that title XXI of the Public Health Service Act establishes a Federal rule of law applicable to a civil action brought for a vaccine-related injury or death—

(A)

this title does not affect the application of the rule of law to such an action; and

(B)

any rule of law prescribed by this title in conflict with a rule of law of such title XXI shall not apply to such action.

(2)

If there is an aspect of a civil action brought for a vaccine-related injury or death to which a Federal rule of law under title XXI of the Public Health Service Act does not apply, then this title or otherwise applicable law (as determined under this title) will apply to such aspect of such action.

(b)

Other Federal Law

Except as provided in this section, nothing in this title shall be deemed to affect any defense available to a defendant in a health care lawsuit or action under any other provision of Federal law.

209.

State flexibility and protection of States’ rights

(a)

Health Care Lawsuits

The provisions governing health care lawsuits set forth in this title preempt, subject to subsections (b) and (c), State law to the extent that State law prevents the application of any provisions of law established by or under this title. The provisions governing health care lawsuits set forth in this title supersede chapter 171 of title 28, United States Code, to the extent that such chapter—

(1)

provides for a greater amount of damages or contingent fees, a longer period in which a health care lawsuit may be commenced, or a reduced applicability or scope of periodic payment of future damages, than provided in this title; or

(2)

prohibits the introduction of evidence regarding collateral source benefits, or mandates or permits subrogation or a lien on collateral source benefits.

(b)

Protection of States’ Rights and Other Laws

(1)

Any issue that is not governed by any provision of law established by or under this title (including State standards of negligence) shall be governed by otherwise applicable State or Federal law.

(2)

This title shall not preempt or supersede any State or Federal law that imposes greater procedural or substantive protections for health care providers and health care organizations from liability, loss, or damages than those provided by this title or create a cause of action.

(c)

State Flexibility

No provision of this title shall be construed to preempt—

(1)

any State law (whether effective before, on, or after the date of the enactment of this Act) that specifies a particular monetary amount of compensatory or punitive damages (or the total amount of damages) that may be awarded in a health care lawsuit, regardless of whether such monetary amount is greater or lesser than is provided for under this title, notwithstanding section 204(a); or

(2)

any defense available to a party in a health care lawsuit under any other provision of State or Federal law.

210.

Applicability; effective date

This title shall apply to any health care lawsuit brought in a Federal or State court, or subject to an alternative dispute resolution system, that is initiated on or after the date of the enactment of this Act, except that any health care lawsuit arising from an injury occurring prior to the date of the enactment of this Act shall be governed by the applicable statute of limitations provisions in effect at the time the injury occurred.

III

Allowing People To Purchase Health Insurance Across State Lines

301.

Specification of constitutional authority for enactment of law

This title is enacted pursuant to the power granted Congress under article I, section 8, clause 3, of the United States Constitution.

302.

Findings

Congress finds the following:

(1)

The application of numerous and significant variations in State law and the implementation of the Patient Protection and Affordable Care Act impacts the ability of insurers to offer, and individuals to obtain, affordable individual health insurance coverage, thereby impeding commerce in individual health insurance coverage.

(2)

Mandates for health care coverage established by title I of the Patient Protection and Affordable Care Act will significantly elevate health insurance costs beyond State and Federal ability to pay.

(3)

Individual health insurance coverage is increasingly offered through the Internet, other electronic means, and by mail, all of which are inherently part of interstate commerce.

(4)

In response to these issues, it is appropriate to encourage increased efficiency in the offering of individual health insurance coverage through a collaborative approach by the States in regulating this coverage.

(5)

The establishment of risk-retention groups has provided a successful model for the sale of insurance across State lines, as the acts establishing those groups allow insurance to be sold in multiple States but regulated by a single State.

303.

Cooperative governing of individual health insurance coverage

(a)

In General

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

D

Cooperative Governing of Individual Health Insurance Coverage

2795.

Definitions

In this part:

(1)

Primary state

The term primary State means, with respect to individual health insurance coverage offered by a health insurance issuer, the State designated by the issuer as the State whose covered laws shall govern the health insurance issuer in the sale of such coverage under this part. An issuer, with respect to a particular policy, may only designate one such State as its primary State with respect to all such coverage it offers. Such an issuer may not change the designated primary State with respect to individual health insurance coverage once the policy is issued, except that such a change may be made upon renewal of the policy. With respect to such designated State, the issuer is deemed to be doing business in that State.

(2)

Secondary state

The term secondary State means, with respect to individual health insurance coverage offered by a health insurance issuer, any State that is not the primary State. In the case of a health insurance issuer that is selling a policy in, or to a resident of, a secondary State, the issuer is deemed to be doing business in that secondary State.

(3)

Health insurance issuer

The term health insurance issuer has the meaning given such term in section 2791(b)(2), except that such an issuer must be licensed in the primary State and be qualified to sell individual health insurance coverage in that State.

(4)

Individual health insurance coverage

The term individual health insurance coverage means health insurance coverage offered in the individual market, as defined in section 2791(e)(1).

(5)

Applicable state authority

The term applicable State authority means, with respect to a health insurance issuer in a State, the State insurance commissioner or official or officials designated by the State to enforce the requirements of this title for the State with respect to the issuer.

(6)

Hazardous financial condition

The term hazardous financial condition means that, based on its present or reasonably anticipated financial condition, a health insurance issuer is unlikely to be able—

(A)

to meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or

(B)

to pay other obligations in the normal course of business.

(7)

Covered laws

(A)

In general

The term covered laws means the laws, rules, regulations, agreements, and orders governing the insurance business pertaining to—

(i)

individual health insurance coverage issued by a health insurance issuer;

(ii)

the offer, sale, rating (including medical underwriting), renewal, and issuance of individual health insurance coverage to an individual;

(iii)

the provision to an individual in relation to individual health insurance coverage of health care and insurance related services;

(iv)

the provision to an individual in relation to individual health insurance coverage of management, operations, and investment activities of a health insurance issuer; and

(v)

the provision to an individual in relation to individual health insurance coverage of loss control and claims administration for a health insurance issuer with respect to liability for which the issuer provides insurance.

(B)

Exception

Such term does not include any law, rule, regulation, agreement, or order governing the use of care or cost management techniques, including any requirement related to provider contracting, network access or adequacy, health care data collection, or quality assurance.

(8)

State

The term State means the 50 States and includes the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.

(9)

Unfair claims settlement practices

The term unfair claims settlement practices means only the following practices:

(A)

Knowingly misrepresenting to claimants and insured individuals relevant facts or policy provisions relating to coverage at issue.

(B)

Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under policies.

(C)

Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under policies.

(D)

Failing to effectuate prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear.

(E)

Refusing to pay claims without conducting a reasonable investigation.

(F)

Failing to affirm or deny coverage of claims within a reasonable period of time after having completed an investigation related to those claims.

(G)

A pattern or practice of compelling insured individuals or their beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them.

(H)

A pattern or practice of attempting to settle or settling claims for less than the amount that a reasonable person would believe the insured individual or his or her beneficiary was entitled by reference to written or printed advertising material accompanying or made part of an application.

(I)

Attempting to settle or settling claims on the basis of an application that was materially altered without notice to, or knowledge or consent of, the insured.

(J)

Failing to provide forms necessary to present claims within 15 calendar days of a requests with reasonable explanations regarding their use.

(K)

Attempting to cancel a policy in less time than that prescribed in the policy or by the law of the primary State.

(10)

Fraud and abuse

The term fraud and abuse means an act or omission committed by a person who, knowingly and with intent to defraud, commits, or conceals any material information concerning, one or more of the following:

(A)

Presenting, causing to be presented or preparing with knowledge or belief that it will be presented to or by an insurer, a reinsurer, broker or its agent, false information as part of, in support of or concerning a fact material to one or more of the following:

(i)

An application for the issuance or renewal of an insurance policy or reinsurance contract.

(ii)

The rating of an insurance policy or reinsurance contract.

(iii)

A claim for payment or benefit pursuant to an insurance policy or reinsurance contract.

(iv)

Premiums paid on an insurance policy or reinsurance contract.

(v)

Payments made in accordance with the terms of an insurance policy or reinsurance contract.

(vi)

A document filed with the commissioner or the chief insurance regulatory official of another jurisdiction.

(vii)

The financial condition of an insurer or reinsurer.

(viii)

The formation, acquisition, merger, reconsolidation, dissolution or withdrawal from one or more lines of insurance or reinsurance in all or part of a State by an insurer or reinsurer.

(ix)

The issuance of written evidence of insurance.

(x)

The reinstatement of an insurance policy.

(B)

Solicitation or acceptance of new or renewal insurance risks on behalf of an insurer reinsurer or other person engaged in the business of insurance by a person who knows or should know that the insurer or other person responsible for the risk is insolvent at the time of the transaction.

(C)

Transaction of the business of insurance in violation of laws requiring a license, certificate of authority or other legal authority for the transaction of the business of insurance.

(D)

Attempt to commit, aiding or abetting in the commission of, or conspiracy to commit the acts or omissions specified in this paragraph.

2796.

Application of law

(a)

In General

The covered laws of the primary State shall apply to individual health insurance coverage offered by a health insurance issuer in the primary State and in any secondary State, but only if the coverage and issuer comply with the conditions of this section with respect to the offering of coverage in any secondary State.

(b)

Exemptions From Covered Laws in a Secondary State

Except as provided in this section, a health insurance issuer with respect to its offer, sale, rating (including medical underwriting), renewal, and issuance of individual health insurance coverage in any secondary State is exempt from any covered laws of the secondary State (and any rules, regulations, agreements, or orders sought or issued by such State under or related to such covered laws) to the extent that such laws would—

(1)

make unlawful, or regulate, directly or indirectly, the operation of the health insurance issuer operating in the secondary State, except that any secondary State may require such an issuer—

(A)

to pay, on a nondiscriminatory basis, applicable premium and other taxes (including high risk pool assessments) which are levied on insurers and surplus lines insurers, brokers, or policyholders under the laws of the State;

(B)

to register with and designate the State insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process;

(C)

to submit to an examination of its financial condition by the State insurance commissioner in any State in which the issuer is doing business to determine the issuer’s financial condition, if—

(i)

the State insurance commissioner of the primary State has not done an examination within the period recommended by the National Association of Insurance Commissioners; and

(ii)

any such examination is conducted in accordance with the examiners’ handbook of the National Association of Insurance Commissioners and is coordinated to avoid unjustified duplication and unjustified repetition;

(D)

to comply with a lawful order issued—

(i)

in a delinquency proceeding commenced by the State insurance commissioner if there has been a finding of financial impairment under subparagraph (C); or

(ii)

in a voluntary dissolution proceeding;

(E)

to comply with an injunction issued by a court of competent jurisdiction, upon a petition by the State insurance commissioner alleging that the issuer is in hazardous financial condition;

(F)

to participate, on a nondiscriminatory basis, in any insurance insolvency guaranty association or similar association to which a health insurance issuer in the State is required to belong;

(G)

to comply with any State law regarding fraud and abuse (as defined in section 2795(10)), except that if the State seeks an injunction regarding the conduct described in this subparagraph, such injunction must be obtained from a court of competent jurisdiction;

(H)

to comply with any State law regarding unfair claims settlement practices (as defined in section 2795(9)); or

(I)

to comply with the applicable requirements for independent review under section 2798 with respect to coverage offered in the State;

(2)

require any individual health insurance coverage issued by the issuer to be countersigned by an insurance agent or broker residing in that Secondary State; or

(3)

otherwise discriminate against the issuer issuing insurance in both the primary State and in any secondary State.

(c)

Clear and Conspicuous Disclosure

A health insurance issuer shall provide the following notice, in 12-point bold type, in any insurance coverage offered in a secondary State under this part by such a health insurance issuer and at renewal of the policy, with the 5 blank spaces therein being appropriately filled with the name of the health insurance issuer, the name of primary State, the name of the secondary State, the name of the secondary State, and the name of the secondary State, respectively, for the coverage concerned:

Notice

This policy is issued by _____ and is governed by the laws and regulations of the State of _____, and it has met all the laws of that State as determined by that State’s Department of Insurance. This policy may be less expensive than others because it is not subject to all of the insurance laws and regulations of the State of _____, including coverage of some services or benefits mandated by the law of the State of _____. Additionally, this policy is not subject to all of the consumer protection laws or restrictions on rate changes of the State of _____. As with all insurance products, before purchasing this policy, you should carefully review the policy and determine what health care services the policy covers and what benefits it provides, including any exclusions, limitations, or conditions for such services or benefits.

.

(d)

Prohibition on Certain Reclassifications and Premium Increases

(1)

In general

For purposes of this section, a health insurance issuer that provides individual health insurance coverage to an individual under this part in a primary or secondary State may not upon renewal—

(A)

move or reclassify the individual insured under the health insurance coverage from the class such individual is in at the time of issue of the contract based on the health-status related factors of the individual; or

(B)

increase the premiums assessed the individual for such coverage based on a health status-related factor or change of a health status-related factor or the past or prospective claim experience of the insured individual.

(2)

Construction

Nothing in paragraph (1) shall be construed to prohibit a health insurance issuer—

(A)

from terminating or discontinuing coverage or a class of coverage in accordance with subsections (b) and (c) of section 2742;

(B)

from raising premium rates for all policy holders within a class based on claims experience;

(C)

from changing premiums or offering discounted premiums to individuals who engage in wellness activities at intervals prescribed by the issuer, if such premium changes or incentives—

(i)

are disclosed to the consumer in the insurance contract;

(ii)

are based on specific wellness activities that are not applicable to all individuals; and

(iii)

are not obtainable by all individuals to whom coverage is offered;

(D)

from reinstating lapsed coverage; or

(E)

from retroactively adjusting the rates charged an insured individual if the initial rates were set based on material misrepresentation by the individual at the time of issue.

(e)

Prior Offering of Policy in Primary State

A health insurance issuer may not offer for sale individual health insurance coverage in a secondary State unless that coverage is currently offered for sale in the primary State.

(f)

Licensing of Agents or Brokers for Health Insurance Issuers

Any State may require that a person acting, or offering to act, as an agent or broker for a health insurance issuer with respect to the offering of individual health insurance coverage obtain a license from that State, with commissions or other compensation subject to the provisions of the laws of that State, except that a State may not impose any qualification or requirement which discriminates against a nonresident agent or broker.

(g)

Documents for Submission to State Insurance Commissioner

Each health insurance issuer issuing individual health insurance coverage in both primary and secondary States shall submit—

(1)

to the insurance commissioner of each State in which it intends to offer such coverage, before it may offer individual health insurance coverage in such State—

(A)

a copy of the plan of operation or feasibility study or any similar statement of the policy being offered and its coverage (which shall include the name of its primary State and its principal place of business);

(B)

written notice of any change in its designation of its primary State; and

(C)

written notice from the issuer of the issuer’s compliance with all the laws of the primary State; and

(2)

to the insurance commissioner of each secondary State in which it offers individual health insurance coverage, a copy of the issuer’s quarterly financial statement submitted to the primary State, which statement shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by—

(A)

a member of the American Academy of Actuaries; or

(B)

a qualified loss reserve specialist.

(h)

Power of Courts To Enjoin Conduct

Nothing in this section shall be construed to affect the authority of any Federal or State court to enjoin—

(1)

the solicitation or sale of individual health insurance coverage by a health insurance issuer to any person or group who is not eligible for such insurance; or

(2)

the solicitation or sale of individual health insurance coverage that violates the requirements of the law of a secondary State which are described in subparagraphs (A) through (H) of section 2796(b)(1).

(i)

Power of Secondary States To Take Administrative Action

Nothing in this section shall be construed to affect the authority of any State to enjoin conduct in violation of that State’s laws described in section 2796(b)(1).

(j)

State Powers To Enforce State Laws

(1)

In general

Subject to the provisions of subsection (b)(1)(G) (relating to injunctions) and paragraph (2), nothing in this section shall be construed to affect the authority of any State to make use of any of its powers to enforce the laws of such State with respect to which a health insurance issuer is not exempt under subsection (b).

(2)

Courts of competent jurisdiction

If a State seeks an injunction regarding the conduct described in paragraphs (1) and (2) of subsection (h), such injunction must be obtained from a Federal or State court of competent jurisdiction.

(k)

States’ Authority To Sue

Nothing in this section shall affect the authority of any State to bring action in any Federal or State court.

(l)

Generally Applicable Laws

Nothing in this section shall be construed to affect the applicability of State laws generally applicable to persons or corporations.

(m)

Guaranteed Availability of Coverage to HIPAA Eligible Individuals

To the extent that a health insurance issuer is offering coverage in a primary State that does not accommodate residents of secondary States or does not provide a working mechanism for residents of a secondary State, and the issuer is offering coverage under this part in such secondary State which has not adopted a qualified high risk pool as its acceptable alternative mechanism (as defined in section 2744(c)(2)), the issuer shall, with respect to any individual health insurance coverage offered in a secondary State under this part, comply with the guaranteed availability requirements for eligible individuals in section 2741.

2797.

Primary State must meet Federal floor before issuer may sell into secondary States

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

2798.

Independent external appeals procedures

(a)

Right to External Appeal

A health insurance issuer may not offer, sell, or issue individual health insurance coverage in a secondary State under the provisions of this title unless—

(1)

both the secondary State and the primary State have legislation or regulations in place establishing an independent review process for individuals who are covered by individual health insurance coverage, or

(2)

in any case in which the requirements of subparagraph (A) are not met with respect to the either of such States, the issuer provides an independent review mechanism substantially identical (as determined by the applicable State authority of such State) to that prescribed in the Health Carrier External Review Model Act of the National Association of Insurance Commissioners for all individuals who purchase insurance coverage under the terms of this part, except that, under such mechanism, the review is conducted by an independent medical reviewer, or a panel of such reviewers, with respect to whom the requirements of subsection (b) are met.

(b)

Qualifications of Independent Medical Reviewers

In the case of any independent review mechanism referred to in subsection (a)(2)—

(1)

In general

In referring a denial of a claim to an independent medical reviewer, or to any panel of such reviewers, to conduct independent medical review, the issuer shall ensure that—

(A)

each independent medical reviewer meets the qualifications described in paragraphs (2) and (3);

(B)

with respect to each review, each reviewer meets the requirements of paragraph (4) and the reviewer, or at least 1 reviewer on the panel, meets the requirements described in paragraph (5); and

(C)

compensation provided by the issuer to each reviewer is consistent with paragraph (6).

(2)

Licensure and expertise

Each independent medical reviewer shall be a physician (allopathic or osteopathic) or health care professional who—

(A)

is appropriately credentialed or licensed in 1 or more States to deliver health care services; and

(B)

typically treats the condition, makes the diagnosis, or provides the type of treatment under review.

(3)

Independence

(A)

In general

Subject to subparagraph (B), each independent medical reviewer in a case shall—

(i)

not be a related party (as defined in paragraph (7));

(ii)

not have a material familial, financial, or professional relationship with such a party; and

(iii)

not otherwise have a conflict of interest with such a party (as determined under regulations).

(B)

Exception

Nothing in subparagraph (A) shall be construed to—

(i)

prohibit an individual, solely on the basis of affiliation with the issuer, from serving as an independent medical reviewer if—

(I)

a non-affiliated individual is not reasonably available;

(II)

the affiliated individual is not involved in the provision of items or services in the case under review;

(III)

the fact of such an affiliation is disclosed to the issuer and the enrollee (or authorized representative) and neither party objects; and

(IV)

the affiliated individual is not an employee of the issuer and does not provide services exclusively or primarily to or on behalf of the issuer;

(ii)

prohibit an individual who has staff privileges at the institution where the treatment involved takes place from serving as an independent medical reviewer merely on the basis of such affiliation if the affiliation is disclosed to the issuer and the enrollee (or authorized representative), and neither party objects; or

(iii)

prohibit receipt of compensation by an independent medical reviewer from an entity if the compensation is provided consistent with paragraph (6).

(4)

Practicing health care professional in same field

(A)

In general

In a case involving treatment, or the provision of items or services—

(i)

by a physician, a reviewer shall be a practicing physician (allopathic or osteopathic) of the same or similar specialty, as a physician who, acting within the appropriate scope of practice within the State in which the service is provided or rendered, typically treats the condition, makes the diagnosis, or provides the type of treatment under review; or

(ii)

by a non-physician health care professional, the reviewer, or at least 1 member of the review panel, shall be a practicing non-physician health care professional of the same or similar specialty as the non-physician health care professional who, acting within the appropriate scope of practice within the State in which the service is provided or rendered, typically treats the condition, makes the diagnosis, or provides the type of treatment under review.

(B)

Practicing defined

For purposes of this paragraph, the term practicing means, with respect to an individual who is a physician or other health care professional, that the individual provides health care services to individual patients on average at least 2 days per week.

(5)

Pediatric expertise

In the case of an external review relating to a child, a reviewer shall have expertise under paragraph (2) in pediatrics.

(6)

Limitations on reviewer compensation

Compensation provided by the issuer to an independent medical reviewer in connection with a review under this section shall—

(A)

not exceed a reasonable level; and

(B)

not be contingent on the decision rendered by the reviewer.

(7)

Related party defined

For purposes of this section, the term related party means, with respect to a denial of a claim under a coverage relating to an enrollee, any of the following:

(A)

The issuer involved, or any fiduciary, officer, director, or employee of the issuer.

(B)

The enrollee (or authorized representative).

(C)

The health care professional that provides the items or services involved in the denial.

(D)

The institution at which the items or services (or treatment) involved in the denial are provided.

(E)

The manufacturer of any drug or other item that is included in the items or services involved in the denial.

(F)

Any other party determined under any regulations to have a substantial interest in the denial involved.

(8)

Definitions

For purposes of this subsection:

(A)

Enrollee

The term enrollee means, with respect to health insurance coverage offered by a health insurance issuer, an individual enrolled with the issuer to receive such coverage.

(B)

Health care professional

The term health care professional means an individual who is licensed, accredited, or certified under State law to provide specified health care services and who is operating within the scope of such licensure, accreditation, or certification.

2799.

Enforcement

(a)

In General

Subject to subsection (b), with respect to specific individual health insurance coverage the primary State for such coverage has sole jurisdiction to enforce the primary State’s covered laws in the primary State and any secondary State.

(b)

Secondary State’s Authority

Nothing in subsection (a) shall be construed to affect the authority of a secondary State to enforce its laws as set forth in the exception specified in section 2796(b)(1).

(c)

Court Interpretation

In reviewing action initiated by the applicable secondary State authority, the court of competent jurisdiction shall apply the covered laws of the primary State.

(d)

Notice of Compliance Failure

In the case of individual health insurance coverage offered in a secondary State that fails to comply with the covered laws of the primary State, the applicable State authority of the secondary State may notify the applicable State authority of the primary State.

.

(b)

Effective Date

The amendment made by subsection (a) shall apply to individual health insurance coverage offered, issued, or sold after the date that is one year after the date of the enactment of this Act.

(c)

GAO Ongoing Study and Reports

(1)

Study

The Comptroller General of the United States shall conduct an ongoing study concerning the effect of the amendment made by subsection (a) on—

(A)

the number of uninsured and under-insured;

(B)

the availability and cost of health insurance policies for individuals with pre-existing medical conditions;

(C)

the availability and cost of health insurance policies generally;

(D)

the elimination or reduction of different types of benefits under health insurance policies offered in different States; and

(E)

cases of fraud or abuse relating to health insurance coverage offered under such amendment and the resolution of such cases.

(2)

Annual reports

The Comptroller General shall submit to Congress an annual report, after the end of each of the 5 years following the effective date of the amendment made by subsection (a), on the ongoing study conducted under paragraph (1).

304.

Severability

If any provision of this title or the application of such provision to any person or circumstance is held to be unconstitutional, the remainder of this title and the application of the provisions of such to any other person or circumstance shall not be affected.

IV

Increasing Transparency and Competition in Healthcare

401.

Access to Medicare data to improve transparency

Section 1874(e) of the Social Security Act (42 U.S.C. 1395kk(e)), as added by section 10332 of Public Law 111–148, is amended to read as follows:

(e)

Availability of Medicare data

(1)

In general

The Secretary shall make available to qualified entities (as defined in paragraph (2)) data described in paragraph (3) for the purpose of analyzing cost and quality data and improving transparency in the marketplace.

(2)

Qualified entities

For purposes of this subsection, the term qualified entity means either of the following:

(A)

Designated State all-payer claims database

A State all-payer claims database that—

(i)

collects and combines claims information from public and private payers and makes such data available to subscribers; and

(ii)

has been designated (in a manner recognized by the Secretary) as meeting requirements for receipt of data under this subsection.

A State all-payer claims database that is in operation as of December 1, 2011, and that is participating as of such date in a national federation of government, private, non-profit, and academic organizations focused on improving the development and deployment of State-based all payer claims databases shall be treated (for the period ending 1 year after the date of establishment of designation criteria under clause (ii) as meeting the requirement of such clause.
(B)

Other qualified entity

A public or private entity that—

(i)

is qualified (as determined by the Secretary) to use claims data to evaluate the performance of providers of services and suppliers on measures of quality, efficiency, effectiveness, and resource use; and

(ii)

agrees to meet the other requirements described in paragraph (4) and meets such other requirements as the Secretary may specify, such as ensuring security of data.

(3)

Data described

(A)

In general

The data described in this paragraph are standardized extracts of claims data under parts A, B and D for items and services furnished under such parts for one or more geographic areas and time periods requested by a qualified entity. The Secretary shall take such actions as the Secretary deems necessary to protect the identity of individuals entitled to or enrolled for benefits under such parts.

(B)

Standardized extracts

The standardized extracts described in this paragraph shall be provided in a format that is agreed upon by an outside entity specified by the Secretary with experience gathering and analyzing claims data from payers and with a sufficient number of participants from State all-payer claims databases.

(C)

Geographic areas

Geographic areas under subparagraph (A) may include individual States, groups of States, or nationwide, if sufficient claims from other public and private payers are produced for such areas.

(4)

Requirements

(A)

Specification of uses and methodologies

(i)

In general

A qualified entity requesting data under this subsection shall—

(I)

enter a data use agreement, developed by the Secretary specifically for the purposes of this subsection, governing applicable uses and disclosures of data and that aligns all activities of qualified entities under this subsection;

(II)

submit to the Secretary a description of the type of activities for which such qualified entity will use such data, which may include population health management, disease tracking, provider quality improvement, and improving value in the health system;

(III)

commit to use, if available, nationally approved or endorsed measures to compare provider and supplier performance or, if not available, a transparent process as to the measures for such comparison;

(IV)

include data made available under this subsection, with sufficient claims data from other sources, in the evaluation and comparison of provider and supplier performance; and

(V)

make reports available to health care consumers consistent with paragraph (5)(E).

(ii)

Availability of data

A qualified entity requesting data under this subsection may make such data available to providers of services and suppliers, including in the format of a report for such a provider or supplier developed from a search of a State all-payer claims database. The entity may charge such providers and suppliers a reasonable fee for making such data available.

(B)

Fee

Data described in paragraph (3) shall be made available to a qualified entity under this subsection at a fee equal to the cost of making such data available. Such fee shall be pro-rated across the entire agreement period between the qualified entity and the Secretary . Any fee collected pursuant to this subparagraph shall be deposited into the Federal Supplementary Medical Insurance Trust Fund under section 1841.

(C)

Limitation of uses

Data released to a qualified entity under this subsection shall not be subject to discovery or admission as evidence in judicial or administrative proceedings without consent of the applicable provider of services or supplier.

(5)

Study and report by the Institute of Medicine

(A)

In general

The Secretary may enter into an agreement with the Institute of Medicine of the National Academies to conduct a study as to which service data under parts A and B would be most valuable and actionable for consumers in assessing the performance of providers of services and suppliers.

(B)

Report

An agreement entered into under subparagraph (A) shall provide for the Institute of Medicine to submit to the Secretary and to Congress a report containing the results of the study and recommendations for providing such information to consumers within one year after the date of the enactment of this paragraph.

(C)

Role of qualified entities in developing reports for consumers

Before making such recommendations, qualified entities shall have an opportunity to provide input to the Institute of Medicine as to the type of information that should be conveyed to consumers.

(D)

Development and implementation of reports for consumers

Based on the report under subparagraph (B) and input from qualified entities, the Secretary shall develop requirements for reports made available to consumers under this subsection with the goal of increasing health care transparency.

(E)

Reports to consumers

Reports consistent with such requirements shall be made available to consumers within one year of the completion of such report.

.

V

Expanding the Effectiveness of Health Savings Accounts

501.

Amendment of 1986 Code

Except as otherwise expressly provided, whenever in this title an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

A

Provisions relating to tax-Preferred health accounts

511.

Allow both spouses to make catch-up contributions to the same HSA account

(a)

In general

Paragraph (3) of section 223(b) is amended by adding at the end the following new subparagraph:

(C)

Special rule where both spouses are eligible individuals with 1 account

If—

(i)

an individual and the individual's spouse have both attained age 55 before the close of the taxable year, and

(ii)

the spouse is not an account beneficiary of a health savings account as of the close of such year,

the additional contribution amount shall be 200 percent of the amount otherwise determined under subparagraph (B).

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

512.

Provisions relating to Medicare

(a)

Individuals over age 65 only enrolled in Medicare Part A

Paragraph (7) of section 223(b) is amended by adding at the end the following: This paragraph shall not apply to any individual during any period for which the individual's only entitlement to such benefits is an entitlement to hospital insurance benefits under part A of title XVIII of such Act pursuant to an enrollment for such hospital insurance benefits under section 226(a)(1) of such Act..

(b)

Medicare beneficiaries participating in Medicare advantage MSA may contribute their own money to their MSA

Subsection (b) of section 138 is amended by striking paragraph (2) and by redesignating paragraphs (3) and (4) as paragraphs (2) and (3), respectively.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

513.

Individuals eligible for veterans benefits for a service-connected disability

(a)

In general

Paragraph (1) of section 223(c) is amended by adding at the end the following new subparagraph:

(C)

Special rule for individuals eligible for certain veterans benefits

For purposes of subparagraph (A)(ii), an individual shall not be treated as covered under a health plan described in such subparagraph merely because the individual receives periodic hospital care or medical services for a service-connected disability under any law administered by the Secretary of Veterans Affairs but only if the individual is not eligible to receive such care or services for any condition other than a service-connected disability.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

514.

Individuals eligible for Indian Health Service assistance

(a)

In general

Paragraph (1) of section 223(c), as amended by section 612, is amended by adding at the end the following new subparagraph:

(D)

Special rule for individuals eligible for assistance under Indian Health Service programs

For purposes of subparagraph (A)(ii), an individual shall not be treated as covered under a health plan described in such subparagraph merely because the individual receives hospital care or medical services under a medical care program of the Indian Health Service or of a tribal organization.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

515.

Individuals eligible for TRICARE coverage

(a)

In general

Paragraph (1) of section 223(c), as amended by sections 613 and 614, is amended by adding at the end the following new subparagraph:

(E)

Special rule for individuals eligible for assistance under tricare

For purposes of subparagraph (A)(ii), an individual shall not be treated as covered under a health plan described in such subparagraph merely because the individual is eligible to receive hospital care, medical services, or prescription drugs under TRICARE Extra or TRICARE Standard and such individual is not enrolled in TRICARE Prime.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

516.

Health FSA carryforwards

(a)

In general

Section 125 is amended by redesignating subsections (i) and (j) as subsections (j) and (k), respectively, and by inserting after subsection (h) the following new subsection:

(i)

Special rules applicable to health flexible spending arrangements

(1)

In general

For purposes of this title, a plan or other arrangement shall not fail to be treated as a health flexible spending or similar arrangement solely because under the plan or arrangement a participant is permitted access to any unused balance in the participant’s accounts under such plan or arrangement in the manner provided under paragraph (2).

(2)

Carryforward of unused benefits in health arrangements

(A)

In general

A plan or arrangement may permit a participant in a health flexible spending arrangement to elect to carry forward any aggregate unused balances in the participant’s accounts under such arrangement as of the close of any year to the succeeding year. Such carryforward shall be treated as having occurred within 30 days of the close of the year.

(B)

Dollar limit on carryforwards

(i)

In general

The amount which a participant may elect to carry forward under subparagraph (A) from any year shall not exceed $500. For purposes of this paragraph, all plans and arrangements maintained by an employer or any related person shall be treated as 1 plan.

(ii)

Cost-of-living adjustment

In the case of any taxable year beginning in a calendar year after 2011, the $500 amount under clause (i) shall be increased by an amount equal to—

(I)

$500, multiplied by

(II)

the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting 2010 for 1992 in subparagraph (B) thereof.

If any dollar amount as increased under this clause is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100.
(C)

Exclusion from gross income

No amount shall be required to be included in gross income under this chapter by reason of any carryforward under this paragraph.

(D)

Coordination with limits

The maximum amount which may be contributed to a health flexible spending arrangement for any year to which an unused amount is carried under this paragraph shall be reduced by such amount.

(3)

Terms relating to flexible spending arrangements

(A)

Flexible spending arrangements

For purposes of this subsection, a flexible spending arrangement is a benefit program which provides employees with coverage under which specified incurred expenses may be reimbursed (subject to reimbursement maximums and other reasonable conditions).

(B)

Health arrangements

The term health flexible spending arrangement means any flexible spending arrangement (or portion thereof) which provides payments for expenses incurred for medical care (as defined in section 213(d)).

.

(b)

Conforming amendments

(1)

The heading for section 125 of the Internal Revenue Code of 1986 is amended by inserting and health flexible spending arrangements after plans.

(2)

The item relating to section 125 in the table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting and health flexible spending arrangements after plans.

(c)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.

517.

FSA and HRA interaction with HSAs

(a)

Eligible individuals include FSA and HRA participants

Subparagraph (B) of section 223(c)(1) is amended—

(1)

by striking and at the end of clause (ii),

(2)

by striking the period at the end of clause (iii) and inserting , and, and

(3)

by inserting after clause (iii) the following new clause:

(iv)

coverage under a health flexible spending arrangement or a health reimbursement arrangement in the plan year a qualified HSA distribution as described in section 106(e) is made on behalf of the individual if after the qualified HSA distribution is made and for the remaining duration of the plan year, the coverage provided under the health flexible spending arrangement or health reimbursement arrangement is converted to—

(I)

coverage that does not pay or reimburse any medical expense incurred before the minimum annual deductible under paragraph (2)(A)(i) (prorated for the period occurring after the qualified HSA distribution is made) is satisfied,

(II)

coverage that, after the qualified HSA distribution is made, does not pay or reimburse any medical expense incurred after the qualified HSA distribution is made other than preventive care as defined in paragraph (2)(C),

(III)

coverage that, after the qualified HSA distribution is made, pays or reimburses benefits for coverage described in clause (ii) (but not through insurance or for long-term care services),

(IV)

coverage that, after the qualified HSA distribution is made, pays or reimburses benefits for permitted insurance or coverage described in clause (ii) (but not for long-term care services),

(V)

coverage that, after the qualified HSA distribution is made, pays or reimburses only those medical expenses incurred after an individual’s retirement (and no expenses incurred before retirement), or

(VI)

coverage that, after the qualified HSA distribution is made, is suspended, pursuant to an election made on or before the date the individual elects a qualified HSA distribution or, if later, on the date of the individual enrolls in a high deductible health plan, that does not pay or reimburse, at any time, any medical expense incurred during the suspension period except as defined in the preceding subclauses of this clause.

.

(b)

Qualified HSA distribution shall not affect flexible spending arrangement

Paragraph (1) of section 106(e) is amended to read as follows:

(1)

In general

A plan shall not fail to be treated as a health flexible spending arrangement under this section, section 105, or section 125, or as a health reimbursement arrangement under this section or section 105, merely because such plan provides for a qualified HSA distribution.

.

(c)

FSA balances at year end shall not forfeit

Paragraph (2) of section 125(d) is amended by adding at the end the following new subparagraph:

(E)

Exception for qualified HSA distributions

Subparagraph (A) shall not apply to the extent that there is an amount remaining in a health flexible spending account at the end of a plan year that an individual elects to contribute to a health savings account pursuant to a qualified HSA distribution (as defined in section 106(e)(2)).

.

(d)

Simplification of limitations on FSA and HRA rollovers

Paragraph (2) of section 106(e) is amended to read as follows:

(2)

Qualified HSA distribution

(A)

In general

The term qualified HSA distribution means a distribution from a health flexible spending arrangement or health reimbursement arrangement to the extent that such distribution does not exceed the lesser of—

(i)

the balance in such arrangement as of the date of such distribution, or

(ii)

the amount determined under subparagraph (B).

Such term shall not include more than 1 distribution with respect to any arrangement.
(B)

Dollar limitations

(i)

Distributions from a health flexible spending arrangement

A qualified HSA distribution from a health flexible spending arrangement shall not exceed the applicable amount.

(ii)

Distributions from a health reimbursement arrangement

A qualified HSA distribution from a health reimbursement arrangement shall not exceed—

(I)

the applicable amount divided by 12, multiplied by

(II)

the number of months during which the individual is a participant in the health reimbursement arrangement.

(iii)

Applicable amount

For purposes of this subparagraph, the applicable amount is—

(I)

$2,250 in the case of an eligible individual who has self-only coverage under a high deductible health plan at the time of such distribution, and

(II)

$4,500 in the case of an eligible individual who has family coverage under a high deductible health plan at the time of such distribution.

.

(e)

Elimination of additional tax for failure To maintain high deductible health plan coverage

Subsection (e) of section 106 is amended—

(1)

by striking paragraph (3) and redesignating paragraphs (4) and (5) as paragraphs (3) and (4), respectively, and

(2)

by striking subparagraph (A) of paragraph (3), as so redesignated, and redesignating subparagraphs (B) and (C) of such paragraph as subparagraphs (A) and (B) thereof, respectively.

(f)

Limited purpose FSAs and HRAs

Subsection (e) of section 106, as amended by this section, is amended by adding at the end the following new paragraph:

(5)

Limited purpose FSAs and HRAs

A plan shall not fail to be a health flexible spending arrangement or health reimbursement arrangement under this section or section 105 merely because the plan converts coverage for individuals who enroll in a high deductible health plan described in section 223(c)(2) to coverage described in section 223(c)(1)(B)(iv). Coverage for such individuals may be converted as of the date of enrollment in the high deductible health plan, without regard to the period of coverage under the health flexible spending arrangement or health reimbursement arrangement, and without requiring any change in coverage to individuals who do not enroll in a high deductible health plan.

.

(g)

Distribution amounts adjusted for cost-of-Living

Subsection (e) of section 106, as amended by this section, is amended by adding at the end the following new paragraph:

(6)

Cost-of-living adjustment

(A)

In general

In the case of any taxable year beginning after December 31, 2011, each of the dollar amounts in paragraph (2)(B)(iii) shall be increased by an amount equal to such dollar amount, multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins by substituting calendar year 2010 for calendar year 1992 in subparagraph (B) thereof.

(B)

Rounding

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

.

(h)

Disclaimer of disqualifying coverage

Subparagraph (B) of section 223(c)(1), as amended by this section, is amended—

(1)

by striking and at the end of clause (iii),

(2)

by striking the period at the end of clause (iv) and inserting , and, and

(3)

by inserting after clause (iv) the following new clause:

(v)

any coverage (including prospective coverage) under a health plan that is not a high deductible health plan which is disclaimed in writing, at the time of the creation or organization of the health savings account, including by execution of a trust described in subsection (d)(1) through a governing instrument that includes such a disclaimer, or by acceptance of an amendment to such a trust that includes such a disclaimer.

.

(i)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

518.

Allowance of distributions for prescription and over-the-counter medicines and drugs

(a)

Reference to repeal of distributions for medicine qualified only if for prescribed drug or insulin

Section 101 of this Act provides for the repeal of section 9003 of the Patient Protection and Affordable Care Act (Public Law 111–148) and the amendments made by such section. The Internal Revenue Code of 1986 shall be applied as if such section 9003 and amendments had never been enacted.

(b)

Allowance of distributions for all medicines and drugs

(1)

HSAs

Subparagraph (A) of section 223(d)(2) is amended by adding at the end the following: Such term shall include an amount paid for any prescription or over-the-counter medicine or drug..

(2)

Archer MSAs

Subparagraph (A) of section 220(d)(2) is amended by adding at the end the following: Such term shall include an amount paid for any prescription or over-the-counter medicine or drug..

(3)

Health flexible spending arrangements and health reimbursement arrangements

Section 106 is amended by adding at the end the following new subsection:

(f)

Reimbursements for all medicines and drugs

For purposes of this section and section 105, reimbursement for expenses incurred for any prescription or over-the-counter medicine or drug shall be treated as a reimbursement for medical expenses.

.

(4)

Effective dates

(A)

Distributions from savings accounts

The amendments made by paragraphs (1) and (2) shall apply to amounts paid with respect to taxable years beginning after December 31, 2009.

(B)

Reimbursements

The amendment made by paragraph (3) shall apply to expenses incurred with respect to taxable years beginning after December 31, 2009.

519.

Purchase of health insurance from HSA account

(a)

In general

Paragraph (2) of section 223(d) is amended to read as follows:

(2)

Qualified medical expenses

(A)

In general

The term qualified medical expenses means, with respect to an account beneficiary, amounts paid by such beneficiary for medical care (as defined in section 213(d)) for any individual covered by a high deductible health plan of the account beneficiary, but only to the extent such amounts are not compensated for by insurance or otherwise.

(B)

Health insurance may not be purchased from account

Except as provided in subparagraph (C), subparagraph (A) shall not apply to any payment for insurance.

(C)

Exceptions

Subparagraph (B) shall not apply to any expense for coverage under—

(i)

a health plan during any period of continuation coverage required under any Federal law,

(ii)

a qualified long-term care insurance contract (as defined in section 7702B(b)),

(iii)

a health plan during any period in which the individual is receiving unemployment compensation under any Federal or State law,

(iv)

a high deductible health plan, or

(v)

any health insurance under title XVIII of the Social Security Act, other than a Medicare supplemental policy (as defined in section 1882 of such Act).

.

(b)

Effective date

The amendment made by this section shall apply with respect to insurance purchased after the date of the enactment of this Act in taxable years beginning after such date.

520.

Special rule for certain medical expenses incurred before establishment of account

(a)

In general

Paragraph (2) of section 223(d), as amended by section 619, is amended by adding at the end the following new subparagraph:

(D)

Certain medical expenses incurred before establishment of account treated as qualified

An expense shall not fail to be treated as a qualified medical expense solely because such expense was incurred before the establishment of the health savings account if such expense was incurred—

(i)

during either—

(I)

the taxable year in which the health savings account was established, or

(II)

the preceding taxable year in the case of a health savings account established after the taxable year in which such expense was incurred but before the time prescribed by law for filing the return for such taxable year (not including extensions thereof), and

(ii)

for medical care of an individual during a period that such individual was covered by a high deductible health plan and met the requirements of subsection (c)(1)(A)(ii) (after application of subsection (c)(1)(B)).

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

521.

Preventive care prescription drug clarification

(a)

Clarify use of drugs in preventive care

Subparagraph (C) of section 223(c)(2) is amended by adding at the end the following: Preventive care shall include prescription and over-the-counter drugs and medicines which have the primary purpose of preventing the onset of, further deterioration from, or complications associated with chronic conditions, illnesses, or diseases..

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2003.

522.

Equivalent bankruptcy protections for health savings accounts as retirement funds

(a)

In general

Section 522 of title 11, United States Code, is amended by adding at the end the following new subsection:

(r)

Treatment of health savings accounts

For purposes of this section, any health savings account (as described in section 223 of the Internal Revenue Code of 1986) shall be treated in the same manner as an individual retirement account described in section 408 of such Code.

.

(b)

Effective date

The amendment made by this section shall apply to cases commencing under title 11, United States Code, after the date of the enactment of this Act.

523.

Administrative error correction before due date of return

(a)

In general

Paragraph (4) of section 223(f) is amended by adding at the end the following new subparagraph:

(D)

Exception for administrative errors corrected before due date of return

Subparagraph (A) shall not apply if any payment or distribution is made to correct an administrative, clerical or payroll contribution error and if—

(i)

such distribution is received by the individual on or before the last day prescribed by law (including extensions of time) for filing such individual's return for such taxable year, and

(ii)

such distribution is accompanied by the amount of net income attributable to such contribution.

Any net income described in clause (ii) shall be included in the gross income of the individual for the taxable year in which it is received.

.

(b)

Effective date

The amendment made by this section shall take effect on the date of the enactment of this Act.

524.

Reauthorization of medicaid health opportunity accounts

(a)

In general

Section 1938 of the Social Security Act (42 U.S.C. 1396u–8) is amended—

(1)

in subsection (a)—

(A)

by striking paragraph (2) and inserting the following:

(2)

Initial demonstration

The demonstration program under this section shall begin 90 days after the date of the enactment of this paragraph. The Secretary shall approve States to conduct demonstration programs under this section for a 5-year period, with each State demonstration program covering 1 or more geographic areas specified by the State. With respect to a State, after the initial 5-year period of any demonstration program conducted under this section by the State, unless the Secretary finds, taking into account cost-effectiveness and quality of care, that the State demonstration program has been unsuccessful, the demonstration program may be extended or made permanent in the State.

; and

(B)

in paragraph (3), in the matter preceding subparagraph (A)—

(i)

by striking not; and

(ii)

by striking unless and inserting if ;

(2)

in subsection (b)—

(A)

in paragraph (3), by inserting clause (i) through (vii), (viii) (without regard to the amendment made by section 2004(c)(2) of Public Law 111–148), (x), or (xi) of after described in ; and

(B)

by striking paragraphs (4), (5), and (6);

(3)

in subsection (c)—

(A)

by striking paragraphs (3) and (4);

(B)

by redesignating paragraphs (5) through (8) as paragraphs (3) through (6), respectively; and

(C)

in paragraph (4) (as redesignated by subparagraph (B)), by striking Subject to subparagraphs (D) and (E) and inserting Subject to subparagraph (D); and

(4)

in subsection (d)—

(A)

in paragraph (2), by striking subparagraph (E); and

(B)

in paragraph (3)—

(i)

in subparagraph (A)(ii), by striking Subject to subparagraph (B)(ii), in and inserting In; and

(ii)

by striking subparagraph (B) and inserting the following:

(B)

Maintenance of health opportunity account after becoming ineligible for public benefit

Notwithstanding any other provision of law, if an account holder of a health opportunity account becomes ineligible for benefits under this title because of an increase in income or assets—

(i)

no additional contribution shall be made into the account under paragraph (2)(A)(i); and

(ii)

the account shall remain available to the account holder for 3 years after the date on which the individual becomes ineligible for such benefits for withdrawals under the same terms and conditions as if the account holder remained eligible for such benefits, and such withdrawals shall be treated as medical assistance in accordance with subsection (c)(4).

.

(b)

Conforming amendment

Section 613 of Public Law 111–3 is repealed.

B

Other provisions

531.

Certain exercise equipment and physical fitness programs treated as medical care

(a)

In general

Subsection (d) of section 213 is amended by adding at the end the following new paragraph:

(12)

Exercise equipment and physical fitness programs

(A)

In general

The term medical care shall include amounts paid—

(i)

to purchase or use equipment used in a program (including a self-directed program) of physical exercise,

(ii)

to participate, or receive instruction, in a program of physical exercise, and

(iii)

for membership dues in a fitness club the primary purpose of which is to provide access to equipment and facilities for physical exercise.

(B)

Limitation

Amounts treated as medical care under subparagraph (A) shall not exceed $1,000 with respect to any individual for any taxable year.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

532.

Certain nutritional and dietary supplements to be treated as medical care

(a)

In general

Subsection (d) of section 213, as amended by section 631, is amended by adding at the end the following new paragraph:

(13)

Nutritional and dietary supplements

(A)

In general

The term medical care shall include amounts paid to purchase herbs, vitamins, minerals, homeopathic remedies, meal replacement products, and other dietary and nutritional supplements.

(B)

Limitation

Amounts treated as medical care under subparagraph (A) shall not exceed $1,000 with respect to any individual for any taxable year.

(C)

Meal replacement product

For purposes of this paragraph, the term meal replacement product means any product that—

(i)

is permitted to bear labeling making a claim described in section 403(r)(3) of the Federal Food, Drug, and Cosmetic Act, and

(ii)

is permitted to claim under such section that such product is low in fat and is a good source of protein, fiber, and multiple essential vitamins and minerals.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

533.

Certain provider fees to be treated as medical care

(a)

In general

Subsection (d) of section 213, as amended by sections 631 and 632, is amended by adding at the end the following new paragraph:

(14)

Periodic provider fees

The term medical care shall include periodic fees paid to a primary physician, physician assistant, or nurse practitioner for the right to receive medical services on an as-needed basis.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

VI

Covering People with Pre-Existing Conditions, Removing Annual and Lifetime Coverage Caps, and Expanding Access to Care

A

Making Health Care Coverage Affordable for Every American

1

Ensuring coverage for individuals with preexisting conditions and multiple health care needs

601.

Establish universal access programs to improve high risk pools and reinsurance markets

(a)

State requirement

(1)

In general

Not later than January 1, 2012, each State shall—

(A)

subject to paragraph (3), operate—

(i)

a qualified State reinsurance program described in subsection (b); or

(ii)

qualifying State high risk pool described in subsection (c)(1); and

(B)

subject to paragraph (3), apply to the operation of such a program from State funds an amount equivalent to the portion of State funds derived from State premium assessments (as defined by the Secretary) that are not otherwise used on State health care programs.

(2)

Relation to current qualified high risk pool program

(A)

States not operating a qualified high risk pool

In the case of a State that is not operating a current section 2745 qualified high risk pool as of the date of the enactment of this Act—

(i)

the State may only meet the requirement of paragraph (1) through the operation of a qualified State reinsurance program described in subsection (b); and

(ii)

the State’s operation of such a reinsurance program shall be treated, for purposes of section 2745 of the Public Health Service Act, as the operation of a qualified high risk pool described in such section.

(B)

State operating a qualified high risk pool

In the case of a State that is operating a current section 2745 qualified high risk pool as of the date of the enactment of this Act—

(i)

as of January 1, 2012, such a pool shall not be treated as a qualified high risk pool under section 2745 of the Public Health Service Act unless the pool is a qualifying State high risk pool described in subsection (c)(1); and

(ii)

the State may use premium assessment funds described in paragraph (1)(B) to transition from operation of such a pool to operation of a qualified State reinsurance program described in subsection (b).

(3)

Application of funds

If the program or pool operated under paragraph (1)(A) is in strong fiscal health, as determined in accordance with standards established by the National Association of Insurance Commissioners and as approved by the State Insurance Commissioner involved, the requirement of paragraph (1)(B) shall be deemed to be met.

(b)

Qualified State reinsurance program

(1)

In general

For purposes of this section, a qualified State reinsurance program means a program operated by a State program that provides reinsurance for health insurance coverage offered in the small group market in accordance with the model for such a program established (as of the date of the enactment of this Act).

(2)

Form of program

A qualified State reinsurance program may provide reinsurance—

(A)

on a prospective or retrospective basis; and

(B)

on a basis that protects health insurance issuers against the annual aggregate spending of their enrollees as well as purchase protection against individual catastrophic costs.

(3)

Satisfaction of HIPAA requirement

A qualified State reinsurance program shall be deemed, for purposes of section 2745 of the Public Health Service Act, to be a qualified high risk pool under such section.

(c)

Qualifying State high risk pool

(1)

In general

A qualifying State high risk pool described in this subsection means a current section 2745 qualified high risk pool that meets the following requirements:

(A)

The pool must provide at least two coverage options, one of which must be a high deductible health plan coupled with a health savings account.

(B)

The pool must be funded with a stable funding source.

(C)

The pool must eliminate any waiting lists so that all eligible residents who are seeking coverage through the pool should be allowed to receive coverage through the pool.

(D)

The pool must allow for coverage of individuals who, but for the 24-month disability waiting period under section 226(b) of the Social Security Act, would be eligible for Medicare during the period of such waiting period.

(E)

The pool must limit the pool premiums to no more than 150 percent of the average premium for applicable standard risk rates in that State.

(F)

The pool must conduct education and outreach initiatives so that residents and brokers understand that the pool is available to eligible residents.

(G)

The pool must provide coverage for preventive services and disease management for chronic diseases.

(2)

Verification of citizenship or alien qualification

(A)

In general

Notwithstanding any other provision of law, only citizens and nationals of the United States shall be eligible to participate in a qualifying State high risk pool that receives funds under section 2745 of the Public Health Service Act or this section.

(B)

Condition of participation

As a condition of a State receiving such funds, the Secretary shall require the State to certify, to the satisfaction of the Secretary, that such State requires all applicants for coverage in the qualifying State high risk pool to provide satisfactory documentation of citizenship or nationality in a manner consistent with section 1903(x) of the Social Security Act.

(C)

Records

The Secretary shall keep sufficient records such that a determination of citizenship or nationality only has to be made once for any individual under this paragraph.

(3)

Relation to section 2745

As of January 1, 2012, a pool shall not qualify as qualified high risk pool under section 2745 of the Public Health Service Act unless the pool is a qualifying State high risk pool described in paragraph (1).

(d)

Waivers

In order to accommodate new and innovative programs, the Secretary may waive such requirements of this section for qualified State reinsurance programs and for qualifying State high risk pools as the Secretary deems appropriate.

(e)

Funding

In addition to any other amounts appropriated, there is appropriated to carry out section 2745 of the Public Health Service Act (including through a program or pool described in subsection (a)(1))—

(1)

$15,000,000,000 for the period of fiscal years 2012 through 2021; and

(2)

an additional $10,000,000,000 for the period of fiscal years 2017 through 2021.

(f)

Definitions

In this section:

(1)

Health insurance coverage; health insurance issuer

The terms health insurance coverage and health insurance issuer have the meanings given such terms in section 2791 of the Public Health Service Act.

(2)

Current section 2745 qualified high risk pool

The term current section 2745 qualified high risk pool has the meaning given the term qualified high risk pool under section 2745(g) of the Public Health Service Act as in effect as of the date of the enactment of this Act.

(3)

Secretary

The term Secretary means Secretary of Health and Human Services.

(4)

Standard risk rate

The term standard risk rate means a rate that—

(A)

is determined under the State high risk pool by considering the premium rates charged by other health insurance issuers offering health insurance coverage to individuals in the insurance market served;

(B)

is established using reasonable actuarial techniques; and

(C)

reflects anticipated claims experience and expenses for the coverage involved.

(5)

State

The term State means any of the 50 States or the District of Columbia.

602.

Elimination of certain requirements for guaranteed availability in individual market

(a)

In general

Section 2741(b) of the Public Health Service Act (42 U.S.C. 300gg–41(b)) is amended—

(1)

in paragraph (1)—

(A)

by striking (1)(A) and inserting (1); and

(B)

by striking and (B) and all that follows up to the semicolon at the end;

(2)

by adding and at the end of paragraph (2);

(3)

in paragraph (3)—

(A)

by striking (1)(A) and inserting (1); and

(B)

by striking the semicolon at the end and inserting a period; and

(4)

by striking paragraphs (4) and (5).

(b)

Effective date

The amendments made by subsection (a) shall take effect on the date of the enactment of this Act.

603.

No annual or lifetime spending caps

(a)

In general

Notwithstanding any other provision of law, a health insurance issuer (including an entity licensed to sell insurance with respect to a State or group health plan) may not apply an annual or lifetime aggregate spending cap on any health insurance coverage or plan offered by such issuer. The restriction of the previous sentence shall not apply with respect to a health insurance coverage or plan if, as of the date of the enactment of this Act, it would result in a significant decrease in access to benefits under the plan or would significantly increase premiums under the plan.

(b)

Application

Subsection (a) shall be enforced as if it were included as a provision in parts A and B of title XXVII of the Public Health Service Act (as such title is in effect after the date of repeal of Public Law 111–148 under section 101).

604.

Preventing unjust cancellation of insurance coverage

(a)

Clarification regarding application of guaranteed renewability of individual health insurance coverage

Section 2742 of the Public Health Service Act (42 U.S.C. 300gg–42) is amended—

(1)

in its heading, by inserting , continuation in force, including prohibition of rescission, after Guaranteed renewability;

(2)

in subsection (a), by inserting , including without rescission, after continue in force; and

(3)

in subsection (b)(2), by inserting before the period at the end the following: , including intentional concealment of material facts regarding a health condition related to the condition for which coverage is being claimed.

(b)

Opportunity for independent, external third party review in certain cases

Subpart 1 of part B of title XXVII of the Public Health Service Act is amended by adding at the end the following new section:

2746.

Opportunity for independent, external third party review in certain cases

(a)

Notice and review right

If a health insurance issuer determines to nonrenew or not continue in force, including rescind, health insurance coverage for an individual in the individual market on the basis described in section 2742(b)(2) before such nonrenewal, discontinuation, or rescission, may take effect the issuer shall provide the individual with notice of such proposed nonrenewal, discontinuation, or rescission and an opportunity for a review of such determination by an independent, external third party under procedures specified by the Secretary.

(b)

Independent determination

If the individual requests such review by an independent, external third party of a nonrenewal, discontinuation, or rescission of health insurance coverage, the coverage shall remain in effect until such third party determines that the coverage may be nonrenewed, discontinued, or rescinded under section 2742(b)(2).

.

(c)

Effective date

The amendments made by this section shall apply after the date of the enactment of this Act with respect to health insurance coverage issued before, on, or after such date.

2

Reducing health care premiums and the number of uninsured Americans

611.

State innovation programs

(a)

Programs that reduce the cost of health insurance premiums

(1)

Payments to States

(A)

For premium reductions in the small group market

If the Secretary determines that a State has reduced the average per capita premium for health insurance coverage in the small group market in year 3, in year 6, or year 9 (as defined in subsection (c)) below the premium baseline for such year (as defined paragraph (2)), the Secretary shall pay the State an amount equal to the product of—

(i)

bonus premium percentage (as defined in paragraph (3)) for the State, market, and year; and

(ii)

the maximum State premium payment amount (as defined in paragraph (4)) for the State, market, and year.

(B)

For premium reductions in the individual market

If the Secretary determines that a State has reduced the average per capita premium for health insurance coverage in the individual market in year 3, in year 6, or in year 9 below the premium baseline for such year, the Secretary shall pay the State an amount equal to the product of—

(i)

bonus premium percentage for the State, market, and year; and

(ii)

the maximum State premium payment amount for the State, market, and year.

(2)

Premium baseline

For purposes of this subsection, the term premium baseline means, for a market in a State—

(A)

for year 1, the average per capita premiums for health insurance coverage in such market in the State in such year; or

(B)

for a subsequent year, the baseline for the market in the State for the previous year under this paragraph increased by a percentage specified in accordance with a formula established by the Secretary, in consultation with the Congressional Budget Office and the Bureau of the Census, that takes into account at least the following:

(i)

Growth factor

The inflation in the costs of inputs to health care services in the year.

(ii)

Historic premium growth rates

Historic growth rates, during the 10 years before year 1, of per capita premiums for health insurance coverage.

(iii)

Demographic considerations

Historic average changes in the demographics of the population covered that impact on the rate of growth of per capita health care costs.

(3)

Bonus premium percentage defined

(A)

In general

For purposes of this subsection, the term bonus premium percentage means, for the small group market or individual market in a State for a year, such percentage as determined in accordance with the following table based on the State’s premium performance level (as defined in subparagraph (B)) for such market and year:

The bonus premium percentage for a State is—For year 3 if the premium performance level of the State is—For year 6 if the premium performance level of the State is—For year 9 if the premium performance level of the State is—
100 percent at least 8.5% at least 11%at least 13.5%
50 percent at least 6.38%, but less than 8.5%at least 10.38%, but less than 11%at least 12.88%, but less than 13.5%
25 percent at least 4.25%, but less than 6.38% at least 9.75%, but less than 10.38% at least 12.25%, but less than 12.88%
0 percentless than 4.25%less than 9.75%less than 12.25%.
(B)

Premium performance level

For purposes of this subsection, the term premium performance level means, for a State, market, and year, the percentage reduction in the average per capita premiums for health insurance coverage for the State, market, and year, as compared to the premium baseline for such State, market, and year.

(4)

Maximum State premium payment amount defined

For purposes of this subsection, the term maximum State premium payment amount means, for a State for the small group market or the individual market for a year, the product of—

(A)

the proportion (as determined by the Secretary), of the number of nonelderly individuals lawfully residing in all the States who are enrolled in health insurance coverage in the respective market in the year, who are residents of the State; and

(B)

the amount available for obligation from amounts appropriated under subsection (d) for such market with respect to performance in such year.

(5)

Methodology for calculating average per capita premiums

(A)

Establishment

The Secretary shall establish, by rule and consistent with this subsection, a methodology for computing the average per capita premiums for health insurance coverage for the small group market and for the individual market in each State for each year beginning with year 1.

(B)

Adjustments

Under such methodology, the Secretary shall provide for the following adjustments (in a manner determined appropriate by the Secretary):

(i)

Exclusion of illegal aliens

An adjustment so as not to take into account enrollees who are not lawfully present in the United States and their premium costs.

(ii)

Treating State premium subsidies as premium costs

An adjustment so as to increase per capita premiums to remove the impact of premium subsidies made directly by a State to reduce health insurance premiums.

(6)

Conditions of payment

As a condition of receiving a payment under paragraph (1), a State must agree to submit aggregate, non-individually identifiable data to the Secretary, in a form and manner specified by the Secretary, for use by the Secretary to determine the State’s premium baseline and premium performance level for purposes of this subsection.

(b)

Programs that reduce the number of uninsured

(1)

In general

If the Secretary determines that a State has reduced the percentage of uninsured nonelderly residents in year 5, year 7, or year 9, below the uninsured baseline (as defined in paragraph (2)) for the State for the year, the Secretary shall pay the State an amount equal to the product of—

(A)

bonus uninsured percentage (as defined in paragraph (3)) for the State and year; and

(B)

the maximum uninsured payment amount (as defined in paragraph (4)) for the State and year.

(2)

Uninsured baseline

(A)

In general

For purposes of this subsection, and subject to subparagraph (B), the term uninsured baseline means, for a State, the percentage of nonelderly residents in the State who are uninsured in year 1.

(B)

Adjustment

The Secretary may, at the written request of a State, adjust the uninsured baseline for States for a year to take into account unanticipated and exceptional changes, such as an unanticipated migration, of nonelderly individuals into, or out of, States in a manner that does not reflect substantially the proportion of uninsured nonelderly residents in the States involved in year 1. Any such adjustment shall only be done in a manner that does not result in the average of the uninsured baselines for nonelderly residents for all States being changed.

(3)

Bonus uninsured percentage

(A)

Bonus uninsured percentage

For purposes of this subsection, the term bonus uninsured percentage means, for a State for a year, such percentage as determined in accordance with the following table, based on the uninsured performance level (as defined in subparagraph (B)) for such State and year:

The bonus uninsured percentage for a State is—For year 5 if the uninsured performance level of the State is—For year 7 if the uninsured performance level of the State is—For year 9 if the uninsured performance level of the State is—
100 percent at least 10% at least 15%at least 20%
50 percent at least 7.5% but less than 10%at least 13.75% but less than 15% at least 18.75% but less than 20%
25 percent at least 5% but less than 7.5%at least 12.5% but less than 13.75%at least 17.5% but less than 18.75%
0 percentless than 5%less than 12.5%less than 17.5%.
(B)

Uninsured performance level

For purposes of this subsection, the term uninsured performance level means, for a State for a year, the reduction (expressed as a percentage) in the percentage of uninsured nonelderly residents in such State in the year as compared to the uninsured baseline for such State for such year.

(4)

Maximum State uninsured payment amount defined

For purposes of this subsection, the term maximum State uninsured payment amount means, for a State for a year, the product of—

(A)

the proportion (as determined by the Secretary), of the number of uninsured nonelderly individuals lawfully residing in all the States in the year, who are residents of the State; and

(B)

the amount available for obligation under this subsection from amounts appropriated under subsection (d) with respect to performance in such year.

(5)

Methodology for computing the percentage of uninsured nonelderly residents in a State

(A)

Establishment

The Secretary shall establish, by rule and consistent with this subsection, a methodology for computing the percentage of nonelderly residents in a State who are uninsured in each year beginning with year 1.

(B)

Rules

(i)

Treatment of uninsured

Such methodology shall treat as uninsured those residents who do not have health insurance coverage or other creditable coverage (as defined in section 9801(c)(1) of the Internal Revenue Code of 1986), except that such methodology shall rely upon data on the nonelderly and uninsured populations within each State in such year provided through population surveys conducted by federal agencies.

(ii)

Limitation to nonelderly

Such methodology shall exclude individuals who are 65 years of age or older.

(iii)

Exclusion of illegal aliens

Such methodology shall exclude individuals not lawfully present in the United States.

(6)

Conditions of payment

As a condition of receiving a payment under paragraph (1), a State must agree to submit aggregate, non-individually identifiable data to the Secretary, in a form and manner specified by the Secretary, for use by the Secretary in determining the State’s uninsured baseline and uninsured performance level for purposes of this subsection.

(c)

Definitions

For purposes of this section:

(1)

Group health plan

The term group health plan has the meaning given such term in section 9832(a) of the Internal Revenue Code of 1986.

(2)

Health insurance coverage

The term health insurance coverage has the meaning given such term in section 9832(b)(1) of the Internal Revenue Code of 1986.

(3)

Individual market

Except as the Secretary may otherwise provide in the case of group health plans that have fewer than 2 participants as current employees on the first day of a plan year, the term individual market means the market for health insurance coverage offered to individuals other than in connection with a group health plan.

(4)

Secretary

The term Secretary means the Secretary of Health and Human Services.

(5)

Small group market

The term small group market means the market for health insurance coverage under which individuals obtain health insurance coverage (directly or through any arrangement) on behalf of themselves (and their dependents) through a group health plan maintained by an employer who employed on average at least 2 but not more than 50 employees on business days during a calendar year.

(6)

State

The term State means any of the 50 States and the District of Columbia.

(7)

Years

The terms year 1, year 2, year 3, and similar subsequently numbered years mean 2012, 2013, 2014, and subsequent sequentially numbered years.

(d)

Appropriations; payments

(1)

Payments for reductions in cost of health insurance coverage

(A)

Small group market

(i)

In general

From any funds in the Treasury not otherwise appropriated, there is appropriated for payments under subsection (a)(1)(A)—

(I)

$18,000,000,000 with respect to performance in year 3;

(II)

$5,000,000,000 with respect to performance in year 6; and

(III)

$2,000,000,000 with respect to performance in year 9.

(ii)

Availability of appropriated funds

Funds appropriated under clause (i) shall remain available until expended.

(B)

Individual market

(i)

In general

Subject to clause (ii), from any funds in the Treasury not otherwise appropriated, there is appropriated for payments under subsection (a)(1)(B)—

(I)

$7,000,000,000 with respect to performance in year 3;

(II)

$2,000,000,000 with respect to performance in year 6; and

(III)

$1,000,000,000 with respect to performance in year 9.

(ii)

Availability of appropriated funds

Of the funds appropriated under clause (i) that are not expended or obligated by the end of the year following the year for which the funds are appropriated—

(I)

75 percent shall remain available until expended for payments under subsection (a)(1)(B); and

(II)

25 percent shall remain available until expended for payments under subsection (a)(1)(A).

(2)

Payments for reductions in the percentage of uninsured

(A)

In general

From any funds in the Treasury not otherwise appropriated, there is appropriated for payments under subsection (b)(1)—

(i)

$10,000,000,000 with respect to performance in year 5;

(ii)

$3,000,000,000 with respect to performance in year 7; and

(iii)

$2,000,000,000 with respect to performance in year 9.

(B)

Availability of appropriated funds

Funds appropriated under subparagraph (A) shall remain available until expended.

(3)

Payment timing

Payments under this section shall be made in a form and manner specified by the Secretary in the year after the performance year involved.

612.

Health plan finders

(a)

State plan finders

Not later than 12 months after the date of the enactment of this Act, each State may contract with a private entity to develop and operate a plan finder website (referred to in this section as a State plan finder) which shall provide information to individuals in such State on plans of health insurance coverage that are available to individuals in such State (in this section referred to as a health insurance plan). Such State may not operate a plan finder itself.

(b)

Multi-State plan finders

(1)

In general

A private entity may operate a multi-State finder that operates under this section in the States involved in the same manner as a State plan finder would operate in a single State.

(2)

Sharing of information

States shall regulate the manner in which data is shared between plan finders to ensure consistency and accuracy in the information about health insurance plans contained in such finders.

(c)

Requirements for plan finders

Each plan finder shall meet the following requirements:

(1)

The plan finder shall ensure that each health insurance plan in the plan finder meets the requirements for such plans under subsection (d).

(2)

The plan finder shall present complete information on the costs and benefits of health insurance plans (including information on monthly premium, copayments, and deductibles) in a uniform manner that—

(A)

uses the standard definitions developed under paragraph (3); and

(B)

is designed to allow consumers to easily compare such plans.

(3)

The plan finder shall be available on the Internet and accessible to all individuals in the State or, in the case of a multi-State plan finder, in all States covered by the multi-State plan finder.

(4)

The plan finder shall allow consumers to search and sort data on the health insurance plans in the plan finder on criteria such as coverage of specific benefits (such as coverage of disease management services or pediatric care services), as well as data available on quality.

(5)

The plan finder shall meet all relevant State laws and regulations, including laws and regulations related to the marketing of insurance products. In the case of a multi-State plan finder, the finder shall meet such laws and regulations for all of the States involved.

(6)

The plan finder shall meet solvency, financial, and privacy requirements established by the State or States in which the plan finder operates or the Secretary for multi-State finders.

(7)

The plan finder and the employees of the plan finder shall be appropriately licensed in the State or States in which the plan finder operates, if such licensure is required by such State or States.

(8)

Notwithstanding subsection (f)(1), the plan finder shall assist individuals who are eligible for the Medicaid program under title XIX of the Social Security Act or State Children’s Health Insurance Program under title XXI of such Act by including information on Medicaid options, eligibility, and how to enroll.

(d)

Requirements for plans participating in a plan finder

(1)

In general

Each State shall ensure that health insurance plans participating in the State plan finder or in a multi-State plan finder meet the requirements of paragraph (2) (relating to adequacy of insurance coverage, consumer protection, and financial strength).

(2)

Specific requirements

In order to participate in a plan finder, a health insurance plan must meet all of the following requirements, as determined by each State in which such plan operates:

(A)

The health insurance plan shall be actuarially sound.

(B)

The health insurance plan may not have a history of abusive policy rescissions.

(C)

The health insurance plan shall meet financial and solvency requirements.

(D)

The health insurance plan shall disclose—

(i)

all financial arrangements involving the sale and purchase of health insurance, such as the payment of fees and commissions; and

(ii)

such arrangements may not be abusive.

(E)

The health insurance plan shall maintain electronic health records that comply with the requirements of the American Recovery and Reinvestment Act of 2009 (Public Law 111–5) related to electronic health records.

(F)

The health insurance plan shall make available to plan enrollees via the finder, whether by information provided to the finder or by a website link directing the enrollee from the finder to the health insurance plan website, data that includes the price and cost to the individual of services offered by a provider according to the terms and conditions of the health plan. Data described in this paragraph is not made public by the finder, only made available to the individual once enrolled in the health plan.

(e)

Prohibitions

(1)

Direct Enrollment

The State plan finder may not directly enroll individuals in health insurance plans.

(2)

Conflicts of interest

(A)

Companies

A health insurance issuer offering a health insurance plan through a plan finder may not—

(i)

be the private entity developing and maintaining a plan finder under subsections (a) and (b); or

(ii)

have an ownership interest in such private entity or in the plan finder.

(B)

Individuals

An individual employed by a health insurance issuer offering a health insurance plan through a plan finder may not serve as a director or officer for—

(i)

the private entity developing and maintaining a plan finder under subsections (a) and (b); or

(ii)

the plan finder.

(f)

Construction

Nothing in this section shall be construed to allow the Secretary authority to regulate benefit packages or to prohibit health insurance brokers and agents from—

(1)

utilizing the plan finder for any purpose; or

(2)

marketing or offering health insurance products.

(g)

Plan finder defined

For purposes of this section, the term plan finder means a State plan finder under subsection (a) or a multi-State plan finder under subsection (b).

(h)

State defined

In this section, the term State has the meaning given such term for purposes of title XIX of the Social Security Act.

613.

Administrative simplification

(a)

Operating Rules for Health Information Transactions

(1)

Definition of operating rules

Section 1171 of the Social Security Act (42 U.S.C. 1320d) is amended by adding at the end the following:

(9)

Operating rules

The term operating rules means the necessary business rules and guidelines for the electronic exchange of information that are not defined by a standard or its implementation specifications as adopted for purposes of this part.

.

(2)

Operating rules and compliance

Section 1173 of the Social Security Act (42 U.S.C. 1320d–2) is amended—

(A)

in subsection (a)(2), by adding at the end the following new subparagraph:

(J)

Electronic funds transfers.

; and

(B)

by adding at the end the following new subsections:

(g)

Operating rules

(1)

In general

The Secretary shall adopt a single set of operating rules for each transaction described in subsection (a)(2) with the goal of creating as much uniformity in the implementation of the electronic standards as possible. Such operating rules shall be consensus-based and reflect the necessary business rules affecting health plans and health care providers and the manner in which they operate pursuant to standards issued under Health Insurance Portability and Accountability Act of 1996.

(2)

Operating rules development

In adopting operating rules under this subsection, the Secretary shall rely on recommendations for operating rules developed by a qualified nonprofit entity, as selected by the Secretary, that meets the following requirements:

(A)

The entity focuses its mission on administrative simplification.

(B)

The entity demonstrates an established multi-stakeholder and consensus-based process for development of operating rules, including representation by or participation from health plans, health care providers, vendors, relevant Federal agencies, and other standard development organizations.

(C)

The entity has established a public set of guiding principles that ensure the operating rules and process are open and transparent.

(D)

The entity coordinates its activities with the HIT Policy Committee and the HIT Standards Committee (as established under title XXX of the Public Health Service Act) and complements the efforts of the Office of the National Healthcare Coordinator and its related health information exchange goals.

(E)

The entity incorporates national standards, including the transaction standards issued under Health Insurance Portability and Accountability Act of 1996.

(F)

The entity supports nondiscrimination and conflict of interest policies that demonstrate a commitment to open, fair, and nondiscriminatory practices.

(G)

The entity allows for public review and updates of the operating rules.

(3)

Review and recommendations

The National Committee on Vital and Health Statistics shall—

(A)

review the operating rules developed by a nonprofit entity described under paragraph (2);

(B)

determine whether such rules represent a consensus view of the health care industry and are consistent with and do not alter current standards;

(C)

evaluate whether such rules are consistent with electronic standards adopted for health information technology; and

(D)

submit to the Secretary a recommendation as to whether the Secretary should adopt such rules.

(4)

Implementation

(A)

In general

The Secretary shall adopt operating rules under this subsection, by regulation in accordance with subparagraph (C), following consideration of the rules developed by the non-profit entity described in paragraph (2) and the recommendation submitted by the National Committee on Vital and Health Statistics under paragraph (3)(D) and having ensured consultation with providers.

(B)

Adoption requirements; effective dates

(i)

Eligibility for a health plan and health claim status

The set of operating rules for transactions for eligibility for a health plan and health claim status shall be adopted not later than July 1, 2013, in a manner ensuring that such rules are effective not later than January 1, 2015, and may allow for the use of a machine readable identification card.

(ii)

Electronic funds transfers and health care payment and remittance advice

The set of operating rules for electronic funds transfers and health care payment and remittance advice shall be adopted not later than July 1, 2014, in a manner ensuring that such rules are effective not later than January 1, 2016.

(iii)

Other completed transactions

The set of operating rules for the remainder of the completed transactions described in subsection (a)(2), including health claims or equivalent encounter information, enrollment and disenrollment in a health plan, health plan premium payments, and referral certification and authorization, shall be adopted not later than July 1, 2016, in a manner ensuring that such rules are effective not later than January 1, 2018.

(C)

Expedited rulemaking

The Secretary shall promulgate an interim final rule applying any standard or operating rule recommended by the National Committee on Vital and Health Statistics pursuant to paragraph (3). The Secretary shall accept public comments on any interim final rule published under this subparagraph for 60 days after the date of such publication.

(h)

Compliance

(1)

Health plan certification

(A)

Eligibility for a health plan, health claim status, electronic funds transfers, health care payment and remittance advice

Not later than December 31, 2015, a health plan shall file a statement with the Secretary, in such form as the Secretary may require, certifying that the data and information systems for such plan are in compliance with any applicable standards (as described under paragraph (7) of section 1171) and operating rules (as described under paragraph (9) of such section) for electronic funds transfers, eligibility for a health plan, health claim status, and health care payment and remittance advice, respectively.

(B)

Other completed transactions

Not later than December 31, 2017, a health plan shall file a statement with the Secretary, in such form as the Secretary may require, certifying that the data and information systems for such plan are in compliance with any applicable standards and operating rules for the remainder of the completed transactions described in subsection (a)(2), including health claims or equivalent encounter information, enrollment and disenrollment in a health plan, health plan premium payments, and referral certification and authorization, respectively. A health plan shall provide the same level of documentation to certify compliance with such transactions as is required to certify compliance with the transactions specified in subparagraph (A).

(2)

Documentation of compliance

A health plan shall provide the Secretary, in such form as the Secretary may require, with adequate documentation of compliance with the standards and operating rules described under paragraph (1). A health plan shall not be considered to have provided adequate documentation and shall not be certified as being in compliance with such standards, unless the health plan—

(A)

demonstrates to the Secretary that the plan conducts the electronic transactions specified in paragraph (1) in a manner that fully complies with the regulations of the Secretary; and

(B)

provides documentation showing that the plan has completed end-to-end testing for such transactions with their partners, such as hospitals and physicians.

(3)

Service contracts

A health plan shall be required to comply with any applicable certification and compliance requirements (and provide the Secretary with adequate documentation of such compliance) under this subsection for any entities that provide services pursuant to a contract with such health plan.

(4)

Certification by outside entity

The Secretary may contract with an independent, outside entity to certify that a health plan has complied with the requirements under this subsection, provided that the certification standards employed by such entities are in accordance with any standards or rules issued by the Secretary.

(5)

Compliance with revised standards and rules

A health plan (including entities described under paragraph (3)) shall comply with the certification and documentation requirements under this subsection for any interim final rule promulgated by the Secretary under subsection (i) that amends any standard or operating rule described under paragraph (1) of this subsection. A health plan shall comply with such requirements not later than the effective date of the applicable interim final rule.

(6)

Audits of health plans

The Secretary shall conduct periodic audits to ensure that health plans (including entities described under paragraph (3)) are in compliance with any standards and operating rules that are described under paragraph (1).

(i)

Review and amendment of standards and rules

(1)

Establishment

Not later than January 1, 2016, the Secretary shall establish a review committee (as described under paragraph (4)).

(2)

Evaluations and Reports

(A)

Hearings

Not later than April 1, 2016, and not less than biennially thereafter, the Secretary, acting through the review committee, shall conduct hearings to evaluate and review the existing standards and operating rules established under this section.

(B)

Report

Not later than July 1, 2016, and not less than biennially thereafter, the review committee shall provide recommendations for updating and improving such standards and rules. The review committee shall recommend a single set of operating rules per transaction standard and maintain the goal of creating as much uniformity as possible in the implementation of the electronic standards.

(3)

Interim final rulemaking

(A)

In general

Any recommendations to amend existing standards and operating rules that have been approved by the review committee and reported to the Secretary under paragraph (2)(B) shall be adopted by the Secretary through promulgation of an interim final rule not later than 90 days after receipt of the committee's report.

(B)

Public comment

(i)

Public comment period

The Secretary shall accept public comments on any interim final rule published under this paragraph for 60 days after the date of such publication.

(ii)

Effective date

The effective date of any amendment to existing standards or operating rules that is adopted through an interim final rule published under this paragraph shall be 25 months following the close of such public comment period.

(4)

Review committee

(A)

Definition

For the purposes of this subsection, the term review committee means a committee within the Department of Health and Human services that has been designated by the Secretary to carry out this subsection, including—

(i)

the National Committee on Vital and Health Statistics; or

(ii)

any appropriate committee as determined by the Secretary.

(B)

Coordination of HIT Standards

In developing recommendations under this subsection, the review committee shall consider the standards approved by the Office of the National Coordinator for Health Information Technology.

(j)

Penalties

(1)

Penalty fee

(A)

In general

Not later than April 1, 2016, and annually thereafter, the Secretary shall assess a penalty fee (as determined under subparagraph (B)) against a health plan that has failed to meet the requirements under subsection (h) with respect to certification and documentation of compliance with the standards (and their operating rules) as described under paragraph (1) of such subsection.

(B)

Fee amount

Subject to subparagraphs (C), (D), and (E), the Secretary shall assess a penalty fee against a health plan in the amount of $1 per covered life until certification is complete. The penalty shall be assessed per person covered by the plan for which its data systems for major medical policies are not in compliance and shall be imposed against the health plan for each day that the plan is not in compliance with the requirements under subsection (h).

(C)

Additional penalty for misrepresentation

A health plan that knowingly provides inaccurate or incomplete information in a statement of certification or documentation of compliance under subsection (h) shall be subject to a penalty fee that is double the amount that would otherwise be imposed under this subsection.

(D)

Annual fee increase

The amount of the penalty fee imposed under this subsection shall be increased on an annual basis by the annual percentage increase in total national health care expenditures, as determined by the Secretary.

(E)

Penalty limit

A penalty fee assessed against a health plan under this subsection shall not exceed, on an annual basis—

(i)

an amount equal to $20 per covered life under such plan; or

(ii)

an amount equal to $40 per covered life under the plan if such plan has knowingly provided inaccurate or incomplete information (as described under subparagraph (C)).

(F)

Determination of covered individuals

The Secretary shall determine the number of covered lives under a health plan based upon the most recent statements and filings that have been submitted by such plan to the Securities and Exchange Commission.

(2)

Notice and Dispute Procedure

The Secretary shall establish a procedure for assessment of penalty fees under this subsection that provides a health plan with reasonable notice and a dispute resolution procedure prior to provision of a notice of assessment by the Secretary of the Treasury (as described under paragraph (4)(B)).

(3)

Penalty fee report

Not later than May 1, 2016, and annually thereafter, the Secretary shall provide the Secretary of the Treasury with a report identifying those health plans that have been assessed a penalty fee under this subsection.

(4)

Collection of penalty fee

(A)

In General

The Secretary of the Treasury, acting through the Financial Management Service, shall administer the collection of penalty fees from health plans that have been identified by the Secretary in the penalty fee report provided under paragraph (3).

(B)

Notice

Not later than August 1, 2016, and annually thereafter, the Secretary of the Treasury shall provide notice to each health plan that has been assessed a penalty fee by the Secretary under this subsection. Such notice shall include the amount of the penalty fee assessed by the Secretary and the due date for payment of such fee to the Secretary of the Treasury (as described in subparagraph (C)).

(C)

Payment due date

Payment by a health plan for a penalty fee assessed under this subsection shall be made to the Secretary of the Treasury not later than November 1, 2016, and annually thereafter.

(D)

Unpaid penalty fees

Any amount of a penalty fee assessed against a health plan under this subsection for which payment has not been made by the due date provided under subparagraph (C) shall be—

(i)

increased by the interest accrued on such amount, as determined pursuant to the underpayment rate established under section 6601 of the Internal Revenue Code of 1986; and

(ii)

treated as a past-due, legally enforceable debt owed to a Federal agency for purposes of section 6402(d) of the Internal Revenue Code of 1986.

(E)

Administrative fees

Any fee charged or allocated for collection activities conducted by the Financial Management Service will be passed on to a health plan on a pro-rata basis and added to any penalty fee collected from the plan.

.

(b)

Promulgation of rules

(1)

Unique health plan identifier

The Secretary shall promulgate a final rule to establish a unique health plan identifier (as described in section 1173(b) of the Social Security Act (42 U.S.C. 1320d–2(b))) based on the input of the National Committee of Vital and Health Statistics. The Secretary may do so on an interim final basis and such rule shall be effective not later than October 1, 2014.

(2)

Electronic funds transfer

The Secretary shall promulgate a final rule to establish a standard for electronic funds transfers (as described in section 1173(a)(2)(J) of the Social Security Act, as added by subsection (a)(2)(A)). The Secretary may do so on an interim final basis and shall adopt such standard not later than January 1, 2014, in a manner ensuring that such standard is effective not later than January 1, 2016.

(c)

Expansion of electronic transactions in Medicare

Section 1862(a) of the Social Security Act (42 U.S.C. 1395y(a)) is amended—

(1)

in paragraph (23), by striking the or at the end;

(2)

in paragraph (24), by striking the period and inserting ; or; and

(3)

by inserting after paragraph (24) the following new paragraph:

(25)

not later than January 1, 2016, for which the payment is other than by electronic funds transfer (EFT) or an electronic remittance in a form as specified in ASC X12 835 Health Care Payment and Remittance Advice or subsequent standard.

.

(d)

Medicare and medicaid compliance reports

Not later than July 1, 2015, the Secretary of Health and Human Services shall submit a report to the chairs and ranking members of the Committee on Ways and Means and the Committee on Energy and Commerce of the House of Representatives and the chairs and ranking members of the Committee on Health, Education, Labor, and Pensions and the Committee on Finance of the Senate on the extent to which the Medicare program and providers that serve beneficiaries under that program, and State Medicaid programs and providers that serve beneficiaries under those programs, transact electronically in accordance with transaction standards issued under the Health Insurance Portability and Accountability Act of 1996, part C of title XI of the Social Security Act, and regulations promulgated under such Acts.

B

Improving Access to Health Care

1

Expanding Access and Lowering Costs for Small Businesses

620.

Short title

This chapter may be cited as the Small Business Health Fairness Act of 2011.

621.

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:

8

RULES GOVERNING ASSOCIATION HEALTH PLANS

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.
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 2011,

(2)

a plan under which the sponsor does not restrict membership to one or more trades and businesses or industries and whose eligible participating employers represent a broad cross-section of trades and businesses or industries, or

(3)

a plan whose eligible participating employers represent one or more trades or businesses, or one or more industries, consisting of any of the following: agriculture; equipment and automobile dealerships; barbering and cosmetology; certified public accounting practices; child care; construction; dance, theatrical and orchestra productions; disinfecting and pest control; financial services; fishing; food service establishments; hospitals; labor organizations; logging; manufacturing (metals); mining; medical and dental practices; medical laboratories; professional consulting services; sanitary services; transportation (local and freight); warehousing; wholesaling/distributing; or any other trade or business or industry which has been indicated as having average or above-average risk or health claims experience by reason of State rate filings, denials of coverage, proposed premium rate levels, or other means demonstrated by such plan in accordance with regulations.

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 2011.

(B)

Sole authority

The board has sole authority under the plan to approve applications for participation in the plan and to contract with a service provider to administer the day-to-day affairs of the plan.

(c)

Treatment of Franchise Networks

In the case of a group health plan which is established and maintained by a franchiser for a franchise network consisting of its franchisees—

(1)

the requirements of subsection (a) and section 801(a) shall be deemed met if such requirements would otherwise be met if the franchiser were deemed to be the sponsor referred to in section 801(b), such network were deemed to be an association described in section 801(b), and each franchisee were deemed to be a member (of the association and the sponsor) referred to in section 801(b); and

(2)

the requirements of section 804(a)(1) shall be deemed met.

The Secretary may by regulation define for purposes of this subsection the terms franchiser, franchise network, and franchisee.
804.

Participation and coverage requirements

(a)

Covered Employers and Individuals

The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan—

(1)

each participating employer must be—

(A)

a member of the sponsor,

(B)

the sponsor, or

(C)

an affiliated member of the sponsor with respect to which the requirements of subsection (b) are met,

except that, in the case of a sponsor which is a professional association or other individual-based association, if at least one of the officers, directors, or employees of an employer, or at least one of the individuals who are partners in an employer and who actively participates in the business, is a member or such an affiliated member of the sponsor, participating employers may also include such employer; and
(2)

all individuals commencing coverage under the plan after certification under this part must be—

(A)

active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, participating employers; or

(B)

the beneficiaries of individuals described in subparagraph (A).

(b)

Coverage of Previously Uninsured Employees

In the case of an association health plan in existence on the date of the enactment of the Small Business Health Fairness Act of 2011, an affiliated member of the sponsor of the plan may be offered coverage under the plan as a participating employer only if—

(1)

the affiliated member was an affiliated member on the date of certification under this part; or

(2)

during the 12-month period preceding the date of the offering of such coverage, the affiliated member has not maintained or contributed to a group health plan with respect to any of its employees who would otherwise be eligible to participate in such association health plan.

(c)

Individual Market Unaffected

The requirements of this subsection are met with respect to an association health plan if, under the terms of the plan, no participating employer may provide health insurance coverage in the individual market for any employee not covered under the plan which is similar to the coverage contemporaneously provided to employees of the employer under the plan, if such exclusion of the employee from coverage under the plan is based on a health status-related factor with respect to the employee and such employee would, but for such exclusion on such basis, be eligible for coverage under the plan.

(d)

Prohibition of Discrimination Against Employers and Employees Eligible To Participate

The requirements of this subsection are met with respect to an association health plan if—

(1)

under the terms of the plan, all employers meeting the preceding requirements of this section are eligible to qualify as participating employers for all geographically available coverage options, unless, in the case of any such employer, participation or contribution requirements of the type referred to in section 2711 of the Public Health Service Act are not met;

(2)

upon request, any employer eligible to participate is furnished information regarding all coverage options available under the plan; and

(3)

the applicable requirements of sections 701, 702, and 703 are met with respect to the plan.

805.

Other requirements relating to plan documents, contribution rates, and benefit options

(a)

In General

The requirements of this section are met with respect to an association health plan if the following requirements are met:

(1)

Contents of governing instruments

The instruments governing the plan include a written instrument, meeting the requirements of an instrument required under section 402(a)(1), which—

(A)

provides that the board of trustees serves as the named fiduciary required for plans under section 402(a)(1) and serves in the capacity of a plan administrator (referred to in section 3(16)(A));

(B)

provides that the sponsor of the plan is to serve as plan sponsor (referred to in section 3(16)(B)); and

(C)

incorporates the requirements of section 806.

(2)

Contribution rates must be nondiscriminatory

(A)

The contribution rates for any participating small employer do not vary on the basis of any health status-related factor in relation to employees of such employer or their beneficiaries and do not vary on the basis of the type of business or industry in which such employer is engaged.

(B)

Nothing in this title or any other provision of law shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from—

(i)

setting contribution rates based on the claims experience of the plan; or

(ii)

varying contribution rates for small employers in a State to the extent that such rates could vary using the same methodology employed in such State for regulating premium rates in the small group market with respect to health insurance coverage offered in connection with bona fide associations (within the meaning of section 2791(d)(3) of the Public Health Service Act),

subject to the requirements of section 702(b) relating to contribution rates.
(3)

Floor for number of covered individuals with respect to certain plans

If any benefit option under the plan does not consist of health insurance coverage, the plan has as of the beginning of the plan year not fewer than 1,000 participants and beneficiaries.

(4)

Marketing requirements

(A)

In general

If a benefit option which consists of health insurance coverage is offered under the plan, State-licensed insurance agents shall be used to distribute to small employers coverage which does not consist of health insurance coverage in a manner comparable to the manner in which such agents are used to distribute health insurance coverage.

(B)

State-licensed insurance agents

For purposes of subparagraph (A), the term State-licensed insurance agents means one or more agents who are licensed in a State and are subject to the laws of such State relating to licensure, qualification, testing, examination, and continuing education of persons authorized to offer, sell, or solicit health insurance coverage in such State.

(5)

Regulatory requirements

Such other requirements as the applicable authority determines are necessary to carry out the purposes of this part, which shall be prescribed by the applicable authority by regulation.

(b)

Ability of Association Health Plans To Design Benefit Options

Subject to section 514(d), nothing in this part or any provision of State law (as defined in section 514(c)(1)) shall be construed to preclude an association health plan, or a health insurance issuer offering health insurance coverage in connection with an association health plan, from exercising its sole discretion in selecting the specific items and services consisting of medical care to be included as benefits under such plan or coverage, except (subject to section 514) in the case of (1) any law to the extent that it is not preempted under section 731(a)(1) with respect to matters governed by section 711, 712, or 713, or (2) any law of the State with which filing and approval of a policy type offered by the plan was initially obtained to the extent that such law prohibits an exclusion of a specific disease from such coverage.

806.

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

(a)

In General

The requirements of this section are met with respect to an association health plan if—

(1)

the benefits under the plan consist solely of health insurance coverage; or

(2)

if the plan provides any additional benefit options which do not consist of health insurance coverage, the plan—

(A)

establishes and maintains reserves with respect to such additional benefit options, in amounts recommended by the qualified actuary, consisting of—

(i)

a reserve sufficient for unearned contributions;

(ii)

a reserve sufficient for benefit liabilities which have been incurred, which have not been satisfied, and for which risk of loss has not yet been transferred, and for expected administrative costs with respect to such benefit liabilities;

(iii)

a reserve sufficient for any other obligations of the plan; and

(iv)

a reserve sufficient for a margin of error and other fluctuations, taking into account the specific circumstances of the plan; and

(B)

establishes and maintains aggregate and specific excess/stop loss insurance and solvency indemnification, with respect to such additional benefit options for which risk of loss has not yet been transferred, as follows:

(i)

The plan shall secure aggregate excess/stop loss insurance for the plan with an attachment point which is not greater than 125 percent of expected gross annual claims. The applicable authority may by regulation provide for upward adjustments in the amount of such percentage in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A).

(ii)

The plan shall secure specific excess/stop loss insurance for the plan with an attachment point which is at least equal to an amount recommended by the plan’s qualified actuary. The applicable authority may by regulation provide for adjustments in the amount of such insurance in specified circumstances in which the plan specifically provides for and maintains reserves in excess of the amounts required under subparagraph (A).

(iii)

The plan shall secure indemnification insurance for any claims which the plan is unable to satisfy by reason of a plan termination.

Any person issuing to a plan insurance described in clause (i), (ii), or (iii) of subparagraph (B) shall notify the Secretary of any failure of premium payment meriting cancellation of the policy prior to undertaking such a cancellation. Any regulations prescribed by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B) may allow for such adjustments in the required levels of excess/stop loss insurance as the qualified actuary may recommend, taking into account the specific circumstances of the plan.
(b)

Minimum Surplus in Addition to Claims Reserves

In the case of any association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan establishes and maintains surplus in an amount at least equal to—

(1)

$500,000, or

(2)

such greater amount (but not greater than $2,000,000) as may be set forth in regulations prescribed by the applicable authority, considering the level of aggregate and specific excess/stop loss insurance provided with respect to such plan and other factors related to solvency risk, such as the plan’s projected levels of participation or claims, the nature of the plan’s liabilities, and the types of assets available to assure that such liabilities are met.

(c)

Additional Requirements

In the case of any association health plan described in subsection (a)(2), the applicable authority may provide such additional requirements relating to reserves, excess/stop loss insurance, and indemnification insurance as the applicable authority considers appropriate. Such requirements may be provided by regulation with respect to any such plan or any class of such plans.

(d)

Adjustments for Excess/Stop Loss Insurance

The applicable authority may provide for adjustments to the levels of reserves otherwise required under subsections (a) and (b) with respect to any plan or class of plans to take into account excess/stop loss insurance provided with respect to such plan or plans.

(e)

Alternative Means of Compliance

The applicable authority may permit an association health plan described in subsection (a)(2) to substitute, for all or part of the requirements of this section (except subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless arrangement, or other financial arrangement as the applicable authority determines to be adequate to enable the plan to fully meet all its financial obligations on a timely basis and is otherwise no less protective of the interests of participants and beneficiaries than the requirements for which it is substituted. The applicable authority may take into account, for purposes of this subsection, evidence provided by the plan or sponsor which demonstrates an assumption of liability with respect to the plan. Such evidence may be in the form of a contract of indemnification, lien, bonding, insurance, letter of credit, recourse under applicable terms of the plan in the form of assessments of participating employers, security, or other financial arrangement.

(f)

Measures To Ensure Continued Payment of Benefits by Certain Plans in Distress

(1)

Payments by certain plans to association health plan fund

(A)

In general

In the case of an association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan makes payments into the Association Health Plan Fund under this subparagraph when they are due. Such payments shall consist of annual payments in the amount of $5,000, and, in addition to such annual payments, such supplemental payments as the Secretary may determine to be necessary under paragraph (2). Payments under this paragraph are payable to the Fund at the time determined by the Secretary. Initial payments are due in advance of certification under this part. Payments shall continue to accrue until a plan’s assets are distributed pursuant to a termination procedure.

(B)

Penalties for failure to make payments

If any payment is not made by a plan when it is due, a late payment charge of not more than 100 percent of the payment which was not timely paid shall be payable by the plan to the Fund.

(C)

Continued duty of the secretary

The Secretary shall not cease to carry out the provisions of paragraph (2) on account of the failure of a plan to pay any payment when due.

(2)

Payments by secretary to continue excess/stop loss insurance coverage and indemnification insurance coverage for certain plans

In any case in which the applicable authority determines that there is, or that there is reason to believe that there will be: (A) a failure to take necessary corrective actions under section 809(a) with respect to an association health plan described in subsection (a)(2); or (B) a termination of such a plan under section 809(b) or 810(b)(8) (and, if the applicable authority is not the Secretary, certifies such determination to the Secretary), the Secretary shall determine the amounts necessary to make payments to an insurer (designated by the Secretary) to maintain in force excess/stop loss insurance coverage or indemnification insurance coverage for such plan, if the Secretary determines that there is a reasonable expectation that, without such payments, claims would not be satisfied by reason of termination of such coverage. The Secretary shall, to the extent provided in advance in appropriation Acts, pay such amounts so determined to the insurer designated by the Secretary.

(3)

Association health plan fund

(A)

In general

There is established on the books of the Treasury a fund to be known as the Association Health Plan Fund. The Fund shall be available for making payments pursuant to paragraph (2). The Fund shall be credited with payments received pursuant to paragraph (1)(A), penalties received pursuant to paragraph (1)(B); and earnings on investments of amounts of the Fund under subparagraph (B).

(B)

Investment

Whenever the Secretary determines that the moneys of the fund are in excess of current needs, the Secretary may request the investment of such amounts as the Secretary determines advisable by the Secretary of the Treasury in obligations issued or guaranteed by the United States.

(g)

Excess/Stop Loss Insurance

For purposes of this section—

(1)

Aggregate excess/stop loss insurance

The term aggregate excess/stop loss insurance means, in connection with an association health plan, a contract—

(A)

under which an insurer (meeting such minimum standards as the applicable authority may prescribe by regulation) provides for payment to the plan with respect to aggregate claims under the plan in excess of an amount or amounts specified in such contract;

(B)

which is guaranteed renewable; and

(C)

which allows for payment of premiums by any third party on behalf of the insured plan.

(2)

Specific excess/stop loss insurance

The term specific excess/stop loss insurance means, in connection with an association health plan, a contract—

(A)

under which an insurer (meeting such minimum standards as the applicable authority may prescribe by regulation) provides for payment to the plan with respect to claims under the plan in connection with a covered individual in excess of an amount or amounts specified in such contract in connection with such covered individual;

(B)

which is guaranteed renewable; and

(C)

which allows for payment of premiums by any third party on behalf of the insured plan.

(h)

Indemnification Insurance

For purposes of this section, the term indemnification insurance means, in connection with an association health plan, a contract—

(1)

under which an insurer (meeting such minimum standards as the applicable authority may prescribe by regulation) provides for payment to the plan with respect to claims under the plan which the plan is unable to satisfy by reason of a termination pursuant to section 809(b) (relating to mandatory termination);

(2)

which is guaranteed renewable and noncancellable for any reason (except as the applicable authority may prescribe by regulation); and

(3)

which allows for payment of premiums by any third party on behalf of the insured plan.

(i)

Reserves

For purposes of this section, the term reserves means, in connection with an association health plan, plan assets which meet the fiduciary standards under part 4 and such additional requirements regarding liquidity as the applicable authority may prescribe by regulation.

(j)

Solvency Standards Working Group

(1)

In general

Within 90 days after the date of the enactment of the Small Business Health Fairness Act of 2011, the applicable authority shall establish a Solvency Standards Working Group. In prescribing the initial regulations under this section, the applicable authority shall take into account the recommendations of such Working Group.

(2)

Membership

The Working Group shall consist of not more than 15 members appointed by the applicable authority. The applicable authority shall include among persons invited to membership on the Working Group at least one of each of the following:

(A)

a representative of the National Association of Insurance Commissioners;

(B)

a representative of the American Academy of Actuaries;

(C)

a representative of the State governments, or their interests;

(D)

a representative of existing self-insured arrangements, or their interests;

(E)

a representative of associations of the type referred to in section 801(b)(1), or their interests; and

(F)

a representative of multiemployer plans that are group health plans, or their interests.

807.

Requirements for application and related requirements

(a)

Filing Fee

Under the procedure prescribed pursuant to section 802(a), an association health plan shall pay to the applicable authority at the time of filing an application for certification under this part a filing fee in the amount of $5,000, which shall be available in the case of the Secretary, to the extent provided in appropriation Acts, for the sole purpose of administering the certification procedures applicable with respect to association health plans.

(b)

Information To Be Included in Application for Certification

An application for certification under this part meets the requirements of this section only if it includes, in a manner and form which shall be prescribed by the applicable authority by regulation, at least the following information:

(1)

Identifying information

The names and addresses of—

(A)

the sponsor; and

(B)

the members of the board of trustees of the plan.

(2)

States in which plan intends to do business

The States in which participants and beneficiaries under the plan are to be located and the number of them expected to be located in each such State.

(3)

Bonding requirements

Evidence provided by the board of trustees that the bonding requirements of section 412 will be met as of the date of the application or (if later) commencement of operations.

(4)

Plan documents

A copy of the documents governing the plan (including any bylaws and trust agreements), the summary plan description, and other material describing the benefits that will be provided to participants and beneficiaries under the plan.

(5)

Agreements with service providers

A copy of any agreements between the plan and contract administrators and other service providers.

(6)

Funding report

In the case of association health plans providing benefits options in addition to health insurance coverage, a report setting forth information with respect to such additional benefit options determined as of a date within the 120-day period ending with the date of the application, including the following:

(A)

Reserves

A statement, certified by the board of trustees of the plan, and a statement of actuarial opinion, signed by a qualified actuary, that all applicable requirements of section 806 are or will be met in accordance with regulations which the applicable authority shall prescribe.

(B)

Adequacy of contribution rates

A statement of actuarial opinion, signed by a qualified actuary, which sets forth a description of the extent to which contribution rates are adequate to provide for the payment of all obligations and the maintenance of required reserves under the plan for the 12-month period beginning with such date within such 120-day period, taking into account the expected coverage and experience of the plan. If the contribution rates are not fully adequate, the statement of actuarial opinion shall indicate the extent to which the rates are inadequate and the changes needed to ensure adequacy.

(C)

Current and projected value of assets and liabilities

A statement of actuarial opinion signed by a qualified actuary, which sets forth the current value of the assets and liabilities accumulated under the plan and a projection of the assets, liabilities, income, and expenses of the plan for the 12-month period referred to in subparagraph (B). The income statement shall identify separately the plan’s administrative expenses and claims.

(D)

Costs of coverage to be charged and other expenses

A statement of the costs of coverage to be charged, including an itemization of amounts for administration, reserves, and other expenses associated with the operation of the plan.

(E)

Other information

Any other information as may be determined by the applicable authority, by regulation, as necessary to carry out the purposes of this part.

(c)

Filing Notice of Certification With States

A certification granted under this part to an association health plan shall not be effective unless written notice of such certification is filed with the applicable State authority of each State in which at least 25 percent of the participants and beneficiaries under the plan are located. For purposes of this subsection, an individual shall be considered to be located in the State in which a known address of such individual is located or in which such individual is employed.

(d)

Notice of Material Changes

In the case of any association health plan certified under this part, descriptions of material changes in any information which was required to be submitted with the application for the certification under this part shall be filed in such form and manner as shall be prescribed by the applicable authority by regulation. The applicable authority may require by regulation prior notice of material changes with respect to specified matters which might serve as the basis for suspension or revocation of the certification.

(e)

Reporting Requirements for Certain Association Health Plans

An association health plan certified under this part which provides benefit options in addition to health insurance coverage for such plan year shall meet the requirements of section 103 by filing an annual report under such section which shall include information described in subsection (b)(6) with respect to the plan year and, notwithstanding section 104(a)(1)(A), shall be filed with the applicable authority not later than 90 days after the close of the plan year (or on such later date as may be prescribed by the applicable authority). The applicable authority may require by regulation such interim reports as it considers appropriate.

(f)

Engagement of Qualified Actuary

The board of trustees of each association health plan which provides benefits options in addition to health insurance coverage and which is applying for certification under this part or is certified under this part shall engage, on behalf of all participants and beneficiaries, a qualified actuary who shall be responsible for the preparation of the materials comprising information necessary to be submitted by a qualified actuary under this part. The qualified actuary shall utilize such assumptions and techniques as are necessary to enable such actuary to form an opinion as to whether the contents of the matters reported under this part—

(1)

are in the aggregate reasonably related to the experience of the plan and to reasonable expectations; and

(2)

represent such actuary’s best estimate of anticipated experience under the plan.

The opinion by the qualified actuary shall be made with respect to, and shall be made a part of, the annual report.
808.

Notice requirements for voluntary termination

Except as provided in section 809(b), an association health plan which is or has been certified under this part may terminate (upon or at any time after cessation of accruals in benefit liabilities) only if the board of trustees, not less than 60 days before the proposed termination date—

(1)

provides to the participants and beneficiaries a written notice of intent to terminate stating that such termination is intended and the proposed termination date;

(2)

develops a plan for winding up the affairs of the plan in connection with such termination in a manner which will result in timely payment of all benefits for which the plan is obligated; and

(3)

submits such plan in writing to the applicable authority.

Actions required under this section shall be taken in such form and manner as may be prescribed by the applicable authority by regulation.
809.

Corrective actions and mandatory termination

(a)

Actions To Avoid Depletion of Reserves

An association health plan which is certified under this part and which provides benefits other than health insurance coverage shall continue to meet the requirements of section 806, irrespective of whether such certification continues in effect. The board of trustees of such plan shall determine quarterly whether the requirements of section 806 are met. In any case in which the board determines that there is reason to believe that there is or will be a failure to meet such requirements, or the applicable authority makes such a determination and so notifies the board, the board shall immediately notify the qualified actuary engaged by the plan, and such actuary shall, not later than the end of the next following month, make such recommendations to the board for corrective action as the actuary determines necessary to ensure compliance with section 806. Not later than 30 days after receiving from the actuary recommendations for corrective actions, the board shall notify the applicable authority (in such form and manner as the applicable authority may prescribe by regulation) of such recommendations of the actuary for corrective action, together with a description of the actions (if any) that the board has taken or plans to take in response to such recommendations. The board shall thereafter report to the applicable authority, in such form and frequency as the applicable authority may specify to the board, regarding corrective action taken by the board until the requirements of section 806 are met.

(b)

Mandatory Termination

In any case in which—

(1)

the applicable authority has been notified under subsection (a) (or by an issuer of excess/stop loss insurance or indemnity insurance pursuant to section 806(a)) of a failure of an association health plan which is or has been certified under this part and is described in section 806(a)(2) to meet the requirements of section 806 and has not been notified by the board of trustees of the plan that corrective action has restored compliance with such requirements; and

(2)

the applicable authority determines that there is a reasonable expectation that the plan will continue to fail to meet the requirements of section 806,

the board of trustees of the plan shall, at the direction of the applicable authority, terminate the plan and, in the course of the termination, take such actions as the applicable authority may require, including satisfying any claims referred to in section 806(a)(2)(B)(iii) and recovering for the plan any liability under subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure that the affairs of the plan will be, to the maximum extent possible, wound up in a manner which will result in timely provision of all benefits for which the plan is obligated.
810.

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

(a)

Appointment of Secretary as Trustee for Insolvent Plans

Whenever the Secretary determines that an association health plan which is or has been certified under this part and which is described in section 806(a)(2) will be unable to provide benefits when due or is otherwise in a financially hazardous condition, as shall be defined by the Secretary by regulation, the Secretary shall, upon notice to the plan, apply to the appropriate United States district court for appointment of the Secretary as trustee to administer the plan for the duration of the insolvency. The plan may appear as a party and other interested persons may intervene in the proceedings at the discretion of the court. The court shall appoint such Secretary trustee if the court determines that the trusteeship is necessary to protect the interests of the participants and beneficiaries or providers of medical care or to avoid any unreasonable deterioration of the financial condition of the plan. The trusteeship of such Secretary shall continue until the conditions described in the first sentence of this subsection are remedied or the plan is terminated.

(b)

Powers as Trustee

The Secretary, upon appointment as trustee under subsection (a), shall have the power—

(1)

to do any act authorized by the plan, this title, or other applicable provisions of law to be done by the plan administrator or any trustee of the plan;

(2)

to require the transfer of all (or any part) of the assets and records of the plan to the Secretary as trustee;

(3)

to invest any assets of the plan which the Secretary holds in accordance with the provisions of the plan, regulations prescribed by the Secretary, and applicable provisions of law;

(4)

to require the sponsor, the plan administrator, any participating employer, and any employee organization representing plan participants to furnish any information with respect to the plan which the Secretary as trustee may reasonably need in order to administer the plan;

(5)

to collect for the plan any amounts due the plan and to recover reasonable expenses of the trusteeship;

(6)

to commence, prosecute, or defend on behalf of the plan any suit or proceeding involving the plan;

(7)

to issue, publish, or file such notices, statements, and reports as may be required by the Secretary by regulation or required by any order of the court;

(8)

to terminate the plan (or provide for its termination in accordance with section 809(b)) and liquidate the plan assets, to restore the plan to the responsibility of the sponsor, or to continue the trusteeship;

(9)

to provide for the enrollment of plan participants and beneficiaries under appropriate coverage options; and

(10)

to do such other acts as may be necessary to comply with this title or any order of the court and to protect the interests of plan participants and beneficiaries and providers of medical care.

(c)

Notice of Appointment

As soon as practicable after the Secretary’s appointment as trustee, the Secretary shall give notice of such appointment to—

(1)

the sponsor and plan administrator;

(2)

each participant;

(3)

each participating employer; and

(4)

if applicable, each employee organization which, for purposes of collective bargaining, represents plan participants.

(d)

Additional Duties

Except to the extent inconsistent with the provisions of this title, or as may be otherwise ordered by the court, the Secretary, upon appointment as trustee under this section, shall be subject to the same duties as those of a trustee under section 704 of title 11, United States Code, and shall have the duties of a fiduciary for purposes of this title.

(e)

Other Proceedings

An application by the Secretary under this subsection may be filed notwithstanding the pendency in the same or any other court of any bankruptcy, mortgage foreclosure, or equity receivership proceeding, or any proceeding to reorganize, conserve, or liquidate such plan or its property, or any proceeding to enforce a lien against property of the plan.

(f)

Jurisdiction of Court

(1)

In general

Upon the filing of an application for the appointment as trustee or the issuance of a decree under this section, the court to which the application is made shall have exclusive jurisdiction of the plan involved and its property wherever located with the powers, to the extent consistent with the purposes of this section, of a court of the United States having jurisdiction over cases under chapter 11 of title 11, United States Code. Pending an adjudication under this section such court shall stay, and upon appointment by it of the Secretary as trustee, such court shall continue the stay of, any pending mortgage foreclosure, equity receivership, or other proceeding to reorganize, conserve, or liquidate the plan, the sponsor, or property of such plan or sponsor, and any other suit against any receiver, conservator, or trustee of the plan, the sponsor, or property of the plan or sponsor. Pending such adjudication and upon the appointment by it of the Secretary as trustee, the court may stay any proceeding to enforce a lien against property of the plan or the sponsor or any other suit against the plan or the sponsor.

(2)

Venue

An action under this section may be brought in the judicial district where the sponsor or the plan administrator resides or does business or where any asset of the plan is situated. A district court in which such action is brought may issue process with respect to such action in any other judicial district.

(g)

Personnel

In accordance with regulations which shall be prescribed by the Secretary, the Secretary shall appoint, retain, and compensate accountants, actuaries, and other professional service personnel as may be necessary in connection with the Secretary’s service as trustee under this section.

811.

State assessment authority

(a)

In General

Notwithstanding section 514, a State may impose by law a contribution tax on an association health plan described in section 806(a)(2), if the plan commenced operations in such State after the date of the enactment of the Small Business Health Fairness Act of 2011.

(b)

Contribution Tax

For purposes of this section, the term contribution tax imposed by a State on an association health plan means any tax imposed by such State if—

(1)

such tax is computed by applying a rate to the amount of premiums or contributions, with respect to individuals covered under the plan who are residents of such State, which are received by the plan from participating employers located in such State or from such individuals;

(2)

the rate of such tax does not exceed the rate of any tax imposed by such State on premiums or contributions received by insurers or health maintenance organizations for health insurance coverage offered in such State in connection with a group health plan;

(3)

such tax is otherwise nondiscriminatory; and

(4)

the amount of any such tax assessed on the plan is reduced by the amount of any tax or assessment otherwise imposed by the State on premiums, contributions, or both received by insurers or health maintenance organizations for health insurance coverage, aggregate excess/stop loss insurance (as defined in section 806(g)(1)), specific excess/stop loss insurance (as defined in section 806(g)(2)), other insurance related to the provision of medical care under the plan, or any combination thereof provided by such insurers or health maintenance organizations in such State in connection with such plan.

812.

Definitions and rules of construction

(a)

Definitions

For purposes of this part—

(1)

Group health plan

The term group health plan has the meaning provided in section 733(a)(1) (after applying subsection (b) of this section).

(2)

Medical care

The term medical care has the meaning provided in section 733(a)(2).

(3)

Health insurance coverage

The term health insurance coverage has the meaning provided in section 733(b)(1).

(4)

Health insurance issuer

The term health insurance issuer has the meaning provided in section 733(b)(2).

(5)

Applicable authority

The term applicable authority means the Secretary, except that, in connection with any exercise of the Secretary’s authority regarding which the Secretary is required under section 506(d) to consult with a State, such term means the Secretary, in consultation with such State.

(6)

Health status-related factor

The term health status-related factor has the meaning provided in section 733(d)(2).

(7)

Individual market

(A)

In general

The term individual market means the market for health insurance coverage offered to individuals other than in connection with a group health plan.

(B)

Treatment of very small groups

(i)

In general

Subject to clause (ii), such term includes coverage offered in connection with a group health plan that has fewer than 2 participants as current employees or participants described in section 732(d)(3) on the first day of the plan year.

(ii)

State exception

Clause (i) shall not apply in the case of health insurance coverage offered in a State if such State regulates the coverage described in such clause in the same manner and to the same extent as coverage in the small group market (as defined in section 2791(e)(5) of the Public Health Service Act) is regulated by such State.

(8)

Participating employer

The term participating employer means, in connection with an association health plan, any employer, if any individual who is an employee of such employer, a partner in such employer, or a self-employed individual who is such employer (or any dependent, as defined under the terms of the plan, of such individual) is or was covered under such plan in connection with the status of such individual as such an employee, partner, or self-employed individual in relation to the plan.

(9)

Applicable state authority

The term applicable State authority means, with respect to a health insurance issuer in a State, the State insurance commissioner or official or officials designated by the State to enforce the requirements of title XXVII of the Public Health Service Act for the State involved with respect to such issuer.

(10)

Qualified actuary

The term qualified actuary means an individual who is a member of the American Academy of Actuaries.

(11)

Affiliated member

The term affiliated member means, in connection with a sponsor—

(A)

a person who is otherwise eligible to be a member of the sponsor but who elects an affiliated status with the sponsor,

(B)

in the case of a sponsor with members which consist of associations, a person who is a member of any such association and elects an affiliated status with the sponsor, or

(C)

in the case of an association health plan in existence on the date of the enactment of the Small Business Health Fairness Act of 2011, a person eligible to be a member of the sponsor or one of its member associations.

(12)

Large employer

The term large employer means, in connection with a group health plan with respect to a plan year, an employer who employed an average of at least 51 employees on business days during the preceding calendar year and who employs at least 2 employees on the first day of the plan year.

(13)

Small employer

The term small employer means, in connection with a group health plan with respect to a plan year, an employer who is not a large employer.

(b)

Rules of Construction

(1)

Employers and employees

For purposes of determining whether a plan, fund, or program is an employee welfare benefit plan which is an association health plan, and for purposes of applying this title in connection with such plan, fund, or program so determined to be such an employee welfare benefit plan—

(A)

in the case of a partnership, the term employer (as defined in section 3(5)) includes the partnership in relation to the partners, and the term employee (as defined in section 3(6)) includes any partner in relation to the partnership; and

(B)

in the case of a self-employed individual, the term employer (as defined in section 3(5)) and the term employee (as defined in section 3(6)) shall include such individual.

(2)

Plans, funds, and programs treated as employee welfare benefit plans

In the case of any plan, fund, or program which was established or is maintained for the purpose of providing medical care (through the purchase of insurance or otherwise) for employees (or their dependents) covered thereunder and which demonstrates to the Secretary that all requirements for certification under this part would be met with respect to such plan, fund, or program if such plan, fund, or program were a group health plan, such plan, fund, or program shall be treated for purposes of this title as an employee welfare benefit plan on and after the date of such demonstration.

.

(b)

Conforming Amendments to Preemption Rules

(1)

Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is amended by adding at the end the following new subparagraph:

(E)

The preceding subparagraphs of this paragraph do not apply with respect to any State law in the case of an association health plan which is certified under part 8.

.

(2)

Section 514 of such Act (29 U.S.C. 1144) is amended—

(A)

in subsection (b)(4), by striking Subsection (a) and inserting Subsections (a) and (d);

(B)

in subsection (b)(5), by striking subsection (a) in subparagraph (A) and inserting subsection (a) of this section and subsections (a)(2)(B) and (b) of section 805, and by striking subsection (a) in subparagraph (B) and inserting subsection (a) of this section or subsection (a)(2)(B) or (b) of section 805;

(C)

by redesignating subsections (d) and (e) as subsections (e) and (f), respectively; and

(D)

by inserting after subsection (c) the following new subsection:

(d)
(1)

Except as provided in subsection (b)(4), the provisions of this title shall supersede any and all State laws insofar as they may now or hereafter preclude, or have the effect of precluding, a health insurance issuer from offering health insurance coverage in connection with an association health plan which is certified under part 8.

(2)

Except as provided in paragraphs (4) and (5) of subsection (b) of this section—

(A)

In any case in which health insurance coverage of any policy type is offered under an association health plan certified under part 8 to a participating employer operating in such State, the provisions of this title shall supersede any and all laws of such State insofar as they may preclude a health insurance issuer from offering health insurance coverage of the same policy type to other employers operating in the State which are eligible for coverage under such association health plan, whether or not such other employers are participating employers in such plan.

(B)

In any case in which health insurance coverage of any policy type is offered in a State under an association health plan certified under part 8 and the filing, with the applicable State authority (as defined in section 812(a)(9)), of the policy form in connection with such policy type is approved by such State authority, the provisions of this title shall supersede any and all laws of any other State in which health insurance coverage of such type is offered, insofar as they may preclude, upon the filing in the same form and manner of such policy form with the applicable State authority in such other State, the approval of the filing in such other State.

(3)

Nothing in subsection (b)(6)(E) or the preceding provisions of this subsection shall be construed, with respect to health insurance issuers or health insurance coverage, to supersede or impair the law of any State—

(A)

providing solvency standards or similar standards regarding the adequacy of insurer capital, surplus, reserves, or contributions, or

(B)

relating to prompt payment of claims.

(4)

For additional provisions relating to association health plans, see subsections (a)(2)(B) and (b) of section 805.

(5)

For purposes of this subsection, the term association health plan has the meaning provided in section 801(a), and the terms health insurance coverage, participating employer, and health insurance issuer have the meanings provided such terms in section 812, respectively.

.

(3)

Section 514(b)(6)(A) of such Act (29 U.S.C. 1144(b)(6)(A)) is amended—

(A)

in clause (i)(II), by striking and at the end;

(B)

in clause (ii), by inserting and which does not provide medical care (within the meaning of section 733(a)(2)), after arrangement,, and by striking title. and inserting title, and; and

(C)

by adding at the end the following new clause:

(iii)

subject to subparagraph (E), in the case of any other employee welfare benefit plan which is a multiple employer welfare arrangement and which provides medical care (within the meaning of section 733(a)(2)), any law of any State which regulates insurance may apply.

.

(4)

Section 514(e) of such Act (as redesignated by paragraph (2)(C)) is amended—

(A)

by striking Nothing and inserting (1) Except as provided in paragraph (2), nothing; and

(B)

by adding at the end the following new paragraph:

(2)

Nothing in any other provision of law enacted on or after the date of the enactment of the Small Business Health Fairness Act of 2011 shall be construed to alter, amend, modify, invalidate, impair, or supersede any provision of this title, except by specific cross-reference to the affected section.

.

(c)

Plan Sponsor

Section 3(16)(B) of such Act (29 U.S.C. 102(16)(B)) is amended by adding at the end the following new sentence: Such term also includes a person serving as the sponsor of an association health plan under part 8..

(d)

Disclosure of Solvency Protections Related to Self-Insured and Fully Insured Options Under Association Health Plans

Section 102(b) of such Act (29 U.S.C. 102(b)) is amended by adding at the end the following: An association health plan shall include in its summary plan description, in connection with each benefit option, a description of the form of solvency or guarantee fund protection secured pursuant to this Act or applicable State law, if any..

(e)

Savings Clause

Section 731(c) of such Act is amended by inserting or part 8 after this part.

(f)

Report to the Congress Regarding Certification of Self-Insured Association Health Plans

Not later than January 1, 2014, the Secretary of Labor shall report to the Committee on Education and the Workforce of the House of Representatives and the Committee on Health, Education, Labor, and Pensions of the Senate the effect association health plans have had, if any, on reducing the number of uninsured individuals.

(g)

Clerical Amendment

The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 is amended by inserting after the item relating to section 734 the following new items:

Part 8—Rules Governing Association Health Plans

801. Association health plans.

802. Certification of association health plans.

803. Requirements relating to sponsors and boards of trustees.

804. Participation and coverage requirements.

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

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

807. Requirements for application and related requirements.

808. Notice requirements for voluntary termination.

809. Corrective actions and mandatory termination.

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

811. State assessment authority.

812. Definitions and rules of construction.

.

622.

Clarification of treatment of single employer arrangements

Section 3(40)(B) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amended—

(1)

in clause (i), by inserting after control group, the following: except that, in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 812(a)(2)), two or more trades or businesses, whether or not incorporated, shall be deemed a single employer for any plan year of such plan, or any fiscal year of such other arrangement, if such trades or businesses are within the same control group during such year or at any time during the preceding 1-year period,;

(2)

in clause (iii), by striking (iii) the determination and inserting the following:

(iii)
(I)

in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 812(a)(2)), the determination of whether a trade or business is under common control with another trade or business shall be determined under regulations of the Secretary applying principles consistent and coextensive with the principles applied in determining whether employees of two or more trades or businesses are treated as employed by a single employer under section 4001(b), except that, for purposes of this paragraph, an interest of greater than 25 percent may not be required as the minimum interest necessary for common control, or

(II)

in any other case, the determination

;

(3)

by redesignating clauses (iv) and (v) as clauses (v) and (vi), respectively; and

(4)

by inserting after clause (iii) the following new clause:

(iv)

in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 812(a)(2)), in determining, after the application of clause (i), whether benefits are provided to employees of two or more employers, the arrangement shall be treated as having only one participating employer if, after the application of clause (i), the number of individuals who are employees and former employees of any one participating employer and who are covered under the arrangement is greater than 75 percent of the aggregate number of all individuals who are employees or former employees of participating employers and who are covered under the arrangement,

.

623.

Enforcement provisions relating to association health plans

(a)

Criminal Penalties for Certain Willful Misrepresentations

Section 501 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1131) is amended—

(1)

by inserting (a) after Sec. 501.; and

(2)

by adding at the end the following new subsection:

(b)

Any person who willfully falsely represents, to any employee, any employee’s beneficiary, any employer, the Secretary, or any State, a plan or other arrangement established or maintained for the purpose of offering or providing any benefit described in section 3(1) to employees or their beneficiaries as—

(1)

being an association health plan which has been certified under part 8;

(2)

having been established or maintained under or pursuant to one or more collective bargaining agreements which are reached pursuant to collective bargaining described in section 8(d) of the National Labor Relations Act (29 U.S.C. 158(d)) or paragraph fourth of section 2 of the Railway Labor Act (45 U.S.C. 152, paragraph fourth) or which are reached pursuant to labor-management negotiations under similar provisions of State public employee relations laws; or

(3)

being a plan or arrangement described in section 3(40)(A)(i),

shall, upon conviction, be imprisoned not more than 5 years, be fined under title 18, United States Code, or both.

.

(b)

Cease Activities Orders

Section 502 of such Act (29 U.S.C. 1132) is amended by adding at the end the following new subsection:

(n)

Association Health Plan Cease and Desist Orders

(1)

In general

Subject to paragraph (2), upon application by the Secretary showing the operation, promotion, or marketing of an association health plan (or similar arrangement providing benefits consisting of medical care (as defined in section 733(a)(2))) that—

(A)

is not certified under part 8, is subject under section 514(b)(6) to the insurance laws of any State in which the plan or arrangement offers or provides benefits, and is not licensed, registered, or otherwise approved under the insurance laws of such State; or

(B)

is an association health plan certified under part 8 and is not operating in accordance with the requirements under part 8 for such certification,

a district court of the United States shall enter an order requiring that the plan or arrangement cease activities.
(2)

Exception

Paragraph (1) shall not apply in the case of an association health plan or other arrangement if the plan or arrangement shows that—

(A)

all benefits under it referred to in paragraph (1) consist of health insurance coverage; and

(B)

with respect to each State in which the plan or arrangement offers or provides benefits, the plan or arrangement is operating in accordance with applicable State laws that are not superseded under section 514.

(3)

Additional equitable relief

The court may grant such additional equitable relief, including any relief available under this title, as it deems necessary to protect the interests of the public and of persons having claims for benefits against the plan.

.

(c)

Responsibility for Claims Procedure

Section 503 of such Act (29 U.S.C. 1133) is amended by inserting (a) In general.— before In accordance, and by adding at the end the following new subsection:

(b)

Association Health Plans

The terms of each association health plan which is or has been certified under part 8 shall require the board of trustees or the named fiduciary (as applicable) to ensure that the requirements of this section are met in connection with claims filed under the plan.

.

624.

Cooperation between Federal and State authorities

Section 506 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1136) is amended by adding at the end the following new subsection:

(d)

Consultation With States With Respect to Association Health Plans

(1)

Agreements with states

The Secretary shall consult with the State recognized under paragraph (2) with respect to an association health plan regarding the exercise of—

(A)

the Secretary’s authority under sections 502 and 504 to enforce the requirements for certification under part 8; and

(B)

the Secretary’s authority to certify association health plans under part 8 in accordance with regulations of the Secretary applicable to certification under part 8.

(2)

Recognition of primary domicile state

In carrying out paragraph (1), the Secretary shall ensure that only one State will be recognized, with respect to any particular association health plan, as the State with which consultation is required. In carrying out this paragraph—

(A)

in the case of a plan which provides health insurance coverage (as defined in section 812(a)(3)), such State shall be the State with which filing and approval of a policy type offered by the plan was initially obtained, and

(B)

in any other case, the Secretary shall take into account the places of residence of the participants and beneficiaries under the plan and the State in which the trust is maintained.

.

625.

Effective date and transitional and other rules

(a)

Effective Date

The amendments made by this chapter shall take effect 1 year after the date of the enactment of this Act. The Secretary of Labor shall first issue all regulations necessary to carry out the amendments made by this chapter within 1 year after the date of the enactment of this Act.

(b)

Treatment of Certain Existing Health Benefits Programs

(1)

In general

In any case in which, as of the date of the enactment of this Act, an arrangement is maintained in a State for the purpose of providing benefits consisting of medical care for the employees and beneficiaries of its participating employers, at least 200 participating employers make contributions to such arrangement, such arrangement has been in existence for at least 10 years, and such arrangement is licensed under the laws of one or more States to provide such benefits to its participating employers, upon the filing with the applicable authority (as defined in section 812(a)(5) of the Employee Retirement Income Security Act of 1974 (as amended by this chapter)) by the arrangement of an application for certification of the arrangement under part 8 of subtitle B of title I of such Act—

(A)

such arrangement shall be deemed to be a group health plan for purposes of title I of such Act;

(B)

the requirements of sections 801(a) and 803(a) of the Employee Retirement Income Security Act of 1974 shall be deemed met with respect to such arrangement;

(C)

the requirements of section 803(b) of such Act shall be deemed met, if the arrangement is operated by a board of directors which—

(i)

is elected by the participating employers, with each employer having one vote; and

(ii)

has complete fiscal control over the arrangement and which is responsible for all operations of the arrangement;

(D)

the requirements of section 804(a) of such Act shall be deemed met with respect to such arrangement; and

(E)

the arrangement may be certified by any applicable authority with respect to its operations in any State only if it operates in such State on the date of certification.

The provisions of this subsection shall cease to apply with respect to any such arrangement at such time after the date of the enactment of this Act as the applicable requirements of this subsection are not met with respect to such arrangement.
(2)

Definitions

For purposes of this subsection, the terms group health plan, medical care, and participating employer shall have the meanings provided in section 812 of the Employee Retirement Income Security Act of 1974, except that the reference in paragraph (7) of such section to an association health plan shall be deemed a reference to an arrangement referred to in this subsection.

2

Targeted Efforts to Expand Access

631.

Extending coverage of dependents

(a)

Employee Retirement Income Security Act of 1974

(1)

In general

Part 7 of subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by inserting after section 2714 the following new section:

715.

Extending coverage of dependents

(a)

In general

In the case of a group health plan, or health insurance coverage offered in connection with a group health plan, that treats as a beneficiary under the plan an individual who is a dependent child of a participant or beneficiary under the plan, the plan or coverage shall continue to treat the individual as a dependent child without regard to the individual’s age through at least the end of the plan year in which the individual turns an age specified in the plan, but not less than 23 years of age.

(b)

Construction

Nothing in this section shall be construed as requiring a group health plan to provide benefits for dependent children as beneficiaries under the plan or to require a participant to elect coverage of dependent children.

.

(2)

Clerical amendment

The table of contents of such Act is amended by inserting after the item relating to section 714 the following new item:

Sec. 715. Extending coverage of dependents.

.

(b)

PHSA

Title XXVII of the Public Health Service Act is amended by inserting after section 2707 the following new section:

2708.

Extending coverage of dependents

(a)

In general

In the case of a group health plan, or health insurance coverage offered in connection with a group health plan, that treats as a beneficiary under the plan an individual who is a dependent child of a participant or beneficiary under the plan, the plan or coverage shall continue to treat the individual as a dependent child without regard to the individual’s age through at least the end of the plan year in which the individual turns an age specified in the plan, but not less than 23 years of age.

(b)

Construction

Nothing in this section shall be construed as requiring a group health plan to provide benefits for dependent children as beneficiaries under the plan or to require a participant to elect coverage of dependent children.

.

(c)

IRC

(1)

In general

Subchapter B of chapter 100 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

9814.

Extending coverage of dependents

(a)

In general

In the case of a group health plan that treats as a beneficiary under the plan an individual who is a dependent child of a participant or beneficiary under the plan, the plan shall continue to treat the individual as a dependent child without regard to the individual’s age through at least the end of the plan year in which the individual turns an age specified in the plan, but not less than 23 years of age.

(b)

Construction

Nothing in this section shall be construed as requiring a group health plan to provide coverage for dependent children as beneficiaries under the plan or to require a participant to elect coverage of dependent children.

.

(2)

Clerical amendment

The table of sections in such subchapter is amended by adding at the end the following new item:

Sec. 9814. Extending coverage of dependents.

.

(d)

Effective date

The amendments made by this section shall apply to group health plans for plan years beginning more than 3 months after the date of the enactment of this Act and shall apply to individuals who are dependent children under a group health plan, or health insurance coverage offered in connection with such a plan, on or after such date.

632.

Allowing auto-enrollment for employer sponsored coverage

(a)

In general

No State shall establish a law that prevents an employer from instituting auto-enrollment for coverage of a participant or beneficiary, including current employees, under a group health plan, or health insurance coverage offered in connection with such a plan, so long as the participant or beneficiary has the option of declining such coverage.

(b)

Auto-Enrollment

(1)

Notice required

Employers with auto-enrollment under a group health plan or health insurance coverage shall provide annual notification, within a reasonable period before the beginning of each plan year, to each employee eligible to participate in the plan. The notice shall explain the employee contribution to such plan and the employee’s right to decline coverage.

(2)

Treatment of non-action

After a reasonable period of time after receipt of the notice, if an employee fails to make an affirmative declaration declining coverage, then such an employee may be enrolled in the group health plan or health insurance coverage offered in connection with such a plan.”.

(c)

Construction

Nothing in this section shall be construed to supersede State law which establishes, implements, or continues in effect any standard or requirement relating to employers in connection with payroll or the sponsoring of employer sponsored health insurance coverage except to the extent that such standard or requirement prevents an employer from instituting the auto-enrollment described in subsection (a).

VII

Stopping Medicare, Waste, Fraud, and Abuse and Increasing Penalties for Abusers

701.

Increased civil money penalties and criminal fines for Medicare fraud and abuse

(a)

Increased Civil Money Penalties

Section 1128A of the Social Security Act (42 U.S.C. 1320a–7a) is amended—

(1)

in subsection (a), in the matter following paragraph (10)—

(A)

by striking $10,000 each place it appears and inserting $20,000;

(B)

by striking $15,000 and inserting $30,000; and

(C)

by striking $50,000 each place it appears and inserting $100,000; and

(2)

in subsection (b)—

(A)

in paragraph (1), in the flush matter following subparagraph (B), by striking $2,000 and inserting $4,000;

(B)

in paragraph (2), by striking $2,000 and inserting $4,000; and

(C)

in paragraph (3)(A)(i), by striking $5,000 and inserting $10,000.

(b)

Increased Criminal Fines

Section 1128B of the Social Security Act (42 U.S.C. 1320a–7b) is amended—

(1)

in subsection (a), in the flush matter following paragraph (6)—

(A)

by striking $25,000 and inserting $100,000; and

(B)

by striking $10,000 and inserting $20,000;

(2)

in subsection (b)—

(A)

in paragraph (1), in the flush matter following subparagraph (B), by striking $25,000 and inserting $100,000; and

(B)

in paragraph (2), in the flush matter following subparagraph (B), by striking $25,000 and inserting $100,000;

(3)

in subsection (c), by striking $25,000 and inserting $100,000;

(4)

in subsection (d), in the second flush matter following subparagraph (B), by striking $25,000 and inserting $100,000; and

(5)

in subsection (e), by striking $2,000 and inserting $4,000.

(c)

Effective Date

The amendments made by this section shall apply to civil money penalties and fines imposed for actions taken on or after the date of enactment of this Act.

702.

Increased sentences for felonies involving Medicare fraud and abuse

(a)

False Statements and Representations

Section 1128B(a) of the Social Security Act (42 U.S.C. 1320a–7b(a)) is amended, in clause (i) of the flush matter following paragraph (6), by striking not more than five years and inserting not more than 10 years.

(b)

Anti-Kickback

Section 1128B(b) of the Social Security Act (42 U.S.C. 1320a–7b(b)) is amended—

(1)

in paragraph (1), in the flush matter following subparagraph (B), by striking not more than five years and inserting not more than 10 years; and

(2)

in paragraph (2), in the flush matter following subparagraph (B), by striking not more than five years and inserting not more than 10 years.

(c)

False Statement or Representation With Respect to Conditions or Operations of Facilities

Section 1128B(c) of the Social Security Act (42 U.S.C. 1320a–7b(c)) is amended by striking not more than five years and inserting not more than 10 years.

(d)

Excess Charges

Section 1128B(d) of the Social Security Act (42 U.S.C. 1320a–7b(d)) is amended, in the second flush matter following subparagraph (B), by striking not more than five years and inserting not more than 10 years.

(e)

Effective Date

The amendments made by this section shall apply to criminal penalties imposed for actions taken on or after the date of enactment of this Act.

703.

Other DME supplier anti-fraud and abuse provisions

(a)

Mandatory periodic site inspections for DME suppliers

The Secretary of Health and Human Services shall require, as a condition for participation of suppliers of durable medical equipment under part B of title XVIII of the Social Security Act—

(1)

a site inspection to be conducted for each such supplier that has not previously participated under such part within 6 months of the date of its initial participation under such part; and

(2)

a site inspection at least every 2 years to be conducted for each such supplier that has previously participated under such part.

(b)

Post-Payment review

The Secretary also shall provide conduct post-payment reviews of claims for items and services furnished under such part by durable medical equipment suppliers that begin participation under such part after the date of the enactment of this Act. Such reviews shall be conducted not less often than after the first 6, 12, and 18 months of such participation.

(c)

Availability of funds

Funds in the Health Care Fraud and Abuse Control Account under section 1817(k) of the Social Security Act (42 U.S.C. 1395i(k)) shall be available for the conduct of site inspections and post-payment review required under this section.

(d)

Treatment of skilled nursing facilities

In this section, a skilled nursing facility shall not be treated as a supplier of durable medical equipment with respect to any individual who is a resident of such facility.

704.

Retention of certain fraud and abuse provisions

Section 101 shall not apply to the provisions (including amendments made by) title VI of Public Law 111–148, other than subtitles D, H, and I of such title, and provisions of Public Law 111–152 insofar as they relative to such provisions.

705.

Ensuring timely enforcement of Medicare secondary payer requirements in liability cases

The Secretary of the Health and Human Services, acting through the Administrator of the Centers for Medicare & Medicaid Services, shall affirmatively establish, for initial implementation not later than 90 days after the date of the enactment of this Act, a plan to require applicable plans (as defined in subparagraph (F) of section 1862(b)(8) of the Social Security Act (42 U.S.C. 1395y(b)(8)), as added by section 111(a) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law 110–173)), to meet the determination and submission requirements under subparagraph (A) of such section 1862(b)(8).