Small business health plans

(a)

In general

Notwithstanding any other provision of law, with respect to small business health plans— (1)multiple, unaffiliated small employers may pool their employees for the purpose of purchasing health insurance coverage for such employees in the large group market; (2)health insurance issuers may offer health plans in the large group market to employees of the small employers described in paragraph (1); and (3)privately administered health insurance exchanges may offer health plans in the large group market to a pool of employees of multiple, unaffiliated small employers. (b)

Multistate participation

Notwithstanding any other provision of law, pools of employees described in subsection (a)(1) may include employers and employees from multiple States. (c)

Tax treatment of small business health plans

A small business health plan (as defined in section 801(a) of the Employee Retirement Income Security Act of 1974) shall be treated— (1)as a group health plan (as defined in section 2791 of the Public Health Service Act (42 U.S.C. 300gg–91)) for purposes of applying title XXVII of the Public Health Service Act (42 U.S.C. 300gg et seq.) and title XXII of such Act (42 U.S.C. 300bb–1); (2)as a group health plan (as defined in section 5000(b)(1) of the Internal Revenue Code of 1986) for purposes of applying sections 4980B and 5000 and chapter 100 of the Internal Revenue Code of 1986; and (3)as a group health plan (as defined in section 733(a)(1) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1191b(a)(1))) for purposes of applying parts 6 and 7 of title I of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1161 et seq.). (d)

Small business health plans

Subtitle B of title I of the Employee Retirement Income Security Act of 1974 is amended by adding at the end the following new part:

Rules governing small business health plans

801.

Small business health plans

(a)

In general

For purposes of this part, the term small business health plan means a fully insured group health plan whose sponsor is described in subsection (b). (b)

Plan sponsor

The sponsor of a group health plan is described in this subsection if such plan sponsor— (1)receives certification by the Secretary as a qualified sponsor and files a notice of certification with the State in which it operates; (2)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; (3)is established as a permanent entity; (4)is established for a purpose other than providing health benefits to its members, such as a bona fide trade association or a consortium of such associations, a franchise, or a section 7705 professional employer organization; and (5)does not condition membership on the basis of a minimum group size.

802.

Certification of small business health plans

(a)

In general

Not later than 6 months after the date of enactment of this part, the Secretary shall prescribe by interim final rule a procedure under which the Secretary will certify a qualified sponsor of a small business health plan. (b)

Requirements applicable to certified plans

A small business health plan with respect to which certification under this part is in effect shall meet the applicable requirements of this part, effective on the date of certification (or, if later, on the date on which the plan is to commence operations). (c)

Requirements for continued certification

The Secretary may provide by regulation for continued certification of small business health plans under this part. Such regulation shall provide for the revocation of a certification if the applicable authority finds that the small business health plan involved is failing to comply with the requirements of this part. (d)

Oversight of Certified Plans

The Secretary shall determine whether any person has violated, or is about to violate, any provision of this part, including by conducting periodic reviews of certified small business health plans in accordance with section 504, and applying the requirements of sections 518, 519, and 520. (e)

Expedited and deemed certification

(1)

In general

If the Secretary fails to act on an application for certification under this section within 180 days of receipt of such application, the applying small business health plan shall be deemed certified until such time as the Secretary may deny for cause the application for certification. (2)

Civil penalty

The Secretary may assess a civil penalty against the board of trustees, plan administrator, and plan sponsor (jointly and severally) of a small business health plan that is deemed certified under paragraph (1) of up to $500,000 in the event the Secretary determines that the application for certification of such small business health plan was willfully or with gross negligence incomplete or inaccurate.

803.

Requirements relating to sponsors and boards of trustees

(a)

Sponsor

The requirements of this subsection are met with respect to a small business health plan if the sponsor has met (or is deemed under this part to have met) the requirements of section 801(b). (b)

Board of trustees or plan administrator

The requirements of this subsection with respect to a small business health plan are as follows: (1)

Fiscal control

The plan is operated, pursuant to a plan document, by a board of trustees or plan administrator 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 or plan administrator 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

With respect to a plan operated by a board of trustees, except as provided in clauses (ii) and (iii), the members of the board of trustees are individuals selected from individuals who are the owners, officers, directors, or employees of the participating employers or who are partners in the participating employers and actively participate in the business. (ii)

Limitation

(I)

General rule

Except as provided in subclauses (II) and (III), no such member is an owner, officer, director, or employee of, or partner in, a contract administrator or other service provider to the plan. (II)

Limited exception for providers of services solely on behalf of the sponsor

Officers or employees of a sponsor which is a service provider (other than a contract administrator) to the plan may be members of the board if they constitute not more than 25 percent of the membership of the board and they do not provide services to the plan other than on behalf of the sponsor. (III)

Treatment of providers of medical care

In the case of a sponsor which is an association whose membership consists primarily of providers of medical care, subclause (I) shall not apply in the case of any service provider described in subclause (I) who is a provider of medical care under the plan. (iii)

Certain plans excluded

Clause (i) shall not apply to a small business health plan that is in existence on the date of the enactment of this Act. (B)

Plan administrator

The requirements of this section are met with respect to section 7705 professional employer organizations if the requirements of subsections (a) and (b) of section 804 have been met. (C)

Sole authority

The board or plan administrator has sole authority under the plan to approve applications for participation in the plan and to contract with insurers. (c)

Treatment of franchises

In the case of a group health plan that is established and maintained by a franchisor for the benefit of the employees of the franchisor and its franchisees, by multiple franchisors for the benefit of the employees of such franchisors and their franchisees, or by multiple franchisees for the benefit of the employees of such franchisees— (1)the requirements of subsection (a) and section 801(a) shall be deemed met if such requirements would otherwise be met if all franchisors or franchisees establishing and maintaining such plan, as applicable, were deemed to be the sponsor described in section 801(b) and each employee of such franchisors or franchisees, as applicable, were deemed to be a member of the sponsor described in section 801(b); (2)the requirements of section 804(a)(1) shall be deemed met; and (3)the establishment and maintenance of such a group health plan shall not cause any one or more franchisor or franchisee employers participating in such a group health plan to be treated as the employer, co-employer, or joint employer of the employees of another participating franchisor or franchisee employer for any purpose.

804.

Participation and coverage requirements

(a)

Covered employers and individuals

The requirements of this subsection are met with respect to a small business health plan if, under the terms of the plan— (1)each participating employer must be— (A)a member of the sponsor; (B)the sponsor; or (C)an affiliated member of the sponsor, except that, in the case of a sponsor which is a professional association or other individual-based association, if at least one of the officers, directors, or employees of an employer, or at least one of the individuals who are partners in an employer and who actively participates in the business, is a member or such an affiliated member of the sponsor, participating employers may also include such employer; and (2)all individuals commencing coverage under the plan after certification under this part must be— (A)active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, participating employers; or (B)the dependents of individuals described in subparagraph (A). (b)

Individual market unaffected

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

Prohibition of discrimination against employers and employees eligible To participate

The requirements of this subsection are met with respect to a small business health plan if— (1)under the terms of the plan, all employers meeting the requirements of subsections (a) and (b) 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 2705 of the Public Health Service Act are not met; (2)information regarding all coverage options available under the plan is made readily available to any employer eligible to participate; and (3)the applicable requirements of sections 701, 702, and 703 are met with respect to the plan.

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 a small business health plan if the following requirements are met: (1)

Contents of governing instruments

(A)

In general

The instruments governing the plan include a written instrument which— (i)provides that the board of trustees or plan administrator serves as the named fiduciary required for plans under section 402(a)(1) and serves in the capacity of a plan administrator (referred to in section 3(16)(A)); and (ii)provides that the sponsor of the plan is to serve as plan sponsor (referred to in section 3(16)(B)). (B)

Description of material provisions

The terms of the health insurance coverage (including the terms of any individual certificates that may be offered to individuals in connection with such coverage), if any, describe the material benefit and rating, and other provisions set forth in this section and such material provisions are included in the summary plan description. (2)

Contribution rates must be nondiscriminatory

The contribution rates for any participating small employer shall not vary on the basis of any health status-related factor in relation to employees of such employer or their beneficiaries and shall not vary on the basis of the type of business or industry in which such employer is engaged, subject to the terms of this title. (3)

Exceptions regarding self-employed and large employers

(A)

Self-employed

Small business health plans with participating employers who are self-employed individuals (and their dependents) shall enroll such self-employed participating employers in accordance with rating rules that do not violate the rating rules for self-employed individuals in the State in which such self-employed participating employers are located. (B)

Large employers

Small business health plans with participating employers that are larger than small employers (as defined in section 809(a)) shall enroll such large participating employers in accordance with rating rules that do not violate the rating rules for large employers in the State in which such large participating employers are located. (4)

Regulatory requirements

Such other requirements as the Secretary determines are necessary to carry out the purposes of this part, which shall be prescribed by the Secretary by regulation. (b)

Domicile and non-Domicile States

(1)

Domicile State

Coverage shall be issued by a health insurance issuer to a small business health plan in the State in which the sponsor's principal place of business is located. (2)

Non-domicile States

With respect to a State (other than the domicile State) in which participating employers of a small business health plan are located but in which the insurer of the small business health plan in the domicile State is not yet licensed, the following shall apply: (A)

Temporary preemption

If, upon the expiration of the 180-day period following the submission of a licensure application by such insurer (that includes a certified copy of an approved licensure application as submitted by such insurer in the domicile State) to such State, such State has not approved or denied such application, such State's health insurance licensure laws shall be temporarily preempted and the insurer shall be permitted to operate in such State, subject to the following terms: (i)

Application of non-domicile State law

Except with respect to licensure, the laws and authority of the non-domicile State shall remain in full force and effect. (ii)

Revocation of preemption

The preemption of a non-domicile State's health insurance licensure laws pursuant to this subparagraph, shall be terminated upon the occurrence of either of the following: (I)

Approval or denial of application

The approval or denial of an insurer's licensure application, following the laws and regulations of the non-domicile State with respect to licensure. (II)

Determination of material violation

A determination by a non-domicile State that an insurer operating in a non-domicile State pursuant to the preemption provided for in this subparagraph is in material violation of the insurance laws (other than licensure of such State). (B)

No prohibition on promotion

Nothing in this paragraph shall be construed to prohibit a small business health plan or an insurer from promoting coverage prior to the expiration of the 180-day period provided for in subparagraph (A), except that no enrollment or collection of contributions shall occur before the expiration of such 180-day period. (C)

Licensure

Except with respect to the application of the temporary preemption provision of this paragraph, nothing in this part shall be construed to limit the requirement that insurers issuing coverage to small business health plans shall be licensed in each State in which the small business health plans operate. (D)

Servicing by licensed insurers

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

806.

Requirements for application and related requirements

(a)

Filing fee

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

Information To be included in application for certification

An application for certification under this part meets the requirements of this section only if it includes, in a manner and form which shall be prescribed by the applicable authority by regulation, at least the following information: (1)

Identifying information

The names and addresses of— (A)the sponsor; and (B)the members of the board of trustees or the plan administrator 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 participants and beneficiaries expected to be located in each such State. (3)

Bonding requirements

Evidence provided by the board of trustees that the bonding requirements of section 412 will be met as of the date of the application or (if later) commencement of operations. (4)

Plan documents

A copy of the documents governing the plan (including any bylaws and trust agreements), the summary plan description, and other material describing the benefits that will be provided to participants and beneficiaries under the plan. (5)

Agreements with service providers

A copy of any agreements between the plan, health insurance issuer, and contract administrators and other service providers. (c)

Filing notice of certification with States

A certification granted under this part to a small business health plan shall not be effective unless written notice of such certification is filed with the applicable State authority of each State in which the small business health plans operate. (d)

Notice of material changes

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

807.

Notice requirements for voluntary termination

(a)

In general

A small business health plan which is or has been certified under this part may terminate (upon or at any time after cessation of accruals in benefit liabilities) only if the board of trustees, or the plan administrator, 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. (b)

Regulations

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

808.

Implementation and application authority by Secretary

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

809.

Definitions and rules of construction

(a)

Definitions

For purposes of this part: (1)

Affiliated member

The term affiliated member means, in connection with a sponsor— (A)a person who is otherwise eligible to be a member of the sponsor but who elects an affiliated status with the sponsor, or (B)in the case of a sponsor with members which consist of associations, a person who is a member or employee of any such association and elects an affiliated status with the sponsor. (2)

Applicable 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. (3)

Franchisor; franchisee

The terms franchisor and franchisee have the meanings given such terms for purposes of sections 436.2(a) through 436.2(c) of title 16, Code of Federal Regulations (including any such amendments to such regulation after the date of enactment of this part). (4)

Group health plan

The term group health plan has the meaning provided in section 733(a)(1). (5)

Health insurance coverage

The term health insurance coverage has the meaning provided in section 733(b)(1), except that such term shall not include excepted benefits (as defined in section 733(c)). (6)

Health insurance issuer

The term health insurance issuer has the meaning provided in section 733(b)(2). (7)

Individual market

(A)

In general

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

Treatment of very small groups

(i)

In general

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

State exception

Clause (i) shall not apply in the case of health insurance coverage offered in a State if such State regulates the coverage described in such clause in the same manner and to the same extent as coverage in the small group market (as defined in section 2791(e)(5) of the Public Health Service Act) is regulated by such State. (8)

Medical care

The term medical care has the meaning provided in section 733(a)(2). (9)

Participating employer

The term participating employer means, in connection with a small business health plan, any employer, if any individual who is an employee of such employer, a partner in such employer, or a self-employed individual who is such employer (or any dependent, as defined under the terms of the plan, of such individual) is or was covered under such plan in connection with the status of such individual as such an employee, partner, or self-employed individual in relation to the plan. (10)

Section 7705 professional employer organization

The term section 7705 professional employer organization means an organization providing services for a customer pursuant to a contract meeting the conditions of subparagraphs (A) through (E) of subsection (e)(2) of section 7705 of the Internal Revenue Code of 1986, without regard to subsection (a) of such section. Such term includes an entity that is part of a controlled group or is under common control with respect to a section 7705 professional employer organization (within the meaning of section 414 of such Code). Solely for purposes of this part, references in this part to member shall include such a customer of a section 7705 professional employer organization except as applied to references to member or members in paragraph (1) of this subsection (relating to the definition of affiliated member). (11)

Small employer

The term small employer, in connection with a group health plan with respect to a plan year, has the meaning given the term small business concern in the Small Business Act. (b)

Rule of construction

For purposes of determining whether a plan, fund, or program is an employee welfare benefit plan which is a small business health plan, and for purposes of applying this title in connection with such plan, fund, or program so determined to be such an employee welfare benefit plan— (1)in the case of a partnership, the term employer (as defined in section 3(5)) includes the partnership in relation to the partners, and the term employee (as defined in section 3(6)) includes any partner in relation to the partnership; and (2)in the case of a self-employed individual, the term employer (as defined in section 3(5)) and the term employee (as defined in section 3(6)) shall include such individual. (c)

Renewal

Notwithstanding any provision of law to the contrary, a participating employer in a small business health plan shall not be deemed to be a plan sponsor in applying requirements relating to coverage renewal.

(e)

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)Subparagraphs (A) through (D) do not apply with respect to any State law in the case of a small business health plan which is certified under part 8.

(2)Section 514 of such Act (29 U.S.C. 1144) is amended— (A)in subsection (b)(4), by striking Subsection (a) and inserting Subsections (a) and (d); (B)in subsection (b)(5)— (i)in subparagraph (A), by striking subsection (a) and inserting subsection (a) of this section and subsections (a)(2)(B) and (b) of section 804; and (ii)in subparagraph (B), by striking subsection (a) and inserting subsection (a) of this section or subsection (a)(2)(B) or (b) of section 805; (C)by redesignating subsection (d) as subsection (e); and (D)by inserting after subsection (c) the following new subsection:

(d)Except as provided in subsection (b)(4), the provisions of this title shall supersede any and all State laws insofar as they may now or hereafter preclude a health insurance issuer from offering health insurance coverage to a small business health plan sponsor that is certified under part 8.

(f)

Plan sponsor

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

Savings clause

Section 731(c) of such Act is amended by inserting or part 8 after this part. (h)

Clerical amendment

The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 is amended by inserting after the item relating to section 734 the following new items:

Part 8—Rules governing small business health plans

801. Small business health plans.

802. Certification of small business 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. Requirements for application and related requirements.

807. Notice requirements for voluntary termination.

808. Implementation and application authority by Secretary.

809. Definitions and rules of construction.