[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 995 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 995

To amend the Employee Retirement Income Security Act of 1974 to provide 
 new portability, participation, solvency, claims, and other consumer 
protections and freedoms for workers in a mobile workforce; to increase 
 purchasing power for employers and employees by removing barriers to 
  the voluntary formation of multiple employer health plans and fully-
    insured multiple employer arrangements; to increase health plan 
 competition providing more affordable choice of coverage by removing 
 restrictive State laws relating to provider health networks, employer 
   health coalitions, and insured plans and the offering of medisave 
  plans; to expand access to fully-insured coverage for employees of 
small employers through fair rating standards and open markets, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 21, 1995

   Mr. Fawell (for himself, Mr. Goodling, Mr. Armey, Mr. Petri, Mrs. 
   Roukema, Mr. Ballenger, Mr. Hoekstra, Mr. McKeon, Mrs. Meyers of 
Kansas, Mr. Talent, Mr. Greenwood, Mr. Hutchinson, Mr. Knollenberg, Mr. 
    Graham, Mr. Weldon of Florida, and Mr. McIntosh) introduced the 
  following bill; which was referred to the Committee on Economic and 
Educational Opportunity and, in addition, to the Committee on Commerce, 
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

                             March 21, 1995

 Additional sponsors: Mr. Cunningham, Mr. Weller, Mr. McHugh, and Mr. 
                                Calvert

_______________________________________________________________________

                                 A BILL


 
To amend the Employee Retirement Income Security Act of 1974 to provide 
 new portability, participation, solvency, claims, and other consumer 
protections and freedoms for workers in a mobile workforce; to increase 
 purchasing power for employers and employees by removing barriers to 
  the voluntary formation of multiple employer health plans and fully-
    insured multiple employer arrangements; to increase health plan 
 competition providing more affordable choice of coverage by removing 
 restrictive State laws relating to provider health networks, employer 
   health coalitions, and insured plans and the offering of medisave 
  plans; to expand access to fully-insured coverage for employees of 
small employers through fair rating standards and open markets, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``ERISA Targeted Health Insurance 
Reform Act of 1995''.

      TITLE I--IMPROVED ACCESS TO AFFORDABLE HEALTH PLAN COVERAGE

                                                                Title I

                       table of contents of title

Subtitle A--Increased Availability and Continuity of Group Health Plan 
               Coverage for Employees and Their Families

Sec. 1001. Access to affordable group health plan coverage.
      ``Part 8--Access to, and Continuity of, Health Plan Coverage

  ``subpart a--nondiscrimination, portability, renewability, and plan 
                        participation standards
        ``Sec. 801. Nondiscrimination and limitations on preexisting 
                            condition exclusions.
        ``Sec. 802. Portability.
        ``Sec. 803. Requirements for renewability of coverage.
 ``subpart b--encouragement of private standards-setting organizations 
 for provider networks and utilization review under group health plans
        ``Sec. 811. Encouragement of private standards-setting 
                            organizations for provider networks under 
                            group health plans.
        ``Sec. 812. Encouragement of private standards-setting 
                            organizations for utilization review under 
          ``subpart c--establishment of standards; enforcement
        ``Sec. 821. Establishment of standards applicable to insurers 
                            offering health insurance coverage to group 
                            health plans.
        ``Sec. 822. Enforcement with respect to insurers offering 
                            health insurance coverage to group health 
                            plans.
        ``Sec. 823. Preemption.''.
Sec. 1002. Effective date.
    Subtitle B--Requirements for Insurers Offering Health Insurance 
           Coverage to Group Health Plans of Small Employers

Sec. 1101. ERISA requirements for insurers offering health insurance 
                            coverage to group health plans of small 
   ``subpart d--requirements for insurers offering health insurance 
           coverage to group health plans of small employers
        ``Sec. 831. Definitions.
        ``Sec. 832. Requirement for insurers to offer general, 
                            catastrophic, and optional medisave 
                            coverage to small employers.
        ``Sec. 833. General, catastrophic, and medisave coverage 
                            defined.
        ``Sec. 834. Use of fair rating, uniform marketing materials, 
                            and miscellaneous consumer protections.
        ``Sec. 835. Establishment of standards.
        ``Sec. 836. Enforcement.
        ``Sec. 837. Preemption.''.
Sec. 1102. Effective date.
    Subtitle C--Encouragement of Multiple Employer Health Plans and 
                               Preemption

Sec. 1201. Scope ``subpart e--scope of state regulation
        ``Sec. 841. Prohibition of State benefit mandates for group 
                            health plans.
        ``Sec. 842. Prohibition of provisions prohibiting employer 
                            groups from purchasing health insurance.
        ``Sec. 843. Preemption of State anti-managed care laws.''.
Sec. 1202. Preemption of State law for multiple employer health plans 
                            meeting Federal standards.
                ``Part 7--Multiple Employer Health Plans

        ``Sec. 701. Definitions.
        ``Sec. 702. Exempted multiple employer health plans relieved of 
                            certain restrictions on preemption of State 
                            law and treated as employee welfare benefit 
                            plans.
        ``Sec. 703. Exemption procedure.
        ``Sec. 704. Eligibility requirements.
        ``Sec. 705. Additional requirements applicable to exempted 
                            multiple employer health plans.
        ``Sec. 706. Disclosure to participating employers by 
                            arrangements providing medical care.
        ``Sec. 707. Maintenance of reserves.
        ``Sec. 708. Notice requirements for voluntary termination.
        ``Sec. 709. Corrective actions and mandatory termination.
        ``Sec. 710. Expiration, suspension, or revocation of exemption.
        ``Sec. 711. Review of actions of the Secretary.''.
Sec. 1203. Clarification of scope of preemption rules.
Sec. 1204. Clarification of treatment of single employer arrangements.
Sec. 1205. Clarification of treatment of certain collectively bargained 
                            arrangements.
Sec. 1206. Employee leasing healthcare arrangements.
Sec. 1207. Enforcement provisions relating to multiple employer welfare 
                            arrangements and employee leasing 
                            healthcare arrangements.
Sec. 1208. Filing requirements for multiple employer welfare 
                            arrangements offering health benefits.
Sec. 1209. Cooperation between Federal and State authorities.
Sec. 1210. Clarification of treatment of employer health coalitions and 
                            health maintenance organizations.
Sec. 1211. Single annual filing for all participating employers.
Sec. 1212. Effective date; transitional rules.
Subtitle D--Remedies and Enforcement With Respect to Group Health Plans

Sec. 1301. Claims procedure for group health plans.
Sec. 1302. Available court remedies.
Sec. 1303. Effective date.
Subtitle E--Funding and Plan Termination Requirements for Self-Insured 
                           Group Health Plans

Sec. 1401. Special rules for self-insured group health plans.
Sec. 1402. Effective date.
                     Subtitle F--General Provisions

Sec. 1501. Rule of construction.

Subtitle A--Increased Availability and Continuity of Group Health Plan 
               Coverage for Employees and Their Families

SEC. 1001. ACCESS TO AFFORDABLE GROUP HEALTH PLAN COVERAGE.

                                                    Title I, Subtitle A

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding at the end the 
following:

      ``PART 8--ACCESS TO, AND CONTINUITY OF, HEALTH PLAN COVERAGE

``SEC. 800. DEFINITIONS AND SPECIAL RULES.

    ``(a) In General.--For purposes of this part:
            ``(1) Coverage: general coverage, catastrophic coverage, 
        and medisave coverage.--The terms `general coverage', 
        `catastrophic coverage', and `medisave coverage' have the 
        meanings given such terms in subsections (a), (b), and (c), 
        respectively, of section 833.
            ``(2) Dependent.--The term `dependent' means, with respect 
        to any individual, any person who is--
                    ``(A) the spouse or surviving spouse of the 
                individual, or
                    ``(B) a child (including an adopted child) of such 
                individual and--
                            ``(i) under 19 years of age, or
                            ``(ii) under 25 years of age and a full-
                        time student.
            ``(3) Eligible employee.--
                    ``(A) In general.--The term `eligible employee' 
                means, with respect to an employer maintaining a plan 
                (or making contributions to a plan) for any plan year, 
                an employee who, upon the commencement of service 
                during any plan year, would normally perform during the 
                plan year a year of service (within the meaning of 
                section 202(a)(3)) under the plan.
                    ``(B) Treatment of partnerships and self-employed 
                individuals.--Such term includes--
                            ``(i) in connection with a group health 
                        plan maintained by a partnership, a partner in 
                        relation to the partnership, and
                            ``(ii) in connection with a group health 
                        plan maintained by a self-employed individual 
                        who has one or more employees who are eligible 
                        employees (as defined in subparagraph (A)), the 
                        self-employed individual.
            ``(4) Eligible individual.--The term `eligible individual' 
        means, with respect to an eligible employee, such eligible 
        employee and any dependent of such eligible employee.
            ``(5) Employer.--The term `employer' shall have the meaning 
        applicable under section 3(5), except that such term includes 
        the partnership in relation to any partner.
            ``(6) Exempted multiple employer health plan.--The term 
        `exempted multiple employer health plan' means a multiple 
        employer welfare arrangement treated as an employee welfare 
        benefit plan by reason of an exemption under part 7.
            ``(7) Group health plan; plan.--(A) The term `group health 
        plan' means a group health plan (as defined in section 3(42)), 
        but does not include any type of coverage excluded from the 
        definition of health insurance coverage under paragraph (8)(B).
            ``(B) The term `plan' means a group health plan (including 
        any such plan which is a multiemployer plan) and an exempted 
        multiple employer health plan.
            ``(8) Health insurance coverage.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `health insurance coverage' 
                means any hospital or medical service policy or 
                certificate, hospital or medical service plan contract, 
                or health maintenance organization group contract 
                offered by an insurer.
                    ``(B) Exception.--Such term does not include any of 
                the following:
                            ``(i) Coverage only for accident, dental, 
                        vision, disability income, or long-term care 
                        insurance, or any combination thereof.
                            ``(ii) Medicare supplemental health 
                        insurance.
                            ``(iii) Coverage issued as a supplement to 
                        liability insurance.
                            ``(iv) Liability insurance, including 
                        general liability insurance and automobile 
                        liability insurance.
                            ``(v) Worker's compensation or similar 
                        insurance.
                            ``(vi) Automobile medical-payment 
                        insurance.
                            ``(vii) Coverage for a specified disease or 
                        illness.
                            ``(viii) A hospital fixed indemnity policy 
                        or other fixed indemnity policy.
            ``(9) Fully insured.--The term `fully insured' shall have 
        the meaning applicable under section 701(8).
            ``(10) Insurer.--(A) The term `insurer' means--
                    ``(i) an insurance company, insurance service, or 
                insurance organization licensed to engage in the 
                business of insurance in a State, or
                    ``(ii) a health maintenance organization (as 
                defined in subparagraph (B)) licensed to do business in 
                a State.
            (B) Health maintenance organization.--The term `health 
        maintenance organization' means a Federally qualified health 
        maintenance organization (as defined in section 1301(a) of the 
        Public Health Service Act), an organization recognized under 
        State law as a health maintenance organization, or a similar 
        organization regulated under State law for solvency in the same 
        manner and to the same extent as such a health maintenance 
        organization.
            ``(11) Multiple employer welfare arrangement.--The term 
        `multiple employer welfare arrangement' shall have the meaning 
        applicable under section 3(40).
            ``(12) NAIC.--The term `NAIC' means the National 
        Association of Insurance Commissioners.
            ``(13) Network plan.--The term `network plan' includes, as 
        defined in standards established under section 835, an 
        arrangement of an insurer under which health services are 
        offered to be provided primarily through a defined set of 
        providers who have contracts with the insurer.
            ``(14) Options.--
                    ``(A) Fee-for-service option.--General coverage is 
                considered to provide a `fee-for-service option' if 
                benefits with respect to the covered items and services 
                in the coverage are made available for such items and 
                services provided through any lawful provider of such 
                covered items and services.
                    ``(B) Managed care option.--General coverage is 
                considered to provide a `managed care option' if 
                benefits with respect to the covered items and services 
                in the coverage are made available exclusively through 
                a managed care arrangement, except in the case of 
                emergency and urgent services and as otherwise required 
                under law.
                    ``(C) Point-of-service option.--General coverage is 
                considered to provide a `point-of-service option' if 
                the benefits with respect to covered items and services 
                in the coverage are made available principally through 
                a managed care arrangement, with the choice of the 
                covered individual to obtain such benefits for items 
                and services provided through any lawful provider of 
                such covered items and services. The coverage may 
                provide for different cost sharing schedules based on 
                whether the items and services are provided through 
                such an arrangement or outside such an arrangement.
    ``(b) Highly Compensated Employee.--
            ``(1) In general.--In this part, the term `highly 
        compensated employee' means any employee who--
                    ``(A) was a 5-percent owner at any time during the 
                year or the preceding year, or
                    ``(B) had compensation for the preceding year from 
                the employer in excess of $50,000.
        Under regulations the $50,000 amount under subparagraph (B) 
        shall be adjusted for increases in the cost of living. Such 
        regulations shall provide for adjustment procedures which are 
        similar to the procedures used to adjust benefit amounts under 
        section 215(i)(2)(A) of the Social Security Act.
            ``(2) Special rule if no employee described in paragraph 
        (1).--If no employee is treated as a highly compensated 
        employee under paragraph (1), the highest paid officer for the 
        year shall be treated as a highly compensated employee.
            ``(3) 5-percent owner.--An employee shall be treated as a 
        5-percent owner for any year if at any time during such year 
        such employee was a 5-percent owner (as defined under 
        regulations consistent and coextensive with section 416(i)(1) 
        of the Internal Revenue Code of 1986, as in effect on January 
        1, 1995) of the employer.
            ``(4) Compensation.--For purposes of this subsection--
                    ``(A) In general.--The term `compensation' means 
                compensation as defined in regulations consistent and 
                coextensive with the definition in section 415(c)(3) of 
                the Internal Revenue Code of 1986, as in effect on 
                January 1, 1995.
                    ``(B) Certain provisions not taken into account.--
                The determination under subparagraph (A) shall be made 
                in accordance with regulations that are consistent and 
                coextensive with section 414(q)(7) of the Internal 
                Revenue Code of 1986, as in effect on January 1, 1995.
            ``(5) Former employees.--A former employee and an employee 
        who is a nonresident alien and who receives no earned income 
        from sources within the United States shall be treated as a 
        highly compensated employee under regulations that are 
        consistent and coextensive with paragraphs (9) and (11) of 
        section 414(a) of the Internal Revenue Code of 1986, as in 
        effect on January 1, 1995.
    ``(c) Application of ERISA Definitions.--Except as otherwise 
provided in this part, terms used in this part shall have the meanings 
applicable to such terms under section 3.

  ``Subpart A--Nondiscrimination, Portability, Renewability, and Plan 
                        Participation Standards

``SEC. 801. NONDISCRIMINATION AND LIMITATIONS ON PREEXISTING CONDITION 
              EXCLUSIONS.

    ``(a) In General.--Except as provided in subsections (b) and (c), a 
group health plan and an insurer offering health insurance coverage in 
connection with a group health plan may deny, or impose a limitation or 
exclusion of, covered benefits relating to treatment of a condition 
based on health status of an individual, based on claims experience of 
an individual, based on receipt of health care by an individual, based 
on the medical history of an individual, or based on the fact that the 
condition preexisted the effective date of coverage of the individual, 
only if--
            ``(1) the condition relates to a condition that was 
        diagnosed or treated within a period of not to exceed 3 months 
        before the date of such coverage; and
            ``(2) the limitation or exclusion extends over a period of 
        not to exceed 6 months after the date of such coverage.
In the case of an individual who is eligible for coverage but for a 
waiting period imposed by a group health plan or an insurer, in 
applying paragraphs (1) and (2), the individual shall be treated as 
having had such coverage as of the beginning of the waiting period.
    ``(b) Special Rule for Group Health Plans of Small Employers and 
Health Insurance Coverage Offered in the Small Group Market.--
Notwithstanding subsection (a), health insurance coverage offered by an 
insurer in connection with a group health plan to a small employer in 
the small group market (as defined in section 803(b)(4)(B)), and a 
group health plan with respect to such an employer, may consist of 
health insurance coverage which imposes a limitation or exclusion based 
on a preexisting condition but only if--
            ``(1) the condition relates to a condition that was not 
        diagnosed or treated within a period (that exceeds 3 months but 
        does not exceed 6 months) before the date of such coverage; and
            ``(2) the limitation or exclusion extends over a period 
        (that exceeds 6 months but does not exceed 12 months) after the 
        date of such coverage.
    ``(c) No Coverage of Specific Treatment, Procedures, or Classes 
Required.--Nothing in this section may be construed to require the 
coverage of any specific procedure, treatment, or service as part of a 
group health plan or health insurance coverage under this Act or 
through regulation.
    ``(d) Application of Rules by Certain Health Maintenance 
Organizations.--A health maintenance organization that offers health 
insurance coverage shall not be considered as failing to meet the 
requirements of section 1301 of the Public Health Service Act 
notwithstanding that it provides for an exclusion of the coverage based 
on a preexisting condition consistent with the provisions of this 
subpart so long as such exclusion is applied consistent with the 
provisions of this subpart.
    ``(e) Applicability to Late Enrollment.--This section applies in 
the case of any individual with respect to whom coverage is elected 
upon initially becoming eligible for coverage or in connection with any 
subsequent enrollment periods under the plan.
    ``(f) Affiliation Period Alternative to Preexisting Condition 
Limitation.--A group health plan or an insurer offering health 
insurance coverage in connection with a group health plan which does 
not use the preexisting limitations allowed under this section and 
section 802 may impose an affiliation period. For purposes of this 
subsection, the term `affiliation period' means a period--
            ``(1) not to exceed 90 days in the case of an individual 
        first becoming eligible under such plan or coverage, and
            ``(2) not to exceed 180 days in the case of a later 
        election of coverage,
during which no contributions or premiums are required or collected and 
which must expire before the coverage under the plan or the health 
insurance coverage offered in connection with the plan becomes 
effective.

``SEC. 802. PORTABILITY.

    ``(a) In General.--Each group health plan and each insurer offering 
health insurance coverage in connection with a group health plan shall 
provide that if a covered individual is in a period of continuous 
coverage (as defined in subsection (c)) as of a date upon which 
coverage takes effect, any period of exclusion of coverage from covered 
benefits with respect to a preexisting condition (as permitted to be 
excluded under section 801) shall be reduced by at least 1 month for 
each month in the period of continuous coverage. A covered individual 
may be treated by a group health plan, or by an insurer offering health 
insurance coverage in connection with a group health plan, as not being 
in a period of continuous coverage if, upon the request of the plan or 
insurer (as the case may be), the covered individual does not present 
satisfactory documentation of such period of continuous coverage. The 
Secretary may prescribe regulations defining standards for satisfactory 
documentation for purposes of this subsection.
    ``(b) No Preexisting Condition for Newborns and Adopted Children.--
For purposes of this part--
            ``(1) Newborns.--A child who is covered at the time of 
        birth and remains in a period of continuous coverage after such 
        time shall not be considered to have any preexisting condition 
        beginning at the time of birth.
            ``(2) Adopted children.--An adopted child who is covered at 
        the time of adoption and remains in a period of continuous 
        coverage shall not be considered, beginning on the date of 
        adoption, to have any preexisting condition.
    ``(c) Period of Continuous Coverage.--In this subpart, the term 
`period of continuous coverage' means the period--
            ``(1) beginning on the date an individual becomes covered 
        under a group health plan or health insurance coverage (or 
        coverage under a public plan providing medical benefits), and
            ``(2) ending on the date the individual does not have such 
        coverage for a continuous period of more than 3 months (or 6 
        months in the case of an individual who loses coverage due to 
        termination of employment).

``SEC. 803. REQUIREMENTS FOR RENEWABILITY OF COVERAGE.

    ``(a) Multiemployer Plans, Exempted Multiple Employer Health Plans, 
and Fully Insured Multiple Employer Health Arrangements.--A 
multiemployer plan, an exempted multiple employer health plan, and a 
multiple employer welfare arrangement (to the extent to which the 
arrangement offers coverage consisting of medical care (referred to in 
section 3(42)) and such coverage is fully insured) may not deny an 
employer who is covered under such a plan or arrangement continued 
access to coverage under the terms of such a plan or arrangement other 
than--
            ``(1) for nonpayment of contributions,
            ``(2) for fraud or other intentional misrepresentation by 
        the employer,
            ``(3) for noncompliance with material plan or arrangement 
        provisions,
            ``(4) because the plan or arrangement is ceasing to offer 
        any coverage in a geographic area,
            ``(5) for failure to meet the terms of an applicable 
        collective bargaining agreement,
            ``(6) in the case of a plan or arrangement to which section 
        3(40)(C) applies, to the extent necessary to meet the 
        requirements of section 3(40)(C), or
            ``(7) in the case of a multiple employer health plan, for 
        failure to meet the requirements of part 7.
    ``(b) Insurers.--
            ``(1) In general.--An insurer offering health insurance 
        coverage in connection with a group health plan may not cancel 
        (or deny renewal of) such coverage, other than--
                    ``(A) for nonpayment of premiums,
                    ``(B) for fraud or other intentional 
                misrepresentation by the employer or insured,
                    ``(C) for noncompliance with material plan 
                provisions, or
                    ``(D) subject to paragraph (2), because the insurer 
                is ceasing to offer any such coverage (or the same type 
                of coverage in the small employer market) in a State, 
                or, in the case of an insurer that is a health 
                maintenance organization or that offers coverage 
                through a network plan (as defined in section 
                800(a)(13)), in a geographic area.
            ``(2) Notice requirement for market exit.--Paragraph (1)(D) 
        shall not apply to an insurer ceasing to offer coverage unless 
        the insurer provides notice of such termination to employers 
        and individuals covered at least 180 days before the date of 
        termination of coverage.
            ``(3) Limitation on reentry in employer markets.--If an 
        insurer offering health insurance coverage in connection with a 
        group health plan ceases to offer such coverage (or a type of 
        such coverage) in an area with respect to the small group 
        market (as defined in paragraph (4)(B)), the insurer may not 
        offer such coverage (or type of coverage) in the area in such 
        market until 5 years after the date of the termination.
            ``(4) Type of coverage and insurance market defined.--In 
        this subsection--
                    ``(A) general coverage, catastrophic coverage, and 
                medisave coverage (as defined in section 800(a)(1)) 
                shall each be considered to be separate types of health 
                insurance coverage; and
                    ``(B) the term `small group market' means the 
                health insurance market under which individuals obtain 
                health insurance coverage (directly or through any 
                arrangement) on behalf of themselves (and their 
                dependents) on the basis of employment or other 
                relationship with respect to a small employer (as 
                defined in section 831(4)).

``SEC. 804. GROUP HEALTH PLAN PARTICIPATION STANDARDS.

    ``(a) Employees.--No group health plan may require, as a condition 
of participation of an employee in the plan, that the employee--
            ``(1) complete a waiting period consisting of service with 
        the employer or employers maintaining the plan (or contributing 
        to the plan in the case of a multiemployer plan or a multiple 
        employer health plan) if the period extends beyond a period of 
        90 days;
            ``(2) have attained any specified age;
            ``(3) be a highly compensated employee (as defined in 
        section 800(b)); or
            ``(4) be employed (or expected to be employed) for a 
        minimum period by the employer or employers if (except as 
        provided in paragraph (1)) the employee normally performs 
        during a plan year a year of service (within the meaning of 
        section 202(a)(3)) under the plan.
Nothing in this section shall be construed to require employer 
contributions to a group health plan.
    ``(b) Dependents.--
            ``(1) In general.--If a group health plan makes family 
        coverage available, the plan may not require, as a condition of 
        participation of a dependent of an employee in the plan, a 
        waiting period applicable to the coverage of a dependent who is 
        a newborn or an adopted child (at the time of adoption) or a 
        spouse (at the time of marriage) if the employee has met any 
        waiting period applicable to that employee.
            ``(2) Timely enrollment.--
                    ``(A) In general.--Enrollment of an eligible 
                individual who is an eligible employee's dependent 
                described in paragraph (1) shall be considered to be 
                timely if a request for enrollment is made either--
                            ``(i) within 30 days of the date of the 
                        marriage with such a dependent who is the 
                        spouse of the eligible employee, or within 30 
                        days of the date of the birth or adoption of 
                        such a dependent who is a child of the eligible 
                        employee, if family coverage is available as of 
                        such date, or
                            ``(ii) within 30 days of the date family 
                        coverage is first made available.
                    ``(B) Coverage.--If available coverage includes 
                family coverage and enrollment is made under such 
                coverage on a timely basis under subparagraph (A)(i), 
                the coverage shall become effective not later than the 
                first day of the first month beginning after the date 
                the completed request for enrollment is received.
    ``(c) Enrollment Periods.--
            ``(1) Annual period.--A group health plan shall provide for 
        at least one annual open enrollment period (of not less than 30 
        days) each year during which--
                    ``(A) employees who are eligible for coverage under 
                the terms of the plan who are not otherwise covered may 
                elect to be covered, and
                    ``(B) if family coverage is available, employees 
                who are covered but who do not have family coverage may 
                elect family coverage.
            ``(2) Enrollment of eligible individuals who lose other 
        coverage.--A group health plan shall permit an uncovered 
        employee who is otherwise eligible for coverage under the terms 
        of the plan (or an uncovered dependent of such an employee, if 
        family coverage is available) to enroll for coverage under the 
        plan if--
                    ``(A) the employee or dependent was covered under a 
                group health plan or had health insurance coverage at 
                the time coverage was previously offered to the 
                employee or individual,
                    ``(B) the employee stated at such time that 
                coverage under a group health plan or health insurance 
                coverage was the reason for declining enrollment,
                    ``(C) the employee or dependent lost coverage under 
                a group health plan or health insurance coverage (as a 
                result of the termination of the coverage, termination 
                of employment, reduction in the number of hours of 
                employment, or other reason not involving a condition 
                described in section 803(a)(1), 803(a)(2), 
                803(b)(1)(A), or 803(b)(1)(B)), and
                    ``(D) the employee requests such enrollment within 
                30 days after termination of such coverage.

 ``Subpart B--Encouragement of Private Standards-Setting Organizations 
 for Provider Networks and Utilization Review under Group Health Plans

``SEC. 811. ENCOURAGEMENT OF PRIVATE STANDARDS-SETTING ORGANIZATIONS 
              FOR PROVIDER NETWORKS UNDER GROUP HEALTH PLANS.

    ``(a) Requirement to Meet Standards.--Each group health plan, and 
each insurer offering health insurance coverage in connection with a 
group health plan, shall meet such standards as may be recognized or 
established under this section.
    ``(b) Standards.--
            ``(1) In general.--If the Secretary of Health and Human 
        Services determines that a private entity has established 
        standards for provider networks providing items and services 
        covered under group health plans or under health insurance 
        coverage offered by insurers in connection with group health 
        plans, in consultation with appropriate parties (including 
        representatives of health care providers, specialists, 
        insurers, plan administrators, and other experts), and provides 
        for a process for the periodic review and update of such 
        standards, such standards shall be the standards applied under 
        this section.
            ``(2) Contingency.--If the Secretary of Health and Human 
        Services makes a determination contrary to the determination 
        described in paragraph (1), such Secretary shall submit such 
        determination in writing to each House of the Congress.
    ``(c) Requirements for Standards.--The standards established under 
subsection (a) shall consist only of standards relating to--
            ``(1) the extent to which individuals covered under the 
        plan are assured to have reasonably prompt access, through the 
        provider network, to all items and services contained in any 
        package of benefits that may be provided under the provider 
        network, in a manner that assures the continuity of the 
        provision of such items and services,
            ``(2) the extent to which emergency services are provided 
        to covered individuals (including trauma services)--
                    ``(A) without regard to whether or not the provider 
                furnishing such services has a contractual (or other) 
                arrangement with the entity to provide items or 
                services to covered individuals, and
                    ``(B) in the case of services furnished for the 
                treatment of an emergency medical condition, without 
                regard to prior authorization, and
            ``(3) the extent to which--
                    ``(A) standards (including criteria for quality, 
                efficiency, credentialing, and services) are 
                established by the provider network for entering into 
                contracts (other than a contract providing for 
                employment of an employee) with health care providers 
                with respect to the provider network,
                    ``(B) such standards are established pursuant to a 
                mechanism which provides for receipt and consideration 
                of recommendations of the providers who are members of 
                the provider network,
                    ``(C) written notification to the provider is 
                required to terminate or to refuse to renew the 
                agreement and, unless otherwise provided in the 
                agreement and if requested by the provider, written 
                notification to the provider of the reasons for such 
                termination or refusal is also required, and
                    ``(D) unless otherwise provided in the agreement 
                and if requested by the provider, internal review of 
                any such decision to terminate or to refuse renewal is 
                provided for under the provider network.
    ``(d) Provider Network.--For purposes of this section, the term 
`provider network' means, with respect to a group health plan, or with 
respect to health insurance coverage provided by an insurer in 
connection with a group health plan, providers who have entered into an 
agreement under which such providers are obligated to provide items and 
services covered under the plan to participants and beneficiaries under 
the plan.

``SEC. 812. ENCOURAGEMENT OF PRIVATE STANDARDS-SETTING ORGANIZATIONS 
              FOR UTILIZATION REVIEW UNDER GROUP HEALTH PLANS.

    ``(a) Requiring Review to Meet Standards.--A group health plan or 
insurer offering health insurance coverage in connection with a group 
health plan may not deny coverage of or payment for items and services 
on the basis of a utilization review program unless the program meets 
such standards as may be recognized or established under this section.
    ``(b) Standards.--
            ``(1) In general.--If the Secretary of Health and Human 
        Services determines that a private entity has established 
        standards for utilization review programs described in 
        subsection (c), in consultation with appropriate parties 
        (including representatives of health care providers, 
        specialists, insurers, plan administrators, and other experts), 
        and provides for a process for the periodic review and update 
        of such standards, such standards shall be the standards 
        applied under this section.
            ``(2) Contingency.--If the Secretary of Health and Human 
        Services makes a determination contrary to the determination 
        described in paragraph (1), such Secretary shall submit such 
        determination in writing to each House of the Congress.
    ``(c) Requirements for Standards.--The standards established under 
subsection (a) shall consist only of standards relating to--
            ``(1) the extent to which individuals performing 
        utilization review may receive financial compensation based 
        upon the number of denials of coverage;
            ``(2) the process under which a covered individual or 
        provider may obtain timely review of a denial of coverage, 
        including the extent to which a review must be conducted by a 
        medical director of the insurer or plan (as applicable) or a 
        physician designated by the insurer or plan;
            ``(3) the extent to which utilization review is to be 
        conducted in accordance with uniformly applied criteria that 
        are based on currently available medical evidence; and
            ``(4) the extent to which providers are to participate in 
        the development of the utilization review program.

          ``Subpart C--Establishment of Standards; Enforcement

``SEC. 821. ESTABLISHMENT OF STANDARDS APPLICABLE TO INSURERS OFFERING 
              HEALTH INSURANCE COVERAGE TO GROUP HEALTH PLANS.

    ``(a) Role of NAIC.--The Secretary shall request the NAIC to 
develop, within 12 months after the date of the enactment of the ERISA 
Targeted Health Insurance Reform Act of 1995, model regulations that 
specify standards with respect to the requirements of subpart A (other 
than section 804) and subpart B of this part to the extent that such 
requirements are applicable to insurers offering health insurance 
coverage in connection with group health plans and not applicable to 
group health plans. If the Secretary of Health and Human Services 
determines under section 811(b)(1) that a private entity has 
established standards for provider networks consistent with section 
811(c), the standards established under this section with respect to 
the requirements of section 811 shall consist of the standards 
recognized or established under section 811. If the Secretary of Health 
and Human Services determines under section 812(b)(1) that a private 
entity has established standards for utilization review programs that 
are consistent with section 812(c), the standards established under 
this section with respect to the requirements of section 812 shall 
consist of the standards recognized or established under section 812. 
If the NAIC develops recommended regulations under this section 
specifying standards within such period, the Secretary shall review the 
standards. Such review shall be completed within 120 days after the 
date the regulations are developed. Unless the Secretary determines 
within such period that the standards do not effectively provide for 
the application of requirements to insurers in a manner and to an 
extent equivalent in substance to the manner and extent to which the 
requirements apply to group health plans, such standards shall serve as 
the standards under this section, with such amendments as the Secretary 
deems necessary. The Secretary shall provide for public comment in 
connection with the regulations during such 120-day period and in 
advance of any determination by the Secretary.
    ``(b) Contingency.--If the NAIC does not develop such model 
regulations within such period or the Secretary makes the determination 
described in subsection (a), the Secretary shall specify, within 24 
months after the date of the enactment of the ERISA Targeted Health 
Insurance Reform Act of 1995, standards to carry out those 
requirements.
    ``(c) Definitions.--In this subpart, the term `section 821 
standards' means the standards established under this section.

``SEC. 822. ENFORCEMENT WITH RESPECT TO INSURERS OFFERING HEALTH 
              INSURANCE COVERAGE TO GROUP HEALTH PLANS.

    ``(a) Voluntary Enforcement by States.--
            ``(1) In general.--Each State that desires to enforce the 
        section 821 standards (to the extent that the requirements to 
        which such standards apply are applicable to insurers offering 
        health insurance coverage in connection with group health plans 
        and not applicable to group health plans) shall submit to the 
        Secretary, by the deadline specified in paragraph (2), a report 
        on the program the State has established by such deadline and 
        consistent with section 823 to implement and enforce such 
        standards.
            ``(2) Deadline.--
                    ``(A) 1 year after final model regulations.--
                Subject to subparagraph (B), the deadline under this 
                paragraph is 1 year after the date model regulations 
                are established under section 821.
                    ``(B) Exception for legislation.--In the case of a 
                State which the Secretary identifies, in consultation 
                with the NAIC, as--
                            ``(i) requiring State legislation (other 
                        than legislation appropriating funds) in order 
                        for insurers offering health insurance coverage 
                        to group health plans to meet the section 821 
                        standards provided under such model 
                        regulations, but
                            ``(ii) having a legislature which is not 
                        scheduled to meet in 1996 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1997. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.
            ``(3) No federal mandate on states.--Nothing in this 
        subsection shall be construed as imposing a requirement on a 
        State. The establishment by a State of an enforcement program 
        under this subsection is voluntary.
    ``(b) Federal Role.--
            ``(1) State enforcement exclusive of federal enforcement.--
        If the Secretary determines that a State has submitted a report 
        by the deadline specified under subsection (a)(2) and finds 
        that the State has provided for implementation and enforcement 
        of the section 821 standards (to the extent that the 
        requirements to which such standards apply are applicable to 
        insurers offering health insurance coverage in connection with 
        group health plans and not applicable to group health plans), 
        such implementation and enforcement shall be carried out 
        exclusively under State law.
            ``(2) Review of state enforcement programs.--If the 
        Secretary determines that a State has submitted a report by the 
        deadline specified under subsection (a)(2) but finds that the 
        State program does not provide for implementation and 
        enforcement of the section 821 standards that are applicable to 
        insurers and not applicable to group health plans, the 
        Secretary shall notify the State and provide the State a period 
        of 60 days in which to provide for changes that assure such 
        implementation and enforcement of such standards.
            ``(3) Contingency.--If the Secretary determines that a 
        State has not submitted a report by the deadline specified 
        under subsection (a)(2) or, in the case of a State described in 
        paragraph (2), the State has not provided for an implementation 
        and enforcement program after the period of 60 days specified 
        in such paragraph, the Secretary shall provide for such 
        mechanism for the implementation and enforcement in the State 
        of the section 821 standards (to the extent that the 
        requirements to which such standards apply are applicable to 
        insurers offering health insurance coverage in connection with 
        group health plans and not applicable to group health plans) 
        (including the application of civil money penalties under 
        paragraph (4)) as the Secretary determines to be appropriate. 
        Any such implementation and enforcement shall cease to be 
        effective on the date the Secretary finds that a State has 
        established an implementation and enforcement program described 
        in subsection (a)(1).
            ``(4) Application of civil money penalty under secretarial 
        mechanism.--
                    ``(A) In general.--If the Secretary is providing 
                for implementation and enforcement of section 821 
                standards under paragraph (3) and determines that an 
                insurer offering health insurance coverage in 
                connection with a group health plan has failed to 
                comply with such standards applicable to the insurer, 
                the Secretary may impose on the insurer a civil money 
                penalty of not to exceed $25,000 for each such failure. 
                Provisions consistent and coextensive with section 
                1128A of the Social Security Act (other than the first 
                sentence of subsection (a) of such section and other 
                than subsection (b) of such subsection) shall apply to 
                a civil money penalty under this paragraph in the same 
                manner as such section applies to a penalty or 
                proceeding under section 1128A(a) of such Act. Any 
                action authorized under this subparagraph shall be in 
                addition to actions authorized under section 502.
                    ``(B) Corrections within 30 days.--The Secretary 
                shall not impose a civil money penalty under this 
                paragraph by reason of any failure if--
                            ``(i) such failure was due to reasonable 
                        cause and not to willful neglect, and
                            ``(ii) such failure is corrected within the 
                        30-day period beginning on the earliest date 
                        the insurer knew, or exercising reasonable 
                        diligence would have known, that such failure 
                        existed.
    ``(c) Good Faith Compliance with Requirement.--An insurer that 
complies in good faith with an applicable requirement of subpart A of 
this part shall not be subject to a penalty under this section for 
failure to meet such requirement on the basis of its failure to meet 
section 821 standards (or regulations to carry out such standards) for 
any failure that occurs before the date such standards (or regulations) 
have been published and become effective.
    ``(d) Treatment of Policy Approval by Domicile State.--If a 
particular policy or contract of health insurance coverage offered by 
an insurer is approved in a State that has adopted and is enforcing 
section 821 standards and that is the domicile State with respect to 
the insurer, the policy or contract shall be deemed to meet such 
standards with respect to any other State but only if a copy of the 
approval by the domicile State is filed by the insurer with the 
applicable regulatory authority of such other State at least 60 days 
before the date the policy or contract is offered, sold, or issued in 
that other State.

``SEC. 823. PREEMPTION.

    ``(a) In General.--Subject to subsection (b), a State may not 
establish or enforce standards applicable to insurers offering health 
insurance coverage in connection with group health plans and not 
applicable to group health plans, if the standards are different from 
the section 821 standards (to the extent that the requirements to which 
such standards apply are applicable to such insurers and not applicable 
to group health plans).
    ``(b) Exception for Governmental Health Plans.--Subsection (a) 
shall not prevent a State from establishing and enforcing different 
standards with respect to group health plans that are established or 
maintained by the State or political subdivision thereof, or by any 
agency or instrumentality of the State or political subdivision 
thereof. This part shall not be construed as imposing any requirements 
on States or local governments. A group health plan shall not be 
treated as failing to meet the requirements of section 802 solely 
because the plan disregards coverage under any other plan established 
or maintained by a State or a political subdivision thereof for which 
different standards not meeting the minimum requirements of subpart A 
are established or enforced by the State or political subdivision.''.
    (b) Treatment of Governmental Plans.--Section 4(b)(1) of such Act 
(29 U.S.C. 1003(b)(1)) is amended by inserting ``except with respect to 
part 8 of subtitle B,'' after ``(1)''.
    (c) 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 608 the following new items:

   ``PART 8--ACCESS TO, AND CONTINUITY OF, GROUP HEALTH PLAN COVERAGE

``Sec. 800. Definitions and special rules.
  ``Subpart A--Nondiscrimination, Portability, Renewability, and Plan 
                        Participation Standards

``Sec. 801. Nondiscrimination and limitations on preexisting condition 
                            exclusions.
``Sec. 802. Portability.
``Sec. 803. Requirements for renewability of coverage.
``Sec. 804. Group health plan participation standards.
 ``Subpart B--Encouragement of Private Standards-Setting Organizations 
 for Provider Networks and Utilization Review under Group Health Plans

``Sec. 811. Encouragement of private standards-setting organizations 
                            for provider networks under group health 
                            plans.
``Sec. 812. Encouragement of private standards-setting organizations 
                            for utilization review under group health 
                            plans.
          ``Subpart C--Establishment of Standards; Enforcement

``Sec. 821. Establishment of standards applicable to insurers offering 
                            health insurance coverage to group health 
                            plans.
``Sec. 822. Enforcement with respect to insurers offering health 
                            insurance coverage to group health plans.
``Sec. 823. Preemption.''.
    (d) Good Faith Compliance with Requirement.--A group health plan 
(within the meaning of section 3(42) of the Employee Retirement Income 
Security Act of 1974) that complies in good faith with an applicable 
requirement of subpart A of part 8 of title I of such Act before the 
date a regulation has been published and becomes effective to carry out 
such requirement shall be considered to be in compliance with such 
regulation.

SEC. 1002. EFFECTIVE DATE.

    The requirements of subparts A and B of part 8 of subtitle B of 
title I of the Employee Retirement Income Security Act of 1974 (added 
by this subtitle), and the preemption provisions of section 823 of such 
Act (added by this subtitle), shall apply with respect to plan years 
beginning after December 31, 1997.

    Subtitle B--Requirements for Insurers Offering Health Insurance 
           Coverage to Group Health Plans of Small Employers

SEC. 1101. ERISA REQUIREMENTS FOR INSURERS OFFERING HEALTH INSURANCE 
              COVERAGE TO GROUP HEALTH PLANS OF SMALL EMPLOYERS

                                                    Title I, Subtitle B

    (a) In General.--Part 8 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (as added by the preceding 
provisions of this title) is amended by adding at the end the 
following:

   ``Subpart D--Requirements for Insurers Offering Health Insurance 
           Coverage to Group Health Plans of Small Employers

``SEC. 831. DEFINITIONS.

    ``Except as otherwise specifically provided, for purposes of this 
subpart:
            ``(1) Catastrophic deductible amount.--(A) Subject to 
        subparagraph (B), the term `catastrophic deductible amount' 
        means a deductible amount that is at least $1,800 (or $3,600 if 
        the coverage includes family members).
            ``(B) In the case of any calendar year after the first year 
        to which this subpart applies, each dollar amount in 
        subparagraph (A) shall be increased by the percentage by which 
        (i) the average of the monthly consumer price indexes for all 
        urban consumers for the previous year, exceeds (ii) the average 
        of the monthly consumer price indexes for all urban consumers 
        for such first year. If any increase under the preceding 
        sentence does not result in an amount that is a multiple of 
        $50, such increase shall be rounded so that the amount is 
        determined to the nearest multiple of $50.
            ``(2) Dependent child.--The term `dependent child' means a 
        child (including an adopted child) who is under 19 years of age 
        or who is a full-time student and under 25 years of age.
            ``(3) Secretary.--Notwithstanding section 3(13), the term 
        `Secretary' means the Secretary of Health and Human Services.
            ``(4) Small employer.--The term `small employer' means, 
        with respect to a calendar year, an employer with more than 1 
        but less than 51 eligible employees on a typical business day. 
        For purposes of this paragraph, the term `eligible employee' 
        includes a self-employed individual.
            ``(5) Small group market.--The term `small group market' 
        has the meaning provided in section 803(b)(4)(B).
            ``(6) State.--The term `State' means the 50 States, the 
        District of Columbia, Puerto Rico, the Virgin Islands, Guam, 
        and American Samoa.
            ``(7) State commissioner of insurance.--The term `State 
        commissioner of insurance' includes a State superintendent of 
        insurance.

``SEC. 832. REQUIREMENT FOR INSURERS TO OFFER GENERAL, CATASTROPHIC, 
              AND OPTIONAL MEDISAVE COVERAGE TO SMALL EMPLOYERS.

    ``(a) Requirement.--
            ``(1) In general.--Each insurer that makes available any 
        health insurance coverage in connection with a group health 
        plan in the small group market in the State--
                    ``(A) shall make available to each small employer 
                in the State general coverage (as defined in section 
                833(a)), with a fee-for-service option and, if the 
                insurer makes the option available in the State outside 
                the small group market, a point-of-service option and a 
                managed care option (as such terms are defined in 
                section 800(a)(14)),
                    ``(B) shall make available to each small employer 
                in the State catastrophic coverage (as defined in 
                section 833(b)), and
                    ``(C) may make available to each small employer in 
                the State medisave coverage (as defined in section 
                833(c)).
            ``(2) Treatment of certain previously self-insured 
        employers.--
                    ``(A) In general.--An insurer may elect not to make 
                general, catastrophic, and medisave coverage available 
                to group health plans of previously self-insured small 
                employers (described in subparagraph (B)), but only if 
                such election is made in a uniform manner for all such 
                employers. Such an election shall not apply after the 
                end of the 1-year period (or such uniform, shorter 
                period as the insurer may specify) beginning on the 
                last date no such coverage was provided by an employer.
                    ``(B) Previous self-insured employer described.--A 
                previously self-insured small employer described in 
                this subparagraph is a small employer that has provided 
                medical care (referred to in section 3(42)) to 
                employees other than through health insurance coverage 
                to which this subpart applies.
            ``(3) Special rule for health maintenance organizations.--
        The requirements of paragraph (1)(A) (with regard to requiring 
        a fee-for-service option) and paragraph (1)(B) shall not apply 
        with respect to a health insurance coverage that is offered 
        by--
                    ``(A) a health maintenance organization, or
                    ``(B) any other entity if such other entity does 
                not provide for a fee-for-service option.
            ``(4) Construction with respect to coverage offered in 
        connection with associations.--Nothing in paragraph (1) or 
        subsection (b)(1) shall be construed as requiring the general, 
        catastrophic, or medisave coverage made available by an insurer 
        in the small group market in a State in connection with an 
        association referred to in section 834(a)(4) to be the same as 
        the general, catastrophic, or medisave coverage offered in the 
        State in the small group market not in connection with such an 
        association.
    ``(b) Issuance of Coverage.--
            ``(1) In general.--Subject to the succeeding paragraphs of 
        this subsection and subsection (a)(4), each insurer that offers 
        general, catastrophic, or medisave coverage in connection with 
        a group health plan in the small group market in a State--
                    ``(A) must accept every small employer in the State 
                that applies for such coverage; and
                    ``(B) must accept for enrollment under such 
                coverage every eligible individual (as defined in 
                section 800(a)(4)) who applies for enrollment on a 
                timely basis (consistent with paragraph (4)) and may 
                not place any restriction on the eligibility of an 
                individual to enroll so long as such individual is an 
                eligible individual consistent with subpart D.
            ``(2) Special rules for health maintenance organizations.--
        In the case of an insurer that offers health insurance coverage 
        in connection with a group health plan in the small group 
        market and that is a health maintenance organization or offers 
        coverage through a network plan (as defined in section 
        800(a)(13)), the insurer may--
                    ``(A) limit the employers that may apply for such 
                coverage to those with eligible individuals residing in 
                the service area for such organization or plan;
                    ``(B) limit the individuals who may be enrolled 
                under such coverage to those who reside in the service 
                area for such organization or plan; and
                    ``(C) within the service area of such organization 
                or plan, deny such coverage to such employers if the 
                insurer demonstrates that--
                            ``(i) it will not have the capacity to 
                        deliver services adequately to enrollees of any 
                        additional groups because of its obligations to 
                        existing group contract holders and enrollees,
                            ``(ii) it is applying this subparagraph 
                        uniformly to all employers without regard to 
                        the health status, claims experience, or 
                        duration of coverage of those employers and 
                        their employees, and
                            ``(iii) it will not offer coverage to such 
                        employers within such service area for a period 
                        of at least 180 days after such coverage is 
                        denied.
            ``(3) Special rule for financial capacity limits.--An 
        insurer may deny health insurance coverage in connection with a 
        group health plan in the small group market if the insurer 
        demonstrates that--
                    ``(A) it does not have the financial reserves 
                necessary to underwrite additional coverage,
                    ``(B) it is applying this paragraph uniformly to 
                all employers without regard to the health status, 
                claims experience, or duration of coverage of the small 
                employers and their employees, and
                    ``(C) it shall not offer coverage to such employers 
                within such service area for a period of at least 180 
                days after such coverage is denied.
            ``(4) Clarification of timely enrollment.--
                    ``(A) General initial enrollment requirement.--
                Except as provided in this paragraph, enrollment of an 
                eligible individual for general, catastrophic, or 
medisave coverage may be considered not to be timely if the eligible 
employee or dependent fails to enroll under such coverage during an 
initial enrollment period, if such period is at least 30 days long.
                    ``(B) Enrollment due to loss of previous 
                coverage.--Enrollment under general, catastrophic, or 
                medisave coverage is considered to be timely in the 
                case of an eligible individual who--
                            ``(i) was covered under a group health plan 
                        or had health insurance coverage at the time of 
                        the individual's initial enrollment period,
                            ``(ii) stated at the time of the initial 
                        enrollment period that coverage under a group 
                        health plan or health insurance coverage was 
                        the reason for declining enrollment,
                            ``(iii) lost coverage under a group health 
                        plan or health insurance coverage (as a result 
                        of the termination of the coverage, termination 
                        of employment, reduction of numbers of hours of 
                        employment, or other reason other than a reason 
                        described in subparagraph (A) or (B) of section 
                        803(b)), and
                            ``(iv) requests enrollment within 30 days 
                        after termination of the coverage.
                    ``(C) Requirement applies during open enrollment 
                periods.--Each insurer offering general, catastrophic, 
                or medisave coverage in connection with a group health 
                plan in the small group market shall provide for at 
                least one period (of not less than 30 days) each year 
                during which enrollment under such coverage shall be 
                considered to be timely. A late enrollment penalty may 
                apply with respect to any subsequent period (not to 
                extend beyond the effective date of the next such 
                enrollment period).
                    ``(D) Enrollment of dependents.--
                            ``(i) In general.--Enrollment of an 
                        eligible individual who is a spouse or child of 
                        an eligible employee shall be considered to be 
                        timely if a request for enrollment is made 
                        either--
                                    ``(I) within 30 days of the date of 
                                the marriage or of the date of the 
                                birth or adoption of such child, if 
                                family coverage is available as of such 
                                date, or
                                    ``(II) within 30 days of the date 
                                family coverage is first made 
                                available.
                            ``(ii) Coverage.--If available coverage 
                        includes family coverage and enrollment is made 
                        under such coverage on a timely basis under 
                        clause (i)(I), the coverage shall become 
                        effective not later than the first day of the 
                        first month beginning after the date the 
                        completed request for enrollment is received.
            ``(5) Minimum employee participation requirement and 
        waiting period permitted.--
                    ``(A) In general.--Subject to subparagraphs (B) and 
                (C), an insurer offering general, catastrophic, or 
                medisave coverage in connection with a group health 
                plan in the small group market may--
                            ``(i) provide for a minimum participation 
                        requirement with respect to eligible employees 
                        of an employer if such requirement does not 
                        exceed 25 percent of the eligible employees of 
                        the employer who do not otherwise have coverage 
                        under a group health plan or health insurance 
                        coverage (or coverage under a public plan 
                        providing medical benefits); and
                            ``(ii) require a waiting period with 
                        respect to coverage of an eligible employee of 
                        an employer if such period is consistent with 
                        section 804(a)(1).
                    ``(B) Special rule for coverage in connection with 
                certain associations.--In the case of health insurance 
                coverage in connection with an association referred to 
                in section 834(a)(4), the insurer may not provide for a 
                minimum participation requirement with respect to 
                eligible employees of an employer.
                    ``(C) Treatment of coverage elected solely for 
                dependents.--In determining whether the minimum 
                participation requirements of subparagraph (A)(i) are 
                met with respect to a plan, coverage provided under the 
                plan for dependents of an eligible employee, pursuant 
                to an election of coverage by the eligible employee for 
                dependents only, shall be treated as participation by 
                the eligible employee under the plan.

``SEC. 833. GENERAL, CATASTROPHIC, AND MEDISAVE COVERAGE DEFINED.

    ``(a) General Coverage.--In this part, the term `general coverage' 
means health insurance coverage that meets the applicable standards 
provided for under section 835 and that is not catastrophic coverage or 
medisave coverage (as defined in this section).
    ``(b) Catastrophic Coverage.--In this part, the term `catastrophic 
coverage' means health insurance coverage that meets the applicable 
standards provided for under section 835 and under which benefits are 
available for a year only to the extent that expenses for covered 
services in a year exceed a catastrophic deductible amount (as defined 
in section 831(1)).
    ``(c) Medisave Coverage.--
            ``(1) In general.--In this part, the term `medisave 
        coverage' means coverage that meets the applicable standards 
        provided for under section 832 and--
                    ``(A) consists of--
                            ``(i) health insurance coverage under which 
                        benefits are available for a year only to the 
                        extent that expenses for covered services in a 
                        year exceed a catastrophic deductible amount 
                        (as defined in section 831(1)); and
                            ``(ii) medisave cash benefit coverage 
                        consistent with paragraph (2); and
                    ``(B) meets such standards as may be prescribed 
                under section 835.
            ``(2) Medisave cash benefit coverage.--
                    ``(A) In general.--Medisave cash benefit coverage 
                is considered to be consistent with this paragraph to 
                the extent that, in addition to and separate from the 
                benefits from the health insurance coverage described 
                in paragraph (1)(A)--
                            ``(i) under the terms of such coverage 
                        there is a fixed dollar amount of additional 
                        benefits that does not exceed the catastrophic 
                        deductible amount (as defined in section 
                        831(1)) for the catastrophic coverage described 
                        in paragraph (1)(A);
                            ``(ii) subject to clause (iii), the dollar 
                        amount may be used for deductibles, cost-
                        sharing, and other expenses, for items and 
                        services specified under such catastrophic 
                        coverage and medisave cash benefit coverage;
                            ``(iii) any such amount of benefits not so 
                        used shall be accumulated, shall remain 
                        available to be applied against future 
                        deductibles, cost-sharing, and other expenses, 
                        and may be withdrawn for any purpose, or used 
                        to pay for coverage described in paragraph 
                        (1)(A)(i), to the extent that the dollar amount 
                        exceeds 150 percent of the catastrophic 
                        deductible amount (as defined in section 
                        831(1)) for the catastrophic coverage described 
                        in paragraph (1)(A), shall be nonforfeitable, 
                        and, upon the death of all beneficiaries with 
                        respect to such benefits, shall be payable in 
                        cash to the estate of the beneficiary who dies 
                        last; and
                            ``(iv) the coverage meets the portability 
                        rules established under subparagraph (B).
                    ``(B) Portability rules.--In the case of an 
                individual who has medisave cash benefit coverage with 
                respect to which the requirements of clauses (i), (ii), 
                and (iii) of subparagraph (A) are met in a year, who 
                has accumulated an amount of benefits under such 
                coverage, and who terminates such coverage (or 
                terminates enrollment under health insurance coverage 
                that contains medisave cash benefit coverage), the 
                coverage meets the portability rules of this 
                subparagraph if, under the terms of such coverage, the 
                individual is permitted (as elected by the 
                individual)--
                            ``(i) to have an amount equal to all or 
                        some of the amount of benefits accumulated 
                        under such coverage paid towards the payment of 
                        premiums under any group health plan or health 
                        insurance coverage providing coverage for the 
                        individual, and
                            ``(ii) to have an amount equal to all or 
                        some of the remaining balance transferred to a 
                        plan which will provide medisave cash benefit 
                        coverage for that individual in accordance with 
                        the requirements of this paragraph (and such 
                        plan shall credit such amount transferred 
                        towards Medisave cash benefit coverage provided 
                        by such plan).

``SEC. 834. USE OF FAIR RATING, UNIFORM MARKETING MATERIALS, AND 
              MISCELLANEOUS CONSUMER PROTECTIONS.

    ``(a) Use of Fair Rating.--
            ``(1) In general.--As a standard under section 835(a), 
        subject to the succeeding paragraphs of this subsection, the 
        premium rates established by an insurer for general, 
        catastrophic, or medisave coverage offered in connection with a 
        group health plan in the small group market may not vary except 
        by the following:
                    ``(A) Age.--
                            ``(i) In general.--Subject to clause (ii), 
                        by age classes of individuals under 65 years of 
                        age which do not result in the ratio of the 
                        highest age rate to the lowest age rate 
                        exceeding 4-to-1.
                            ``(ii) Schedule of phased-in reductions in 
                        ratio.--The Secretary shall request the NAIC to 
                        determine, within 12 months after the date of 
                        the enactment of the ERISA Targeted Health 
                        Insurance Reform Act of 1995, whether the ratio 
                        referred to in clause (i) can be adjusted for 
                        years after 1998, without adversely affecting 
                        coverage rates and affordability of coverage, 
                        so that the ratio of the highest age rate to 
                        the lowest age rate in effect for any year is 
                        reduced and phased in to a ratio of not less 
                        than 3-to-1. If the NAIC submits to the 
                        Secretary a determination that such a reduction 
                        can so be made, under a schedule of reductions 
                        in such ratio effective for calendar years 
                        after 1998, and specifies the schedule of 
                        reductions for such years, the Secretary shall 
                        review the schedule of reductions. Such review 
                        shall be completed within 120 days after the 
                        date the determination of the NAIC is submitted 
                        to the Secretary. Unless the Secretary 
                        determines within such period that such 
                        schedule of reduced ratios will adversely 
                        affect coverage rates and affordability of 
                        coverage, the ratio in effect under this 
                        subparagraph for any year under such schedule 
                        shall be the ratio in effect for such year 
                        under this subparagraph.
                    ``(B) Geographic area.--By geographic area, based 
                on 3-digit zip code or counties, as identified by the 
                Secretary in consultation with the NAIC and the States 
                involved.
                    ``(C) Family class.--By family class, based on 
                classes of family coverage established by the 
                Secretary, in consultation with the NAIC and the 
                States.
                    ``(D) Benefit design.--By benefit design of 
                coverage, including by type of coverage, such as 
                general, catastrophic, and medisave coverage and by 
                type of coverage option (described in section 
                800(a)(14)) with respect to general coverage.
                    ``(E) 12-month surcharge for less restrictive pre-
                existing condition exclusion.--By whether coverage is 
                being offered pursuant to section 801(a) (relating to a 
                less restrictive pre-existing condition exclusion), and 
                which is not described in section 801(b), but only 
                during the first 12 months in which such coverage is 
                offered.
                    ``(F) Administrative categories.--By permitted 
                expense category, based on differences in expenses 
                among such categories, consistent with subsection (b).
            ``(2) Discount for employer wellness program.--An insurer 
        offering health insurance coverage in connection with a group 
        health plan in the small group market may provide for a group 
        discount with respect to the employer that provides for a 
        wellness program for employees.
            ``(3) Additional variations in renewal premiums permitted 
        for claims experience within class of business.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this paragraph, for a class of business 
                of an insurer, with respect to small employers with 
                similar demographic and other similar objective 
                characteristics (and not relating to claims experience, 
                health status, industry, occupation, or duration of 
                coverage since issue) for the same or similar coverage, 
                the insurer offering health insurance coverage in 
                connection with a group health plan in the small group 
                market may vary the renewal premiums charged during a 
                rating period based on claims experience so long as the 
                highest rates which could be charged to such employers 
                under the rating system for that class of business does 
                not exceed the following percentage of the base premium 
                rate for the class of business for the rating period:
                            ``(i) For a rating (or portion thereof) 
                        that occurs in the first 2 years in which this 
                        section is in effect, 150 percent.
                            ``(ii) For a rating (or portion thereof) 
                        that occurs in a succeeding year, a percentage 
                        specified in any regulation of the Secretary 
                        that may be prescribed under paragraph (6).
                    ``(B) Limit on transfer of employers among classes 
                of business.--In carrying out subparagraph (A), an 
                insurer offering health insurance coverage in 
                connection with a group health plan in the small group 
                market may not involuntarily transfer a small employer 
                into or out of a class of business. An insurer offering 
                such coverage may not offer to transfer a small 
                employer into or out of a class of business unless such 
                offer is made to transfer all small employers in the 
                class of business without regard to demographic 
                characteristics, claim experience, health status, 
                industry, occupation, or duration since issue.
                    ``(C) Definitions.--In this paragraph:
                            ``(i) Base premium rate.--The term `base 
                        premium rate' means, for each class of business 
                        for each rating period, the lowest premium rate 
                        charged or which could have been charged under 
                        a rating system for that class of business by 
                        the insurer to small employers with similar 
                        demographic characteristics and other similar 
                        objective characteristics (not relating to 
                        claims experience, health status, industry, 
                        occupation, or duration of coverage since 
                        issue) for the same or similar health insurance 
                        coverage.
                            ``(ii) Class of business.--The term `class 
                        of business' means, with respect to an insurer, 
                        all (or a distinct group of) small employers as 
                        shown on the records of the insurer.
                            ``(iii) Rules for establishing classes of 
                        business.--For purposes of clause (ii)--
                                    ``(I) an insurer offering health 
                                insurance coverage in connection with a 
                                group health plan in the small group 
                                market may establish, subject to 
                                subclause (II), a distinct group of 
                                small employers on the basis that the 
                                applicable health insurance coverage 
                                either is marketed and sold through 
                                individuals and organizations which are 
                                not participating in the marketing or 
                                sale of other distinct groups of small 
                                employers for the insurer or has been 
                                acquired from another insurer as a 
                                distinct group; and
                                    ``(II) such an insurer may not 
                                establish more than 2 groupings under 
                                each class of business based on the 
                                insurer's use of managed-care 
                                techniques if the techniques are 
                                expected to produce substantial 
                                variation in health care costs.
                            ``(iv) Demographic characteristics.--The 
                        term `demographic characteristics' means age 
                        (based upon classes established under paragraph 
                        (1)(A)), geographic area (based upon areas 
                        identified under paragraph (1)(B)), and family 
                        composition (based upon family classes 
                        established under paragraph (1)(C)).
            ``(4) Treatment of associations as separate pools.--
                    ``(A) In general.--At the election of an insurer, 
                the provisions of this section may be applied 
                separately with respect to either of the following:
                            ``(i) Pooled experience for each 
                        association.--Small employers which are members 
                        of each separate qualified association.
                            ``(ii) Pooled experience for all 
                        associations.--Small employers which are 
                        members of any qualified association.
                    ``(B) 5-year rule.--An election under subparagraph 
                (A) may not be made (or revoked) more frequently than 
                once every 5 years.
                    ``(C) Qualified association defined.--In this 
                paragraph, the term `qualified association' means an 
                association which meets the following requirements:
                            ``(i) The association consists of employers 
                        who together employ at least 200 eligible 
                        employees.
                            ``(ii) At least 25 percent of the eligible 
                        employees of employer members of the 
                        association are eligible employees of small 
                        employer members.
                            ``(iii) The sponsor of the association--
                                    ``(I) is, and has been (together 
                                with its immediate predecessor, if any) 
                                for a continuous period of not less 
                                than 3 years, organized and maintained 
                                in good faith, with a constitution and 
                                bylaws specifically stating its 
                                purpose, as a trade association, an 
                                industry association, a professional 
                                association, or a chamber of commerce 
                                (or similar business group), for 
                                substantial purposes other than that of 
                                obtaining or providing medical care, 
                                and
                                    ``(II) is established as a 
                                permanent entity which receives the 
                                active support of its members.
                    ``(D) Variation within association based on 
                experience not permitted.--In the case of a small 
                employer that is a member of an association that an 
                insurer elects to treat separately under subparagraph 
                (A), the insurer may not vary premiums pursuant to 
                paragraph (3).
            ``(5) Additional variations in initial premiums permitted 
        for underwriting characteristics.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this paragraph, for a class of business 
                of an insurer, with respect to small employers with 
                similar demographic and other similar objective 
                characteristics (not relating to claims experience, 
                health status, industry, occupation, or duration of 
                coverage since issue), for the same or similar 
                coverage, the insurer offering health insurance 
                coverage in connection with a group health plan in the 
                small group market may vary the initial premiums 
                charged on the basis of prior claims experience, health 
                status, industry, occupation, and other underwriting 
                characteristics so long as the highest rates which 
                could be charged to such employers under the rating 
                system for that class of business does not exceed the 
                following percentage of the base premium rate for the 
                class of business for the rating period:
                            ``(i) For a rating (or portion thereof) 
                        that occurs in the first 2 years in which this 
                        section is in effect, 150 percent.
                            ``(ii) For a rating (or portion thereof) 
                        that occurs in a succeeding year, a percentage 
                        specified in any regulation of the Secretary 
                        that may be prescribed under paragraph (6).
                    ``(B) Definitions.--In this paragraph:
                            ``(i) Base premium rate.--The term `base 
                        premium rate' means, for each class of 
                        business, the lowest premium rate charged or 
                        which could have been charged under a rating 
                        system for that class of business by the 
                        insurer to small employers with similar 
                        demographic characteristics and other similar 
                        objective characteristics (not relating to past 
                        claims experience, health status, industry, 
                        occupation, and other underwriting 
                        characteristics) for the same or similar health 
                        insurance coverage.
                            ``(ii) Other definitions.--Clause (ii) 
                        (relating to class of business), clause (iii) 
                        (relating to rules for establishing classes of 
                        business), and clause (iv) (relating to 
                        demographic characteristics) of paragraph 
                        (3)(C) shall also apply with respect to this 
                        paragraph.
            ``(6) Graduated reduction in allowable percentages of base 
        premium rate.--The Secretary shall request the NAIC to 
        determine (in consultation with the American Academy of 
        Actuaries), within 12 months after the date of the enactment of 
        the ERISA Targeted Health Insurance Reform Act of 1995, whether 
        model regulations that provide for a schedule of graduated 
        reductions in the percentages of the base premium rates 
        allowable under each of paragraphs (3)(A)(ii) and (5)(A)(ii) 
        can be developed without adversely affecting coverage rates and 
        affordability of coverage. If the NAIC makes such a 
        determination and develops such model regulations providing for 
        such schedules, the Secretary shall review the schedules 
        provided in such model regulations. Such review shall be 
        completed within 120 days after the date the regulations are 
        developed. Unless the Secretary determines within such 
period that any schedule provided in such model regulations for 
paragraph (3)(A)(ii) or (5)(A)(ii) does not meet the requirements of 
this subsection, such schedule shall serve as the schedule applicable 
under such paragraph, with such amendments as the Secretary deems 
necessary. The Secretary shall provide for public comment in connection 
with the regulations during such 120-day period and in advance of any 
determination by the Secretary.
    ``(b) Administrative Variations.--
            ``(1) Expense categories.--Expense categories shall be 
        established under subsection (a)(1)(F) by an insurer offering 
        health insurance coverage in connection with a group health 
        plan in the small group market in a manner that only reflects 
        differences based on marketing, commissions, and similar 
        expenses.
            ``(2) Limitation on variations.--The variation provided 
        among expense categories under subsection (a)(1)(F) may not 
        result in a premium for the highest expense category exceeding 
        115 percent of the premium for the lowest expense category.
    ``(c) Full Disclosure of Applicable Rating Practices.--At the time 
an insurer offers health insurance coverage in connection with a group 
health plan in the small group market, the insurer shall fully disclose 
to the plan sponsor, at the request of the plan sponsor, rating 
practices for health insurance coverage applicable to that plan, 
including rating practices for different benefit designs offered to the 
plan sponsor.
    ``(d) Actuarial Certification.--Each insurer that offers health 
insurance coverage in connection with a group health plan in the small 
group market in a State shall file annually with the State commissioner 
of insurance, to the extent required by such commissioner, a written 
statement by a member of the American Academy of Actuaries (or other 
individual acceptable to the commissioner) that, based upon an 
examination by the individual which includes a review of the 
appropriate records and of the actuarial assumptions of the insurer and 
methods used by the insurer in establishing premium rates for 
applicable health insurance coverage--
            ``(1) the insurer is in compliance with the applicable 
        provisions of this section, and
            ``(2) the rating methods are actuarially sound.
Each such insurer shall retain a copy of such statement for examination 
at its principal place of business.
    ``(e) Registration and Reporting.--Each insurer that issues any 
health insurance coverage in connection with a group health plan in the 
small group market in a State shall be registered or licensed with the 
State commissioner of insurance and shall comply with any reporting 
requirements of the commissioner relating to such coverage.
    ``(f) Marketing Material.--Each insurer that issues any health 
insurance coverage in connection with a group health plan in the small 
group market in a State shall file with the State those marketing 
materials relating to the offer and sale of health insurance coverage 
to be used for distribution before the materials are used. Such 
materials shall be in a uniform format, as may be provided under 
standards established under section 835.

``SEC. 835. ESTABLISHMENT OF STANDARDS.

    ``(a) Role of NAIC.--The Secretary of Labor shall request the NAIC 
to develop, within 12 months after the date of the enactment of the 
ERISA Targeted Health Insurance Reform Act of 1995, model regulations 
that specify standards with respect to the requirements of this subpart 
to the extent that such requirements are applicable to insurers 
offering health insurance coverage in connection with group health 
plans in the small group market and not applicable to group health 
plans. If the NAIC develops recommended regulations specifying such 
standards within such period, the Secretary of Labor shall review the 
standards. Such review shall be completed within 120 days after the 
date the regulations are developed. Unless the Secretary of Labor 
determines within such period that the standards do not effectively 
provide for the application of the requirements to such insurers, such 
standards shall serve as the standards under this section, with such 
amendments as the Secretary of Labor deems necessary. Such Secretary 
shall provide for public comment in connection with the standards 
during such 120-day period and in advance of any determination by the 
Secretary.
    ``(b) Contingency.--If the NAIC does not develop such model 
regulations within such period or the Secretary of Labor makes the 
determination described in subsection (a), the Secretary of Labor shall 
specify, within 24 months after the date of the enactment of ERISA 
Targeted Health Insurance Reform Act of 1995, standards to carry out 
those requirements.
    ``(c) Definitions.--In this part, the term `section 835 standards' 
means the standards established under this section.

``SEC. 836. ENFORCEMENT.

    ``(a) Voluntary Enforcement by States.--
            ``(1) In general.--Each State that desires to enforce the 
        section 835 standards (to the extent that the requirements to 
        which such standards apply are applicable to insurers offering 
        health insurance coverage in connection with group health plans 
        in the small group market and not applicable to group health 
        plans) shall submit to the Secretary of Labor, by the deadline 
        specified in paragraph (2), a report on the program the State 
        has established by such deadline and consistent with section 
        837 to implement and enforce such standards.
            ``(2) Deadline.--
                    ``(A) 1 year after final model regulations.--
                Subject to subparagraph (B), the deadline under this 
                paragraph is 1 year after the date model regulations 
                are established under section 835.
                    ``(B) Exception for legislation.--In the case of a 
                State which the Secretary of Labor identifies, in 
                consultation with the NAIC, as--
                            ``(i) requiring State legislation (other 
                        than legislation appropriating funds) in order 
                        for insurers to meet the section 835 standards 
                        provided under such model regulations, but
                            ``(ii) having a legislature which is not 
                        scheduled to meet in 1996 in a legislative 
                        session in which such legislation may be 
                        considered,
                the date specified in this paragraph is the first day 
                of the first calendar quarter beginning after the close 
                of the first legislative session of the State 
                legislature that begins on or after January 1, 1997. 
                For purposes of the previous sentence, in the case of a 
                State that has a 2-year legislative session, each year 
                of such session shall be deemed to be a separate 
                regular session of the State legislature.
            ``(3) No federal mandate on states.--Nothing in this 
        subsection shall be construed as imposing a requirement on a 
        State. The establishment by a State of an enforcement program 
        under this subsection is voluntary.
    ``(b) Federal Role.--
            ``(1) State enforcement exclusive of federal enforcement.--
        If the Secretary of Labor determines that a State has submitted 
        a report by the deadline specified under subsection (a)(2) and 
        finds that the State has provided for implementation and 
        enforcement of the section 835 standards (to the extent that 
        the requirements to which such standards apply are applicable 
        to insurers offering health insurance coverage in connection 
        with group health plans in the small group market and not 
        applicable to group health plans), such implementation and 
        enforcement shall be carried out exclusively under State law.
            ``(2) Review of state enforcement programs.--If the 
        Secretary of Labor determines that a State has submitted a 
        report by the deadline specified under subsection (a)(2) but 
        finds that the State program does not provide for 
        implementation and enforcement of the section 835 standards (to 
        the extent that the requirements to which such standards apply 
        are applicable to insurers offering health insurance coverage 
        in connection with group health plans in the small group market 
        and not applicable to group health plans), the Secretary of 
        Labor shall notify the State and provide the State a period of 
        60 days in which to provide for changes that assure such 
        implementation and enforcement of such standards.
            ``(3) Contingency.--If the Secretary of Labor determines 
        that a State has not submitted a report by the deadline 
        specified under subsection (a)(2) or, in the case of a State 
        described in paragraph (1), the State has not provided for an 
        implementation and enforcement program after the period of 60 
days specified in such paragraph, the Secretary of Labor shall provide 
for such mechanism for the implementation and enforcement in the State 
of the section 835 standards (to the extent that the requirements to 
which such standards apply are applicable to insurers offering health 
insurance coverage in connection with group health plans and not 
applicable to group health plans) (including the application of civil 
money penalties under paragraph (3)) as the Secretary of Labor 
determines to be appropriate. Any such implementation and enforcement 
shall cease to be effective on the date the Secretary of Labor finds 
that a State has established an implementation and enforcement program 
described in subsection (a)(1).
            ``(4) Application of civil money penalty under secretarial 
        mechanism.--
                    ``(A) In general.--If the Secretary of Labor is 
                providing for implementation and enforcement of section 
                835 standards under paragraph (2) and determines that 
                an insurer has failed to comply with such standards 
                applicable to the insurer, the Secretary of Labor may 
                impose on the insurer a civil money penalty of not to 
                exceed $25,000 for each such failure. Under regulations 
                of the Secretary of Labor, provisions consistent and 
                coextensive with section 1128A of the Social Security 
                Act (other than the first sentence of subsection (a) of 
                such section and other than subsection (b) of such 
                section) shall apply to a civil money penalty under 
                this paragraph in the same manner as such section 
                applies to a penalty or proceeding under section 
                1128A(a) of such Act. Any action authorized under this 
                subparagraph shall be in addition to actions authorized 
                under section 502.
                    ``(B) Corrections within 30 days.--The Secretary of 
                Labor shall not impose a civil money penalty under this 
                paragraph by reason of any failure if--
                            ``(i) such failure was due to reasonable 
                        cause and not to willful neglect, and
                            ``(ii) such failure is corrected within the 
                        30-day period beginning on the earliest date 
                        the insurer knew, or exercising reasonable 
                        diligence would have known, that such failure 
                        existed.
    ``(c) Good Faith Compliance with Requirement.--An insurer that 
complies in good faith with an applicable requirement of this subpart 
shall not be subject to a penalty under this section for failure to 
meet such requirement on the basis of its failure to meet section 835 
standards (or regulations to carry out such standards) for any failure 
that occurs before the date such standards (or regulations) have been 
published and become effective.
    ``(d) Treatment of Policy Approval by Domicile State.--If a 
particular policy or contract of health insurance coverage offered by 
an insurer is approved in a State that has adopted and is enforcing 
section 835 standards and that is the domicile State with respect to 
the insurer, the policy or contract shall be deemed to meet such 
standards with respect to any other State but only if a copy of the 
approval by the domicile State is filed by the insurer with the 
applicable regulatory authority of such other State at least 60 days 
before the date the policy or contract is offered, sold, or issued in 
that other State.

``SEC. 837. PREEMPTION.

    ``(a) In General.--Subject to subsection (b), a State may not 
establish or enforce standards applicable to insurers offering health 
insurance coverage in connection with group health plans in the small 
group market and not applicable to group health plans, if the standards 
are different from the section 835 standards (to the extent that the 
requirements to which such standards apply are applicable to such 
insurers and not applicable to group health plans).
    ``(b) Transition for More Restrictive State Standards.--Subsection 
(a) shall not apply to a State establishing and enforcing more 
restrictive standards relating to the matters under this subpart during 
the 3-year period beginning on January 1, 1998, if such standards have 
been established and are enforced by the State as of February 1, 1995.
    ``(c) Reference to Additional Provisions.--For additional 
preemption provisions relating to State benefit mandates, see section 
841.''.
    (b) Conforming Amendment.--Section 505 of such Act (29 U.S.C. 1135) 
is amended by striking ``and section 109'' and inserting ``, subpart D 
of part 8, and section 109''.
    (c) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the items relating to part 8 (added by section 1001(b)) the 
following new items:

   ``Subpart D--Requirements for Insurers Offering Health Insurance 
           Coverage to Group Health Plans of Small Employers

``Sec. 831. Definitions.
``Sec. 832. Requirement for insurers to offer general, catastrophic, 
                            and optional medisave coverage to small 
                            employers.
``Sec. 833. General, catastrophic, and medisave coverage defined.
``Sec. 834. Use of fair rating, uniform marketing materials, and 
                            miscellaneous consumer protections.
``Sec. 835. Establishment of standards.
``Sec. 836. Enforcement.
``Sec. 837. Preemption.''.
    (d) Availability of Medisave Coverage to Employers of All Sizes.--
In addition to the provisions of section 832(a)(1)(C) of the Employee 
Retirement Income Security Act of 1974, an insurer that makes available 
any health insurance coverage in connection with a group health plan 
may make available to employers that are not small employers medisave 
coverage (as defined in section 833(c) of such Act).

SEC. 1102. EFFECTIVE DATE.

    The requirements of sections 832, 833, and 834 of the Employee 
Retirement Income Security Act of 1974 (added by this subtitle) and the 
provisions of section 837 of such Act (added by this subtitle) shall 
apply with respect to insurers as of January 1, 1998.

    Subtitle C--Encouragement of Multiple Employer Health Plans and 
                               Preemption

SEC. 1201. SCOPE OF STATE REGULATION.

                                                    Title I, Subtitle C

    (a) In General.--Part 8 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (added by subtitle A of this 
title) is amended by adding at the end the following new subpart:

                 ``Subpart E--Scope of State Regulation

``SEC. 841. PROHIBITION OF STATE BENEFIT MANDATES FOR GROUP HEALTH 
              PLANS.

    ``(a) In General.--No provision of State or local law shall apply 
that requires--
            ``(1) health insurance coverage in connection with a group 
        health plan to include coverage of one or more specific 
        benefits, services, or categories of health care, or services 
        of any class or type of provider of health care; or
            ``(2) an insurer offering health insurance coverage in 
        connection with a group health plan to provide coverage of one 
        or more specific benefits, services, or categories of health 
        care, or services of any class or type of provider of health 
        care.
    ``(b) Exception.--
            ``(1) State enforcement programs.--Subsection (a) shall not 
        apply with respect to a State enforcement program under section 
        822 or 835.
            ``(2) Certain policies.--Notwithstanding subsection (a), a 
        State may require an insurer offering health insurance coverage 
        in connection with a group health plan to offer coverage of one 
        or more specific benefits, services, or categories of health 
        care, or services of any class or type of provider of health 
        care, but only with respect to not more than 2 policies or 
        contracts of health insurance coverage, one of which provides 
        less comprehensive coverage than the other.

``SEC. 842. PROHIBITION OF PROVISIONS PROHIBITING EMPLOYER GROUPS FROM 
              PURCHASING HEALTH INSURANCE.

    ``No provision of State or local law shall apply that prohibits--
            ``(1) 2 or more employers from obtaining coverage under a 
        multiple employer welfare arrangement under which all coverage 
        consists of medical care referred to in section 3(42) and is 
        fully insured (within the meaning of section 701(8)), or
            ``(2) an insurer from offering coverage described in 
        paragraph (1).

``SEC. 843. PREEMPTION OF STATE ANTI-MANAGED CARE LAWS.

    ``(a) Preemption of State Law Provisions.--Subject to subsection 
(b)(3), the following provisions of State law are preempted and may not 
be enforced:
            ``(1) Restrictions on reimbursement rates or selective 
        contracting.--Any State law that--
                    ``(A) restricts the ability of an insurer offering 
                health insurance coverage in connection with a group 
                health plan to negotiate reimbursement rates or forms 
                of payments with providers,
                    ``(B) restricts the ability of such an insurer to 
                limit the number of participating providers, or
                    ``(C) requires standards inconsistent with any 
                standards established under section 811(b).
            ``(2) Restrictions on utilization review methods.--Any 
        State law that, in relation to health insurance coverage 
        offered by an insurer in connection with a group health plan--
                    ``(A) prohibits utilization review of any or all 
                treatments and conditions (including preadmission 
                certification, application of practice guidelines, 
                continued stay review, preauthorization of ambulatory 
                procedures, and retrospective review),
                    ``(B) requires that such review be made (i) by a 
                resident of the State in which the treatment is to be 
                offered or by an individual licensed in such State, or 
                (ii) by a physician in any particular specialty or with 
                any board certified specialty of the same medical 
                specialty as the provider whose services are being 
                reviewed,
                    ``(C) requires the use of specified standards of 
                health care practice in such reviews or requires the 
                disclosure of the specific criteria used in such 
                reviews,
                    ``(D) requires payments to providers for the 
                expenses of responding to utilization review requests,
                    ``(E) imposes liability for delays in performing 
                such review, or
                    ``(F) requires standards in addition to or 
                inconsistent with standards established under section 
                812(b).''.
    (b) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the items relating to part 8 (added by sections 1001(b) and 
1101(c)) the following new items:

                 ``Subpart E--Scope of State Regulation

``Sec. 841. Prohibition of State benefit mandates for group health 
                            plans.
``Sec. 842. Prohibition of provisions prohibiting employer groups from 
                            purchasing health insurance.
``Sec. 843. Preemption of State anti-managed care laws.''.

SEC. 1202. PREEMPTION OF STATE LAW FOR MULTIPLE EMPLOYER HEALTH PLANS 
              MEETING FEDERAL STANDARDS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 (as amended by the preceding provisions of 
this title) is amended by inserting after part 6 the following new 
part:

                ``Part 7--Multiple Employer Health Plans

``SEC. 701. DEFINITIONS.

    ``For purposes of this part--
            ``(1) Insurer.--The term `insurer' means an insurance 
        company, insurance service, or insurance organization, licensed 
        to engage in the business of insurance by a State.
            ``(2) Participating employer.--The term `participating 
        employer' means, in connection with a multiple employer welfare 
        arrangement, any employer if any of its employees, or any of 
        the dependents of its employees, are or were covered under such 
        arrangement in connection with the employment of the employees.
            ``(3) Excess/stop loss coverage.--The term `excess/stop 
        loss coverage' means, in connection with a multiple employer 
        welfare arrangement or group health plan, a contract under 
        which an insurer provides for payment with respect to claims 
        under the arrangement, relating to participants or 
        beneficiaries individually or otherwise, in excess of an amount 
        or amounts specified in such contract.
            ``(4) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries or meets such reasonable standards and qualifications 
        as the Secretary may provide by regulation.
            ``(5) Sponsor.--The term `sponsor' means, in connection 
        with a multiple employer welfare arrangement, the association 
        or other entity which establishes or maintains the arrangement.
            ``(6) State insurance commissioner.--The term `State 
        insurance commissioner' means the insurance commissioner (or 
        similar official) of a State.
            ``(7) Domicile state.--The term `domicile State' means, in 
        connection with a multiple employer welfare arrangement, the 
        State in which, according to the application for an exemption 
        under this part, most individuals to be covered under the 
        arrangement are located, except that, in any case in which 
        information contained in the latest annual report of the 
        arrangement filed under this part indicates that most 
        individuals covered under the arrangement are located in a 
different State, such term means such different State.
            ``(8) Fully insured.--Coverage under a plan or other 
        arrangement is `fully insured' if one or more insurers or 
        health maintenance organizations (as defined in section 
        800(a)(10)(B)), or any combination thereof, are liable under 
        one or more insurance policies or contracts for all benefits 
        under the arrangement (irrespective of any recourse they may 
        have against other parties).
            ``(9) Exempted multiple employer health plan.--The term 
        `exempted multiple employer health plan' means a multiple 
        employer welfare arrangement treated as an employee welfare 
        benefit plan by reason of an exemption under this part.
            ``(10) Provider health network.--The term `provider health 
        network' means an arrangement--
                    ``(A) under which one or more providers of medical 
                care (referred to in section 3(42)) (including medical 
                practitioners), or one or more such providers and one 
                or more community groups, and such other organizations 
                as may be designated by the arrangement, enter into one 
                or more agreements with one or more group health plans, 
                sponsors of group health plans, or both,
                    ``(B) under which such agreements provide that such 
                providers make available to such group health plan or 
                plans the items and services which constitute the 
                medical care provided as benefits thereunder to 
                participants and beneficiaries thereunder, and
                    ``(C) which receives payment for such items and 
                services on a prospective capitated basis or through a 
                fee withhold arrangement, a bonus arrangement, a per 
                diem arrangement, a fee-for-service arrangement, or any 
                combination of the foregoing (irrespective of the 
                extent to which any of the foregoing may involve 
                acceptance of risk).

``SEC. 702. EXEMPTED MULTIPLE EMPLOYER HEALTH PLANS RELIEVED OF CERTAIN 
              RESTRICTIONS ON PREEMPTION OF STATE LAW AND TREATED AS 
              EMPLOYEE WELFARE BENEFIT PLANS.

    ``(a) In General.--Subject to subsection (b), a multiple employer 
welfare arrangement under which coverage is not fully insured and with 
respect to which there is in effect an exemption granted by the 
Secretary under this part (or with respect to which there is pending a 
complete application for such an exemption and the Secretary determines 
that provisional protection under this part is appropriate)--
            ``(1) shall be treated for purposes of subtitle A and the 
        other parts of this subtitle as an employee welfare benefit 
        plan, irrespective of whether such arrangement is an employee 
        welfare benefit plan, and
            ``(2) shall be exempt from section 514(b)(6)(A)(ii).
    ``(b) Benefits Must Consist of Medical Care.--Subsection (a) shall 
apply to a multiple employer welfare arrangement only if the benefits 
provided thereunder consist solely of medical care referred to in 
section 3(42) (disregarding such incidental benefits as the Secretary 
shall specify by regulation).
    ``(c) Restriction on Commencement of New Arrangements.--A multiple 
employer welfare arrangement providing benefits which consist of 
medical care referred to in section 3(42) which has not commenced 
operations as of January 1, 1998, may commence operations only if an 
exemption granted to the arrangement under this part is in effect (or 
there is pending with respect to the arrangement a complete application 
for such an exemption and the Secretary determines that provisional 
protection under this part is appropriate).
    ``(d) Class Exemption Treatment.--In the case of a multiple 
employer welfare arrangement, if--
            ``(1) at the time of application for an exemption under 
        this part with respect to the arrangement, either (A) the 
        arrangement covers at least 1,000 participants and 
        beneficiaries, or (B) with respect to the arrangement there are 
        at least 2,000 employees of eligible participating employers,
            ``(2) a complete application for an exemption under this 
        part with respect to the arrangement has been filed and is 
        pending, and
            ``(3) the application meets such requirements (if any) as 
        the Secretary may provide with respect to class exemptions 
        under this subsection,
an exemption under this part shall be treated as having been granted 
with respect to the arrangement unless and until the Secretary provides 
appropriate notice that the exemption has been denied.

``SEC. 703. EXEMPTION PROCEDURE.

    ``(a) In General.--The Secretary shall grant an exemption described 
in section 702(a) to a multiple employer welfare arrangement if--
            ``(1) an application for such exemption with respect to 
        such arrangement, identified individually or by class, has been 
        duly filed in complete form with the Secretary in accordance 
        with this part,
            ``(2) such application demonstrates compliance with the 
        requirements of section 704 with respect to such arrangement, 
        and
            ``(3) the Secretary finds that such exemption is--
                    ``(A) administratively feasible,
                    ``(B) not adverse to the interests of the 
                individuals covered under the arrangement, and
                    ``(C) protective of the rights and benefits of the 
                individuals covered under the arrangement.
    ``(b) Notice and Hearing.--Before granting an exemption under this 
section, the Secretary shall publish notice in the Federal Register of 
the pendency of the exemption, shall require that adequate notice be 
given to interested persons, including the State insurance commissioner 
of each State in which covered individuals under the arrangement are, 
or are expected to be, located, and shall afford interested persons 
opportunity to present views. The Secretary may not grant an exemption 
under this section unless the Secretary affords an opportunity for a 
hearing and makes a determination on the record with respect to the 
findings required under subsection (a)(3). The Secretary shall, to the 
maximum extent practicable, make a final determination with respect to 
any application filed under this section in the case of a newly 
established arrangement within 90 days after the date which the 
Secretary determines is the date on which such application is filed in 
complete form.

``SEC. 704. ELIGIBILITY REQUIREMENTS.

    ``(a) Application for Exemption.--
            ``(1) In general.--An exemption may be granted by the 
        Secretary under this part only on the basis of an application 
        filed with the Secretary in such form and manner as shall be 
        prescribed in regulations of the Secretary. Any such 
        application shall be signed by the operating committee and the 
        sponsor of the arrangement.
            ``(2) Filing fee.--The arrangement shall pay to the 
        Secretary at the time of filing an application under this 
        section a filing fee in the amount of $5,000, which shall be 
        available, to the extent provided in appropriation Acts, to the 
        Secretary for the sole purpose of administering the exemption 
        procedures under this part.
            ``(3) Information included.--An application filed under 
        this section shall include, in a manner and form prescribed in 
        regulations of the Secretary, at least the following 
        information:
                    ``(A) Identifying information.--The names and 
                addresses of--
                            ``(i) the sponsor, and
                            ``(ii) the members of the operating 
                        committee of the arrangement.
                    ``(B) States in which arrangement intends to do 
                business.--The States in which individuals covered 
                under the arrangement are to be located and the number 
                of such individuals expected to be located in each such 
                State.
                    ``(C) Bonding requirements.--Evidence provided by 
                the operating committee that the bonding requirements 
                of section 412 will be met as of the date of the 
                application.
                    ``(D) Plan documents.--A copy of the documents 
                governing the arrangement (including any bylaws and 
                trust agreements), the summary plan description, and 
                other material describing the benefits and coverage 
                that will be provided to individuals covered under the 
                arrangement.
                    ``(E) Agreements with service providers.--A copy of 
                any agreements between the arrangement and contract 
                administrators and other service providers.
                    ``(F) Funding report.--A report setting forth 
                information determined as of a date within the 120-day 
                period ending with the date of the application, 
                including the following:
                            ``(i) Reserves.--A statement, certified by 
                        the operating committee of the arrangement, and 
                        a statement of actuarial opinion, signed by a 
                        qualified actuary, that all applicable 
                        requirements of section 707 are or will be met 
                        in accordance with regulations which the 
                        Secretary shall prescribe.
                            ``(ii) 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 arrangement for the 
                        12-month period beginning with such date within 
                        such 120-day period, taking into account the 
                        expected coverage and experience of the 
                        arrangement. 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.
                            ``(iii) 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 arrangement and a projection of the assets, 
                        liabilities, income, and expenses of the 
                        arrangement for the 12-month period referred to 
                        in clause (ii). The income statement shall 
                        identify separately the arrangement's 
                        administrative expenses and claims.
                            ``(iv) 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 arrangement.
                            ``(v) Other information.--Any other 
                        information which may be prescribed in 
                        regulations of the Secretary as necessary to 
                        carry out the purposes of this part.
    ``(b) Other Requirements.--A complete application for an exemption 
under this part shall include information which the Secretary 
determines to be complete and accurate and sufficient to demonstrate 
that the following requirements are met with respect to the 
arrangement:
            ``(1) Sponsor.--
                    ``(A) In general.--Except in a case to which 
                subparagraph (B) or (C) applies, the sponsor is, and 
                has been (together with its immediate predecessor, if 
                any) for a continuous period of not less than 3 years 
                before the date of the application, organized and 
                maintained in good faith, with a constitution and 
                bylaws specifically stating its purpose, as a trade 
                association, an industry association, a professional 
                association, or a chamber of commerce (or similar 
                business group, 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 
                (referred to in section 3(42)), and the applicant 
                demonstrates to the satisfaction of the Secretary that 
                the sponsor is established as a permanent entity which 
                receives the active support of its members.
                    ``(B) Special rule for provider health networks.--
                In the case of an arrangement that is a provider health 
                network (as defined in section 701(10)), the sponsor is 
                the operating committee of the network.
                    ``(C) Special rule for employers in the same trade 
                or business.--In the case of an arrangement under which 
                all participating employers are engaged in a common 
                type of trade or business, the sponsor is the operating 
                committee of the arrangement.
            ``(2) Operating committee.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the arrangement is operated, pursuant 
                to a trust agreement, by an operating committee which 
                has complete fiscal control over the arrangement and 
                which is responsible for all operations of the 
                arrangement, and the operating committee 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 arrangement and to meet all requirements 
                of this title applicable to the arrangement. The 
                members of the committee 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. No such member is an 
                owner, officer, director, or employee of, or partner 
                in, a contract administrator or other service provider 
                to the arrangement, except that officers or employees 
                of a sponsor which is a service provider (other than a 
                contract administrator) to the arrangement may be 
                members of the committee if they constitute not more 
                than 25 percent of the membership of the committee and 
                they do not provide services to the arrangement other 
                than on behalf of the sponsor. The committee has sole 
                authority to approve applications for participation in 
                the arrangement and to contract with a service provider 
                to administer the day-to-day affairs of the 
                arrangement.
                    ``(B) Special rule for provider health networks.--
                In the case of an arrangement that is a provider health 
                network (as defined in section 701(10)), the operating 
                committee is the board of the entity that is the 
                network.
            ``(3) Contents of governing instruments.--The instruments 
        governing the arrangement include a written instrument, meeting 
        the requirements of an instrument required under section 
        402(a)(1), which--
                    ``(A) provides that the committee 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 is to serve as plan 
                sponsor (referred to in section 3(16)(B)),
                    ``(C) incorporates the requirements of section 707, 
                and
                    ``(D) provides that, effective upon the granting of 
                an exemption under this part to the arrangement (except 
                in the case of a provider health network)--
                            ``(i) all participating employers must be 
                        members or affiliated members 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 affiliated member of the sponsor, 
                        participating employers may also include such 
                        employer, and
                            ``(ii) all individuals thereafter 
                        commencing coverage under the arrangement must 
                        be--
                                    ``(I) active or retired owners 
                                (including self-employed individuals), 
                                officers, directors, or employees of, 
                                or partners in, participating 
                                employers, or
                                    ``(II) the beneficiaries of 
                                individuals described in subclause (I).
            ``(4) Contribution rates.--The contribution rates referred 
        to in subsection (a)(3)(F)(ii) are adequate.
            ``(5) Variation in contributions.--The contribution rates 
        established under the arrangement do not vary except by age, 
        geographic area, family class, and benefit design in a manner 
        provided under such regulations as the Secretary may prescribe 
        consistent with subparagraphs (A), (B), (C), and (D) of section 
        834(a)(1).
            ``(6) Regulatory requirements.--Such other requirements as 
        the Secretary may prescribe by regulation as necessary to carry 
        out the purposes of this part.
    ``(c) Treatment of Party Seeking Exemption Where Party is Subject 
to Disqualification.--
            ``(1) In general.--In the case of any application for an 
        exemption under this part with respect to a multiple employer 
        welfare arrangement, if the Secretary determines that the 
        sponsor of the arrangement or any other person associated with 
        the arrangement is subject to disqualification under paragraph 
        (2), the Secretary may deny the exemption with respect to such 
        arrangement.
            ``(2) Disqualification.--A person is subject to 
        disqualification under this paragraph if such person--
                    ``(A) has intentionally made a material 
                misstatement in the application for exemption;
                    ``(B) has obtained or attempted to obtain an 
                exemption under this part through misrepresentation or 
                fraud;
                    ``(C) has misappropriated or converted to such 
                person's own use, or improperly withheld, money held 
                under a plan or any multiple employer welfare 
                arrangement;
                    ``(D) is prohibited (or would be prohibited if the 
                arrangement were a plan) from serving in any capacity 
                in connection with the arrangement under section 411,
                    ``(E) has failed to appear without reasonable cause 
                or excuse in response to a subpoena, examination, 
                warrant, or any other order lawfully issued by the 
                Secretary compelling such response,
                    ``(F) has previously been subject to a 
                determination under this part resulting in the denial, 
                suspension, or revocation of an exemption under this 
                part on similar grounds, or
                    ``(G) has otherwise violated any provision of this 
                title with respect to a matter which the Secretary 
                determines of sufficient consequence to merit 
                disqualification for purposes of this part.
    ``(d) Franchise Networks.--In the case of a multiple employer 
welfare arrangement established and maintained by a franchisor for a 
franchise network consisting of its franchisees, such franchisor shall 
be treated as the sponsor referred to in the preceding provisions of 
this section, such network shall be treated as an association referred 
to in such provisions, and each franchisee shall be treated as a member 
(of the association and the sponsor) referred to in such provisions, if 
all participating employers are such franchisees and the requirements 
of subsection (b)(1) with respect to a sponsor are met with respect to 
the network.
    ``(e) Certain Collectively Bargained Arrangements.--In applying the 
preceding provisions of this section in the case of a multiple employer 
welfare arrangement in existence on February 1, 1995, which would be 
described in section 3(40)(A)(i) but solely for the failure to meet the 
requirements of section 3(40)(C)(ii)--
            ``(1) paragraphs (1) and (2) of subsection (b) and 
        subparagraphs (A), (B), and (D) of paragraph (3) of subsection 
        (b) shall be disregarded, and
            ``(2) the joint board of trustees shall be considered the 
        operating committee of the arrangement.
    ``(f) Certain Arrangements Not Meeting Single Employer 
Requirement.--
            ``(1) In general.--In any case in which the majority of the 
        employees covered under a multiple employer welfare arrangement 
        are employees of a single employer (within the meaning of 
        clauses (i) and (ii) of section 3(40)(B)), if all other 
        employees covered under the arrangement are employed by 
        employers who are related to such single employer, subsection 
        (b)(3)(D) shall be disregarded.
            ``(2) Related employers.--For purposes of paragraph (1), 
        employers are `related' if there is among all such employers a 
        common ownership interest or a substantial commonality of 
        business operations based on common suppliers or customers.

``SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO EXEMPTED MULTIPLE 
              EMPLOYER HEALTH PLANS.

    ``(a) Notice of Material Changes.--In the case of any exempted 
multiple employer health plan, descriptions of material changes in any 
information which was required to be submitted with the application for 
the exemption granted under this part shall be filed in such form and 
manner as shall be prescribed in regulations of the Secretary. The 
Secretary 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 exemption.
    ``(b) Reporting Requirements.--Under regulations of the Secretary, 
the requirements of sections 102, 103, and 104 shall apply with respect 
to any multiple employer welfare arrangement which is or has been an 
exempted multiple employer health plan in the same manner and to the 
same extent as such requirements apply to employee welfare benefit 
plans, irrespective of whether such exemption continues in effect. The 
annual report required under section 103 for any plan year in the case 
of any such multiple employer welfare arrangement shall also include 
information described in section 704(a)(3)(F) with respect to the plan 
year and, notwithstanding section 104(a)(1)(A), shall be filed not 
later than 90 days after the close of the plan year.
    ``(c) Engagement of Qualified Actuary.--The operating committee of 
each multiple employer welfare arrangement which is or has been an 
exempted multiple employer health plan shall engage, on behalf of all 
covered individuals, 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 arrangement and to reasonable expectations, 
        and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the arrangement.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.
    ``(d) Filing Notice of Exemption With States.--An exemption granted 
to a multiple employer welfare arrangement under this part shall not be 
effective unless written notice of such exemption is filed with the 
State insurance commissioner of each State in which at least 5 percent 
of the individuals covered under the arrangement are located. For 
purposes of this paragraph, 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. The Secretary may by 
regulation provide in specified cases for the application of the 
preceding sentence with lesser percentages in lieu of such 5 percent 
amount.

``SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY ARRANGEMENTS 
              PROVIDING MEDICAL CARE.

    ``(a) In General.--A multiple employer welfare arrangement 
providing benefits consisting of medical care (referred to in section 
3(42)) shall issue to each participating employer--
            ``(1) a document equivalent to the summary plan description 
        required of plans under part 1,
            ``(2) information describing the contribution rates 
        applicable to participating employers, and
            ``(3) a statement indicating--
                    ``(A) that the arrangement is not a licensed 
                insurer under the laws of any State,
                    ``(B) whether coverage under the arrangement is 
                fully insured,
                    ``(C) if coverage under the arrangement is not 
                fully insured, (i) whether the arrangement is (or has 
                ceased to be) an exempted multiple employer health 
                plan, and (ii) if such an arrangement is an exempted 
                multiple employer health plan, that such arrangement is 
                treated as an employee welfare benefit plan under this 
                title.
    ``(b) Time for Disclosure.--Such information shall be issued to 
employers within such reasonable period of time before becoming 
participating employers as may be prescribed in regulations of the 
Secretary.

``SEC. 707. MAINTENANCE OF RESERVES.

    ``(a) In General.--Each multiple employer welfare arrangement which 
is or has been an exempted multiple employer health plan and under 
which coverage is not fully insured shall establish and maintain 
reserves, consisting of--
            ``(1) a reserve sufficient for unearned contributions,
            ``(2) a reserve sufficient for payment of claims reported 
        and not yet paid and claims incurred but not yet reported, and 
        for expected administrative costs with respect to such claims, 
        and
            ``(3) a reserve, in an amount recommended by the qualified 
        actuary, for any other obligations of the arrangement.
    ``(b) Minimum Amount for Certain Reserves.--The total of the 
reserves described in subsection (a)(2) shall not be less than an 
amount equal to the greater of (1) 25 percent of expected incurred 
claims and expenses for the plan year, or (2) $100,000.
    ``(c) Required Margin.--In determining the amounts of reserves 
required under this section in connection with any multiple employer 
welfare arrangement, the qualified actuary shall include a margin for 
error and other fluctuations taking into account the specific 
circumstances of such arrangement.
    ``(d) Additional Requirements.--The Secretary may provide such 
additional requirements relating to reserves and excess/stop loss 
coverage as the Secretary considers appropriate. Such requirements may 
be provided, by regulation or otherwise, with respect to any 
arrangement or any class of arrangements.
    ``(e) Adjustments for Excess/Stop Loss Coverage.--The Secretary may 
provide for adjustments to the levels of reserves otherwise required 
under subsections (a) and (b) with respect to any arrangement or class 
of arrangements to take into account excess/stop loss coverage provided 
with respect to such arrangement or arrangements.
    ``(f) Alternative Means of Compliance.--The Secretary may permit an 
arrangement (including a provider health network) to substitute, for 
all or part of the reserves required under subsection (a), such 
security, guarantee, or other financial arrangement as the Secretary 
determines to be adequate to enable the arrangement to fully meet all 
its financial obligations on a timely basis.

``SEC. 708. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

    ``Except as provided in section 709(b), a multiple employer welfare 
arrangement with respect to which there is or has been in effect an 
exemption granted under this part may terminate only if the operating 
committee--
            ``(1) not less than 60 days before the proposed termination 
        date, provides to the participants and beneficiaries a written 
        notice of intent to terminate stating that such termination is 
        intended and the proposed termination date,
            ``(2) develops a plan for winding up the affairs of the 
        arrangement in connection with such termination in a manner 
        which will result in timely payment of all benefits for which 
        the arrangement is obligated, and
            ``(3) submits such plan in writing to the Secretary.
Actions required under this paragraph shall be taken in such form and 
manner as may be prescribed in regulations of the Secretary.

``SEC. 709. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

    ``(a) Actions To Avoid Depletion of Reserves.--A multiple employer 
welfare arrangement with respect to which there is or has been in 
effect an exemption granted under this part shall continue to meet the 
requirements of section 707, irrespective of whether such exemption 
continues in effect. The operating committee of such arrangement shall 
determine quarterly whether the requirements of section 707 are met. In 
any case in which the committee determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the Secretary makes such a determination and so notifies the 
committee, the committee shall immediately notify the qualified actuary 
engaged by the arrangement, and such actuary shall, not later than the 
end of the next following month, make such recommendations to the 
committee for corrective action as the actuary determines necessary to 
ensure compliance with section 707. Not later than 10 days after 
receiving from the actuary recommendations for corrective actions, the 
committee shall notify the Secretary (in such form and manner as the 
Secretary may prescribe by regulation) of such recommendations of the 
actuary for corrective action, together with a description of the 
actions (if any) that the committee has taken or plans to take in 
response to such recommendations. The committee shall thereafter report 
to the Secretary, in such form and frequency as the Secretary may 
specify to the committee, regarding corrective action taken by the 
committee until the requirements of section 707 are met.
    ``(b) Mandatory Termination.--In any case in which--
            ``(1) the Secretary has been notified under subsection (a) 
        of a failure of a multiple employer welfare arrangement which 
        is or has been an exempted multiple employer health plan to 
        meet the requirements of section 707 and has not been notified 
        by the operating committee of the arrangement that corrective 
        action has restored compliance with such requirements, and
            ``(2) the Secretary determines that the continuing failure 
        to meet the requirements of section 707 can be reasonably 
        expected to result in a continuing failure to pay benefits for 
        which the arrangement is obligated,
the operating committee of the arrangement shall, at the direction of 
the Secretary, terminate the arrangement and, in the course of the 
termination, take such actions as the Secretary may require as 
necessary to ensure that the affairs of the arrangement will be, to the 
maximum extent possible, wound up in a manner which will result in 
timely payment of all benefits for which the arrangement is obligated.

``SEC. 710. EXPIRATION, SUSPENSION, OR REVOCATION OF EXEMPTION.

    ``(a) Expiration and Renewal of Exemption.--An exemption granted to 
a multiple employer welfare arrangement under this part shall expire 3 
years after the date on which the exemption is granted. An exemption 
which has expired may be renewed by means of application for an 
exemption in accordance with section 704.
    ``(b) Suspension or Revocation of Exemption by Secretary.--The 
Secretary may suspend or revoke an exemption granted to a multiple 
employer welfare arrangement under this part--
            ``(1) for any cause that may serve as the basis for the 
        denial of an initial application for such an exemption under 
        section 704, or
            ``(2) if the Secretary finds that--
                    ``(A) the arrangement, or the sponsor thereof, in 
                the transaction of business while under the exemption, 
                has used fraudulent, coercive, or dishonest practices, 
                or has demonstrated incompetence, untrustworthiness, or 
                financial irresponsibility,
                    ``(B) the arrangement, or the sponsor thereof, is 
                using such methods or practices in the conduct of its 
                operations, so as to render its further transaction of 
                operations hazardous or injurious to participating 
                employers, or covered individuals,
                    ``(C) the arrangement, or the sponsor thereof, has 
                refused to be examined in accordance with this part or 
                to produce its accounts, records, and files for 
                examination in accordance with this part, or
                    ``(D) any of the officers of the arrangement, or 
                the sponsor thereof, has refused to give information 
                with respect to the affairs of the arrangement or the 
                sponsor or to perform any other legal obligation 
                relating to such an examination when required by the 
                Secretary in accordance with this part.
Any such suspension or revocation under this subsection shall be 
effective only upon a final decision of the Secretary made after notice 
and opportunity for a hearing is provided in accordance with section 
710.
    ``(c) Suspension or Revocation of Exemption Under Court 
Proceedings.--An exemption granted to a multiple employer welfare 
arrangement under this part may be suspended or revoked by a court of 
competent jurisdiction in an action by the Secretary brought under 
paragraph (2), (5), or (6) of section 502(a), except that the 
suspension or revocation under this subsection shall be effective only 
upon notification of the Secretary of such suspension or revocation.
    ``(d) Notification of Participating Employers.--All participating 
employers in a multiple employer welfare arrangement shall be notified 
of the expiration, suspension, or revocation of an exemption granted to 
such arrangement under this part, by such persons and in such form and 
manner as shall be prescribed in regulations of the Secretary, not 
later than 20 days after such expiration or after receipt of notice of 
a final decision requiring such suspension or revocation.
    ``(e) Publication of Expirations, Suspensions, and Revocations.--
The Secretary shall publish all expirations of, and all final decisions 
to suspend or revoke, exemptions granted under this part.

``SEC. 711. REVIEW OF ACTIONS OF THE SECRETARY.

    ``(a) In General.--Any decision by the Secretary which involves the 
denial of an application by a multiple employer welfare arrangement for 
an exemption under this part or the suspension or revocation of such an 
exemption shall contain a statement of the specific reason or reasons 
supporting the Secretary's action, including reference to the specific 
terms of the exemption and the statutory provision or provisions 
relevant to the determination.
    ``(b) Denials of Applications.--In the case of the denial of an 
application for an exemption under this part, the Secretary shall send 
a copy of the decision to the applicant by certified or registered mail 
at the address specified in the records of the Secretary. Such decision 
shall constitute the final decision of the Secretary unless the 
arrangement, or any party that would be prejudiced by the decision, 
files a written appeal of the denial within 30 days after the mailing 
of such decision. The Secretary may affirm, modify, or reverse the 
initial decision. The decision on appeal shall become final upon the 
mailing of a copy by certified or registered mail to the arrangement or 
party that filed the appeal.
    ``(c) Suspensions or Revocations of Exemption.--In the case of the 
suspension or revocation of an exemption granted under this part, the 
Secretary shall send a copy of the decision to the arrangement by 
certified or registered mail at its address, as specified in the 
records of the Secretary. Upon the request of the arrangement, or any 
party that would be prejudiced by the suspension or revocation, filed 
within 15 days of the mailing of the Secretary's decision, the 
Secretary shall schedule a hearing on such decision by written notice, 
sent by certified or registered mail to the arrangement or party 
requesting such hearing. Such notice shall set forth--
            ``(1) a specific date and time for the hearing, which shall 
        be within the 10-day period commencing 20 days after the date 
        of the mailing of the notice, and
            ``(2) a specific place for the hearing, which shall be in 
        the District of Columbia or in the State and county thereof (or 
        parish or other similar political subdivision thereof) in which 
        is located the arrangement's principal place of business.
The decision as affirmed or modified in such hearing shall constitute 
the final decision of the Secretary, unless such decision is reversed 
in such hearing.''.
    (b) Conforming Amendment to Definition of Plan Sponsor.--Section 
3(16)(B) of such Act (29 U.S.C. 1002(16)(B)) is amended by adding at 
the end the following new sentence: ``Such term also includes the 
sponsor (as defined in section 701(5)) of a multiple employer welfare 
arrangement which is or has been an exempted multiple employer health 
plan (as defined in section 701(9)).''.
    (c) Alternative Means of Distribution of Summary Plan 
Descriptions.--Section 110 of such Act (29 U.S.C. 1030) is amended by 
adding at the end the following new subsection:
    ``(c) The Secretary shall prescribe, as an alternative method for 
distributing summary plan descriptions in order to meet the 
requirements of section 104(b)(1) in the case of multiple employer 
welfare arrangements providing benefits consisting of medical care 
referred to in section 3(42), a means of distribution of such 
descriptions by participating employers.''.
    (d) 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 608 the following new items:

                ``Part 7--Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Exempted multiple employer health plans relieved of certain 
                            restrictions on preemption of State law and 
                            treated as employee welfare benefit plans.
``Sec. 703. Exemption procedure.
``Sec. 704. Eligibility requirements.
``Sec. 705. Additional requirements applicable to exempted multiple 
                            employer health plans.
``Sec. 706. Disclosure to participating employers by arrangements 
                            providing medical care.
``Sec. 707. Maintenance of reserves.
``Sec. 708. Notice requirements for voluntary termination.
``Sec. 709. Corrective actions and mandatory termination.
``Sec. 710. Expiration, suspension, or revocation of exemption.
``Sec. 711. Review of actions of the Secretary.''

SEC. 1203. CLARIFICATION OF SCOPE OF PREEMPTION RULES.

    (a) In General.--Section 514(b)(6)(A)(ii) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)(6)(A)(ii)) is 
amended by inserting ``, but only, in the case of an arrangement which 
provides medical care referred to in section 3(42) and with respect to 
which an exemption under part 7 is not in effect,'' before ``to the 
extent not inconsistent with the preceding sections of this title''.
    (b) Cross-Reference.--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) For additional rules relating to exemption from subparagraph 
(A)(ii) of multiple employer welfare arrangements providing medical 
care, see part 7.''.
    (c) Conforming Amendment.--Section 514 of such Act is amended by 
adding at the end the following new subsection:
    ``(e) For additional provisions relating to preemption of State law 
with respect to group health plans, see sections 702, 823, 837, 841, 
842, and 843.''.

SEC. 1204. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting ``for any plan year of any 
        such plan, or any fiscal year of any such other arrangement,'' 
        after ``single employer'', and by inserting ``during such year 
        or at any time during the preceding 1-year period'' after 
``common control'';
            (2) in clause (iii)--
                    (A) by striking ``common control shall not be based 
                on an interest of less than 25 percent'' and inserting 
                ``an interest of greater than 25 percent may not be 
                required as the minimum interest necessary for common 
                control'';
                    (B) by striking ``similar to'' and inserting 
                ``consistent and coextensive with''; and
                    (C) by striking ``and'' at the end;
            (3) by redesignating clause (iv) as clause (v); and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in determining, after the application of clause (i), 
        whether benefits are provided to employees of two or more 
        employers, the arrangement shall be treated as having only 1 
        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 85 percent of the 
        aggregate number of all individuals who are employees or former 
        employees of participating employers and who are covered under 
        the arrangement.''.

SEC. 1205. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY BARGAINED 
              ARRANGEMENTS.

    (a) In General.--Section 3(40)(A)(i) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1002(40)(A)(i)) is amended to 
read as follows:
            ``(i) under or pursuant to one or more collective 
        bargaining agreements,''.
    (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 1002(40)) is 
amended by adding at the end the following new subparagraphs:
                    ``(C) Clause (i) of subparagraph (A) shall apply in 
                the case of any plan or other arrangement only if--
                            ``(i) the plan or other arrangement, and 
                        the employee organization or any other entity 
                        sponsoring the plan or other arrangement, do 
                        not--
                                    ``(I) utilize the services of any 
                                licensed insurance agent or broker for 
                                soliciting or enrolling employers or 
                                individuals as participating employers 
                                or covered individuals under the plan 
                                or other arrangement, or
                                    ``(II) pay a commission or any 
                                other type of compensation to a person 
                                that is related either to the volume or 
                                number of employers or individuals 
                                solicited or enrolled as participating 
                                employers or covered individuals under 
                                the plan or other arrangement, or to 
                                the dollar amount or size of the 
                                contributions made by participating 
                                employers or covered individuals to the 
                                plan or other arrangement,
                            ``(ii) covered individuals under the plan 
                        or other arrangement who are neither--
                                    ``(I) employed within a bargaining 
                                unit covered by any of the collective 
                                bargaining agreements with a 
                                participating employer (nor covered on 
                                the basis of an individual's employment 
                                in such a bargaining unit), nor
                                    ``(II) present or former employees 
                                of the sponsoring employee 
                                organization, of an employer who is or 
                                was a party to any of the collective 
                                bargaining agreements, or of the plan 
                                or other arrangement or a related plan 
                                or arrangement (nor covered on the 
                                basis of such present or former 
                                employment),
                        comprise not more than the lesser of 15 percent 
                        of the total number of present and former 
                        employees enrolled under the plan or other 
                        arrangement, or the total number of such 
                        covered individuals under the plan or other 
                        arrangement as of the date of the enactment of 
                        the ERISA Targeted Health Insurance Reform Act 
                        of 1995,
                            ``(iii) the plan or other arrangement does 
                        not provide benefits to individuals (other than 
                        individuals described in clause (ii)(II)) who 
                        work outside the standard metropolitan 
                        statistical area in which the sponsoring 
                        employee organization represents employees (or 
                        to individuals (other than individuals 
                        described in clause (ii)(II)) on the basis of 
                        such work by others), except that in the case 
                        of a sponsoring employee organization that 
                        represents employees who work outside of any 
                        standard metropolitan statistical area, this 
                        clause shall be applied by reference to the 
                        State in which the sponsoring organization 
                        represents employees,
                            ``(iv) the employee organization or other 
                        entity sponsoring the plan or other arrangement 
                        certifies to the Secretary each year, in a form 
                        and manner which shall be prescribed in 
                        regulations of the Secretary--
                                    ``(I) that the plan or other 
                                arrangement meets the requirements of 
                                clauses (i), (ii), and (iii), and
                                    ``(II) if, for any year, 10 percent 
                                or more of the covered individuals 
                                under the plan are individuals not 
                                described in subclause (I) or (II) of 
                                clause (ii), the total number of 
                                covered individuals and the total 
                                number of covered individuals not so 
                                described,
                            ``(v) in the case of a plan or other 
                        arrangement which is not fully insured (as 
                        defined in section 701(8))--
                                    ``(I) the plan or arrangement is a 
                                multiemployer plan, and
                                    ``(II) the requirements of clause 
                                (B) of the proviso to clause (5) of 
                                section 305(c) of the National Labor 
                                Relations Act (29 U.S.C. 186(c)) are 
                                met with respect to such plan or other 
                                arrangement, and
                            ``(vi) in the case of a plan or other 
                        arrangement not in effect as of the date of the 
                        enactment of the ERISA Targeted Health 
                        Insurance Reform Act of 1995, the employee 
                        organization or other entity sponsoring the 
                        plan or arrangement--
                                    ``(I) has been in existence for at 
                                least 3 years or is affiliated with 
                                another employee organization which has 
                                been in existence for at least 3 years, 
                                or
                                    ``(II) demonstrates to the 
                                satisfaction of the Secretary that the 
                                requirements of clauses (i) through (v) 
                                are met with respect to the plan or 
                                other arrangement.
                    ``(D)(i) Clause (i) of subparagraph (A) shall not 
                apply to a plan or other arrangement that is 
                established or maintained pursuant to one or more 
                collective bargaining agreements which the National 
                Labor Relations Boards determines to have been 
                negotiated or otherwise agreed to in a manner or 
                through conduct which violates section 8(a)(2) of the 
                National Labor Relations Act (29 U.S.C. 158(a)(2)).
                    ``(ii)(I) Whenever a State insurance commissioner 
                has reason to believe that this subparagraph is 
                applicable to part or all of a plan or other 
                arrangement, the State insurance commissioner may file 
                a petition with the National Labor Relations Board for 
                a determination under clause (i), along with sworn 
                written testimony supporting the petition.
                    ``(II) The Board shall give any such petition 
                priority over all other petitions and cases, other than 
                other petitions under subclause (I) or cases given 
                priority under section 10 of the National Labor 
                Relations Act (29 U.S.C. 160).
                    ``(III) The Board shall determine, upon the 
                petition and any response, whether, on the facts before 
                it, the plan or other arrangement was negotiated, 
                created, or otherwise agreed to in a manner or through 
                conduct which violates section 8(a)(2) of the National 
                Labor Relations Act (29 U.S.C. 158(a)(2)). Such 
                determination shall constitute a final determination 
                for purposes of this subparagraph and shall be binding 
                in all Federal or State actions with respect to the 
                status of the plan or other arrangement under this 
                subparagraph.
                    ``(IV) A person aggrieved by the determination of 
                the Board under subclause (III) may obtain review of 
                the determination in any United States court of appeals 
                in the circuit in which the collective bargaining at 
                issue occurred. Commencement of proceedings under this 
                subclause shall not, unless specifically ordered by the 
                court, operate as a stay of any State administrative or 
                judicial action or proceeding related to the status of 
                the plan or other arrangement, except that in no case 
                may the court stay, before the completion of the 
                review, an order which prohibits the enrollment of new 
                individuals into coverage under a plan or 
                arrangement.''.
    (c) Conforming Amendments to Definitions of Participant and 
Beneficiary.--Section 3(7) of such Act (29 U.S.C. 1002(7)) is amended 
by adding at the end the following new sentence: ``Such term includes 
an individual who is a covered individual described in paragraph 
(40)(C)(ii).''.

SEC. 1206. EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

    (a) Employee Leasing Healthcare Arrangement Defined.--Section 3 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) is 
amended by adding at the end the following new paragraph:
    ``(43) Employee Leasing Healthcare Arrangement.--
            ``(A) In general.--Subject to subparagraph (B), the term 
        `employee leasing healthcare arrangement' means any labor 
        leasing arrangement, staff leasing arrangement, extended 
        employee staffing or supply arrangement, or other arrangement 
        under which--
                    ``(i) one business or other entity (hereinafter in 
                this paragraph referred to as the `lessee'), under a 
                lease or other arrangement entered into with any other 
                business or other entity (hereinafter in this paragraph 
                referred to as the `lessor'), receives from the lessor 
                the services of individuals to be performed under such 
                lease or other arrangement, and
                    ``(ii) benefits consisting of medical care referred 
                to in section 3(42) are provided to such individuals or 
                such individuals and their dependents as participants 
                and beneficiaries.
            ``(B) Exception.--Such term does not include an arrangement 
        described in subparagraph (A) if, under such arrangement, the 
        lessor retains, both legally and in fact, a complete right of 
        direction and control within the scope of employment over the 
        individuals whose services are supplied under such lease or 
        other arrangement, and such individuals perform a specified 
        function for the lessee which is separate and divisible from 
        the primary business or operations of the lessee.''.
    (b) Treatment of Employee Leasing Healthcare Arrangements as 
Multiple Employer Welfare Arrangements.--Section 3(40) of such Act (29 
U.S.C. 1002(40)) (as amended by the preceding provisions of this title) 
is further amended by adding at the end the following new subparagraph:
    ``(E)(i) Except as provided in clause (ii), the term `multiple 
employer welfare arrangement' includes any employee leasing healthcare 
arrangement.
    ``(ii) An arrangement which would not, by reason of subparagraph 
(B), be treated as a multiple employer welfare arrangement but for this 
subparagraph shall not be treated as a multiple employer welfare 
arrangement for any plan year solely because such arrangement is an 
employee leasing healthcare arrangement if, as of the commencement of 
such plan year--
            ``(I) there are at least 1,000 individuals covered under 
        the arrangement, and
            ``(II) under the lease or other arrangement referred to in 
        paragraph (43)(A)(i), the number of individuals covered under 
        the arrangement whose services are received by the lessee from 
        the lessor constitute less than 15 percent of the total number 
        of individuals covered under the arrangement.''.
    (c) Special Rules for Employee Leasing Healthcare Arrangements.--
            (1) In general.--Part 7 of subtitle B of title I of such 
        Act (as added by the preceding provisions of this Act) is 
        amended by adding at the end the following new section:

``SEC. 712. SPECIAL RULES FOR EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

    ``(a) In General.--The requirements of paragraphs (1), (2), and (3) 
of section 704(b) shall be treated as satisfied in the case of a 
multiple employer welfare arrangement that is an employee leasing 
healthcare arrangement if the application for exemption includes 
information which the Secretary determines to be complete and accurate 
and sufficient to demonstrate that the following requirements are met 
with respect to the arrangement:
            ``(1) 3-year tenure.--The lessor has been in operation for 
        not less than 3 years.
            ``(2) Solicitation restrictions.--Employee leasing services 
        provided under the arrangement are not solicited, advertised, 
        or marketed through licensed insurance agents or brokers acting 
        in such capacity.
            ``(3) Creation of employment relationship.--
                    ``(A) Disclosure statement.--Written notice is 
                provided to each applicant for employment subject to 
                coverage under the arrangement, at the time of 
                application for employment and before commencing 
                coverage under the arrangement, stating that the 
                employer is the lessor under the arrangement.
                    ``(B) Informed consent.--Each such applicant signs 
                a written statement consenting to the employment 
                relationship with the lessor.
                    ``(C) Informed recruitment of lessee's employees.--
                In any case in which the lessor offers employment to an 
                employee of a lessee under the arrangement, the lessor 
                informs each employee in writing that his or her 
                acceptance of employment with the lessor is voluntary 
                and that refusal of such offer will not be deemed to be 
                resignation from or abandonment of current employment.
            ``(4) Requisite employer-employee relationship under 
        arrangement.--Under the employer-employee relationship with the 
        employees of the lessor--
                    ``(A) the lessor retains the ultimate authority to 
                hire, terminate, and reassign such employees,
                    ``(B) the lessor is responsible for the payment of 
                wages, payroll-related taxes, and employee benefits, 
                without regard to payment by the lessee to the lessor 
                for its services,
                    ``(C) the lessor maintains the right of direction 
                and control over its employees, except to the extent 
                that the lessee is responsible for supervision of the 
                work performed consistent with the lessee's 
                responsibility for its product or service, and
                    ``(D) in accordance with section 301(a) of the 
                Labor Management Relations Act, 1947 (29 U.S.C. 
                185(a)), the lessor retains in the absence of an 
                applicable collective bargaining agreement, the right 
                to enter into arbitration and to decide employee 
                grievances, and
                    ``(E) no owner, officer, or director of, or partner 
                in, a lessee is an employee of the lessor, and not more 
                than 10 percent of the individuals covered under the 
                arrangement consist of owners, officers, or directors 
                of, or partners in, such a lessee (or any combination 
                thereof).
    ``(b) Definitions.--For purposes of this section--
            ``(1) Lessor.--The term `lessor' means the business or 
        other entity from which services of individuals are obtained 
        under an employee leasing healthcare arrangement.
            ``(2) Lessee.--The term `lessee' means a business or other 
        entity which receives the services of individuals provided 
        under an employee leasing healthcare arrangement.''.
            (2) Clerical amendment.--The table of contents in section 1 
        of such Act (as amended by the preceding provisions of this 
        title) is further amended by inserting after the item relating 
        to section 711 the following new item:

``Sec. 712. Employee leasing healthcare arrangements.''.

SEC. 1207. ENFORCEMENT PROVISIONS RELATING TO MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS AND EMPLOYEE LEASING HEALTHCARE 
              ARRANGEMENTS.

    (a) Enforcement of Filing Requirements.--Section 502 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132) is 
amended--
            (1) in subsection (a)(6), by striking ``subsection (c)(2) 
        or (i) or (l)'' and inserting ``paragraph (2) or (4) of 
        subsection (c) or subsection (i) or (l)''; and
            (2) by adding at the end of subsection (c) the following 
        new paragraph:
    ``(4) The Secretary may assess a civil penalty against any person 
of up to $1,000 a day from the date of such person's failure or refusal 
to file the information required to be filed with the Secretary under 
section 101(e).''.
    (b) Actions by States in Federal Court.--Section 502(a) of such Act 
(29 U.S.C. 1132(a)) is amended--
            (1) in paragraph (5), by striking ``or'' at the end;
            (2) in paragraph (6), by striking the period and inserting 
        ``, or''; and
            (3) by adding at the end the following:
            ``(7) by a State official having authority under the law of 
        such State to enforce the laws of such State regulating 
        insurance, to enjoin any act or practice which violates any 
        provision of part 7 which such State has the power to enforce 
        under part 7.''.
    (c) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of such Act (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, either willfully or with willful blindness, 
falsely represents, to any employee, any employee's beneficiary, any 
employer, the Secretary, or any State, an 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 exempted multiple employer welfare 
        arrangement (as defined in section 701(10)),
            ``(2) being an employee leasing healthcare arrangement 
        under an exemption granted under part 7,
            ``(3) having been established or maintained under or 
        pursuant to a collective bargaining agreement, or
            ``(4) being a plan or arrangement with respect to which the 
        requirements of section 3(40)(C) are met,
shall, upon conviction, be imprisoned not more than five years, be 
fined under title 18, United States Code, or both.''.
    (d) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(m)(1) Subject to paragraph (2), upon application by the 
Secretary showing the operation, promotion, or marketing of a multiple 
employer welfare arrangement providing benefits consisting of medical 
care referred to in section 3(42) that--
            ``(A) is not licensed, registered, or otherwise approved 
        under the insurance laws of the States in which the arrangement 
        offers or provides benefits, or
            ``(B) is not operating in accordance with the terms of an 
        exemption granted by the Secretary under part 7,
a district court of the United States shall enter an order requiring 
that the arrangement cease activities.
    ``(2) Paragraph (1) shall not apply in the case of a multiple 
employer welfare arrangement if the arrangement shows that--
            ``(A) coverage under it is fully insured, within the 
        meaning of section 701(8), and
            ``(B) with respect to each such State, it is operating in 
        accordance with applicable State insurance laws that are not 
        superseded under section 514.
    ``(3) The court may grant such additional equitable relief, 
including any relief available under this title, as it deems necessary 
to protect the interests of the public and of persons having claims for 
benefits against the arrangement.''.
    (e) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended by adding at the end (after and below 
paragraph (2)) the following new sentence: ``The terms of each multiple 
employer welfare arrangement to which this section applies and which 
provides benefits consisting of medical care referred to in section 
3(42) shall require the operating committee or the named fiduciary (as 
applicable) to ensure that the requirements of this section are met in 
connection with claims filed under the arrangement.''.

SEC. 1208. FILING REQUIREMENTS FOR MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS OFFERING HEALTH BENEFITS.

    Section 101 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1021) is amended--
            (1) by redesignating subsection (e) as subsection (f); and
            (2) by inserting after subsection (d) the following new 
        subsection:
    ``(e)(1) Each multiple employer welfare arrangement shall file with 
the Secretary a registration statement described in paragraph (2) 
within 60 days before commencing operations (in the case of an 
arrangement commencing operations on or after January 1, 1998) and no 
later than February 15 of each year (in the case of an arrangement in 
operation since the beginning of such year), unless, as of the date by 
which such filing otherwise must be made, such arrangement provides no 
benefits consisting of medical care referred to in section 3(42).
    ``(2) Each registration statement--
            ``(A) shall be filed in such form, and contain such 
        information concerning the multiple employer welfare 
        arrangement and any persons involved in its operation 
        (including whether coverage under the arrangement is fully 
        insured), as shall be provided in regulations which shall be 
        prescribed by the Secretary, and
            ``(B) if coverage under the arrangement is not fully 
        insured, shall contain a certification that copies of such 
        registration statement have been transmitted by certified mail 
        to--
                    ``(i) in the case of an arrangement which is an 
                exempted multiple employer health plan (as defined in 
                section 701(10)), the State insurance commissioner of 
                the domicile State of such arrangement, or
                    ``(ii) in the case of an arrangement which is not 
                an exempted multiple employer health plan, the State 
                insurance commissioner of each State in which the 
                arrangement is located.
    ``(3) The person or persons responsible for filing the annual 
registration statement are--
            ``(A) the trustee or trustees so designated by the terms of 
        the instrument under which the multiple employer welfare 
        arrangement is established or maintained, or
            ``(B) in the case of a multiple employer welfare 
        arrangement for which the trustee or trustees cannot be 
        identified, or upon the failure of the trustee or trustees of 
        an arrangement to file, the person or persons actually 
        responsible for the acquisition, disposition, control, or 
        management of the cash or property of the arrangement, 
        irrespective of whether such acquisition, disposition, control, 
        or management is exercised directly by such person or persons 
        or through an agent designated by such person or persons.
    ``(4) Any agreement entered into under section 506(c) with a State 
as the primary domicile State with respect to any multiple employer 
welfare arrangement shall provide for simultaneous filings of reports 
required under this subsection with the Secretary and with the State 
insurance commissioner of such State.''.

SEC. 1209. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(c) Responsibility With Respect to Multiple Employer Welfare 
Arrangements.--
            ``(1) State enforcement.--
                    ``(A) Agreements with states.--A State may enter 
                into an agreement with the Secretary for delegation to 
                the State of some or all of the Secretary's authority 
                under sections 502 and 504 to enforce the provisions of 
                part 7 applicable to multiple employer welfare 
                arrangements which are or have been exempted multiple 
                employer health plans (as defined in section 701(10)). 
                The Secretary shall enter into the agreement if the 
                Secretary determines that the delegation provided for 
                therein would not result in a lower level or quality of 
                enforcement of the provisions of this title.
                    ``(B) Delegations.--Any department, agency, or 
                instrumentality of a State to which authority is 
                delegated pursuant to an agreement entered into under 
                this paragraph may, if authorized under State law and 
                to the extent consistent with such agreement, exercise 
                the powers of the Secretary under this title which 
                relate to such authority.
                    ``(C) Concurrent authority of the secretary.--If 
                the Secretary delegates authority to a State in an 
                agreement entered into under subparagraph (A), the 
                Secretary may continue to exercise such authority 
                concurrently with the State.
                    ``(D) Recognition of primary domicile state.--In 
                entering into any agreement with a State under 
                subparagraph (A), the Secretary shall ensure that, as a 
                result of such agreement and all other agreements 
                entered into under subparagraph (A), only one State 
                will be recognized, with respect to any particular 
                multiple employer welfare arrangement, as the primary 
                domicile State to which authority has been delegated 
                pursuant to such agreements.
            ``(2) Assistance to states.--The Secretary shall--
                    ``(A) provide enforcement assistance to the States 
                with respect to multiple employer welfare arrangements, 
                including, but not limited to, coordinating Federal and 
                State efforts through the establishment of cooperative 
                agreements with appropriate State agencies under which 
                the Pension and Welfare Benefits Administration keeps 
                the States informed of the status of its cases and 
                makes available to the States information obtained by 
                it,
                    ``(B) provide continuing technical assistance to 
                the States with respect to issues involving multiple 
                employer welfare arrangements and this Act,
                    ``(C) assist the States in obtaining from the 
                Office of Regulations and Interpretations timely and 
                complete responses to requests for advisory opinions on 
                issues described in subparagraph (B), and
                    ``(D) distribute copies of all advisory opinions 
                described in subparagraph (C) to the State insurance 
                commissioner of each State.''.

SEC. 1210. CLARIFICATION OF TREATMENT OF EMPLOYER HEALTH COALITIONS AND 
              HEALTH MAINTENANCE ORGANIZATIONS.

    (a) In General.--Section 3(40) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002(40)) is amended--
            (1) in subparagraph (A), by striking ``or'' at the end of 
        clause (ii), by striking the period at the end of clause (iii) 
        and inserting a comma, and by adding at the end the following 
        new clauses:
            ``(iv) by an employer health coalition that--
                    ``(I) is not an arrangement excluded under clause 
                (i), and
                    ``(II) otherwise would not be, but for the 
                agreements described in subparagraph (B)(vi), a 
                multiple employer welfare arrangement (as defined in 
                the preceding provisions of this subparagraph), or
            ``(v) as a health maintenance organization (as defined in 
        section 800(a)(10)(B)).'';
        and
            (2) in subparagraph (B), by striking ``and'' at the end of 
        clause (iv)(II), by striking the period at the end of clause 
        (v) and inserting ``, and'', and by adding at the end the 
        following new clause:
            ``(vi) the term `employer health coalition' means any 
        arrangement under which--
                    ``(I) two or more sponsors of group health plans, 
                group health plans, or both enter into one or more 
                agreements with one or more providers of medical care 
                (referred to in paragraph (42)), and
                    ``(II) such agreements provide that such providers 
                make available to such group health plans the items and 
                services which constitute the medical care provided as 
                benefits under such plans to participants and 
                beneficiaries under such plans.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on the date of the enactment of this Act.

SEC. 1211. SINGLE ANNUAL FILING FOR ALL PARTICIPATING EMPLOYERS.

    (a) In General.--Section 110 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1030), as amended by section 1202(c) of 
this subtitle, is amended by adding at the end the following new 
subsection:
    ``(d) The Secretary shall prescribe by regulation or otherwise an 
alternative method providing for the filing of a single annual report 
(as referred to in section 104(a)(1)(A)) with respect to all employers 
who are participating employers under a multiple employer welfare 
arrangement under which all coverage consists of medical care (referred 
to in section 3(42)) and is fully insured (as defined in section 
701(8)).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of the enactment of this Act. The Secretary of 
Labor shall prescribe the alternative method referred to in section 
110(d) of the Employee Retirement Income Security Act of 1974, as added 
by such amendment, within 90 days after the date of the enactment of 
this Act.

SEC. 1212. EFFECTIVE DATE; TRANSITIONAL RULES.

    (a) Effective Date.--The amendments made by this subtitle (other 
than sections 1210 and 1211) shall take effect January 1, 1998, except 
that the Secretary of Labor may issue regulations before such date 
under such amendments. The Secretary shall issue all regulations 
necessary to carry out the amendments made by this subtitle before the 
effective date thereof.
    (b) Transitional Rules.--If the sponsor of a multiple employer 
welfare arrangement which, as of January 1, 1998, provides benefits 
consisting of medical care referred to in section 3(42) of the Employee 
Retirement Income Security Act of 1974 (added by section 1301(b) of 
this Act) files with the Secretary of Labor an application for an 
exemption under part 7 of subtitle B of title I of such Act within 180 
days after such date and the Secretary has not, as of 90 days after 
receipt of such application, found such application to be materially 
deficient, section 514(b)(6)(A) of such Act (29 U.S.C. 1144(b)(6)(A)) 
shall not apply with respect to such arrangement during the 18-month 
period following such date. If the Secretary determines, at any time 
after the date of the enactment of this Act, that any such exclusion 
from coverage under the provisions of such section 514(b)(6)(A) of such 
Act of a multiple employer welfare arrangement would be detrimental to 
the interests of individuals covered under such arrangement, such 
exclusion shall cease as of the date of the determination. Any 
determination made by the Secretary under this subsection shall be in 
the Secretary's sole discretion.

Subtitle D--Remedies and Enforcement With Respect to Group Health Plans

SEC. 1301. CLAIMS PROCEDURE FOR GROUP HEALTH PLANS.

                                                    Title I, Subtitle D

    (a) In General.--Section 503 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1133) is amended--
            (1) by inserting ``(a) In General.--'' after ``Sec. 503.''; 
        and
            (2) by adding at the end the following new subsection:
    ``(b) Special Rules for Group Health Plans.--
            ``(1) In general.--In addition to meeting the requirements 
        of subsection (a), every group health plan shall afford a 
        reasonable opportunity to any participant or beneficiary, whose 
        request for a preauthorization, an emergency preauthorization, 
        a utilization review determination, or an emergency utilization 
        review determination has been denied, for a full and fair 
        review by the appropriate fiduciary of the decision denying the 
        request.
            ``(2) Time limits for deciding claims.--
                    ``(A) Initial decisions.--A group health plan shall 
                issue an initial approval or denial of any claim for 
                benefits under the terms of the plan not later than 45 
                days after its filing completion date. Failure to 
                approve or deny such a claim within such 45-day period 
                shall be treated as a denial of the claim.
                    ``(B) Reviews of initial decisions.--Every review 
                by a fiduciary required under paragraph (1) of an 
                initial denial under subparagraph (A) shall be 
                completed not later than 45 days after the review 
                filing date. Failure to issue a decision affirming, 
                reversing, or modifying the initial denial shall be 
                treated as a final decision denying the claim.
            ``(3) Time limit for deciding requests for 
        preauthorization.--
                    ``(A) General rule.--Except as provided in 
                subparagraph (B)--
                            ``(i) Initial decisions.--If a request for 
                        preauthorization is required under the terms of 
                        a group health plan, the plan shall approve or 
                        deny any such request not later than 45 days 
                        after its filing completion date. Failure to 
                        approve or deny such a request within such 45-
                        day period shall be treated as a denial of the 
                        request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 45 days after the 
                        review filing date. Failure to issue a decision 
                        affirming, reversing, or modifying the initial 
                        denial within such 45-day period shall be 
                        treated as a final decision denying the 
                        request.
                    ``(B) Requests for emergency preauthorization.--
                            ``(i) Initial decisions.--In any case in 
                        which a request for preauthorization required 
                        under the terms of a group health plan is a 
                        request for emergency preauthorization, the 
                        plan shall approve or deny any such request not 
                        later than 10 days after its filing completion 
                        date (48 hours after such date in cases 
                        involving emergency medical care). Failure to 
                        approve or deny such a request within such 10-
                        day period (or 48-hour period) shall be treated 
                        as a denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 10 days after the 
                        review filing date (48 hours after such date in 
                        cases involving emergency medical care). 
                        Failure to issue a decision affirming, 
                        reversing, or modifying the initial denial 
                        within such 10-day period (or 48-hour period) 
                        shall be treated as a final decision denying 
                        the request.
            ``(4) Time limit for deciding requests for utilization 
        review determinations.--
                    ``(A) General rule.--Except as provided in 
                subparagraph (B)--
                            ``(i) Initial decisions.--If a request for 
                        a utilization review determination is required 
                        under the terms of a group health plan, the 
                        plan shall approve or deny any such request not 
                        later than 45 days after its filing completion 
                        date. Failure to approve or deny such a request 
                        within such 45-day period shall be treated as a 
                        denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 45 days after the 
                        review filing date. Failure to issue a decision 
                        affirming, reversing, or modifying the initial 
                        denial within such 45-day period shall be 
                        treated as a final decision denying the 
                        request.
                    ``(B) Requests for emergency utilization review 
                determinations.--
                            ``(i) Initial decisions.--In any case in 
                        which a request for a utilization review 
                        determination required under the terms of a 
                        group health plan is a request for an emergency 
                        utilization review determination, the plan 
                        shall approve or deny any such request not 
                        later than 10 days after its filing completion 
                        date (48 hours after such date in cases 
                        involving emergency medical care). Failure to 
                        approve or deny such a request within such 10-
                        day period (or 48-hour period) shall be treated 
                        as a denial of the request.
                            ``(ii) Reviews of initial decisions.--Every 
                        review by a fiduciary required under paragraph 
                        (1) of an initial denial under clause (i) shall 
                        be completed not later than 10 days after the 
                        review filing date (48 hours after such date in 
                        cases involving emergency medical care). 
                        Failure to issue a decision affirming, 
                        reversing, or modifying the initial denial 
                        within such 10-day period (or 48-hour period) 
                        shall be treated as a final decision denying 
                        the request.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Claim for benefits.--The term `claim for 
                benefits' means a request for payment by a group health 
                plan of benefits made by or on behalf of a participant 
                or beneficiary after the expense for such benefits has 
                been incurred.
                    ``(B) Utilization review determination.--The term 
                `utilization review determination' means a 
                determination under a group health plan solely that 
                proposed medical care meets the plan's requirements for 
                medical appropriateness or necessity. Unless otherwise 
                expressly provided under the terms of the plan, any 
                such determination shall not by itself constitute a 
                guarantee that benefits under the plan will be 
                provided.
                    ``(C) Preauthorization.--The term 
                `preauthorization' means a determination under a group 
                health plan that proposed medical care meets, under the 
                facts and circumstances at the time of the 
                determination, the plan's terms and conditions of 
                coverage. Such a determination shall, except in the 
                case of a claim involving fraud or misrepresentation, 
                constitute a guarantee that benefits under the plan 
                will be provided.
                    ``(D) Request for preauthor- ization.--The term 
                `request for preauthorization' means a request for 
                preauthorization by a group health plan of medical care 
                made by or on behalf of a participant or beneficiary 
                before the expense for such medical care has been 
                incurred.
                    ``(E) Request for emergency preauthorization.--The 
                term `request for emergency preauthorization' means a 
                request for preauthorization by a group health plan in 
                any case in which the medical care for which the 
                expense is to be incurred constitutes urgent medical 
                care or emergency medical care.
                    ``(F) Request for utilization review 
                determination.--The term `request for a utilization 
                review determination' means a request by or on behalf 
                of a participant or beneficiary, made before an expense 
                for medical care has been incurred, for a utilization 
                review determination by a plan.
                    ``(G) Request for emergency utilization review 
                determination.--The term `request for an emergency 
                utilization review determination' means a request for a 
                utilization review determination in any case in which 
                the medical care to be incurred constitutes urgent 
                medical care or emergency medical care.
                    ``(H) Urgent medical care.--The term `urgent 
                medical care' means medical care in any case in which a 
                physician with appropriate expertise has certified in 
                writing that failure to provide the participant or 
                beneficiary with such medical care within 45 days will 
                result in either--
                            ``(i) the death of the participant or 
                        beneficiary within 120 days, or
                            ``(ii) the immediate, serious, and 
                        irreversible deterioration of the health of the 
                        participant or beneficiary within 120 days 
                        which will significantly increase the 
                        reasonable likelihood of death of the 
                        participant or beneficiary.
                    ``(I) Emergency medical care.--The term `emergency 
                medical care' means medical care in any case in which a 
                physician with appropriate expertise has certified in 
                writing--
                            ``(i) that failure to immediately provide 
                        the care to the participant or beneficiary 
                        could reasonably be expected to result in--
                                    ``(I) placing the health of such 
                                participant or beneficiary (or, with 
                                respect to such a participant or 
                                beneficiary who is a pregnant woman, 
                                the health of the woman or her unborn 
                                child) in serious jeopardy,
                                    ``(II) serious impairment to bodily 
                                functions, or
                                    ``(III) serious dysfunction of any 
                                bodily organ or part,
                        or
                            ``(ii) that immediate provision of the care 
                        is necessary because the participant or 
                        beneficiary has made or is at serious risk of 
                        making an attempt to harm himself or herself or 
                        another individual.
                    ``(J) Filing completion date.--The term `filing 
                completion date' means, in connection with a group 
                health plan, the date as of which the plan is in 
                receipt of all information reasonably required to make 
                an initial decision to approve or deny a claim for 
                benefits, a request for preauthorization, a request for 
                emergency preauthorization, a request for a utilization 
                review determination, or a request for an emergency 
                utilization review determination.
                    ``(K) Review filing date.--The term `review filing 
                date' means, in connection with a group health plan, 
                the date as of which the appropriate fiduciary is in 
                receipt of all information reasonably required to make 
                a decision upon a full and fair review of the denial, 
                in whole or in part, of a claim for benefits, a request 
                for preauthorization, a request for emergency 
                preauthorization, a request for a utilization review 
                determination or a request for an emergency utilization 
                review determination.
                    ``(L) Appropriate fiduciary.--The term `appropriate 
                fiduciary' means, with respect to any determination 
                under a group health plan, the fiduciary designated 
                under section 404(e) to make such determination.
                    ``(M) Medical care.--The term `medical care' means 
                medical care referred to in section 3(42)(A).''.
    (b) Definition of Group Health Plan.--
            (1) In general.--Section 3 of such Act (29 U.S.C. 1002) is 
        amended by adding at the end the following new paragraph:
    ``(42)(A) The term `group health plan' means an employee welfare 
benefit plan providing medical care (as defined under regulations that 
are consistent and coextensive with section 213(d) of the Internal 
Revenue Code of 1986, as of January 1, 1995) to participants or 
beneficiaries directly or through insurance, reimbursement, or 
otherwise.
    ``(B) Any plan, fund, or program which would be a group health plan 
(as defined in subparagraph (A)), if the term `employer' in paragraph 
(1) included a partnership and the term `participant' in paragraph (1) 
included a partner in connection with such partnership--
            ``(i) shall be treated as a group health plan, and
            ``(ii) shall be treated as an employee welfare benefit 
        plan.''.
            (2) Inclusion of eligible employee in definition of 
        participant.--Section 3(7) of such Act (29 U.S.C. 1002(7)) is 
        amended--
                    (A) by inserting ``(A)'' after ``(7)''; and
                    (B) by adding at the end the following new 
                paragraph:
    ``(B) In the case of a group health plan, such term includes an 
eligible employee (as defined in section 800(a)(3))''.
            (3) Conforming amendment.--Section 607 of such Act (29 
        U.S.C. 1167) is amended by striking paragraph (1).
    (c) Designation of Appropriate Fiduciaries.--Section 404 of such 
Act (29 U.S.C. 1104) is amended by adding at the end the following new 
subsection:
    ``(e) One or more fiduciaries shall be designated under each group 
health plan, in accordance with procedures specified under the plan, 
for making determinations under the plan to which section 503(b) 
applies.''.
    (d) Standard of Review Unaffected.--Nothing in this subtitle (or 
the amendments made thereby) shall be construed to affect the standard 
of review applicable under the provisions amended by this subtitle.

SEC. 1302. AVAILABLE COURT REMEDIES.

    (a) In General.--Section 502(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132) is amended by adding at the end 
the following new paragraphs:
    ``(5) In any action commenced under subsection (a) by a participant 
or beneficiary with respect to a group health plan in which the 
plaintiff alleges that a person, in the capacity of a fiduciary and in 
violation of the terms of the plan or this title, has taken an action 
resulting in a denial of a claim for benefits in violation of the terms 
of the plan, or has failed to take an action for which such person is 
responsible under the plan and which is necessary under the plan for 
approval of a claim for benefits required under the terms of the plan, 
upon finding in favor of the plaintiff, the court shall cause to be 
served on the defendant an order requiring the defendant--
            ``(A) to cease and desist from the alleged action or 
        failure to act,
            ``(B) to remedy any such violation of the terms of the plan 
        by such person (including any such failure by such person to 
        take action necessary for approval of a claim for benefits as 
        required under the terms of the plan), and to otherwise comply 
        with the terms of the plan and the applicable requirements of 
        this title,
            ``(C) to pay to the plaintiff prejudgment interest on the 
        claims for benefits at issue in the complaint which were unpaid 
        in violation of the terms of the plan, and
            ``(D) to pay to the plaintiff a reasonable attorney's fee 
        and other reasonable costs relating to the prosecution of the 
        action on the charges on which the plaintiff prevails.
The remedies provided under this paragraph shall be in addition to 
remedies otherwise provided under this section and shall apply only 
after exhaustion of the remedies available under section 503.
    ``(6)(A) The Secretary may assess a civil penalty against the plan 
administrator of, or the appropriate fiduciary (as defined in section 
503(b)(5)(L)) of, one or more group health plans for any pattern or 
practice thereof of repeated failures to provide benefits under the 
terms of the plan or plans without any reasonable basis or repeated 
violations thereby of the requirements of section 503 with respect to 
such plan or plans. Such penalty shall be payable only upon proof by 
clear and convincing evidence of such pattern or practice.
    ``(B) Such penalty shall be in an amount not to exceed the lesser 
of--
            ``(i) 5 percent of the aggregate value of claims shown by 
        the Secretary to have been denied, or unlawfully delayed in 
        violation of section 503, under such pattern or practice, or
            ``(ii) $100,000.
    ``(C) The plan administrator or the appropriate fiduciary of any 
group health plan or plans who has engaged in any such pattern or 
practice with respect to such plans, upon the petition of the 
Secretary, may be removed by the court from that position, and from any 
other involvement, with respect to such plan or plans, for a period of 
not less than 7 years.
    ``(D) For purposes of this paragraph, the phrase `without any 
reasonable basis' means, in connection with any denial of claims for 
benefits under a group health plan, that such denial does not have any 
reasonable basis, support, or justification under--
            ``(i) the facts regarding such claim of which the plan 
        administrator or the appropriate fiduciary was in receipt at 
        the time the claim was denied, and
            ``(ii) the terms of the plan.''.
    (b) Conforming Amendment.--Section 502(a)(6) of such Act (29 U.S.C. 
1132(a)(6)) is amended by inserting ``or (c)(6)'' after ``(c)(2)''.

SEC. 1303. EFFECTIVE DATE.

    The amendments made by this subtitle shall take effect January 1, 
1998, except that the Secretary of Labor may issue regulations before 
such date under such amendments. The Secretary shall issue all 
regulations necessary to carry out the amendments made by this subtitle 
before the effective date thereof.

Subtitle E--Funding and Plan Termination Requirements for Self-Insured 
                           Group Health Plans

SEC. 1401. SPECIAL RULES FOR SELF-INSURED GROUP HEALTH PLANS.

                                                    Title I, Subtitle E

    Part 6 of subtitle B of title I of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1161 et seq.) is amended by adding at 
the end the following new sections:

``SEC. 610. SPECIAL FUNDING RULES FOR SELF-INSURED GROUP HEALTH PLANS.

    ``(a) Self-Insured Group Health Plans.--For purposes of this 
section, the term `self-insured group health plan' means a group health 
plan under which some or all coverage is not fully insured (within the 
meaning of section 701(8)), other than a multiple employer health plan 
(to which the funding requirements of section 707 apply).
    ``(b) Funding Requirements for Self-Insured Group Health Plans of 
Small Employers.--
            ``(1) In general.--The Secretary shall prescribe by 
        regulation provisions described in paragraph (2) applicable to 
        self-insured group health plans which are not multiemployer 
        plans and which offer coverage only with respect to employees 
        of small employers (as defined in section 831(9)), for the 
        purpose of promoting adequate funding of such plans.
            ``(2) Requirements.--
                    ``(A) General rule.--Except as provided in 
                subparagraph (B), the provisions described in paragraph 
                (1) shall require the group health plan to establish 
                and maintain reserves in an amount at least equal to 
                the greater of--
                            ``(i) a reserve sufficient for payment of 
                        claims reported and not yet paid and claims 
                        incurred but not yet reported, and for expected 
                        administrative costs with respect to such 
                        claims, or
                            ``(ii) 25 percent of the amount of expected 
                        incurred claims and expenses for the plan year.
                    ``(B) Exception.--The Secretary may in such 
                regulations permit a group health plan to substitute, 
                for all or part of the reserves required under 
                subparagraph (A), such security, guarantee, or other 
                financial arrangement as the Secretary determines to be 
                adequate to enable the plan to fully meet all its 
                financial obligations on a timely basis.
            ``(3) Criteria for compliance.--The criteria that the 
        Secretary shall take into account in determining compliance 
        with the requirements described in paragraph (2) shall include:
                    ``(A) the size of the employer involved;
                    ``(B) the benefit package provided under the plan;
                    ``(C) whether the coverage provided under the plan 
                is in the form of a fee-for-service arrangement, a 
                health maintenance organization, or any other type of 
                coverage;
                    ``(D) the extent to which excess/stop loss coverage 
                (within the meaning of section 701(3)) is maintained 
                for the plan and the extent to which such coverage is 
                maintained for the plan sponsor; and
                    ``(E) the nature of any security, guarantee, or 
                other financial arrangement described in paragraph 
                (2)(B) obtained for the plan.
    ``(c) Funding Requirements for Plans Sponsored by Large Employers 
When Plan Sponsors Are in Distress.--
            ``(1) Notification of plan distress.--Except as provided in 
        paragraph (5), in the case of any self-insured group health 
        plan (other than a multiemployer plan) which offers coverage 
        with respect to employees of any employer who is not a small 
        employer (as defined in section 831(4)), if--
                    ``(A) a named fiduciary of such plan determines 
                that there is reason to believe that the plan is in 
                distress, or
                    ``(B) the Secretary makes such a determination and 
                the Secretary notifies the named fiduciary of such 
                determination,
        the named fiduciary shall immediately notify a qualified 
        actuary, who shall be engaged by the plan on behalf of plan 
        participants and beneficiaries, of such determination and such 
        actuary shall, not later than the end of the next following 
        month, provide to each named fiduciary under the plan all 
        information necessary to enable the fiduciary or fiduciaries to 
        develop and implement a strategy for plan maintenance in 
        accordance with paragraph (3). Not later than 10 days after the 
        named fiduciary receives such information from the actuary, the 
        named fiduciary shall notify the participants and beneficiaries 
        and the Secretary (in such form and manner as the Secretary may 
        prescribe by regulation) of the determination that the plan had 
        entered into distress and the reasons for such determination 
        (including the information provided by the actuary pursuant to 
        this paragraph), and shall include in such notification a 
        description of the strategy for plan maintenance for the plan 
        that the plan administrator or any named fiduciary has 
        implemented or plans to implement.
            ``(2) Distress.--
                    ``(A) In general.--For purposes of this subsection, 
                a plan is in `distress' if each person who is a plan 
                sponsor of the plan or a substantial member of the 
                controlled group of the plan sponsor of the plan 
                satisfies the distress criteria of clause (i), (ii), or 
                (iii) of subparagraph (B).
                    ``(B) Satisfaction of distress criteria.--
                            ``(i) Inability to pay debts.--A person 
                        satisfies the distress criteria of this clause 
                        if such person breaches a material payment 
                        covenant, under any debt instrument, that is 
                        not cured within any grace period applicable 
                        under such covenant.
                            ``(ii) Liquidation in bankruptcy or 
                        insolvency proceedings.--A person satisfies the 
                        distress criteria of this clause if--
                                    ``(I) such person has filed, or has 
                                had filed against such person, a 
                                petition seeking liquidation in a case 
                                under title 11, United States Code, or 
                                under any similar law of a State or 
                                political subdivision of a State (or a 
                                case described in subparagraph (A) 
                                filed by or against such person has 
                                been converted to a case in which 
                                liquidation is sought), and
                                    ``(II) such case has not been 
                                dismissed.
                            ``(iii) Reorganization in bankruptcy or 
                        insolvency proceedings.--A person satisfies the 
                        distress criteria of this clause if--
                                    ``(I) such person has filed, or has 
                                had filed against such person, a 
                                petition seeking reorganization in a 
                                case under title 11, United States 
                                Code, or under any similar law of a 
                                State or political subdivision of a 
                                State (or a case described in 
                                subparagraph (B) filed by or against 
                                such person has been converted to such 
                                a case in which reorganization is 
                                sought), and
                                    ``(II) such case has not been 
                                dismissed.
            ``(3) Strategy for plan maintenance.--Any strategy for plan 
        maintenance referred to in paragraph (1) shall include such 
        measures as are necessary (as determined in accordance with 
        such regulations as the Secretary may prescribe) to ensure 
        that, as of the end of a reasonable period of time (determined 
        in accordance with such regulations as the Secretary may 
        prescribe)--
                    ``(A) there is no unreasonable risk of failure by 
                the plan to timely provide benefits under the terms of 
                the plan, and
                    ``(B) if the plan were to then terminate, the 
                affairs of the plan could be wound up in a manner which 
                would result in timely provision of all benefits for 
                which the plan is then obligated.
            ``(4) Qualified actuary.--The requirements of subsection 
        (c) of section 705 shall apply with respect to self-insured 
        group health plans for purposes of this subsection in the same 
        manner and to the same extent as such subsection applies to 
        multiple employer health plans under section 705.
            ``(5) Election of reserve requirements in lieu of distress 
        rules.--In any case in which the plan sponsor of a self-insured 
        group health plan referred to in paragraph (1) makes an 
        election (in such form and manner as shall be prescribed in 
        regulations of the Secretary) to have subsection (b) apply with 
        respect to the plan--
                    ``(A) the preceding paragraphs of this subsection 
                shall not apply with respect to such plan in connection 
                with any distress, and
                    ``(B) subsection (b) shall apply with respect to 
                such plan for the period of such election in the same 
                manner and to the same extent as subsection (b) applies 
                to plans described in subsection (b)(1).
        Any such election may be made before, on, or after the date on 
        which the plan enters into such distress and shall apply for a 
        reasonable period of time (specified in accordance with such 
        regulations of the Secretary) in relation to such date.
    ``(d) Funding Requirements for Overburdened Multiemployer Plans.--
            ``(1) In general.--If a self-insured group health plan 
        which is a multiemployer plan is overburdened for a plan year, 
        then the plan sponsor shall, within a reasonable period of time 
        after the beginning of such plan year, amend the plan, in 
        accordance with such regulations as the Secretary may 
        prescribe, to increase required employer contributions, 
        decrease benefits, or both, to the extent necessary to ensure 
        that the plan is not overburdened for the subsequent plan year.
            ``(2) Definitions.--
                    ``(A) Overburdened plan.--For purposes of this 
                section, a self-insured group health plan which is a 
                multiemployer plan is `overburdened' for a plan year if 
                the overburden ratio for the plan for the plan year 
                exceeds 10 percent.
                    ``(B) Overburden ratio.--For purposes of 
                subparagraph (A), the term `overburden ratio' for a 
                plan for a plan year is a fraction--
                            ``(i) the numerator of which is the excess 
                        of--
                                    ``(I) the sum of expected claims 
                                reported and not yet paid as of the end 
                                of the preceding plan year, expected 
                                claims incurred but not yet reported as 
                                of the end of the preceding plan year, 
                                expected administrative costs with 
                                respect to such claims, and the amount 
                                of expected incurred claims for the 
                                plan year, over
                                    ``(II) the sum of the value of plan 
                                assets of the plan as of the end of the 
                                preceding plan year, expected earnings 
                                on plan assets for the plan year (if 
                                any), and the amount of expected 
                                contributions to the plan for the plan 
                                year, and
                            ``(ii) the denominator of which is the 
                        amount of expected contributions to the plan 
                        for the plan year.
    ``(e) Corrective Actions To Avoid Depletion of Reserves for Single-
Employer Plans.--
            ``(1) Annual review.--In any case in which the requirements 
        of subsection (b) are applicable to a self-insured group health 
        plan, each named fiduciary of such plan shall conduct an annual 
        review of the plan for the purpose of determining whether the 
        requirements of subsection (b) are met with respect to such 
        plan.
            ``(2) Notification of failure to meet reserves and required 
        recommendations.--In any case in which a named fiduciary of 
        such self-insured group health plan determines that there is 
        reason to believe that there is or will be a failure to meet 
        the applicable requirements referred to in paragraph (1) with 
        respect to such plan, or the Secretary makes such a 
        determination and so notifies the named fiduciary, the named 
        fiduciary shall immediately notify a qualified actuary who 
        shall be engaged by the plan on behalf of plan participants and 
        beneficiaries, and such actuary shall, not later than the end 
        of the next following month, provide to each named fiduciary 
        under the plan all information necessary to enable the 
        fiduciary or fiduciaries to take such corrective action as may 
        be necessary to ensure compliance with such requirements.
            ``(3) Corrective action.--Not later than 10 days after the 
        named fiduciary receives information from the actuary pursuant 
        to paragraph (2), the named fiduciary shall notify the 
        participants and beneficiaries and the Secretary (in such form 
        and manner as the Secretary may prescribe by regulation) of the 
        nature and extent of the failure referred to in paragraph (2) 
        and the information provided by the actuary pursuant to 
        paragraph (2), and shall include in such notification a 
        description of the actions (if any) that the plan administrator 
        or any named fiduciary has taken or plans to take to ensure 
        compliance with the applicable requirements referred to in 
        paragraph (1). The named fiduciary shall thereafter report to 
        the Secretary, in such form and frequency as the Secretary may 
        specify, regarding corrective action taken by the administrator 
        or named fiduciary until the applicable requirements referred 
        to in paragraph (1) are met.
            ``(4) Qualified actuary.--The requirements of subsection 
        (c) of section 705 shall apply with respect to self-insured 
        group health plans for purposes of this subsection in the same 
        manner and to the same extent as such subsection applies to 
        multiple employer health plans under section 705.
    ``(f) Corrective Actions To Avoid Depletion of Reserves for 
Multiemployer Plans.--
            ``(1) Annual review.--Not later than 3 months after the 
        beginning of each plan year, the plan sponsor of each self-
        insured group health plan which is a multiemployer plan shall 
        conduct a review of the plan for the purpose of determining 
        whether the plan will be overburdened for such plan year.
            ``(2) Notification that plan will be overburdened and 
        required recommendations.--In any case in which the plan 
        sponsor of such multiemployer plan determines that there is 
        reason to believe that the plan will be overburdened for a plan 
        year, or the Secretary makes such a determination and so 
        notifies the plan sponsor, the plan sponsor shall immediately 
        notify a qualified actuary who shall be engaged by the plan on 
        behalf of plan participants and beneficiaries, and such actuary 
        shall, not later than the end of the next following month, 
        provide to the plan sponsor all information necessary to enable 
        the plan sponsor to take such corrective action as may be 
        necessary to ensure that the plan will not be overburdened for 
        such plan year.
            ``(3) Corrective action.--Not later than 10 days after the 
        plan sponsor receives information from the actuary pursuant to 
        paragraph (2), the plan sponsor shall notify the participants 
        and beneficiaries and the Secretary (in such form and manner as 
        the Secretary may prescribe by regulation) that there is reason 
        to believe that the plan will be overburdened for the plan year 
        and of the extent to which the plan will be overburdened for 
        the plan year and the information provided by the actuary 
        pursuant to paragraph (2), and shall include in such 
        notification a description of the actions (if any) that the 
        plan sponsor has taken or plans to take in response to ensure 
        that the plan will not be overburdened for such plan year. The 
        plan sponsor shall thereafter report to the Secretary, in such 
        form and frequency as the Secretary may specify, regarding 
        corrective action taken by the plan sponsor.
            ``(4) Qualified actuary.--The requirements of subsection 
        (c) of section 705 shall apply with respect to self-insured 
        group health plans which are multiemployer plans for purposes 
        of this subsection in the same manner and to the same extent as 
        such subsection applies to multiple employer health plans under 
        section 705.

``SEC. 611. TERMINATION OF SELF-INSURED GROUP HEALTH PLANS.

    ``In the case of any self-insured group health plan (as defined in 
section 610(a))--
            ``(1) Notice requirements for voluntary termination.--
        Except as provided in paragraph (2), the plan may terminate 
        only if, not less than 60 days before the proposed termination 
        date, the plan administrator 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) Mandatory termination.--In any case in which--
                    ``(A) the Secretary has been notified under section 
                610(e)(3) of a failure of the plan to meet the 
                applicable requirements referred to in section 
                610(e)(1) or has been notified under section 610(f)(3) 
                that the plan will be overburdened and has not been 
                notified by the administrator or the plan within the 
                time prescribed by the Secretary that corrective action 
                has restored compliance with such requirements or 
                prevented the plan from being overburdened for the plan 
                year, and
                    ``(B) the Secretary directs the plan administrator 
                of the plan to terminate the plan,
        the administrator of the plan shall terminate the plan. In the 
        course of the termination, the administrator shall take such 
        actions as the Secretary may require 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.''.
    (b) Clerical Amendment.--The table of contents in section 1 of such 
Act is amended by inserting after the item relating to section 609 the 
following new items:

``Sec. 610. Special rules for self-insured group health plans.
``Sec. 611. Termination of self-insured group health plans.''.

SEC. 1402. EFFECTIVE DATE.

    Subsections (b), (c), (d), and (e) of section 610 of the Employee 
Retirement Income Security Act of 1974 (added by section 1401) shall 
apply with respect to plan years beginning on or after January 1, 1998. 
Section 611 of such Act shall apply with respect to plan terminations 
occurring on or after such date.

                     Subtitle F--General Provisions

SEC. 1501. RULE OF CONSTRUCTION.

                                                    Title I, Subtitle F

    Nothing in this Act or any amendment made thereby may be construed 
to require the coverage of any specific procedure, treatment, or 
service as part of a group health plan or health insurance coverage 
under this Act or through regulation.
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