[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1062 Introduced in Senate (IS)]

  1st Session
                                S. 1062

    To amend the Employee Retirement Income Security Act of 1974 to 
increase the purchasing power of individuals and employers, to protect 
employees whose health benefits are provided through multiple employer 
  welfare arrangements, to provide increased security of health care 
                   benefits, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                July 21 (legislative day, July 10), 1995

Mr. Jeffords (for himself and Mr. Nunn) introduced the following bill; 
 which was read twice and referred to the Committee on Labor and Human 
                               Resources

_______________________________________________________________________

                                 A BILL


 
    To amend the Employee Retirement Income Security Act of 1974 to 
increase the purchasing power of individuals and employers, to protect 
employees whose health benefits are provided through multiple employer 
  welfare arrangements, to provide increased security of health care 
                   benefits, 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; AMENDMENT OF ERISA.

    (a) Short Title.--This Act may be cited as the ``Employer Group 
Purchasing Reform Act of 1995''.
    (b) Amendment of ERISA.--Except as otherwise expressly provided, 
whenever in this Act an amendment is expressed in terms of an amendment 
to a section or other provision, such reference shall be treated as a 
reference to a section or other provision of the Employee Retirement 
Income Security Act of 1974.

SEC. 2. DEFINITIONS AND SPECIAL RULES.

    Section 3(1) (29 U.S.C. 1002(1)) is amended--
            (1) by striking ``(1) The terms'' and inserting ``(1)(A) 
        The terms''; and
            (2) by adding at the end thereof the following new 
        subparagraphs:
            ``(B)(i) The term `employee benefit group health plan' 
        means any plan or arrangement (whether fully insured or self-
        funded) that provides, or pays for health benefits (such as 
        physician and hospital benefits). Such term does not include 
        any of the following, or a combination thereof:
                    ``(I) Coverage only for accidental death, 
                dismemberment, dental, or vision.
                    ``(II) Coverage providing wages or payments in lieu 
                of wages for any period during which the employee is 
                absent from work on account of sickness or injury.
                    ``(III) A medicare supplemental policy (as defined 
                in section 1882(g)(1) of the Social Security Act).
                    ``(IV) Coverage issued as a supplement to liability 
                insurance.
                    ``(V) Workers' compensation or similar insurance.
                    ``(VI) Automobile medical payment insurance.
                    ``(VII) A long-term care insurance policy, 
                including a nursing home fixed indemnity policy.
                    ``(VIII) Any plan or arrangement not described in 
                any preceding subparagraph that provides for benefit 
                payments, on a periodic basis, for a specified disease 
                or illness or period of hospitalization without regard 
                to the costs incurred or services rendered during the 
                period to which the payments relate.
                    ``(IX) Coverage provided through a State risk pool, 
                uncompensated care pool, or similar subsidized program.
                    ``(X) Such other plan or arrangement as the 
                Secretary determines is not an employee benefit group 
                health plan.
            ``(ii) The term `health insurer' means an entity which is 
        licensed and authorized under State law to offer health service 
        insurance or health indemnity insurance contracts, including 
        the following:
                    ``(I) a licensed insurance company;
                    ``(II) a licensed prepaid network plan (such as a 
                preferred provider organization or health maintenance 
                organization); or
                    ``(III) any other entity (other than an entity 
                described in paragraph (12)) (providing a plan of 
                health insurance or health benefits) with respect to 
                which State insurance laws are not preempted under 
                section 514 of this Act.
            ``(iii) The term `prepaid network plan' means an employee 
        benefit group health plan that arranges for the financing and 
        delivery of health care services to persons covered under such 
        health plan, in whole or in part, through arrangements with 
        providers to furnish such health care services.
            ``(C) The term `health plan purchasing coalition' has the 
        meaning given such term in section 802(a).
            ``(D) The term `fully insured health plan' means an 
        arrangement under which all benefits (with the exception of co-
        payments and deductibles) are provided in an amount that is 
        guaranteed under a policy of insurance issued by a health 
        insurer.
            ``(E) The term `self-funded health plan' means an employee 
        benefit group health plan under which the employer or plan 
        sponsor retains substantial risk for providing benefits under 
        the plan as provided by regulations promulgated by the 
        Secretary of Labor.''.

              TITLE I--EMPLOYEE GROUP HEALTH PLAN SECURITY

SEC. 101. EMPLOYEE BENEFIT GROUP HEALTH PLAN NONDISCRIMINATION 
              REQUIREMENTS.

    Section 510 (29 U.S.C. 1140) is amended--
            (1) by striking ``510. It shall'' and inserting ``510. (a) 
        In General.--It shall''; and
            (2) by adding at the end thereof the following new 
        subsections:
    ``(b) Employee Benefit Group Health Plan Nondiscrimination 
Requirements.--
            ``(1) In general.--An employee benefit group health plan 
        (whether fully insured or self-funded) in force on or after the 
        date of enactment of this subsection, may not deny any coverage 
        or establish eligibility, continuation, enrollment, or 
        contribution requirements for participants or beneficiaries 
        based on health status, medical condition, claims experience, 
        receipt of health care, medical history, anticipated need for 
        health care, evidence of insurability, or disability of a 
        participant or beneficiary.
            ``(2) Health promotion exception.--Nothing in this 
        subsection shall prevent an employee benefit group health plan 
        from establishing discounts for participation in programs of 
        health promotion or disease prevention.
            ``(3) Limitation on preexisting condition exclusions and 
        lifetime limits.--
                    ``(A) In general.--An employee benefit group health 
                plan (fully insured or self-funded) may impose a 
                limitation or exclusion of benefits relating to 
                treatment of a condition based on the fact that the 
                condition preexisted the effective date of the plan 
                with respect to a participant or beneficiary only if--
                            ``(i) the condition was diagnosed or 
                        treated during the 6-month period prior to the 
                        date of enrollment in the health plan;
                            ``(ii) the limitation or exclusion extends 
                        for a period of not more than 12 months after 
                        the date of enrollment in the health plan;
                            ``(iii) the limitation or exclusion does 
                        not apply to an individual who, within 30 days 
                        of the date of birth of the individual, was 
                        covered under the plan; and
                            ``(iv) the limitation or exclusion does not 
                        apply to a pregnancy existing on the effective 
                        date of coverage.
    ``(c) Crediting of Qualifying Previous Coverage.--
            ``(1) In general.--An employee benefit group health plan 
        (whether fully insured or self-funded) shall provide that if a 
        participant or beneficiary is in a period of previous 
        qualifying coverage as of the date of enrollment under such 
        plan, any period of exclusion or limitation of coverage with 
        respect to a preexisting condition shall be reduced by 1 month 
        for each month in which the participant or beneficiary was in 
        the period of previous qualifying coverage.
            ``(2) Discharge of duty.--The duty of an employer or plan 
        sponsor to verify previous qualifying coverage with respect to 
        a participant or beneficiary is effectively discharged when 
        such plan sponsor provides documentation to a participant or 
        beneficiary at the time such participant or beneficiary becomes 
        ineligible for coverage under the group health plan verifying--
                    ``(A) the dates that the participant or beneficiary 
                was covered under such previous qualifying coverage;
                    ``(B) the benefits and cost-sharing arrangement 
                available to the participant or beneficiary under such 
                previous qualifying coverage; and
                    ``(C) the preexisting condition limitations or 
                exclusions, if any, that applied to the plan under such 
                previous qualifying coverage.
            ``(3) Definition.--The term `previous qualifying coverage' 
        means the period beginning on the date a participant or 
        beneficiary is enrolled under a health plan and ends on the 
        date the participant or beneficiary is not so enrolled for a 
        continuous period of more than 30 days (without regard to any 
        waiting period).
    ``(d) Lifetime Limits.--An employee benefit group health plan 
(whether fully insured or self-funded) may not impose a catastrophic or 
lifetime limit with respect to coverage under the plan.''.

SEC. 102. DISCLOSURE REQUIREMENTS.

    (a) Disclosure of Information by Insurers.--Part 1 of subtitle B of 
title I (29 U.S.C. 1021 et seq.) is amended by adding at the end 
thereof the following new section:

``SEC. 112. DISCLOSURE OF INFORMATION BY INSURERS.

    ``(a) In General.--In connection with the offering for sale of any 
employee benefit group health plan to an employer or plan sponsor, an 
insurer shall make a reasonable disclosure, as part of its solicitation 
and sales materials, of--
            ``(1) the provisions of the group health plan concerning 
        the insurer's right to change premium rates and the factors 
        that affect changes in premium rates;
            ``(2) the provisions of such plan relating to renewability 
        of policies and contracts;
            ``(3) the provisions of such plan relating to any 
        preexisting condition provision; and
            ``(4) descriptive information about the benefits available 
        under all benefit plans for which the employer is qualified.
Information shall be provided under this subsection in a manner 
determined to be understandable by the typical plan participant and 
beneficiary, and shall be accurate and comprehensive to reasonably 
inform employers and participants of their rights and obligations under 
the plan.
    ``(b) Exception.--With respect to the requirements of subsection 
(a), any information that is determined by the insurer to be 
proprietary and trade secret information, or competitively sensitive 
information, shall not be subject to the disclosure requirements of 
such subsection except as agreed to by the insurer.''.
    (b) Disclosure to Participants and Beneficiaries in Self-Funded 
Employee Benefit Group Health Plans.--Part 1 of subtitle B of title I 
(29 U.S.C. 1021 et seq.) (as amended by subsection (a)) is further 
amended by adding at the end thereof the following new section:

``SEC. 113. DISCLOSURE TO PARTICIPANTS AND BENEFICIARIES IN SELF-FUNDED 
              EMPLOYEE BENEFIT GROUP HEALTH PLANS.

    ``(a) Requirement.--
            ``(1) In general.--Each self-funded employee benefit group 
        health plan shall issue to each participant and beneficiary, in 
        language determined to be easily understandable by the typical 
        participant or beneficiary, a statement indicating--
                    ``(A)(i) that the plan is enforced under this Act 
                and is not a licensed health plan under the laws of any 
                State;
                    ``(ii) that the plan is not required to provide any 
                State-mandated benefits; and
                    ``(iii) that the plan is not required to 
                participate in State guarantee funds; and
                    ``(B) that, if the plan does not pay all benefits 
                for which participants or beneficiaries are eligible 
                under the arrangement, responsibility for payment for 
                medical care may to some extent remain with the 
                participant or beneficiary.
                    ``(2) Time for disclosure.--The information 
                described in paragraph (1) shall be provided to each 
                participant and beneficiary within 30 days after the 
                close of each fiscal year of the arrangement and within 
                such reasonable time before commencing coverage under 
                the arrangement as the Secretary shall prescribe by 
                regulation.
    ``(b) Notice of Material Changes.--
            ``(1) In general.--Each self-funded health plan shall issue 
        to each participant and beneficiary, in language determined to 
        be easily understandable to the typical participant or 
        beneficiary, a notice describing any material change in the 
        terms of the plan.
            ``(2) Time for disclosure.--The notice referred to in 
        paragraph (1) shall be issued to each participant and 
        beneficiary within 30 days after the earlier of the date of the 
        adoption of the material change involved or the effective date 
        thereof.''.

SEC. 103. PLAN TERMINATION REQUIREMENTS.

    Part 6 of subtitle B of title I (29 U.S.C. 1161 et seq.) is amended 
by adding at the end thereof the following new section:

``SEC. 610. GROUP HEALTH PLAN TERMINATION NOTIFICATION REQUIREMENTS.

    ``(a) In General.--Not later than 90 days prior to the termination 
of any employee benefit group health plan (whether the plan is fully 
insured or self-funded), the plan sponsor shall notify each participant 
and beneficiary of such termination. During such 90-day period, an 
employer may not--
            ``(1) modify benefits as described in the most recent plan 
        document; or
            ``(2) modify employer contribution rates.
    ``(b) Proof of Plan Involuntary Termination Policy.--
            ``(1) In general.--Except as provided in paragraph (4), the 
        plan sponsor shall submit to the Secretary, for each self-
        funded employee benefit group health plan, evidence of the 
        existence of a plan involuntary termination policy. Such 
        termination policy--
                    ``(A) shall be submitted on an annual basis;
                    ``(B) shall be issued either by--
                            ``(i) a State-licensed insurer; or
                            ``(ii) a United States domiciled State-
                        licensed captive insurer, as determined in 
                        regulations promulgated by the Secretary;
                    ``(C) shall provide each participant or beneficiary 
                90 days of coverage beyond the date of plan 
                termination; and
                    ``(D) shall provide for all outstanding benefit 
                payments covered under the plan.
            ``(2) Issuance.--The requirements of paragraph (1) may be 
        met through surety bonds, letters of credit, or other 
        appropriate security to the extent provided in regulations 
        issued by the Secretary.
            ``(3) Coverage.--For purposes of this paragraph (1)(C), the 
        term `coverage' means coverage for the same benefits as 
        described in the latest summary plan document.
            ``(4) Exception.--Notwithstanding the requirements of this 
        section, a self-funded employee benefit group health plan that 
        is subject to the requirements of this section, shall not be 
        required to meet the requirements of paragraphs (1) and (2) 
        if--
                    ``(A) in the case of an employee benefit group 
                health plan or plans maintained by a single employer, 
                the employer has received at least a AAA bond credit 
                rating or an equivalent credit rating from a credit 
                rating agency certified for such purpose by the 
                Secretary; and
                    ``(B) in the case of an employee benefit group 
                health plan that is multiemployer plan that is 
                collectively bargained and meets the requirements of 
                section 302 of the Labor Management Relations Act of 
                1947 (29 U.S.C. 186), the trustees of the plan have 
                entered into withdrawal liability agreements with the 
                contributing employers to the plan which are approved 
                by the Secretary.
        The requirements of subparagraphs (A) and (B) are met with 
        respect to an employee benefit group health plan if the plan 
        submits on an annual basis to the Secretary a statement of 
        compliance with either such paragraph.''.
         TITLE II--MULTIPLE EMPLOYER WELFARE ARRANGEMENT REFORM

SEC. 201. DEFINITIONS.

    (a) Clarification of Status of Plans Maintained by Participating 
Employers Under Multiple Employer Welfare Arrangements.--Section 
3(1)(A) (29 U.S.C. 1002(1)) (as amended by section 2) is further 
amended by adding at the end the following new sentence: ``Irrespective 
of whether a multiple employer welfare arrangement is (or is treated 
as) a plan under this title, each participating employer under such 
arrangement shall be treated as maintaining by means of such 
arrangement an employee welfare benefit plan under which the employees 
of such employer who are covered under such arrangement are the 
participants.''.
    (b) Modifications to Definition of Multiple Employer Welfare 
Arrangement.--Paragraph (40) of section 3 (29 U.S.C. 1002(40)) is 
amended by adding at the end the following new subparagraph:
            ``(C)(i) The term `multiple employer welfare arrangement' 
        includes an employee welfare benefit plan which is established 
        or maintained for the purpose of offering or providing any 
        benefit described in paragraph (1) to individuals (or their 
        beneficiaries) who perform services pursuant to an employee 
        leasing arrangement if--
                    ``(I) under such employee leasing arrangement the 
                lessor does not retain, both legally and in fact, the 
                right of direction and control within the scope of 
                employment over the individuals whose services are 
                supplied under the arrangement,
                    ``(II) under the employee leasing arrangement the 
                lessor's responsibility for payment of wages, payroll 
                related taxes, and employee benefits of such 
                individuals is, either legally or in fact, dependent 
                upon payment by the lessee to the lessor for its 
                services,
                    ``(III) employee leasing services provided under 
                the employee leasing arrangement are solicited, 
                advertised, or marketed through or by licensed 
                insurance agents or brokers, or
                    ``(IV) any owner or director of, any partner in, or 
                any relative of, the lessee is an employee of the 
                lessor or is eligible to participate in the employee 
                welfare benefit plan or other arrangement.
            ``(ii) For purposes of this subparagraph, the term 
        `employee leasing arrangement' means any labor leasing 
        arrangement, staff leasing arrangement, extended employee 
        staffing or supply arrangement, or other arrangement under 
        which one business or other entity (referred to in this 
        subparagraph as the `lessee') receives, under a lease or other 
        arrangement entered into with any other business or other 
        entity (referred to in this subparagraph as the `lessor'), 
        services of individuals to be performed under such lease or 
        other arrangement.''.
    (c) Registration Requirements for MEWA's.--Paragraph (40) of 
section 3 (29 U.S.C. 1002(40)) as amended by subsection (c), is further 
amended by adding at the end the following new subparagraph:
            ``(D) The Secretary shall by regulation provide for the 
        registration of multiple employer welfare arrangement with the 
        Secretary on an annual basis.''.
    (d) Clarification of Treatment of Single Employer Arrangements.--
Section 3(40)(B) (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i)--
                    (A) by inserting ``for any plan year of any such 
                plan, or any fiscal year of any such other 
                arrangement,'' after ``single employer''; and
                    (B) 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. 202. MODIFICATION OF PREEMPTION RULES FOR MULTIPLE EMPLOYER 
              WELFARE ARRANGEMENTS.

    (a) State Laws Not Preempted.--Subparagraph (A) of section 
514(b)(6) (29 U.S.C. 1144(b)(6)(A)) is amended to read as follows:
    ``(A) In the case of a multiple employer welfare arrangement which 
is an employee benefit group health plan (whether fully insured or 
self-funded) in addition to this title, any law of any State which 
regulates insurance may apply.''.
    (b) Other Preemption Rules.--Section 514(b)(6) (29 U.S.C. 
1144(b)(6)) is amended by striking subparagraphs (B) and (C) and 
inserting in lieu thereof the following new subparagraph:
    ``(B) Nothing in this title shall be construed as prohibiting a 
State from--
            ``(i) requiring any person to provide information or 
        documentation which the insurance commissioner (or similar 
        official) of the State deems necessary to enable the State to 
        determine whether an entity is a multiple employer welfare 
        arrangement, or
            ``(ii) applying generally applicable licensing requirements 
        with respect to the services of contract administrators or 
        other licensed professionals whose services are provided to a 
        multiple employer welfare arrangement.''.

SEC. 203. APPLICATION OF CRIMINAL PENALTIES.

    (a) In General.--Section 501 (29 U.S.C. 1131) is amended by adding 
at the end the following new subsection:
    ``(b) Any person who, in connection with a multiple employer 
welfare arrangement established or maintained for the purpose of 
offering or providing any employee benefit group health plan benefit to 
employees or their beneficiaries, willfully and knowingly makes a false 
representation to any employer, any employee, any employee's 
beneficiary, any State, or the Secretary as to the status of the 
arrangement under this Act, or as to the relationship of the 
arrangement to any employer or to any employee organization (including 
any national or international employee organization or federation of 
such organizations), shall, upon conviction, be fined not more than 
$5,000 ($100,000 in the case of persons other than individuals), or be 
imprisoned not more than 1 year, or both.''.
    (b) Conforming Amendment.--Section 501 (29 U.S.C. 1131) is amended 
by inserting ``(a)'' after ``Sec. 501.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any action taken on or after the date of the enactment of this 
Act.

              TITLE III--HEALTH PLAN PURCHASING COALITIONS

SEC. 301. HEALTH PLAN PURCHASING COALITIONS.

    (a) In General.--Subtitle B of title I (42 U.S.C. 1021 et seq.) is 
amended by adding at the end thereof the following new part:

              ``Part 7--Health Plan Purchasing Coalitions

``SEC. 801. APPLICABILITY.

    ``The requirements of this part shall apply to all registered 
health plan purchasing coalitions.

``SEC. 802. HEALTH PLAN PURCHASING COALITIONS.

    ``(a) Definition.--As used in this part, the term `health plan 
purchasing coalition' means a group of individuals or employers that, 
on a voluntary basis and in accordance with this section, form an 
entity for the purpose of providing insured health plans for its 
membership. An insurer, agent, broker or any other individual or entity 
engaged in the sale of insurance may not form or underwrite a 
coalition.
    ``(b) Certification.--
            ``(1) In general.--A State shall certify health plan 
        purchasing coalitions that meet the requirements of this 
        section. Each coalition shall be chartered under State law and 
        registered with the Secretary of Labor.
            ``(2) State refusal to certify.--If a State fails to 
        implement a program for certifying health plan purchasing 
        coalitions in accordance with the standards under this Act, the 
        Secretary shall certify and oversee the operations of such 
        coalitions in such State.
            ``(3) Interstate coalitions.--
                    ``(A) In general.--For purposes of this section, a 
                health plan purchasing coalition operating in more than 
                one State shall be certified by the State in which the 
                coalition is domiciled.
                    ``(B) Charter.--An interstate health plan 
                purchasing coalition shall be chartered by each State 
                in which such coalition conducts business (such as 
                offering membership to individuals or entities in a 
                State or offering enrollment in health plans operating 
                in a State). States may enter into cooperative 
                arrangements for the purpose of certifying and 
                overseeing the operation of such coalitions.
                    ``(C) Domicile.--For purposes of subparagraph (A), 
                a health plan purchasing coalition shall be considered 
                to be domiciled in the State in which the most 
                participants and beneficiaries of the coalition are 
                located.
            ``(4) State location of participants and beneficiaries.--
                    ``(A) In general.--A health plan purchasing 
                coalition shall be treated as covering participants and 
                beneficiaries located in a State only if the minimum 
                required number of members who are covered under the 
                coalition as participants and beneficiaries are located 
                in such State, except that if the minimum required 
                number of such individuals are not located in any 
                State, such arrangement shall be treated as covering 
                participants and beneficiaries in any State in which 
                any participant or beneficiary is located.
                    ``(B) Minimum required number.--For purposes of 
                subparagraph (A), the minimum required number is the 
                greater of--
                            ``(i) 5 percent of the total number of 
                        individuals described in subparagraph (A), or
                            ``(ii) 100.
                    ``(C) Location of individuals in state.--For 
                purposes of subparagraph (A), a participant or 
                beneficiary shall be treated as located in a State if 
                such participant or beneficiary is employed in such 
                State or the address of such participant or beneficiary 
                last known by the coalition is located in such State.
    ``(c) Board of Directors.--
            ``(1) In general.--Each health plan purchasing coalition 
        shall be governed by a Board of Directors that shall be 
        responsible for ensuring the performance of the duties of the 
        coalition under this section. The Board shall be composed of a 
        broad cross-section of representatives of employers, employees, 
        and individuals participating in the coalition. An insurer, 
        agent, broker or any other individual or entity engaged in the 
        sale of insurance may not hold or control any right to vote 
        with respect to a coalition.
            ``(2) Limitation on compensation.--A health plan purchasing 
        coalition may not provide compensation to members of the Board 
        of Directors. The coalition may provide reimbursements to such 
        members for the reasonable and necessary expenses incurred by 
        the members in the performance of their duties as members of 
        the Board.
            ``(3) Conflict of interest.--No member of the Board of 
        Directors (or family members of such members) nor any 
        management personnel of the coalition may be employed by, be a 
        consultant for, be a member of the board of directors of, be 
        affiliated with an agent of, or otherwise be a representative 
        of any health plan or other insurer, health care provider, or 
        agent or broker. Nothing in the preceding sentence shall limit 
        a member of the Board from purchasing coverage from a health 
        plan offered through the coalition.
    ``(d) Membership and Marketing Area.--
            ``(1) Membership.--
                    ``(A) In general.--A health plan purchasing 
                coalition may establish limits on the size of employers 
                who may become a member of the coalition, and may 
                determine whether to permit individuals to become 
                members. Upon the establishment of such membership 
                requirements, the coalition shall, except as provided 
                in subparagraph (B), accept all employers (or 
                individuals) residing within the area served by the 
                coalition who meet such requirements as members on a 
                first come, first-served basis.
                    ``(B) Capacity limits.--A health plan purchasing 
                coalition may cease accepting employers or individuals 
                as members of the coalition if--
                            ``(i) the coalition ceases to permit any 
                        new employers or individuals to become members; 
                        and
                            ``(ii) the coalition can demonstrate to the 
                        State (or the Secretary in the case of 
                        coalitions certified by the Secretary) that the 
                        financial or other capacity of coalition to 
                        serve current members will be impaired if the 
                        coalition is required to accept other members.
            ``(2) Marketing area.--A State may establish rules 
        regarding the geographic area that must be served by a health 
        plan purchasing coalition. With respect to a State that has not 
        established such rules, a health plan purchasing coalition 
        operating in the State shall define the boundaries of the area 
        to be served by the coalition, except that such boundaries may 
        not be established on the basis of health status or 
        insurability.
    ``(e) Duties and Responsibilities.--
            ``(1) In general.--A health plan purchasing coalition 
        shall--
                    ``(A) enter into agreements with at least three, 
                unaffiliated insured health plans, except that the 
                requirement of subparagraph shall not apply in regions 
                (such as remote or frontier areas) in which compliance 
                with such requirement is not possible;
                    ``(B) enter into agreements with employers and 
                individuals who become members of the coalition;
                    ``(C) participate in any program of risk-adjustment 
                or reinsurance, or any similar program, that is 
                established by the State;
                    ``(D) prepare and disseminate comparative health 
                plan materials (including information about cost, 
                quality, benefits, and other information concerning 
                health plans offered through the coalition);
                    ``(E) actively market to all eligible employers and 
                individuals residing within the service area; and
                    ``(F) act as an ombudsman for health plan 
                enrollees.
            ``(2) Permissible activities.--A health plan purchasing 
        coalition may perform such other functions as determined by the 
        Board of Directors or the State (or the Secretary in the case 
        of a coalition certified by the Secretary) to further the 
        purposes of this part, including, but not limited to--
                    ``(A) the collection and distribution of premiums 
                and the performance of other administrative functions;
                    ``(B) the collection and analysis of surveys of 
                health plan enrollee satisfaction;
                    ``(C) the charging of a membership fee to enrollees 
                (such fees may not be based on health status) and the 
                charging of participation fees to health plans;
                    ``(D) cooperating with employers that self-fund for 
                the purpose of negotiating with providers and health 
                plans; and
                    ``(E) otherwise contracting and negotiating with 
                health plans and health care providers.
    ``(f) Limitations on Coalition Activities.--A health plan 
purchasing coalition shall not--
            ``(1) perform any activity relating to the licensing of 
        health plans;
            ``(2) assume financial risk in relating to any health plan;
            ``(3) perform any other activities that conflict or are 
        inconsistent with the performance of its duties under this 
        part;
            ``(4) establish eligibility, continuation, enrollment, or 
        contribution requirements for individuals based on health 
        status, medical condition, claims experience, receipt of health 
        care, medical history, evidence of insurability, or disability 
        of the individual; and
            ``(5) operate on a for-profit or other basis where the 
        legal structure of the coalition (as determined under 
        guidelines developed by the Secretary) permits profits to be 
        made and not returned to the members of the coalition.
    ``(g) Rules of Construction.--Nothing in this section shall be 
construed to--
            ``(1) require that a State organize, operate, or otherwise 
        create health care purchasing coalitions;
            ``(2) otherwise require the establishment of health care 
        purchasing coalitions;
            ``(3) require individuals or employers to purchase health 
        plans through a health care purchasing coalition;
            ``(4) require that a health plan purchasing coalition be 
        the only type of health insurance purchasing arrangement 
        permitted to operate in a State; or
            ``(5) establish a purchasing coalition as an employee 
        welfare benefit plan.
    ``(h) Health Plan Purchasing Coalition Relationship to Plan 
Sponsors.--
            ``(1) In general.--With respect to a health plan purchasing 
        coalition, each employer or plan sponsor member shall be 
        treated as maintaining an employee welfare benefit plan on 
        behalf of the plan participants and beneficiaries under the 
        plan involved.
            ``(2) Coalition as plan administrator.--A health plan 
        purchasing coalition may act as the plan administrator for any 
        employer member of the coalition. In acting as such a plan 
        administrator the coalition may--
                    ``(A) collect and distribute premiums;
                    ``(B) manage COBRA continuation coverage 
                requirements;
                    ``(C) provide summary plan description material to 
                participants and beneficiaries; and
                    ``(D) carry out any other administrative activities 
                determined appropriate by the coalition.''.
    (b) Limited Preemption.--Section 514 (29 U.S.C. 1144) is amended by 
adding at the end thereof the following new subsection:
    ``(e)(1) Notwithstanding any other provision of this section, with 
respect to a health plan purchasing coalition that meets the 
requirements of part 7, the following State laws shall be preempted:
            ``(A) State fictitious group laws.
            ``(B) State rating requirement laws, except to the extent 
        necessary to comply with the requirements of paragraph (2).
            ``(C) State mandated benefit laws, except to the extent 
        necessary to comply with the requirements of paragraph (3).
            ``(D) Other State laws that directly conflict with the 
        requirements in such part 7.
    ``(2) With respect to a State rating requirement law, a health plan 
purchasing coalition--
            ``(A) may not permit premium rates for health plans to vary 
        among employers or individuals that are members of a health 
        plan purchasing coalition in excess of the amount of such 
        variations that would be permitted under such State rating laws 
        among employers that are not members of the coalition; and
            ``(B) with respect to premium rates negotiated by the 
        coalition, may permit such rates to be less than rates that 
        would otherwise be permitted under State law if such rating 
        differential is not based on differences in health status or 
        demographic factors.
    ``(3) With respect to a State mandated benefit law, a health plan 
purchasing coalition--
            ``(A) may apply any small group reform plan design of the 
        State to health plans offered by the coalition; or
            ``(B) if the State has no specific small group plan design, 
        may design a plan that shall apply to all health plans offered 
        by the coalition.''.

SEC. 302. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 (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 and Health Plan Purchasing Coalitions.--
            ``(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 
                this title applicable to multiple employer welfare 
                arrangements and health plan purchasing coalitions.
                    ``(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, 
                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.
            ``(2) Assistance to states.--The Secretary may--
                    ``(A) provide enforcement assistance to the States 
                with respect to multiple employer welfare arrangements, 
                including 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.''.
                                 <all>
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