[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1515 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 1515

To amend title I of the Employee Retirement Income Security Act of 1974 
 to provide new portability, participation, solvency, and other health 
 insurance protections and freedoms for workers in a mobile workforce, 
to increase the purchasing power of employees and employers by removing 
  barriers to the voluntary formation of association health plans, to 
 increase health plan competition providing more affordable choice of 
 coverage, to expand access to health insurance coverage for employees 
    of small employers through open markets, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 1, 1997

  Mr. Fawell (for himself, Mr. Goodling, Mr. Hastert, Mr. Armey, Mr. 
    Pickett, Mr. Lipinski, Mr. Moran of Virginia, Mr. Poshard, Mr. 
    Traficant, Mr. McHale, Mr. Davis of Illinois, Mr. Costello, Mr. 
 Ackerman, Mr. Frost, Mr. Condit, Mr. Hall of Texas, Mr. Stenholm, Mr. 
     Boswell, Mr. Rush, Ms. Molinari, Mr. Petri, Mrs. Roukema, Mr. 
  Ballenger, Mr. Hoekstra, Mr. McKeon, Mr. Sam Johnson, of Texas, Mr. 
  Talent, Mr. Greenwood, Mr. Knollenberg, Mr. Riggs, Mr. Graham, Mr. 
   Souder, Mr. McIntosh, Mr. Paul, Mr. Peterson of Pennsylvania, Mr. 
 Upton, Mr. Deal of Georgia, Mr. Hilleary, Mr. Scarborough, Mr. Baker, 
   Mr. Bartlett of Maryland, Mr.  Barton of Texas, Mr. Bateman, Mr. 
    Boehlert, Mr. Bonilla, Mr. Burton of Indiana, Mr. Calvert, Mr. 
 Campbell, Mr. Canady of Florida, Mr. Collins, Mr. Cooksey, Mr. Cox of 
   California, Mr. Crane, Mr. Cunningham, Mr. Dickey, Ms. Dunn, Mrs. 
   Emerson, Mr. English of Pennsylvania, Mr. Ewing, Mr. Foley, Mrs. 
     Fowler, Mr. Fox of Pennsylvania, Mr. Gallegly, Mr. Gekas, Mr. 
 Gilchrest, Mr. Gilman, Mr. Goss, Mr. Herger, Mr. Bereuter, Mr. Horn, 
   Mr. Hostettler, Mr. Houghton, Mr. Hunter, Mr. Hyde, Mr. Kim, Mr. 
 Kingston, Mr. Kolbe, Mr. LaHood, Mr. Leach, Mr. Lewis of California, 
   Mr. Linder, Mr. McCollum, Mr. McHugh, Mr. Manzullo, Mr. Miller of 
Florida, Mrs. Morella, Mrs. Myrick, Mr. Neumann, Mr. Ney, Mr. Packard, 
 Mr. Porter, Ms. Pryce of Ohio, Mr. Quinn, Mr. Regula, Mr. Royce, Mr. 
   Saxton, Mr. Dan Schaefer of Colorado, Mr. Schiff, Mr. Shays, Mr. 
   Shimkus, Mr. Smith of Texas, Mrs. Linda Smith of Washington, Mr. 
Snowbarger, Mr. Solomon, Mr. Spence, Mr. Stearns, Mr. Walsh, Mr. Wamp, 
  Mr. Watkins, Mr. Watts of Oklahoma, Mr. Weldon of Pennsylvania, Mr. 
Weldon of Florida, Mr. Weller, and Mr. Wicker) introduced the following 
    bill; which was referred to the Committee on Education and the 
                               Workforce

_______________________________________________________________________

                                 A BILL


 
To amend title I of the Employee Retirement Income Security Act of 1974 
 to provide new portability, participation, solvency, and other health 
 insurance protections and freedoms for workers in a mobile workforce, 
to increase the purchasing power of employees and employers by removing 
  barriers to the voluntary formation of association health plans, to 
 increase health plan competition providing more affordable choice of 
 coverage, to expand access to health insurance coverage for employees 
    of small employers through 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 ``Expansion of Portability and Health 
Insurance Coverage Act of 1997''.

SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding after part 7 the 
following new part:

           ``Part 8--Rules Governing Association Health Plans

``SEC. 801. ASSOCIATION HEALTH PLANS.

    ``(a) In General.--For purposes of this part, the term `association 
health plan' means a group health plan--
            ``(1) whose sponsor is (or is deemed under this part to be) 
        described in subsection (b), and
            ``(2) under which at least one option of health insurance 
        coverage offered by a health insurance issuer (which may 
        include, among other options, managed care options, point of 
        service options, and preferred provider options) is provided to 
        participants and beneficiaries.
    ``(b) Sponsorship.--The sponsor of a group health plan is described 
in this subsection if such sponsor--
            ``(1) is organized and maintained in good faith, with a 
        constitution and bylaws specifically stating its purpose and 
        providing for periodic meetings on at least an annual basis, as 
        a trade association, an industry association (including a rural 
        electric cooperative association or a rural telephone 
        cooperative 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, and
            ``(2) is established as a permanent entity which receives 
        the active support of its members and collects dues or 
        contributions from its members (including affiliated members) 
        on a periodic basis, without conditioning such dues or 
        contributions on the basis of health status-related factors 
        with respect to the employees of such members or the dependents 
        of such employees or on the basis of participation in a group 
        health plan.
Any sponsor consisting of an association of entities which meet the 
requirements of paragraphs (1) and (2) shall be deemed to be a sponsor 
described in this subsection.

``SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.

    ``(a) In General.--The Secretary shall prescribe by regulation a 
procedure under which, subject to subsection (b), the Secretary shall 
certify association health plans which apply for certification as 
meeting the requirements of this part.
    ``(b) Standards.--Under the procedure prescribed pursuant to 
subsection (a), the Secretary shall certify an association health plan 
as meeting the requirements of this part only if the Secretary is 
satisfied that--
            ``(1) such certification--
                    ``(A) is administratively feasible,
                    ``(B) is not adverse to the interests of the 
                individuals covered under the plan, and
                    ``(C) is protective of the rights and benefits of 
                the individuals covered under the plan, and
            ``(2) the applicable requirements of this part are met (or, 
        upon the date on which the plan is to commence operations, will 
        be met) with respect to the plan.
    ``(c) Requirements Applicable to Certified Plans.--An association 
health plan with respect to which certification under this part is in 
effect shall meet the applicable requirements of this part, effective 
on the date of certification (or, if later, on the date on which the 
plan is to commence operations).
    ``(d) Requirements for Continued Certification.--The Secretary may 
provide by regulation for continued certification under this part, 
including requirements relating to any commencement, by an association 
health plan which has been certified under this part, of a benefit 
option which does not consist of health insurance coverage.
    ``(e) Class Certification for Fully-Insured Plans.--The Secretary 
shall establish a class certification procedure for association health 
plans under which all benefits consist of health insurance coverage. 
Under such procedure, the Secretary shall provide for the granting of 
certification under this part to the plans in each class of such 
association health plans upon appropriate filing under such procedure 
in connection with plans in such class and payment of the prescribed 
fee under section 807(a).

``SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES.

    ``(a) Sponsor.--The requirements of this subsection are met with 
respect to an association health plan if--
            ``(1) the sponsor (together with its immediate predecessor, 
        if any) has met (or is deemed under this part to have met) for 
        a continuous period of not less than 3 years ending with the 
        date of the application for certification under this part, the 
        requirements of section 801(b)(1), and
            ``(2) the sponsor meets (or is deemed under this part to 
        meet) the requirements of section 801(b)(2).
    ``(b) Board of Trustees.--The requirements of this subsection are 
met with respect to an association health plan if the following 
requirements are met:
            ``(1) Fiscal control.--The plan is operated, pursuant to a 
        trust agreement, by a board of trustees which has complete 
        fiscal control over the plan and which is responsible for all 
        operations of the plan.
            ``(2) Rules of operation and financial controls.--The board 
        of trustees has in effect rules of operation and financial 
        controls, based on a 3-year plan of operation, adequate to 
        carry out the terms of the plan and to meet all requirements of 
        this title applicable to the plan.
            ``(3) Rules governing relationship to participating 
        employers and to contractors.--The members of the board of 
        trustees are individuals selected from individuals who are the 
        owners, officers, directors, or employees of the participating 
        employers or who are partners in the participating employers 
        and actively participate in the business. No such member is an 
        owner, officer, director, or employee of, or partner in, a 
        contract administrator or other service provider to the plan, 
        except that officers or employees of a sponsor which is a 
        service provider (other than a contract administrator) to the 
        plan may be members of the board if they constitute not more 
        than 25 percent of the membership of the board and they do not 
        provide services to the plan other than on behalf of the 
        sponsor. The board has sole authority to approve applications 
        for participation in the plan and to contract with a service 
        provider to administer the day-to-day affairs of the plan.
    ``(c) Treatment of Franchise Networks.--In the case of a group 
health plan which is established and maintained by a franchiser for a 
franchise network consisting of its franchisees--
            ``(1) the requirements of subsection (a) and section 
        801(a)(1) shall be deemed met if such requirements would 
        otherwise be met if the franchiser were deemed to be the 
        sponsor referred to in section 801(b), such network were deemed 
        to be an association described in section 801(b), and each 
        franchisee were deemed to be a member (of the association and 
the sponsor) referred to in section 801(b), and
            ``(2) the requirements of section 804(a)(1) shall be deemed 
        met.
    ``(d) Certain Collectively Bargained Plans.--
            ``(1) In general.--In the case of a group health plan 
        described in paragraph (2)--
                    ``(A) the requirements of subsection (a) and 
                section 801(a)(1) shall be deemed met,
                    ``(B) the joint board of trustees shall be deemed a 
                board of trustees with respect to which the 
                requirements of subsection (b) are met, and
                    ``(C) the requirements of section 804 shall be 
                deemed met.
            ``(2) Requirements.--A group health plan is described in 
        this paragraph if--
                    ``(A) the plan is a multiemployer plan,
                    ``(B) the plan is in existence on April 1, 1997, 
                and would be described in section 3(40)(A)(i) but 
                solely for the failure to meet the requirements of 
                section 3(40)(C)(ii) or (to the extent provided in 
                regulations of the Secretary) solely for the failure to 
                meet the requirements of subparagraph (D) of section 
                3(40), or
                    ``(C)(i) the plan is in existence on April 1, 1997, 
                has been in existence as of such date for at least 3 
                years, meets the requirements of section 801(b)(2), and 
                would be described in section 3(40)(A)(i) but solely 
                for the failure to meet the requirements of 
                subparagraph (C)(i) or (C)(ii), and
                    ``(ii) individuals who are members of the plan 
                sponsor--
                            ``(I) participate by elections in the 
                        organizational governance of the plan sponsor,
                            ``(II) are eligible for appointment as 
                        trustee of the plan or for participation in the 
                        appointment of trustees of the plan, and
                            ``(III) if covered under the plan, have 
                        full rights under the plan of a participant in 
                        an employee welfare benefit plan.
    ``(e) Certain Plans Not Meeting Single Employer Requirement.--
            ``(1) In general.--In any case in which the majority of the 
        employees covered under a group health plan 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 
        plan are employed by employers who are related to such single 
        employer--
                    ``(A) the requirements of subsection (a) and 
                section 801(a)(1) shall not apply if such single 
                employer is the sponsor of the plan, and
                    ``(B) the requirements of subsection (b) shall be 
                deemed met if the board of trustees is the named 
                fiduciary in connection with the plan.
            ``(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. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

    ``(a) Covered Employers and Individuals.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan--
            ``(1) 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
            ``(2) all individuals commencing coverage under the plan 
        after certification under this part must be--
                    ``(A) active or retired owners (including self-
                employed individuals), officers, directors, or 
                employees of, or partners in, participating employers, 
                or
                    ``(B) the beneficiaries of individuals described in 
                subparagraph (A).
    ``(b) Coverage of Previously Uninsured Employees.--The requirements 
of this subsection are met with respect to an association health plan 
if, under the terms of the plan, no affiliated member of the sponsor 
may be offered coverage under the plan as a participating employer 
unless--
            ``(1) the affiliated member was an affiliated member on the 
        date of certification under this part, or
            ``(2) during the 12-month period preceding the date of the 
        offering of such coverage, the affiliated member has not 
        maintained or contributed to a group health plan with respect 
        to any of its employees who would otherwise be eligible to 
        participate in such association health plan.
    ``(c) Individual Market Unaffected.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan, no participating employer may provide health 
insurance coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer under the plan, 
if such exclusion of the employee from coverage under the plan is based 
on a health status-related factor with respect to the employee and such 
employee would, but for such exclusion on such basis, be eligible for 
coverage under the plan.
    ``(d) Prohibition of Discrimination Against Employers and Employees 
Eligible to Participate.--The requirements of this subsection are met 
with respect to an association health plan if--
            ``(1) under the terms of the plan, no employer meeting the 
        preceding requirements of this section is excluded as a 
        participating employer, unless--
                    ``(A) participation or contribution requirements of 
                the type referred to in section 2711 of the Public 
                Health Service Act are not met with respect to the 
                excluded employer, or
                    ``(B) the excluded employer does not satisfy a 
                required minimum level of employment uniformly 
                applicable to participating employers,
            ``(2) the applicable requirements of sections 701, 702, and 
        703 are met with respect to the plan, and
            ``(3) applicable benefit options under the plan are 
        actively marketed to all eligible participating employers.

``SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION 
              RATES, AND BENEFIT OPTIONS.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if the following requirements are 
met:
            ``(1) Contents of governing instruments.--The instruments 
        governing the plan include a written instrument, meeting the 
        requirements of an instrument required under section 402(a)(1), 
        which--
                    ``(A) provides that the board of trustees serves as 
                the named fiduciary required for plans under section 
                402(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A)),
                    ``(B) provides that the sponsor of the plan is to 
                serve as plan sponsor (referred to in section 
                3(16)(B)), and
                    ``(C) incorporates the requirements of section 806.
            ``(2) Contribution rates must be nondiscriminatory.--
                    ``(A) The contribution rates for any participating 
                employer do not vary significantly on the basis of the 
                claims experience of such employer and do not vary on 
                the basis of the type of business or industry in which 
                such employer is engaged.
                    ``(B) Nothing in this title or any other provision 
                of law shall be construed to preclude an association 
                health plan, or a health insurance issuer offering 
                health insurance coverage in connection with an 
                association health plan, from setting contribution 
                rates based on the claims experience of the plan, to 
                the extent contribution rates under the plan meet the 
                requirements of section 702(b).
            ``(3) Floor for number of covered individuals with respect 
        to certain plans.--If any benefit option under the plan does 
        not consist of health insurance coverage, the plan has not 
        fewer than 1,000 participants and beneficiaries.
            ``(4) Regulatory requirements.--Such other requirements as 
        the Secretary may prescribe by regulation as necessary to carry 
        out the purposes of this part.
    ``(b) Ability of Association Health Plans to Design Benefit 
Options.--Nothing in this part or any provision of State law (as 
defined in section 514(c)(1)) shall be construed to preclude an 
association health plan, or a health insurance issuer offering health 
insurance coverage in connection with an association health plan, from 
exercising its sole discretion in selecting the specific items and 
services consisting of medical care to be included as benefits under 
such plan or coverage, except in the case of any law to the extent that 
it (1) prohibits an exclusion of a specific disease from such coverage, 
or (2) is not preempted under section 731(a)(1) with respect to matters 
governed by section 711 or 712.

``SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR 
              PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH 
              INSURANCE COVERAGE.

    ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if--
            ``(1) the benefits under the plan consist solely of health 
        insurance coverage, or
            ``(2) if the plan provides any additional benefit options 
        which do not consist of health insurance coverage, the plan--
                    ``(A) establishes and maintains reserves with 
                respect to such additional benefit options, consisting 
                of--
                            ``(i) a reserve sufficient for unearned 
                        contributions,
                            ``(ii) a reserve sufficient for benefit 
                        liabilities which have been incurred, which 
                        have not been satisfied, and for which risk of 
                        loss has not yet been transferred, and for 
                        expected administrative costs with respect to 
                        such benefit liabilities, and
                            ``(iii) a reserve, in an amount recommended 
                        by the qualified actuary, for any other 
                        obligations of the plan,
                and
                    ``(B) establishes and maintains aggregate excess/
                stop loss insurance and solvency indemnification as 
                follows:
                            ``(i) The plan shall secure aggregate 
                        excess/stop loss insurance for the plan with an 
                        attachment point which is not greater than 125 
                        percent of expected gross annual claims. The 
                        Secretary may by regulation define the incurred 
                        or paid basis and relevant claims periods for 
                        purposes of determining expected claims under 
                        this clause and provide for upward adjustments 
                        in the amount of such percentage in specified 
                        circumstances in which the plan specifically 
                        provides for and maintains reserves in excess 
                        of the amounts required under subparagraph (A).
                            ``(ii) The plan shall secure a means of 
                        indemnification for any claims which the plan 
                        is unable to satisfy by reason of a termination 
                        pursuant to section 809(b) (relating to 
                        mandatory termination).
Any regulations prescribed by the Secretary pursuant to paragraph 
(2)(B)(i) may allow for such adjustments in the required levels of 
excess/stop loss insurance as the qualified actuary may recommend, 
taking into account the specific circumstances of the plan.
    ``(b) Minimum Amount for Certain Reserves.--The total of the 
reserves described in subsection (a)(2)(B) 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) $400,000.
    ``(c) Required Margin.--In determining the amounts of reserves 
required under this section in connection with any association health 
plan described in subsection (a)(2), the qualified actuary shall 
include a margin for error and other fluctuations taking into account 
the specific circumstances of such plan.
    ``(d) Additional Requirements.--In the case of any association 
health plan described in subsection (a)(2), the Secretary may provide 
such additional requirements relating to reserves and excess/stop loss 
insurance as the Secretary considers appropriate. Such requirements may 
be provided, by regulation or otherwise, with respect to any such plan 
or any class of such plans.
    ``(e) Adjustments for Excess/Stop Loss Insurance.--The Secretary 
may provide for adjustments to the levels of reserves otherwise 
required under subsections (a) and (b) with respect to any plan or 
class of plans to take into account excess/stop loss insurance provided 
with respect to such plan or plans.
    ``(f) Alternative Means of Compliance.--The Secretary may permit an 
association health plan described in subsection (a)(2) to substitute, 
for all or part of the requirements of this section, such security, 
guarantee, hold-harmless arrangement, 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. The Secretary may 
take into account, for purposes of this subsection, evidence provided 
by the plan or sponsor which demonstrates an assumption of liability 
with respect to the plan. Such evidence may be in the form of a 
contract of indemnification, lien, bonding, insurance, letter of 
credit, recourse under applicable terms of the plan in the form of 
assessments of participating employers, security, or other financial 
arrangement.
    ``(g) Excess/Stop Loss Insurance.--For purposes of this section, 
the term `excess/stop loss insurance' means, in connection with an 
association health plan, a contract under which a health insurance 
issuer (or such other insurer as may be determined under regulations of 
the Secretary) provides for payment to the plan with respect to claims 
under the plan in excess of an amount or amounts specified in such 
contract.

``SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS.

    ``(a) Filing Fee.--Under the procedure prescribed pursuant to 
section 802(a), an association health plan shall pay to the Secretary 
at the time of filing an application for certification under this part 
a filing fee in the amount of $5,000, which shall be available, to the 
extent provided in appropriation Acts, to the Secretary for the sole 
purpose of administering the certification procedures applicable with 
respect to association health plans.
    ``(b) Information To Be Included in Application for 
Certification.--An application for certification under this part meets 
the requirements of this section only if it includes, in a manner and 
form prescribed in regulations of the Secretary, at least the following 
information:
            ``(1) Identifying information.--The names and addresses 
        of--
                    ``(A) the sponsor, and
                    ``(B) the members of the board of trustees of the 
                plan.
            ``(2) States in which plan intends to do business.--The 
        States in which participants and beneficiaries under the plan 
        are to be located and the number of them expected to be located 
        in each such State.
            ``(3) Bonding requirements.--Evidence provided by the board 
        of trustees that the bonding requirements of section 412 will 
        be met as of the date of the application or (if later) 
        commencement of operations.
            ``(4) Plan documents.--A copy of the documents governing 
        the plan (including any bylaws and trust agreements), the 
        summary plan description, and other material describing the 
        benefits that will be provided to participants and 
        beneficiaries under the plan.
            ``(5) Agreements with service providers.--A copy of any 
        agreements between the plan and contract administrators and 
        other service providers.
            ``(6) Funding report.--In the case of association health 
        plans providing benefits options in addition to health 
        insurance coverage, a report setting forth information with 
        respect to such additional benefit options determined as of a 
        date within the 120-day period ending with the date of the 
        application, including the following:
                    ``(A) Reserves.--A statement, certified by the 
                board of trustees of the plan, and a statement of 
                actuarial opinion, signed by a qualified actuary, that 
                all applicable requirements of section 806 are or will 
                be met in accordance with regulations which the 
                Secretary shall prescribe.
                    ``(B) Adequacy of contribution rates.--A statement 
                of actuarial opinion, signed by a qualified actuary, 
                which sets forth a description of the extent to which 
                contribution rates are adequate to provide for the 
                payment of all obligations and the maintenance of 
                required reserves under the plan for the 12-month 
                period beginning with such date within such 120-day 
                period, taking into account the expected coverage and 
                experience of the plan. If the contribution rates are 
                not fully adequate, the statement of actuarial opinion 
                shall indicate the extent to which the rates are 
                inadequate and the changes needed to ensure adequacy.
                    ``(C) Current and projected value of assets and 
                liabilities.--A statement of actuarial opinion signed 
                by a qualified actuary, which sets forth the current 
                value of the assets and liabilities accumulated under 
                the plan and a projection of the assets, liabilities, 
                income, and expenses of the plan for the 12-month 
                period referred to in subparagraph (B). The income 
                statement shall identify separately the plan's 
                administrative expenses and claims.
                    ``(D) Costs of coverage to be charged and other 
                expenses.--A statement of the costs of coverage to be 
                charged, including an itemization of amounts for 
                administration, reserves, and other expenses associated 
                with the operation of the plan.
                    ``(E) Other information.--Any other information 
                which may be prescribed in regulations of the Secretary 
                as necessary to carry out the purposes of this part.
    ``(c) Filing Notice of Certification With States.--A certification 
granted under this part to an association health plan shall not be 
effective unless written notice of such certification is filed with the 
applicable State authority of each State in which at least 25 percent 
of the participants and beneficiaries under the plan are located. For 
purposes of this subsection, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed.
    ``(d) Notice of Material Changes.--In the case of any association 
health plan certified under this part, descriptions of material changes 
in any information which was required to be submitted with the 
application for the certification under this part shall be filed in 
such form and manner as shall be prescribed 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 certification.
    ``(e) Reporting Requirements for Certain Association Health 
Plans.--An association health plan certified under this part which 
provides benefit options in addition to health insurance coverage for 
such plan year shall meet the requirements of section 103 by filing an 
annual report under such section which shall include information 
described in subsection (b)(6) with respect to the plan year and, 
notwithstanding section 104(a)(1)(A), shall be filed not later than 90 
days after the close of the plan year (or on such later date as may be 
prescribed by the Secretary).
    ``(f) Engagement of Qualified Actuary.--The board of trustees of 
each association health plan which provides benefits options in 
addition to health insurance coverage and which is applying for 
certification under this part or is certified under this part shall 
engage, on behalf of all participants and beneficiaries, a qualified 
actuary who shall be responsible for the preparation of the materials 
comprising information necessary to be submitted by a qualified actuary 
under this part. The qualified actuary shall utilize such assumptions 
and techniques as are necessary to enable such actuary to form an 
opinion as to whether the contents of the matters reported under this 
part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the plan and to reasonable expectations, and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the plan.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.

``SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

    ``Except as provided in section 809(b), an association health plan 
which is or has been certified under this part may terminate (upon or 
at any time after cessation of accruals in benefit liabilities) only if 
the board of trustees--
            ``(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 
        plan in connection with such termination in a manner which will 
        result in timely payment of all benefits for which the plan is 
        obligated, and
            ``(3) submits such plan in writing to the Secretary.
Actions required under this section shall be taken in such form and 
manner as may be prescribed in regulations of the Secretary.

``SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

    ``(a) Actions To Avoid Depletion of Reserves.--An association 
health plan which is certified under this part and which provides 
benefits other than health insurance coverage shall continue to meet 
the requirements of section 806, irrespective of whether such 
certification continues in effect. The board of trustees of such plan 
shall determine quarterly whether the requirements of section 806 are 
met. In any case in which the board determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the Secretary makes such a determination and so notifies the board, 
the board shall immediately notify the qualified actuary engaged by the 
plan, and such actuary shall, not later than the end of the next 
following month, make such recommendations to the board for corrective 
action as the actuary determines necessary to ensure compliance with 
section 806. Not later than 30 days after receiving from the actuary 
recommendations for corrective actions, the board shall notify the 
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 
board has taken or plans to take in response to such recommendations. 
The board shall thereafter report to the Secretary, in such form and 
frequency as the Secretary may specify to the board, regarding 
corrective action taken by the board until the requirements of section 
806 are met.
    ``(b) Mandatory Termination.--In any case in which--
            ``(1) the Secretary has been notified under subsection (a) 
        of a failure of an association health plan which is or has been 
        certified under this part and is described in section 806(a)(2) 
        to meet the requirements of section 806 and has not been 
        notified by the board of trustees of the plan that corrective 
        action has restored compliance with such requirements, and
            ``(2) the Secretary determines that there is a reasonable 
        expectation that the plan will continue to fail to meet the 
        requirements of section 806,
the board of trustees of the plan shall, at the direction of the 
Secretary, terminate the plan and, in the course of the termination, 
take such actions as the Secretary may require, including satisfying 
any claims referred to in section 806(a)(2)(B)(ii) and recovering for 
the plan any liability under section 806(f), 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.

``SEC. 810. SPECIAL RULES FOR CHURCH PLANS.

    ``(a) Election for Church Plans.--Notwithstanding section 4(b)(2), 
if a church, a convention or association of churches, or an 
organization described in section 3(33)(C)(i) maintains a church plan 
which is a group health plan (as defined in section 733(a)(1)), and 
such church, convention, association, or organization makes an election 
with respect to such plan under this subsection (in such form and 
manner as the Secretary may by regulation prescribe), then the 
provisions of this section shall apply to such plan, with respect to 
benefits provided under such plan consisting of medical care, as if 
section 4(b)(2) did not contain an exclusion for church plans. Nothing 
in this paragraph shall be construed to render any other section of 
this title applicable to church plans, except to the extent that such 
other section is incorporated by reference in this section.
    ``(b) Effect of Election.--
            ``(1) Preemption of state insurance laws regulating covered 
        church plans.--Subject to paragraphs (2) and (3), this section 
        shall supersede any and all State laws which regulate insurance 
        insofar as they may now or hereafter regulate church plans to 
        which this section applies or trusts established under such 
        church plans.
            ``(2) General state insurance regulation unaffected.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), nothing in this section shall be 
                construed to exempt or relieve any person from any 
                provision of State law which regulates insurance.
                    ``(B) Church plans not to be deemed insurance 
                companies or insurers.--Neither a church plan to which 
                this section applies, nor any trust established under 
                such a church plan, shall be deemed to be an insurance 
                company or other insurer or to be engaged in the 
                business of insurance for purposes of any State law 
                purporting to regulate insurance companies or insurance 
                contracts.
            ``(3) Preemption of certain state laws relating to premium 
        rate regulation and benefit mandates.--The provisions of 
        subsections (a)(2)(B) and (b) of section 805 shall apply with 
        respect to a church plan to which this section applies in the 
        same manner and to the same extent as such provisions apply 
        with respect to association health plans.
            ``(4) Definitions.--For purposes of this subsection--
                    ``(A) State law.--The term `State law' includes all 
                laws, decisions, rules, regulations, or other State 
                action having the effect of law, of any State. A law of 
                the United States applicable only to the District of 
                Columbia shall be treated as a State law rather than a 
                law of the United States.
                    ``(B) State.--The term `State' includes a State, 
                any political subdivision thereof, or any agency or 
                instrumentality of either, which purports to regulate, 
                directly or indirectly, the terms and conditions of 
                church plans covered by this section.
    ``(c) Requirements for Covered Church Plans.--
            ``(1) Fiduciary rules and exclusive purpose.--A fiduciary 
        shall discharge his duties with respect to a church plan to 
        which this section applies--
                    ``(A) for the exclusive purpose of:
                            ``(i) providing benefits to participants 
                        and their beneficiaries; and
                            ``(ii) defraying reasonable expenses of 
                        administering the plan;
                    ``(B) with the care, skill, prudence and diligence 
                under the circumstances then prevailing that a prudent 
                man acting in a like capacity and familiar with such 
                matters would use in the conduct of an enterprise of a 
                like character and with like aims; and
                    ``(C) in accordance with the documents and 
                instruments governing the plan.
        The requirements of this paragraph shall not be treated as not 
        satisfied solely because the plan assets are commingled with 
        other church assets, to the extent that such plan assets are 
        separately accounted for.
            ``(2) Claims procedure.--In accordance with regulations of 
        the Secretary, every church plan to which this section applies 
        shall--
                    ``(A) provide adequate notice in writing to any 
                participant or beneficiary whose claim for benefits 
                under the plan has been denied, setting forth the 
                specific reasons for such denial, written in a manner 
                calculated to be understood by the participant;
                    ``(B) afford a reasonable opportunity to any 
                participant whose claim for benefits has been denied 
                for a full and fair review by the appropriate fiduciary 
                of the decision denying the claim; and
                    ``(C) provide a written statement to each 
                participant describing the procedures established 
                pursuant to this paragraph.
            ``(3) Annual statements.--In accordance with regulations of 
        the Secretary, every church plan to which this section applies 
        shall file with the Secretary an annual statement--
                    ``(A) stating the names and addresses of the plan 
                and of the church, convention, or association 
                maintaining the plan (and its principal place of 
                business);
                    ``(B) certifying that it is a church plan to which 
                this section applies and that it complies with the 
                requirements of paragraphs (1) and (2);
                    ``(C) identifying the States in which participants 
                and beneficiaries under the plan are or likely will be 
                located during the 1-year period covered by the 
                statement; and
                    ``(D) containing a copy of a statement of actuarial 
                opinion signed by a qualified actuary that the plan 
                maintains capital, reserves, insurance, other financial 
                arrangements, or any combination thereof adequate to 
                enable the plan to fully meet all of its financial 
                obligations on a timely basis.
            ``(4) Disclosure.--At the time that the annual statement is 
        filed by a church plan with the Secretary pursuant to paragraph 
        (3), a copy of such statement shall be made available by the 
        Secretary to the State insurance commissioner (or similar 
        official) of any State. The name of each church plan and 
        sponsoring organization filing an annual statement in 
        compliance with paragraph (3) shall be published annually in 
        the Federal Register.
    ``(c) Enforcement.--The Secretary may enforce the provisions of 
this section in a manner consistent with section 502, to the extent 
applicable with respect to actions under section 502(a)(5), and with 
section 3(33)(D), except that, other than for the purpose of seeking a 
temporary restraining order, a civil action may be brought with respect 
to the plan's failure to meet any requirement of this section only if 
the plan fails to correct its failure within the correction period 
described in section 3(33)(D). The other provisions of part 5 (except 
sections 501(a), 503, 512, 514, and 515) shall apply with respect to 
the enforcement and administration of this section.
    ``(d) Definitions and Other Rules.--For purposes of this section--
            ``(1) In general.--Except as otherwise provided in this 
        section, any term used in this section which is defined in any 
        provision of this title shall have the definition provided such 
        term by such provision.
            ``(2) Seminary students.--Seminary students who are 
        enrolled in an institution of higher learning described in 
        section 3(33)(C)(iv) and who are treated as participants under 
        the terms of a church plan to which this section applies shall 
        be deemed to be employees as defined in section 3(6) if the 
        number of such students constitutes an insignificant portion of 
        the total number of individuals who are treated as participants 
        under the terms of the plan.''.

``SEC. 811. DEFINITIONS AND RULES OF CONSTRUCTION.

    ``(a) Definitions.--For purposes of this part--
            ``(1) Group health plan.--The term `group health plan' has 
        the meaning provided in section 733(a)(1).
            ``(2) Medical care.--The term `medical care' has the 
        meaning provided in section 733(a)(2).
            ``(3) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning provided in section 
        733(b)(1).
            ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning provided in section 733(b)(2).
            ``(5) Health status-related factor.--The term `health 
        status-related factor' has the meaning provided in section 
        733(d)(2).
            ``(6) Individual market.--
                    ``(A) In general.--The term `individual market' 
                means the market for health insurance coverage offered 
                to individuals other than in connection with a group 
                health plan.
                    ``(B) Treatment of very small groups.--
                            ``(i) In general.--Subject to clause (ii), 
                        such term includes coverage offered in 
                        connection with a group health plan that has 
                        fewer than 2 participants as current employees 
                        or participants described in section 732(d)(3) 
                        on the first day of the plan year.
                            ``(ii) State exception.--Clause (i) shall 
                        not apply in the case of health insurance 
                        coverage offered in a State if such State 
                        regulates the coverage described in such clause 
                        in the same manner and to the same extent as 
                        coverage in the small group market (as defined 
                        in section 2791(e)(5) of the Public Health 
                        Service Act) is regulated by such State.
            ``(7) Participating employer.--The term `participating 
        employer' means, in connection with an association health plan, 
        any employer, if any individual who is an employee of such 
        employer, a partner in such employer, or a self-employed 
        individual who is such employer (or any dependent, as defined 
        under the terms of the plan, of such individual) is or was 
        covered under such plan in connection with the status of such 
        individual as such an employee, partner, or self-employed 
        individual in relation to the plan.
            ``(8) Applicable state authority.--The term `applicable 
        State authority' means, with respect to a health insurance 
        issuer in a State, the State insurance commissioner or official 
        or officials designated by the State to enforce the 
        requirements of title XXVII of the Public Health Service Act 
        for the State involved with respect to such issuer.
            ``(9) 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.
    ``(b) Rules of Construction.--
            ``(1) Employers and employees.--For purposes of determining 
        whether a plan, fund, or program is an employee welfare benefit 
        plan which is an association health plan, and for purposes of 
        applying this title in connection with such plan, fund, or 
        program so determined to be such an employee welfare benefit 
        plan, the term `employer' (as defined in section 3(5)) and the 
        term `employee' (as defined in section 3(6)) shall include an 
        individual who is a partner or a self-employed individual.
            ``(2) Plans, funds, and programs treated as group health 
        plans.--In the case of any plan, fund, or program which was 
        established or is maintained for the purpose of providing 
        medical care (through the purchase of insurance or otherwise) 
        for individuals covered thereunder and which demonstrates to 
        the Secretary that all requirements for certification under 
        this part would be met with respect to such plan, fund, or 
        program if such plan, fund, or program were a group health 
        plan, such plan, fund, or program shall be treated for purposes 
        of this title as an employee welfare benefit plan on and after 
        the date of such demonstration.''.
    (b) Conforming Amendments to Preemption Rules.--
            (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is 
        amended by adding at the end the following new subparagraph:
    ``(E) The preceding subparagraphs of this paragraph do not apply 
with respect to any State law in the case of an association health plan 
which is certified under part 8.''.
            (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
                    (A) in subsection (b)(4), by striking ``Subsection 
                (a)'' and inserting ``Subsections (a) and (d)'';
                    (B) in subsection (b)(5), by striking ``subsection 
                (a)'' in subparagraph (A) and inserting ``subsection 
                (a) of this section and subsections (a)(2)(B) and (b) 
                of section 805'', and by striking ``subsection (a)'' in 
                subparagraph (B) and inserting ``subsection (a) of this 
                section or subsection (a)(2)(B) or (b) of section 
                805'';
                    (C) by redesignating subsection (d) as subsection 
                (e); and
                    (D) by inserting after subsection (c) the following 
                new subsection:
    ``(d)(1) Except as provided in subsection (b)(4), the provisions of 
this title shall supersede any and all State laws insofar as they may 
now or hereafter preclude a health insurance issuer from offering 
health insurance coverage in connection with an association health plan 
which is certified under part 8.
    ``(2) Except as provided in paragraphs (4) and (5) of subsection 
(b) of this section--
            ``(A) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan 
        certified under part 8 to a participating employer operating in 
        such State, the provisions of this title shall supersede any 
        and all laws of such State insofar as they may preclude a 
        health insurance issuer from offering health insurance coverage 
        of the same policy type to other employers operating in the 
        State which are eligible for coverage under such association 
        health plan, whether or not such other employers are 
        participating employers in such plan.
            ``(B) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan in a 
        State and the filing, with the applicable State authority, of 
        the policy form in connection with such policy type is approved 
        by such State authority, the provisions of this title shall 
        supersede any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as they may 
        preclude, upon the filing in the same form and manner of such 
        policy form with the applicable State authority in such other 
        State, the approval of the filing in such other State.
    ``(3) For additional provisions relating to association health 
plans, see subsections (a)(2)(B) and (b) of section 805.
    ``(4) For purposes of this subsection, the term `association health 
plan' has the meaning provided in section 801(a), and the terms `health 
insurance coverage', `participating employer', and `health insurance 
issuer' have the meanings provided such terms in section 811, 
respectively.''.
            (3) Section 514(b)(6)(A) of such Act (29 U.S.C. 
        1144(b)(6)(A)) is amended--
                    (A) in clause (i)(II), by striking ``and'' at the 
                end;
                    (B) in clause (ii), by inserting ``and which does 
                not provide medical care (within the meaning of section 
                733(a)(2)),'' after ``arrangement'', and by striking 
                ``title.'' and inserting ``title, and''; and
                    (C) by adding at the end the following new clause:
                    ``(iii) subject to subparagraph (E), in the case of 
                any other employee welfare benefit plan which is a 
                multiple employer welfare arrangement and which 
                provides medical care (within the meaning of section 
                733(a)(2)), any law of any State which regulates 
                insurance may apply.''.
    (c) Plan Sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
102(16)(B)) is amended by adding at the end the following new sentence: 
``Such term also includes a person serving as the sponsor of an 
association health plan under part 8.''.
    (d) Savings Clause.--Section 731(c) of such Act is amended by 
inserting ``or part 8'' after ``this part''.
    (e) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 734 the following new items:

           ``Part 8--Rules Governing Association Health Plans

``Sec. 801. Association health plans.
``Sec. 802. Certification of association health plans.
``Sec. 803. Requirements relating to sponsors and boards of trustees.
``Sec. 804. Participation and coverage requirements.
``Sec. 805. Other requirements relating to plan documents, contribution 
                            rates, and benefit options.
``Sec. 806. Maintenance of reserves and provisions for solvency for 
                            plans providing health benefits in addition 
                            to health insurance coverage.
``Sec. 807. Requirements for application and related requirements.
``Sec. 808. Notice requirements for voluntary termination.
``Sec. 809. Corrective actions and mandatory termination.
``Sec. 810. Special rules for church plans.
``Sec. 811. Definitions and rules of construction.''

SEC. 3. 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 
        ``control group'';
            (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''; and
                    (B) by striking ``similar to'' and inserting 
                ``consistent and coextensive with'';
            (3) by redesignating clauses (iv) and (v) as clauses (v) 
        and (vi), respectively; and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in 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 75 percent of the 
        aggregate number of all individuals who are employees or former 
        employees of participating employers and who are covered under 
        the arrangement,''.

SEC. 4. 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)(I) under or pursuant to one or more collective 
        bargaining agreements which are reached pursuant to collective 
        bargaining described in section 8(d) of the National Labor 
        Relations Act (29 U.S.C. 158(d)) or paragraph Fourth of section 
        2 of the Railway Labor Act (45 U.S.C. 152, paragraph Fourth) or 
        which are reached pursuant to labor-management negotiations 
        under similar provisions of State public employee relations 
        laws, and (II) in accordance with subparagraphs (C), (D), and 
        (E),''.
    (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) A plan or other arrangement is established or maintained in 
accordance with this subparagraph only if the following requirements 
are met:
            ``(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, other than a full time 
                employee of the employee organization (or a member of 
                the organization to the extent provided in regulations 
                of the Secretary), 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;
        except to the extent that the services used by the plan, 
        arrangement, organization, or other entity consist solely of 
        preparation of documents necessary for compliance with the 
        reporting and disclosure requirements of part 1 or 
        administrative, investment, or consulting services unrelated to 
        solicitation or enrollment of covered individuals.
            ``(ii) As of the end of the preceding plan year, the number 
        of covered individuals under the plan or other arrangement who 
        are identified to the plan or arrangement and 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 employees (or former employees who 
                were covered while employed) 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);
        does not exceed 15 percent of the total number of individuals 
        who are covered under the plan or arrangement and who are 
        present or former employees who are or were covered under the 
        plan or arrangement pursuant to a collective bargaining 
        agreement with a participating employer. The requirements of 
        the preceding provisions of this clause shall be treated as 
        satisfied if, as of the end of the preceding plan year, such 
        covered individuals are comprised solely of individuals who 
        were covered individuals under the plan or other arrangement as 
        of the date of the enactment of the Expansion of Portability 
        and Health Insurance Coverage Act of 1997 and, as of the end of 
        the preceding plan year, the number of such covered individuals 
        does not exceed 25 percent of the total number of present and 
        former employees enrolled under the plan or other arrangement.
            ``(iii) 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 that the plan or 
        other arrangement meets the requirements of clauses (i) and 
        (ii).
    ``(D) A plan or arrangement is established or maintained in 
accordance with this subparagraph only if--
            ``(i) all of the benefits provided under the plan or 
        arrangement consist of health insurance coverage; or
            ``(ii)(I) the plan or arrangement is a multiemployer plan; 
        and
            ``(II) the requirements of clause (B) of the proviso to 
        clause (5) of section 302(c) of the Labor Management Relations 
        Act, 1947 (29 U.S.C. 186(c)) are met with respect to such plan 
        or other arrangement.
    ``(E) A plan or arrangement is established or maintained in 
accordance with this subparagraph only if--
            ``(i) the plan or arrangement is in effect as of the date 
        of the enactment of the Expansion of Portability and Health 
        Insurance Coverage Act of 1997, or
            ``(ii) 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 subparagraphs (C) 
                and (D) are met with respect to the plan or other 
                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. 5. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION HEALTH PLANS.

    (a) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1131) is amended--
            (1) by inserting ``(a)'' after ``Sec. 501.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Any person who, either willfully or with willful blindness, 
falsely represents, to any employee, any employee's beneficiary, any 
employer, the Secretary, or any State, a plan or other arrangement 
established or maintained for the purpose of offering or providing any 
benefit described in section 3(1) to employees or their beneficiaries 
as--
            ``(1) being an association health plan which has been 
        certified under part 8;
            ``(2) having been established or maintained under or 
        pursuant to one or more collective bargaining agreements which 
        are reached pursuant to collective bargaining described in 
        section 8(d) of the National Labor Relations Act (29 U.S.C. 
        158(d)) or paragraph Fourth of section 2 of the Railway Labor 
        Act (45 U.S.C. 152, paragraph Fourth) or which are reached 
        pursuant to labor-management negotiations under similar 
        provisions of State public employee relations laws; or
            ``(3) being a plan or arrangement with respect to which the 
        requirements of subparagraph (C), (D), or (E) of section 3(40) 
        are met;
shall, upon conviction, be imprisoned not more than five years, be 
fined under title 18, United States Code, or both.''.
    (b) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(n)(1) Subject to paragraph (2), upon application by the 
Secretary showing the operation, promotion, or marketing of an 
association health plan (or similar arrangement providing benefits 
consisting of medical care (as defined in section 733(a)(2))) that--
            ``(A) is not certified under part 8, is subject under 
        section 514(b)(6) to the insurance laws of any State in which 
        the plan or arrangement offers or provides benefits, and is not 
        licensed, registered, or otherwise approved under the insurance 
        laws of such State; or
            ``(B) is an association health plan certified under part 8 
        and is not operating in accordance with the requirements under 
        part 8 for such certification,
a district court of the United States shall enter an order requiring 
that the plan or arrangement cease activities.
    ``(2) Paragraph (1) shall not apply in the case of an association 
health plan or other arrangement if the plan or arrangement shows 
that--
            ``(A) all benefits under it referred to in paragraph (1) 
        consist of health insurance coverage; and
            ``(B) with respect to each State in which the plan or 
        arrangement offers or provides benefits, the plan or 
        arrangement is operating in accordance with applicable State 
laws that are not superseded under section 514.
    ``(3) The court may grant such additional equitable relief, 
including any relief available under this title, as it deems necessary 
to protect the interests of the public and of persons having claims for 
benefits against the plan.''.
    (c) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended by adding at the end (after and below 
paragraph (2)) the following new sentence: ``The terms of each 
association health plan which is or has been certified under part 8 
shall require the board of trustees or the named fiduciary (as 
applicable) to ensure that the requirements of this section are met in 
connection with claims filed under the plan.''.

SEC. 6. 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 of States With Respect to Association Health 
Plans.--
            ``(1) 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 requirements for certification under part 8. 
        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.
            ``(2) 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.
            ``(3) 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 
        association health plan, as the primary domicile State to which 
        authority has been delegated pursuant to such agreements.''.

SEC. 7. EFFECTIVE DATE AND TRANSITIONAL RULES.

    (a) Effective Date.--The amendments made by sections 2, 5, and 6 of 
this Act shall take effect on January 1, 1999. The amendments made by 
sections 3 and 4 of this Act shall take effect on the date of the 
enactment of this Act. The Secretary shall issue all regulations 
necessary to carry out the amendments made by this Act before January 
1, 1999.
    (b) Exception.--Section 801(a)(2) of the Employee Retirement Income 
Security Act of 1974 (added by section 2) does not apply with respect 
to group health plans (as defined in section 733(a)(1) of such Act) 
existing on April 1, 1997, which do not provide health insurance 
coverage (as defined in section 733(b)(1) of such Act) on such date.
                                 <all>