[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2795 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 2795

To amend the Public Health Service Act to establish a nationwide health 
 insurance purchasing pool for small businesses and the self-employed 
   that would offer a choice of private health plans and make health 
         coverage more affordable, predictable, and accessible.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 2, 2008

  Mr. Durbin (for himself, Ms. Snowe, Mrs. Lincoln, and Mr. Coleman) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Public Health Service Act to establish a nationwide health 
 insurance purchasing pool for small businesses and the self-employed 
   that would offer a choice of private health plans and make health 
         coverage more affordable, predictable, and accessible.

    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 ``Small Business Health Options 
Program Act of 2008'' or the ``SHOP Act''.

SEC. 2. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT.

    The Public Health Service Act (42 U.S.C. 201 et seq.) is amended by 
adding at the end the following:

           ``TITLE XXX--SMALL BUSINESS HEALTH OPTIONS PROGRAM

``SEC. 3001. DEFINITIONS.

    ``(a) In General.--In this title:
            ``(1) Administrator.--The term `Administrator' means the 
        Administrator appointed under section 3002(a).
            ``(2) Small business health board.--The term `Small 
        Business Health Board' means the Board established under 
        section 3002(d).
            ``(3) Employee.--The term `employee' has the meaning given 
        such term under section 3(6) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002(6)). Such term shall not 
        include an employee of the Federal Government.
            ``(4) Employer.--The term `employer' has the meaning given 
        such term under section 3(5) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002(5)), except that such term 
        shall include employers who employed an average of at least 1 
        but not more than 100 employees (who worked an average of at 
        least 35 hours per week) on business days during the year 
        preceding the date of application, and shall include self-
        employed individuals with either not less than $5,000 in net 
        earnings or not less than $15,000 in gross earnings from self-
        employment in the preceding taxable year. Such term shall not 
        include the Federal Government.
            ``(5) Health insurance coverage.--The term `health 
        insurance coverage' has the meaning given such term in section 
        2791.
            ``(6) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning given such term in section 2791.
            ``(7) Health status-related factor.--The term `health 
        status-related factor' has the meaning given such term in 
        section 2791(d)(9).
            ``(8) Participating employer.--The term `participating 
        employer' means an employer that--
                    ``(A) elects to provide health insurance coverage 
                under this title to its employees; and
                    ``(B) is not offering other comprehensive health 
                insurance coverage to such employees.
    ``(b) Application of Certain Rules in Determination of Employer 
Size.--For purposes of subsection (a)(3):
            ``(1) Application of aggregation rule for employers.--All 
        persons treated as a single employer under subsection (b), (c), 
        (m), or (o) of section 414 of the Internal Revenue Code of 1986 
        shall be treated as 1 employer.
            ``(2) Employers not in existence in preceding year.--In the 
        case of an employer which was not in existence for the full 
        year prior to the date on which the employer applies to 
        participate, the determination of whether such employer meets 
        the requirements of subsection (a)(4) shall be based on the 
        average number of employees that it is reasonably expected such 
        employer will employ on business days in the employer's first 
        full year.
            ``(3) Predecessors.--Any reference in this subsection to an 
        employer shall include a reference to any predecessor of such 
        employer.
    ``(c) Waiver and Continuation of Participation.--
            ``(1) Waiver.--The Administrator may waive the limitations 
        relating to the size of an employer which may participate in 
        the health insurance program established under this title on a 
        case by case basis if the Administrator determines that such 
        employer makes a compelling case for such a waiver. In making 
        determinations under this paragraph, the Administrator may 
        consider the effects of the employment of temporary and 
        seasonal workers and other factors.
            ``(2) Continuation of participation.--An employer 
        participating in the program under this title that experiences 
        an increase in the number of employees so that such employer 
        has in excess of 100 employees, may not be excluded from 
        participation solely as a result of such increase in employees.
    ``(d) Treatment of Health Insurance Coverage as Group Health 
Plan.--Health insurance coverage offered under this title shall be 
treated as a group health plan for purposes of applying the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.) except 
to the extent that a provision of this title expressly provides 
otherwise.
    ``(e) Application of HIPAA Rules.--Notwithstanding any provision of 
State law, the provisions of subparts 1, 3, and 4 of part A of title 
XXVII shall apply to health insurance coverage offered under this 
title. A State may modify State law as appropriate to provide for the 
enforcement of such provisions for health insurance coverage offered in 
the State under this title.

``SEC. 3002. ADMINISTRATION OF SMALL BUSINESS HEALTH INSURANCE POOL.

    ``(a) Office and Administrator.--The Secretary shall designate an 
office within the Department of Health and Human Services to administer 
the program under this title. Such office shall be headed by an 
Administrator to be appointed by the Secretary.
    ``(b) Qualifications.--The Secretary shall ensure that the 
individual appointed to serve as the Administrator under subsection (a) 
has an appropriate background with experience in health insurance, 
business, or health policy.
    ``(c) Duties.--The Administrator shall--
            ``(1) enter into contracts with health insurance issuers to 
        provide health insurance coverage to individuals and employees 
        who enroll in health insurance coverage in accordance with this 
        title;
            ``(2) maintain the contracts for health insurance policies 
        when an employee elects which health plan offered under this 
        title to enroll in as permitted under section 3007(d)(7);
            ``(3) ensure that health insurance issuers comply with the 
        requirements of this title;
            ``(4) ensure that employers meet eligibility requirements 
        for participation in the health insurance pool established 
        under this title;
            ``(5) enter into agreements with entities to serve as 
        navigators, as defined in section 3003;
            ``(6) collect premiums from employers and employees and 
        make payments for health insurance coverage;
            ``(7) collect other information needed to administer the 
        program under this title;
            ``(8) compile, produce, and distribute information (which 
        shall not be subject to review or modification by the States) 
        to employers and employees (directly and through navigators) 
        concerning the open enrollment process, the health insurance 
        coverage available through the pool, and standardized 
        comparative information concerning such coverage, which shall 
        be available through an interactive Internet website, including 
        a description of the coverage plans available in each State and 
        comparative information, about premiums, index rates, benefits, 
        quality, and consumer satisfaction under such plans;
            ``(9) provide information to health insurance issuers, 
        including, at the discretion of the Administrator, notification 
        when proposed rates are not in a competitive range;
            ``(10) conduct public education activities (directly and 
        through navigators) to raise the awareness of the public of the 
        program under this title and the associated tax credit under 
        the Internal Revenue Code of 1986;
            ``(11) develop methods to facilitate enrollment in health 
        insurance coverage under this title, including through the use 
        of the Internet;
            ``(12) if appropriate, enter into contracts for the 
        performance of administrative functions under this title as 
        permitted under section 3009;
            ``(13) carefully consider benefit recommendations that are 
        endorsed by at least two-thirds of the members of the Small 
        Business Health Board;
            ``(14) establish and administer a contingency fund for risk 
        corridors as provided for in section 3008; and
            ``(15) carry out any other activities necessary to 
        administer this title.
    ``(d) Limitations.--The Administrator shall not--
            ``(1) negotiate premiums with participating health 
        insurance issuers; or
            ``(2) exclude health insurance issuers from participating 
        in the program under this title except for violating contracts 
        or the requirements of this title.
    ``(e) Small Business Health Board.--
            ``(1) In general.--There shall be established a Small 
        Business Health Board to monitor the implementation of the 
        program under this title and to make recommendations to the 
        Administrator concerning improvements in the program.
            ``(2) Appointment.--The Comptroller General shall appoint 
        13 individuals who have expertise in health care benefits, 
        financing, economics, actuarial science or other related 
        fields, to serve as members of the Small Business Health Board. 
        In appointing members under the preceding sentence, the 
        Comptroller General shall ensure that such members include--
                    ``(A) a mix of different types of professionals;
                    ``(B) a broad geographic representation;
                    ``(C) not less than 3 individuals with an employee 
                perspective;
                    ``(D) not less than 3 individuals with a small 
                business perspective, at least 1 of whom shall have a 
                self-employed perspective; and
                    ``(E) not less than 1 individual with a background 
                in insurance regulation.
            ``(3) Terms.--Members of the Small Business Health Board 
        shall serve for a term of 3 years, such terms to end on March 
        15 of the applicable year, except as provided in paragraph (4). 
        The Comptroller General shall stagger the terms for members 
        first appointed. A member may be reappointed after the 
        expiration of a term. A member may serve after expiration of a 
        term until a successor has been appointed.
            ``(4) Small business representatives.--Beginning on March 
        16, 2012, 3 of the individuals the Comptroller General appoints 
        to the Small Business Health Board shall be representatives of 
        the 3 navigators through which the largest number of 
        individuals have enrolled for health insurance coverage over 
        the previous 2-year period. Such appointees shall serve for 1 
        year. The Comptroller General shall consider for appointment in 
        years prior to the date specified in this paragraph, 
        individuals who are representatives of entities that may serve 
        as navigators.
            ``(5) Chairperson; vice chairperson.--The Comptroller 
        General shall designate a member of the Small Business Health 
        Board, at the time of appointment of such member, to serve as 
        Chairperson and a member to serve as Vice Chairperson for the 
        term of the appointment, except that in the case of a vacancy 
        of either such position, the Comptroller General may designate 
        another member to serve in such position for the remainder of 
        such member's term.
            ``(6) Compensation.--While serving on the business of the 
        Small Business Health Board (including travel time), a member 
        of the Small Business Health Board shall be entitled to 
        compensation at the per diem equivalent of the rate provided 
        for level IV of the Executive Schedule under section 5315 of 
        title 5, United States Code, and while so serving away from 
        home and the member's regular place of business, a member may 
        be allowed travel expenses, as authorized by the Chairperson of 
        the Small Business Health Board.
            ``(7) Disclosure.--The Comptroller General shall establish 
        a system for the public disclosure, by members of the Small 
        Business Health Board, of financial and other potential 
        conflicts of interest.
            ``(8) Meetings.--The Small Business Health Board shall meet 
        at the call of the Chairperson. Each such meeting shall be open 
        to the public.
            ``(9) Duties.--The Small Business Health Board shall--
                    ``(A) provide general oversight of the program 
                under this title and make recommendations to the 
                Administrator;
                    ``(B) monitor and make recommendations to the 
                Administrator on the benefit requirements for national 
                plans in this title;
                    ``(C) make recommendations concerning information 
                that the Administrator, health plans, and navigators 
                should distribute to employers and employees 
                participating in the program under this title; and
                    ``(D) monitor and make recommendations to the 
                Administrator on adverse selection within the program 
                under this title and between the coverage provided 
                under the program and the State-regulated health 
                insurance market.
            ``(10) Approval of recommendations.--A recommendation shall 
        require approval by not less than two-thirds of the members of 
        the Board.
            ``(11) Public notice and comment on recommendations.--The 
        Administrator shall--
                    ``(A) publish recommendations by the Small Business 
                Health Board in the Federal Register;
                    ``(B) solicit written comments concerning such 
                recommendations; and
                    ``(C) provide an opportunity for the presentation 
                of oral comments concerning such recommendations at a 
                public meeting.

``SEC. 3003. NAVIGATORS.

    ``(a) In General.--The Administrator shall enter into agreements 
with private and public entities, beginning a reasonable period prior 
to the beginning of the first calendar year in which health insurance 
coverage is offered under this title, under which such entities will 
serve as navigators.
    ``(b) Eligibility.--To be eligible to enter into an agreement under 
subsection (a), an entity shall demonstrate to the Administrator that 
the entity has existing relationships with, or could readily establish 
relationships with, employers and employees, and self-employed 
individuals, likely to be eligible to participate in the program under 
this title. Such entities may include trade, industry and professional 
associations, chambers of commerce, unions, small business development 
centers, and other entities that the Administrator determines to be 
capable of carrying out the duties described in subsection (c).
    ``(c) Duties.--An entity that serves as a navigator under an 
agreement under subsection (a) shall--
            ``(1) coordinate with the Administrator on public education 
        activities to raise awareness of the program under this title;
            ``(2) distribute information developed by the Administrator 
        on the open enrollment process, private health plans available 
        through the program under this title, and standardized 
        comparative information about the health insurance coverage 
        under the program;
            ``(3) distribute information about the availability of the 
        tax credit under section 36 of the Internal Revenue Code of 
        1986 as added by the Small Business Health Options Program Act 
        of 2008;
            ``(4) assist employers and employees in enrolling in the 
        program under this title; and
            ``(5) respond to questions about the program under this 
        title and participating plans.
    ``(d) Supplemental Materials.--In addition to information developed 
by the Administrator under subsection (c)(2), a navigator may develop 
and distribute other information that is related to the health 
insurance program established under this title, subject to review and 
approval by the Administrator and filing in each State in which the 
navigator operates.
    ``(e) Standards.--
            ``(1) In general.--The Administrator shall establish 
        standards for navigators under this section, including 
        provisions to avoid conflicts of interest. Under such 
        standards, a navigator may not--
                    ``(A) be a health insurance issuer; or
                    ``(B) receive any consideration directly or 
                indirectly from any health insurance issuer in 
                connection with the participation of any employer in 
                the program under this title or the enrollment of any 
                eligible employee in health insurance coverage under 
                this title.
            ``(2) Fair and impartial information and services.--The 
        Administrator shall consult with the Small Business Health 
        Board concerning the standards necessary to ensure that a 
        navigator will provide fair and impartial information and 
        services. An agreement between the Administrator and a 
        navigator may include specific provisions with respect to such 
        navigator to ensure that such navigator will provide fair and 
        impartial information and services. If a navigator, or entity 
        seeking to become a navigator, is a party to any arrangement 
        with any health insurance issuer to receive compensation 
        related to other health care programs not covered under this 
        title, the entity shall disclose the terms of such compensation 
        arrangements to the Administrator, and the Administrator shall 
        take such information into account in determining the 
        appropriate standards and agreement terms for such navigator.

``SEC. 3004. CONTRACTS WITH HEALTH INSURANCE ISSUERS.

    ``(a) In General.--The Administrator may enter into contracts with 
qualified health insurance issuers, without regard to section 5 of 
title 41, United States Code, or other statutes requiring competitive 
bidding, to provide health benefits plans to employees of participating 
employers and self-employed individuals under this title. Each contract 
shall be for a uniform term of at least 1 year, but may be made 
automatically renewable from term to term in the absence of notice of 
termination by either party. In entering into such contracts, the 
Administrator shall ensure that health benefits coverage is provided 
for an individual only, two adults in a household, one adult and one or 
more children, and a family.
    ``(b) Eligibility.--A health insurance issuer shall be eligible to 
enter into a contract under subsection (a) if such issuer--
            ``(1) is licensed to offer health benefits plan coverage in 
        each State in which the plan is offered; and
            ``(2) meets such other reasonable requirements as 
        determined appropriate by the Administrator, after an 
        opportunity for public comment and publication in the Federal 
        Register.
    ``(c) Cost-Sharing and Networks.--The Administrator shall ensure 
that health benefits plans with a range of cost-sharing and network 
arrangements are available under this title.
    ``(d) Revocation.--Approval of a health benefits plan participating 
in the program under this title may be withdrawn or revoked by the 
Administrator only after notice to the health insurance issuer involved 
and an opportunity for a hearing without regard to subchapter II of 
chapter 5 and chapter 7 of title 5, United States Code.
    ``(e) Conversion.--
            ``(1) In general.--Except as provided in paragraph (2), a 
        contract may not be made or a plan approved under this section 
        if the health insurance issuer under such contract or plan does 
        not provide to each enrollee whose coverage under the plan is 
        terminated, including a termination due to discontinuance of 
        the contract or plan, the option to have issued to that 
        individual a nongroup policy without evidence of insurability. 
        A health insurance issuer shall provide a notice of such option 
        to individuals who enroll in the plan. An enrollee who 
        exercises such conversion option shall pay the full periodic 
        charges for the nongroup policy.
            ``(2) Exceptions.--A health insurance issuer shall not be 
        required to offer a nongroup policy under paragraph (1) if the 
        termination under the plan occurred because--
                    ``(A) the enrollee failed to pay any required 
                monthly premiums under the plan;
                    ``(B) the enrollee performed an act or practice 
                that constitutes fraud in connection with the coverage 
                under the plan;
                    ``(C) the enrollee made an intentional 
                misrepresentation of a material fact under the terms of 
                coverage of the plan; or
                    ``(D) the terminated coverage under the plan was 
                replaced by similar coverage within 31 days after the 
                date of termination.
    ``(f) Payment of Premiums.--
            ``(1) In general.--Employers shall collect premium payments 
        from their employees through payroll deductions and shall 
        forward such payments and the contribution of the employer (if 
        any) to the Administrator. The Administrator shall develop 
        procedures through which such payments shall be received and 
        forwarded to the health insurance issuer involved.
            ``(2) Failure to pay.--
                    ``(A) In general.--Failure to pay premiums shall be 
                treated as a debt owed to the United States in the same 
                manner as the failure to repay a loan made to an 
                individual under the Higher Education Act of 1965 is 
                treated as such a debt.
                    ``(B) Procedures.--The Administrator shall 
                establish procedures--
                            ``(i) for the termination of employers that 
                        fail, for a two consecutive month period (or 
                        such other time period as determined 
                        appropriate by the Administrator), to make 
                        premium payments in a timely manner; and
                            ``(ii) for recovering the cost of unpaid 
                        and uncollected premiums through an adjustment 
                        in the rates charged for the subsequent year in 
                        accordance with section 3007(b)(1)(C).

``SEC. 3005. EMPLOYER PARTICIPATION.

    ``(a) Participation Procedure.--The Administrator shall develop a 
procedure for employers and self-employed individuals to participate in 
the program under this title, including procedures relating to the 
offering of health benefits plans to employees and the payment of 
premiums for health insurance coverage under this title. For the 
purpose of premium payments, a self-employed individual shall be 
considered an employer that is making a 100 percent contribution toward 
the premium amount.
    ``(b) Enrollment and Offering of Other Coverage.--
            ``(1) Enrollment.--A participating employer shall ensure 
        that each eligible employee has an opportunity to enroll in a 
        plan of the employer's choice or a plan of the employee's 
        choice in accordance with section 3007(d)(7).
            ``(2) Prohibition on offering other comprehensive health 
        benefit coverage.--A participating employer may not offer a 
        health insurance plan providing comprehensive health benefit 
        coverage to employees other than a health benefits plan offered 
        under this title.
            ``(3) Prohibition on coercion.--An employer shall not 
        pressure, coerce, or offer inducements to an employee to elect 
        not to enroll in coverage under the program under this title or 
        to select a particular health benefits plan.
            ``(4) Offer of supplemental coverage options.--
                    ``(A) In general.--A participating employer may 
                offer supplementary coverage options to employees.
                    ``(B) Definition.--In subparagraph (A), the term 
                `supplementary coverage' means benefits described as 
                `excepted benefits' under section 2791(c).
    ``(c) Regulatory Flexibility.--In developing the procedure under 
subsection (a), the Administrator shall comply with the requirements 
specified under the Regulatory Flexibility Act under chapter 6 of title 
5, United States Code, consider the economic impacts that the 
regulation will have on small businesses, and consider regulatory 
alternatives that would mitigate such impact. The Administrator shall 
publish and publicly disseminate a small business compliance guide, 
pursuant to section 212 of the Small Business Regulatory Enforcement 
Fairness Act, that explains the compliance requirements for employer 
participation. Such compliance guide shall be published not later than 
the date of the publication of the final rule under this title, or the 
effective date of such rules, whichever is later.
    ``(d) Rule of Construction.--Except as provided in section 3004(f), 
nothing in this title shall be construed to require that an employer 
make premium contributions on behalf of employees.

``SEC. 3006. ELIGIBILITY AND ENROLLMENT.

    ``(a) In General.--An individual shall be eligible to enroll in 
health insurance coverage under this title for coverage beginning in 
2011 if such individual is an employee of a participating employer 
described in section 3001(a)(4) or is a self-employed individual as 
defined in section 401(c)(1)(B) of the Internal Revenue Code of 1986 
and meets the definition of a participating employer in section 
3001(a)(8). An employer may allow employees who average fewer than 35 
hours per week to enroll.
    ``(b) Limitation.--A health insurance issuer may not refuse to 
provide coverage to any eligible individual under subsection (a) who 
selects a health benefits plan offered by such issuer under this title.
    ``(c) Type of Enrollment.--An eligible individual may enroll as an 
individual or as an adult with one or more children regardless of 
whether another adult is present in the enrollee's household or family.
    ``(d) Open Enrollment.--
            ``(1) In general.--The Administrator shall establish an 
        annual open enrollment period during which an employer may 
        elect to become a participating employer and an employee may 
        enroll in a health benefits plan under this title for the 
        following calendar year.
            ``(2) Open enrollment period.--For purposes of this title, 
        the term `open enrollment period' means, with respect to 
        calendar year 2011 and each succeeding calendar year, the 
        period beginning on October 1, 2010, and ending December 1, 
        2010, and each succeeding period beginning October 1 and ending 
        December 1. Coverage in a health benefits plan selected during 
        such an open enrollment period shall begin on January 1 of the 
        calendar year following the selection.
            ``(3) Newly eligible employers and employees.--
        Notwithstanding the open enrollment period provided for under 
        paragraph (2), the Administrator shall establish an enrollment 
        process to enable a newly eligible employer or an employer with 
        an existing health benefits policy whose term is ending to 
        become a participating employer and for an employee of such 
        employer, or a new employee of a participating employer, to 
        enroll in a health benefits plan under this title outside of an 
        open enrollment period. The Administrator may establish a 
        process for setting the renewal date for the participation of 
        an employer that initially becomes a participating employer 
        outside of the open enrollment period to coincide with a 
        subsequent open enrollment period.
            ``(4) Limitation of changing enrollment.--An employer or 
        employee (as the case may be) may elect to change the health 
        benefits plan that the employee is enrolled in only during an 
        open enrollment period.
            ``(5) Effectiveness of election and change of election.--An 
        election to change a health benefits plan that is made during 
        the open enrollment period under paragraph (2) shall take 
        effect as of the first day of the following calendar year.
            ``(6) Continuation of enrollment.--An employee who has 
        enrolled in a health benefits plan under this title is 
        considered to have been continuously enrolled in that health 
        benefits plan until such time as--
                    ``(A) the employer or employee (as the case may be) 
                elects to change health benefits plans; or
                    ``(B) the health benefits plan is terminated.
    ``(e) Providing Information To Promote Informed Choice.--The 
Administrator shall compile, produce, and disseminate information to 
employers, employees, and navigators under section 3002(c)(8) to 
promote informed choice that shall be made available at least 30 days 
prior to the beginning of each open enrollment period.
    ``(f) Termination of Employment.--An employee may remain enrolled 
in a health plan under this title for the remainder of the calendar 
year following the termination or separation of the employee from 
employment or termination of the employer, if the employee pays 100 
percent of the monthly premium for the remainder of the year involved.
    ``(g) Rule of Construction.--Nothing in this title shall be 
construed to prohibit a health insurance issuer providing coverage 
through the program under this title from using the services of a 
licensed agent or broker.

``SEC. 3007. HEALTH COVERAGE AVAILABLE WITHIN THE SMALL BUSINESS POOL.

    ``(a) Preexisting Condition Exclusions.--
            ``(1) In general.--Each contract under this title may 
        include a preexisting condition exclusion as defined under 
        section 9801(b)(1) of the Internal Revenue Code of 1986.
            ``(2) Exclusion period.--A preexisting condition exclusion 
        under this subsection shall provide for coverage of a 
        preexisting condition to begin not later than 6 months after 
        the date on which the coverage of the individual under a health 
        benefits plan commences, reduced by the aggregate of 1 day for 
        each day that the individual was covered under creditable 
        health insurance coverage (as defined for purposes of section 
        2701(c)) immediately preceding the date the individual 
        submitted an application for coverage under this title. This 
        provision shall be applied notwithstanding the applicable 
        provision for the reduction of the exclusion period provided 
        for in section 701(a)(3) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1181(a)(3)).
    ``(b) Rates and Premiums; State Laws.--
            ``(1) In general.--Rates charged and premiums paid for a 
        health benefits plan under this title--
                    ``(A) shall be determined in accordance with 
                subsection (d);
                    ``(B) may be annually adjusted; and
                    ``(C) shall be adjusted to cover the administrative 
                costs of the Administrator under this title and the 
                office established under section 3002.
            ``(2) Benefit mandate laws.--With respect to a contract 
        entered into under this title under which a health insurance 
        issuer will offer health benefits plan coverage, State mandated 
        benefit laws in effect in the State in which the plan is 
        offered shall continue to apply, except in the case of a 
        nationwide plan.
            ``(3) Limitation.--Nothing in this subsection shall be 
        construed to preempt any State or local law (including any 
        State grievance, claims, and appeals procedure laws, State 
        provider mandate laws, and State network adequacy laws) except 
        those laws and regulations described in subsection (b)(2), 
        (d)(2)(B), and (d)(5).
    ``(c) Termination and Reenrollment.--If an individual who is 
enrolled in a health benefits plan under this title voluntarily 
terminates the enrollment, except in the case of an individual who has 
lost or changes employment or whose employer is terminated for failure 
to pay premiums, the individual shall not be eligible for reenrollment 
until the first open enrollment period following the expiration of 6 
months after the date of such termination.
    ``(d) Rating Rules and Transitional Application of State Law.--
            ``(1) Years 2011 and 2012.--With respect to calendar years 
        2011 and 2012 (open enrollment period beginning October 1, 
        2010, and October 1, 2011), the following shall apply:
                    ``(A) In the case of an employer that elects to 
                participate in the program under this title, the State 
                rating requirements applicable to employers purchasing 
                health insurance coverage in the small group market in 
                the State in which the employer is located shall apply 
                with respect to such coverage, except that premium 
                rates for such coverage shall not vary based on health-
                status related factors.
                    ``(B) State rating requirements shall apply to 
                health insurance coverage purchased in the small group 
                market in the State, except that a State shall be 
                prohibited from allowing premium rates to vary based on 
                health-status related factors.
            ``(2) Subsequent years.--
                    ``(A) NAIC recommendations.--
                            ``(i) Study.--Beginning in 2009, the 
                        Administrator shall contract with the National 
                        Association of Insurance Commissioners to 
                        conduct a study of the rating requirements 
                        utilized in the program under this title and 
                        the rating requirements that apply to health 
                        insurance purchased in the small group markets 
                        in the States, and to develop recommendations 
                        concerning rating requirements. Such 
                        recommendations shall be submitted to the 
                        appropriate committees of Congress during 
                        calendar year 2011.
                            ``(ii) Consultation.--In conducting the 
                        study under clause (i), the National 
                        Association of Insurance Commissioners shall 
                        consult with key stakeholders (including small 
                        businesses, self-employed individuals, 
                        employees of small businesses, health insurance 
                        issuers, health care providers, and patient 
                        advocates).
                            ``(iii) Recommendations.--During calendar 
                        year 2011, the recommendations of the National 
                        Association of Insurance Commissioners shall be 
                        submitted to Congress (in the form of a 
                        legislative proposal), and shall concern--
                                    ``(I) rating requirements for 
                                health insurance coverage under this 
                                title for calendar year 2013 and 
                                subsequent calendar years; and
                                    ``(II) a maximum permissible 
                                variance between State rating 
                                requirements and the rating 
                                requirements for coverage under this 
                                title that will allow State flexibility 
                                without causing significant adverse 
                                selection for health insurance coverage 
                                under this title.
                    ``(B) Application of requirements.--If, pursuant to 
                this subsection, an Act is enacted to implement rating 
                requirements pursuant to the recommendations submitted 
                under subparagraph (A), or alternative rating 
                requirements developed by Congress, such rating 
                requirements shall apply to the program under this 
                title beginning in calendar year 2013 (open enrollment 
                periods beginning October 1, 2012, and thereafter).
            ``(3) Failure to enact legislation.--If an Act is not 
        enacted as provided for in paragraph (2)(B), the fallback 
        rating rules under paragraph (5) shall apply beginning in 
        calendar year 2013 (open enrollment periods beginning October 
        1, 2012, and thereafter).
            ``(4) Expedited congressional consideration.--
                    ``(A) Introduction and committee consideration.--
                            ``(i) Introduction.--A legislative proposal 
                        submitted to Congress pursuant to paragraph (2) 
                        shall be introduced in the House of 
                        Representatives by the Speaker, and in the 
                        Senate by the majority leader, immediately upon 
                        receipt of the language and shall be referred 
                        to the appropriate committees of Congress. If 
                        the proposal is not introduced in accordance 
                        with the preceding sentence, legislation may be 
                        introduced in either House of Congress by any 
                        member thereof.
                            ``(ii) Committee consideration.--
                        Legislation introduced in the House of 
                        Representatives and the Senate under clause (i) 
                        shall be referred to the appropriate committees 
                        of jurisdiction of the House of Representatives 
                        and the Senate. Not later than 45 calendar days 
                        after the introduction of the legislation or 
                        February 15th, 2012, whichever is later, the 
                        committee of Congress to which the legislation 
                        was referred shall report the legislation or a 
                        committee amendment thereto. If the committee 
                        has not reported such legislation (or identical 
                        legislation) at the end of 45 calendar days 
                        after its introduction, or February 15th, 2012, 
                        whichever is later, such committee shall be 
                        deemed to be discharged from further 
                        consideration of such legislation and such 
                        legislation shall be placed on the appropriate 
                        calendar of the House involved.
                    ``(B) Expedited procedure.--
                            ``(i) Consideration.--Not later than 15 
                        calendar days after the date on which a 
                        committee has been or could have been 
                        discharged from consideration of legislation 
                        under this paragraph, the Speaker of the House 
                        of Representatives, or the Speaker's designee, 
                        or the majority leader of the Senate, or the 
                        leader's designee, shall move to proceed to the 
                        consideration of the committee amendment to the 
                        legislation, and if there is no such amendment, 
                        to the legislation. It shall also be in order 
                        for any member of the House of Representatives 
                        or the Senate, respectively, to move to proceed 
                        to the consideration of the legislation at any 
                        time after the conclusion of such 15-day 
                        period. All points of order against the 
                        legislation (and against consideration of the 
                        legislation) with the exception of points of 
                        order under the Congressional Budget Act of 
                        1974 are waived. A motion to proceed to the 
                        consideration of the legislation is highly 
                        privileged in the House of Representatives and 
                        is privileged in the Senate and is not 
                        debatable. The motion is not subject to 
                        amendment, to a motion to postpone 
                        consideration of the legislation, or to a 
                        motion to proceed to the consideration of other 
                        business. A motion to reconsider the vote by 
                        which the motion to proceed is agreed to or not 
                        agreed to shall not be in order. If the motion 
                        to proceed is agreed to, the House of 
                        Representatives or the Senate, as the case may 
                        be, shall immediately proceed to consideration 
                        of the legislation in accordance with the 
                        Standing Rules of the House of Representatives 
                        or the Senate, as the case may be, without 
                        intervening motion, order, or other business, 
                        and the resolution shall remain the unfinished 
                        business of the House of Representatives or the 
                        Senate, as the case may be, until disposed of, 
                        except as provided in clause (iii).
                            ``(ii) Consideration by other house.--If, 
                        before the passage by one House of the 
                        legislation that was introduced in such House, 
                        such House receives from the other House 
                        legislation as passed by such other House--
                                    ``(I) the legislation of the other 
                                House shall not be referred to a 
                                committee and shall immediately 
                                displace the legislation that was 
                                introduced in the House in receipt of 
                                the legislation of the other House; and
                                    ``(II) the legislation of the other 
                                House shall immediately be considered 
                                by the receiving House under the same 
                                procedures applicable to legislation 
                                reported by or discharged from a 
                                committee under this paragraph.
                            ``Upon disposition of legislation that is 
                        received by one House from the other House, it 
                        shall no longer be in order to consider the 
                        legislation that was introduced in the 
                        receiving House.
                            ``(iii) Senate vote requirement.--
                        Legislation under this paragraph shall only be 
                        approved in the Senate if affirmed by the votes 
                        of 3/5 of the Senators duly chosen and sworn. 
                        If legislation in the Senate has not reached 
                        final passage within 10 days after the motion 
                        to proceed is agreed to (excluding periods in 
                        which the Senate is in recess) it shall be in 
                        order for the majority leader to file a cloture 
                        petition on the legislation or amendments 
                        thereto, in accordance with rule XXII of the 
                        Standing Rules of the Senate. If such a cloture 
                        motion on the legislation fails, is shall be in 
                        order for the majority leader to proceed to 
                        other business and the legislation shall be 
                        returned to or placed on the Senate calendar.
                            ``(iv) Consideration in conference.--
                        Immediately upon a final passage of the 
                        legislation that results in a disagreement 
                        between the two Houses of Congress with respect 
                        to the legislation, conferees shall be 
                        appointed and a conference convened. Not later 
                        than 15 days after the date on which conferees 
                        are appointed (excluding periods in which one 
                        or both Houses are in recess), the conferees 
                        shall file a report with the House of 
                        Representatives and the Senate resolving the 
                        differences between the Houses on the 
                        legislation. Notwithstanding any other rule of 
                        the House of Representatives or the Senate, it 
                        shall be in order to immediately consider a 
                        report of a committee of conference on the 
                        legislation filed in accordance with this 
                        subclause. Debate in the House of 
                        Representatives and the Senate on the 
                        conference report shall be limited to 10 hours, 
                        equally divided and controlled by the Speaker 
                        of the House of Representatives and the 
                        minority leader of the House of Representatives 
                        or their designees and the majority and 
                        minority leaders of the Senate or their 
                        designees. A vote on final passage of the 
                        conference report shall occur immediately at 
                        the conclusion or yielding back of all time for 
                        debate on the conference report. The conference 
                        report shall be approved in the Senate only if 
                        affirmed by the votes of 3/5 of the Senators 
                        duly chosen and sworn.
                    ``(C) Rules of the senate and house of 
                representatives.--This paragraph is enacted by 
                Congress--
                            ``(i) as an exercise of the rulemaking 
                        power of the Senate and House of 
                        Representatives, respectively, and is deemed to 
                        be part of the rules of each House, 
                        respectively, but applicable only with respect 
                        to the procedure to be followed in that House 
                        in the case of legislation under this 
                        paragraph, and it supersedes other rules only 
                        to the extent that it is inconsistent with such 
                        rules; and
                            ``(ii) with full recognition of the 
                        constitutional right of either House to change 
                        the rules (so far as they relate to the 
                        procedure of that House) at any time, in the 
                        same manner, and to the same extent as in the 
                        case of any other rule of that House.
            ``(5) Fallback rating rules.--For purposes of paragraph 
        (3), the fallback rating rules are as follows:
                    ``(A) Program.--
                            ``(i) Rating rules.--A health insurance 
                        issuer that enters into a contract under the 
                        program under this title shall determine the 
                        amount of premiums to assess for coverage under 
                        a health benefits plan based on a community 
                        rate that may be annually adjusted only--
                                    ``(I) based on the age of covered 
                                individuals (subject to clause (iii));
                                    ``(II) based on the geographic area 
                                involved if the adjustment is based on 
                                geographical divisions that are not 
                                smaller than a metropolitan statistical 
                                area and the issuer provides evidence 
                                of geographic variation in cost of 
                                services;
                                    ``(III) based on industry (subject 
                                to clause (iv));
                                    ``(IV) based on tobacco use; and
                                    ``(V) based on whether such 
                                coverage is for an individual, 2 adults 
                                in a household, 1 adult and 1 or more 
                                children, or a family.
                            ``(ii) Limitation.--Premium rates charged 
                        for coverage under the program under this title 
                        shall not vary based on health-status related 
                        factors, gender, class of business, or claims 
                        experience or any other factor not described in 
                        clause (i).
                            ``(iii) Age adjustments.--
                                    ``(I) In general.--With respect to 
                                clause (i)(I), in making adjustments 
                                based on age, the Administrator shall 
                                establish not more than 5 age brackets 
                                to be used by a health insurance issuer 
                                in establishing rates for individuals 
                                under the age of 65. The rates for any 
                                age bracket shall not exceed 300 
                                percent of the rate for the lowest age 
                                bracket. Age-related premiums may not 
                                vary within age brackets.
                                    ``(II) Ages 65 and older.--With 
                                respect to clause (i)(I), a health 
                                insurance issuer may develop separate 
                                rates for covered individuals who are 
                                65 years of age or older for whom the 
                                primary payor for health benefits 
                                coverage is the medicare program under 
                                title XVIII of the Social Security Act, 
                                for the coverage of health benefits 
                                that are not otherwise covered under 
                                medicare.
                            ``(iv) Industry adjustment.--With respect 
                        to clause (i)(III), in making adjustments based 
                        on industry, the rates for any industry shall 
                        not exceed 115 percent of the rate for the 
                        lowest industry and shall be based on evidence 
                        of industry variation in cost of services.
                    ``(B) State rating rules.--State rating 
                requirements shall apply to health insurance coverage 
                purchased in the small group market, except that a 
                State shall not permit premium rates to vary based on 
                health-status related factors.
            ``(6) State with less premium variation.--Effective 
        beginning in calendar year 2013, in the case of a State that 
        provides a rating variance with respect to age that is less 
        than the Federal limit established under paragraph (2)(B) or 
        (3) or that provides for some form of community rating, or that 
        provides a rating variance with respect to industry that is 
        less than the Federal limit established under paragraph (2)(B) 
        or (3), or that provides a rating variance with respect to the 
        geographic area involved that is less than the Federal limit 
        established in paragraph (2)(B) or (3), premium rates charged 
        for health insurance coverage under this title in such State 
        with respect to such factor shall reflect the rating 
        requirements of such State.
            ``(7) Employee choice.--
                    ``(A) Calendar years 2011 and 2012.--With respect 
                to calendar years 2011 and 2012 (open enrollment 
                periods beginning October 1, 2010, and October 1, 
                2011), in the case of a State that applies community 
                rating or adjusted community rating where any age 
                bracket does not exceed 300 percent of the lowest age 
                bracket, employees of an employer located in that State 
                may elect to enroll in any health plan offered under 
                this title.
                    ``(B) Subsequent years.--Beginning in calendar year 
                2013 (open enrollment periods beginning October 1, 
                2012, and thereafter), employees of an employer that 
                participates in the program under this title may elect 
                to enroll in any health plan offered under this title.
                    ``(C) Exception.--In any State or year in which an 
                employee is not able to select a health plan as 
                provided for in subparagraph (A) or (B), the employer 
                shall select the health plan or plans that shall be 
                made available to the employees of such employer.
            ``(8) State approval of rates.--State laws requiring the 
        approval of rates with respect to health insurance shall 
        continue to apply to health insurance coverage under this title 
        in such State unless the State fails to enforce the application 
        of rates that would otherwise apply to health insurance issuers 
        under the program under this title.
    ``(e) Benefits.--
            ``(1) Statement of benefits.--Each contract under this 
        title shall contain a detailed statement of benefits offered 
        and shall include information concerning such maximums, 
        limitations, exclusions, and other definitions of benefits as 
        the Administrator considers necessary or reasonable.
            ``(2) Nationwide plans.--
                    ``(A) In general.--In the case of contracts with 
                health insurance issuers that offer a health benefit 
                plan on a nationwide basis, in the first year after the 
                date of enactment of this title, the benefit package 
                shall include benefits established by the 
                Administrator.
                    ``(B) Process for establishing benefits for 
                nationwide plans.--The benefits provide for under 
                subparagraph (A) shall be determined as follows:
                            ``(i) Not later than 30 days after the date 
                        of enactment of this title, the Secretary shall 
                        enter into a contract with the Institute of 
                        Medicine to develop a minimum set of benefits 
                        to be offered by nationwide plans.
                            ``(ii) In developing such minimum set of 
                        benefits, the Institute of Medicine shall 
                        convene public forums to allow input from key 
                        stakeholders (including small businesses, self-
                        employed individuals, employees of small 
                        businesses, health insurance issuers, insurance 
                        regulators, health care providers, and patient 
                        advocates) and shall consult with the Small 
                        Business Health Board.
                            ``(iii) The Institute of Medicine shall 
                        consider--
                                    ``(I) the clinical appropriateness 
                                and effectiveness of the benefits 
                                covered;
                                    ``(II) the affordability of the 
                                benefits covered;
                                    ``(III) the financial protection of 
                                enrollees against high health care 
                                expenses;
                                    ``(IV) access to necessary health 
                                care services; and
                                    ``(V) benefits similar to those 
                                available in the small group market on 
                                the date of enactment of this title.
                            ``(iv) The benefits package shall not be 
                        discriminatory or be likely to promote or 
                        induce adverse selection.
                            ``(v) The Administrator shall publish the 
                        benefits recommended by the Institute of 
                        Medicine for public comment.
                            ``(vi) Based on the comments received, the 
                        Administrator may make changes only to the 
                        extent that the recommendation from the 
                        Institute of Medicine is not consistent with 
                        the criteria contained in clause (iii) or there 
                        is a compelling need for the changes to ensure 
                        the effective functioning of the program.
                    ``(C) Changes to benefits.--
                            ``(i) In genera1.--By a vote of a two-
                        thirds majority, the Small Business Health 
                        Board may recommend to the Administrator 
                        changes to the benefit package for nationwide 
                        plans under this paragraph for years subsequent 
                        to the first year in which such benefits are in 
                        effect.
                            ``(ii) Reduction in benefits.--The 
                        Administrator may reduce benefits that were 
                        previously covered under this paragraph only 
                        if--
                                    ``(I) two-thirds of the Small 
                                Business Health Board recommend such 
                                change; or
                                    ``(II) there is a compelling need 
                                for the change to prevent a substantial 
                                reduction in participation in the 
                                program under this title.
    ``(f) Additional Premium for Delayed Enrollment.--
            ``(1) In general.--A self-employed individual who is 
        eligible to participate in the program under this title, who 
        does not reside in a State where a self-employed individual is 
        eligible for coverage in the small group market, and who does 
        not elect to enroll in coverage under such program in the first 
        year in which the self-employed individual is eligible to so 
        enroll, shall be subject to an additional premium for delayed 
        enrollment.
            ``(2) Amount.--The Administrator shall establish the amount 
        of the additional premium under paragraph (1), which shall be 
        the amount determined by the Administrator to be actuarially 
        appropriate, to encourage enrollment, and to reduce adverse 
        selection. The amount of the additional premium shall be 
        calculated by the Administrator based on the number of years 
        specified in paragraph (4).
            ``(3) Payment.--A self-employed individual shall pay the 
        additional premium under this subsection, if any, for a period 
        of time equal to the number of years specified in paragraph 
        (4). After the expiration of such period the additional premium 
        for delayed enrollment shall be terminated.
            ``(4) Years.--The number of years specified in this 
        paragraph is the number of years that the self-employed 
        individual involved was eligible to participate in the program 
        under this title but did not enroll in coverage under such 
        program and did not otherwise have creditable coverage (as 
        defined for purposes of section 2701(c)).
    ``(g) State Enforcement.--
            ``(1) State authority.--With respect to the enforcement of 
        provisions in this title that supersede State law (as described 
        in paragraph (2)), a State may require that health insurance 
        issuers that issue, sell, renew, or offer health insurance 
        coverage in the State in the small group market or through the 
        program under this title, comply with the requirements of this 
        title with respect to such issuers.
            ``(2) Provisions described.--The provisions described in 
        this paragraph shall include the following:
                    ``(A) Prohibitions on varying premium rates based 
                on health-status related factors (subsections (d)(1)(A) 
                and (B) of section 3007).
                    ``(B) The implementation of rating requirements 
                that shall apply to the program under this title 
                beginning in calendar year 2013 (subsections (d)(2)(B) 
                and (d)(3) of section 3007).
                    ``(C) Benefit requirements for nationwide plans 
                available in the program under this title (subsection 
                (e)).
            ``(3) Failure to implement or enforce provisions.--In the 
        case of a determination by the Secretary that a State has 
        failed to substantially enforce a provision (or provisions) 
        described in paragraph (2) with respect to health insurance 
        issuers in the State, the Secretary shall enforce such 
        provision (or provisions).
            ``(4) Secretarial enforcement authority.--The Secretary 
        shall have the same authority in relation to the enforcement of 
        the provisions of this title with respect to issuers of health 
        insurance coverage in a State as the Secretary has under 
        section 2722(b)(2) in relation to the enforcement of the 
        provisions of part A of title XXVII with respect to issuers of 
        health insurance coverage in the small group market in the 
        State.
    ``(h) State Opt Out.--A State may prohibit small employers and 
self-employed individuals in the State from participating in the 
program under this title if the State--
            ``(1) defines its small group market to include groups of 
        one (so that self-employed individuals are eligible for 
        coverage in such market);
            ``(2) prohibits the use of health-status related factors 
        and other factors described in subsection (d)(5)(A);
            ``(3) has in effect rating rules that--
                    ``(A) in calendar years 2011 and 2012, comply with 
                subsection (d)(5)(A); and
                    ``(B) in calendar year 2013 and thereafter, comply 
                with subsection (d)(2)(B) or (d)(3), whichever is in 
                effect for such calendar year;
        except that such rules may impose limits on rating variation in 
        addition to those provided for in such subsection;
            ``(4) maintains a State-wide purchasing pool that provides 
        purchasers in the small group market a choice of health benefit 
        plans, with comparative information provided concerning such 
        plans and the premiums charged for such plans made available 
        through the Internet; and
            ``(5) enacts a law to request an opt out under this 
        subsection.

``SEC. 3008. ENCOURAGING PARTICIPATION BY HEALTH INSURANCE ISSUERS 
              THROUGH ADJUSTMENTS FOR RISK.

    ``(a) Application of Risk Corridors.--
            ``(1) In general.--This section shall only apply to health 
        insurance issuers with respect to health benefits plans offered 
        under this Act during any of calendar years 2011 through 2013.
            ``(2) Notification of costs under the plan.--In the case of 
        a health insurance issuer that offers a health benefits plan 
        under this title in any of calendar years 2011 through 2013, 
        the issuer shall notify the Administrator, before such date in 
        the succeeding year as the Administrator specifies, of the 
        total amount of costs incurred in providing benefits under the 
        health benefits plan for the year involved and the portion of 
        such costs that is attributable to administrative expenses.
            ``(3) Allowable costs defined.--For purposes of this 
        section, the term `allowable costs' means, with respect to a 
        health benefits plan offered by a health insurance issuer under 
        this title, for a year, the total amount of costs described in 
        paragraph (2) for the plan and year, reduced by the portion of 
        such costs attributable to administrative expenses incurred in 
        providing the benefits described in such paragraph.
    ``(b) Adjustment of Payment.--
            ``(1) No adjustment if allowable costs within 3 percent of 
        target amount.--If the allowable costs for the health insurance 
        issuer with respect to the health benefits plan involved for a 
        calendar year are at least 97 percent, but do not exceed 103 
        percent, of the target amount for the plan and year involved, 
        there shall be no payment adjustment under this section for the 
        plan and year.
            ``(2) Increase in payment if allowable costs above 103 
        percent of target amount.--
                    ``(A) Costs between 103 and 108 percent of target 
                amount.--If the allowable costs for the health 
                insurance issuer with respect to the health benefits 
                plan involved for the year are greater than 103 
                percent, but not greater than 108 percent, of the 
                target amount for the plan and year, the Administrator 
                shall reimburse the issuer for such excess costs 
                through payment to the issuer of an amount equal to 75 
                percent of the difference between such allowable costs 
                and 103 percent of such target amount.
                    ``(B) Costs above 108 percent of target amount.--If 
                the allowable costs for the health insurance issuer 
                with respect to the health benefits plan involved for 
                the year are greater than 108 percent of the target 
                amount for the plan and year, the Administrator shall 
                reimburse the issuer for such excess costs through 
                payment to the issuer in an amount equal to the sum 
                of--
                            ``(i) 3.75 percent of such target amount; 
                        and
                            ``(ii) 90 percent of the difference between 
                        such allowable costs and 108 percent of such 
                        target amount.
            ``(3) Reduction in payment if allowable costs below 97 
        percent of target amount.--
                    ``(A) Costs between 92 and 97 percent of target 
                amount.--If the allowable costs for the health 
                insurance issuer with respect to the health benefits 
                plan involved for the year are less than 97 percent, 
                but greater than or equal to 92 percent, of the target 
                amount for the plan and year, the issuer shall be 
                required to pay into a contingency reserve fund 
                established and maintained by the Administrator, an 
                amount equal to 75 percent of the difference between 97 
                percent of the target amount and such allowable costs.
                    ``(B) Costs below 92 percent of target amount.--If 
                the allowable costs for the health insurance issuer 
                with respect to the health benefits plan involved for 
                the year are less than 92 percent of the target amount 
                for the plan and year, the issuer shall be required to 
                pay into the contingency fund established under 
                subparagraph (A), an amount equal to the sum of--
                            ``(i) 3.75 percent of such target amount; 
                        and
                            ``(ii) 90 percent of the difference between 
                        92 percent of such target amount and such 
                        allowable costs.
            ``(4) Target amount described.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `target amount' means, with respect to a 
                health benefits plan offered by an issuer under this 
                title in any of calendar years 2011 through 2013, an 
                amount equal to--
                            ``(i) the total of the monthly premiums 
                        estimated by the health insurance issuer and 
                        accepted by the Administrator to be paid for 
                        enrollees in the plan under this title for the 
                        calendar year involved; reduced by
                            ``(ii) the amount of administrative 
                        expenses that the issuer estimates, and the 
                        Administrator accepts, will be incurred by the 
                        issuer with respect to the plan for such 
                        calendar year.
                    ``(B) Submission of target amount.--Not later than 
                December 31, 2010, and each December 31 thereafter 
                through calendar year 2012, an issuer shall submit to 
                the Administrator a description of the target amount 
                for such issuer with respect to health benefits plans 
                provided by the issuer under this title.
    ``(c) Disclosure of Information.--
            ``(1) In general.--Each contract under this title shall 
        provide--
                    ``(A) that a health insurance issuer offering a 
                health benefits plan under this title shall provide the 
                Administrator with such information as the 
                Administrator determines is necessary to carry out this 
                subsection including the notification of costs under 
                subsection (a)(2) and the target amount under 
                subsection (b)(4)(B); and
                    ``(B) that the Administrator has the right to 
                inspect and audit any books and records of the issuer 
                that pertain to the information regarding costs 
                provided to the Administrator under such subsections.
            ``(2) Restriction on use of information.--Information 
        disclosed or obtained pursuant to the provisions of this 
        subsection may be used by the office designated under section 
        3002(a) and its employees and contractors only for the purposes 
        of, and to the extent necessary in, carrying out this section.

``SEC. 3009. ADMINISTRATION THROUGH REGIONAL OR OTHER ADMINISTRATIVE 
              ENTITIES.

    ``(a) In General.--In order to provide for the administration of 
the benefits under this title with maximum efficiency and convenience 
for participating employers and health care providers and other 
individuals and entities providing services to such employers, the 
Administrator--
            ``(1) shall enter into contracts with eligible entities, to 
        the extent appropriate, to perform, on a regional or other 
        basis, activities to receive, disburse, and account for 
        payments of premiums to participating employers by individuals, 
        and for payments by participating employers and employees to 
        health insurance issuers; and
            ``(2) may enter into contracts with eligible entities, to 
        the extent appropriate, to perform, on a regional or other 
        basis, one or more of the following:
                    ``(A) Collect and maintain all information relating 
                to individuals, families, and employers participating 
                in the program under this title.
                    ``(B) Serve as a channel of communication between 
                health insurance issuers, participating employers, and 
                individuals relating to the administration of this 
                title.
                    ``(C) Otherwise carry out such activities for the 
                administration of this title, in such manner, as may be 
                provided for in the contract entered into under this 
                section.
    ``(b) Application.--To be eligible to receive a contract under 
subsection (a), an entity shall prepare and submit to the Administrator 
an application at such time, in such manner, and containing such 
information as the Administration may require.
    ``(c) Process.--
            ``(1) Competitive bidding.--All contracts under this 
        section shall be awarded through a competitive bidding process 
        on a bi-annual basis.
            ``(2) Requirement.--No contract shall be entered into with 
        any entity under this section unless the Administrator finds 
        that such entity will perform its obligations under the 
        contract efficiently and effectively and will meet such 
        requirements as to financial responsibility, legal authority, 
        and other matters as the Administrator finds pertinent.
            ``(3) Publication of standards and criteria.--If the 
        Administrator enters into contracts under subsection (a), the 
        Administrator shall publish in the Federal Register standards 
        and criteria for the efficient and effective performance of 
        contract obligations under this section, and opportunity shall 
        be provided for public comment prior to implementation. In 
        establishing such standards and criteria, the Administrator 
        shall provide for a system to measure an entity's performance 
        of responsibilities.
            ``(4) Term.--Each contract under this section shall be for 
        a term of at least 2 years, and may be made automatically 
        renewable from term to term in the absence of notice by either 
        party of intention to terminate at the end of the current term, 
        except that the Administrator may terminate any such contract 
        at any time (after such reasonable notice and opportunity for 
        hearing to the entity involved as the Administrator may provide 
        in regulations) if the Administrator finds that the entity has 
        failed substantially to carry out the contract or is carrying 
        out the contract in a manner inconsistent with the efficient 
        and effective administration of the program established by this 
        title.
    ``(d) Terms of Contract.--A contract entered into under this 
section shall include--
            ``(1) a description of the duties of the contracting 
        entity;
            ``(2) an assurance that the entity will furnish to the 
        Administrator such timely information and reports as the 
        Administrator determines appropriate;
            ``(3) an assurance that the entity will maintain such 
        records and afford such access thereto as the Administrator 
        finds necessary to assure the correctness and verification of 
        the information and reports under paragraph (2) and otherwise 
        to carry out the purposes of this title;
            ``(4) an assurance that the entity shall comply with such 
        confidentiality and privacy protection guidelines and 
        procedures as the Administrator may require;
            ``(5) an assurance that the entity does not have, and will 
        continue to avoid, any conflicts of interest relative to any 
        functions it will perform; and
            ``(6) such other terms and conditions not inconsistent with 
        this section as the Administrator may find necessary or 
        appropriate.

``SEC. 3010. PUBLIC EDUCATION CAMPAIGN AND REPORT.

    ``(a) In General.--In carrying out this title, the Administrator 
shall develop and implement an educational campaign with interagency 
participation (including at a minimum the Small Business 
Administration, the Department of Labor, and employees of the office 
established under section 3002 who oversee the provision of information 
through navigators) to provide information to employers and the general 
public concerning the health insurance program developed under this 
title, including the contact information relating to an individual or 
individuals who will be available to resolve various types of problems 
with health insurance coverage provided under this title.
    ``(b) Public Education Campaign.--There is authorized to be 
appropriated to carry out this section, such sums as may be necessary 
for each of fiscal years 2008 through 2010.
    ``(c) Reports to Congress.--Not later than 1 year and 2 years after 
the implementation of the campaign under subsection (a), the 
Administrator shall submit to the appropriate committees of Congress a 
report that describes the activities of the Administrator under 
subsection (a), including a determination by the Administrator of the 
percentage of employers with knowledge of the health benefits program 
under this title.

``SEC. 3011. APPROPRIATIONS.

    ``There are authorized to be appropriated to the Administrator such 
sums as may be necessary in each fiscal year for the development and 
administration of the program under this title.

``SEC. 3012. EFFECTIVE DATE.

    ``This title shall take effect on the date of enactment of this 
title.''.

SEC. 3. AMENDMENT TO ERISA.

    Section 514(b)(2) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1144(b)(2)) is amended by adding at the end the 
following:
    ``(C) Notwithstanding subparagraph (A), the provisions of 
subsections (d)(1)(B) and (g)(2)(A) of section 3007 of the Public 
Health Service Act (relating to the prohibition on health-status 
related rating and the Federal enforcement of such provisions) shall 
supercede any State law that conflicts with such provisions.''.

SEC. 4. CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to credits) is amended 
by inserting after section 45N the following new section:

``SEC. 45O. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE CREDIT.

    ``(a) Determination of Credit.--In the case of a qualified small 
employer, there shall be allowed as a credit against the tax imposed by 
this chapter for the taxable year an amount equal to the credit amount 
described in subsection (b).
    ``(b) General Credit Amount.--For purposes of this section--
            ``(1) In general.--The credit amount described in this 
        subsection is the product of--
                    ``(A) the amount specified in paragraph (2),
                    ``(B) the employer size factor specified in 
                paragraph (3), and
                    ``(C) the percentage of year factor specified in 
                paragraph (4).
            ``(2) Applicable amount.--For purposes of paragraph (1)--
                    ``(A) In general.--The applicable amount is equal 
                to--
                            ``(i) $1,000 for each employee of the 
                        employer who receives self-only health 
                        insurance coverage through the employer,
                            ``(ii) $2,000 for each employee of the 
                        employer who receives family health insurance 
                        coverage through the employer, and
                            ``(iii) $1,500 for each employee of the 
                        employer who receives health insurance coverage 
                        for two adults or one adult and one or more 
                        children through the employer.
                    ``(B) Bonus for payment of greater percentage of 
                premiums.--The applicable amount otherwise specified in 
                subparagraph (A) shall be increased by $200 in the case 
                of subparagraph (A)(i), $400 in the case of 
                subparagraph (A)(ii), and $300 in the case of 
                subparagraph (A)(iii), for each additional 10 percent 
                of the qualified employee health insurance expenses 
                exceeding 60 percent which are paid by the qualified 
                small employer.
            ``(3) Employer size factor.--For purposes of paragraph (1), 
        the employer size factor is the percentage determined in 
        accordance with the following table:


----------------------------------------------------------------------------------------------------------------
                              ``If the employer size is:                                   The percentage is:
----------------------------------------------------------------------------------------------------------------
10 or fewer full-time employees                                                        100%
More than 10 but not more than 20 full-time employees                                  80%
More than 20 but not more than 30 full-time employees                                  60%
More than 30 but not more than 40 full-time employees                                  40%
More than 40 but not more than 50 full-time employees                                  20%
More than 50 full-time employees                                                       0%
----------------------------------------------------------------------------------------------------------------

            ``(4) Percentage of year factor.--For purposes of paragraph 
        (1), the percentage of year factor is equal to the ratio of--
                    ``(A) the number of months during the taxable year 
                for which the employer paid or incurred qualified 
                employee health insurance expenses, and
                    ``(B) 12.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified small employer.--
                    ``(A) In general.--The term `qualified small 
                employer' means any employer (as defined in section 
                3001(a)(4) of the Public Health Service Act) which--
                            ``(i) either--
                                    ``(I) purchases health insurance 
                                coverage for its employees in a small 
                                group market in a State which meets the 
                                requirements under subparagraph (B), or
                                    ``(II) with respect to any taxable 
                                year beginning after 2010, is a 
                                participating employer (as defined in 
                                section 3001(a)(8) of such Act) in the 
                                program under title XXX of such Act,
                            ``(ii) pays or incurs at least 60 percent 
                        of the qualified employee health insurance 
                        expenses of such employer or is self-employed, 
                        and
                            ``(iii) employed an average of 50 or fewer 
                        full-time employees during the preceding 
                        taxable year or was a self-employed individual 
                        with either not less than $5,000 in net 
                        earnings or not less than $15,000 in gross 
                        earnings from self-employment in the preceding 
                        taxable year.
                    ``(B) State small group market requirements.--A 
                State meets the requirements of this subparagraph if--
                            ``(i) during calendar years 2009 and 2010, 
                        the State--
                                    ``(I) defines its small group 
                                market to include groups of one (so 
                                that self-employed individuals are 
                                eligible for coverage in such market),
                                    ``(II) prohibits the use of health-
                                status related factors and other 
                                factors described in section 
                                3007(d)(5)(A) of such Act, and
                                    ``(III) has in effect rating rules 
                                that comply with section 3007(d)(5)(A) 
                                of such Act (except that such rules may 
                                impose limits on rating variation in 
                                addition to those provided for in such 
                                section),
                            ``(ii) during calendar years 2011 and 2012, 
                        the State--
                                    ``(I) meets the requirements under 
                                clause (i), and
                                    ``(II) maintains a State-wide 
                                purchasing pool that provides 
                                purchasers in the small group market a 
                                choice of health benefit plans, with 
                                comparative information provided 
                                concerning such plans and the premiums 
                                charged for such plans made available 
                                through the Internet, and
                            ``(iii) for calendar years after 2012, the 
                        State--
                                    ``(I) meets the requirements under 
                                clauses (i)(I), (i)(II), and (ii)(II), 
                                and
                                    ``(II) has in effect rating rules 
                                that comply with paragraph (2)(B) or 
                                (3) of section 3007(d) of such Act, 
                                whichever is in effect for such 
                                calendar year (except that such rules 
                                may impose limits on rating variation 
                                in addition to those provided for in 
                                such section).
            ``(2) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid by an 
                employer or an employee of such employer for health 
                insurance coverage under such Act to the extent such 
                amount is attributable to coverage--
                            ``(i) provided to any employee (as defined 
                        in subsection 3001(a)(3) of such Act), or
                            ``(ii) for the employer, in the case of a 
                        self-employed individual.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance coverage pursuant to a salary 
                reduction arrangement shall be taken into account under 
                subparagraph (A).
            ``(3) Full-time employee.--The term `full-time employee' 
        means, with respect to any period, an employee (as defined in 
        section 3001(a)(3) of such Act) of an employer if the average 
        number of hours worked by such employee in the preceding 
        taxable year for such employer was at least 35 hours per week.
    ``(d) Inflation Adjustment.--
            ``(1) In general.--For each taxable year after 2009, the 
        dollar amounts specified in subsections (b)(2)(A), (b)(2)(B), 
        and (c)(1)(A)(iii) (after the application of this paragraph) 
        shall be the amounts in effect in the preceding taxable year 
        or, if greater, the product of--
                    ``(A) the corresponding dollar amount specified in 
                such subsection, and
                    ``(B) the ratio of the index of wage inflation (as 
                determined by the Bureau of Labor Statistics) for 
                August of the preceding calendar year to such index of 
                wage inflation for August of 2008.
            ``(2) Rounding.--If any amount determined under paragraph 
        (1) is not a multiple of $100, such amount shall be rounded to 
        the next lowest multiple of $100.
    ``(e) Application of Certain Rules in Determination of Employer 
Size.--For purposes of this section--
            ``(1) Application of aggregation rule for employers.--All 
        persons treated as a single employer under subsection (b), (c), 
        (m), or (o) of section 414 shall be treated as 1 employer.
            ``(2) Employers not in existence in preceding year.--In the 
        case of an employer which was not in existence for the full 
        preceding taxable year, the determination of whether such 
        employer meets the requirements of this section shall be based 
        on the average number of full-time employees that it is 
        reasonably expected such employer will employ on business days 
        in the employer's first full taxable year.
            ``(3) Predecessors.--Any reference in this subsection to an 
        employer shall include a reference to any predecessor of such 
        employer.
    ``(f) Coordination With Advance Payments of Credit.--With respect 
to any taxable year, the amount which would (but for this subsection) 
be allowed as a credit to the taxpayer under subsection (a) shall be 
reduced by the aggregate amount paid on behalf of such taxpayer under 
section 7527A for months beginning in such taxable year. If the amount 
determined under this subsection is less than zero, the taxpayer shall 
owe additional tax in such amount under this chapter.
    ``(g) Credits for Nonprofit Organizations.--Any credit which would 
be allowable under subsection (a) with respect to a qualified small 
business if such qualified small business were not exempt from tax 
under this chapter shall be treated as a credit allowable under this 
subpart to such qualified small business.''.
    (b) Advance Payments of Credit.--Chapter 77 of the Internal Revenue 
Code of 1986 is amended by inserting after section 7527 the following 
new section:

``SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS FOR 
              QUALIFIED SMALL EMPLOYERS.

    ``(a) General Rule.--Not later than December 31, 2008, the 
Secretary shall establish a program for making monthly payments on 
behalf of qualified small employers to the program established under 
title XXX of the Public Health Service Act. The amount of the monthly 
payment for a qualified small employer shall be one twelfth of the 
amount of the credit for the tax year to which the qualified small 
employer is entitled under section 36. If a monthly payment is made by 
the Secretary for which the employer is not entitled to a corresponding 
credit, the employer shall owe additional tax in such amount under this 
chapter.
    ``(b) Qualified Small Employer.--For purposes of this section, the 
term `qualified small employer' has the meaning given such term in 
section 36(c)(1).''.
    (c) Conforming Amendments.--
            (1) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by adding at the end the following new items:

``Sec. 45O. Small business employee health insurance credit.''.
            (2) The table of sections for chapter 77 of such Code is 
        amended by inserting after the item relating to section 7527 
        the following new item:

``Sec. 7527A. Advance payment of credit for health insurance costs for 
                            qualified small employers.''.
    (d) Deductibility.--The payment of premiums by a participating 
employer under this Act shall be considered to be an ordinary and 
necessary expense in carrying on a trade or business for purposes of 
the Internal Revenue Code of 1986 and shall be deductible.
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after 
December 31, 2008.
                                 <all>