[House Report 108-156]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
 1st Session            HOUSE OF REPRESENTATIVES                108-156
======================================================================
 
               SMALL BUSINESS HEALTH FAIRNESS ACT OF 2003

                                _______
                                

 June 16, 2003.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Boehner, from the Committee on Education and the Workforce, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 660]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 660) to amend title I of the Employee 
Retirement Income Security Act of 1974 to improve access and 
choice for entrepreneurs with small businesses with respect to 
medical care for their employees, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Small Business 
Health Fairness Act of 2003''.
  (b) Table of Contents.--The table of contents is as follows:

Sec. 1. Short title and table of contents.
Sec. 2. Rules governing association health plans.

           ``Part 8--Rules Governing Association Health Plans

        ``Sec. 801. Association health plans.
        ``Sec. 802. Certification of association health plans.
        ``Sec. 803. Requirements relating to sponsors and boards of 
                        trustees.
        ``Sec. 804. Participation and coverage requirements.
        ``Sec. 805. Other requirements relating to plan documents, 
                        contribution rates, and benefit options.
        ``Sec. 806. Maintenance of reserves and provisions for solvency 
                        for plans providing health benefits in addition 
                        to health insurance coverage.
        ``Sec. 807. Requirements for application and related 
                        requirements.
        ``Sec. 808. Notice requirements for voluntary termination.
        ``Sec. 809. Corrective actions and mandatory termination.
        ``Sec. 810. Trusteeship by the Secretary of insolvent 
                        association health plans providing health 
                        benefits in addition to health insurance 
                        coverage.
        ``Sec. 811. State assessment authority.
        ``Sec. 812. Definitions and rules of construction.

Sec. 3. Clarification of treatment of single employer arrangements.
Sec. 4. Enforcement provisions relating to association health plans.
Sec. 5. Cooperation between Federal and State authorities.
Sec. 6. Effective date and transitional and other rules.

SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS.

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

           ``Part 8--Rules Governing Association Health Plans

``SEC. 801. ASSOCIATION HEALTH PLANS.

  ``(a) In General.--For purposes of this part, the term `association 
health plan' means a group health plan whose sponsor is (or is deemed 
under this part to be) described in subsection (b).
  ``(b) Sponsorship.--The sponsor of a group health plan is described 
in this subsection if such sponsor--
          ``(1) is organized and maintained in good faith, with a 
        constitution and bylaws specifically stating its purpose and 
        providing for periodic meetings on at least an annual basis, as 
        a bona fide trade association, a bona fide industry association 
        (including a rural electric cooperative association or a rural 
        telephone cooperative association), a bona fide professional 
        association, or a bona fide chamber of commerce (or similar 
        bona fide business association, including a corporation or 
        similar organization that operates on a cooperative basis 
        (within the meaning of section 1381 of the Internal Revenue 
        Code of 1986)), for substantial purposes other than that of 
        obtaining or providing medical care;
          ``(2) is established as a permanent entity which receives the 
        active support of its members and requires for membership 
        payment on a periodic basis of dues or payments necessary to 
        maintain eligibility for membership in the sponsor; and
          ``(3) does not condition membership, such dues or payments, 
        or coverage under the plan on the basis of health status-
        related factors with respect to the employees of its members 
        (or affiliated members), or the dependents of such employees, 
        and does not condition such dues or payments on the basis of 
        group health plan participation.
Any sponsor consisting of an association of entities which meet the 
requirements of paragraphs (1), (2), and (3) shall be deemed to be a 
sponsor described in this subsection.

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

  ``(a) In General.--The applicable authority shall prescribe by 
regulation a procedure under which, subject to subsection (b), the 
applicable authority shall certify association health plans which apply 
for certification as meeting the requirements of this part.
  ``(b) Standards.--Under the procedure prescribed pursuant to 
subsection (a), in the case of an association health plan that provides 
at least one benefit option which does not consist of health insurance 
coverage, the applicable authority shall certify such plan as meeting 
the requirements of this part only if the applicable authority is 
satisfied that the applicable requirements of this part are met (or, 
upon the date on which the plan is to commence operations, will be met) 
with respect to the plan.
  ``(c) Requirements Applicable to Certified Plans.--An association 
health plan with respect to which certification under this part is in 
effect shall meet the applicable requirements of this part, effective 
on the date of certification (or, if later, on the date on which the 
plan is to commence operations).
  ``(d) Requirements for Continued Certification.--The applicable 
authority may provide by regulation for continued certification of 
association health plans under this part.
  ``(e) Class Certification for Fully Insured Plans.--The applicable 
authority shall establish a class certification procedure for 
association health plans under which all benefits consist of health 
insurance coverage. Under such procedure, the applicable authority 
shall provide for the granting of certification under this part to the 
plans in each class of such association health plans upon appropriate 
filing under such procedure in connection with plans in such class and 
payment of the prescribed fee under section 807(a).
  ``(f) Certification of Self-Insured Association Health Plans.--An 
association health plan which offers one or more benefit options which 
do not consist of health insurance coverage may be certified under this 
part only if such plan consists of any of the following:
          ``(1) a plan which offered such coverage on the date of the 
        enactment of the Small Business Health Fairness Act of 2003,
          ``(2) a plan under which the sponsor does not restrict 
        membership to one or more trades and businesses or industries 
        and whose eligible participating employers represent a broad 
        cross-section of trades and businesses or industries, or
          ``(3) a plan whose eligible participating employers represent 
        one or more trades or businesses, or one or more industries, 
        consisting of any of the following: agriculture; equipment and 
        automobile dealerships; barbering and cosmetology; certified 
        public accounting practices; child care; construction; dance, 
        theatrical and orchestra productions; disinfecting and pest 
        control; financial services; fishing; foodservice 
        establishments; hospitals; labor organizations; logging; 
        manufacturing (metals); mining; medical and dental practices; 
        medical laboratories; professional consulting services; 
        sanitary services; transportation (local and freight); 
        warehousing; wholesaling/distributing; or any other trade or 
        business or industry which has been indicated as having average 
        or above-average risk or health claims experience by reason of 
        State rate filings, denials of coverage, proposed premium rate 
        levels, or other means demonstrated by such plan in accordance 
        with regulations.

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

  ``(a) Sponsor.--The requirements of this subsection are met with 
respect to an association health plan if the sponsor has met (or is 
deemed under this part to have met) the requirements of section 801(b) 
for a continuous period of not less than 3 years ending with the date 
of the application for certification under this part.
  ``(b) Board of Trustees.--The requirements of this subsection are met 
with respect to an association health plan if the following 
requirements are met:
          ``(1) Fiscal control.--The plan is operated, pursuant to a 
        trust agreement, by a board of trustees which has complete 
        fiscal control over the plan and which is responsible for all 
        operations of the plan.
          ``(2) Rules of operation and financial controls.--The board 
        of trustees has in effect rules of operation and financial 
        controls, based on a 3-year plan of operation, adequate to 
        carry out the terms of the plan and to meet all requirements of 
        this title applicable to the plan.
          ``(3) Rules governing relationship to participating employers 
        and to contractors.--
                  ``(A) Board membership.--
                          ``(i) In general.--Except as provided in 
                        clauses (ii) and (iii), the members of the 
                        board of trustees are individuals selected from 
                        individuals who are the owners, officers, 
                        directors, or employees of the participating 
                        employers or who are partners in the 
                        participating employers and actively 
                        participate in the business.
                          ``(ii) Limitation.--
                                  ``(I) General rule.--Except as 
                                provided in subclauses (II) and (III), 
                                no such member is an owner, officer, 
                                director, or employee of, or partner 
                                in, a contract administrator or other 
                                service provider to the plan.
                                  ``(II) Limited exception for 
                                providers of services solely on behalf 
                                of the sponsor.--Officers or employees 
                                of a sponsor which is a service 
                                provider (other than a contract 
                                administrator) to the plan may be 
                                members of the board if they constitute 
                                not more than 25 percent of the 
                                membership of the board and they do not 
                                provide services to the plan other than 
                                on behalf of the sponsor.
                                  ``(III) Treatment of providers of 
                                medical care.--In the case of a sponsor 
                                which is an association whose 
                                membership consists primarily of 
                                providers of medical care, subclause 
                                (I) shall not apply in the case of any 
                                service provider described in subclause 
                                (I) who is a provider of medical care 
                                under the plan.
                          ``(iii) Certain plans excluded.--Clause (i) 
                        shall not apply to an association health plan 
                        which is in existence on the date of the 
                        enactment of the Small Business Health Fairness 
                        Act of 2003.
                  ``(B) Sole authority.--The board has sole authority 
                under the plan to approve applications for 
                participation in the plan and to contract with a 
                service provider to administer the day-to-day affairs 
                of the plan.
  ``(c) Treatment of Franchise Networks.--In the case of a group health 
plan which is established and maintained by a franchiser for a 
franchise network consisting of its franchisees--
          ``(1) the requirements of subsection (a) and section 801(a) 
        shall be deemed met if such requirements would otherwise be met 
        if the franchiser were deemed to be the sponsor referred to in 
        section 801(b), such network were deemed to be an association 
        described in section 801(b), and each franchisee were deemed to 
        be a member (of the association and the sponsor) referred to in 
        section 801(b); and
          ``(2) the requirements of section 804(a)(1) shall be deemed 
        met.
The Secretary may by regulation define for purposes of this subsection 
the terms `franchiser', `franchise network', and `franchisee'.

``SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

  ``(a) Covered Employers and Individuals.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan--
          ``(1) each participating employer must be--
                  ``(A) a member of the sponsor,
                  ``(B) the sponsor, or
                  ``(C) an affiliated member of the sponsor with 
                respect to which the requirements of subsection (b) are 
                met,
        except that, in the case of a sponsor which is a professional 
        association or other individual-based association, if at least 
        one of the officers, directors, or employees of an employer, or 
        at least one of the individuals who are partners in an employer 
        and who actively participates in the business, is a member or 
        such an affiliated member of the sponsor, participating 
        employers may also include such employer; and
          ``(2) all individuals commencing coverage under the plan 
        after certification under this part must be--
                  ``(A) active or retired owners (including self-
                employed individuals), officers, directors, or 
                employees of, or partners in, participating employers; 
                or
                  ``(B) the beneficiaries of individuals described in 
                subparagraph (A).
  ``(b) Coverage of Previously Uninsured Employees.--In the case of an 
association health plan in existence on the date of the enactment of 
the Small Business Health Fairness Act of 2003, an affiliated member of 
the sponsor of the plan may be offered coverage under the plan as a 
participating employer only if--
          ``(1) the affiliated member was an affiliated member on the 
        date of certification under this part; or
          ``(2) during the 12-month period preceding the date of the 
        offering of such coverage, the affiliated member has not 
        maintained or contributed to a group health plan with respect 
        to any of its employees who would otherwise be eligible to 
        participate in such association health plan.
  ``(c) Individual Market Unaffected.--The requirements of this 
subsection are met with respect to an association health plan if, under 
the terms of the plan, no participating employer may provide health 
insurance coverage in the individual market for any employee not 
covered under the plan which is similar to the coverage 
contemporaneously provided to employees of the employer under the plan, 
if such exclusion of the employee from coverage under the plan is based 
on a health status-related factor with respect to the employee and such 
employee would, but for such exclusion on such basis, be eligible for 
coverage under the plan.
  ``(d) Prohibition of Discrimination Against Employers and Employees 
Eligible To Participate.--The requirements of this subsection are met 
with respect to an association health plan if--
          ``(1) under the terms of the plan, all employers meeting the 
        preceding requirements of this section are eligible to qualify 
        as participating employers for all geographically available 
        coverage options, unless, in the case of any such employer, 
        participation or contribution requirements of the type referred 
        to in section 2711 of the Public Health Service Act are not 
        met;
          ``(2) upon request, any employer eligible to participate is 
        furnished information regarding all coverage options available 
        under the plan; and
          ``(3) the applicable requirements of sections 701, 702, and 
        703 are met with respect to the plan.

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

  ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if the following requirements are 
met:
          ``(1) Contents of governing instruments.--The instruments 
        governing the plan include a written instrument, meeting the 
        requirements of an instrument required under section 402(a)(1), 
        which--
                  ``(A) provides that the board of trustees serves as 
                the named fiduciary required for plans under section 
                402(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A));
                  ``(B) provides that the sponsor of the plan is to 
                serve as plan sponsor (referred to in section 
                3(16)(B)); and
                  ``(C) incorporates the requirements of section 806.
          ``(2) Contribution rates must be nondiscriminatory.--
                  ``(A) The contribution rates for any participating 
                small employer do not vary on the basis of any health 
                status-related factor in relation to employees of such 
                employer or their beneficiaries and do not vary on the 
                basis of the type of business or industry in which such 
                employer is engaged.
                  ``(B) Nothing in this title or any other provision of 
                law shall be construed to preclude an association 
                health plan, or a health insurance issuer offering 
                health insurance coverage in connection with an 
                association health plan, from--
                          ``(i) setting contribution rates based on the 
                        claims experience of the plan; or
                          ``(ii) varying contribution rates for small 
                        employers in a State to the extent that such 
                        rates could vary using the same methodology 
                        employed in such State for regulating premium 
                        rates in the small group market with respect to 
                        health insurance coverage offered in connection 
                        with bona fide associations (within the meaning 
                        of section 2791(d)(3) of the Public Health 
                        Service Act),
                subject to the requirements of section 702(b) relating 
                to contribution rates.
          ``(3) Floor for number of covered individuals with respect to 
        certain plans.--If any benefit option under the plan does not 
        consist of health insurance coverage, the plan has as of the 
        beginning of the plan year not fewer than 1,000 participants 
        and beneficiaries.
          ``(4) Marketing requirements.--
                  ``(A) In general.--If a benefit option which consists 
                of health insurance coverage is offered under the plan, 
                State-licensed insurance agents shall be used to 
                distribute to small employers coverage which does not 
                consist of health insurance coverage in a manner 
                comparable to the manner in which such agents are used 
                to distribute health insurance coverage.
                  ``(B) State-licensed insurance agents.--For purposes 
                of subparagraph (A), the term `State-licensed insurance 
                agents' means one or more agents who are licensed in a 
                State and are subject to the laws of such State 
                relating to licensure, qualification, testing, 
                examination, and continuing education of persons 
                authorized to offer, sell, or solicit health insurance 
                coverage in such State.
          ``(5) Regulatory requirements.--Such other requirements as 
        the applicable authority determines are necessary to carry out 
        the purposes of this part, which shall be prescribed by the 
        applicable authority by regulation.
  ``(b) Ability of Association Health Plans To Design Benefit 
Options.--Subject to section 514(d), nothing in this part or any 
provision of State law (as defined in section 514(c)(1)) shall be 
construed to preclude an association health plan, or a health insurance 
issuer offering health insurance coverage in connection with an 
association health plan, from exercising its sole discretion in 
selecting the specific items and services consisting of medical care to 
be included as benefits under such plan or coverage, except (subject to 
section 514) in the case of (1) any law to the extent that it is not 
preempted under section 731(a)(1) with respect to matters governed by 
section 711, 712, or 713, or (2) any law of the State with which filing 
and approval of a policy type offered by the plan was initially 
obtained to the extent that such law prohibits an exclusion of a 
specific disease from such coverage.

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

  ``(a) In General.--The requirements of this section are met with 
respect to an association health plan if--
          ``(1) the benefits under the plan consist solely of health 
        insurance coverage; or
          ``(2) if the plan provides any additional benefit options 
        which do not consist of health insurance coverage, the plan--
                  ``(A) establishes and maintains reserves with respect 
                to such additional benefit options, in amounts 
                recommended by the qualified actuary, consisting of--
                          ``(i) a reserve sufficient for unearned 
                        contributions;
                          ``(ii) a reserve sufficient for benefit 
                        liabilities which have been incurred, which 
                        have not been satisfied, and for which risk of 
                        loss has not yet been transferred, and for 
                        expected administrative costs with respect to 
                        such benefit liabilities;
                          ``(iii) a reserve sufficient for any other 
                        obligations of the plan; and
                          ``(iv) a reserve sufficient for a margin of 
                        error and other fluctuations, taking into 
                        account the specific circumstances of the plan; 
                        and
                  ``(B) establishes and maintains aggregate and 
                specific excess /stop loss insurance and solvency 
                indemnification, with respect to such additional 
                benefit options for which risk of loss has not yet been 
                transferred, as follows:
                          ``(i) The plan shall secure aggregate excess 
                        /stop loss insurance for the plan with an 
                        attachment point which is not greater than 125 
                        percent of expected gross annual claims. The 
                        applicable authority may by regulation provide 
                        for upward adjustments in the amount of such 
                        percentage in specified circumstances in which 
                        the plan specifically provides for and 
                        maintains reserves in excess of the amounts 
                        required under subparagraph (A).
                          ``(ii) The plan shall secure specific excess 
                        /stop loss insurance for the plan with an 
                        attachment point which is at least equal to an 
                        amount recommended by the plan's qualified 
                        actuary. The applicable authority may by 
                        regulation provide for adjustments in the 
                        amount of such insurance in specified 
                        circumstances in which the plan specifically 
                        provides for and maintains reserves in excess 
                        of the amounts required under subparagraph (A).
                          ``(iii) The plan shall secure indemnification 
                        insurance for any claims which the plan is 
                        unable to satisfy by reason of a plan 
                        termination.
Any person issuing to a plan insurance described in clause (i), (ii), 
or (iii) shall notify the Secretary of any failure of premium payment 
meriting cancellation of the policy prior to undertaking such a 
cancellation. Any regulations prescribed by the applicable authority 
pursuant to clause (i) or (ii) of subparagraph (B) may allow for such 
adjustments in the required levels of excess /stop loss insurance as 
the qualified actuary may recommend, taking into account the specific 
circumstances of the plan.
  ``(b) Minimum Surplus in Addition to Claims Reserves.--In the case of 
any association health plan described in subsection (a)(2), the 
requirements of this subsection are met if the plan establishes and 
maintains surplus in an amount at least equal to--
          ``(1) $500,000, or
          ``(2) such greater amount (but not greater than $2,000,000) 
        as may be set forth in regulations prescribed by the applicable 
        authority, considering the level of aggregate and specific 
        excess /stop loss insurance provided with respect to such plan 
        and other factors related to solvency risk, such as the plan's 
        projected levels of participation or claims, the nature of the 
        plan's liabilities, and the types of assets available to assure 
        that such liabilities are met.
  ``(c) Additional Requirements.--In the case of any association health 
plan described in subsection (a)(2), the applicable authority may 
provide such additional requirements relating to reserves, excess /stop 
loss insurance, and indemnification insurance as the applicable 
authority considers appropriate. Such requirements may be provided by 
regulation with respect to any such plan or any class of such plans.
  ``(d) Adjustments for Excess /Stop Loss Insurance.--The applicable 
authority may provide for adjustments to the levels of reserves 
otherwise required under subsections (a) and (b) with respect to any 
plan or class of plans to take into account excess /stop loss insurance 
provided with respect to such plan or plans.
  ``(e) Alternative Means of Compliance.--The applicable authority may 
permit an association health plan described in subsection (a)(2) to 
substitute, for all or part of the requirements of this section (except 
subsection (a)(2)(B)(iii)), such security, guarantee, hold-harmless 
arrangement, or other financial arrangement as the applicable authority 
determines to be adequate to enable the plan to fully meet all its 
financial obligations on a timely basis and is otherwise no less 
protective of the interests of participants and beneficiaries than the 
requirements for which it is substituted. The applicable authority may 
take into account, for purposes of this subsection, evidence provided 
by the plan or sponsor which demonstrates an assumption of liability 
with respect to the plan. Such evidence may be in the form of a 
contract of indemnification, lien, bonding, insurance, letter of 
credit, recourse under applicable terms of the plan in the form of 
assessments of participating employers, security, or other financial 
arrangement.
  ``(f) Measures To Ensure Continued Payment of Benefits by Certain 
Plans in Distress.--
          ``(1) Payments by certain plans to association health plan 
        fund.--
                  ``(A) In general.--In the case of an association 
                health plan described in subsection (a)(2), the 
                requirements of this subsection are met if the plan 
                makes payments into the Association Health Plan Fund 
                under this subparagraph when they are due. Such 
                payments shall consist of annual payments in the amount 
                of $5,000, and, in addition to such annual payments, 
                such supplemental payments as the Secretary may 
                determine to be necessary under paragraph (2). Payments 
                under this paragraph are payable to the Fund at the 
                time determined by the Secretary. Initial payments are 
                due in advance of certification under this part. 
                Payments shall continue to accrue until a plan's assets 
                are distributed pursuant to a termination procedure.
                  ``(B) Penalties for failure to make payments.--If any 
                payment is not made by a plan when it is due, a late 
                payment charge of not more than 100 percent of the 
                payment which was not timely paid shall be payable by 
                the plan to the Fund.
                  ``(C) Continued duty of the secretary.--The Secretary 
                shall not cease to carry out the provisions of 
                paragraph (2) on account of the failure of a plan to 
                pay any payment when due.
          ``(2) Payments by secretary to continue excess /stop loss 
        insurance coverage and indemnification insurance coverage for 
        certain plans.--In any case in which the applicable authority 
        determines that there is, or that there is reason to believe 
        that there will be: (A) a failure to take necessary corrective 
        actions under section 809(a) with respect to an association 
        health plan described in subsection (a)(2); or (B) a 
        termination of such a plan under section 809(b) or 810(b)(8) 
        (and, if the applicable authority is not the Secretary, 
        certifies such determination to the Secretary), the Secretary 
        shall determine the amounts necessary to make payments to an 
        insurer (designated by the Secretary) to maintain in force 
        excess /stop loss insurance coverage or indemnification 
        insurance coverage for such plan, if the Secretary determines 
        that there is a reasonable expectation that, without such 
        payments, claims would not be satisfied by reason of 
        termination of such coverage. The Secretary shall, to the 
        extent provided in advance in appropriation Acts, pay such 
        amounts so determined to the insurer designated by the 
        Secretary.
          ``(3) Association health plan fund.--
                  ``(A) In general.--There is established on the books 
                of the Treasury a fund to be known as the `Association 
                Health Plan Fund'. The Fund shall be available for 
                making payments pursuant to paragraph (2). The Fund 
                shall be credited with payments received pursuant to 
                paragraph (1)(A), penalties received pursuant to 
                paragraph (1)(B); and earnings on investments of 
                amounts of the Fund under subparagraph (B).
                  ``(B) Investment.--Whenever the Secretary determines 
                that the moneys of the fund are in excess of current 
                needs, the Secretary may request the investment of such 
                amounts as the Secretary determines advisable by the 
                Secretary of the Treasury in obligations issued or 
                guaranteed by the United States.
  ``(g) Excess /Stop Loss Insurance.--For purposes of this section--
          ``(1) Aggregate excess /stop loss insurance.--The term 
        `aggregate excess /stop loss insurance' means, in connection 
        with an association health plan, a contract--
                  ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payments to the plan with 
                respect to aggregate claims under the plan in excess of 
                an amount or amounts specified in such contract;
                  ``(B) which is guaranteed renewable; and
                  ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
          ``(2) Specific excess/stop loss insurance.--The term 
        `specific excess/stop loss insurance' means, in connection with 
        an association health plan, a contract--
                  ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to aggregate claims under the plan in excess of 
                an amount or amounts specified in such contract;
                  ``(B) which is guaranteed renewable; and
                  ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
          ``(2) Specific excess /stop loss insurance.--The term 
        `specific excess /stop loss insurance' means, in connection 
        with an association health plan, a contract--
                  ``(A) under which an insurer (meeting such minimum 
                standards as the applicable authority may prescribe by 
                regulation) provides for payment to the plan with 
                respect to claims under the plan in connection with a 
                covered individual in excess of an amount or amounts 
                specified in such contract in connection with such 
                covered individual;
                  ``(B) which is guaranteed renewable; and
                  ``(C) which allows for payment of premiums by any 
                third party on behalf of the insured plan.
  ``(h) Indemnification Insurance.--For purposes of this section, the 
term `indemnification insurance' means, in connection with an 
association health plan, a contract--
          ``(1) under which an insurer (meeting such minimum standards 
        as the applicable authority may prescribe by regulation) 
        provides for payment to the plan with respect to claims under 
        the plan which the plan is unable to satisfy by reason of a 
        termination pursuant to section 809(b) (relating to mandatory 
        termination);
          ``(2) which is guaranteed renewable and noncancellable for 
        any reason (except as the applicable authority may prescribe by 
        regulation); and
          ``(3) which allows for payment of premiums by any third party 
        on behalf of the insured plan.
  ``(i) Reserves.--For purposes of this section, the term `reserves' 
means, in connection with an association health plan, plan assets which 
meet the fiduciary standards under part 4 and such additional 
requirements regarding liquidity as the applicable authority may 
prescribe by regulation.
  ``(j) Solvency Standards Working Group.--
          ``(1) In general.--Within 90 days after the date of the 
        enactment of the Small Business Health Fairness Act of 2003, 
        the applicable authority shall establish a Solvency Standards 
        Working Group. In prescribing the initial regulations under 
        this section, the applicable authority shall take into account 
        the recommendations of such Working Group.
          ``(2) Membership.--The Working Group shall consist of not 
        more than 15 members appointed by the applicable authority. The 
        applicable authority shall include among persons invited to 
        membership on the Working Group at least one of each of the 
        following:
                  ``(A) a representative of the National Association of 
                Insurance Commissioners;
                  ``(B) a representative of the American Academy of 
                Actuaries;
                  ``(C) a representative of the State governments, or 
                their interests;
                  ``(D) a representative of existing self-insured 
                arrangements, or their interests;
                  ``(E) a representative of associations of the type 
                referred to in section 801(b)(1), or their interests; 
                and
                  ``(F) a representative of multiemployer plans that 
                are group health plans, or their interests.

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

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

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

  ``Except as provided in section 809(b), an association health plan 
which is or has been certified under this part may terminate (upon or 
at any time after cessation of accruals in benefit liabilities) only if 
the board of trustees, not less than 60 days before the proposed 
termination date--
          ``(1) provides to the participants and beneficiaries a 
        written notice of intent to terminate stating that such 
        termination is intended and the proposed termination date;
          ``(2) develops a plan for winding up the affairs of the plan 
        in connection with such termination in a manner which will 
        result in timely payment of all benefits for which the plan is 
        obligated; and
          ``(3) submits such plan in writing to the applicable 
        authority.
Actions required under this section shall be taken in such form and 
manner as may be prescribed by the applicable authority by regulation.

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

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

``SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION 
                    HEALTH PLANS PROVIDING HEALTH BENEFITS IN ADDITION 
                    TO HEALTH INSURANCE COVERAGE.

  ``(a) Appointment of Secretary as Trustee for Insolvent Plans.--
Whenever the Secretary determines that an association health plan which 
is or has been certified under this part and which is described in 
section 806(a)(2) will be unable to provide benefits when due or is 
otherwise in a financially hazardous condition, as shall be defined by 
the Secretary by regulation, the Secretary shall, upon notice to the 
plan, apply to the appropriate United States district court for 
appointment of the Secretary as trustee to administer the plan for the 
duration of the insolvency. The plan may appear as a party and other 
interested persons may intervene in the proceedings at the discretion 
of the court. The court shall appoint such Secretary trustee if the 
court determines that the trusteeship is necessary to protect the 
interests of the participants and beneficiaries or providers of medical 
care or to avoid any unreasonable deterioration of the financial 
condition of the plan. The trusteeship of such Secretary shall continue 
until the conditions described in the first sentence of this subsection 
are remedied or the plan is terminated.
  ``(b) Powers as Trustee.--The Secretary, upon appointment as trustee 
under subsection (a), shall have the power--
          ``(1) to do any act authorized by the plan, this title, or 
        other applicable provisions of law to be done by the plan 
        administrator or any trustee of the plan;
          ``(2) to require the transfer of all (or any part) of the 
        assets and records of the plan to the Secretary as trustee;
          ``(3) to invest any assets of the plan which the Secretary 
        holds in accordance with the provisions of the plan, 
        regulations prescribed by the Secretary, and applicable 
        provisions of law;
          ``(4) to require the sponsor, the plan administrator, any 
        participating employer, and any employee organization 
        representing plan participants to furnish any information with 
        respect to the plan which the Secretary as trustee may 
        reasonably need in order to administer the plan;
          ``(5) to collect for the plan any amounts due the plan and to 
        recover reasonable expenses of the trusteeship;
          ``(6) to commence, prosecute, or defend on behalf of the plan 
        any suit or proceeding involving the plan;
          ``(7) to issue, publish, or file such notices, statements, 
        and reports as may be required by the Secretary by regulation 
        or required by any order of the court;
          ``(8) to terminate the plan (or provide for its termination 
        in accordance with section 809(b)) and liquidate the plan 
        assets, to restore the plan to the responsibility of the 
        sponsor, or to continue the trusteeship;
          ``(9) to provide for the enrollment of plan participants and 
        beneficiaries under appropriate coverage options; and
          ``(10) to do such other acts as may be necessary to comply 
        with this title or any order of the court and to protect the 
        interests of plan participants and beneficiaries and providers 
        of medical care.
  ``(c) Notice of Appointment.--As soon as practicable after the 
Secretary's appointment as trustee, the Secretary shall give notice of 
such appointment to--
          ``(1) the sponsor and plan administrator;
          ``(2) each participant;
          ``(3) each participating employer; and
          ``(4) if applicable, each employee organization which, for 
        purposes of collective bargaining, represents plan 
        participants.
  ``(d) Additional Duties.--Except to the extent inconsistent with the 
provisions of this title, or as may be otherwise ordered by the court, 
the Secretary, upon appointment as trustee under this section, shall be 
subject to the same duties as those of a trustee under section 704 of 
title 11, United States Code, and shall have the duties of a fiduciary 
for purposes of this title.
  ``(e) Other Proceedings.--An application by the Secretary under this 
subsection may be filed notwithstanding the pendency in the same or any 
other court of any bankruptcy, mortgage foreclosure, or equity 
receivership proceeding, or any proceeding to reorganize, conserve, or 
liquidate such plan or its property, or any proceeding to enforce a 
lien against property of the plan.
  ``(f) Jurisdiction of Court.--
          ``(1) In general.--Upon the filing of an application for the 
        appointment as trustee or the issuance of a decree under this 
        section, the court to which the application is made shall have 
        exclusive jurisdiction of the plan involved and its property 
        wherever located with the powers, to the extent consistent with 
        the purposes of this section, of a court of the United States 
        having jurisdiction over cases under chapter 11 of title 11, 
        United States Code. Pending an adjudication under this section 
        such court shall stay, and upon appointment by it of the 
        Secretary as trustee, such court shall continue the stay of, 
        any pending mortgage foreclosure, equity receivership, or other 
        proceeding to reorganize, conserve, or liquidate the plan, the 
        sponsor, or property of such plan or sponsor, and any other 
        suit against any receiver, conservator, or trustee of the plan, 
        the sponsor, or property of the plan or sponsor. Pending such 
        adjudication and upon the appointment by it of the Secretary as 
        trustee, the court may stay any proceeding to enforce a lien 
        against property of the plan or the sponsor or any other suit 
        against the plan or the sponsor.
          ``(2) Venue.--An action under this section may be brought in 
        the judicial district where the sponsor or the plan 
        administrator resides or does businessor where any asset of the 
plan is situated. A district court in which such action is brought may 
issue process with respect to such action in any other judicial 
district.
  ``(g) Personnel.--In accordance with regulations which shall be 
prescribed by the Secretary, the Secretary shall appoint, retain, and 
compensate accountants, actuaries, and other professional service 
personnel as may be necessary in connection with the Secretary's 
service as trustee under this section.

``SEC. 811. STATE ASSESSMENT AUTHORITY.

  ``(a) In General.--Notwithstanding section 514, a State may impose by 
law a contribution tax on an association health plan described in 
section 806(a)(2), if the plan commenced operations in such State after 
the date of the enactment of the Small Business Health Fairness Act of 
2003.
  ``(b) Contribution Tax.--For purposes of this section, the term 
`contribution tax' imposed by a State on an association health plan 
means any tax imposed by such State if--
          ``(1) such tax is computed by applying a rate to the amount 
        of premiums or contributions, with respect to individuals 
        covered under the plan who are residents of such State, which 
        are received by the plan from participating employers located 
        in such State or from such individuals;
          ``(2) the rate of such tax does not exceed the rate of any 
        tax imposed by such State on premiums or contributions received 
        by insurers or health maintenance organizations for health 
        insurance coverage offered in such State in connection with a 
        group health plan;
          ``(3) such tax is otherwise nondiscriminatory; and
          ``(4) the amount of any such tax assessed on the plan is 
        reduced by the amount of any tax or assessment otherwise 
        imposed by the State on premiums, contributions, or both 
        received by insurers or health maintenance organizations for 
        health insurance coverage, aggregate excess /stop loss 
        insurance (as defined in section 806(g)(1)), specific excess /
        stop loss insurance (as defined in section 806(g)(2)), other 
        insurance related to the provision of medical care under the 
        plan, or any combination thereof provided by such insurers or 
        health maintenance organizations in such State in connection 
        with such plan.

``SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION.

  ``(a) Definitions.--For purposes of this part--
          ``(1) Group health plan.--The term `group health plan' has 
        the meaning provided in section 733(a)(1) (after applying 
        subsection (b) of this section).
          ``(2) Medical care.--The term `medical care' has the meaning 
        provided in section 733(a)(2).
          ``(3) Health insurance coverage.--The term `health insurance 
        coverage' has the meaning provided in section 733(b)(1).
          ``(4) Health insurance issuer.--The term `health insurance 
        issuer' has the meaning provided in section 733(b)(2).
          ``(5) Applicable authority.--The term `applicable authority' 
        means the Secretary, except that, in connection with any 
        exercise of the Secretary's authority regarding which the 
        Secretary is required under section 506(d) to consult with a 
        State, such term means the Secretary, in consultation with such 
        State.
          ``(6) Health status-related factor.--The term `health status-
        related factor' has the meaning provided in section 733(d)(2).
          ``(7) Individual market.--
                  ``(A) In general.--The term `individual market' means 
                the market for health insurance coverage offered to 
                individuals other than in connection with a group 
                health plan.
                  ``(B) Treatment of very small groups.--
                          ``(i) In general.--Subject to clause (ii), 
                        such term includes coverage offered in 
                        connection with a group health plan that has 
                        fewer than 2 participants as current employees 
                        or participants described in section 732(d)(3) 
                        on the first day of the plan year.
                          ``(ii) State exception.--Clause (i) shall not 
                        apply in the case of health insurance coverage 
                        offered in a State if such State regulates the 
                        coverage described in such clause in the same 
                        manner and to the same extent as coverage in 
                        the small group market (as defined in section 
                        2791(e)(5) of the Public Health Service Act) is 
                        regulated by such State.
          ``(8) Participating employer.--The term `participating 
        employer' means, in connection with an association health plan, 
        any employer, if any individual who is an employee of such 
        employer, a partner in such employer, or a self-employed 
        individual who is such employer (or any dependent, as defined 
        under the terms of the plan, of such individual) is or was 
        covered under such plan in connection with the status of such 
        individual as such an employee, partner, or self-employed 
        individual in relation to the plan.
          ``(9) Applicable state authority.--The term `applicable State 
        authority' means, with respect to a health insurance issuer in 
        a State, the State insurance commissioner or official or 
        officials designated by the State to enforce the requirements 
        of title XXVII of the Public Health Service Act for the State 
        involved with respect to such issuer.
          ``(10) Qualified actuary.--The term `qualified actuary' means 
        an individual who is a member of the American Academy of 
        Actuaries.
          ``(11) Affiliated member.--The term `affiliated member' 
        means, in connection with a sponsor--
                  ``(A) a person who is otherwise eligible to be a 
                member of the sponsor but who elects an affiliated 
                status with the sponsor,
                  ``(B) in the case of a sponsor with members which 
                consist of associations, a person who is a member of 
                any such association and elects an affiliated status 
                with the sponsor, or
                  ``(C) in the case of an association health plan in 
                existence on the date of the enactment of the Small 
                Business Health Fairness Act of 2003, a person eligible 
                to be a member of the sponsor or one of its member 
                associations.
          ``(12) Large employer.--The term `large employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who employed an average of at least 51 
        employees on business days during the preceding calendar year 
        and who employs at least 2 employees on the first day of the 
        plan year.
          ``(13) Small employer.--The term `small employer' means, in 
        connection with a group health plan with respect to a plan 
        year, an employer who is not a large employer.
  ``(b) Rules of Construction.--
          ``(1) Employers and employees.--For purposes of determining 
        whether a plan, fund, or program is an employee welfare benefit 
        plan which is an association health plan, and for purposes of 
        applying this title in connection with such plan, fund, or 
        program so determined to be such an employee welfare benefit 
        plan--
                  ``(A) in the case of a partnership, the term 
                `employer' (as defined in section 3(5)) includes the 
                partnership in relation to the partners, and the term 
                `employee' (as defined in section 3(6)) includes any 
                partner in relation to the partnership; and
                  ``(B) in the case of a self-employed individual, the 
                term `employer' (as defined in section 3(5)) and the 
                term `employee' (as defined in section 3(6)) shall 
                include such individual.
          ``(2) Plans, funds, and programs treated as employee welfare 
        benefit plans.--In the case of any plan, fund, or program which 
        was established or is maintained for the purpose of providing 
        medical care (through the purchase of insurance or otherwise) 
        for employees (or their dependents) covered thereunder and 
        which demonstrates to the Secretary that all requirements for 
        certification under this part would be met with respect to such 
        plan, fund, or program if such plan, fund, or program were a 
        group health plan, such plan, fund, or program shall be treated 
        for purposes of this title as an employee welfare benefit plan 
        on and after the date of such demonstration.''.
  (b) Conforming Amendments to Preemption Rules.--
          (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is 
        amended by adding at the end the following new subparagraph:
  ``(E) The preceding subparagraphs of this paragraph do not apply with 
respect to any State law in the case of an association health plan 
which is certified under part 8.''.
          (2) Section 514 of such Act (29 U.S.C. 1144) is amended--
                  (A) in subsection (b)(4), by striking ``Subsection 
                (a)'' and inserting ``Subsections (a) and (d)'';
                  (B) in subsection (b)(5), by striking ``subsection 
                (a)'' in subparagraph (A) and inserting ``subsection 
                (a) of this section and subsections (a)(2)(B) and (b) 
                of section 805'', and by striking ``subsection (a)'' in 
                subparagraph (B) and inserting ``subsection (a) of this 
                section or subsection (a)(2)(B) or (b) of section 
                805'';
                  (C) by redesignating subsection (d) as subsection 
                (e); and
                  (D) by inserting after subsection (c) the following 
                new subsection:
  ``(d)(1) Except as provided in subsection (b)(4), the provisions of 
this title shall supersede any and all State laws insofar as they may 
now or hereafter preclude,or have the effect of precluding, a health 
insurance issuer from offering health insurance coverage in connection 
with an association health plan which is certified under part 8.
  ``(2) Except as provided in paragraphs (4) and (5) of subsection (b) 
of this section--
          ``(A) In any case in which health insurance coverage of any 
        policy type is offered under an association health plan 
        certified under part 8 to a participating employer operating in 
        such State, the provisions of this title shall supersede any 
        and all laws of such State insofar as they may preclude a 
        health insurance issuer from offering health insurance coverage 
        of the same policy type to other employers operating in the 
        State which are eligible for coverage under such association 
        health plan, whether or not such other employers are 
        participating employers in such plan.
          ``(B) In any case in which health insurance coverage of any 
        policy type is offered in a State under an association health 
        plan certified under part 8 and the filing, with the applicable 
        State authority (as defined in section 812(a)(9)), of the 
        policy form in connection with such policy type is approved by 
        such State authority, the provisions of this title shall 
        supersede any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as they may 
        preclude, upon the filing in the same form and manner of such 
        policy form with the applicable State authority in such other 
        State, the approval of the filing in such other State.
  ``(3) Nothing in subsection (b)(6)(E) or the preceding provisions of 
this subsection shall be construed, with respect to health insurance 
issuers or health insurance coverage, to supersede or impair the law of 
any State--
          ``(A) providing solvency standards or similar standards 
        regarding the adequacy of insurer capital, surplus, reserves, 
        or contributions, or
          ``(B) relating to prompt payment of claims.
  ``(4) For additional provisions relating to association health plans, 
see subsections (a)(2)(B) and (b) of section 805.
  ``(5) For purposes of this subsection, the term `association health 
plan' has the meaning provided in section 801(a), and the terms `health 
insurance coverage', `participating employer', and `health insurance 
issuer' have the meanings provided such terms in section 812, 
respectively.''.
          (3) Section 514(b)(6)(A) of such Act (29 U.S.C. 
        1144(b)(6)(A)) is amended--
                  (A) in clause (i)(II), by striking ``and'' at the 
                end;
                  (B) in clause (ii), by inserting ``and which does not 
                provide medical care (within the meaning of section 
                733(a)(2)),'' after ``arrangement,'', and by striking 
                ``title.'' and inserting ``title, and''; and
                  (C) by adding at the end the following new clause:
          ``(iii) subject to subparagraph (E), in the case of any other 
        employee welfare benefit plan which is a multiple employer 
        welfare arrangement and which provides medical care (within the 
        meaning of section 733(a)(2)), any law of any State which 
        regulates insurance may apply.''.
          (4) Section 514(e) of such Act (as redesignated by paragraph 
        (2)(C)) is amended--
                  (A) by striking ``Nothing'' and inserting ``(1) 
                Except as provided in paragraph (2), nothing''; and
                  (B) by adding at the end the following new paragraph:
  ``(2) Nothing in any other provision of law enacted on or after the 
date of the enactment of the Small Business Health Fairness Act of 2003 
shall be construed to alter, amend, modify, invalidate, impair, or 
supersede any provision of this title, except by specific cross-
reference to the affected section.''.
  (c) Plan Sponsor.--Section 3(16)(B) of such Act (29 U.S.C. 
102(16)(B)) is amended by adding at the end the following new sentence: 
``Such term also includes a person serving as the sponsor of an 
association health plan under part 8.''.
  (d) Disclosure of Solvency Protections Related to Self-Insured and 
Fully Insured Options Under Association Health Plans.--Section 102(b) 
of such Act (29 U.S.C. 102(b)) is amended by adding at the end the 
following: ``An association health plan shall include in its summary 
plan description, in connection with each benefit option, a description 
of the form of solvency or guarantee fund protection secured pursuant 
to this Act or applicable State law, if any.''.
  (e) Savings Clause.--Section 731(c) of such Act is amended by 
inserting ``or part 8'' after ``this part''.
  (f) Report to the Congress Regarding Certification of Self-Insured 
Association Health Plans.--Not later than January 1, 2008, the 
Secretary of Labor shall report to the Committee on Education and the 
Workforce of the House of Representatives and the Committee on Health, 
Education, Labor, and Pensions of the Senate the effect association 
health plans have had, if any, on reducing the number of uninsured 
individuals.
  (g) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 734 the following new items:

           ``Part 8--Rules Governing Association Health Plans

``Sec. 801. Association health plans.
``Sec. 802. Certification of association health plans.
``Sec. 803. Requirements relating to sponsors and boards of trustees.
``Sec. 804. Participation and coverage requirements.
``Sec. 805. Other requirements relating to plan documents, contribution 
rates, and benefit options.
``Sec. 806. Maintenance of reserves and provisions for solvency for 
plans providing health benefits in addition to health insurance 
coverage.
``Sec. 807. Requirements for application and related requirements.
``Sec. 808. Notice requirements for voluntary termination.
``Sec. 809. Corrective actions and mandatory termination.
``Sec. 810. Trusteeship by the Secretary of insolvent association 
health plans providing health benefits in addition to health insurance 
coverage.
``Sec. 811. State assessment authority.
``Sec. 812. Definitions and rules of construction.''.

SEC. 3. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

  Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
          (1) in clause (i), by inserting after ``control group,'' the 
        following: ``except that, in any case in which the benefit 
        referred to in subparagraph (A) consists of medical care (as 
        defined in section 812(a)(2)), two or more trades or 
        businesses, whether or not incorporated, shall be deemed a 
        single employer for any plan year of such plan, or any fiscal 
        year of such other arrangement, if such trades or businesses 
        are within the same control group during such year or at any 
        time during the preceding 1-year period,'';
          (2) in clause (iii), by striking ``(iii) the determination'' 
        and inserting the following:
          ``(iii)(I) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), the determination of whether a trade or 
        business is under `common control' with another trade or 
        business shall be determined under regulations of the Secretary 
        applying principles consistent and coextensive with the 
        principles applied in determining whether employees of two or 
        more trades or businesses are treated as employed by a single 
        employer under section 4001(b), except that, for purposes of 
        this paragraph, an interest of greater than 25 percent may not 
        be required as the minimum interest necessary for common 
        control, or
          ``(II) in any other case, the determination'';
          (3) by redesignating clauses (iv) and (v) as clauses (v) and 
        (vi), respectively; and
          (4) by inserting after clause (iii) the following new clause:
          ``(iv) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined in 
        section 812(a)(2)), in determining, after the application of 
        clause (i), whether benefits are provided to employees of two 
        or more employers, the arrangement shall be treated as having 
        only one participating employer if, after the application of 
        clause (i), the number of individuals who are employees and 
        former employees of any one participating employer and who are 
        covered under the arrangement is greater than 75 percent of the 
        aggregate number of all individuals who are employees or former 
        employees of participating employers and who are covered under 
        the arrangement,''.

SEC. 4. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION HEALTH PLANS.

  (a) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1131) is amended--
          (1) by inserting ``(a)'' after ``Sec. 501.''; and
          (2) by adding at the end the following new subsection:
  ``(b) Any person who willfully falsely represents, to any employee, 
any employee's beneficiary, any employer, the Secretary, or any State, 
a plan or other arrangement established or maintained for the purpose 
of offering or providing any benefit described in section 3(1) to 
employees or their beneficiaries as--
          ``(1) being an association health plan which has been 
        certified under part 8;
          ``(2) having been established or maintained under or pursuant 
        to one or more collective bargaining agreements which are 
        reached pursuant to collectivebargaining described in section 
8(d) of the National Labor Relations Act (29 U.S.C. 158(d)) or 
paragraph Fourth of section 2 of the Railway Labor Act (45 U.S.C. 152, 
paragraph Fourth) or which are reached pursuant to labor-management 
negotiations under similar provisions of State public employee 
relations laws; or
          ``(3) being a plan or arrangement described in section 
        3(40)(A)(i),
shall, upon conviction, be imprisoned not more than 5 years, be fined 
under title 18, United States Code, or both.''.
  (b) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
  ``(n) Association Health Plan Cease and Desist Orders.--
          ``(1) In general.--Subject to paragraph (2), upon application 
        by the Secretary showing the operation, promotion, or marketing 
        of an association health plan (or similar arrangement providing 
        benefits consisting of medical care (as defined in section 
        733(a)(2))) that--
                  ``(A) is not certified under part 8, is subject under 
                section 514(b)(6) to the insurance laws of any State in 
                which the plan or arrangement offers or provides 
                benefits, and is not licensed, registered, or otherwise 
                approved under the insurance laws of such State; or
                  ``(B) is an association health plan certified under 
                part 8 and is not operating in accordance with the 
                requirements under part 8 for such certification,
        a district court of the United States shall enter an order 
        requiring that the plan or arrangement cease activities.
          ``(2) Exception.--Paragraph (1) shall not apply in the case 
        of an association health plan or other arrangement if the plan 
        or arrangement shows that--
                  ``(A) all benefits under it referred to in paragraph 
                (1) consist of health insurance coverage; and
                  ``(B) with respect to each State in which the plan or 
                arrangement offers or provides benefits, the plan or 
                arrangement is operating in accordance with applicable 
                State laws that are not superseded under section 514.
          ``(3) Additional equitable relief.--The court may grant such 
        additional equitable relief, including any relief available 
        under this title, as it deems necessary to protect the 
        interests of the public and of persons having claims for 
        benefits against the plan.''.
  (c) Responsibility for Claims Procedure.--Section 503 of such Act (29 
U.S.C. 1133) is amended by inserting ``(a) In General.--'' before ``In 
accordance'', and by adding at the end the following new subsection:
  ``(b) Association Health Plans.--The terms of each association health 
plan which is or has been certified under part 8 shall require the 
board of trustees or the named fiduciary (as applicable) to ensure that 
the requirements of this section are met in connection with claims 
filed under the plan.''.

SEC. 5. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

  Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
  ``(d) Consultation With States With Respect to Association Health 
Plans.--
          ``(1) Agreements with states.--The Secretary shall consult 
        with the State recognized under paragraph (2) with respect to 
        an association health plan regarding the exercise of--
                  ``(A) the Secretary's authority under sections 502 
                and 504 to enforce the requirements for certification 
                under part 8; and
                  ``(B) the Secretary's authority to certify 
                association health plans under part 8 in accordance 
                with regulations of the Secretary applicable to 
                certification under part 8.
          ``(2) Recognition of primary domicile state.--In carrying out 
        paragraph (1), the Secretary shall ensure that only one State 
        will be recognized, with respect to any particular association 
        health plan, as the State to with which consultation is 
        required. In carrying out this paragraph--
                  ``(A) in the case of a plan which provides health 
                insurance coverage (as defined in section 812(a)(3)), 
                such State shall be the State with which filing and 
                approval of a policy type offered by the plan was 
                initially obtained, and
                  ``(B) in any other case, the Secretary shall take 
                into account the places of residence of the 
                participants and beneficiaries under the plan and the 
                State in which the trust is maintained.''.

SEC. 6. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES.

  (a) Effective Date.--The amendments made by this Act shall take 
effect one year from the date of the enactment. The Secretary of Labor 
shall first issue all regulations necessary to carry out the amendments 
made by this Act within one year after the date of the enactment of 
this Act.
  (b) Treatment of Certain Existing Health Benefits Programs.--
          (1) In general.--In any case in which, as of the date of the 
        enactment of this Act, an arrangement is maintained in a State 
        for the purpose of providing benefits consisting of medical 
        care for the employees and beneficiaries of its participating 
        employers, at least 200 participating employers make 
        contributions to such arrangement, such arrangement has been in 
        existence for at least 10 years, and such arrangement is 
        licensed under the laws of one or more States to provide such 
        benefits to its participating employers, upon the filing with 
        the applicable authority (as defined in section 812(a)(5) of 
        the Employee Retirement Income Security Act of 1974 (as amended 
        by this subtitle)) by the arrangement of an application for 
        certification of the arrangement under part 8 of subtitle B of 
        title I of such Act--
                  (A) such arrangement shall be deemed to be a group 
                health plan for purposes of title I of such Act;
                  (B) the requirements of sections 801(a) and 803(a) of 
                the Employee Retirement Income Security Act of 1974 
                shall be deemed met with respect to such arrangement;
                  (C) the requirements of section 803(b) of such Act 
                shall be deemed met, if the arrangement is operated by 
                a board of directors which--
                          (i) is elected by the participating 
                        employers, with each employer having one vote; 
                        and
                          (ii) has complete fiscal control over the 
                        arrangement and which is responsible for all 
                        operations of the arrangement;
                  (D) the requirements of section 804(a) of such Act 
                shall be deemed met with respect to such arrangement; 
                and
                  (E) the arrangement may be certified by any 
                applicable authority with respect to its operations in 
                any State only if it operates in such State on the date 
                of certification.
        The provisions of this subsection shall cease to apply with 
        respect to any such arrangement at such time after the date of 
        the enactment of this Act as the applicable requirements of 
        this subsection are not met with respect to such arrangement.
          (2) Definitions.--For purposes of this subsection, the terms 
        ``group health plan'', ``medical care'', and ``participating 
        employer'' shall have the meanings provided in section 812 of 
        the Employee Retirement Income Security Act of 1974, except 
        that the reference in paragraph (7) of such section to an 
        ``association health plan'' shall be deemed a reference to an 
        arrangement referred to in this subsection.

                                Purpose

    The purpose of H.R. 660 is to reduce the ranks of the 
uninsured by improving access to health care for uninsured 
working families, particularly those who are employed in small 
businesses. The bill would create association health plans 
(``AHPs'') that would allow small businesses to join together 
through bona-fide trade associations, thus enjoying larger 
economies of scale presently enjoyed by many large corporations 
and unions, to purchase health insurance for their workers at a 
lower cost than they are presently experiencing. H.R. 660 would 
increase small businesses' bargaining power with health care 
providers, give them freedom from costly state mandated benefit 
packages, and lower overhead costs that would better enable 
them to offer health care coverage for their workers.

                            Committee Action

    Representative Ernie Fletcher (R-KY) introduced H.R. 660 on 
February 11, 2003 along with 70 bi-partisan original co-
sponsors including Education and the Workforce Committee 
Chairman John Boehner and Subcommittee on Employer-Employee 
Relations Chairman Sam Johnson; the number of bi-partisan co-
sponsors rose to 156 by the time the bill was reported by the 
Committee to the full House of Representatives. The bill is the 
culmination of legislative activity started by the Committee in 
the 104th Congress through the present 108th Congress. This 
activity included bill introductions, hearings, mark-ups, floor 
consideration, and House Senate Conference activity that had 
the goal of expanding health coverage through the sponsorship 
of health plans by bona fide trade associations.

                             104TH CONGRESS

    In the 104th Congress, the Subcommittee on Employer-
Employee Relations held an oversight hearing ``Health Insurance 
Reform--The ERISA Title I Framework: A 20-Year Success Story'' 
on February 14, 1995. Testimony was received from: 
Representative Pat Williams; Former Representative John 
Erlenborn; Frank Cummings, Esq., LeBoeuf, Lamb, Greene & 
MacRae; Randal Johnson, Director of Benefits Planning, 
Motorola, Inc.; Ralph Brennan, President, Mr. B.'s Inc.; 
William Goodrich, President, United Agribusiness League; and 
Brian Atchinson, Vice President, National Association of 
Insurance Commissioners, Superintendent, Bureau of Insurance, 
State of Maine.
    On February 21, 1995, H.R. 995, The ERISA Targeted Health 
Insurance Reform Act was introduced by then Chairman of the 
Subcommittee on Employer-Employee Relations, Rep. Harris Fawell 
with 15 original cosponsors that rose to 50 bi-partisan 
cosponsors. The Subcommittee on Employer-Employee Relations 
held a hearing on this bill on March 10, 1995. Witnesses at the 
hearing were: Jack Faris, President National Federation of 
Independent Business; Jerry Jasinowski, President National 
Association of Manufacturers; Sean Sullivan, President and CEO, 
National Business Coalition on Health; Timothy Flaherty, 
American Medical Association; Charles Masten, Inspector 
General, Department of Labor; Gerald McGeehan, Graphic Arts 
Benefits Corp; Kala Ladenheim, Intergovernmental Health Policy 
Project, George Washington University; and Judith Waxman, 
Director of Government Affairs of Families, USA. A third 
hearing was held on March 28, 1995 during which the 
Subcommittee continued its review of H.R. 995. Testimony was 
presented by: Richard Lesher, President, U.S. Chamber of 
Commerce; Keith Richman, President, Medco Associates, Inc.; Jon 
Reiker, Vice President, Benefits, General Mills Restaurants, 
Inc.; Frank Cummings, Esq., LeBoeuf, Lamb, Greene & MacRae; and 
Lee Douglas, Insurance Commissioner of Arkansas, President, 
National Association of Insurance Commissioners.
    The Committee on Economic and Educational Opportunities 
(the previous name of the Education and the Workforce 
Committee) on March 6, 1996 discharged H.R. 995 from the 
Subcommittee on Employer-Employee Relations, approved H.R. 995, 
as amended, on voice vote, and, by a roll call vote of 24 ayes 
to 18 nays, ordered the bill favorably reported to the House of 
Representatives. However, the bill was not considered by the 
full body before the conclusion of the 104th Congress.

                             105TH CONGRESS

    On May 1, 1997 H.R. 1515, the Expansion of Portability and 
Health Insurance Coverage Act of 1997 (``EPHIC'') was 
introduced by Representative Harris Fawell with 136 bi-partisan 
original cosponsors that rose to 157 bi-partisan cosponsors.
    The Subcommittee on Employer-Employee Relations held a 
legislative hearing on EPHIC on May 8, 1997. Testimony was 
received from: the Honorable James P. Moran (D-VA,); Jack 
Faris, President and CEO, National Federation of Independent 
Business; Mary Castro, Vice President, Employee Benefits, 
Independent Grocers Alliance, Inc., Chicago, IL; Cathy Hurwit, 
Deputy Director, Citizen Action; Kathleen Sebelius, 
Commissioner of Insurance, State of Kansas; Donald Dressler, 
President of Insurance Services, Western Growers Association, 
on behalf of The Association Healthcare Coalition, Newport 
Beach, CA; and Jeffrey H. Joseph, Vice President, Domestic 
Policy, U.S. Chamber of Commerce.
    On Wednesday, June 11, 1997, the Committee on Education and 
the Workforce discharged H.R. 1515 from the Subcommittee on 
Employer-Employee Relations and then followed on Thursday June 
12, 1997, with full Committee approval of it, as amended, on a 
voice vote, and, by a vote of 24 ayes to 20 nays, ordered the 
bill favorably reported and incorporated into subtitle D of the 
reconciliation package transmitted to the Budget Committee and 
ordered reported the bill, as amended, to the House of 
Representatives. It became part of H.R. 2015, the Balanced 
Budget Act of 1997, which passed the House of Representatives 
on June 25, 1967 on a vote of 270 yeas to 162 nays; however, 
the association health plan provisions were deleted from the 
Conference agreement that was eventually signed into law. A 
version of the association health plan provisions of the bill 
were then incorporated into H.R. 4250, the Patient Protection 
Act of 1998, which was introduced by Representative Newt 
Gingrich, the then Speaker of the House of Representatives, on 
July 16, 1998. On July 24, 1998, the House of Representatives 
passed the bill, including a version of the provisions of H.R. 
1515, on a vote of 216 yeas to 210 nays; however, on October 9, 
1998 the U.S. Senate tabled consideration of the measure on a 
vote of 50 yeas to 47 nays where it remained until the 
conclusion of the 105th Congress.

                             106TH CONGRESS

    At the commencement of the 106th Congress, Representative 
John A. Boehner (R-OH) succeeded the retired Representative 
Harris Fawell as the Chairman of the Subcommittee on Employer-
Employee Relations. On March 25, 1999, the Subcommittee on 
Employer-Employee Relations held a hearing on ``Expanding 
Affordable Health Care Coverage: Benefits and Consequences of 
Association Health Plans''. Witnesses at the hearing were: Ms. 
Mary Nell Lehnhard, Senior Vice President Policy and 
Representation, BlueCross BlueShield Association, Washington, 
DC; Ms. Victoria Caldeira, Manager of Legislation Affairs, 
National Federation of Independent Business, Washington, DC; 
Mr. Donald G. Dressler, CAE President for Insurance Services, 
Western Growers Association, Newport Beach, CA; Mr. Steven B. 
Larsen, Commissioner of Insurance State of Maryland, Baltimore, 
MD, testifying on behalf of National Association of Insurance 
Commissioners.
    On April 20, 1999, Representative Jim Talent (R-MO) 
introduced H.R. 1496 the Small Business Access and Choice for 
Entrepreneurs Act of 1999 with 13 bi-partisan original 
cosponsors that rose to 47 bi-partisan cosponsors. This bill 
was then incorporated into H.R. 2990 introduced by Rep. Talent 
on September 30, 1999 and passed by the House of 
Representatives on a vote of 227 yeas to 205 nays on October 6, 
1999. After passage of a similar bill, S. 1344, a Conference 
was held between the House of Representatives and the Senate 
but it did not conclude by the end of the 106th Congress.

                             107TH CONGRESS

    At the commencement of the 107th Congress, Representative 
John A. Boehner (R-OH) succeeded the retired Representative 
William Goodling as the Chairman of the Committee on Education 
and the Workforce; Representative Sam Johnson (R-TX) then 
succeeded Representative Boehner as the Chairman of the 
Subcommittee on Employer-Employee Relations. Representative 
Ernie Fletcher (R-KY) introduced H.R. 1774, the Small Business 
Health Fairness Act of 2001, on May 9, 2001 with 46 bi-partisan 
original cosponsors that rose to 111 bi-partisan cosponsors.
    On June 18, 2002, the Subcommittee on Employer Employee 
Relations held a hearing on ``The Rising Cost of Health Care: 
How are Employers and Employees Responding?'' Witnesses at the 
hearing were: Dr. Paul Ginsburg, President, Center for Studying 
Health System Change, Washington, DC; Ms S.Catherine Longley, 
Commissioner, Maine Department of Professional and Financial 
Regulation, Augusta, ME; Dr. Henry Simmons, President, National 
Coalition on Health Care, Washington, DC; Mr. Patrick McGinnis, 
CEO, Trover Solutions, Louisville, KY; Ms Carol Miller, 
Frontier Education Center, Santa Fe, NM; Ms Cathy A. Streker, 
Director of Employee Benefits and Planning, Textron, Inc., 
Providence, RI.
    Following the June hearing, on July 9, 2002, the 
Subcommittee on Employer Relations held a hearing entitled 
``Expanding Access to Quality Health Care: Solutions for 
Uninsured Americans''. Testimony at the hearing was received 
from: Representative Ernie Fletcher (R-KY), and Representative 
John Tierney (D-MA), U.S. House of Representatives; Dr. Mark B. 
McClellan, Member, Council of Economic Advisors, Washington, 
D.C.; Mr. Harry Kraemer, Jr., Chairman and Chief Executive 
Officer, Baxter International Inc., Deerfield, IL, testifying 
on Behalf of The Healthcare Leadership Council; Mr. Joseph 
Rossman, Vice President of Fringe Benefits, Associated Builders 
and Contractors, Rosslyn, VA, testifying on Behalf of the 
Association Health Plan Coalition; and Mr. Ron Pollack, 
Executive Director, Families USA, Washington, D.C.
    On July 19, 2001, Representative Greg Ganske (R-IA) 
introduced HR 2563. When the House of Representatives passed 
H.R. 2563 on August 2, 2001, by a vote of 226 ayes to 203 nays, 
it contained H.R. 1774, the Small Business Health Fairness Act 
of 2001, as an amendment. The bill was not taken up by the 
Senate before the conclusion of the 107th Congress.

                             108TH CONGRESS

    On February 11, 2003, Representative Ernie Fletcher 
introduced H.R. 660, the ``Small Business Health Fairness Act 
of 2003'' with 70 bi-partisan original cosponsors that rose to 
156 bi-partisan cosponsors. The Subcommittee on Employer-
Employee Relations held a hearing on H.R. 660 on March 13, 
2003. Witnesses at the hearing presenting testimony were: Hon. 
Ann L. Combs, Assistant Secretary of Labor, Employee Benefits 
Security Administration, Washington DC; Ms. Phyllis Burlage, 
Burlage Associates, PA, Millersville, MD, testifying on behalf 
of the National Federation of Independent Business; Alice 
Weiss, Esq., Director of Health Policy, National Partnership 
for Families, Washington DC; and Mr. Greg Scandlen, Director, 
Center for Consumer Driven Health Care, The Galen Institute, 
Alexandria, VA.
    The Subcommittee on Employer-Employee Relations marked-up, 
approved and reported H.R. 660 to the full Committee on 
Education and the Workforce by a bi-partisan vote of 13 yeas to 
8 nays on April 8, 2003. On June 12, 2003, the Committee on 
Education and the Workforce ordered reported, as amended, H.R. 
660 to the full House of Representatives by a vote of 26-21.

                                Summary

    The Small Business Health Fairness Act (H.R. 660) addresses 
both the access and cost issues at the heart of the health care 
reform debate. The bipartisan bill, introduced by a bipartisan 
group of legislators led by Employer-Employee Relations 
Subcommittee Chairman Sam Johnson (R-TX), Representatives Ernie 
Fletcher (R-KY), Nydia Velazquez (D-NY), and Cal Dooley (D-CA), 
would improve access to quality health care for uninsured 
families. Specifically, it would create association health 
plans (AHPs) to allow small businesses to join together through 
bona-fide trade associations to purchase health insurance for 
their workers at a lower cost. The measure would increase small 
businesses' bargaining power with health care providers, give 
them freedom from costly state-mandated benefit packages, and 
lower their overhead costs by as much as 30 percent--benefits 
that many large corporations and unions already enjoy because 
of their larger economies of scale.
    The bill has more than 150 cosponsors, including House 
Speaker Dennis Hastert (R-IL), Small Business Committee 
Chairman Don Manzullo (R-IL), Representatives Brad Carson (D-
OK), Jerry Costello (D-IL), and Johnny Isakson (R-GA). A broad 
and diverse coalition of more than 100 groups have endorsed the 
bill, including the U.S. Chamber of Commerce, the National 
Federation of Independent Business, the American Farm Bureau 
Federation, the Associated Builders and Contractors, The Latino 
Coalition, National Black Chamber of Commerce, the National 
Association of Women Business Owners, and the National 
Restaurant Association. Sen. Olympia Snowe (R-ME introduced 
companion legislation in the Senate (S. 545).
    The bill establishes that an association health plan (AHP) 
is a group health plan that offers fully-insured and/or self-
insured medical benefits, has been certified by the Labor 
Department, and is operated by a board of trustees with 
complete fiscal control and responsibility for all operations. 
The association sponsoring the plan must have been in existence 
for at least three years for substantial purposes other than 
providing health insurance coverage.
    To be certified by the Labor Department, a ``self-insured'' 
AHP must have at least 1,000 participants and beneficiaries. 
The self-insured AHP must have also offered coverage on the 
date of enactment, represent a broad cross-section of trades, 
or represent one or more trades with average or above health 
insurance risk.
    The bill requires all employers participating in the AHP to 
be members or affiliated members of the sponsor. All 
individuals under the plan must be active or retired employees, 
owners, officers, directors, partners, or their beneficiaries.
    The measure expressly prohibits discrimination by requiring 
that all employers that are association members are eligible 
for participation, all geographically available coverage 
options are made available upon request to eligible employers, 
and eligible individuals cannot be excluded from enrolling 
because of health status. The bill prohibits AHPs from charging 
higher rates for sicker individuals or groups within the plan, 
except to the extent already allowed under the relevant state 
rating law.
    H.R. 660 makes clear that AHPs must comply with the Health 
Insurance Portability and Accountability Act (HIPAA), which 
prohibits group health plans from excluding high-risk 
individuals with high claims experience. Thus, it will not be 
possible for AHPs to ``cherry pick'' because sick or high risk 
groups or individuals cannot be denied coverage. State-licensed 
health insurance agents must be used to distribute health 
insurance coverage provided to small employers under an AHP and 
must also be used to distribute self-insured benefits to small 
employers through an AHP.
    The bill includes solvency standards that are similar or 
stronger than standards enacted by states for association 
plans. These new solvency protections go far beyond what is 
required of single employer and labor union plans under current 
law. H.R. 660 requires self-insured AHPs to maintain reserves 
that are sufficient for unearned contribution, benefit 
liabilities, expected administrative costs, and any other 
obligations. A qualified actuary who is a member of the 
American Academy of Actuaries must recommend these reserve 
levels.
    AHPs must also obtain aggregate and specific stop-loss 
insurance; indemnification insurance for any claims if the plan 
is terminated; and must also make annual payments to an 
Association Health Plan Fund. In addition, an AHP must maintain 
surplus reserves of between $500,000 and $2 million. If an AHP 
is unable to provide benefits when due or is otherwise in a 
financially troubled condition, the Labor Secretary must act as 
a trustee to administer the plan for the duration of the 
insolvency. A certified AHP may terminate only if the trustees 
provide 60 days advance written notice to participants and 
beneficiaries and submit a plan for timely payment of all 
benefit obligations. The measure establishes a Solvency 
Standards Working Group within 90 days after enactment to 
recommend initial regulations.
    The bill gives certified AHPs freedom from costly state-
mandated benefit packages by exempting them from state benefit 
mandates, except that AHPs must comply with any state laws that 
require coverage of specific diseases. The measure clarifies 
that states may regulate self-insured multiple employer welfare 
arrangements providing medical care which do not elect to meet 
the certification requirements for AHPs.
    H.R. 660 requires the Labor Secretary to consult with the 
states about the regulation of AHPs located in their state. It 
establishes criminal penalties for willful misrepresentation as 
a certified AHP or collectively bargained status; authorizes 
the Department to issue cease activity orders against 
fraudulent health plans; and outlines the responsibility of the 
board of trustees for meeting required claims procedures. The 
Labor Secretary must report to Congress no later than January 
1, 2008, on the impact of AHPs on reducing the number of 
uninsured.

                     Committee Statement and Views


                 A. BACKGROUND AND NEED FOR LEGISLATION

Strengths of our Nation's Employer-Provided Health Care System

    When the Employee Retirement Income Security Act (ERISA) 
\1\ was enacted in 1974, the Congress found that employee 
benefit plans, including employer provided health benefits, 
directly impacted the continued well being and security of 
millions of employees and their dependents.\2\ The well being 
of these workers and their families was of such national 
importance that Congress, through the enactment of ERISA, 
preempted the states' regulatory role in order to assure 
uniform federal standards. It is the belief of the Committee on 
Education and the Workforce (hereinafter the ``Committee''), 
that the ability to utilize uniform standards is the 
cornerstone of our nation's successful employer-provided health 
care system.
---------------------------------------------------------------------------
    \1\ 29 U.S.C. Sec. 1001, et seq.
    \2\ 29 U.S.C. Sec. 1001(a).
---------------------------------------------------------------------------
    When Congress enacted ERISA, much of the dialogue about 
employer-sponsored benefits pertained to pension plans. Today, 
more than 131 million Americans obtain their health insurance 
coverage through an employer-sponsored health plan covered 
under ERISA. Thismeans that more Americans receive health 
benefits voluntarily provided by their employer than any other form of 
health care insurance including Medicare and Medicaid.
    The Committee believes our nation's employer-provided 
health care system to be an enormous success story. Indeed, the 
Committee views its task with regard to this system to be to 
protect it from federal proscriptions, such as increased 
federal mandates, that cause the provision of health care 
insurance to become more costly, thereby making it more 
difficult for employers to offer health coverage to their 
employees.
    It is the view of the Committee that ERISA's preemption of 
state mandates and regulation has provided a stable framework 
by which employers have been able to offer health plans to 
workers and their families.
    An April 2002 study by PriceWaterhouseCoopers notes that 
state mandates have increased 25-fold over the time period from 
1970-1996.\3\ Thus, during the three decades since ERISA was 
enacted, self-insured employers offering health plans would 
have seen their regulatory and administrative burden increase 
accordingly, were it not for ERISA's preemption.
---------------------------------------------------------------------------
    \3\ PriceWaterhouseCoopers, The Factors Fueling Rising Health Care 
Costs, April 2002.
---------------------------------------------------------------------------
    Under ERISA, employers and unions offering health insurance 
products to their employees must comply with state regulation 
for these health policies. This is the result of the Supreme 
Court's ruling in Metropolitan Life Insurance Co. v. 
Massachusetts, 471 U.S. 724 (1985). In that decision, the court 
held that if an employer's health plan purchases a fully 
insured product offered by an insurer regulated by the states, 
then such insurance regulation may include imposing 
requirements that specific benefits be included in the products 
sold to the plan.\4\ These state laws then fall within the 
jurisdiction of Section 514(b)(2)(A) of ERISA, which saves any 
law of any state that regulates insurance from being preempted 
by ERISA.\5\
---------------------------------------------------------------------------
    \4\ Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724 
(1985).
    \5\ 29 U.S. C Sec. 1144(b)(2)(A).
---------------------------------------------------------------------------
    However, when an employer or union self-funds the health 
benefits it provides to workers (i.e. taking on the risk of 
insurable events), ERISA ensures that the employer or union 
cannot be deemed to be in the business of insurance.\6\
---------------------------------------------------------------------------
    \6\ 29 U.S.C. Sec. 1144(b)(2)(B).
---------------------------------------------------------------------------
    Thus, those employers and unions who self-fund or self-
insure their benefits are able to take advantage of ERISA's 
preemption of state regulation to offer a uniform health 
benefit package that can be offered to individuals across state 
lines. 67 million of the 131 million Americans who obtain their 
health insurance from their employer receive benefits through a 
self-funded plan.
    The preemption of state benefit mandates well serves 
employers, unions, and employees. PriceWaterhouseCoopers 
estimates that the 1500 state benefit mandates make up 15 
percent of the increased cost of health insurance for 2002.\7\ 
These costs might well price many employers out of the business 
of offering insurance were it not for the opportunity to self-
fund their health care under ERISA.
---------------------------------------------------------------------------
    \7\ Ibid.
---------------------------------------------------------------------------
    However, rather than use the preemption of state benefit 
mandates to offer inferior health care to workers, unions and 
self-insured large employers offer rich benefit packages to 
their workers. As cited in a 1996 GAO study, a KPMG study found 
that self-funded plans are more likely to offer benefits and 
services that are most commonly mandated by states than fully 
insured plans.\8\ This pattern holds true for other benefits 
that are not typically mandated.
---------------------------------------------------------------------------
    \8\ US GAO ``Health Insurance Regulation--Varying State 
Requirements Affect Cost of Insurance, August 1996.
---------------------------------------------------------------------------
    Uniformity also provides for lower administrative costs. A 
2002 Robert Wood Johnson Research Synthesis Report cites the 
fact that administrative costs make up only 12 percent of 
health care costs for large employers. This is compared to the 
administrative costs for smaller employers that make up 40 
percent of overall health costs.\9\
---------------------------------------------------------------------------
    \9\ Robert Wood Johnson Foundation, ``Are Health Insurance Premiums 
Higher for Small Firms?'' September 2002.
---------------------------------------------------------------------------
    Employees surveyed about their health benefits conclude in 
wide majorities that they are pleased with their employer-
sponsored coverage and that they are not willing to risk losing 
this coverage in order to obtain additional mandated 
benefits.\10\
---------------------------------------------------------------------------
    \10\ 2002 Health Confidence Survey, September 2002; Kaiser Family 
Foundation/Harvard School of Public Health, ``National Survey on 
Consumer Experiences With and Attitudes Toward Health Plans: Key 
Findings,'' August, 2001.
---------------------------------------------------------------------------
    However, though the Committee views the history of 
employer-sponsored health benefits since the enactment of ERISA 
as a success story, the Committee acknowledges that the 
employer sponsored health care system faces challenges. In 
particular, the Committee is concerned about the issue of 
rising health care costs and the extent to which these health 
care costs result in less coverage.

Challenges to Employer-Provided Health Care

    Estimates for 2001 show that for the average employer, the 
cost of providing health care increased by 11 percent. Though 
2002 premium increases have not yet been released, experts 
expect the increase to be in the area of 13 percent. At a 
hearing before the Subcommittee on Employer-Employee Relations 
in June of 2002, Paul Ginsburg, President of the Center for 
Studying Health System Change, testified about the threat these 
increases pose to the employer-sponsored health care system:

          Rising health costs affect people's ability to afford 
        health insurance. When insurance premiums rise faster 
        than workers' wages, fewer people obtain employment-
        based health insurance. This happens through small 
        employers deciding not to provide coverage to their 
        employees and employees deciding not to take up 
        employer coverage because the employee contribution is 
        too high. If health care costs trends continue to 
        exceedincreases in wage rates by a large margin, this 
could result in substantial loss of employer-based health 
insurance.\11\
---------------------------------------------------------------------------
    \11\ Hearing on ``The Rising Costs of Health Care: How are 
Employers and Employees Responding?'' before the Subcommittee on 
Employer Employee Relations, Committee on Education and the Workforce, 
U.S. House of Representatives, 107th Congress, Second Session, June 18, 
2002.

    Catherine Longley, Commissioner of Professional and 
Financial Regulation, State of Maine, agreed with Ginsburg's 
testimony and shared these insights about the situation Maine 
---------------------------------------------------------------------------
employers face:

          In the State of Maine, we are facing a health care 
        cost crisis. Although health care costs have increased 
        dramatically across the country, they have increased 
        even faster in Maine. Nationally, from 1990-1998, the 
        per capital expenditures for personal health care 
        increased an average of 53.3%; in Maine, the increase 
        was 80.4% for the same period of time* * * Maine 
        employers are faced with difficult choices--do they 
        continue existing policies at a significant increase in 
        cost and shift more of the cost of the health insurance 
        to employees; do they retain coverage but offer higher 
        deductible policies; do they forego increasing employee 
        salaries to maintain coverage; or do they drop coverage 
        altogether? \12\
---------------------------------------------------------------------------
    \12\ Hearing on ``The Rising Costs of Health Care: How are 
Employers and Employees Responding?'' Subcommittee on Employer-Employee 
Relations, Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, June 18, 2002.

    Commissioner Longley testified that the State of Maine and 
Independent Governor Angus King, have recognized that state 
imposed benefit mandates impose significant costs on employers 
---------------------------------------------------------------------------
and have taken dramatic steps to address this:

          For example, in 1995, Governor King signed a 
        progressive mental health parity law that required 
        health insurance coverage for 7 specific biologically 
        based mental illnesses in policies held by employer 
        groups of 20 or more. Since that time, the King 
        Administration has grown more and more concerned about 
        the dramatic increases in health care costs and effect 
        of public policy on those increases. As a result, in 
        2002 the Administration adopted a presumption against 
        further mandates, which only the most compelling of 
        arguments should overturn. Given the circumstances this 
        year, Governor King felt that he could no longer 
        support additional mandates and accordingly, vetoed LD 
        1627, ``An Act to Ensure Equality in Mental Health 
        Coverage,'' the only health insurance mandate vetoed 
        during his nearly eight years as governor. * * * it was 
        felt that Maine could ill afford any new mandate that 
        would further increase costs. As Governor King stated 
        in his April 11, 2002 veto message to the Maine 
        Legislature, ``When you are in a hole, the first rule 
        is not to dig any deeper.'' \13\
---------------------------------------------------------------------------
    \13\ Hearing on ``The Rising Costs of Health Care: How are 
Employers and Employees Responding?'' Subcommittee on Employer-Employee 
Relations, Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, June 18, 2002.
---------------------------------------------------------------------------

Challenges to small employers

    Nowhere is the threat to employer-sponsored health care 
more apparent than in the situation regarding small businesses. 
For those small employers who can afford health insurance for 
their employees, a fully insured plan is often their only 
available option. The net effect of the Metropolitan Life 
decision has been to subject these smaller employers that fully 
insure to the burdens of costly state mandates, thereby making 
health insurance for their employees even less affordable than 
it is for larger employers who are not subject to state 
mandates.
    Because of their size and limited resources, self-insuring 
is not a viable option for small firms, and thus they must 
purchase fully insured health products that are subject to 
state benefit mandates. In fact, firms with fewer than 100 
employees offered self-insured plans at just 11 percent of all 
work sites in 2000.\14\ This means that small firms bear the 
entire state regulatory burden--and the increased costs that 
accompany it--that their larger employer and union counterparts 
are able to avoid.
---------------------------------------------------------------------------
    \14\ Medical Expenditure Panel Survey from Agency for Healthcare 
Research and Quality as cited by NovaRest Consulting, ``New York State 
Mandated Health Insurance Benefits, May 2003.''
---------------------------------------------------------------------------
    Small businesses also suffer from greater variability in 
claims costs. In a firm with very few employees, a sick 
employee will have a greater impact on health care premiums, 
and these rising premiums sometimes price these firms out of 
insurance altogether. By contrast, because the employer pool is 
larger, sick employees in a larger group are less likely to 
cause premiums to rise as the healthy employees balance out the 
sicker individuals.
    In July of 2002, the Subcommittee on Employer-Employee 
Relations held a hearing on the problem of the uninsured. At 
the hearing, Joe Rossmann, Vice President of Fringe Benefits, 
Associated Builders and Contractors (ABC) testified to the 
increases in costs that ABC's member companies, most of which 
are smaller employers, are experiencing:

          For example, in Houston, Texas, Acoustical Concepts, 
        Inc. was forced to accept a premium increase of 47% 
        this year, even though they had no significant claims. 
        Moreover, their insurance company, Blue Cross/Blue 
        Shield, has informed them that in 1-2 years, the 87 
        employees at this company will be offered only 
        catastrophic coverage.\15\
---------------------------------------------------------------------------
    \15\ Hearing on ``Expanding Access to Quality Health Care: 
Solutions for Uninsured Americans'' Subcommittee on Employer-Employee 
Relations, Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, July 9, 2002.

    He went on to say that, ``Indeed, massive premium increases 
of 40 percent, 50 percent and higher, and/or benefit 
reductions, are typical of what small businesses throughout the 
nation are experiencing today.'' \16\
---------------------------------------------------------------------------
    \16\ Ibid.
---------------------------------------------------------------------------
    At a later hearing on H.R. 660, the Small Business Health 
Fairness Act, Phyllis Burlage, President, Burlage Associates, 
shared her experience:

          ``My rate hike this year is 45% with our health 
        maintenance organization (HMO). This is real money 
        since I absorb all the cost increases for my employees. 
        Since 1996,my company has experienced a 226% increase 
in premiums--how can any business survive with these types of increases 
over just a few years?'' \17\
---------------------------------------------------------------------------
    \17\ Hearing on ``H.R. 660, the Small Business Health Fairness 
Act,'' Subcommittee on Employer-Employee Relations, Committee on 
Education and the Workforce, U.S. House of Representatives, 108th 
Congress, First Session, March 13, 2003.

    There is ample evidence to indicate that small employers 
face greater challenges than larger employers or unions in 
providing health coverage--putting workers in small businesses 
at a greater risk of being uninsured.

High costs for small employers means workers in small businesses are 
        uninsured

    The increase in costs for small employers means that 
workers in small businesses are not offered health care 
insurance or are at risk of losing their health insurance. 
According to figures released by the U.S. Census Bureau in 
September 2002, the number of Americans who have no health 
insurance increased to more than 41 million. Declining coverage 
in the employer based market accounts for the increase in the 
uninsured. Significantly, the reduction in employer-sponsored 
coverage comes almost totally from a decrease in the number of 
individuals covered by small employers.
    Over 50 percent of the 41 million uninsured Americans 
either work in a small business or are a dependent of a small 
business worker.\18\ The cost of insurance is the most 
significant barrier to insurance coverage for workers and their 
families.\19\
---------------------------------------------------------------------------
    \18\ Department of Labor estimates of working families' health 
insurance status, based on the Census Bureau's annual March Current 
Population Survey.
    \19\ Testimony of Harry M. J. Kraemer, Jr., Chairman and CEO, 
Baxter International, Inc., on behalf of the Healthcare Leadership 
Council, at Subcommittee on Employer-Employee Relations Hearing on 
``Expanding Access to Quality Health Care: Solutions for Uninsured 
Americans'' Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, July 9, 2002.
---------------------------------------------------------------------------
    Indeed, the cost of health coverage is the most important 
factor employers cite in their decision whether to offer health 
care to their employees and their families. A 1997 survey by 
the Henry J. Kaiser Family Foundation indicated that small 
firms are extremely price sensitive. This survey found that 
even a 5 percent decrease in price would result in a 10-15 
percent increase in the likelihood of purchasing a plan.
    Testimony from Ann L. Combs, Assistant Secretary for 
Employee Benefits Security, U.S. Department of Labor, explains 
some of the barriers to coverage that small firms face:

          Cost is clearly the biggest barrier for small 
        employers that want to provide health insurance. For a 
        variety of reasons, insurers typically charge small 
        firms more per employee than large firms for comparable 
        coverage. Small company premiums are 20 percent to 30 
        percent higher than those of large self-insured 
        companies with similar claims per covered employee. 
        Cost drivers include small businesses administrative 
        overhead, insurance company marketing and underwriting 
        expenses, adverse selection, and state regulatory 
        burdens. Small firms are likely to offer less generous 
        benefits and more of their premiums are consumed by 
        administrative costs.\20\

    \20\ Hearing on ``H.R. 660, the Small Business Health Fairness 
Act,'' Subcommittee on Employer-Employee Relations, Committee on 
Education and the Workforce, U.S. House of Representatives, 108th 
Congress, First Session, March 13, 2003.

    Though the primary barrier to health coverage for small 
businesses is cost, other factors also deter small firms from 
offering coverage. Testimony from Harry M. J. Kraemer, Jr., 
Chairman and CEO, Baxter International, Inc., on behalf of the 
Healthcare Leadership Council, provides additional reasons that 
---------------------------------------------------------------------------
small firms are less likely to offer health care coverage:

          In an April 2002 survey by the Kaiser Family 
        Foundation, over one third of small businesses not 
        offering coverage said that administrative hassle was a 
        very important reason * * * A 2000 focus group of the 
        California Health Care Foundation found that a lack of 
        unbiased, easily understood information on health 
        insurance was a major barrier in acquiring coverage. 
        Many small business owners do not fully understand the 
        health insurance market and are skeptical of 
        information from insurance companies, the focus group 
        report stated. This lack of credible information could 
        be leading to inaction on the part of employers * * *An 
        EBRI 2000 Small Employer Health Benefits Survey found 
        that many small employers make decisions about whether 
        to offer health benefits to their workers without being 
        fully aware of the tax advantages that can make this 
        benefit more affordable. This survey found that 57 
        percent of small employers do not know that health 
        insurance premiums are 100 percent tax deductible. \21\
---------------------------------------------------------------------------
    \21\ Subcommittee on Employer-Employee Relations Hearing on 
``Expanding Access to Quality Health Care: Solutions for Uninsured 
Americans'' Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, July 9, 2002.

    These factors, administrative costs, necessity of 
information about health insurance, and tax structure, are 
easily borne by larger employers. Taken together, however, they 
add to the difficulties that small employers face in offering 
health care coverage to their employees.

Solutions for our Nation's uninsured--the Small Business Health 
        Fairness Act, H.R. 660

    It is the strong belief of the Committee that solutions to 
the growing problem of the uninsured, particularly in small 
businesses, can only be found by utilizing the strengths of the 
employer-based health care system. Harry Kraemer's testimony 
puts it this way:

          In all of our research, the single most important 
        point that cannot be ignored is that the uninsured 
        issue is a workplace issue, with millions of wage-
        earning households representing the lion's share of the 
        uninsured population. It then stands to reason that our 
        most effective solutions must be found within the 
        existing private employer-based health care system.\22\
---------------------------------------------------------------------------
    \22\ Subcommittee on Employer-Employee Relations Hearing on 
``Expanding Access to Quality Health Care: Solutions for Uninsured 
Americans'' Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, July 9, 2002.

    The Committee believes that if smaller employers were able 
to band together to become larger purchasers of health 
insurance, that this would give small businesses greater 
economies of scale, allowing them to bargain for health 
insurance with the clout of much larger businesses. In 
addition, if small businesses were able to self-fund their 
health plans, they would relieve the regulatory burden of state 
mandated benefit laws. The Committee believes that these two 
factors would combine to significantly lower the costs of 
health insurance, making it possible for very small firms to 
offer insurance.
    The Small Business Health Fairness Act, H.R. 660, 
introduced by Representatives. Ernie Fletcher (R-KY), 
Subcommittee on Employer-Employee Relations Chairman Sam 
Johnson (R-TX), Nydia Velazquez (D-NY) and Cal Dooley (D-CA) 
amends ERISA to allow the establishment of Association Health 
Plans (AHPs). AHPs allow small businesses to join together 
under the umbrella of bona fide trade associations to become 
larger purchasers of health insurance. In addition, AHPs make 
it possible for small employers to self-insure, thereby 
avoiding costly state benefit mandates. The Committee expects 
that this will lower costs for small employers by 15-30 
percent, making it possible for small firms to offer health 
insurance to workers and their families, many of whom are 
uninsured. Because of this, the Committee expects that AHPs 
will reduce the number of the uninsured by millions.
    The Association Health Plan (AHP) bill is not new to the 
Committee on Education and the Workforce. AHP provisions were 
first included in H.R. 995, the ERISA Targeted Health Insurance 
Reform Act of 1995, introduced by then Subcommittee on 
Employer-Employee Relations Chairman Harris Fawell (R-IL) on 
February 21, 1995.
    During the 105th Congress, Representative Fawell introduced 
the AHP bill as the Expansion of Portability and Health 
Insurance Coverage Act of 1997. This bill was added to the 
Balanced Budget Act and approved by the House of 
Representatives in July of 1998, however a House-Senate 
Conference Committee again dropped the provisions from the 
final report. In 1998, the AHP bill was included in broader 
Patients' Bill of Rights legislation that passed the House of 
Representative in July of 1998
    During the 106th Congress, Representative Jim Talent (R-MO) 
introduced the bill as the Small Business Access and Choice for 
Entrepreneurs Act of 1999, H.R. 1496. The provisions of this 
bill passed the House of Representatives in October of 1999 
with a bipartisan vote of 227-205.
    Representative Ernie Fletcher introduced the AHP bill in 
the 107th as the Small Business Health Fairness Act, H.R. 1774. 
The bill was added to broader Patients' Bill of Rights 
legislation and passed the House of Representatives in August 
of 2001 by a vote of 226-203.
    AHPs have been a companion of Patients' Bill of Rights 
legislation because they offer the most basic patient 
protection of all, access to health care. However, because of 
the inherent controversy of patients' rights legislation, the 
issue of access to health care has remained dormant while 
Congress debated the controversial provisions, which expand 
liability for health care coverage provided by employers.
    It is the strong belief of the Committee that Congress can 
no longer wait to provide access to health care to our nation's 
uninsured, particularly those employed by small businesses. 
Thus, the Committee again moves forward with the AHP bill, 
hoping that this time it will be considered by the House of 
Representatives without the accompaniment of controversial 
patients' rights legislation.

Benefits of Association Health Plans

    As discussed supra, the preemption of state mandates is an 
integral aspect of ERISA. Because most small employers do not 
have the resources to take on the risk of self-insurance, they 
have been foreclosed from ERISA's federal preemption, and are 
held captive instead to the states' regulation of fully insured 
health products. Thus, small employers are not on a level 
playing field with large employers and unions.
    Representative Bill Archer (R-TX) predicted this dynamic at 
ERISA's passage:

          I think it is interesting to note that here we are 
        trying to permit small employers to compete with big 
        business, and that this * * * will have just the 
        reverse effect; the large corporations and the unions 
        have been basically excepted by this bill. But the 
        small employer * * * will no longer be able to compete, 
        in many instances, with the big corporations.\23\
---------------------------------------------------------------------------
    \23\ Debate on H.R. 2, the Welfare and Pension Plans Disclosure 
Act, U.S. House of Representatives, February 27, 1974.

    AHPs will solve many of these problems for small employers. 
Testimony from Ann L. Combs, Assistant Secretary for Employee 
Benefits Security, U.S. Department of Labor, at a March 2003 
Subcommittee on Employer-Employee Relations Hearing on H.R. 
660, discusses the benefits of AHPs for small businesses:
    In an AHP, the current market and financial barriers that 
face small businesses would be reduced or eliminated. Small 
businesses would enjoy greater bargaining power, economies of 
scale, administrative efficiencies, and the benefits of a 
uniform regulatory structure, giving them more access to 
affordable coverage.\24\
---------------------------------------------------------------------------
    \24\ Hearing on H.R. 660, the Small Business Health Fairness Act, 
Subcommittee on Employer-Employee Relations, Committee on Education and 
the Workforce, U.S. House of Representatives, 108th Congress, First 
Session, March 13, 2003
---------------------------------------------------------------------------
    Joe Rossmann, Vice President of Fringe Benefits, Associated 
Builders and Contractors (ABC) describes the experience of the 
association health plan offered by ABC before it was forced to 
discontinue its health coverage due to overlapping, 
inconsistent and incompatible state laws:

          We estimate that AHPs * * * can reduce the cost of 
        health benefits by 15-30 percent for small business 
        workers. We know this because association plans have 
        already proven they can deliver savings compared with 
        the cost of small employers purchasing directly from an 
        insurance company. For example, the AHP sponsored by 
        ABC for more than 40 years, which operated nationally, 
        had total administrative expenses of 13\1/2\ cents 
        (13.5 percent) for every dollar of premium. These costs 
        included all marketing, administration, insurance 
        company risk, claim payment expenses and state premium 
        taxes. Alternatively, small employers who purchase 
        coverage directly from an insurance company can 
        experience total expenses of 25 to 35 cents (25-35 
        percent) for every dollar of premium.\25\

    \25\ Subcommittee on Employer-Employee Relations Hearing on 
``Expanding Access to Quality Health Care: Solutions for Uninsured 
Americans'' Committee on Education and the Workforce, U.S. House of 
Representatives, 107th Congress, Second Session, July 9, 2002.

    By utilizing the time-tested feature of federal preemption 
contained in ERISA, AHPs build upon the successes produced by 
private sector innovation and market competition. Rather than 
creating a new federal law, H.R. 660 builds on the current 
successful ERISA framework upon which plan sponsors have relied 
for almost thirty years. The enactment of AHP legislation would 
put the nation well on its way to closing the gap in health 
insurance coverage by offering millions of uninsured workers, 
their spouses and their children, the opportunity to access 
more affordable health coverage.
    Unfortunately, the smallest employers have not shared in 
the advantages of ERISA. AHPs build on ERISA to give smaller 
employers the same economies of scale and freedom to offer 
affordable coverage that larger employers and unions enjoy. In 
short, the bill clears the way for market forces to bring small 
employers costs down.

Why current ERISA law needs changes to clarify the status of 
        association health plans under Federal and State law

    Allowing small employers to join together to form multiple 
employer plans is the most efficient means to deliver 
affordable health coverage to employees, particularly for 
smaller employers and employees who work in industries with 
high job mobility or above-average insurance risk. However, 
current law has not achieved the twin goals of preserving self-
insurance as an option for multiple employer plans of 
legitimate business and industry associations while keeping 
``bogus unions'' and fraudulent insurance schemes from using 
ERISA's federal preemption clause as a shield against state 
regulation of their abusive health insurance practices.
    Under ERISA, a multiple employer welfare arrangement (MEWA) 
is defined as a plan or other ``non-plan'' arrangement 
established to offer or provide ERISA welfare benefits (e.g., 
health benefits) to the employees of two or more employers.\26\ 
Under current law, the breadth of this definition should be 
read to sweep in the following types of entities: (1) large 
employer plans that include employees of entities outside the 
``control group'' of the employer; (2) ``church plans'' and 
governmental plans currently exempt from ERISA; (3) multiple 
employer entities, such as those maintained by legitimate 
trade, industry and professional associations, which meet the 
definition under ERISA of an ``employee benefit plan''; and (4) 
other multiple employer welfare arrangements which do not meet 
the definition under ERISA of an ``employee benefit plan''.\27\
---------------------------------------------------------------------------
    \26\ The statute expressly excludes from the MEWA definition plans 
or other arrangements which are established or maintained--(i) under or 
pursuant to one or more agreements which the Secretary (of Labor) finds 
to be collective bargaining agreements, (ii) by a rural electric 
cooperative, or (iii) by a rural telephone cooperative association.'' 
The Department issued a regulation establishing standards and 
procedures for determinations as to whether a plan or other arrangement 
would be treated as established or maintained under or pursuant to one 
or more collective bargaining agreements for purposes of the above 
noted exception under ERISA section 3(40)(A)(i). See 20 C.F.R. 
Sec. 2510.3-40.
    \27\ 29 U.S.C. Sec. 1003(40).
---------------------------------------------------------------------------
    In general, ERISA's federal preemption provisions allow 
states to regulate insurance products that employee benefit 
plans purchase, but preclude states from applying state 
insurance law directly to ERISA-covered employee benefit 
plans.\28\ As originally enacted, this broad preemption 
included self-insured multiple employer entities that met 
ERISA's definition of ``employee benefit plan.''
---------------------------------------------------------------------------
    \28\ This concept is incorporated in ERISA section 514 as the so-
called ``deemer clause'' prohibiting states from deeming ERISA plans to 
be an insurance company or engaged in the business of insurance for 
purposes of any state law purporting to regulate insurance. 29 U.S.C. 
Sec. 1144(b)(2)(B).
---------------------------------------------------------------------------
    Unfortunately, illegitimate schemes (which did not rise to 
the level of ERISA ``employee benefit plans'') promoted by 
``bogus unions'' and others were able to delay and thwart 
legitimate state enforcement efforts by claiming ERISA 
preemption. To remedy this, ERISA was amended in 1983 in an 
attempt to clarify the ability of states to regulate the non-
ERISA-plan entities as well as legitimate self-insured ERISA 
multiple employer plans (but the regulation by the states of 
the latter was conditional, i.e., regulation is permitted only 
``to the extent not inconsistent with the provisions'' * * * of 
ERISA Title I).\29\ This later clause was intended to 
facilitate state regulation of all self-insured benefit 
arrangements by allowing responsible state regulation of self-
insured multiple employer ERISA plans. It was not expected that 
states would use this authority to terminate legitimate self-
insured plans solely because they were not licensed under state 
laws designed to regulate commercial insurance companies.
---------------------------------------------------------------------------
    \29\ U.S.C. Sec. 1144.
---------------------------------------------------------------------------
    Unfortunately, the 1983 amendment to ERISA did not achieve 
its intended objective. While a few states have enacted 
specific statutes regulating legitimate self-insured multiple 
employer plans, others have outlawed all self-insured multiple 
employer benefit arrangements, even legitimate self-insured 
ERISA plans. Some state actions have been selective in nature 
and have not followed any consistent basis either within a 
state or among states.
    Neither did the 1983 amendment achieve the objective of 
stemming the number of illegitimate enterprises that continue 
to bilk the public under arrangements that are not legitimate 
ERISA ``employee benefit plans''.
    H.R. 660 will meet these dual objectives by enabling 
legitimate associations to maintain or establish multiple 
employer plans by voluntarily seeking licensure in the few 
states permitting this or to seek federal certification. 
Entities that do not have either a state or federal 
certification will be fully subject to state law. Therefore the 
states, as they choose, may force them to meet any insurance or 
multiple employer plan licensing requirements or shut them 
down. Under thebill, all such entities must register with DOL 
and the states and are subject to the criminal penalties under ERISA 
for failure to do so (illegitimate entities will become criminal 
enterprises). In addition, the Department of Labor is given ``cease and 
desist'' authority to curtail the activities of any such illegitimate 
entities.
    The above-described changes are necessary to clarify ERISA 
preemption and the role of the states and the federal 
government in relation to MEWAs.
    These clarifications of ERISA preemption relating to MEWAs 
will free substantial federal resources that have been spent to 
stop health insurance fraud and abuse. Moreover, the 
considerable state resources involved in stopping MEWA fraud 
will be released for more productive purposes. Additional 
resources of the federal government can also be redirected more 
productively in administering the new law and helping expand 
more affordable health coverage.
    As described in more detail below, the bill will require 
self-insured AHPs to meet solvency, fiduciary, and other 
necessary standards. The fact is that, under the bill, 
legitimate association self-insured arrangements will be 
subject to greater solvency regulation than union-sponsored 
multiemployer plans and the self-insured single-employer plans 
of even the largest employers.

Conclusion

    H.R. 660 will open up the health insurance market to the 
millions of American workers and their families who today do 
not have access to or cannot afford private health insurance. 
It does so by removing the structural barriers that prevent 
some employers from voluntarily providing health insurance to 
their employees, either on their own or as part of an 
association health plan.
    The bill employs Title I of ERISA to provide a twenty-
first-Century model of freedom for employees and employers to 
negotiate benefits, letting market forces help reduce health 
care costs, thus making health insurance coverage more 
available and affordable for the American worker.
    It is long overdue that cost-conscious small employers be 
given the same opportunity to achieve the economies of scale 
and freedom from excessive government regulation that large 
employers and unions already enjoy. Removing barriers and 
allowing small employers to pool together to voluntarily form 
ERISA multiple employer health plans can effectively address 
the problems of uninsured workers and their families.
    AHPs build on what is already working in our employer-based 
health care system; and the increased health plan competition 
that results will mean improved access to more affordable 
coverage for millions of employees, particularly those 
uninsured individuals and their families who work for small 
businesses.
    In conclusion, the only way major strides in expanding 
access to health coverage for the uninsured can be achieved in 
a voluntary market is to make reforms that bring down the cost 
of providing health coverage to employers, particularly small 
employers. Health care reform that is effective in expanding 
access and based on free market principles is possible. It is 
in the grasp of this Congress in the form of AHPs. It is the 
strong belief of the Committee that H.R. 660 presents this 
Congress with perhaps its best opportunity since the passage of 
ERISA to expand access to affordable health insurance for the 
many American families who are currently uninsured.

                             B. LEGISLATION

    As described supra, providing access to affordable health 
care coverage for American workers and their families has been 
the subject of considerable Committee attention during the 
current and past Congresses. H.R. 660, the Small Business 
Health Fairness Act, will do just that.

H.R. 660's rules governing establishment of association health plans

    H.R. 660 amends Subtitle B of Title I of ERISA to add a new 
Part 8 that sets forth rules governing the establishment of 
AHPs. AHPs are defined as group health plans whose sponsors are 
bona fide trade, industry or professional associations or bona 
fide chambers of commerce. These organizations must be 
organized and maintained in good faith for a continuous period 
of not less than three years with purposes other than that of 
obtaining or providing medical care. They must be established 
as permanent entities, receiving the active support of members 
and requiring for membership payment on a periodic basis of 
dues or payments necessary to maintain eligibility for 
membership in the sponsor. These bona fide organizations must 
not condition membership, dues or payments, or coverage under 
the association health plan on the basis of health-status 
related factors. In addition to the associations described 
above, franchise networks are eligible to seek certification as 
AHPs.
    Opponents of H.R. 660 have charged that the bill will 
result in a segmented small group market, i.e. that 
associations will form AHPs in order to select or ``cherry 
pick'' healthy individuals away from state small group markets. 
Indeed, under current law, sham ``unions'' and other fraudulent 
insurance organizations have claimed ERISA preemption in order 
to evade state regulation. Not all states have statutes dealing 
with MEWA's and many states suffer from insufficient resources 
and ineffective enforcement of regulations, leaving these 
fraudulent insurance schemes unchallenged
    The Committee intends the bill's requirements that only 
allow bona fide trade and professional associations, such as 
National Federation of Independent Business and the National 
Restaurant Association, to offer AHPs to protect against 
``cherry picking,'' or selection of lower risk individuals into 
AHPs. This ensures that AHPs will not be formed in order to 
select healthy individuals; rather, associations must have a 
larger purpose in order to form or establish an AHP. Additional 
protections against ``cherry picking'' will be discussed later.

H.R. 660's procedures and conditions for certification for AHPs

    H.R. 660 establishes procedures for the certification of 
AHPs. In the case of a self-insured AHP, the Department of 
Labor (DOL) shall grant certification only if all of the 
requirements of the newly established Part 8 are met, or will 
be met upon the date on which the plan is to 
commenceoperations. Self-insured association health plans must have at 
least 1,000 participants and beneficiaries and may only be certified if 
they are one of the following:
          (1) A plan that offered such coverage on the date of 
        enactment of this Act;
          (2) A plan where the sponsor does not restrict 
        membership to one or more trades or businesses or 
        industries and whose eligible participating employers 
        represent a broad cross-section of trades or businesses 
        or industries; or
          (3) A plan whose eligible participating employers 
        represent one or more trades, businesses, or industries 
        specified in the bill; or which have been indicated as 
        having average or above-average health insurance risk 
        or health claims experience by reason of state rate 
        filings, denials of coverage, or proposed premium rate 
        levels, or other means demonstrated by such plan in 
        accord with regulations prescribed by DOL.
    In addition to the requirement that only bona fide trade 
and industry associations may offer AHPs, the Committee 
believes that these requirements, allowing only multi-industry 
associations, or trade associations with average risk to self-
insure, will be a further protection against ``cherry 
picking.''
    In the case of AHPs that offer fully insured health 
products, the Secretary shall establish a class certification 
procedure. Because of the states role in regulating insurance, 
the Committee envisions the class certification process to 
involve the appropriate state regulatory authorities. For 
example, as state insurance commissioners will continue to 
govern the solvency of fully insured health insurance products 
offered by AHPs, the Committee intends the Department of Labor 
to consult with state insurance commissioners to ensure that 
issuers offering products to AHPs meet appropriate solvency 
standards. The Committee expects that this consultation would 
be maintained on an ongoing basis to ensure that certified AHPs 
offering fully insured health products continue to meet 
appropriate state standards.
    All AHPs must be operated, pursuant to a trust agreement, 
by a ``board of trustees'' which has fiscal control and which 
is responsible for all operations of the plan. The board of 
trustees must develop rules of operation and financial control 
based on a three-year plan of operation, which is adequate to 
carry out the terms of the plan and to meet all applicable 
requirements of Title I of ERISA. The board of trustees must 
consist of individuals who are owners, officers, directors or 
employees of the employers who participate in the plan. 
Instruments governing the AHP must provide that the board of 
trustees serves as the named fiduciary and plan administrator, 
that the sponsor serves as plan sponsor, and that certain 
reserve requirements are met.
    AHPs must meet all of ERISA's fiduciary rules requiring 
that the assets of an employee benefit plan be held in trust 
for the exclusive benefit of plan participants and their 
beneficiaries, and for defraying reasonable expenses of 
administering the plan. Part 4 of Title I of ERISA explains the 
fundamental duties of fiduciaries to employee benefit plans. In 
short, fiduciaries are to act solely in the interest of 
participants and beneficiaries with care, skill, prudence and 
diligence.\30\ The Committee believes that the fiduciary duty 
of loyalty--the highest duty of loyalty known to the law--is 
the ultimate protection to participants and beneficiaries in 
ERISA plans.\31\
    Accordingly, the Committee believes that the employers and 
employees who participate in AHPs will be well-protected.
---------------------------------------------------------------------------
    \30\ 29 U.S.C. Sec.  1104.
    \31\ See, e.g., Donovan v. Bierwith, 680 F.2d 263, 272 n.8 (2d Cir. 
1982).
---------------------------------------------------------------------------
    Additional certification criteria include the filing of a 
complete application; a filing fee of $5,000; financial, 
actuarial, reporting, and participation requirements; and such 
other requirements as may be specified by the Secretary as a 
condition of the certification. In addition, the application 
must include the following: (1) identifying information about 
the arrangement and the states in which it will operate; (2) 
evidence that ERISA's bonding requirements will be met; (3) 
copies of all plan documents and agreements with service 
providers; (4) a funding report indicating that the reserve 
requirements will be met, that contribution rates will be 
adequate to cover obligations, and that a qualified actuary who 
is a member in good standing of the American Academy of 
Actuaries has issued an opinion with respect to the 
arrangement's assets, liabilities, and projected costs; and (5) 
any other information prescribed by the Secretary. Certified 
AHPs must notify the applicable authority of any material 
changes in this information at any time, must file annual 
reports with the Secretary, and must engage a qualified 
actuary.
    AHPs are also required to file their certification with the 
applicable state authority of each state in which at least 25% 
of the participants and beneficiaries under the plan are 
located.

H.R. 660's Protections Against Discrimination

    H.R. 660 prohibits discrimination against eligible 
employers and employees by requiring that all employers who are 
association members must be eligible for participation under 
the terms of the plan and informed of all benefit options 
available. In addition, H.R. 660 requires that all eligible 
individuals of such participating employers may not be excluded 
from enrolling in the plan because of health status.
    Despite these protections, opponents of H.R. 660 have 
criticized it as allowing anti-selection with respect to the 
small group market. The Committee notes that requiring all 
employers who are members of the bona fide association to be 
eligible for the AHP is equal to or greater than any state law 
governing insurers.
    In addition, employers participating in the AHP are 
forbidden from selectively providing sick individuals with 
coverage in the individual health insurance market. The 
Committee intends this prohibition to be an additional 
protection against ``cherry picking'' by ensuring that AHPs may 
not in effect select against sick individuals by allowing their 
employers to provide coverage to these workers outside of the 
AHP.
    H.R. 660 allows AHPs to include minimum participation, 
contribution, and size requirements to the extent that they 
meet the nondiscrimination and other rules under sections 701, 
702, and 703 of ERISA.\32\
---------------------------------------------------------------------------
    \32\ 29 U.S.C. Sec.  1171, 1172, 1173.
---------------------------------------------------------------------------
    AHPs are specifically prohibited from denying or 
conditioning health insurance for individuals on the basis of 
health status. Specifically, the bill requires AHPs to follow 
the same rules on portability, pre-existing conditions, 
nondiscrimination and renewability that large employers and 
insurance companies must follow under the 1996 Health Insurance 
Portability, Accessibility and Accountability Act (HIPAA).
    In addition to H.R. 660's protections for individuals, the 
bill also requires that the contribution rates for any 
particular employer must be nondiscriminatory. This means that 
contribution rates for employers cannot vary on the basis of 
any health status-related factor with respect to employees of 
particular employers or on the type of business or industry in 
which the employer is engaged--unless the state where that 
small employer is located would specifically allow such a 
variation, and then, only to the extent that the state would 
allow.
    During full Committee consideration of the bill, the 
Committee considered and rejected two amendments that would 
have prohibited AHPs from varying rates for small employers 
even if the state law allowed such a variance. The Committee 
has included many protections in the bill in order to prevent 
the practice of ``cherry picking'' by AHPs. The Committee 
believes that it is important to note that if H.R. 660 did not 
allow AHPs to vary contribution rates for small employers in a 
state to the extent that the state law would allow, it would be 
likely that health insurance issuers would ``cherry pick'' the 
healthier small employer groups out of the AHP.
    Some would propose that AHPs should be required to 
``community rate'' or average the claims of all participating 
employers in the AHP and charge each an equivalent contribution 
rate. They assert that group pooling is all that is needed to 
lower health insurance costs and thus avoid the ``cherry 
picking'' of healthier groups by health insurance issuers.
    Though the Committee believes that pooling of risk will 
indeed lower costs, in some cases, it would not be enough to 
prevent the ``cherry picking'' of healthy groups by health 
insurance issuers. For example, the State of Illinois allows 
issuers to vary rates for small employers on the basis of 
medical information. Thus, an issuer might attempt to draw 
healthier groups away from the AHP by offering a rate that 
could be 67% lower than a sick group. While economies of scale 
will lower the health insurance costs of the employers 
participating in an AHP, it is unlikely that they will be 
lowered by 67%. Thus, in the Illinois case, it is obvious that 
the AHP may need to have the same flexibility as other state 
regulated products to attract a broad cross section of its 
membership versus only the unhealthy groups.
    The Committee also notes that almost every state allows 
rates for small employers to vary by some factors, such as age, 
gender or geography. Only two states, New York and Vermont, 
have gone so far as to require strict ``community rating'' in 
the small group market. Allowing issuers to vary rates while 
requiring community rating for AHPs would virtually ensure that 
issuers have an advantage over AHPs in the marketplace, thereby 
resulting in adverse selection against AHPs.
    Another argument that has been used to support the 
contention that H.R. 660 will allow ``cherry-picking'' is the 
assertion that state insurance rating rules will not apply to 
fully insured health products offered by AHPs. It is the view 
of the Committee that in the case of AHPs that offer fully 
insured health coverage, H.R. 660 does not generally preempt 
state laws that govern the rating of insurance products offered 
by associations except in the cases discussed below.
    The Committee intends H.R. 660 to preempt state insurance 
rating laws for fully insured plans to the extent that they 
would prohibit AHPs from setting premiums on the basis of the 
claims of the AHP plan. For example, some state laws require 
that claims for all small employers in the state (those in and 
out of the AHP) be averaged to determine a general average for 
premium setting purposes. In those states, these laws would be 
preempted.
    Importantly, should a state attempt to regulate federally 
certified AHPs more strictly with regard to allowable rating 
practices than other non-AHP associations offering coverage in 
a state, H.R. 660 would preempt these laws as well.
    In contrast to the situation for AHPs that offer fully 
insured health products, self-insured AHPs, like self-insured 
union and employer plans, will not be subject to state rating 
laws because they are not in the business of insurance. ERISA 
sets no federal requirements for self-insured plans--it does 
not require that large employers or unions ``community rate'' 
their plans. These plans can and do vary their rates for 
employees, particularly on geography. Nothing in federal law 
prohibits a union or large employer from varying rates for a 
group of their similarly situated individuals. For example, a 
different collective bargaining unit, a different employer in a 
multi-employer plan, or a set of employees located in a 
different geographic location, could have different rates.
    It is the intention of the Committee that self-insured AHPs 
be allowed to vary rates on geography, age, family composition, 
gender or other criteria, as is the case for other self-insured 
plans.
    During full Committee consideration of the bill, there was 
discussion about the interplay of ERISA and the rights and 
protections of individuals under Title VII of the Civil Rights 
Act. As the AHP bill is simply an amendment to ERISA, it does 
not change the relationship of these two laws. Because of this, 
protections for individuals under the Title VII of the Civil 
Rights Act will be the same for workers participating in AHPs 
as they are for workers who receive health coverage under ERISA 
plans today.

H.R. 660's preemption of State mandates

    H.R. 660 allows AHPs to exercise sole discretion in 
selecting specific items and services to be covered under the 
plan. This rule is true for both AHPs that offer fully insured 
health products as well as AHPs that self-insure. As such, the 
bill preempts any state law that would specify items or 
services to be covered under the plan.
    Clearly, AHPs that self-insure would be exempt from state 
laws that require specific items or services as they are not in 
the business of insurance. However, preemption is also granted 
in the case of fully insured health products. As the bill 
specifically requires that a self-insured AHP have at least 
1000 participants, in order for smaller associations to take 
advantage of thepreemption from benefit mandates, they must 
also be preempted on the fully insured side. However, the bill does not 
preempt state laws that require health plans to cover individuals with 
specific diseases, such as diabetes, or AIDS, in the state where the 
AHP is domiciled.
    During Committee consideration of the bill, the Committee 
rejected amendment after amendment that would have allowed 
general preemption of state benefit mandates with specific 
exceptions. The Committee feels strongly that (1) many 
individuals who receive coverage through AHPs would otherwise 
have had no health care coverage, and (2) coverage offered by 
AHPs will be high quality, covering most if not all of the 
benefits that are typically mandated by the states.
    Because of this, the Committee confidently rejected the 
need to micromanage the provision of health care by AHPs, 
instead giving them the freedom that large employers and unions 
already enjoy, to select the benefit packages that most serve 
their employees. The Committee also notes that for many 
workers, passage of AHPs will mean the difference between 
access to coverage and no health care coverage at all. Though 
state laws may guarantee particular benefits when coverage is 
offered, in general, state laws do not require that health 
coverage be offered. Therefore for those many individuals who 
are not offered health insurance by their employer, the 
coverage their employer is able to access through the AHP, with 
or without particular state mandates, will provide health 
benefits the individual would not otherwise have.
    Opponents of the bill have suggested that the bill's 
preemption from state benefit mandates also preempts laws such 
as those that regulate solvency, external review and prompt 
payment of claims. Asst. Sec. Ann Combs and Subcommittee 
Chairman Johnson clarified during both hearings on the bill and 
its consideration by the Subcommittee that this is not the 
case, and that it is the intent of the Committee that state 
laws such as those that govern external review and prompt 
payment of claims will apply to AHPs that offer fully insured 
health coverage. Since these laws do not impact ``the selection 
of specific items or services consisting of medical care,'' 
these laws are not preempted. Though the Committee believes 
that the bill as introduced did not preempt these laws, during 
Committee consideration of the bill, two amendments were 
adopted to clarify the application of these laws. The 
Subcommittee Chairman's mark added language that amended 
Section 514 of ERISA to clarify that the preceding amendments 
to 514 should not be construed to supersede or impair the law 
of any State with respect to issuers or health insurance 
coverage, that provides solvency standards. During full 
Committee consideration, the Committee amended this section to 
clarify that laws relating to prompt payment of claims were 
also not superseded.
    During Committee consideration of the bill, the Committee 
also rejected amendments that would have subjected AHPs to 
federal mandates. The Committee believes that adding federal 
benefit mandates to ERISA is an issue separate and apart from 
the decision to create AHPs. Should Congress decide to 
establish additional federal patient protections, the Committee 
believes that they should be applied to all plans equally.

H.R. 660's solvency requirements

    Health insurance issuers that offer fully insured coverage 
to AHPs will continue to be subject to state laws regarding 
solvency as discussed above. In addition, the Committee expects 
that the Department of Labor would condition its class 
certification of fully insured AHPs on the issuers, 
satisfaction of state solvency and other insurance regulations.
    With respect to self-insured AHPs, H.R. 660 sets forth 
strict solvency requirements. Solvency provisions are as 
follows:
           AHPs are required to maintain: (1) reserves 
        adequate for unearned contributions from employers, (2) 
        reserves for liabilities incurred, (3) reserves for any 
        other obligations, and (4) reserves for a margin of 
        error. The amount of each of these reserve components 
        must be recommended by a qualified actuary, certified 
        by the American Academy of Actuaries;
           AHPs are required to maintain aggregate stop 
        loss insurance in the event that claims exceed the 
        plan's expectation by 25 percent, and specific stop 
        loss insurance as recommended by a qualified actuary. 
        Both of these insurance products will be fully 
        regulated by the state, and the Secretary of Labor is 
        able to modify or increase these requirements by 
        regulation;
           AHPs are required to maintain 
        indemnification insurance in order to prevent unpaid 
        claims in the event of plan termination;
           The board of trustees of an AHP is required 
        to certify on a quarterly basis that the AHP is 
        financially sound. If the board determines that the 
        solvency requirements of the bill are not being met, 
        they must, in consultation with the qualified actuary, 
        develop a plan to ensure compliance and report such 
        information to the Secretary;
           AHPs are required to maintain a minimum 
        surplus reserve of $500,000. This amount may be 
        increased to up to $2 million by the Secretary of 
        Labor;
           AHPs are also required to contribute $5,000 
        per year to a new Association Health Plan Fund, 
        established to assist in paying claims in the event of 
        an AHP termination. The Secretary may increase the 
        required contribution if this amount is inadequate;
           The bill also establishes a new Solvency 
        Standards Working Group. Members from the National 
        Association of Insurance Commissioners, the American 
        Academy of Actuaries, the state governments, and others 
        will make recommendations to the Secretary to assist in 
        the formation of solvency regulations.
    The Committee notes that these requirements are much 
stronger than current law for employers or unions who self-
insure, as ERISA contains no solvency standards for these 
entities. Further, the Committee notes that these standards are 
generally analogous to state solvency standards for health 
insurance issuers.
    H.R. 660 also grants authority to the Secretary to make 
payments to stop loss or indemnification insurers in any case 
in which the Secretary determines that an AHP is failing or 
will fail to meet the federal solvency requirements or will 
terminate. During consideration of the bill at Subcommittee, 
H.R. 660 was strengthened by requiring that the issuers of stop 
loss and indemnification insurance for self-insured AHPs notify 
the Secretary of Labor if the AHP fails to make a payment that 
would result in the cancellation of the insurance policy. This 
provision is intended to ensure that the Secretary of Labor 
maintains insurance products if necessary, so that in the event 
of an AHP failure, the insured products meet plan losses and 
satisfy workers' claims.
    The Committee also grants authority to the Secretary to 
permit an association health plan to substitute, for all or 
part of the reserves required, such security, guarantee, hold-
harmless arrangements, insurance, or other financial 
arrangement as the Secretary determines to be adequate to 
enable the plan to fully satisfy all benefit liabilities on a 
timely basis. Such an alternative must not be less protective 
than the basic provisions for which it is substituted.
    H.R. 660 also requires a self-insured AHP to meet the 
reserve requirements even if its certification is no longer in 
effect.
    In any case where an AHP notifies the Secretary that it has 
failed to meet the reserve requirements and corrective action 
has not restored compliance, and the Secretary determines that 
there is a reasonable expectation that the plan will continue 
to fail to meet the applicable requirements, the Secretary may 
direct the board to terminate the arrangement.
    H.R 660 provides that an AHP may also voluntarily terminate 
only if the board of trustees provides 60 days advance written 
notice to participants and beneficiaries and submits to the 
Secretary a plan providing for timely payment of all benefit 
obligations.
    Whenever the Secretary determines an AHP won't be able to 
provide benefits, or is otherwise in financial distress, the 
Secretary shall apply to the appropriate United States district 
court for appointment as trustee to administer the termination 
of the plan.

H.R. 660's State assessment authority

    H.R. 660 specifically allows a state to assess self-insured 
AHPs with a contribution tax to the same extent the state taxes 
health insurance plans that offer coverage to fully insured 
AHPs. Such tax must be computed by subtracting the amount of 
any tax or assessment otherwise imposed by the state on other 
insured products maintained by the self-insured AHP.

H.R. 660's amendments to ERISA's preemption rules

    H.R. 660 adds a new subsection 514(d) of ERISA (current 
subsection (d) is redesignated as (e)) to clarify the ability 
of health insurance issuers to offer health insurance coverage 
under AHPs. The Committee intends this change to be one of the 
most important provisions of the bill. Should states attempt to 
preclude AHPs from operating by passing laws that preclude them 
from doing so or have this effect, these laws will be preempted 
under ERISA. For example, should a state law refuse to license 
health insurance issuers that intend to provide health coverage 
to an AHP, the Committee intends this law to be preempted by 
the bill. The Committee intends this language to serve as a 
warning to state regulators that their ability to regulate 
fully insured health products provided by AHPs stops at the 
point where they attempt to prevent AHPs from operating.
    H.R. 660 also makes two changes to ERISA's preemption laws 
regarding MEWAs. First, paragraph (6) of section 514(b) is made 
inapplicable with respect to any state law in the case of a 
certified AHP. Second, the bill removes the current restriction 
on state regulation of self-insured multiple employer welfare 
arrangements providing medical care (which do not elect to meet 
the certification requirements for AHPs) under section 
514(b)(6)(A)(ii) by eliminating the requirement that such state 
laws otherwise ``be consistent with the provisions of ERISA 
Title I.'' As discussed supra, H.R. 660 provides that 
legitimate associations may choose to either remain subject to 
the few state multiple plan laws or to apply for a federal 
certification. The legislation draws bright lines regarding 
state and federal authority regarding self-insured multiple 
employer plans. Current law is confusing regarding the 
responsibility of the states and the Department of Labor under 
ERISA. Under the bill, MEWAs have two choices, apply for and 
become a certified AHP, or be regulated entirely by the states.
    H.R. 660 includes two other important changes: (1) It 
clarifies the ability of any health insurance issuer to offer 
health insurance coverage of the same policy type as offered in 
connection with a particular AHP to eligible employers, 
regardless of whether such employers choose or do not choose to 
become members of the particular association; and (2) It 
clarifies that health insurance coverage policy forms filed and 
approved in a particular state in connection with an insurer's 
offering under an association health plan are deemed to be 
approved in any other state in which such coverage is offered 
when the insurer provides a complete filing in the same form 
and manner to the authority in the other state. The Committee 
intends the preemption amendment with regard to the filing of 
policy forms in other states to remedy the administrative 
burden of filing differing policy forms in different states, 
and to speed the process of approval, as once the policy form 
is approved in one state, it is deemed to be approved in every 
other state.
    Section 514 of ERISA is also amended to include a cross-
reference to the newly created section 805(b) (relating to the 
ability of AHPs and health insurance issuers to design 
association health insurance options) and to section 
805(a)(2)(B) (relating to the ability of AHPs and health 
insurance issuers to base contribution rates on the experience 
of such plans). As discussed above, during Committee 
consideration, two other changes were made to the bill's 
preemption language regarding the solvency of fully insured 
health products or health insurance issuers and the prompt 
payment of claims by health insurers providing to an AHP.

H.R. 660's enforcement provisions relating to AHPs and MEWAs

    H.R. 660 amends ERISA to establish enforcement provisions 
relating to AHPs and MEWAs. Specifically, the bill establishes 
that: (1) willful misrepresentation that an entity is a 
certified AHP or collectively-bargained arrangement may result 
in criminal penalties; (2) Section 502 of ERISA is amended to 
allow for cease activity orders for arrangements found to be 
neither licensed, registered, or otherwise approved under State 
insurance law, or operating in accordance with the terms of the 
certification granted by the Secretary under Part 8; and (3) 
Section 503 of ERISA is amended to require the named fiduciary 
or board of trustees of an AHP to comply with the required 
claims procedure under ERISA.

H.R. 660's cooperation between Federal and State authorities

    H.R. 660 amends section 506 of ERISA (relating to 
coordination and responsibility of agencies enforcing ERISA and 
related laws) to require the Secretary of Labor to consult with 
state insurance departments with regard to the Secretary's 
authority under section 502 and 504 toenforce provisions 
applicable to certified AHPs. In the case of AHPs offering fully 
insured health coverage, the Secretary shall consult with the state in 
which filing and approval of a policy type offered by the plan was 
initially obtained. In all other cases, the Secretary shall take into 
account the places of residence of the participants and beneficiaries 
under the plan and the state in which the trust is maintained in 
determining which state is the state with which consultation is 
required.

H.R. 660's effective date

    In general, the amendments made by H.R. 660 are effective 
one year after enactment of the Act. In addition, the Secretary 
is required to issue all regulations needed to carry out the 
amendments within one year after enactment of the Act. In 
addition, the Secretary shall report to Congress AHPs effect on 
reducing the number of uninsured workers after five years.

                           Section by Section

     Section 1--Short title and table of contents.
     Section 2(a) creates a new Part 8 under ERISA (as 
described below).
     Section 801 outlines that a sponsor of an AHP must 
be a bona fide association established for substantial purposes 
other than that of obtaining or providing medical care. The 
association must charge dues to its small business members and 
must not condition membership, dues or coverage under the 
health plan on the basis of health status.
     Section 802 establishes a procedure for the 
certification of Association Health Plans as prescribed by the 
Secretary of Labor. For AHPs that purchase health insurance 
from an insurance company, the Secretary will establish a class 
certification. For those that will offer a self-insured health 
benefit, the bill establishes several criteria in order to 
insure that the businesses covered will be of average health 
risk, to avoid pulling only healthy individuals from the small 
employer market (``cherry-picking'').
     Section 803 establishes additional eligibility 
requirements for AHPs. Applicants must demonstrate that the 
arrangement's sponsor has been in existence for a continuous 
period of at least three years for substantial purposes other 
than providing coverage under a group health plan. AHPs must be 
operated, pursuant to a trust agreement, by a ``board of 
trustees'' which has complete fiscal control and which is 
responsible for all operations of the plan. The board of 
trustees must consist of individuals who are owners, officers, 
directors or employees of the employers who participate in the 
plan.
     Section 804 prohibits discrimination against 
eligible employers and employees by requiring that, (1) all 
employers who are association members be eligible for 
participation under the terms of the plan, (2) that eligible 
employers be informed of all benefit options available, and (3) 
that eligible individuals of such participating employers not 
be excluded from enrolling in the plan because of health 
status. The bill also stipulates that no participating employer 
may exclude an employee from enrollment under an AHP by 
purchasing an individual policy of health insurance coverage 
for such person based on his or her health status.
     Section 805 requires that contribution rates for 
any particular employer must be nondiscriminatory--they cannot 
vary on the health status of the particular employer or on the 
type of business or industry in which the employer is engaged, 
unless the state in which the employer is located would 
specifically allow such a variance, and then, only to the 
degree allowed in the state. In the case of AHPs offering fully 
insured health coverage, state rating laws that prevent an AHP 
from setting contribution rates based on the claims experience 
of the plan or that regulate a federally certified AHP more 
strictly than other associations offering fully insured 
coverage shall also be preempted. In addition, this section 
outlines that association health plans must be allowed to 
design benefit options. Specifically, the bill mandates that no 
provision of state law shall preclude an AHP or health 
insurance issuer from exercising its sole discretion in 
designing the items and services of medical care to be included 
as health insurance coverage under the plan.
     Section 806 establishes capital reserve 
requirements for self-insured AHPs and requires them to obtain 
stop loss and indemnification insurance. In addition, the AHP 
must maintain minimum surplus reserves of $500,000 or such 
greater amount (up to $2,000,000) as the Secretary of Labor may 
prescribe. Any person issuing stop loss or indemnification 
insurance to a plan is required to notify the Secretary of 
Labor of any failure of premium payment meriting cancellation 
of the policy. The bill also establishes an ``Association 
Health Plan Fund'' which is to be managed by the Department of 
Labor for the purpose of making payments to cover any 
outstanding benefit claims which are not fulfilled in accord 
with the solvency standards described above. All certified AHPs 
would be required to pay $5,000 into the fund annually. The 
bill also establishes a ``Solvency Standards Working Group'' 
for the purpose of providing input to the Secretary with 
respect to solvency requirements for AHPs certified under the 
Act. The bill grants authority to the Secretary to permit an 
association health plan to substitute, for all or part of the 
reserves required, such security, guarantee, hold-harmless 
arrangements, insurance, or other financial arrangement as the 
Secretary determines to be adequate to enable the plan to fully 
satisfy all benefit liabilities on a timely basis. Such an 
alternative must not be less protective than the basic 
provisions for which it is substituted. If the Secretary 
determines that there will be a failure or termination of an 
AHP, the bill grants the Secretary authority to make payments 
to insurers in order to maintain in force the stop loss or 
indemnification insurance.
     Section 807 sets forth additional criteria which 
association health plans must meet to qualify for 
certification. The Secretary shall grant certification to a 
plan only if: (1) acomplete application has been filed, 
accompanied by the filing fee of $5,000; and (2) all other terms of the 
certification are met (including financial, actuarial, reporting, 
participation, and such other requirements as may be specified as a 
condition of the certification). AHPs are also required to file their 
certification with the applicable state authority of each state in 
which at least 25% of the participants and beneficiaries under the plan 
are located.
     Section 808 requires that, except as provided in 
section 809, an AHP may voluntarily terminate only if the board 
of trustees provides 60 days advance written notice to 
participants and beneficiaries and submits to the applicable 
authority a plan providing for timely payment of all benefit 
obligations.
     Section 809 requires that the board of trustees of 
a self-insured AHP must determine quarterly whether the reserve 
requirements of section 806 are being met and, if they are not, 
must, in consultation with the qualified actuary, develop a 
plan to ensure compliance and report such information to the 
Secretary. In any case where an AHP notifies the Secretary that 
it has failed to meet the reserve requirements and corrective 
action has not restored compliance, and the Secretary 
determines that there is a reasonable expectation that the plan 
will continue to fail to meet the requirements applicable to 
the AHPs; the Secretary may direct the board to terminate the 
arrangement.
     Section 810 sets forth procedures whereby the 
Secretary may become the trustee of insolvent AHPs. Whenever 
the Secretary determines an AHP won't be able to provide 
benefits, or is otherwise in financial distress, the Secretary 
shall apply for appointment as trustee to administer the 
termination of the plan.
     Section 811 allows a state to assess newly 
certified AHPs with a contribution tax to the same extent they 
tax health insurance plans. Such tax must be computed by 
subtracting the amount of any tax or assessment otherwise 
imposed by the state on other insured products maintained by 
the self-insured AHP.
     Section 812 defines the following terms: group 
health plan, medical care, health insurance coverage, health 
insurance issuer, applicable authority, health status-related 
factor, individual market, treatment of very small groups, 
participating employer, applicable state authority, qualified 
actuary, affiliated member, large employer, and small employer.
     Section 2(b) includes other conforming amendments 
to ERISA with regard to state preemption--The bill makes 
conforming amendments to ERISA to clarify the treatment of 
ERISA's preemption rules with regard to AHPs. For certified 
AHPs, state law is preempted to the extent that it would 
preclude an AHP from existing in a state. In addition, state 
law is also preempted in order to allow health insurance 
issuers to offer health insurance coverage of the same policy 
type as offered in connection with a particular AHP to eligible 
employers, regardless of whether such employers are members of 
the particular association. Health insurance coverage policy 
forms filed and approved in a particular state in connection 
with an insurer's offering under an AHP are deemed to be 
approved in any other state in which such coverage is offered 
when the insurer provides a complete filing in the same form 
and manner to the authority in the other state. The bill also 
makes two changes to ERISA's preemption laws regarding MEWAs. 
First, paragraph (6) of section 514(b) is made inapplicable 
with respect to any state law in the case of a certified AHP. 
Second, the bill removes the current restriction on state 
regulation of self-insured multiple employer welfare 
arrangements providing medical care (which do not elect to meet 
the certification requirements for AHPs) under section 
514(b)(6)(A)(ii) by eliminating the requirement that such state 
laws otherwise ``be consistent with the provisions of ERISA 
Title I.'' The bill also amends Section 514 to clarify that the 
preceding amendments to 514 should not be construed to 
supersede or impair the law of any State with respect to 
issuers or health insurance coverage, that provides solvency 
standards. During full Committee consideration, the Committee 
amended this section to clarify that laws relating to prompt 
payment of claims were also not superseded.
     Section 3 of the bill clarifies the treatment of 
single employer arrangements.
     Section 4 amends ERISA to establish enforcement 
provisions relating to AHPs and multiple employer welfare 
arrangements (MEWAs): (1) willful misrepresentation that an 
entity is an exempted AHP or collectively-bargained arrangement 
may result in criminal penalties; (2) the section provides for 
cease activity orders for arrangements found to be neither 
licensed, registered, or otherwise approved under State 
insurance law, or operating in accordance with the terms of the 
certification granted by the Secretary under Part 8; and (3) 
the section provides for the responsibility of the named 
fiduciary or board of trustees of an AHP to comply with the 
required claims procedure under ERISA.
     Section 5 amends section 506 of ERISA (relating to 
coordination and responsibility of agencies enforcing ERISA and 
related laws) to require the Secretary of Labor to consult with 
state insurance departments with regard to the Secretary's 
authority under sections 502 and 504 to enforce provisions 
applicable to certified AHPs.
     Section 6. In general, the amendments made by the 
Act will be effective one year after enactment of the Act. In 
addition, the Secretary will be required to issue all 
regulations needed to carry out the amendments within one year 
after enactment of the Act.

                       Explanation of Amendments

    The provisions of the substitute are explained in this 
report.


                             Correspondence

                     Congress of the United States,
                                  House of Representatives,
                                     Washington, DC, June 12, 2003.
Hon. John Boehner,
Chairman, Committee on Education and the Workforce,
Rayburn House Office Building, Washington, DC.
    Dear Mr. Chairman: Due to other legislative duties, I was 
unavoidably detained during Committee consideration of H.R. 
660, the ``Small Business Health Fairness Act of 2003.'' 
Consequently, I missed roll call number three on the fourth 
amendment offered by Representative Carolyn McCarthy. Had I 
been present, I would have voted against the amendment.
    I would appreciate your including this letter in the 
Committee Report to accompany H.R. 660. Thank you for your 
attention to this matter.
            Sincerely,
                                         Michael N. Castle,
                                                Member of Congress.
                                ------                                

                     Congress of the United States,
                                  House of Representatives,
                                     Washington, DC, June 12, 2003.
Hon. John Boehner,
Chairman, Committee on Education and the Workforce,
Rayburn House Office Building, Washington, DC.
    Dear Mr. Chairman: Due to other legislative duties, I was 
unavoidably detained during Committee consideration of H.R. 
660, the ``Small Business Health Fairness Act of 2003.'' 
Consequently, I missed roll call number one on the second 
amendment offered by Representative Ron Kind. Had I been 
present, I would have voted NO.
    I would appreciate your including this letter in the 
Committee Report to accompany H.R. 660. Thank you for your 
attention to this matter.
            Sincerely,
                                             Jon C. Porter,
                                                Member of Congress.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. This bill reduces the ranks of the uninsured by 
improving access to health care for uninsured working families, 
particularly those who are employed in small businesses. The 
bill would create association health plans (``AHPs'') that 
would allow small businesses to join together through bona-fide 
trade associations, thus enjoying larger economies of scale 
presently enjoyed by many large corporations and unions, to 
purchase health insurance for their workers at a lower cost 
than they are presently experiencing. H.R. 660 would increase 
small businesses' bargaining power with health care providers, 
give them freedom from costly state mandated benefit packages, 
and lower overhead costs that would better enable them to offer 
health care coverage for their workers. Since ERISA excludes 
governmental plans, the bill does not apply to legislative 
branch employees. As public employees, legislative branch 
employees are eligible to participate in the healthcare offered 
through federal arrangements with private insurers.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the body of this report.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This bill reduces the ranks of the uninsured by 
improving access to health care for uninsured working families, 
particularly those who are employed in small businesses. The 
bill would create association health plans (``AHPs'' that would 
allow small businesses to join together through bona-fide trade 
associations, thus enjoying larger economies of scale presently 
enjoyed by many large corporations and unions, to purchase 
health insurance for their workers at a lower cost than they 
are presently experiencing. H.R. 660 would increase small 
businesses' bargaining power with health care providers, give 
them freedom from costly state mandated benefit packages, and 
lower overhead costs that would better enable them to offer 
health care coverage for their workers. In compliance with this 
requirement, the Committee has received a letter from the 
Congressional Budget Office included herein.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 and with respect to 
requirements of 3(c)(3) of rule XIII of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for H.R. 660 from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 16, 2003.
Hon. John A. Boehner,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
estimated the effect on revenues of H.R. 660, the Small 
Business Health Fairness Act of 2003, as ordered reported by 
the Committee on Education and the Workforce on June 11, 2003. 
However, CBO has not yet completed the estimate of the effect 
of the bill on federal spending for Medicaid. We expect to 
provide you with a complete estimate shortly.
    H.R. 660 would establish a certification process and 
regulatory structure for association health plans (AHPs). These 
entities, which would be regulated by the Department of Labor, 
could provide health plans to employers under different sets of 
rules than apply to insurers or other health plan arrangements 
that fall under state insurance regulation.
    If H.R. 660 is enacted, CBO would expect a small net 
increase in total spending by employers on employer-sponsored 
health insurance. Such spending would increase as otherwise 
uninsured employees became insured through the new entities. 
Spending also would increase for those employers who continued 
to offer traditional, state-regulated plans because of a 
disproportionate tendency for higher-cost groups to remain with 
state-regulated plans, which are typically subject to rules 
that compress the range of premiums that can be charged across 
firms. Those spending increases would be partially offset by 
reduced spending among employers who found less expensive plans 
in the AHP market and chose to shift to those new plans instead 
of purchasing insurance in the traditional, state-regulated 
market, and among employers who responded to higher premiums 
for policies in the traditional market by dropping coverage. 
Thus, the composition of the total compensation packages of 
employees would shift toward non-taxable health benefits and 
away from taxable wages and salaries. CBO estimates that, as a 
result, total federal revenues would decrease by $3 million in 
2004, by $60 million over the 2004-2008 period, and by $280 
million over the 2004-2013 period. Of those amounts, Social 
Security payroll taxes, which are off-budget, account for about 
$1 million in 2004, $20 million over the 2004-2008 period, and 
$80 million over the 2004-2013 period.
    CBO estimates that enacting H.R. 600 would result in a net 
increase of about 600,000 people with employment-based health 
insurance coverage by 2008. As a result, we expect that fewer 
people would be covered by Medicaid, and that Medicaid spending 
would decline. CBO has not yet estimated the effect of the bill 
on federal spending for Medicaid, but the amount of the outlay 
savings could approach or exceed the amount of the estimated 
revenue loss.
    The Department of Labor would incur the costs of overseeing 
and regulating these plans. CBO has not completed an estimate 
of those costs, which would be subject to appropriation.
    H.R. 660 would preempt a number of state laws that regulate 
health coverage and that would impose taxes on existing 
entities that become certified as AHPs. Those preemptions would 
be intergovernmental mandates as defined in the Unfunded 
Mandates Reform Act (UMRA). The preemptions of state regulatory 
laws would not result in additional costs to state, local, or 
tribal governments. Limitations on state taxing authority, 
however, would result in a net decrease in state revenues of up 
to about $20 million in 2004. But, as a greater number of the 
uninsured became insured through association plans, states 
would realize a net increase of about $15 million in revenues 
from other taxes on such plans in 2008. The losses that states 
would face in the early years would not exceed the statutory 
threshold established in UMRA ($59 million in 2003, adjusted 
annually for inflation). H.R. 660 contains no private-sector 
mandates as defined in UMRA.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Alexis 
Ahlstrom (for changes in revenues); Leo Lex (for the state and 
local impact); and Stuart Hagen (for the private-sector 
impact).
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.

         Statement of General Performance Goals and Objectives

    In accordance with Clause (3)(c) of House rule XIII, the 
goals of H.R. 660 to reduce the ranks of the uninsured by 
improving access to health care for uninsured working families, 
particularly those who are employed in small businesses. The 
bill would create association health plans (``AHPs'') that 
would allow small businesses to join together through bona-fide 
trade associations, thus enjoying larger economies of scale 
presently enjoyed by many large corporations and unions, to 
purchase health insurance for their workers at a lower cost 
than they are presently experiencing. H.R. 660 would increase 
small businesses' bargaining power with health care providers, 
give them freedom from costly state mandated benefit packages, 
and lower overhead costs that would better enable them to offer 
health care coverage for their workers. The Committee expects 
the Department of Labor to implement the changes to the law in 
accordance with these stated goals.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress in the 
Constitution to enact the law proposed by H.R. 660. The 
Employee Retirement Income Security Act (ERISA) has been 
determined by the federal courts to be within Congress' 
Constitutional authority. In Commercial Mortgage Insurance, 
Inc. v. Citizens National Bank of Dallas, 526 F.Supp. 510 (N.D. 
Tex. 1981), the court held that Congress legitimately concluded 
that employee benefit plans so affected interstate commerce as 
to be within the scope of Congressional powers under Article 1, 
Section 8, Clause 3 of the Constitution of the United States. 
In Murphy v. Wal-Mart Associates' Group Health Plan, 928 
F.Supp. 700 (E.D. Tex 1996), the court upheld the preemption 
provisions of ERISA. Because H.R. 660 modifies but does not 
extend the federal regulation of pensions, the Committee 
believes that the Act falls within the same scope of 
Congressional authority as ERISA.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 660. However, clause 3(d)(3)(B) of that rule provides that 
this requirement does not apply when the Committee has included 
in its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

           *       *       *       *       *       *       *



                            TABLE OF CONTENTS

Sec. 1. Short title and table of contents.
     * * * * * * *

             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

     * * * * * * *

                    Subtitle B--Regulatory Provisions

     * * * * * * *

            Part 8--Rules Governing Association Health Plans

Sec. 801. Association health plans.
Sec. 802. Certification of association health plans.
Sec. 803. Requirements relating to sponsors and boards of trustees.
Sec. 804. Participation and coverage requirements.
Sec. 805. Other requirements relating to plan documents, contribution 
          rates, and benefit options.
Sec. 806. Maintenance of reserves and provisions for solvency for plans 
          providing health benefits in addition to health insurance 
          coverage.
Sec. 807. Requirements for application and related requirements.
Sec. 808. Notice requirements for voluntary termination.
Sec. 809. Corrective actions and mandatory termination.
Sec. 810. Trusteeship by the Secretary of insolvent association health 
          plans providing health benefits in addition to health 
          insurance coverage.
Sec. 811. State assessment authority.
Sec. 812. Definitions and rules of construction.

           *       *       *       *       *       *       *


             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

Subtitle A--General Provisions

           *       *       *       *       *       *       *


                              DEFINITIONS

  Sec. 3. For purposes of this title:
  (1)  * * *

           *       *       *       *       *       *       *

  (16)(A)  * * *
  (B) The term ``plan sponsor'' means (i) the employer in the 
case of an employee benefit plan established or maintained by a 
single employer, (ii) the employee organization in the case of 
a plan established or maintained by an employee organization, 
or (iii) in the case of a plan established or maintained by two 
or more employers or jointly by one or more employers and one 
or more employee organizations, the association, committee, 
joint board of trustees, or other similar group of 
representatives of the parties who establish or maintain the 
plan. Such term also includes a person serving as the sponsor 
of an association health plan under part 8.

           *       *       *       *       *       *       *

  (40)(A)  * * *
  (B) For purposes of this paragraph--
          (i) two or more trades or businesses, whether or not 
        incorporated, shall be deemed a single employer if such 
        trades or businesses are within the same control group, 
        except that, in any case in which the benefit referred 
        to in subparagraph (A) consists of medical care (as 
        defined in section 812(a)(2)), two or more trades or 
        businesses, whether or not incorporated, shall be 
        deemed a single employer for any plan year of such 
        plan, or any fiscal year of such other arrangement, if 
        such trades or businesses are within the same control 
        group during such year or at any time during the 
        preceding 1-year period,

           *       *       *       *       *       *       *

          [(iii) the determination]
          (iii)(I) in any case in which the benefit referred to 
        in subparagraph (A) consists of medical care (as 
        defined in section 812(a)(2)), the determination of 
        whether a trade or business is under ``common control'' 
        with another trade or business shall be determined 
        under regulations of the Secretary applying principles 
        consistent and coextensive with the principles applied 
        in determining whether employees of two or more trades 
        or businesses are treated as employed by a single 
        employer under section 4001(b), except that, for 
        purposes of this paragraph, an interest of greater than 
        25 percent may not be required as the minimum interest 
        necessary for common control, or
          (II) in any other case, the determination of whether 
        a trade or business is under ``common control'' with 
        another trade or business shall be determined under 
        regulations of the Secretary applying principles 
        similar to the principles applied in determining 
        whether employees of two or more trades or businesses 
        are treated as employed by a single employer under 
        section 4001(b), except that, for purposes of this 
        paragraph, common control shall not be based on an 
        interest of less than 25 percent,
          (iv) in any case in which the benefit referred to in 
        subparagraph (A) consists of medical care (as defined 
        in section 812(a)(2)), in determining, after the 
        application of clause (i), whether benefits are 
        provided to employees of two or more employers, the 
        arrangement shall be treated as having only one 
        participating employer if, after the application of 
        clause (i), the number of individuals who are employees 
        and former employees of any one participating employer 
        and who are covered under the arrangement is greater 
        than 75 percent of the aggregate number of all 
        individuals who are employees or former employees of 
        participating employers and who are covered under the 
        arrangement,
          [(iv)] (v) the term ``rural electric cooperative'' 
        means--
                  (I)  * * *

           *       *       *       *       *       *       *

          [(v)] (vi) the term ``rural telephone cooperative 
        association'' means an organization described in 
        paragraph (4) or (6) of section 501(c) of the Internal 
        Revenue Code of 1986 which is exempt from tax under 
        section 501(a) of such Code and at least 80 percent of 
        the members of which are organizations engaged 
        primarily in providing telephone service to rural areas 
        of the United States on a mutual, cooperative, or other 
        basis.

           *       *       *       *       *       *       *


                   Subtitle B--Regulatory Provisions 


Part 1--Reporting and Disclosure101--1

           *       *       *       *       *       *       *



                        SUMMARY PLAN DESCRIPTION

  Sec. 102. (a)  * * *
  (b) The summary plan description shall contain the following 
information: The name and type of administration of the plan; 
in the case of a group health plan (as defined in section 
733(a)(1)), whether a health insurance issuer (as defined in 
section 733(b)(2)) is responsible for the financing or 
administration (including payment of claims) of the plan and 
(if so) the name and address of such issuer; the name and 
address of the person designated as agent for the service of 
legal process, if such person is not the administrator; the 
name and address of the administrator; names, titles, and 
addresses of any trustee or trustees (if they are persons 
different from the administrator); a description of the 
relevant provisions of any applicable collective bargaining 
agreement; the plan's requirements respecting eligibility for 
participation and benefits; a description of the provisions 
providing for nonforfeitable pension benefits; circumstances 
which may result in disqualification, ineligibility, or denial 
or loss of benefits; the source of financing of the plan and 
the identity of any organization through which benefits are 
provided; the date of the end of the plan year and whether the 
records of the plan are kept on a calendar, policy, or fiscal 
year basis; the procedures to be followed in presenting claims 
for benefits under the plan including the office at the 
Department of Labor through which participants and 
beneficiaries may seek assistance or information regarding 
their rights under this Act and the Health Insurance 
Portability and Accountability Act of 1996 with respect to 
health benefits that are offered through a group health plan 
(as defined in section 733(a)(1)) and the remedies available 
under the plan for the redress of claims which are denied in 
whole or in part (including procedures required under section 
503 of this Act). An association health plan shall include in 
its summary plan description, in connection with each benefit 
option, a description of the form of solvency or guarantee fund 
protection secured pursuant to this Act or applicable State 
law, if any.

           *       *       *       *       *       *       *


                 Part 5--Administration and Enforcement


                           CRIMINAL PENALTIES

  Sec. 501. (a) Any person who willfully violates any provision 
of part 1 of this subtitle, or any regulation or order issued 
under any such provision, shall upon conviction be fined not 
more than $100,000 or imprisoned not more than 10 years, or 
both; except that in the case of such violation by a person not 
an individual, the fine imposed upon such person shall be a 
fine not exceeding $500,000.
  (b) Any person who willfully falsely represents, to any 
employee, any employee's beneficiary, any employer, the 
Secretary, or any State, a plan or other arrangement 
established or maintained for the purpose of offering or 
providing any benefit described in section 3(1) to employees or 
their beneficiaries as--
          (1) being an association health plan which has been 
        certified under part 8;
          (2) having been established or maintained under or 
        pursuant to one or more collective bargaining 
        agreements which are reached pursuant to collective 
        bargaining described in section 8(d) of the National 
        Labor Relations Act (29 U.S.C. 158(d)) or paragraph 
        Fourth of section 2 of the Railway Labor Act (45 U.S.C. 
        152, paragraph Fourth) or which are reached pursuant to 
        labor-management negotiations under similar provisions 
        of State public employee relations laws; or
          (3) being a plan or arrangement described in section 
        3(40)(A)(i),
shall, upon conviction, be imprisoned not more than 5 years, be 
fined under title 18, United States Code, or both.

                           CIVIL ENFORCEMENT

  Sec. 502. (a)  * * *

           *       *       *       *       *       *       *

  (n) Association Health Plan Cease and Desist Orders.--
          (1) In general.--Subject to paragraph (2), upon 
        application by the Secretary showing the operation, 
        promotion, or marketing of an association health plan 
        (or similar arrangement providing benefits consisting 
        of medical care (as defined in section 733(a)(2))) 
        that--
                  (A) is not certified under part 8, is subject 
                under section 514(b)(6) to the insurance laws 
                of any State in which the plan or arrangement 
                offers or provides benefits, and is not 
                licensed, registered, or otherwise approved 
                under the insurance laws of such State; or
                  (B) is an association health plan certified 
                under part 8 and is not operating in accordance 
                with the requirements under part 8 for such 
                certification,
        a district court of the United States shall enter an 
        order requiring that the plan or arrangement cease 
        activities.
          (2) Exception.--Paragraph (1) shall not apply in the 
        case of an association health plan or other arrangement 
        if the plan or arrangement shows that--
                  (A) all benefits under it referred to in 
                paragraph (1) consist of health insurance 
                coverage; and
                  (B) with respect to each State in which the 
                plan or arrangement offers or provides 
                benefits, the plan or arrangement is operating 
                in accordance with applicable State laws that 
                are not superseded under section 514.
          (3) Additional equitable relief.--The court may grant 
        such additional equitable relief, including any relief 
        available under this title, as it deems necessary to 
        protect the interests of the public and of persons 
        having claims for benefits against the plan.

                            CLAIMS PROCEDURE

  Sec. 503. (a) In General._In accordance with regulations of 
the Secretary, every employee benefit plan shall--
          (1)  * * *

           *       *       *       *       *       *       *

  (b) Association Health Plans.--The terms of each association 
health plan which is or has been certified under part 8 shall 
require the board of trustees or the named fiduciary (as 
applicable) to ensure that the requirements of this section are 
met in connection with claims filed under the plan.

           *       *       *       *       *       *       *


    COORDINATION AND RESPONSIBILITY OF AGENCIES ENFORCING EMPLOYEE 
        RETIREMENT INCOME SECURITY ACT AND RELATED FEDERAL LAWS

  Sec. 506. (a)  * * *

           *       *       *       *       *       *       *

  (d) Consultation With States With Respect to Association 
Health Plans.--
          (1) Agreements with states.--The Secretary shall 
        consult with the State recognized under paragraph (2) 
        with respect to an association health plan regarding 
        the exercise of--
                  (A) the Secretary's authority under sections 
                502 and 504 to enforce the requirements for 
                certification under part 8; and
                  (B) the Secretary's authority to certify 
                association health plans under part 8 in 
                accordance with regulations of the Secretary 
                applicable to certification under part 8.
          (2) Recognition of primary domicile state.--In 
        carrying out paragraph (1), the Secretary shall ensure 
        that only one State will be recognized, with respect to 
        any particular association health plan, as the State to 
        with which consultation is required. In carrying out 
        this paragraph--
                  (A) in the case of a plan which provides 
                health insurance coverage (as defined in 
                section 812(a)(3)), such State shall be the 
                State with which filing and approval of a 
                policy type offered by the plan was initially 
                obtained, and
                  (B) in any other case, the Secretary shall 
                take into account the places of residence of 
                the participants and beneficiaries under the 
                plan and the State in which the trust is 
                maintained.

           *       *       *       *       *       *       *


                          EFFECT ON OTHER LAWS

  Sec. 514. (a)  * * *
  (b)(1)  * * *

           *       *       *       *       *       *       *

  (4) [Subsection (a)] Subsections (a) and (d) shall not apply 
to any generally applicable criminal law of a State.
  (5)(A) Except as provided in subparagraph (B), [subsection 
(a)] subsection (a) of this section and subsections (a)(2)(B) 
and (b) of section 805 shall not apply to the Hawaii Prepaid 
Health Care Act (Haw. Rev. Stat. Sec. Sec. 393-1 through 393-
51).
  (B) Nothing in subparagraph (A) shall be construed to exempt 
from [subsection (a)] subsection (a) of this section or 
subsection (a)(2)(B) or (b) of section 805--
          (i)  * * *

           *       *       *       *       *       *       *

  (6)(A) Notwithstanding any other provision of this section--
          (i) in the case of an employee welfare benefit plan 
        which is a multiple employer welfare arrangement and is 
        fully insured (or which is a multiple employer welfare 
        arrangement subject to an exemption under subparagraph 
        (B)), any law of any State which regulates insurance 
        may apply to such arrangement to the extent that such 
        law provides--
                  (I)  * * *
                  (II) provisions to enforce such standards, 
                [and]
          (ii) in the case of any other employee welfare 
        benefit plan which is a multiple employer welfare 
        arrangement, and which does not provide medical care 
        (within the meaning of section 733(a)(2)), in addition 
        to this title, any law of any State which regulates 
        insurance may apply to the extent not inconsistent with 
        the preceding sections of this [title.] title, and
          (iii) subject to subparagraph (E), in the case of any 
        other employee welfare benefit plan which is a multiple 
        employer welfare arrangement and which provides medical 
        care (within the meaning of section 733(a)(2)), any law 
        of any State which regulates insurance may apply.

           *       *       *       *       *       *       *

  (E) The preceding subparagraphs of this paragraph do not 
apply with respect to any State law in the case of an 
association health plan which is certified under part 8.

           *       *       *       *       *       *       *

  (d)(1) Except as provided in subsection (b)(4), the 
provisions of this title shall supersede any and all State laws 
insofar as they may now or hereafter preclude, or have the 
effect of precluding, a health insurance issuer from offering 
health insurance coverage in connection with an association 
health plan which is certified under part 8.
  (2) Except as provided in paragraphs (4) and (5) of 
subsection (b) of this section--
          (A) In any case in which health insurance coverage of 
        any policy type is offered under an association health 
        plan certified under part 8 to a participating employer 
        operating in such State, the provisions of this title 
        shall supersede any and all laws of such State insofar 
        as they may preclude a health insurance issuer from 
        offering health insurance coverage of the same policy 
        type to other employers operating in the State which 
        are eligible for coverage under such association health 
        plan, whether or not such other employers are 
        participating employers in such plan.
          (B) In any case in which health insurance coverage of 
        any policy type is offered in a State under an 
        association health plan certified under part 8 and the 
        filing, with the applicable State authority (as defined 
        in section 812(a)(9)), of the policy form in connection 
        with such policy type is approved by such State 
        authority, the provisions of this title shall supersede 
        any and all laws of any other State in which health 
        insurance coverage of such type is offered, insofar as 
        they may preclude, upon the filing in the same form and 
        manner of such policy form with the applicable State 
        authority in such other State, the approval of the 
        filing in such other State.
  (3) Nothing in subsection (b)(6)(E) or the preceding 
provisions of this subsection shall be construed, with respect 
to health insurance issuers or health insurance coverage, to 
supersede or impair the law of any State--
          (A) providing solvency standards or similar standards 
        regarding the adequacy of insurer capital, surplus, 
        reserves, or contributions, or
          (B) relating to prompt payment of claims.
  (4) For additional provisions relating to association health 
plans, see subsections (a)(2)(B) and (b) of section 805.
  (5) For purposes of this subsection, the term ``association 
health plan'' has the meaning provided in section 801(a), and 
the terms ``health insurance coverage'', ``participating 
employer'', and ``health insurance issuer'' have the meanings 
provided such terms in section 812, respectively.
  [(d) Nothing] (e)(1) Except as provided in paragraph (2), 
nothing in this title shall be construed to alter, amend, 
modify, invalidate, impair, or supersede any law of the United 
States (except as provided in sections 111 and 507(b)) or any 
rule or regulation issued under any such law.
  (2) Nothing in any other provision of law enacted on or after 
the date of the enactment of the Small Business Health Fairness 
Act of 2003 shall be construed to alter, amend, modify, 
invalidate, impair, or supersede any provision of this title, 
except by specific cross-reference to the affected section.

           *       *       *       *       *       *       *


Part 7--Group Health Plan Requirements

           *       *       *       *       *       *       *


                     Subpart C--General Provisions

SEC. 731. PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION.

  (a)  * * *

           *       *       *       *       *       *       *

  (c) Rules of Construction.--Except as provided in section 
711, nothing in this part or part 8 shall be construed as 
requiring a group health plan or health insurance coverage to 
provide specific benefits under the terms of such plan or 
coverage.

           *       *       *       *       *       *       *


            Part 8--Rules Governing Association Health Plans

SEC. 801. ASSOCIATION HEALTH PLANS.

  (a) In General.--For purposes of this part, the term 
``association health plan'' means a group health plan whose 
sponsor is (or is deemed under this part to be) described in 
subsection (b).
  (b) Sponsorship.--The sponsor of a group health plan is 
described in this subsection if such sponsor--
          (1) is organized and maintained in good faith, with a 
        constitution and bylaws specifically stating its 
        purpose and providing for periodic meetings on at least 
        an annual basis, as a bona fide trade association, a 
        bona fide industry association (including a rural 
        electric cooperative association or a rural telephone 
        cooperative association), a bona fide professional 
        association, or a bona fide chamber of commerce (or 
        similar bona fide business association, including a 
        corporation or similar organization that operates on a 
        cooperative basis (within the meaning of section 1381 
        of the Internal Revenue Code of 1986)), for substantial 
        purposes other than that of obtaining or providing 
        medical care;
          (2) is established as a permanent entity which 
        receives the active support of its members and requires 
        for membership payment on a periodic basis of dues or 
        payments necessary to maintain eligibility for 
        membership in the sponsor; and
          (3) does not condition membership, such dues or 
        payments, or coverage under the plan on the basis of 
        health status-related factors with respect to the 
        employees of its members (or affiliated members), or 
        the dependents of such employees, and does not 
        condition such dues or payments on the basis of group 
        health plan participation.
Any sponsor consisting of an association of entities which meet 
the requirements of paragraphs (1), (2), and (3) shall be 
deemed to be a sponsor described in this subsection.

SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS.

  (a) In General.--The applicable authority shall prescribe by 
regulation a procedure under which, subject to subsection (b), 
the applicable authority shall certify association health plans 
which apply for certification as meeting the requirements of 
this part.
  (b) Standards.--Under the procedure prescribed pursuant to 
subsection (a), in the case of an association health plan that 
provides at least one benefit option which does not consist of 
health insurance coverage, the applicable authority shall 
certify such plan as meeting the requirements of this part only 
if the applicable authority is satisfied that the applicable 
requirements of this part are met (or, upon the date on which 
the plan is to commence operations, will be met) with respect 
to the plan.
  (c) Requirements Applicable to Certified Plans.--An 
association health plan with respect to which certification 
under this part is in effect shall meet the applicable 
requirements of this part, effective on the date of 
certification (or, if later, on the date on which the plan is 
to commence operations).
  (d) Requirements for Continued Certification.--The applicable 
authority may provide by regulation for continued certification 
of association health plans under this part.
  (e) Class Certification for Fully Insured Plans.--The 
applicable authority shall establish a class certification 
procedure for association health plans under which all benefits 
consist of health insurance coverage. Under such procedure, the 
applicable authority shall provide for the granting of 
certification under this part to the plans in each class of 
such association health plans upon appropriate filing under 
such procedure in connection with plans in such class and 
payment of the prescribed fee under section 807(a).
  (f) Certification of Self-Insured Association Health Plans.--
An association health plan which offers one or more benefit 
options which do not consist of health insurance coverage may 
be certified under this part only if such plan consists of any 
of the following:
          (1) a plan which offered such coverage on the date of 
        the enactment of the Small Business Health Fairness Act 
        of 2003,
          (2) a plan under which the sponsor does not restrict 
        membership to one or more trades and businesses or 
        industries and whose eligible participating employers 
        represent a broad cross-section of trades and 
        businesses or industries, or
          (3) a plan whose eligible participating employers 
        represent one or more trades or businesses, or one or 
        more industries, consisting of any of the following: 
        agriculture; equipment and automobile dealerships; 
        barbering and cosmetology; certified public accounting 
        practices; child care; construction; dance, theatrical 
        and orchestra productions; disinfecting and pest 
        control; financial services; fishing; foodservice 
        establishments; hospitals; labor organizations; 
        logging; manufacturing (metals); mining; medical and 
        dental practices; medical laboratories; professional 
        consulting services; sanitary services; transportation 
        (local and freight); warehousing; wholesaling/
        distributing; or any other trade or business or 
        industry which has been indicated as having average or 
        above-average risk or health claims experience by 
        reason of State rate filings, denials of coverage, 
        proposed premium rate levels, or other means 
        demonstrated by such plan in accordance with 
        regulations.

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

  (a) Sponsor.--The requirements of this subsection are met 
with respect to an association health plan if the sponsor has 
met (or is deemed under this part to have met) the requirements 
of section 801(b) for a continuous period of not less than 3 
years ending with the date of the application for certification 
under this part.
  (b) Board of Trustees.--The requirements of this subsection 
are met with respect to an association health plan if the 
following requirements are met:
          (1) Fiscal control.--The plan is operated, pursuant 
        to a trust agreement, by a board of trustees which has 
        complete fiscal control over the plan and which is 
        responsible for all operations of the plan.
          (2) Rules of operation and financial controls.--The 
        board of trustees has in effect rules of operation and 
        financial controls, based on a 3-year plan of 
        operation, adequate to carry out the terms of the plan 
        and to meet all requirements of this title applicable 
        to the plan.
          (3) Rules governing relationship to participating 
        employers and to contractors.--
                  (A) Board membership.--
                          (i) In general.--Except as provided 
                        in clauses (ii) and (iii), the members 
                        of the board of trustees are 
                        individuals selected from individuals 
                        who are the owners, officers, 
                        directors, or employees of the 
                        participating employers or who are 
                        partners in the participating employers 
                        and actively participate in the 
                        business.
                          (ii) Limitation.--
                                  (I) General rule.--Except as 
                                provided in subclauses (II) and 
                                (III), no such member is an 
                                owner, officer, director, or 
                                employee of, or partner in, a 
                                contract administrator or other 
                                service provider to the plan.
                                  (II) Limited exception for 
                                providers of services solely on 
                                behalf of the sponsor.--
                                Officers or employees of a 
                                sponsor which is a service 
                                provider (other than a contract 
                                administrator) to the plan may 
                                be members of the board if they 
                                constitute not more than 25 
                                percent of the membership of 
                                the board and they do not 
                                provide services to the plan 
                                other than on behalf of the 
                                sponsor.
                                  (III) Treatment of providers 
                                of medical care.--In the case 
                                of a sponsor which is an 
                                association whose membership 
                                consists primarily of providers 
                                of medical care, subclause (I) 
                                shall not apply in the case of 
                                any service provider described 
                                in subclause (I) who is a 
                                provider of medical care under 
                                the plan.
                          (iii) Certain plans excluded.--Clause 
                        (i) shall not apply to an association 
                        health plan which is in existence on 
                        the date of the enactment of the Small 
                        Business Health Fairness Act of 2003.
                  (B) Sole authority.--The board has sole 
                authority under the plan to approve 
                applications for participation in the plan and 
                to contract with a service provider to 
                administer the day-to-day affairs of the plan.
  (c) Treatment of Franchise Networks.--In the case of a group 
health plan which is established and maintained by a franchiser 
for a franchise network consisting of its franchisees--
          (1) the requirements of subsection (a) and section 
        801(a) shall be deemed met if such requirements would 
        otherwise be met if the franchiser were deemed to be 
        the sponsor referred to in section 801(b), such network 
        were deemed to be an association described in section 
        801(b), and each franchisee were deemed to be a member 
        (of the association and the sponsor) referred to in 
        section 801(b); and
          (2) the requirements of section 804(a)(1) shall be 
        deemed met.
The Secretary may by regulation define for purposes of this 
subsection the terms ``franchiser'', ``franchise network'', and 
``franchisee''.

SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS.

  (a) Covered Employers and Individuals.--The requirements of 
this subsection are met with respect to an association health 
plan if, under the terms of the plan--
          (1) each participating employer must be--
                  (A) a member of the sponsor,
                  (B) the sponsor, or
                  (C) an affiliated member of the sponsor with 
                respect to which the requirements of subsection 
                (b) are met,
        except that, in the case of a sponsor which is a 
        professional association or other individual-based 
        association, if at least one of the officers, 
        directors, or employees of an employer, or at least one 
        of the individuals who are partners in an employer and 
        who actively participates in the business, is a member 
        or such an affiliated member of the sponsor, 
        participating employers may also include such employer; 
        and
          (2) all individuals commencing coverage under the 
        plan after certification under this part must be--
                  (A) active or retired owners (including self-
                employed individuals), officers, directors, or 
                employees of, or partners in, participating 
                employers; or
                  (B) the beneficiaries of individuals 
                described in subparagraph (A).
  (b) Coverage of Previously Uninsured Employees.--In the case 
of an association health plan in existence on the date of the 
enactment of the Small Business Health Fairness Act of 2003, an 
affiliated member of the sponsor of the plan may be offered 
coverage under the plan as a participating employer only if--
          (1) the affiliated member was an affiliated member on 
        the date of certification under this part; or
          (2) during the 12-month period preceding the date of 
        the offering of such coverage, the affiliated member 
        has not maintained or contributed to a group health 
        plan with respect to any of its employees who would 
        otherwise be eligible to participate in such 
        association health plan.
  (c) Individual Market Unaffected.--The requirements of this 
subsection are met with respect to an association health plan 
if, under the terms of the plan, no participating employer may 
provide health insurance coverage in the individual market for 
any employee not covered under the plan which is similar to the 
coverage contemporaneously provided to employees of the 
employer under the plan, if such exclusion of the employee from 
coverage under the plan is based on a health status-related 
factor with respect to the employee and such employee would, 
but for such exclusion on such basis, be eligible for coverage 
under the plan.
  (d) Prohibition of Discrimination Against Employers and 
Employees Eligible To Participate.--The requirements of this 
subsection are met with respect to an association health plan 
if--
          (1) under the terms of the plan, all employers 
        meeting the preceding requirements of this section are 
        eligible to qualify as participating employers for all 
        geographically available coverage options, unless, in 
        the case of any such employer, participation or 
        contribution requirements of the type referred to in 
        section 2711 of the Public Health Service Act are not 
        met;
          (2) upon request, any employer eligible to 
        participate is furnished information regarding all 
        coverage options available under the plan; and
          (3) the applicable requirements of sections 701, 702, 
        and 703 are met with respect to the plan.

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

  (a) In General.--The requirements of this section are met 
with respect to an association health plan if the following 
requirements are met:
          (1) Contents of governing instruments.--The 
        instruments governing the plan include a written 
        instrument, meeting the requirements of an instrument 
        required under section 402(a)(1), which--
                  (A) provides that the board of trustees 
                serves as the named fiduciary required for 
                plans under section 402(a)(1) and serves in the 
                capacity of a plan administrator (referred to 
                in section 3(16)(A));
                  (B) provides that the sponsor of the plan is 
                to serve as plan sponsor (referred to in 
                section 3(16)(B)); and
                  (C) incorporates the requirements of section 
                806.
          (2) Contribution rates must be nondiscriminatory.--
                  (A) The contribution rates for any 
                participating small employer do not vary on the 
                basis of any health status-related factor in 
                relation to employees of such employer or their 
                beneficiaries and do not vary on the basis of 
                the type of business or industry in which such 
                employer is engaged.
                  (B) Nothing in this title or any other 
                provision of law shall be construed to preclude 
                an association health plan, or a health 
                insurance issuer offering health insurance 
                coverage in connection with an association 
                health plan, from--
                          (i) setting contribution rates based 
                        on the claims experience of the plan; 
                        or
                          (ii) varying contribution rates for 
                        small employers in a State to the 
                        extent that such rates could vary using 
                        the same methodology employed in such 
                        State for regulating premium rates in 
                        the small group market with respect to 
                        health insurance coverage offered in 
                        connection with bona fide associations 
                        (within the meaning of section 
                        2791(d)(3) of the Public Health Service 
                        Act),
                subject to the requirements of section 702(b) 
                relating to contribution rates.
          (3) Floor for number of covered individuals with 
        respect to certain plans.--If any benefit option under 
        the plan does not consist of health insurance coverage, 
        the plan has as of the beginning of the plan year not 
        fewer than 1,000 participants and beneficiaries.
          (4) Marketing requirements.--
                  (A) In general.--If a benefit option which 
                consists of health insurance coverage is 
                offered under the plan, State-licensed 
                insurance agents shall be used to distribute to 
                small employers coverage which does not consist 
                of health insurance coverage in a manner 
                comparable to the manner in which such agents 
                are used to distribute health insurance 
                coverage.
                  (B) State-licensed insurance agents.--For 
                purposes of subparagraph (A), the term ``State-
                licensed insurance agents'' means one or more 
                agents who are licensed in a State and are 
                subject to the laws of such State relating to 
                licensure, qualification, testing, examination, 
                and continuing education of persons authorized 
                to offer, sell, or solicit health insurance 
                coverage in such State.
          (5) Regulatory requirements.--Such other requirements 
        as the applicable authority determines are necessary to 
        carry out the purposes of this part, which shall be 
        prescribed by the applicable authority by regulation.
  (b) Ability of Association Health Plans To Design Benefit 
Options.--Subject to section 514(d), nothing in this part or 
any provision of State law (as defined in section 514(c)(1)) 
shall be construed to preclude an association health plan, or a 
health insurance issuer offering health insurance coverage in 
connection with an association health plan, from exercising its 
sole discretion in selecting the specific items and services 
consisting of medical care to be included as benefits under 
such plan or coverage, except (subject to section 514) in the 
case of (1) any law to the extent that it is not preempted 
under section 731(a)(1) with respect to matters governed by 
section 711, 712, or 713, or (2) any law of the State with 
which filing and approval of a policy type offered by the plan 
was initially obtained to the extent that such law prohibits an 
exclusion of a specific disease from such coverage.

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

  (a) In General.--The requirements of this section are met 
with respect to an association health plan if--
          (1) the benefits under the plan consist solely of 
        health insurance coverage; or
          (2) if the plan provides any additional benefit 
        options which do not consist of health insurance 
        coverage, the plan--
                  (A) establishes and maintains reserves with 
                respect to such additional benefit options, in 
                amounts recommended by the qualified actuary, 
                consisting of--
                          (i) a reserve sufficient for unearned 
                        contributions;
                          (ii) a reserve sufficient for benefit 
                        liabilities which have been incurred, 
                        which have not been satisfied, and for 
                        which risk of loss has not yet been 
                        transferred, and for expected 
                        administrative costs with respect to 
                        such benefit liabilities;
                          (iii) a reserve sufficient for any 
                        other obligations of the plan; and
                          (iv) a reserve sufficient for a 
                        margin of error and other fluctuations, 
                        taking into account the specific 
                        circumstances of the plan; and
                  (B) establishes and maintains aggregate and 
                specific excess /stop loss insurance and 
                solvency indemnification, with respect to such 
                additional benefit options for which risk of 
                loss has not yet been transferred, as follows:
                          (i) The plan shall secure aggregate 
                        excess /stop loss insurance for the 
                        plan with an attachment point which is 
                        not greater than 125 percent of 
                        expected gross annual claims. The 
                        applicable authority may by regulation 
                        provide for upward adjustments in the 
                        amount of such percentage in specified 
                        circumstances in which the plan 
                        specifically provides for and maintains 
                        reserves in excess of the amounts 
                        required under subparagraph (A).
                          (ii) The plan shall secure specific 
                        excess /stop loss insurance for the 
                        plan with an attachment point which is 
                        at least equal to an amount recommended 
                        by the plan's qualified actuary. The 
                        applicable authority may by regulation 
                        provide for adjustments in the amount 
                        of such insurance in specified 
                        circumstances in which the plan 
                        specifically provides for and maintains 
                        reserves in excess of the amounts 
                        required under subparagraph (A).
                          (iii) The plan shall secure 
                        indemnification insurance for any 
                        claims which the plan is unable to 
                        satisfy by reason of a plan 
                        termination.
Any person issuing to a plan insurance described in clause (i), 
(ii), or (iii) shall notify the Secretary of any failure of 
premium payment meriting cancellation of the policy prior to 
undertaking such a cancellation. Any regulations prescribed by 
the applicable authority pursuant to clause (i) or (ii) of 
subparagraph (B) may allow for such adjustments in the required 
levels of excess /stop loss insurance as the qualified actuary 
may recommend, taking into account the specific circumstances 
of the plan.
  (b) Minimum Surplus in Addition to Claims Reserves.--In the 
case of any association health plan described in subsection 
(a)(2), the requirements of this subsection are met if the plan 
establishes and maintains surplus in an amount at least equal 
to--
          (1) $500,000, or
          (2) such greater amount (but not greater than 
        $2,000,000) as may be set forth in regulations 
        prescribed by the applicable authority, considering the 
        level of aggregate and specific excess /stop loss 
        insurance provided with respect to such plan and other 
        factors related to solvency risk, such as the plan's 
        projected levels of participation or claims, the nature 
        of the plan's liabilities, and the types of assets 
        available to assure that such liabilities are met.
  (c) Additional Requirements.--In the case of any association 
health plan described in subsection (a)(2), the applicable 
authority may provide such additional requirements relating to 
reserves, excess /stop loss insurance, and indemnification 
insurance as the applicable authority considers appropriate. 
Such requirements may be provided by regulation with respect to 
any such plan or any class of such plans.
  (d) Adjustments for Excess /Stop Loss Insurance.--The 
applicable authority may provide for adjustments to the levels 
of reserves otherwise required under subsections (a) and (b) 
with respect to any plan or class of plans to take into account 
excess /stop loss insurance provided with respect to such plan 
or plans.
  (e) Alternative Means of Compliance.--The applicable 
authority may permit an association health plan described in 
subsection (a)(2) to substitute, for all or part of the 
requirements of this section (except subsection 
(a)(2)(B)(iii)), such security, guarantee, hold-harmless 
arrangement, or other financial arrangement as the applicable 
authority determines to be adequate to enable the plan to fully 
meet all its financial obligations on a timely basis and is 
otherwise no less protective of the interests of participants 
and beneficiaries than the requirements for which it is 
substituted. The applicable authority may take into account, 
for purposes of this subsection, evidence provided by the plan 
or sponsor which demonstrates an assumption of liability with 
respect to the plan. Such evidence may be in the form of a 
contract of indemnification, lien, bonding, insurance, letter 
of credit, recourse under applicable terms of the plan in the 
form of assessments of participating employers, security, or 
other financial arrangement.
  (f) Measures To Ensure Continued Payment of Benefits by 
Certain Plans in Distress.--
          (1) Payments by certain plans to association health 
        plan fund.--
                  (A) In general.--In the case of an 
                association health plan described in subsection 
                (a)(2), the requirements of this subsection are 
                met if the plan makes payments into the 
                Association Health Plan Fund under this 
                subparagraph when they are due. Such payments 
                shall consist of annual payments in the amount 
                of $5,000, and, in addition to such annual 
                payments, such supplemental payments as the 
                Secretary may determine to be necessary under 
                paragraph (2). Payments under this paragraph 
                are payable to the Fund at the time determined 
                by the Secretary. Initial payments are due in 
                advance of certification under this part. 
                Payments shall continue to accrue until a 
                plan's assets are distributed pursuant to a 
                termination procedure.
                  (B) Penalties for failure to make payments.--
                If any payment is not made by a plan when it is 
                due, a late payment charge of not more than 100 
                percent of the payment which was not timely 
                paid shall be payable by the plan to the Fund.
                  (C) Continued duty of the secretary.--The 
                Secretary shall not cease to carry out the 
                provisions of paragraph (2) on account of the 
                failure of a plan to pay any payment when due.
          (2) Payments by secretary to continue excess/stop 
        loss insurance coverage and indemnification insurance 
        coverage for certain plans.--In any case in which the 
        applicable authority determines that there is, or that 
        there is reason to believe that there will be: (A) a 
        failure to take necessary corrective actions under 
        section 809(a) with respect to an association health 
        plan described in subsection (a)(2); or (B) a 
        termination of such a plan under section 809(b) or 
        810(b)(8) (and, if the applicable authority is not the 
        Secretary, certifies such determination to the 
        Secretary), the Secretary shall determine the amounts 
        necessary to make payments to an insurer (designated by 
        the Secretary) to maintain in force excess/stop loss 
        insurance coverage or indemnification insurance 
        coverage for such plan, if the Secretary determines 
        that there is a reasonable expectation that, without 
        such payments, claims would not be satisfied by reason 
        of termination of such coverage. The Secretary shall, 
        to the extent provided in advance in appropriation 
        Acts, pay such amounts so determined to the insurer 
        designated by the Secretary.
          (3) Association health plan fund.--
                  (A) In general.--There is established on the 
                books of the Treasury a fund to be known as the 
                ``Association Health Plan Fund''. The Fund 
                shall be available for making payments pursuant 
                to paragraph (2). The Fund shall be credited 
                with payments received pursuant to paragraph 
                (1)(A), penalties received pursuant to 
                paragraph (1)(B); and earnings on investments 
                of amounts of the Fund under subparagraph (B).
                  (B) Investment.--Whenever the Secretary 
                determines that the moneys of the fund are in 
                excess of current needs, the Secretary may 
                request the investment of such amounts as the 
                Secretary determines advisable by the Secretary 
                of the Treasury in obligations issued or 
                guaranteed by the United States.
  (g) Excess/Stop Loss Insurance.--For purposes of this 
section--
          (1) Aggregate excess/stop loss insurance.--The term 
        ``aggregate excess/stop loss insurance'' means, in 
        connection with an association health plan, a 
        contract--
                  (A) under which an insurer (meeting such 
                minimum standards as the applicable authority 
                may prescribe by regulation) provides for 
                payment to the plan with respect to aggregate 
                claims under the plan in excess of an amount or 
                amounts specified in such contract;
                  (B) which is guaranteed renewable; and
                  (C) which allows for payment of premiums by 
                any third party on behalf of the insured plan.
          (2) Specific excess/stop loss insurance.--The term 
        ``specific excess/stop loss insurance'' means, in 
        connection with an association health plan, a 
        contract--
                  (A) under which an insurer (meeting such 
                minimum standards as the applicable authority 
                may prescribe by regulation) provides for 
                payment to the plan with respect to claims 
                under the plan in connection with a covered 
                individual in excess of an amount or amounts 
                specified in such contract in connection with 
                such covered individual;
                  (B) which is guaranteed renewable; and
                  (C) which allows for payment of premiums by 
                any third party on behalf of the insured plan.
  (h) Indemnification Insurance.--For purposes of this section, 
the term ``indemnification insurance'' means, in connection 
with an association health plan, a contract--
          (1) under which an insurer (meeting such minimum 
        standards as the applicable authority may prescribe by 
        regulation) provides for payment to the plan with 
        respect to claims under the plan which the plan is 
        unable to satisfy by reason of a termination pursuant 
        to section 809(b) (relating to mandatory termination);
          (2) which is guaranteed renewable and noncancellable 
        for any reason (except as the applicable authority may 
        prescribe by regulation); and
          (3) which allows for payment of premiums by any third 
        party on behalf of the insured plan.
  (i) Reserves.--For purposes of this section, the term 
``reserves'' means, in connection with an association health 
plan, plan assets which meet the fiduciary standards under part 
4 and such additional requirements regarding liquidity as the 
applicable authority may prescribe by regulation.
  (j) Solvency Standards Working Group.--
          (1) In general.--Within 90 days after the date of the 
        enactment of the Small Business Health Fairness Act of 
        2003, the applicable authority shall establish a 
        Solvency Standards Working Group. In prescribing the 
        initial regulations under this section, the applicable 
        authority shall take into account the recommendations 
        of such Working Group.
          (2) Membership.--The Working Group shall consist of 
        not more than 15 members appointed by the applicable 
        authority. The applicable authority shall include among 
        persons invited to membership on the Working Group at 
        least one of each of the following:
                  (A) a representative of the National 
                Association of Insurance Commissioners;
                  (B) a representative of the American Academy 
                of Actuaries;
                  (C) a representative of the State 
                governments, or their interests;
                  (D) a representative of existing self-insured 
                arrangements, or their interests;
                  (E) a representative of associations of the 
                type referred to in section 801(b)(1), or their 
                interests; and
                  (F) a representative of multiemployer plans 
                that are group health plans, or their 
                interests.

SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS.

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

SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION.

  Except as provided in section 809(b), an association health 
plan which is or has been certified under this part may 
terminate (upon or at any time after cessation of accruals in 
benefit liabilities) only if the board of trustees, not less 
than 60 days before the proposed termination date--
          (1) provides to the participants and beneficiaries a 
        written notice of intent to terminate stating that such 
        termination is intended and the proposed termination 
        date;
          (2) develops a plan for winding up the affairs of the 
        plan in connection with such termination in a manner 
        which will result in timely payment of all benefits for 
        which the plan is obligated; and
          (3) submits such plan in writing to the applicable 
        authority.
Actions required under this section shall be taken in such form 
and manner as may be prescribed by the applicable authority by 
regulation.

SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION.

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

SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION HEALTH 
                    PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO 
                    HEALTH INSURANCE COVERAGE.

  (a) Appointment of Secretary as Trustee for Insolvent 
Plans.--Whenever the Secretary determines that an association 
health plan which is or has been certified under this part and 
which is described in section 806(a)(2) will be unable to 
provide benefits when due or is otherwise in a financially 
hazardous condition, as shall be defined by the Secretary by 
regulation, the Secretary shall, upon notice to the plan, apply 
to the appropriate United States district court for appointment 
of the Secretary as trustee to administer the plan for the 
duration of the insolvency. The plan may appear as a party and 
other interested persons may intervene in the proceedings at 
the discretion of the court. The court shall appoint such 
Secretary trustee if the court determines that the trusteeship 
is necessary to protect the interests of the participants and 
beneficiaries or providers of medical care or to avoid any 
unreasonable deterioration of the financial condition of the 
plan. The trusteeship of such Secretary shall continue until 
the conditions described in the first sentence of this 
subsection are remedied or the plan is terminated.
  (b) Powers as Trustee.--The Secretary, upon appointment as 
trustee under subsection (a), shall have the power--
          (1) to do any act authorized by the plan, this title, 
        or other applicable provisions of law to be done by the 
        plan administrator or any trustee of the plan;
          (2) to require the transfer of all (or any part) of 
        the assets and records of the plan to the Secretary as 
        trustee;
          (3) to invest any assets of the plan which the 
        Secretary holds in accordance with the provisions of 
        the plan, regulations prescribed by the Secretary, and 
        applicable provisions of law;
          (4) to require the sponsor, the plan administrator, 
        any participating employer, and any employee 
        organization representing plan participants to furnish 
        any information with respect to the plan which the 
        Secretary as trustee may reasonably need in order to 
        administer the plan;
          (5) to collect for the plan any amounts due the plan 
        and to recover reasonable expenses of the trusteeship;
          (6) to commence, prosecute, or defend on behalf of 
        the plan any suit or proceeding involving the plan;
          (7) to issue, publish, or file such notices, 
        statements, and reports as may be required by the 
        Secretary by regulation or required by any order of the 
        court;
          (8) to terminate the plan (or provide for its 
        termination in accordance with section 809(b)) and 
        liquidate the plan assets, to restore the plan to the 
        responsibility of the sponsor, or to continue the 
        trusteeship;
          (9) to provide for the enrollment of plan 
        participants and beneficiaries under appropriate 
        coverage options; and
          (10) to do such other acts as may be necessary to 
        comply with this title or any order of the court and to 
        protect the interests of plan participants and 
        beneficiaries and providers of medical care.
  (c) Notice of Appointment.--As soon as practicable after the 
Secretary's appointment as trustee, the Secretary shall give 
notice of such appointment to--
          (1) the sponsor and plan administrator;
          (2) each participant;
          (3) each participating employer; and
          (4) if applicable, each employee organization which, 
        for purposes of collective bargaining, represents plan 
        participants.
  (d) Additional Duties.--Except to the extent inconsistent 
with the provisions of this title, or as may be otherwise 
ordered by the court, the Secretary, upon appointment as 
trustee under this section, shall be subject to the same duties 
as those of a trustee under section 704 of title 11, United 
States Code, and shall have the duties of a fiduciary for 
purposes of this title.
  (e) Other Proceedings.--An application by the Secretary under 
this subsection may be filed notwithstanding the pendency in 
the same or any other court of any bankruptcy, mortgage 
foreclosure, or equity receivership proceeding, or any 
proceeding to reorganize, conserve, or liquidate such plan or 
its property, or any proceeding to enforce a lien against 
property of the plan.
  (f) Jurisdiction of Court.--
          (1) In general.--Upon the filing of an application 
        for the appointment as trustee or the issuance of a 
        decree under this section, the court to which the 
        application is made shall have exclusive jurisdiction 
        of the plan involved and its property wherever located 
        with the powers, to the extent consistent with the 
        purposes of this section, of a court of the United 
        States having jurisdiction over cases under chapter 11 
        of title 11, United States Code. Pending an 
        adjudication under this section such court shall stay, 
        and upon appointment by it of the Secretary as trustee, 
        such court shall continue the stay of, any pending 
        mortgage foreclosure, equity receivership, or other 
        proceeding to reorganize, conserve, or liquidate the 
        plan, the sponsor, or property of such plan or sponsor, 
        and any other suit against any receiver, conservator, 
        or trustee of the plan, the sponsor, or property of the 
        plan or sponsor. Pending such adjudication and upon the 
        appointment by it of the Secretary as trustee, the 
        court may stay any proceeding to enforce a lien against 
        property of the plan or the sponsor or any other suit 
        against the plan or the sponsor.
          (2) Venue.--An action under this section may be 
        brought in the judicial district where the sponsor or 
        the plan administrator resides or does business or 
        where any asset of the plan is situated. A district 
        court in which such action is brought may issue process 
        with respect to such action in any other judicial 
        district.
  (g) Personnel.--In accordance with regulations which shall be 
prescribed by the Secretary, the Secretary shall appoint, 
retain, and compensate accountants, actuaries, and other 
professional service personnel as may be necessary in 
connection with the Secretary's service as trustee under this 
section.

SEC. 811. STATE ASSESSMENT AUTHORITY.

  (a) In General.--Notwithstanding section 514, a State may 
impose by law a contribution tax on an association health plan 
described in section 806(a)(2), if the plan commenced 
operations in such State after the date of the enactment of the 
Small Business Health Fairness Act of 2003.
  (b) Contribution Tax.--For purposes of this section, the term 
``contribution tax'' imposed by a State on an association 
health plan means any tax imposed by such State if--
          (1) such tax is computed by applying a rate to the 
        amount of premiums or contributions, with respect to 
        individuals covered under the plan who are residents of 
        such State, which are received by the plan from 
        participating employers located in such State or from 
        such individuals;
          (2) the rate of such tax does not exceed the rate of 
        any tax imposed by such State on premiums or 
        contributions received by insurers or health 
        maintenance organizations for health insurance coverage 
        offered in such State in connection with a group health 
        plan;
          (3) such tax is otherwise nondiscriminatory; and
          (4) the amount of any such tax assessed on the plan 
        is reduced by the amount of any tax or assessment 
        otherwise imposed by the State on premiums, 
        contributions, or both received by insurers or health 
        maintenance organizations for health insurance 
        coverage, aggregate excess /stop loss insurance (as 
        defined in section 806(g)(1)), specific excess /stop 
        loss insurance (as defined in section 806(g)(2)), other 
        insurance related to the provision of medical care 
        under the plan, or any combination thereof provided by 
        such insurers or health maintenance organizations in 
        such State in connection with such plan.

SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION.

  (a) Definitions.--For purposes of this part--
          (1) Group health plan.--The term ``group health 
        plan'' has the meaning provided in section 733(a)(1) 
        (after applying subsection (b) of this section).
          (2) Medical care.--The term ``medical care'' has the 
        meaning provided in section 733(a)(2).
          (3) Health insurance coverage.--The term ``health 
        insurance coverage'' has the meaning provided in 
        section 733(b)(1).
          (4) Health insurance issuer.--The term ``health 
        insurance issuer'' has the meaning provided in section 
        733(b)(2).
          (5) Applicable authority.--The term ``applicable 
        authority'' means the Secretary, except that, in 
        connection with any exercise of the Secretary's 
        authority regarding which the Secretary is required 
        under section 506(d) to consult with a State, such term 
        means the Secretary, in consultation with such State.
          (6) Health status-related factor.--The term ``health 
        status-related factor'' has the meaning provided in 
        section 733(d)(2).
          (7) Individual market.--
                  (A) In general.--The term ``individual 
                market'' means the market for health insurance 
                coverage offered to individuals other than in 
                connection with a group health plan.
                  (B) Treatment of very small groups.--
                          (i) In general.--Subject to clause 
                        (ii), such term includes coverage 
                        offered in connection with a group 
                        health plan that has fewer than 2 
                        participants as current employees or 
                        participants described in section 
                        732(d)(3) on the first day of the plan 
                        year.
                          (ii) State exception.--Clause (i) 
                        shall not apply in the case of health 
                        insurance coverage offered in a State 
                        if such State regulates the coverage 
                        described in such clause in the same 
                        manner and to the same extent as 
                        coverage in the small group market (as 
                        defined in section 2791(e)(5) of the 
                        Public Health Service Act) is regulated 
                        by such State.
          (8) Participating employer.--The term ``participating 
        employer'' means, in connection with an association 
        health plan, any employer, if any individual who is an 
        employee of such employer, a partner in such employer, 
        or a self-employed individual who is such employer (or 
        any dependent, as defined under the terms of the plan, 
        of such individual) is or was covered under such plan 
        in connection with the status of such individual as 
        such an employee, partner, or self-employed individual 
        in relation to the plan.
          (9) Applicable state authority.--The term 
        ``applicable State authority'' means, with respect to a 
        health insurance issuer in a State, the State insurance 
        commissioner or official or officials designated by the 
        State to enforce the requirements of title XXVII of the 
        Public Health Service Act for the State involved with 
        respect to such issuer.
          (10) Qualified actuary.--The term ``qualified 
        actuary'' means an individual who is a member of the 
        American Academy of Actuaries.
          (11) Affiliated member.--The term ``affiliated 
        member'' means, in connection with a sponsor--
                  (A) a person who is otherwise eligible to be 
                a member of the sponsor but who elects an 
                affiliated status with the sponsor,
                  (B) in the case of a sponsor with members 
                which consist of associations, a person who is 
                a member of any such association and elects an 
                affiliated status with the sponsor, or
                  (C) in the case of an association health plan 
                in existence on the date of the enactment of 
                the Small Business Health Fairness Act of 2003, 
                a person eligible to be a member of the sponsor 
                or one of its member associations.
          (12) Large employer.--The term ``large employer'' 
        means, in connection with a group health plan with 
        respect to a plan year, an employer who employed an 
        average of at least 51 employees on business days 
        during the preceding calendar year and who employs at 
        least 2 employees on the first day of the plan year.
          (13) Small employer.--The term ``small employer'' 
        means, in connection with a group health plan with 
        respect to a plan year, an employer who is not a large 
        employer.
  (b) Rules of Construction.--
          (1) Employers and employees.--For purposes of 
        determining whether a plan, fund, or program is an 
        employee welfare benefit plan which is an association 
        health plan, and for purposes of applying this title in 
        connection with such plan, fund, or program so 
        determined to be such an employee welfare benefit 
        plan--
                  (A) in the case of a partnership, the term 
                ``employer'' (as defined in section 3(5)) 
                includes the partnership in relation to the 
                partners, and the term ``employee'' (as defined 
                in section 3(6)) includes any partner in 
                relation to the partnership; and
                  (B) in the case of a self-employed 
                individual, the term ``employer'' (as defined 
                in section 3(5)) and the term ``employee'' (as 
                defined in section 3(6)) shall include such 
                individual.
          (2) Plans, funds, and programs treated as employee 
        welfare benefit plans.--In the case of any plan, fund, 
        or program which was established or is maintained for 
        the purpose of providing medical care (through the 
        purchase of insurance or otherwise) for employees (or 
        their dependents) covered thereunder and which 
        demonstrates to the Secretary that all requirements for 
        certification under this part would be met with respect 
        to such plan, fund, or program if such plan, fund, or 
        program were a group health plan, such plan, fund, or 
        program shall be treated for purposes of this title as 
        an employee welfare benefit plan on and after the date 
        of such demonstration.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    Once again the majority proposes legislation it claims is 
in the interest of working families, but in fact undermines 
their workplace benefits. Rather than addressing real solutions 
for getting vital health coverage for uninsured Americans, this 
legislation will cut health benefits for 4.5 million workers 
who currently have coverage, and will make coverage more 
expensive for four out of five small businesses. The proposed 
AHPs would be almost entirely exempt from oversight by state 
regulators, undermining coverage for serious diseases, and 
increasing consumer's vulnerability to fraud and insolvencies.
    Sixty million Americans lack health coverage for some part 
of a year and are looking to Congress for help. Approximately 
half of those Americans work for or are family members of 
someone who works for a small employer. Many small employers 
lack the financial resources to afford health insurance 
coverage. These employers, and the workers and family members 
who depend upon them, need solutions that will provide an 
expanded pool for affordable coverage and subsidize the costs 
of low wage workers. H.R. 660 not only fails to deliver help, 
it actually will reduce health care coverage and raise health 
insurance costs for millions of Americans.
    The independent Congressional Budget Office analyzed the 
impact of this bill:

          Under the most likely scenario for AHPs * * * the 
        Congressional Budget office estimates that 
        approximately 4.6 million of those people might obtain 
        their coverage through the proposed new insurance 
        arrangements. But overall enrollment in employer-
        sponsored health insurance would increase by only about 
        330,000 people. Because most firms purchasing coverage 
        through an AHP would be switching from traditional 
        insurance coverage--that is, insurance plans subject to 
        the full array of state insurance regulations.

    CBO also warns us that far from reducing health expenses, 
this bill will increase health costs, because it will allow 
cherry picking of the most desirable employees, leaving the 
more expensive employers in the current system. CBO concluded 
that AHPs primarily will compete by offering less generous 
benefit packages and thus, reducing coverage for over 4.5 
million workers and families. And those who remain covered by 
non-AHP insurance will pay increased costs to compensate for 
those who are siphoned off into AHPs.
    A new study by Mercer Consultants, commissioned by National 
Business United, made even more dire predictions. Mercer found 
that H.R. 660 would increase the number of the uninsured by 1 
million as employers in the non-AHP market dropped coverage due 
to premium increases. Health insurance premiums in the non-AHP 
market were estimated to rise 23% due to the exodus of 
healthier firms to non-regulated AHPs.
    Rather than expanding health coverage and health services; 
it is going to lead to the reduction of health coverage for 4.6 
million Americans who will lose the right to urgently needed 
medical coverage like OB/GYN and pediatrician services, 
cervical, colon, mammography and prostate cancer screening and 
treatment, maternity benefits and well-care child services, and 
diabetes treatment.
    That is why over 500 local and national organizations 
oppose this bill, including the National Governors Association, 
the Republicans Governors Associations, Democratic Governors 
Association, 41 state Attorneys General, the National 
Association of Insurance Commissioners, National Small Business 
United, Blue Cross and Blue Shield, and the Health Insurance 
Association of America, and well as dozens and dozens of labor, 
consumer, and business groups (see attached list).
H.R. 660 Allows and Encourages Employers to Dump their Existing Plans, 
        More Generous Health Plans in Order to Avoid State Regulation
    Although the proponents of the bill contend that the 
purpose of the bill is to encourage employers who currently 
offer no insurance to provide such coverage, the bill does 
nothing to prohibit existing employers from dumping their 
current, more generous insurance plans and join an AHP. In 
fact, as we've noted above, the CBO and Mercer study predict 
that the vast majority of AHP participants will be those who 
simply dropped their existing coverage. Representative Miller 
offered an amendment to prohibit employers from dumping their 
existing, more generous health insurance plans, in order to 
join the AHP. The Majority rejected this amendment.
H.R. 660 Cuts Benefits For Millions of Workers by Overriding Critical 
        State Consumer Protections Laws
    Under H.R. 660, AHPs would have sole discretion to select 
the specific items and services to be covered, and 
notwithstanding state laws. AHPs would be exempt from key 
consumer protection laws, including state laws requiring access 
to mammography screening, emergency services, maternity care 
for expectant mothers, well-baby care for infants, and other 
protections that ensure appropriate access to health care.
    This bill would result in a two-tiered small group health 
insurance marketplace, one tier consisting of those who benefit 
from preemption of state health mandates, and another tier 
comprised of those who remain subject to state consumer 
protections. As Members of Congress, we should be seeking ways 
to eliminate the gap in health care disparity, not creating a 
new one.
    The Republican Majority contend that given the choice, AHPs 
will freely choose to provide ample health care coverage. 
However, history demonstrates that for years businesses 
provided health coverage without providing basic health care 
reliability. In the past, access to mammograms, maternity 
payments for expectant mothers, cancer-screeningprocedures, 
well-baby care, and other preventive health treatment were routinely 
omitted in health coverage.
    States were forced to enact consumer protections because 
businesses did not insist on providing comprehensive coverage 
for their employees. Today, nearly all states and the District 
of Columbia have laws that protect access to mammography 
screening, emergency services, allow direct access to OBGYNs, 
diabetic supplies and education, and prompt payment rules.
    More than 25 states and the District of Columbia have laws 
that protect access to prostate cancer screening, cervical 
cancer screening, and well-baby care. Over 36 states have 
mental health parity laws and more than 32 states require 
insurance plans to cover a minimum amount of mental health 
benefits.
    Both CBO and Mercer concluded that AHPs would be driven to 
compete by limiting covered benefits for the employees of small 
employers.
    We believe, as do hundreds of organizations, public 
officials, and health care providers that state consumer 
protection laws represent significant steps toward Congress's 
goal of improving access to comprehensive health care for all. 
Our Republican colleagues do not. They would prefer to roll 
back the protections we have today. Therefore, the Republican 
Majority rejected each of the 10 amendments offered by 
Democrats to restore consumer protections lost under this 
legislation. Among their many dubious arguments, one member of 
the Republican Majority argued that access to preventive health 
screening constituted health insurance with ``whistles and 
bells.''
    State consumer protections are not ``whistles and bells.'' 
They are wellness programs that save lives and billions of 
dollars in acute health care cost.

H.R. 660 Encourages ``Cherry-Picking'' or ``Skimming'' of Younger, 
        Healthier Populations

    In addition to eliminating critical consumer protections, 
the bill permits AHPs to engage in ``cherry picking'', by 
skimming off the healthiest consumers and leaving the sickest 
patients uninsured.
    H.R. 660 allows AHPs to offer coverage to specific types of 
employers, allowing plans to seek memberships with better risk 
and less costly populations. In addition, AHPs may offer 
different premiums to each of their member employers. Thus, 
AHPs may charge lower rates for lower risk persons and charge 
far more for higher risk persons, forcing them out of the pool. 
The bill's only restriction is that the difference in premiums 
cannot be health-status based. But the provision is meaningless 
because it permits AHPs to accomplish the same goal by 
``cherry-picking'' and varying premiums based on age, sex, 
race, national origin, or any other key factor of an employer's 
workforce, including geography and membership.
    Unlike the Republican Majority, we are convinced by the 
independent Congressional Budget Office (CBO) finding that AHP 
legislation would result in higher premiums for 80 percent of 
small employers, while as many as 100,000 of the sickest 
individuals would lose coverage altogether. As noted above, the 
Mercer Consulting study found that health insurance premiums 
would substantially increase for small employers that continued 
to purchase state regulated coverage, and the number of 
uninsured would increase by over 1 million as a result of 
coverage losses among workers and their dependents.
    During the committee markup, we supported the amendment 
offered by our colleague Representative Robert Andrews (D-NJ) 
to preclude AHPs from varying employer contributions or 
premiums based on the age, race, or religion of the employer's 
workforce. Amendments also were offered by Representatives 
Majette and Norwood that would have limited the ability of AHPs 
to vary premiums among member employers. However, the 
Republican Majority rejected these amendments, preferring to 
exacerbate current health disparities in our health care 
system.

AHPs Would Operate Largely Unregulated

    Regulation of insurance and public health has traditionally 
been the province of the states. H.R. 660 eliminates centuries 
of state law that established minimum standards for the conduct 
of the business of insurance, and raises important questions 
about the future ability of states to regulate health insurance 
at all.
    The bill contains several vaguely drafted provisions that 
would preempt a wide swath of state laws and will lead to 
decades of litigation in the courts. During Committee debate, 
the Majority could not clearly articulate the specific state 
laws that would be preempted under the bill. For example, the 
bill preempts state laws ``Insofar as they preclude or have the 
effect of precluding an insurer from offering coverage in 
connection with an AHP''. The American Law Division of the 
Congressional Research Service has concluded that the courts 
will have to determine which laws affect the operation of an 
AHP and preemption will depend on the applicable state law at 
issue.
    By allowing insurers who sell to AHPs to set up business in 
a state with very lenient rules and oversight and market to 
small employers without meeting any state's rules, states would 
be rendered powerless to take action even where there is 
obvious risk to consumers. AHPs are permitted to domicile in a 
single state and operate nationally. For example, the 
individuals in Florida covered by a Michigan AHP are unlikely 
to travel to Michigan if they have a problem and Florida will 
be unable to help them.
    We strongly disagree with the provisions of HR 660 that 
would federalize oversight of AHPs, providing the Department of 
Labor (DOL) with minimal regulatory authority over AHPs. States 
are in the business of regulating insurance for good reason. 
States can shut down fraudulent health plans faster than DOL. 
States can shut down crooked health plans by issuing emergency 
cease-and-desist order withindays, while DOL can take several 
years. Additionally, DOL lacks sufficient staff and budget to regulate 
AHP plans adequately.
    Most state attorneys general, plus state governors, 
insurance regulators and state insurance legislators also 
publicly agree sole federal oversight of AHPs would expose 
small businesses to potentially widespread scams. In a June 11, 
2003 press release, the Coalition Against Insurance Fraud 
stated, ``State oversight is a vital part of the safety net our 
businesses need to help ensure health coverage provides 
reliable protection, not empty promises.''
    Experience with another form of health insurance pooling 
without adequate accountability already exist; Multiple 
Employer Welfare Arrangements (MEWAs). We know from past 
experience that these plans can harm consumers. MEWA fraud and 
abuse problems have resulted in 400,000 uninsured consumers 
with over $123 million in upaid medical bills.
    During Committee markup, Representative Andrews offered an 
amendment to preclude any MEWA from operating as an AHP. We 
supported this amendment because we wanted to ensure that the 
abysmal failure of MEWAs would not replicate itself under a new 
name.
    During committee markup we supported an amendment offered 
by Representative Denise Majette (D-GA) to permit state 
insurance commissioners to retain full authority to protect the 
residents of thier states covered by AHPs. In addition, that 
amendment provided that no AHP may offer coverage to residents 
of a state unless the insurance commissioner of the state of 
the AHP's domicile agrees to carry out any order or judgment 
issued by the state insurance commissioner or other duly 
authorized state official of an aggrieved out-of-state 
resident.

H.R. 660 Fails to Address Real Problems of Small Business

    H.R. 660 does not address the major reasons that small 
businesses do not offer health insurance coverage--lack of 
stability, lack of profitability, and generally low wage 
workforces. A majority of small businesses do not survive their 
first year of operations and a small minority exist after 3 
years of operation. And the majority of small business 
workforces employ low wage employees. Over half the uninsured 
earn less than two times the poverty rate. A minimum wage 
worker earns $1000 a month. An individual health insurance 
policy costs over $200 a month and a family policy costs over 
$600 a month. In order for a small business to offer health 
coverage to a low wage employee, at a 50% employer contribution 
rate, would mean a 10-30% salary increase for these workers 
would be necessary. These employers are unlikely to be able to 
afford such an increase and many of these employees would 
choose cash over health insurance.
    As noted above, CBO analyzed AHP legislation in 2000 and 
concluded much the same. Of the 42 million uninsured, CBO 
concluded that only 330,000 would receive coverage under AHPs. 
CBO concluded that AHPs primarily would cover employers who 
already have coverage and shift to cheaper AHP plans, 
potentially 4.5 million individuals.

Does Not Level the Playing Field with Large Employers

    AHP supporters claim their bill is simply designed to level 
the playing field between small and and large employers. 
However, H.R. 660 actually gives small employers better 
treatment than exists for large employers. Large employers that 
provide coverage through insurance are covered by state 
insurance and consumer protection laws. Further, large 
employers don't and can't cherry pick. Large employers only 
vary premiums to their workers based upon family size and 
geographic location. H.R. 660 would permit AHPs to vary 
preimums for any and every reason other than health status, 
including age, race and sex.
    By contrast, AHPs would be mostly exempt from these state 
requirements and protections; self-insured AHPs would be fully 
exempt from state regulations; and fully insure AHPs would be 
subject to limited state protections only in the state where 
the AHP chose to be licensed. Group health insurers and ERISA 
plans are also subject to rating restrictions that either limit 
or bar them from charging individuals more based on health-
related factors. H.R. 660 would permit AHPs to discriminate 
against group members, charging them more if they are less 
health or more likely to use health care services. Far from 
``leveling the playing field,'' AHPs would create grossly 
unfair competition between these new quasi-insurers and 
traditional health insurers or ERISA plans.

The Democratic Alternative

    During the markup, Representative Ron Kind offered an 
amendment in the nature of a substitute would direct the 
Secretary of Labor to create a small employer health pool and 
plan similar to the Federal Employees Health Benefit Plan 
(SEHB), without cutting vital health benefits. The substitute 
provides small businesses the same access and health care 
coverage that federal employees have. It also authorizes the 
funds reserved in the FY 2004 budget resolution to DOL to 
provide subsidies to employers with low wage workforces 
recognizing the reality that most small employers cannot 
significantly increase spending for these workers.
    The Democratic alternative allows all employers with fewer 
than 100 employees during the previous calendar to be eligible 
to apply for coverage under SEHB. Employers must offer coverage 
to all employees who have completed 3 months of service. 
Employees working fewer than 30 hours a week are eligible for 
pro rata coverage. It authorizes the Secretary of Labor to 
establish an initial open enrollment period and thereafter an 
annual enrollment period. Small employers currentlyproviding 
coverage are provided a one-time election to join SEHB during the 
initial open enrollment period. The substitute would require the 
Department of Labor to annually contract with state licensed health 
insurers to offer health insurance coverage in a state. Participating 
insurers shall remain subject to state laws applicable to the states in 
which they cover residents. The plan authorizes up to $10 billion a 
year to provide small employer health coverage subsidies in fiscal year 
2004-2008 (in accordance with the FY 2004 Budget Resolution).
    During Committee mark-up a number of other amendments were 
offered that would have maintained needed state law consumer 
protections. The Majority rejected all amendments that would 
have protected consumers.
    The Majority also rejected a number of other amendments 
that would have addressed many of the bill's substantial 
deficiencies. Representative McCollum offered an amendment to 
require AHPs to provide maternal and child care coverage; 
Representatives McCarthy and Woolsey offered an amendment to 
provide mammography screening coverage; Representative McCarthy 
also offered an amendment to cover prostate screening; 
Representative Holt offered an amendment to provide 
contraceptive coverage; Representative Susan Davis offered an 
amendment to require compliance with state laws requiring 
direct access to OB/GYN services; Representatives Kildee and 
Hinojosa offered an amendment to require coverage of diabetes; 
Mr. Kind offered an amendment to cover treatment of autism; 
Representative Holt offered an amendment to require coverage of 
state mental health and substance abuse laws; Representatives 
Tierney and Van Hollen offered an amendment to require 
Association Health Plans to comply with state patients' bill of 
rights protections, such as prompt payment of claims and 
independent external review of coverage decisions; and 
Representative Kucinich offered an amendment to prevent benefit 
cuts and limit annual out-of-pocket increases for employees.

 Organizations and Public Officials Opposed to Federal AHP Legislation

    Over 500 organizations have expressed opposition:

                            STATE OFFICIALS

National Governors Association
Republican Governors Association
Democratic Governors Association
Attorneys General Representing 41 States
National Association of Insurance Commissioners
National Conference of State Legislatures
National Conference of Insurance Legislators
Southeastern Utah Association of Local Governments

                          CHAMBERS OF COMMERCE

Albuquerque, New Mexico
Black Chamber of Commerce of Greater Kansas City
Boston
Cherry Creek Chamber (Colorado)
Cleveland (COSE)
Denver Metro
Detroit
Draper Chamber of Commerce (Utah)
Florence, Colorado
Greater Akron Chamber (Ohio)
Greater Columbus Chamber (Ohio)
Greater Manchester, New Hampshire
Greater Seattle
Heber Valley Economic Development (Utah)
Lansing Regional Chamber (Michigan)
Metro Jackson, Mississippi
Missouri
New Hampshire Business and Industry Association
Northern Ohio
Oklahoma City
Oklahoma State
Palisade Chamber (Colorado)
Philadelphia
North Park Chamber (Colorado)
Salem Economic Development (Utah)
Springville Economic Development (Utah)
Tulsa, Oklahoma
Washington State (Association of Washington Business)

                              FARM BUREAUS

Mississippi Farm Bureau
Tennessee Farm Bureau Federation--Tennessee Rural Health
Utah Farm Bureau Federation
Virginia Farm Bureau

                      SMALL BUSINESS ASSOCIATIONS

Arizona Small Business Association
Indiana Association of Community and Economic Development
Indiana Manufacturers' Association
Ohio/Kentucky Concrete Pavement Association
Mountain States Lumber and Building
Materials Dealers Association (CO, UT)
National Small Business United (Represents over 16 
        associations)
New Hampshire Business Council
New Hampshire High Tech Council
Professional Musicians of Arizona

                              LABOR UNIONS

AFL-CIO--American Federation of Labor and Congress of 
        Industrial Organizations
AFSCME--American Federal of State, County and Municipal 
        Employees--With additional letters from: Louisiana 
        Chapter; New Mexico Chapter; Rhode Island Council 94
American Federal of Teachers (AFT)--With additional letters 
        from: Louisiana Chapter; Utah Chapter
Atlanta Labor Council
Cement Masons Local 577 (Colorado)
BEW--Oregon
International Union, United Auto Workers (UAW)
Indiana UAW
Laborers' International Union--Local 149--Aurora, Illinois
Montana Progressive Labor Caucus
National Education Association--Rhode Island Chapter
Providence (Rhode Island) Central Federation of Labor
Service Employees International Union (SEIU)
Teamsters' 190--Montana
United Food and Commercial Workers Union--Washington
Washington State Labor Council

                        CONSUMER/ADVOCACY GROUPS

National Groups

Alliance for Children and Families
American Association of Pastoral Counselors
American Association of People with Disabilities
American Congress of Community Supports and Employment Services
American Corn Growers Association
American Diabetes Association
American Family Foundation
American Homeowners Grassroots Alliance
Americans for a Balanced Budget
Anxiety Disorders Association of America
Association for the Advancement of Psychology
Bazelon Center for Mental Health Law
Center on Disability and Health
Child Welfare League of America
Children & Adults with Attention-Deficit/Hyperactivity Disorder
Coalition Against Insurance Fraud
Consumer Federation of America
Consumers Union
Depression and Bipolar Support Alliance
Families USA
Federation of Families for Children's Mental Health
Friends Committee on National Legislation
International Certification and Reciprocity Consortium
League of United Latin American Citizens (LULAC)
Maternal and Child Health Coalition for Healthy Families
National Alliance for the Mentally III
National Association for Children's Behavioral Health
National Association for Rural Mental Health
National Association of Anorexia Nervosa and Associated 
        Disorders
National Association of Farmer Elected Committees
National Association of Protection and Advocacy Systems
National Council for Community Behavioral Healthcare
National Council of La Raza
National Foundation for Depressive Illness
National Mental Health Association
National Partnership for Women & Families
National Patient Advocate Foundation
Research Institute for Independent Living
Suicide Prevention Action Network
Tourette Syndrome Association
United Cerebral Palsy Association
USAction
Women Involved in Farm Economics

Local Groups

AIDS Project Rhode Island
AIDS Response Seacoast--New Hampshire
AIDS Survival Project (Georgia)
ARC of Colorado
ARC of Indiana
ARC of Norfolk, Nebraska
ARC of Ohio
ARC of Utah
Access Utah Network
Adoption Options (Colorado)
Allies With Families (Utah)
American Cancer Society--Montana Chapter
Arizona Citizen Action
Association of Community Organizations for Reform Now 
        (California)
Autism Society of Nebraska
Bethpage Omaha
Best Buddies International--Indiana Chapter
Big Brother and Big Sister--Illinois
Bosom Buddies of Georgia, Inc.
Brian Injury Association of Colorado
Buckeye Art Therapy Association of Ohio
California Coalition for Mental Health
California Pan-Ethnic Health Network
Campaign for Better Health Care (Illinois)
Cancer World (Oregon)
Catholic Charities of Colorado
Catholic Charities of Colorado Springs
Catholic Charities of Omaha, Nebraska
Catholic Charities Pueblo (Colorado)
Catholic Conference of Kentucky
Catholic Conference of Minnesota
Center for Policy Analysis (California)
Central Ohio Diabetes Association
Centro Legal (Minnesota Minority Support Group)
Child Connect (Nebraska)
Children's Diabetes Foundation--Denver Chapter
Citizen Action of Illinois
Citizen Action of New York
Coalition for Accountable Government (Utah)
Colorado Classified School Employees Association
Colorado Forum on Community
Colorado Developmental Disabilities Planning Council
Colorado Women's Agenda
Community Connection (Utah)
Community Connections (Nebraska)
Community Harvest Food Bank of Fort Wayne, Indiana
Community Humanitarian Resource Center (Nebraska)
Concerned Christian Americans--Illinois
Congress of California Seniors
Connecticut Citizen Action Group
Damien Center--Indiana
Day At A Time Club (Colorado)
Depression and Bi-Polar Support Alliance of Ohio
Denver, Adams and Arapahoe County (CO) CARES
Eagle Forum (Illinois)
El Comite--Colorado
Electric League (Missouri)
EMPOWER Colorado
Family Counseling Service (Illinois)
Family Ties Adoption Center of Colorado
Federation of Families for Children's Mental Health--Colorado
Gathering Place (Nebraska)
Georgia Abortion and Reproduction Rights Action League (GARAL)
Georgia Rural--Urban Summit
Granite State Independent Living Foundation
Gray Panthers California
Health Action New Mexico
Health Care for All (Massachusetts)
Health Law Advocates (Massachusetts)
Helena Indian Alliance--Montana
Hispanic Community Center (Nebraska)
Illinois Caucus for Adolescent Health
Indiana Association of Area Agencies on Aging
Indiana Coalition on Housing and Homeless Issues
Individual and Family Counseling--Illinois
Insure the Uninsured Project (California)
Interfaith Service Bureau (California)
Iowa Christian Coalition
Iowa citizen Action Network
Jewish Community Relations Council--Indiana
Kentuckians for Health Care Reform
Kentucky Catholic Charities and Diocese
Kentucky Minority Farmers Association
Louisiana Maternal and Children's Health Coalition
Maine Consumers for Affordable Healthcare
Maine Women's Lobby
Maine Women's Policy Center
Marshalltown Cancer Resource Center (Iowa)
Maternal and Children's Health Coalition (Louisiana)
Mental Health Care Associates (Nebraska)
Mental Health Consumer Advocates of Rhode Island
Minnesota Catholic Conference
Minnesota Lawsuit Abuse Watch (M-LAW)
Minnesota State Council on Disability
Montana Coalition for Competitive Choices
Montana Council for Families
Montana Peoples Action
Montana Senior Citizens Association
Multiple Sclerosis Society of Indiana
Mutual Ground--Illinois
National Barter and Commodity Association (Formerly the 
        Colorado Citizens for an Alternative Tax System)
National Kidney Foundation of Georgia
Navajo County Arizona Special Public Health District
Nebraska Arthritis Foundation
Nebraska Tax Research Council
Nebraskans for Equal Taxation
New Mexico Advocates for Children and Families
New Mexico Teen Pregnancy Coalition
New Hampshire Coalition of State Taxpayers
New Hampshire Commission on the Status of Women
Noble/ARC of Greater Indianapolis
Ocean State Action--Rhode Island
Ohio AIDS Coalition
Ohio Advocates for Mental Health
Ohio Citizen Advocates for Chemical Dependency, Prevention and 
        Treatment
Ohioans for Diabetes Control
Planned Parenthood of Georgia
Planned Parenthood of Mid/East Tennessee
Planned Parenthood of Northern New England
People Living Through Cancer--New Mexico
Protectmontanakids.org
Quality Care for Children (Georgia)
Redemptorist Social Services Center (Missouri)
Religious Action Center for Reform Judaism
Rhode Island Kids Count
Safe Kids--Safe Comunities--Montana
Small Business Lobby (Virginia)
Sudden Arrhythmia Death Syndrome (Utah)
United Cerebral Palsy Association--Nebraska
Utah Coalition Against Sexual Assault
Victim Assistance Team of Grand County Colorado
Washington Citizen Action
Wisconsin Citizen Action
Wisdom of Wellness Foundation (Georgia)
WISE Foundation
Women's Association of North Shore Democrats--Louisiana
Women's Policy Group (Georgia)

                            PHYSICIAN GROUPS

National Groups

American Academy of Child and Adolescent Psychiatry
American Academy of Neurology
American Academy of Pediatrics
American Association for Geriatric Psychiatry
American College of Foot & Ankle Surgeons
American Psychiatric Association--With additional letters from: 
        Louisiana Chapter, New Hampshire Chapter
National Alliance of Medical Researchers and Teaching 
        Physicians

Local Groups

American Academy of Physicians--Nebraska Chapter
Bennett Breast Cancer Center (Maine)
Missouri State Medical Association
Nebraska Academy of Family Physicians
Nebraska Medical Association
New Hampshire Health Care Association
New Mexico State Health Association
Rhode Island Medical Association
Rose Breast Center (Colorado)
Virginia Medical Society
Washington Healthcare Forum

                            PROVIDER GROUPS

National Groups

American Association for Marriage and Family Therapy
American Association for Psychosocial Rehabilitation
American Association on Mental Retardation
American Chiropractic Association
American Counseling Association
American Group Psychotherapy Association
American Managed Behavioral Healthcare Association
American Mental Health Counselors Association
American Nurses Association
American Optometric Association--With additional letters from: 
        Arkansas Chapter, Indiana Chapter, Kentucky Chapter, 
        New Hampshire Chapter, New Mexico Chapter, Tennessee 
        Chapter, Virginia Chapter
American Podiatric Medical Association
American Psychiatric Nurses Association
American Psychological Association
American Psychotherapy Association
American Society of Clinical Psychopharmacology, Inc.
Association for Ambulatory Behavorial Healthcare
Association of Women's Health, Obstetrics and Neonatal Nurses 
        Clinical Social Work Federation
Employee Assistance Professionals Association
Federation of Behavioral, Psychological and Cognitive Sciences
National Association of County Behavorial Health Directors
National Association of School Psychologists
National Association of Social Workers
National Association of State Mental Health Program Directors

Local Groups

AAC Association (Nebraska)
Action Counseling (Colorado)
Accupuncture Association of Colorado
Acupuncture Association of Utah
Acupuncture Association of Washington
Addiction and Behaviorial Health Center (Nebraska)
AIM Institute (Nebraska)
Alegent Health Psychiatric (Nebraska)
Alzheimer's Association of Utah
Arden Courts (Illinois)
Arkansas Association for Marriage and Family Therapy
Arkansas Chiropractic Legislative Council
Arkansas Independent Living Council
Arkansas Mental Health Counselors Association
Aspen Therapy (Utah)
Association of Community Service Agencies (California)
Avenues to New Horizons (Nebraska)
Avera St. Anthony's Hospital (Nebraska)
A.W.A.R.E. Inc. (Mental Health Provider--Montana)
Bear River Mental Health Services (Utah)
Beaver Valley Hospital (Utah)
Behavioral Health Specialists (Nebraska)
Bergan Mercy Child Development Center
Black River Mental Health Services (Utah)
Boulder County Partners (Colorado)
Bungalow Care Center (Utah)
California Council of Community Mental Health Agencies
California Society for Clinical Social Work
Cedar Springs Behavioral Health (Colorado)
Central District Health Center (Nebraska)
Centennial Mental Health Center (Colorado)
Central Iowa Psychological Services
Collidge Mental Health Center (Nebraska)
Community Adolescent Counseling (Colorado)
Community Counseling Center of Aurora, Illinois
Conway Regional Health Systems (Arkansas)
Counseling Center for the Rockies (Colorado)
Danville Services Corporation (Utah)
Direct Benefits (Minnesota)
First Call For Help (Nebraska)
Franklin County (Ohio) Mental Health Association
Full Circle Alternative Center (Colorado)
Geneva Mental Health (Illinois)
Gordon Memorial Hospital (Nebraska)
Greater Portland (Maine) Pediatric Associates
Healthy Mothers--Healthy Babies (Montana)
Heartland Counseling and Consulting (Nebraska)
Highland Ridge Hospital (Utah)
Holladay Family and Child Guidance Clinic (Utah)
Home Health Services and Staffing Association of New Jersey
Institute for Alcohol Awareness (Fort Collins, Colorado)
Institute for Alcohol Awareness (Greeley, Colorado)
Jane Phillips Nawata Health Center (Oklahoma)
Kane County Hospital (Utah)
Kentucky Dental Association
Kentucky Mental Health Consortium
Leo Pocha Clinic (Montana)
LifeWise Health Plan of Oregon
Lincoln/Lancaster County Human Services Federation (Nebraska)
Louisana Academy of Medical Psychologists
Louisana Alliance for the Mentally III
Louisana Association for Ambulatory Healthcare
Louisana Association for the Advancement of Psychology
Louisana Healthcare Commission
Leukemia Lymphoma Society of Oregon
Maine Association of Mental Health Services
Maine Nurse Practitioners Association
Medical Weight Management (California)
Melham Medical Center (Nebraska)
Mental Health Corporation (Colorado)
Mental Health Liaison Group
Mesability (Colorado)
Minnesota Association of Community Mental Health Programs
Minnesota Council of Health Plans
Missouri Ambulance Association
Montana Council of Community Mental Health Centers
Nemeha County Breast Cancer Support Group (Nebraska)
New Hampshire Mental Health Coalition
New Hampshire Pastoral Psychotherapists Association
New West Health Services (Montana)
Niobrara Valley Hospital (Nebraska)
Northstar Mental Health Services (Nebraska)
Northwest Alzheimer's Association (Nebraska)
Ogallala Counseling Center (Nebraska)
Ohio Ambulatory Healthcare Association
Ohio Association of County Behavioral Health Authorities
Ohio Clinical Social Work Society
Ohio Counseling Association
Ohio Council of Behavioral Healthcare Providers
Ohio Dietetic Association
Old Mill Counseling (Nebraska)
Omni Behavioral Health (Nebraska)
Providence Medical Center (Nebraska)
Rainbow Center (Nebraska)
Rhode Island Association of Health Centers
Rhode Island Autism Project
Rhole Island Council of Community Mental Health Organizations
Rhode Island Dental Society
Rural Counties Program, Spanish Peaks Mental Health Center 
        (Colorado)
Sanpete Valley Hospital (Utah)
Saunders County (Nebraska) Health Services
Serenity Place (Nebraska)
Steiner & Associates, P.C.
Stoney Ridge Day Treatment Center (Nebraska)
Sweetgrass-Stillwater Mental Health Association (Montana)
Swope Parkway Health Center (Missouri)
Tri-County Mental Health Services--Maine
Tulane University Health Sciences Center (Louisiana)
Utah Association of Pathologists
Valley Community Clinic (California)
Wasatch Canyon Mental Health (Utah)
Washington Message Therapy Association
West Holt Memorial Hospital (Nebraska)
Willowbrook Mental Health Center (Nebraska)

                  HEALTH INSURANCE TRADE ASSOCIATIONS

American Association of Health Plans--With additional letters 
        from: Kentucky Association of Health Plans, New Jersey 
        Association of Health Plans, Ohio Association of Health 
        Plans, Virginia Association of Health Plans, 
        Association of Washington Healthcare Plans, American 
        Republic Insurance Company (Iowa), Association of 
        Health Insurance
Advisors/National Association of Insurance and Financial 
        Advisors--With additional letters from: Maine Chapter, 
        Blue Cross and Blue Shield Association
Delta Dental Plans Association--With additional letters from 
        all 50 state plans
Christiana Care Health Plans
Federation of Iowa Insurers
Health Insurance Association of America
Megellan Health Services
National Association of Health
Underwriters--With additional letters from: Principal Financial 
        Group--with additional letters from: Iowa Office, Tufts 
        Health Plan

                                   George Miller.
                                   Dennis J. Kucinich.
                                   Paul M. Grijalva.
                                   Ron Kind.
                                   Danny K. Davis.
                                   Betty McCollum.
                                   Tim Ryan.
                                   Carolyn McCarthy.
                                   John F. Tierney.
                                   Tim Bishop.
                                   David Wu.
                                   Rush Holt.
                                   Denise L. Majette.
                                   Chris Van Hollen.
                                   Susan Davis.
                                   Ruben Hinojosa.
                                   Lynn C. Woolsey.
                                   Robert E. Andrews.
                                   Donald M. Payne.
                                   Major R. Owens.
                                   Dale E. Kildee.

                                
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