[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6210 Introduced in House (IH)]
110th CONGRESS
2d Session
H. R. 6210
To amend the Public Health Service Act to establish a nationwide health
insurance purchasing pool for small businesses and the self-employed
that would offer a choice of private health plans and make health
coverage more affordable, predictable, and accessible.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 9, 2008
Mr. Kind (for himself, Mr. English of Pennsylvania, Mr. Barrow, Mr.
Young of Florida, Mr. Carnahan, Mrs. Emerson, Mr. Allen, Mr. Gerlach,
Mr. Altmire, Mr. Shays, Mr. Courtney, and Mr. Ramstad) introduced the
following bill; which was referred to the Committee on Energy and
Commerce, and in addition to the Committees on Education and Labor,
Ways and Means, and Rules, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as
fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Public Health Service Act to establish a nationwide health
insurance purchasing pool for small businesses and the self-employed
that would offer a choice of private health plans and make health
coverage more affordable, predictable, and accessible.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Health Options
Program Act of 2008'' or the ``SHOP Act''.
SEC. 2. AMENDMENT TO THE PUBLIC HEALTH SERVICE ACT.
The Public Health Service Act (42 U.S.C. 201 et seq.) is amended by
adding at the end the following:
``TITLE XXX--SMALL BUSINESS HEALTH OPTIONS PROGRAM
``SEC. 3001. DEFINITIONS.
``(a) In General.--In this title:
``(1) Administrator.--The term `Administrator' means the
Administrator appointed under section 3002(a).
``(2) Small business health board.--The term `Small
Business Health Board' means the Board established under
section 3002(d).
``(3) Employee.--The term `employee' has the meaning given
such term under section 3(6) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(6)). Such term shall not
include an employee of the Federal Government.
``(4) Employer.--The term `employer' has the meaning given
such term under section 3(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(5)), except that such term
shall include employers who employed an average of at least 1
but not more than 100 employees (who worked an average of at
least 35 hours per week) on business days during the year
preceding the date of application, and shall include self-
employed individuals with either not less than $5,000 in net
earnings or not less than $15,000 in gross earnings from self-
employment in the preceding taxable year. Such term shall not
include the Federal Government.
``(5) Health insurance coverage.--The term `health
insurance coverage' has the meaning given such term in section
2791.
``(6) Health insurance issuer.--The term `health insurance
issuer' has the meaning given such term in section 2791.
``(7) Health status-related factor.--The term `health
status-related factor' has the meaning given such term in
section 2791(d)(9).
``(8) Participating employer.--The term `participating
employer' means an employer that--
``(A) elects to provide health insurance coverage
under this title to its employees; and
``(B) is not offering other comprehensive health
insurance coverage to such employees.
``(b) Application of Certain Rules in Determination of Employer
Size.--For purposes of subsection (a)(3):
``(1) Application of aggregation rule for employers.--All
persons treated as a single employer under subsection (b), (c),
(m), or (o) of section 414 of the Internal Revenue Code of 1986
shall be treated as 1 employer.
``(2) Employers not in existence in preceding year.--In the
case of an employer which was not in existence for the full
year prior to the date on which the employer applies to
participate, the determination of whether such employer meets
the requirements of subsection (a)(4) shall be based on the
average number of employees that it is reasonably expected such
employer will employ on business days in the employer's first
full year.
``(3) Predecessors.--Any reference in this subsection to an
employer shall include a reference to any predecessor of such
employer.
``(c) Waiver and Continuation of Participation.--
``(1) Waiver.--The Administrator may waive the limitations
relating to the size of an employer which may participate in
the health insurance program established under this title on a
case by case basis if the Administrator determines that such
employer makes a compelling case for such a waiver. In making
determinations under this paragraph, the Administrator may
consider the effects of the employment of temporary and
seasonal workers and other factors.
``(2) Continuation of participation.--An employer
participating in the program under this title that experiences
an increase in the number of employees so that such employer
has in excess of 100 employees, may not be excluded from
participation solely as a result of such increase in employees.
``(d) Treatment of Health Insurance Coverage as Group Health
Plan.--Health insurance coverage offered under this title shall be
treated as a group health plan for purposes of applying the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.) except
to the extent that a provision of this title expressly provides
otherwise.
``(e) Application of HIPAA Rules.--Notwithstanding any provision of
State law, the provisions of subparts 1, 3, and 4 of part A of title
XXVII shall apply to health insurance coverage offered under this
title. A State may modify State law as appropriate to provide for the
enforcement of such provisions for health insurance coverage offered in
the State under this title.
``SEC. 3002. ADMINISTRATION OF SMALL BUSINESS HEALTH INSURANCE POOL.
``(a) Office and Administrator.--The Secretary shall designate an
office within the Department of Health and Human Services to administer
the program under this title. Such office shall be headed by an
Administrator to be appointed by the Secretary.
``(b) Qualifications.--The Secretary shall ensure that the
individual appointed to serve as the Administrator under subsection (a)
has an appropriate background with experience in health insurance,
business, or health policy.
``(c) Duties.--The Administrator shall--
``(1) enter into contracts with health insurance issuers to
provide health insurance coverage to individuals and employees
who enroll in health insurance coverage in accordance with this
title;
``(2) maintain the contracts for health insurance policies
when an employee elects which health plan offered under this
title to enroll in as permitted under section 3007(d)(7);
``(3) ensure that health insurance issuers comply with the
requirements of this title;
``(4) ensure that employers meet eligibility requirements
for participation in the health insurance pool established
under this title;
``(5) enter into agreements with entities to serve as
navigators, as defined in section 3003;
``(6) collect premiums from employers and employees and
make payments for health insurance coverage;
``(7) collect other information needed to administer the
program under this title;
``(8) compile, produce, and distribute information (which
shall not be subject to review or modification by the States)
to employers and employees (directly and through navigators)
concerning the open enrollment process, the health insurance
coverage available through the pool, and standardized
comparative information concerning such coverage, which shall
be available through an interactive Internet website, including
a description of the coverage plans available in each State and
comparative information, about premiums, index rates, benefits,
quality, and consumer satisfaction under such plans;
``(9) provide information to health insurance issuers,
including, at the discretion of the Administrator, notification
when proposed rates are not in a competitive range;
``(10) conduct public education activities (directly and
through navigators) to raise the awareness of the public of the
program under this title and the associated tax credit under
the Internal Revenue Code of 1986;
``(11) develop methods to facilitate enrollment in health
insurance coverage under this title, including through the use
of the Internet;
``(12) if appropriate, enter into contracts for the
performance of administrative functions under this title as
permitted under section 3009;
``(13) carefully consider benefit recommendations that are
endorsed by at least two-thirds of the members of the Small
Business Health Board;
``(14) establish and administer a contingency fund for risk
corridors as provided for in section 3008; and
``(15) carry out any other activities necessary to
administer this title.
``(d) Limitations.--The Administrator shall not--
``(1) negotiate premiums with participating health
insurance issuers; or
``(2) exclude health insurance issuers from participating
in the program under this title except for violating contracts
or the requirements of this title.
``(e) Small Business Health Board.--
``(1) In general.--There shall be established a Small
Business Health Board to monitor the implementation of the
program under this title and to make recommendations to the
Administrator concerning improvements in the program.
``(2) Appointment.--The Comptroller General shall appoint
13 individuals who have expertise in health care benefits,
financing, economics, actuarial science or other related
fields, to serve as members of the Small Business Health Board.
In appointing members under the preceding sentence, the
Comptroller General shall ensure that such members include--
``(A) a mix of different types of professionals;
``(B) a broad geographic representation;
``(C) not less than 3 individuals with an employee
perspective;
``(D) not less than 3 individuals with a small
business perspective, at least 1 of whom shall have a
self-employed perspective;
``(E) not less than 1 individual with a background
in insurance regulation; and
``(F) not less than 1 individual with a patient
perspective.
``(3) Terms.--Members of the Small Business Health Board
shall serve for a term of 3 years, such terms to end on March
15 of the applicable year, except as provided in paragraph (4).
The Comptroller General shall stagger the terms for members
first appointed. A member may be reappointed after the
expiration of a term. A member may serve after expiration of a
term until a successor has been appointed.
``(4) Small business representatives.--Beginning on March
16, 2012, 3 of the individuals the Comptroller General appoints
to the Small Business Health Board shall be representatives of
the 3 navigators through which the largest number of
individuals have enrolled for health insurance coverage over
the previous 2-year period. Such appointees shall serve for 1
year. The Comptroller General shall consider for appointment in
years prior to the date specified in this paragraph,
individuals who are representatives of entities that may serve
as navigators.
``(5) Chairperson; vice chairperson.--The Comptroller
General shall designate a member of the Small Business Health
Board, at the time of appointment of such member, to serve as
Chairperson and a member to serve as Vice Chairperson for the
term of the appointment, except that in the case of a vacancy
of either such position, the Comptroller General may designate
another member to serve in such position for the remainder of
such member's term.
``(6) Compensation.--While serving on the business of the
Small Business Health Board (including travel time), a member
of the Small Business Health Board shall be entitled to
compensation at the per diem equivalent of the rate provided
for level IV of the Executive Schedule under section 5315 of
title 5, United States Code, and while so serving away from
home and the member's regular place of business, a member may
be allowed travel expenses, as authorized by the Chairperson of
the Small Business Health Board.
``(7) Disclosure.--The Comptroller General shall establish
a system for the public disclosure, by members of the Small
Business Health Board, of financial and other potential
conflicts of interest.
``(8) Meetings.--The Small Business Health Board shall meet
at the call of the Chairperson. Each such meeting shall be open
to the public.
``(9) Duties.--The Small Business Health Board shall--
``(A) provide general oversight of the program
under this title and make recommendations to the
Administrator;
``(B) monitor and make recommendations to the
Administrator on the benefit requirements for national
plans in this title;
``(C) make recommendations concerning information
that the Administrator, health plans, and navigators
should distribute to employers and employees
participating in the program under this title; and
``(D) monitor and make recommendations to the
Administrator on adverse selection within the program
under this title and between the coverage provided
under the program and the State-regulated health
insurance market.
``(10) Approval of recommendations.--A recommendation shall
require approval by not less than two-thirds of the members of
the Board.
``(11) Public notice and comment on recommendations.--The
Administrator shall--
``(A) publish recommendations by the Small Business
Health Board in the Federal Register;
``(B) solicit written comments concerning such
recommendations; and
``(C) provide an opportunity for the presentation
of oral comments concerning such recommendations at a
public meeting.
``SEC. 3003. NAVIGATORS.
``(a) In General.--The Administrator shall enter into agreements
with private and public entities, beginning a reasonable period prior
to the beginning of the first calendar year in which health insurance
coverage is offered under this title, under which such entities will
serve as navigators.
``(b) Eligibility.--To be eligible to enter into an agreement under
subsection (a), an entity shall demonstrate to the Administrator that
the entity has existing relationships with, or could readily establish
relationships with, employers and employees, and self-employed
individuals, likely to be eligible to participate in the program under
this title. Such entities may include trade, industry and professional
associations, chambers of commerce, unions, small business development
centers, and other entities that the Administrator determines to be
capable of carrying out the duties described in subsection (c).
``(c) Duties.--An entity that serves as a navigator under an
agreement under subsection (a) shall--
``(1) coordinate with the Administrator on public education
activities to raise awareness of the program under this title;
``(2) distribute information developed by the Administrator
on the open enrollment process, private health plans available
through the program under this title, and standardized
comparative information about the health insurance coverage
under the program;
``(3) distribute information about the availability of the
tax credit under section 36 of the Internal Revenue Code of
1986 as added by the Small Business Health Options Program Act
of 2008;
``(4) assist employers and employees in enrolling in the
program under this title; and
``(5) respond to questions about the program under this
title and participating plans.
``(d) Supplemental Materials.--In addition to information developed
by the Administrator under subsection (c)(2), a navigator may develop
and distribute other information that is related to the health
insurance program established under this title, subject to review and
approval by the Administrator and filing in each State in which the
navigator operates.
``(e) Standards.--
``(1) In general.--The Administrator shall establish
standards for navigators under this section, including
provisions to avoid conflicts of interest. Under such
standards, a navigator may not--
``(A) be a health insurance issuer; or
``(B) receive any consideration directly or
indirectly from any health insurance issuer in
connection with the participation of any employer in
the program under this title or the enrollment of any
eligible employee in health insurance coverage under
this title.
``(2) Fair and impartial information and services.--The
Administrator shall consult with the Small Business Health
Board concerning the standards necessary to ensure that a
navigator will provide fair and impartial information and
services. An agreement between the Administrator and a
navigator may include specific provisions with respect to such
navigator to ensure that such navigator will provide fair and
impartial information and services. If a navigator, or entity
seeking to become a navigator, is a party to any arrangement
with any health insurance issuer to receive compensation
related to other health care programs not covered under this
title, the entity shall disclose the terms of such compensation
arrangements to the Administrator, and the Administrator shall
take such information into account in determining the
appropriate standards and agreement terms for such navigator.
``SEC. 3004. CONTRACTS WITH HEALTH INSURANCE ISSUERS.
``(a) In General.--The Administrator may enter into contracts with
qualified health insurance issuers, without regard to section 5 of
title 41, United States Code, or other statutes requiring competitive
bidding, to provide health benefits plans to employees of participating
employers and self-employed individuals under this title. Each contract
shall be for a uniform term of at least 1 year, but may be made
automatically renewable from term to term in the absence of notice of
termination by either party. In entering into such contracts, the
Administrator shall ensure that health benefits coverage is provided
for an individual only, two adults in a household, one adult and one or
more children, and a family.
``(b) Eligibility.--A health insurance issuer shall be eligible to
enter into a contract under subsection (a) if such issuer--
``(1) is licensed to offer health benefits plan coverage in
each State in which the plan is offered; and
``(2) meets such other reasonable requirements as
determined appropriate by the Administrator, after an
opportunity for public comment and publication in the Federal
Register.
``(c) Cost-Sharing and Networks.--The Administrator shall ensure
that health benefits plans with a range of cost-sharing and network
arrangements are available under this title.
``(d) Revocation.--Approval of a health benefits plan participating
in the program under this title may be withdrawn or revoked by the
Administrator only after notice to the health insurance issuer involved
and an opportunity for a hearing without regard to subchapter II of
chapter 5 and chapter 7 of title 5, United States Code.
``(e) Conversion.--
``(1) In general.--Except as provided in paragraph (2), a
contract may not be made or a plan approved under this section
if the health insurance issuer under such contract or plan does
not provide to each enrollee whose coverage under the plan is
terminated, including a termination due to discontinuance of
the contract or plan, the option to have issued to that
individual a nongroup policy without evidence of insurability.
A health insurance issuer shall provide a notice of such option
to individuals who enroll in the plan. An enrollee who
exercises such conversion option shall pay the full periodic
charges for the nongroup policy.
``(2) Exceptions.--A health insurance issuer shall not be
required to offer a nongroup policy under paragraph (1) if the
termination under the plan occurred because--
``(A) the enrollee failed to pay any required
monthly premiums under the plan;
``(B) the enrollee performed an act or practice
that constitutes fraud in connection with the coverage
under the plan;
``(C) the enrollee made an intentional
misrepresentation of a material fact under the terms of
coverage of the plan; or
``(D) the terminated coverage under the plan was
replaced by similar coverage within 31 days after the
date of termination.
``(f) Payment of Premiums.--
``(1) In general.--Employers shall collect premium payments
from their employees through payroll deductions and shall
forward such payments and the contribution of the employer (if
any) to the Administrator. The Administrator shall develop
procedures through which such payments shall be received and
forwarded to the health insurance issuer involved.
``(2) Failure to pay.--The Administrator shall establish--
``(A) procedures for the termination of employers
that fail for a two consecutive month period (or such
other time period as determined appropriate by the
Administrator) to make premium payments in a timely
manner; and
``(B) other procedures regarding unpaid and
uncollected premiums.
``SEC. 3005. EMPLOYER PARTICIPATION.
``(a) Participation Procedure.--The Administrator shall develop a
procedure for employers and self-employed individuals to participate in
the program under this title, including procedures relating to the
offering of health benefits plans to employees and the payment of
premiums for health insurance coverage under this title. For the
purpose of premium payments, a self-employed individual shall be
considered an employer that is making a 100 percent contribution toward
the premium amount.
``(b) Enrollment and Offering of Other Coverage.--
``(1) Enrollment.--A participating employer shall ensure
that each eligible employee has an opportunity to enroll in a
plan of the employer's choice or a plan of the employee's
choice in accordance with section 3007(d)(7).
``(2) Prohibition on offering other comprehensive health
benefit coverage.--A participating employer may not offer a
health insurance plan providing comprehensive health benefit
coverage to employees other than a health benefits plan offered
under this title.
``(3) Prohibition on coercion.--An employer shall not
pressure, coerce, or offer inducements to an employee to elect
not to enroll in coverage under the program under this title or
to select a particular health benefits plan.
``(4) Offer of supplemental coverage options.--
``(A) In general.--A participating employer may
offer supplementary coverage options to employees.
``(B) Definition.--In subparagraph (A), the term
`supplementary coverage' means benefits described as
`excepted benefits' under section 2791(c).
``(c) Regulatory Flexibility.--In developing the procedure under
subsection (a), the Administrator shall comply with the requirements
specified under the Regulatory Flexibility Act under chapter 6 of title
5, United States Code, consider the economic impacts that the
regulation will have on small businesses, and consider regulatory
alternatives that would mitigate such impact. The Administrator shall
publish and publicly disseminate a small business compliance guide,
pursuant to section 212 of the Small Business Regulatory Enforcement
Fairness Act, that explains the compliance requirements for employer
participation. Such compliance guide shall be published not later than
the date of the publication of the final rule under this title, or the
effective date of such rules, whichever is later.
``(d) Rule of Construction.--Except as provided in section 3004(f),
nothing in this title shall be construed to require that an employer
make premium contributions on behalf of employees.
``SEC. 3006. ELIGIBILITY AND ENROLLMENT.
``(a) In General.--An individual shall be eligible to enroll in
health insurance coverage under this title for coverage beginning in
2011 if such individual is an employee of a participating employer
described in section 3001(a)(4) or is a self-employed individual as
defined in section 401(c)(1)(B) of the Internal Revenue Code of 1986
and meets the definition of a participating employer in section
3001(a)(8). An employer may allow employees who average fewer than 35
hours per week to enroll.
``(b) Limitation.--A health insurance issuer may not refuse to
provide coverage to any eligible individual under subsection (a) who
selects a health benefits plan offered by such issuer under this title.
``(c) Type of Enrollment.--An eligible individual may enroll as an
individual or as an adult with one or more children regardless of
whether another adult is present in the enrollee's household or family.
``(d) Open Enrollment.--
``(1) In general.--The Administrator shall establish an
annual open enrollment period during which an employer may
elect to become a participating employer and an employee may
enroll in a health benefits plan under this title for the
following calendar year.
``(2) Open enrollment period.--For purposes of this title,
the term `open enrollment period' means, with respect to
calendar year 2011 and each succeeding calendar year, the
period beginning on October 1, 2010, and ending December 1,
2010, and each succeeding period beginning October 1 and ending
December 1. Coverage in a health benefits plan selected during
such an open enrollment period shall begin on January 1 of the
calendar year following the selection.
``(3) Newly eligible employers and employees.--
Notwithstanding the open enrollment period provided for under
paragraph (2), the Administrator shall establish an enrollment
process to enable a newly eligible employer or an employer with
an existing health benefits policy whose term is ending to
become a participating employer and for an employee of such
employer, or a new employee of a participating employer, to
enroll in a health benefits plan under this title outside of an
open enrollment period. The Administrator may establish a
process for setting the renewal date for the participation of
an employer that initially becomes a participating employer
outside of the open enrollment period to coincide with a
subsequent open enrollment period.
``(4) Limitation of changing enrollment.--An employer or
employee (as the case may be) may elect to change the health
benefits plan that the employee is enrolled in only during an
open enrollment period.
``(5) Effectiveness of election and change of election.--An
election to change a health benefits plan that is made during
the open enrollment period under paragraph (2) shall take
effect as of the first day of the following calendar year.
``(6) Continuation of enrollment.--An employee who has
enrolled in a health benefits plan under this title is
considered to have been continuously enrolled in that health
benefits plan until such time as--
``(A) the employer or employee (as the case may be)
elects to change health benefits plans; or
``(B) the health benefits plan is terminated.
``(e) Providing Information To Promote Informed Choice.--The
Administrator shall compile, produce, and disseminate information to
employers, employees, and navigators under section 3002(c)(8) to
promote informed choice that shall be made available at least 30 days
prior to the beginning of each open enrollment period.
``(f) Termination of Employment.--An employee may remain enrolled
in a health plan under this title for the remainder of the calendar
year following the termination or separation of the employee from
employment or termination of the employer, if the employee pays 102
percent of the monthly premium for the remainder of the year involved.
``(g) Rule of Construction.--Nothing in this title shall be
construed to prohibit a health insurance issuer providing coverage
through the program under this title from using the services of a
licensed agent or broker.
``SEC. 3007. HEALTH COVERAGE AVAILABLE WITHIN THE SMALL BUSINESS POOL.
``(a) Preexisting Condition Exclusions.--
``(1) In general.--Each contract under this title may
include a preexisting condition exclusion as defined under
section 9801(b)(1) of the Internal Revenue Code of 1986.
``(2) Exclusion period.--A preexisting condition exclusion
under this subsection shall provide for coverage of a
preexisting condition to begin not later than 6 months after
the date on which the coverage of the individual under a health
benefits plan commences, reduced by the aggregate of 1 day for
each day that the individual was covered under creditable
health insurance coverage (as defined for purposes of section
2701(c)) immediately preceding the date the individual
submitted an application for coverage under this title. This
provision shall be applied notwithstanding the applicable
provision for the reduction of the exclusion period provided
for in section 701(a)(3) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1181(a)(3)).
``(b) Rates and Premiums; State Laws.--
``(1) In general.--Rates charged and premiums paid for a
health benefits plan under this title--
``(A) shall be determined in accordance with
subsection (d);
``(B) may be annually adjusted; and
``(C) shall be adjusted to cover the administrative
costs of the Administrator under this title and the
office established under section 3002.
``(2) Benefit mandate laws.--With respect to a contract
entered into under this title under which a health insurance
issuer will offer health benefits plan coverage, State mandated
benefit laws in effect in the State in which the plan is
offered shall continue to apply, except in the case of a
nationwide plan.
``(3) Limitation.--Nothing in this subsection shall be
construed to preempt any State or local law (including any
State grievance, claims, and appeals procedure laws, State
provider mandate laws, and State network adequacy laws) except
those laws and regulations described in subsection (b)(2),
(d)(2)(B), and (d)(5).
``(c) Termination and Reenrollment.--If an individual who is
enrolled in a health benefits plan under this title voluntarily
terminates the enrollment, except in the case of an individual who has
lost or changes employment or whose employer is terminated for failure
to pay premiums, the individual shall not be eligible for reenrollment
until the first open enrollment period following the expiration of 6
months after the date of such termination.
``(d) Rating Rules and Transitional Application of State Law.--
``(1) Years 2011 and 2012.--With respect to calendar years
2011 and 2012 (open enrollment period beginning October 1,
2010, and October 1, 2011), the following shall apply:
``(A) In the case of an employer that elects to
participate in the program under this title, the State
rating requirements applicable to employers purchasing
health insurance coverage in the small group market in
the State in which the employer is located shall apply
with respect to such coverage, except that premium
rates for such coverage shall not vary based on health-
status related factors.
``(B) State rating requirements shall apply to
health insurance coverage purchased in the small group
market in the State, except that a State shall be
prohibited from allowing premium rates to vary based on
health-status related factors.
``(2) Subsequent years.--
``(A) NAIC recommendations.--
``(i) Rating requirements.--Beginning in
2009, the Administrator shall contract with the
National Association of Insurance Commissioners
to conduct a study of the rating requirements
utilized in the program under this title and
the rating requirements that apply to health
insurance purchased in the small group markets
in the States, and to develop recommendations
concerning rating requirements. Such
recommendations shall be submitted as a
legislative proposal to Congress during
calendar year 2011.
``(ii) State law harmonization.--Beginning
in 2009, the Administrator shall contract with
the National Association of Insurance
Commissioners to conduct a study of
administrative procedures, including rate and
form filing, standards of external review, and
standards of internal review, that apply to the
program under this title and to health
insurance purchased in the small group markets
in the States.
``(iii) Consultation.--In conducting the
studies and developing the recommendations
under clauses (i) and (ii), the National
Association of Insurance Commissioners shall
consult with key stakeholders (including small
businesses, self-employed individuals,
employees of small businesses, health insurance
issuers, health care providers, and patient
advocates).
``(iv) Recommendations regarding ratings.--
During 2011, the recommendations of the
National Association of Insurance Commissioners
under clause (i) shall be submitted to Congress
in the form of a legislative proposal and shall
concern--
``(I) rating requirements for
health insurance coverage under this
title for 2013 and subsequent years;
and
``(II) a maximum permissible
variance between State rating
requirements and the rating
requirements for coverage under this
title that will allow State flexibility
without causing significant adverse
selection for health insurance coverage
under this title.
``(B) Application of rating requirements.--If,
pursuant to this subsection, an Act is enacted to
implement recommendations submitted under subparagraph
(A)(i), or alternative rating requirements developed by
Congress, such rating requirements shall apply to the
program under this title beginning in 2013 (open
enrollment periods beginning October 1, 2012, and
thereafter).
``(3) Failure to enact legislation regarding rating
requirements.--If an Act is not enacted as provided for in
paragraph (2)(B) with respect to rating requirements, the
fallback rating rules under paragraph (5) shall apply beginning
in 2013 (open enrollment periods beginning October 1, 2012, and
thereafter).
``(4) Expedited congressional consideration.--
``(A) Introduction and committee consideration.--
``(i) Introduction.--A legislative proposal
submitted to Congress pursuant to paragraph (2)
shall be introduced in the House of
Representatives by the Speaker, and in the
Senate by the majority leader, immediately upon
receipt of the language and shall be referred
to the appropriate committees of Congress. If
the proposal is not introduced in accordance
with the preceding sentence, legislation may be
introduced in either House of Congress by any
member thereof.
``(ii) Committee consideration.--
Legislation introduced in the House of
Representatives and the Senate under clause (i)
shall be referred to the appropriate committees
of jurisdiction of the House of Representatives
and the Senate. Not later than 45 calendar days
after the introduction of the legislation or
February 15, 2012, whichever is later, the
committee of Congress to which the legislation
was referred shall report the legislation or a
committee amendment thereto. If the committee
has not reported such legislation (or identical
legislation) at the end of 45 calendar days
after its introduction, or February 15, 2012,
whichever is later, such committee shall be
deemed to be discharged from further
consideration of such legislation and such
legislation shall be placed on the appropriate
calendar of the House involved.
``(B) Expedited procedure.--
``(i) Consideration.--Not later than 15
calendar days after the date on which a
committee has been or could have been
discharged from consideration of legislation
under this paragraph, the Speaker of the House
of Representatives, or the Speaker's designee,
or the majority leader of the Senate, or the
leader's designee, shall move to proceed to the
consideration of the committee amendment to the
legislation, and if there is no such amendment,
to the legislation. It shall also be in order
for any member of the House of Representatives
or the Senate, respectively, to move to proceed
to the consideration of the legislation at any
time after the conclusion of such 15-day
period. All points of order against the
legislation (and against consideration of the
legislation) with the exception of points of
order under the Congressional Budget Act of
1974 are waived. A motion to proceed to the
consideration of the legislation is highly
privileged in the House of Representatives and
is privileged in the Senate and is not
debatable. The motion is not subject to
amendment, to a motion to postpone
consideration of the legislation, or to a
motion to proceed to the consideration of other
business. A motion to reconsider the vote by
which the motion to proceed is agreed to or not
agreed to shall not be in order. If the motion
to proceed is agreed to, the House of
Representatives or the Senate, as the case may
be, shall immediately proceed to consideration
of the legislation in accordance with the
Standing Rules of the House of Representatives
or the Senate, as the case may be, without
intervening motion, order, or other business,
and the resolution shall remain the unfinished
business of the House of Representatives or the
Senate, as the case may be, until disposed of,
except as provided in clause (iii).
``(ii) Consideration by other house.--If,
before the passage by one House of the
legislation that was introduced in such House,
such House receives from the other House
legislation as passed by such other House--
``(I) the legislation of the other
House shall not be referred to a
committee and shall immediately
displace the legislation that was
introduced in the House in receipt of
the legislation of the other House; and
``(II) the legislation of the other
House shall immediately be considered
by the receiving House under the same
procedures applicable to legislation
reported by or discharged from a
committee under this paragraph.
``Upon disposition of legislation that is
received by one House from the other House, it
shall no longer be in order to consider the
legislation that was introduced in the
receiving House.
``(iii) Senate vote requirement.--
Legislation under this paragraph shall only be
approved in the Senate if affirmed by the votes
of \3/5\ of the Senators duly chosen and sworn.
If legislation in the Senate has not reached
final passage within 10 days after the motion
to proceed is agreed to (excluding periods in
which the Senate is in recess) it shall be in
order for the majority leader to file a cloture
petition on the legislation or amendments
thereto, in accordance with rule XXII of the
Standing Rules of the Senate. If such a cloture
motion on the legislation fails, is shall be in
order for the majority leader to proceed to
other business and the legislation shall be
returned to or placed on the Senate calendar.
``(iv) Consideration in conference.--
Immediately upon a final passage of the
legislation that results in a disagreement
between the two Houses of Congress with respect
to the legislation, conferees shall be
appointed and a conference convened. Not later
than 15 days after the date on which conferees
are appointed (excluding periods in which one
or both Houses are in recess), the conferees
shall file a report with the House of
Representatives and the Senate resolving the
differences between the Houses on the
legislation. Notwithstanding any other rule of
the House of Representatives or the Senate, it
shall be in order to immediately consider a
report of a committee of conference on the
legislation filed in accordance with this
subclause. Debate in the House of
Representatives and the Senate on the
conference report shall be limited to 10 hours,
equally divided and controlled by the Speaker
of the House of Representatives and the
minority leader of the House of Representatives
or their designees and the majority and
minority leaders of the Senate or their
designees. A vote on final passage of the
conference report shall occur immediately at
the conclusion or yielding back of all time for
debate on the conference report. The conference
report shall be approved in the Senate only if
affirmed by the votes of \3/5\ of the Senators
duly chosen and sworn.
``(C) Rules of the senate and house of
representatives.--This paragraph is enacted by
Congress--
``(i) as an exercise of the rulemaking
power of the Senate and House of
Representatives, respectively, and is deemed to
be part of the rules of each House,
respectively, but applicable only with respect
to the procedure to be followed in that House
in the case of legislation under this
paragraph, and it supersedes other rules only
to the extent that it is inconsistent with such
rules; and
``(ii) with full recognition of the
constitutional right of either House to change
the rules (so far as they relate to the
procedure of that House) at any time, in the
same manner, and to the same extent as in the
case of any other rule of that House.
``(5) Fallback rating rules.--For purposes of paragraph
(3), the fallback rating rules are as follows:
``(A) Program.--
``(i) Rating rules.--A health insurance
issuer that enters into a contract under the
program under this title shall determine the
amount of premiums to assess for coverage under
a health benefits plan based on a community
rate that may be annually adjusted only--
``(I) based on the age of covered
individuals (subject to clause (iii));
``(II) based on the geographic area
involved if the adjustment is based on
geographical divisions that are not
smaller than a metropolitan statistical
area and the issuer provides evidence
of geographic variation in cost of
services;
``(III) based on industry (subject
to clause (iv));
``(IV) based on tobacco use; and
``(V) based on whether such
coverage is for an individual, 2 adults
in a household, 1 adult and 1 or more
children, or a family.
``(ii) Limitation.--Premium rates charged
for coverage under the program under this title
shall not vary based on health-status related
factors, gender, class of business, or claims
experience or any other factor not described in
clause (i).
``(iii) Age adjustments.--
``(I) In general.--With respect to
clause (i)(I), in making adjustments
based on age, the Administrator shall
establish not more than 5 age brackets
to be used by a health insurance issuer
in establishing rates for individuals
under the age of 65. The rates for any
age bracket shall not exceed 300
percent of the rate for the lowest age
bracket. Age-related premiums may not
vary within age brackets.
``(II) Ages 65 and older.--With
respect to clause (i)(I), a health
insurance issuer may develop separate
rates for covered individuals who are
65 years of age or older for whom the
primary payor for health benefits
coverage is the Medicare Program under
title XVIII of the Social Security Act,
for the coverage of health benefits
that are not otherwise covered under
Medicare.
``(iv) Industry adjustment.--With respect
to clause (i)(III), in making adjustments based
on industry, the rates for any industry shall
not exceed 115 percent of the rate for the
lowest industry and shall be based on evidence
of industry variation in cost of services.
``(B) State rating rules.--State rating
requirements shall apply to health insurance coverage
purchased in the small group market, except that a
State shall not permit premium rates to vary based on
health-status related factors.
``(6) State with less premium variation.--Effective
beginning in calendar year 2013, in the case of a State that
provides a rating variance with respect to age that is less
than the Federal limit established under paragraph (2)(B) or
(3) or that provides for some form of community rating, or that
provides a rating variance with respect to industry that is
less than the Federal limit established under paragraph (2)(B)
or (3), or that provides a rating variance with respect to the
geographic area involved that is less than the Federal limit
established in paragraph (2)(B) or (3), premium rates charged
for health insurance coverage under this title in such State
with respect to such factor shall reflect the rating
requirements of such State.
``(7) Employee choice.--
``(A) Calendar years 2011 and 2012.--With respect
to calendar years 2011 and 2012 (open enrollment
periods beginning October 1, 2010, and October 1,
2011), in the case of a State that applies community
rating or adjusted community rating where any age
bracket does not exceed 300 percent of the lowest age
bracket, employees of an employer located in that State
may elect to enroll in any health plan offered under
this title.
``(B) Subsequent years.--Beginning in calendar year
2013 (open enrollment periods beginning October 1,
2012, and thereafter), employees of an employer that
participates in the program under this title may elect
to enroll in any health plan offered under this title.
``(C) Exception.--In any State or year in which an
employee is not able to select a health plan as
provided for in subparagraph (A) or (B), the employer
shall select the health plan or plans that shall be
made available to the employees of such employer.
``(8) State approval of rates.--State laws requiring the
approval of rates with respect to health insurance shall
continue to apply to health insurance coverage under this title
in such State unless the State fails to enforce the application
of rates that would otherwise apply to health insurance issuers
under the program under this title.
``(e) Benefits.--
``(1) Statement of benefits.--Each contract under this
title shall contain a detailed statement of benefits offered
and shall include information concerning such maximums,
limitations, exclusions, and other definitions of benefits as
the Administrator considers necessary or reasonable.
``(2) Nationwide plans.--
``(A) In general.--In the case of contracts with
health insurance issuers that offer a health benefit
plan on a nationwide basis, in the first year after the
date of enactment of this title, the benefit package
shall include benefits established by the
Administrator.
``(B) Process for establishing benefits for
nationwide plans.--The benefits provide for under
subparagraph (A) shall be determined as follows:
``(i) Not later than 30 days after the date
of enactment of this title, the Secretary shall
enter into a contract with the Institute of
Medicine to develop a minimum set of benefits
to be offered by nationwide plans.
``(ii) In developing such minimum set of
benefits, the Institute of Medicine shall
convene public forums to allow input from key
stakeholders (including small businesses, self-
employed individuals, employees of small
businesses, health insurance issuers, insurance
regulators, health care providers, and patient
advocates) and shall consult with the Small
Business Health Board.
``(iii) The Institute of Medicine shall
consider--
``(I) the clinical appropriateness
and effectiveness of the benefits
covered;
``(II) the affordability of the
benefits covered;
``(III) the financial protection of
enrollees against high health care
expenses;
``(IV) access to necessary health
care services; and
``(V) benefits similar to those
available in the small group market on
the date of enactment of this title.
``(iv) The benefits package shall not be
discriminatory or be likely to promote or
induce adverse selection.
``(v) The Administrator shall publish the
benefits recommended by the Institute of
Medicine for public comment.
``(vi) Based on the comments received, the
Administrator may make changes only to the
extent that the recommendation from the
Institute of Medicine is not consistent with
the criteria contained in clause (iii) or there
is a compelling need for the changes to ensure
the effective functioning of the program.
``(C) Changes to benefits.--
``(i) In genera1.--By a vote of a two-
thirds majority, the Small Business Health
Board may recommend to the Administrator
changes to the benefit package for nationwide
plans under this paragraph for years subsequent
to the first year in which such benefits are in
effect.
``(ii) Reduction in benefits.--The
Administrator may reduce benefits that were
previously covered under this paragraph only
if--
``(I) two-thirds of the Small
Business Health Board recommend such
change; or
``(II) there is a compelling need
for the change to prevent a substantial
reduction in participation in the
program under this title.
``(f) Additional Premium for Delayed Enrollment.--
``(1) In general.--A self-employed individual who is
eligible to participate in the program under this title, who
does not reside in a State where a self-employed individual is
eligible for coverage in the small group market, and who does
not elect to enroll in coverage under such program in the first
year in which the self-employed individual is eligible to so
enroll, shall be subject to an additional premium for delayed
enrollment.
``(2) Amount.--The Administrator shall establish the amount
of the additional premium under paragraph (1), which shall be
the amount determined by the Administrator to be actuarially
appropriate, to encourage enrollment, and to reduce adverse
selection. The amount of the additional premium shall be
calculated by the Administrator based on the number of years
specified in paragraph (4).
``(3) Payment.--A self-employed individual shall pay the
additional premium under this subsection, if any, for a period
of time equal to the number of years specified in paragraph
(4). After the expiration of such period the additional premium
for delayed enrollment shall be terminated.
``(4) Years.--The number of years specified in this
paragraph is the number of years that the self-employed
individual involved was eligible to participate in the program
under this title but did not enroll in coverage under such
program and did not otherwise have creditable coverage (as
defined for purposes of section 2701(c)).
``(g) State Enforcement.--
``(1) State authority.--With respect to the enforcement of
provisions in this title that supersede State law (as described
in paragraph (2)), a State may require that health insurance
issuers that issue, sell, renew, or offer health insurance
coverage in the State in the small group market or through the
program under this title, comply with the requirements of this
title with respect to such issuers.
``(2) Provisions described.--The provisions described in
this paragraph shall include the following:
``(A) Prohibitions on varying premium rates based
on health-status related factors (subsections (d)(1)(A)
and (B) of section 3007).
``(B) The implementation of rating requirements
that shall apply to the program under this title
beginning in calendar year 2013 (subsections (d)(2)(B)
and (d)(3) of section 3007).
``(C) Benefit requirements for nationwide plans
available in the program under this title (subsection
(e)).
``(3) Failure to implement or enforce provisions.--In the
case of a determination by the Secretary that a State has
failed to substantially enforce a provision (or provisions)
described in paragraph (2) with respect to health insurance
issuers in the State, the Secretary shall enforce such
provision (or provisions).
``(4) Secretarial enforcement authority.--The Secretary
shall have the same authority in relation to the enforcement of
the provisions of this title with respect to issuers of health
insurance coverage in a State as the Secretary has under
section 2722(b)(2) in relation to the enforcement of the
provisions of part A of title XXVII with respect to issuers of
health insurance coverage in the small group market in the
State.
``(h) State Opt Out.--A State may prohibit small employers and
self-employed individuals in the State from participating in the
program under this title if the State--
``(1) defines its small group market to include groups of
one (so that self-employed individuals are eligible for
coverage in such market);
``(2) prohibits the use of health-status related factors
and other factors described in subsection (d)(5)(A);
``(3) has in effect rating rules that--
``(A) in calendar years 2011 and 2012, comply with
subsection (d)(5)(A); and
``(B) in calendar year 2013 and thereafter, comply
with subsection (d)(2)(B) or (d)(3), whichever is in
effect for such calendar year;
except that such rules may impose limits on rating variation in
addition to those provided for in such subsection;
``(4) maintains a State-wide purchasing pool that provides
purchasers in the small group market a choice of health benefit
plans, with comparative information provided concerning such
plans and the premiums charged for such plans made available
through the Internet; and
``(5) enacts a law to request an opt out under this
subsection.
``SEC. 3008. ENCOURAGING PARTICIPATION BY HEALTH INSURANCE ISSUERS
THROUGH ADJUSTMENTS FOR RISK.
``(a) Application of Risk Corridors.--
``(1) In general.--This section shall only apply to health
insurance issuers with respect to health benefits plans offered
under this Act during any of calendar years 2011 through 2013.
``(2) Notification of costs under the plan.--In the case of
a health insurance issuer that offers a health benefits plan
under this title in any of calendar years 2011 through 2013,
the issuer shall notify the Administrator, before such date in
the succeeding year as the Administrator specifies, of the
total amount of costs incurred in providing benefits under the
health benefits plan for the year involved and the portion of
such costs that is attributable to administrative expenses.
``(3) Allowable costs defined.--For purposes of this
section, the term `allowable costs' means, with respect to a
health benefits plan offered by a health insurance issuer under
this title, for a year, the total amount of costs described in
paragraph (2) for the plan and year, reduced by the portion of
such costs attributable to administrative expenses incurred in
providing the benefits described in such paragraph.
``(b) Adjustment of Payment.--
``(1) No adjustment if allowable costs within 3 percent of
target amount.--If the allowable costs for the health insurance
issuer with respect to the health benefits plan involved for a
calendar year are at least 97 percent, but do not exceed 103
percent, of the target amount for the plan and year involved,
there shall be no payment adjustment under this section for the
plan and year.
``(2) Increase in payment if allowable costs above 103
percent of target amount.--
``(A) Costs between 103 and 108 percent of target
amount.--If the allowable costs for the health
insurance issuer with respect to the health benefits
plan involved for the year are greater than 103
percent, but not greater than 108 percent, of the
target amount for the plan and year, the Administrator
shall reimburse the issuer for such excess costs
through payment to the issuer of an amount equal to 75
percent of the difference between such allowable costs
and 103 percent of such target amount.
``(B) Costs above 108 percent of target amount.--If
the allowable costs for the health insurance issuer
with respect to the health benefits plan involved for
the year are greater than 108 percent of the target
amount for the plan and year, the Administrator shall
reimburse the issuer for such excess costs through
payment to the issuer in an amount equal to the sum
of--
``(i) 3.75 percent of such target amount;
and
``(ii) 90 percent of the difference between
such allowable costs and 108 percent of such
target amount.
``(3) Reduction in payment if allowable costs below 97
percent of target amount.--
``(A) Costs between 92 and 97 percent of target
amount.--If the allowable costs for the health
insurance issuer with respect to the health benefits
plan involved for the year are less than 97 percent,
but greater than or equal to 92 percent, of the target
amount for the plan and year, the issuer shall be
required to pay into a contingency reserve fund
established and maintained by the Administrator, an
amount equal to 75 percent of the difference between 97
percent of the target amount and such allowable costs.
``(B) Costs below 92 percent of target amount.--If
the allowable costs for the health insurance issuer
with respect to the health benefits plan involved for
the year are less than 92 percent of the target amount
for the plan and year, the issuer shall be required to
pay into the contingency fund established under
subparagraph (A), an amount equal to the sum of--
``(i) 3.75 percent of such target amount;
and
``(ii) 90 percent of the difference between
92 percent of such target amount and such
allowable costs.
``(4) Target amount described.--
``(A) In general.--For purposes of this subsection,
the term `target amount' means, with respect to a
health benefits plan offered by an issuer under this
title in any of calendar years 2011 through 2013, an
amount equal to--
``(i) the total of the monthly premiums
estimated by the health insurance issuer and
accepted by the Administrator to be paid for
enrollees in the plan under this title for the
calendar year involved; reduced by
``(ii) the amount of administrative
expenses that the issuer estimates, and the
Administrator accepts, will be incurred by the
issuer with respect to the plan for such
calendar year.
``(B) Submission of target amount.--Not later than
December 31, 2010, and each December 31 thereafter
through calendar year 2012, an issuer shall submit to
the Administrator a description of the target amount
for such issuer with respect to health benefits plans
provided by the issuer under this title.
``(c) Disclosure of Information.--
``(1) In general.--Each contract under this title shall
provide--
``(A) that a health insurance issuer offering a
health benefits plan under this title shall provide the
Administrator with such information as the
Administrator determines is necessary to carry out this
subsection including the notification of costs under
subsection (a)(2) and the target amount under
subsection (b)(4)(B); and
``(B) that the Administrator has the right to
inspect and audit any books and records of the issuer
that pertain to the information regarding costs
provided to the Administrator under such subsections.
``(2) Restriction on use of information.--Information
disclosed or obtained pursuant to the provisions of this
subsection may be used by the office designated under section
3002(a) and its employees and contractors only for the purposes
of, and to the extent necessary in, carrying out this section.
``SEC. 3009. ADMINISTRATION THROUGH REGIONAL OR OTHER ADMINISTRATIVE
ENTITIES.
``(a) In General.--In order to provide for the administration of
the benefits under this title with maximum efficiency and convenience
for participating employers and health care providers and other
individuals and entities providing services to such employers, the
Administrator--
``(1) shall enter into contracts with eligible entities, to
the extent appropriate, to perform, on a regional or other
basis, activities to receive, disburse, and account for
payments of premiums to participating employers by individuals,
and for payments by participating employers and employees to
health insurance issuers; and
``(2) may enter into contracts with eligible entities, to
the extent appropriate, to perform, on a regional or other
basis, one or more of the following:
``(A) Collect and maintain all information relating
to individuals, families, and employers participating
in the program under this title.
``(B) Serve as a channel of communication between
health insurance issuers, participating employers, and
individuals relating to the administration of this
title.
``(C) Otherwise carry out such activities for the
administration of this title, in such manner, as may be
provided for in the contract entered into under this
section.
``(b) Application.--To be eligible to receive a contract under
subsection (a), an entity shall prepare and submit to the Administrator
an application at such time, in such manner, and containing such
information as the Administration may require.
``(c) Process.--
``(1) Competitive bidding.--All contracts under this
section shall be awarded through a competitive bidding process
on a bi-annual basis.
``(2) Requirement.--No contract shall be entered into with
any entity under this section unless the Administrator finds
that such entity will perform its obligations under the
contract efficiently and effectively and will meet such
requirements as to financial responsibility, legal authority,
and other matters as the Administrator finds pertinent.
``(3) Publication of standards and criteria.--If the
Administrator enters into contracts under subsection (a), the
Administrator shall publish in the Federal Register standards
and criteria for the efficient and effective performance of
contract obligations under this section, and opportunity shall
be provided for public comment prior to implementation. In
establishing such standards and criteria, the Administrator
shall provide for a system to measure an entity's performance
of responsibilities.
``(4) Term.--Each contract under this section shall be for
a term of at least 2 years, and may be made automatically
renewable from term to term in the absence of notice by either
party of intention to terminate at the end of the current term,
except that the Administrator may terminate any such contract
at any time (after such reasonable notice and opportunity for
hearing to the entity involved as the Administrator may provide
in regulations) if the Administrator finds that the entity has
failed substantially to carry out the contract or is carrying
out the contract in a manner inconsistent with the efficient
and effective administration of the program established by this
title.
``(d) Terms of Contract.--A contract entered into under this
section shall include--
``(1) a description of the duties of the contracting
entity;
``(2) an assurance that the entity will furnish to the
Administrator such timely information and reports as the
Administrator determines appropriate;
``(3) an assurance that the entity will maintain such
records and afford such access thereto as the Administrator
finds necessary to assure the correctness and verification of
the information and reports under paragraph (2) and otherwise
to carry out the purposes of this title;
``(4) an assurance that the entity shall comply with such
confidentiality and privacy protection guidelines and
procedures as the Administrator may require;
``(5) an assurance that the entity does not have, and will
continue to avoid, any conflicts of interest relative to any
functions it will perform; and
``(6) such other terms and conditions not inconsistent with
this section as the Administrator may find necessary or
appropriate.
``SEC. 3010. PUBLIC EDUCATION CAMPAIGN AND REPORT.
``(a) In General.--In carrying out this title, the Administrator
shall develop and implement an educational campaign with interagency
participation (including at a minimum the Small Business
Administration, the Department of Labor, and employees of the office
established under section 3002 who oversee the provision of information
through navigators) to provide information to employers and the general
public concerning the health insurance program developed under this
title, including the contact information relating to an individual or
individuals who will be available to resolve various types of problems
with health insurance coverage provided under this title.
``(b) Public Education Campaign.--There is authorized to be
appropriated to carry out this section, such sums as may be necessary
for each of fiscal years 2008 through 2010.
``(c) Reports to Congress.--Not later than 1 year and 2 years after
the implementation of the campaign under subsection (a), the
Administrator shall submit to the appropriate committees of Congress a
report that describes the activities of the Administrator under
subsection (a), including a determination by the Administrator of the
percentage of employers with knowledge of the health benefits program
under this title.
``SEC. 3011. APPROPRIATIONS.
``There are authorized to be appropriated to the Administrator such
sums as may be necessary in each fiscal year for the development and
administration of the program under this title.
``SEC. 3012. EFFECTIVE DATE.
``This title shall take effect on the date of enactment of this
title.''.
SEC. 3. AMENDMENT TO ERISA.
Section 514(b)(2) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1144(b)(2)) is amended by adding at the end the
following:
``(C) Notwithstanding subparagraph (A), the provisions of
subsections (d)(1)(B) and (g)(2)(A) of section 3007 of the Public
Health Service Act (relating to the prohibition on health-status
related rating and the Federal enforcement of such provisions) shall
supercede any State law that conflicts with such provisions.''.
SEC. 4. CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to credits) is amended
by inserting after section 45N the following new section:
``SEC. 45O. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE CREDIT.
``(a) Determination of Credit.--In the case of a qualified small
employer, there shall be allowed as a credit against the tax imposed by
this chapter for the taxable year an amount equal to the credit amount
described in subsection (b).
``(b) General Credit Amount.--For purposes of this section--
``(1) In general.--The credit amount described in this
subsection is the product of--
``(A) the amount specified in paragraph (2),
``(B) the employer size factor specified in
paragraph (3), and
``(C) the percentage of year factor specified in
paragraph (4).
``(2) Applicable amount.--For purposes of paragraph (1)--
``(A) In general.--The applicable amount is equal
to--
``(i) $1,000 for each employee of the
employer who receives self-only health
insurance coverage through the employer,
``(ii) $2,000 for each employee of the
employer who receives family health insurance
coverage through the employer, and
``(iii) $1,500 for each employee of the
employer who receives health insurance coverage
for two adults or one adult and one or more
children through the employer.
``(B) Bonus for payment of greater percentage of
premiums.--The applicable amount otherwise specified in
subparagraph (A) shall be increased by $200 in the case
of subparagraph (A)(i), $400 in the case of
subparagraph (A)(ii), and $300 in the case of
subparagraph (A)(iii), for each additional 10 percent
of the qualified employee health insurance expenses
exceeding 60 percent which are paid by the qualified
small employer.
``(3) Employer size factor.--For purposes of paragraph (1),
the employer size factor is the percentage determined in
accordance with the following table:
----------------------------------------------------------------------------------------------------------------
``If the employer size is: The percentage is:
----------------------------------------------------------------------------------------------------------------
10 or fewer full-time employees 100%
More than 10 but not more than 20 full-time employees 80%
More than 20 but not more than 30 full-time employees 60%
More than 30 but not more than 40 full-time employees 40%
More than 40 but not more than 50 full-time employees 20%
More than 50 full-time employees 0%
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``(4) Percentage of year factor.--For purposes of paragraph
(1), the percentage of year factor is equal to the ratio of--
``(A) the number of months during the taxable year
for which the employer paid or incurred qualified
employee health insurance expenses, and
``(B) 12.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified small employer.--
``(A) In general.--The term `qualified small
employer' means any employer (as defined in section
3001(a)(4) of the Public Health Service Act) which--
``(i) either--
``(I) purchases health insurance
coverage for its employees in a small
group market in a State which meets the
requirements under subparagraph (B), or
``(II) with respect to any taxable
year beginning after 2010, is a
participating employer (as defined in
section 3001(a)(8) of such Act) in the
program under title XXX of such Act,
``(ii) pays or incurs at least 60 percent
of the qualified employee health insurance
expenses of such employer or is self-employed,
and
``(iii) employed an average of 50 or fewer
full-time employees during the preceding
taxable year or was a self-employed individual
with either not less than $5,000 in net
earnings or not less than $15,000 in gross
earnings from self-employment in the preceding
taxable year.
``(B) State small group market requirements.--A
State meets the requirements of this subparagraph if--
``(i) during calendar years 2009 and 2010,
the State--
``(I) defines its small group
market to include groups of one (so
that self-employed individuals are
eligible for coverage in such market),
``(II) prohibits the use of health-
status related factors and other
factors described in section
3007(d)(5)(A) of such Act, and
``(III) has in effect rating rules
that comply with section 3007(d)(5)(A)
of such Act (except that such rules may
impose limits on rating variation in
addition to those provided for in such
section),
``(ii) during calendar years 2011 and 2012,
the State--
``(I) meets the requirements under
clause (i), and
``(II) maintains a State-wide
purchasing pool that provides
purchasers in the small group market a
choice of health benefit plans, with
comparative information provided
concerning such plans and the premiums
charged for such plans made available
through the Internet, and
``(iii) for calendar years after 2012, the
State--
``(I) meets the requirements under
clauses (i)(I), (i)(II), and (ii)(II),
and
``(II) has in effect rating rules
that comply with paragraph (2)(B) or
(3) of section 3007(d) of such Act,
whichever is in effect for such
calendar year (except that such rules
may impose limits on rating variation
in addition to those provided for in
such section).
``(2) Qualified employee health insurance expenses.--
``(A) In general.--The term `qualified employee
health insurance expenses' means any amount paid by an
employer or an employee of such employer for health
insurance coverage under such Act to the extent such
amount is attributable to coverage--
``(i) provided to any employee (as defined
in subsection 3001(a)(3) of such Act), or
``(ii) for the employer, in the case of a
self-employed individual.
``(B) Exception for amounts paid under salary
reduction arrangements.--No amount paid or incurred for
health insurance coverage pursuant to a salary
reduction arrangement shall be taken into account under
subparagraph (A).
``(3) Full-time employee.--The term `full-time employee'
means, with respect to any period, an employee (as defined in
section 3001(a)(3) of such Act) of an employer if the average
number of hours worked by such employee in the preceding
taxable year for such employer was at least 35 hours per week.
``(d) Inflation Adjustment.--
``(1) In general.--For each taxable year after 2009, the
dollar amounts specified in subsections (b)(2)(A), (b)(2)(B),
and (c)(1)(A)(iii) (after the application of this paragraph)
shall be the amounts in effect in the preceding taxable year
or, if greater, the product of--
``(A) the corresponding dollar amount specified in
such subsection, and
``(B) the ratio of the index of wage inflation (as
determined by the Bureau of Labor Statistics) for
August of the preceding calendar year to such index of
wage inflation for August of 2008.
``(2) Rounding.--If any amount determined under paragraph
(1) is not a multiple of $100, such amount shall be rounded to
the next lowest multiple of $100.
``(e) Application of Certain Rules in Determination of Employer
Size.--For purposes of this section--
``(1) Application of aggregation rule for employers.--All
persons treated as a single employer under subsection (b), (c),
(m), or (o) of section 414 shall be treated as 1 employer.
``(2) Employers not in existence in preceding year.--In the
case of an employer which was not in existence for the full
preceding taxable year, the determination of whether such
employer meets the requirements of this section shall be based
on the average number of full-time employees that it is
reasonably expected such employer will employ on business days
in the employer's first full taxable year.
``(3) Predecessors.--Any reference in this subsection to an
employer shall include a reference to any predecessor of such
employer.
``(f) Coordination With Advance Payments of Credit.--With respect
to any taxable year, the amount which would (but for this subsection)
be allowed as a credit to the taxpayer under subsection (a) shall be
reduced by the aggregate amount paid on behalf of such taxpayer under
section 7527A for months beginning in such taxable year. If the amount
determined under this subsection is less than zero, the taxpayer shall
owe additional tax in such amount under this chapter.
``(g) Credits for Nonprofit Organizations.--Any credit which would
be allowable under subsection (a) with respect to a qualified small
business if such qualified small business were not exempt from tax
under this chapter shall be treated as a credit allowable under this
subpart to such qualified small business.''.
(b) Advance Payments of Credit.--Chapter 77 of the Internal Revenue
Code of 1986 is amended by inserting after section 7527 the following
new section:
``SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR HEALTH INSURANCE COSTS FOR
QUALIFIED SMALL EMPLOYERS.
``(a) General Rule.--Not later than December 31, 2008, the
Secretary shall establish a program for making monthly payments on
behalf of qualified small employers to the program established under
title XXX of the Public Health Service Act. The amount of the monthly
payment for a qualified small employer shall be one twelfth of the
amount of the credit for the tax year to which the qualified small
employer is entitled under section 36. If a monthly payment is made by
the Secretary for which the employer is not entitled to a corresponding
credit, the employer shall owe additional tax in such amount under this
chapter.
``(b) Qualified Small Employer.--For purposes of this section, the
term `qualified small employer' has the meaning given such term in
section 36(c)(1).''.
(c) Conforming Amendments.--
(1) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of the Internal Revenue Code of 1986
is amended by adding at the end the following new items:
``Sec. 45O. Small business employee health insurance credit.''.
(2) The table of sections for chapter 77 of such Code is
amended by inserting after the item relating to section 7527
the following new item:
``Sec. 7527A. Advance payment of credit for health insurance costs for
qualified small employers.''.
(d) Deductibility.--The payment of premiums by a participating
employer under this Act shall be considered to be an ordinary and
necessary expense in carrying on a trade or business for purposes of
the Internal Revenue Code of 1986 and shall be deductible.
(e) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred in taxable years beginning after
December 31, 2008.
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