[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6582 Introduced in House (IH)]
110th CONGRESS
2d Session
H. R. 6582
To encourage the development of small business cooperatives for
healthcare options to improve coverage for employees (CHOICE) including
through a small business CHOICE tax credit.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 23, 2008
Ms. Velazquez (for herself and Mr. Pitts) introduced the following
bill; which was referred to the Committee on Energy and Commerce, and
in addition to the Committee on Ways and Means, 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 encourage the development of small business cooperatives for
healthcare options to improve coverage for employees (CHOICE) including
through a small business CHOICE tax credit.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLES; TABLE OF CONTENTS.
(a) Short Titles.--This Act may be cited as the ``Small Business
Cooperative for Healthcare Options to Improve Coverage for Employees
(CHOICE) Act of 2008'' or as the ``Small Business CHOICE Act of 2008''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short titles; table of contents.
TITLE I--FULLY FUNDED SMALL BUSINESS HEALTH INSURANCE COOPERATIVES
Sec. 101. Definitions.
Sec. 102. Commission to promote Fully Funded Small Business Health
Insurance cooperatives.
Sec. 103. Fully Funded Small Business Health Insurance cooperatives
exempted from certain State laws.
Sec. 104. Preservation of State benefit mandates.
Sec. 105. Access to claims reporting data.
TITLE II--SMALL BUSINESS CHOICE CREDIT
Sec. 201. Small Business CHOICE credit.
TITLE I--FULLY FUNDED SMALL BUSINESS HEALTH INSURANCE COOPERATIVES
SEC. 101. DEFINITIONS.
For purposes of this title:
(1) Fully funded health insurance.--The term ``fully funded
health insurance'' means, with respect to a fully funded small
business health insurance cooperative, insurance provided to
assume and spread a portion, of the risk of insuring the health
liability exposure of the members of such cooperative.
(2) Fully funded small business health insurance
cooperative.--The term ``Fully Funded Small Business Health
Insurance cooperative'' means a bona fide association or
financial cooperative organization of persons with a common
affiliation (such as employment, labor union membership, place
of residence, industry, or line of business) that form a
captive insurance company chartered in a State that has adopted
laws and regulations for captive insurers that are materially
identical to standards to be developed by the National
Association of Insurance Commissioners by July 1, 2009, if each
of the following conditions are met:
(A) The cooperative--
(i) has no fewer than 100 members and no
fewer than 5,000 lives (or, beginning as of 5
years after the date of the enactment of this
Act, 15,000 lives); or
(ii) meets such minimum capital
requirements as the Secretary shall specify,
taking into account recommendations of the
commission established under section 102.
(B) The cooperative administers the activities
described in paragraph (1) separately from other
activities of the cooperative.
(C) The cooperative is chartered or licensed as a
captive insurance company under the laws of a State and
is authorized to engage in the business of insurance
under the laws of such State.
(D) The cooperative does not vary the premium paid
for a small business participating in the cooperative
based on the health status of individuals for whom such
small business purchases health insurance, or the
claims experience of such small business and does not
exclude such an individual from coverage based on the
health status or claims experience of such individual.
(E) The cooperative has as its owners only small
businesses--
(i) that comprise the membership of the
cooperative; and
(ii) that are provided excess claims
coverage insurance by the cooperative.
(F) Ownership, with respect to a member, is shared
equitably among all participants in the cooperative.
(G) Each owner of a small business participating in
the cooperative contracts with a primary insurer to
provide fully insured employee health insurance.
(H) The cooperative provides excess claims coverage
insurance that does not pay benefits in a year for an
insured person until the annual maximum of the policy
purchased from the insurer has been exceeded. The
annual maximum of the primary insurance policy shall
not be less than $10,000, and not be more than
$250,000, per insured person in paid claims. The
Secretary shall provide for an annual increase in the
dollar amounts specified in the previous sentence based
on annual inflation in health care expenses per capita
for such persons.
(I) Benefits provided by excess claims coverage
insurers must meet the high deductible health plan
requirements of section 223(c)(2)(A)(ii) of the
Internal Revenue Code of 1986 for a high deductible
health plan provided under applicable State law.
(J) The excess claims coverage insurance offered by
the cooperative meets all requirements of State law for
the State in which it is offered.
(K) The name of the cooperative includes the phrase
``Fully Funded Small Business Health Insurance
cooperative''.
Nothing in this paragraph shall be construed as preventing such
a cooperative from requiring a small business, as a condition
of becoming a member of the cooperative, to have a written
commitment to the cooperative for such membership for a period
of time.
(3) Small business.--The term ``small business'' means a
business that--
(A) has been classified as a small business concern
by the Small Business Administration for purposes of
the Small Business Act (15 U.S.C. 631 et seq.) under
size standards established under section 3 of such Act
(15 U.S.C. 632); or
(B) has no more than 500 employees, as calculated
under section 121.106 of title 13, Code of Federal
Regulations, as in effect as of January 1, 2007.
(4) State.--The term ``State'' means each of the 50 States,
the District of Columbia, and Puerto Rico.
SEC. 102. COMMISSION TO PROMOTE FULLY FUNDED SMALL BUSINESS HEALTH
INSURANCE COOPERATIVES.
(a) Establishment.--Not later than January 1, 2009, the Secretary
of the Treasury, in consultation with the Administrator of the Small
Business Administration, shall establish, and provide for the operation
of, an independent commission (in this section referred to as the
``commission'') on Fully Funded Small Business Health Insurance
Cooperatives consistent with this section.
(b) Composition.--
(1) In general.--Subject to subparagraph (B), the
commission shall be comprised of one representative from each
of the following organizations, as nominated by the
organization to the Secretary of the Treasury:
(A) The American Academy of Actuaries.
(B) The National Association of Insurance
Commissioners.
(C) The Captive Insurance Companies Association.
(D) The Conference of Consulting Actuaries.
(E) The Society of Actuaries.
(F) The Actuarial Board for Counseling and
Discipline.
(G) The Actuarial Standards Board.
(2) Limitation.--No individual who has a business
relationship with an active Fully Funded Small Business Health
Insurance cooperative or who is employed by any State, Federal,
or local entity may serve as a member of the commission.
(3) Compensation.--
(A) In general.--The Secretary shall provide to
members of the commission compensation in an annual
amount that does not exceed the amount specified in
subparagraph (B).
(B) Limitation.--The amount specified in this
subparagraph is $50,000, or, for a year after 2009, the
amount specified in this subparagraph for the previous
year increased by the annual percentage increase in the
consumer price index for all urban consumers for the
previous year.
(c) Functions.--The commission shall--
(1) promote the development of Fully Funded Small Business
Health Insurance cooperatives;
(2) provide for technical assistance in such development;
(3) make recommendations to the Secretary regarding minimum
capital requirements referred to in section 102(2)(A)(ii);
(4) conduct oversight of Fully Funded Small Business Health
Insurance cooperatives; and
(5) make quarterly reports to Congress regarding the
development, implementation, and maintenance of such
cooperatives, including the appropriate number of businesses
and lives that should be required under section 101(2)(A) and
the maximum amount of excess claims coverage insurance that
should be provided per covered person.
(d) Commission Staff.--The commission shall provide for such staff,
including an executive director, as it determines necessary to carry
out its functions.
(e) Commission Headquarters.--The commission shall be domiciled
within the District of Columbia.
(f) Authorization of Appropriations.--There is authorized to be
appropriated for purposes of carrying out subsection (a) $4,000,000 for
fiscal year 2009 and $2,000,000 for each of fiscal years 2010 through
2013.
(g) Relation to FACA.--The provisions of section 14 of the Federal
Advisory Committee Act shall not apply to the commission.
SEC. 103. FULLY FUNDED SMALL BUSINESS HEALTH INSURANCE COOPERATIVES
EXEMPTED FROM CERTAIN STATE LAWS.
(a) In General.--Except as provided in this title, a Fully Funded
Small Business Health Insurance cooperative is exempt from any State
law, rule, regulation, or order to the extent that such law, rule,
regulation, or order would--
(1) prohibit the establishment of a Fully Funded Small
Business Health Insurance cooperative;
(2) impose any material requirements, procedures, or
standards (other than solvency requirements) on a Fully Funded
Small Business Health Insurance cooperative that are not
generally applicable to other entities engaged in a
substantially similar business;
(3) require that a Fully Funded Small Business Health
Insurance cooperative must have a minimum number of members,
common ownership or affiliation, or a certain legal structure;
(4) require that any excess claims coverage insurance
policy issued to a Fully Funded Small Business Health Insurance
cooperative or any members of the cooperative be countersigned
by an insurance agent or broker residing in the State involved;
or
(5) otherwise discriminate against a Fully Funded Small
Business Health Insurance cooperative or any of its members.
(b) Application of Exemptions.--The exemptions specified in
subsection (a) apply to--
(1) excess claims coverage insurance provided to--
(A) a Fully Funded Small Business Health Insurance
cooperative; or
(B) any small business who is a member of a Fully
Funded Small Business Health Insurance cooperative; and
(2) the provision of--
(A) excess claims coverage insurance coverage;
(B) excess claims coverage insurance related
services;
(C) health management services such as--
(i) third party administrators;
(ii) disease management;
(iii) managed care organizations; and
(iv) data warehousing services; or
(D) health information technology, including
electronic health records;
to a Fully Funded Small Business Health Insurance cooperative
or member of the cooperative.
(c) Requirement for State Licensure Permitted.--A State may require
that a person acting, or offering to act, as an agent or broker for a
Fully Funded Small Business Health Insurance cooperative obtain a
license from that State, except that a State may not impose any
qualification or requirement which prohibits a licensed resident or
nonresident agent or broker from selling within the State.
(d) State Authority Preserved.--
(1) Nothing in this section shall be construed to affect
the authority of any State to make use of any of its powers to
enforce the laws of such State with respect to which a Fully
Funded Small Business Health Insurance cooperative is not
exempt under this section.
(2) Nothing in this section shall affect the authority of
any State to bring an action in any Federal or State court.
(3) Nothing in this section shall affect any State law
regarding prompt payment of benefits.
(e) Requirements for Financial Information.--Financial information
submitted to the State insurance commissioner by a Fully Funded Small
Business Health Insurance cooperative must be certified by an
independent public accountant and must include a statement of opinion
on loss and loss adjustment expense reserves made by a certified
actuary.
(f) Fiduciary Responsibility.--
(1) In general.--Each fiduciary (as defined in paragraph
(3)(A)) of a Fully Funded Small Business Health Insurance
cooperative shall exercise fiduciary responsibility (as defined
in paragraph (3)(B)) in relation to activities of the
cooperative.
(2) State and federal rights of action.--
(A) Limitations on liability under state or federal
law.--In the case of a bona fide association or
financial cooperative organization of individuals with
a common affiliation (such as employment, labor union
membership, or place of residence) that forms a Fully
Funded Small Business Health Insurance cooperative in
accordance with this Act, such association or
organization shall not be liable in any action under
State or Federal law for the actions of such
cooperative except insofar as the association or
organization is acting as a fiduciary with respect to
the cooperative.
(B) Exclusive federal remedy for fiduciary
breaches.--To the extent that such association or
organization exercises control over such cooperative
and has breached a fiduciary responsibility to its
membership in the formation or operation of such
cooperative, a member of the association or
organization may seek a remedy for such breach only in
Federal court.
(C) Limitation on vicarious liability.--A fiduciary
shall not be vicariously liable for the actions
(including a failure to act) of an agent of the
fiduciary in the absence of--
(i) actual knowledge of the fiduciary; and
(ii) approval or acquiescence by the
fiduciary in the action (or failure to act).
(3) Definitions.--For purposes of this subsection:
(A) Fiduciary.--The term ``fiduciary'', with
respect to a Fully Funded Small Business Health
Insurance cooperative--
(i) means an officer, agent, or employee of
the cooperative; and
(ii) includes any other person acting in
concert with any such officer, agent, or
employee with respect to the cooperative, if
such other person has actual notice of such
order.
(B) Fiduciary responsibility.--The term ``fiduciary
responsibility'' means, with respect to a fiduciary of
a cooperative, acting prudently and solely in the
interest of the cooperative participants, including in
the case of actions with respect to the selection and
monitoring of the cooperative's relationship with a
primary insurer and reinsurer.
(g) Effective Date.--This section shall apply to Fully Funded Small
Business Health Insurance cooperative on and after the date of the
enactment of this Act.
SEC. 104. PRESERVATION OF STATE BENEFIT MANDATES.
Notwithstanding any other provision of this title a primary health
insurer to which this title applies shall not be exempted from benefit
mandates under State law.
SEC. 105. ACCESS TO CLAIMS REPORTING DATA.
(a) Federal Preemption.--No law, regulation, or administrative
action of a State or political subdivision thereof, or any decision or
order rendered by a court under State law, shall have any effect if
such law, regulation, or decision conflicts with, hinders, poses an
obstacle to or frustrates the purposes of this section.
(b) Requirements Upon Receipt and Request of Claims Information.--
(1) In general.--Not later than the 30th day after the date
a health insurance issuer (as defined in section 2791(b)(2) of
the Public Health Service Act), contracted to provide fully
funded health insurance to members of a Fully Funded Small
Business Health Insurance cooperative (referred to in this
section as a ``Cooperative''), receives a written request for a
report of claim information from the fiduciary (as defined in
section 103(f)(3)(A)) of the Cooperative, the health insurance
issuer shall provide the report to such fiduciary in accordance
with this subsection.
(2) Limitation on obligation.--The health insurance issuer
is not obligated to provide a report under this subsection--
(A) regarding a particular employer or group health
plan more than twice in any 12-month period; or
(B) unless the request is made not later than the
second anniversary of the date of termination of
coverage under a group health plan issued by the health
insurance issuer.
(3) Form of report.--A health insurance issuer shall
provide the report of claim information under paragraph (1)
through one of the following methods:
(A) In written form.
(B) Through an electronic file transmitted by
secure electronic mail or a file transfer protocol
site.
(C) By making the required information available
through a secure website or web portal accessible by
the Cooperative fiduciary.
(4) General contents of report.--A report of claim
information provided under paragraph (1) shall contain all
information available to the health insurance issuer that is
responsive to the request made under such paragraph, including,
subject to paragraphs (6) through (8), protected health
information, for the 36-month period preceding the date of the
report, or for the entire period of coverage, whichever period
is shorter.
(5) Specific contents.--Subject to paragraphs (6) through
(8), a report under paragraph (1) shall include the following:
(A) Aggregate paid claims experience by month,
including claims experience for medical, dental, and
pharmacy benefits, as applicable.
(B) Total premium paid by month.
(C) Total number of covered employees on a monthly
basis by coverage tier, including whether coverage was
for--
(i) an employee only;
(ii) an employee with dependents only;
(iii) an employee with a spouse only; or
(iv) an employee with a spouse and
dependents.
(D) The total dollar amount of claims pending as of
the date of the report.
(E) A separate description and individual claims
report for any individual whose total paid claims
exceed $10,000 during the 12-month period preceding the
date of the report, including the following information
related to the claims for that individual:
(i) A unique identifying number,
characteristic, or code for the individual.
(ii) The amounts paid.
(iii) Dates of service.
(iv) Applicable procedure codes and
diagnosis codes.
(F) A statement describing precertification
requests for hospital stays of five days or longer that
were made during the 30-day period preceding the date
of the report for claims that are not part of the
report described by subparagraphs (A) through (E).
(6) Protected health information.--A health insurance
issuer may not disclose, in a report of claim information
provided under this section, protected health information if
the health insurance issuer is prohibited from disclosing such
information under the regulations promulgated under section
264(c) of the Health Insurance Portability and Accountability
Act of 1996 (Public Law 104-191). To withhold information in
accordance with this paragraph, the health insurance issuer
shall--
(A) notify the requesting Cooperative fiduciary
that information is being withheld; and
(B) provide to the Cooperative fiduciary a list of
categories of claim information that the health
insurance issuer has determined are subject to the more
stringent privacy restrictions under such regulations.
(7) Cooperative fiduciary certification.--A Cooperative
fiduciary is entitled to receive protected health information
under subparagraphs (E) and (F) of paragraph (5) only after the
Cooperative fiduciary makes to the health insurance issuer a
certification substantially similar to the following: ``I
hereby certify that the Cooperative will safeguard and limit
the use and disclosure of protected health information that is
received from the group health plan to perform the plan
administration functions.''.
(8) Information as of date of termination of coverage.--In
the case of a request made under paragraph (1) after the date
of termination of coverage, the report shall contain all
information available to the health insurance issuer as of the
date of the report that is responsive to the request, including
protected health information, and including the information
described in subparagraphs (A) through (F) of paragraph (5) for
the period described in such paragraph preceding the date of
termination of coverage or for the entire policy period,
whichever period is shorter. Notwithstanding this paragraph,
such a report may not include the protected health information
described in subparagraph (E) or (F) of paragraph (5) unless a
certification has been provided in accordance with paragraph
(7).
(c) Request for Additional Information.--
(1) In general.--On receipt of a report required by
subsection (b), the Cooperative fiduciary may review the report
and, not later than the 10th day after the date the report is
received, may make a written request to the health insurance
issuer for additional information in accordance with this
subsection for specified individuals.
(2) Provision of additional information.--With respect to a
request for additional information under paragraph (1)
concerning specified individuals for whom claims information
has been provided under subsection (b)(5)(E), the health
insurance issuer shall provide additional information on the
prognosis or recovery if available and, for individuals in
active case management, the most recent case management
information, including any future expected costs and treatment
plan, that relate to the claims for that individual.
(3) Timely response.--The health insurance issuer shall
respond to the request for additional information under this
subsection not later than the 15th day after the date of
receiving the request unless the Cooperative fiduciary agrees
to a request for additional time.
(4) Certification requirement.--The health insurance issuer
is not required to produce the report described by this
subsection unless a certification has been provided in
accordance with subsection (b)(7).
(d) Limitation on Liability for Disclosure of Information.--A
health insurance issuer that releases information, including protected
health information, in accordance with this section has not violated a
standard of care and is not liable for civil damages resulting from,
and is not subject to criminal prosecution for, releasing that
information.
(e) Penalties.--A health insurance issuer that does not comply with
a request for information in accordance with this section is subject to
administrative penalties in an amount not to exceed $25,000 per
affected individual.
TITLE II--SMALL BUSINESS CHOICE CREDIT
SEC. 201. SMALL BUSINESS CHOICE CREDIT.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business related
credits) is amended by adding at the end the following new section:
``SEC. 450. SMALL BUSINESS CHOICE CREDIT.
``(a) In General.--For purposes of section 38, the small business
CHOICE credit determined under this section for any taxable year is an
amount equal to 65 percent of the amount paid or incurred by the
employer for self only or family coverage of an employee under a
qualified employer-subsidized health coverage for eligible coverage
months beginning in the taxable year.
``(b) Limitations.--
``(1) Size limitation.--The credit allowed under subsection
(a) shall not be allowed with respect to more than 100
employees of the employer for any eligible coverage month
beginning in any taxable year.
``(2) Wellness program requirement.--
``(A) In general.--The credit allowed under
subsection (a) shall not be allowed with respect to
coverage of an employee and family members of the
employee unless the employer offers a qualified small
business wellness program with respect to such covered
employees and such covered family members.
``(B) Exemption for single employee firms.--
Subparagraph (A) shall not apply to an employer that
has only 1 employee.
``(c) Definitions and Special Rule.--For purposes of this section:
``(1) Eligible coverage month.--The term `eligible coverage
month' means any month if--
``(A) as of the first day of such month, the
employer is a member of a Fully Funded Small Business
Health Insurance cooperative and purchases excess
coverage from such cooperative's captive insurance
company; and
``(B) for the month the employee with respect to
whom the credit is determined is covered under a
qualified employer-subsidized health coverage of the
employer.
``(2) Fully funded small business health insurance
cooperative.--The term `Fully Funded Small Business Health
Insurance cooperative' has the meaning given such term in
section 101(2) of the Small Business CHOICE Act of 2008.
``(3) Qualified employer-subsidized health coverage.--
``(A) In general.--The term `qualified employer-
subsidized health coverage' means any insurance
coverage which constitutes medical care under an
insurance policy--
``(i) which is maintained in conjunction
with excess coverage purchased from a fully
funded small business captive company and
coverage purchased from a licensed primary
insurer;
``(ii) which is available to all full-time
employees working a minimum of 35 hours per
week or its monthly equivalent;
``(iii) under which at least the applicable
percentage of the cost of such coverage
(determined under section 4980B) is paid or
incurred by the employer;
``(iv) under which the percentage of the
cost of such coverage paid or incurred by the
employer with respect to highly compensated
employees (as defined in section 414(q)) does
not exceed the percentage of such cost paid or
incurred by the employer with respect to
employees who are not highly compensated
employees; and
``(v) the primary insurance and excess
claims coverage plans are the only plans of the
employer to which the employer contributes to
the cost of coverage.
``(B) Exception for certain coverage.--Such term
does not include a health plan substantially all of the
coverage of which is of excepted benefits described in
section 9832(c).
``(C) Applicable percentage.--For purposes of
subparagraph (A), the applicable percentage is--
``(i) 65 percent, with respect to self only
coverage; and
``(ii) 35 percent, with respect to family
coverage.
``(4) Qualified small business wellness program.--The term
`qualified small business wellness program' means a program
which--
``(A) is established by an entity with expertise in
lifestyle management and wellness tools that enable
employers and covered individuals to lower health
claims and costs while improving the health of such
individuals; and
``(B) is certified by the Secretary of Health and
Human Services, in consultation with persons with
expertise in employer health promotion and wellness
programs, as a qualified small business wellness
program under this section.
``(5) Small employer.--
``(A) In general.--The term `small employer' means,
with respect to a taxable year, any employer or sole
proprietor which employed an average of 100 or fewer
employees on business days during the preceding
calendar year. For purposes of the preceding sentence,
a preceding calendar year may be taken into account
only if the employer or sole proprietor was in
existence throughout such year.
``(B) Employers and sole proprietors not in
existence in preceding taxable year.--In the case of an
employer or sole proprietor which was not in existence
throughout the preceding calendar year, the
determination under subparagraph (A) shall be based on
the average number of employees that it is reasonably
expected such employer or sole proprietor will employ
on business days in the current calendar year.
``(6) Special rule for first year of providing health
benefits coverage.--In the case of the first taxable year for
which an employer or sole proprietor is allowed a credit under
this section, if the employer or proprietor has not previous to
such taxable year offered any health benefits coverage to any
employee, subsection (a) shall be applied by substituting `70
percent' for `65 percent'.
``(7) Time when contributions deemed made.--A rule similar
to the rule of section 219(f)(3) shall apply for purposes of
this section.
``(8) Controlled groups and predecessors.--For purposes of
paragraphs (5) and (6)--
``(A) except as provided by the Secretary, all
persons treated as a single employer under subsection
(b), (c), (m), or (o) of section 414 shall be treated
as 1 employer; and
``(B) any reference to an employer shall include a
reference to any predecessor of such employer.
``(9) Election to have credit apply.--This section shall
apply with respect to a taxpayer for any taxable year only if
there is an election in effect by such taxpayer (at such time
and in such manner as the Secretary may by regulations
prescribe) to have this section apply for such taxable year. No
deduction shall be allowed with respect to amounts paid by the
taxpayer during the taxable year for insurance which
constitutes medical care for the taxpayer or any employee of
the taxpayer if such election is in effect for such taxable
year.''.
(b) Credit To Be Part of General Business Credit.--Subsection (b)
of section 38 of such Code (relating to general business credit) is
amended by striking ``plus'' at the end of paragraph (30), by striking
the period at the end of paragraph (31) and inserting ``plus'', and by
adding at the end the following new paragraph:
``(32) the Small Business CHOICE credit determined under
section 45O(a).''.
(c) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 45O. Small Business CHOICE credit.''.
(d) Effective Date.--The amendments made by this section shall
apply to amounts paid for eligible coverage months beginning in taxable
years beginning after December 31, 2008.
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