FLEX Act

I 117TH CONGRESS 1ST SESSION H. R. 742 To require short-term limited duration insurance issuers to renew or continue in force such insurance coverage at the option of the enrollees, and for other purposes. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 3, 2021 Mr. BUDD (for himself and Mr. HARRIS) introduced the following bill; which was referred to the Committee on Energy and Commerce, and in addition to the Committee on Education and Labor, for a period to be subse- quently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To require short-term limited duration insurance issuers to renew or continue in force such insurance coverage at the option of the enrollees, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Flexibility Through 4 Lower Expenses Health Care Act’’ or the ‘‘FLEX Act’’. 5 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 742 IH SEC. 2. SHORT-TERM LIMITED DURATION INSURANCE DE- 1 FINED. 2 (a) IN GENERAL.—Section 2791(b) of the Public 3 Health Service Act (42 U.S.C. 300gg–91(b)) is amended 4 by adding at the end the following: 5 ‘‘(6) SHORT-TERM LIMITED DURATION INSUR- 6 ANCE.—The term ‘short-term limited duration insur- 7 ance’ means health insurance coverage provided pur- 8 suant to a contract with a health insurance issuer 9 that has an expiration date specified in the contract 10 (not taking into account any extensions that may be 11 elected by the policyholder with or without the 12 issuer’s consent) that is less than 12 months after 13 the original effective date of the contract.’’. 14 (b) APPLICABILITY.—The amendments made by this 15 subsection shall apply with respect to contracts for short- 16 term limited duration insurance that take effect on or 17 after January 1, 2022. 18 SEC. 3. DEFINITION OF ‘‘EMPLOYER’’ UNDER ERISA WITH 19 RESPECT TO GROUP HEALTH PLANS. 20 (a) DEFINITION OF EMPLOYER.—Section 3(5) of the 21 Employee Retirement Income Security Act of 1974 (29 22 U.S.C. 1002(5)) is amended by striking the period and 23 inserting ‘‘(which, with respect to a group health plan, 24 shall be determined in accordance with criteria that in- 25 cludes the criteria under section 735).’’. 26 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 742 IH (b) GROUP HEALTH PLANS.— 1 (1) IN GENERAL.—Part 7 of subtitle B of title 2 I of the Employee Retirement Income Security Act 3 of 1974 (29 U.S.C. 1181 et seq.) is amended by 4 adding at the end the following: 5 ‘‘SEC. 735. DEFINITION OF ‘EMPLOYER’ WITH RESPECT TO 6 GROUP HEALTH PLANS. 7 ‘‘(a) IN GENERAL.—A group or association of em- 8 ployers that meets the criteria under subsection (b) shall 9 be considered an employer under section 3(5) for purposes 10 of sponsoring a group health plan. 11 ‘‘(b) REQUIREMENTS.—The requirements under this 12 subsection are each of the following: 13 ‘‘(1) The primary purpose of the group or asso- 14 ciation may be to offer and provide health coverage 15 to its employer members and their employees, if 16 such group or association has at least 1 substantial 17 business purpose, as described in subsection (c), un- 18 related to offering and providing health coverage or 19 other employee benefits to its employer members and 20 their employees. 21 ‘‘(2) Each employer member of the group or as- 22 sociation participating in the group health plan is a 23 person acting directly as an employer of at least 1 24 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 742 IH employee who is a participant covered under the 1 plan. 2 ‘‘(3) The group or association has— 3 ‘‘(A) a formal organizational structure 4 with a governing body; and 5 ‘‘(B) by-laws or other similar indications of 6 formality. 7 ‘‘(4) The functions and activities of the group 8 or association shall be controlled by the employer 9 members of the group or association, and the em- 10 ployer members of the group or association that par- 11 ticipate in the group health plan shall control the 12 plan. Control under this paragraph shall be in form 13 and substance. 14 ‘‘(5) The employer members shall have a com- 15 monality of interest as described in subsection (d). 16 ‘‘(6)(A) The group or association shall not 17 make health coverage through the group health plan 18 available other than to— 19 ‘‘(i) an employee of a current employer 20 member of the group or association; 21 ‘‘(ii) a former employee of a current em- 22 ployer member of the group or association who 23 became eligible for coverage under the group 24 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 742 IH health plan when the former employee was an 1 employee of the employer; and 2 ‘‘(iii) a beneficiary of an individual de- 3 scribed in clause (i) or (ii), such as a spouse or 4 dependent child. 5 ‘‘(B) Notwithstanding subparagraph (A), the 6 group or association shall not make health coverage 7 through the group health plan available to any indi- 8 vidual (or beneficiaries of the individual) for any 9 plan year following the plan year in which the plan 10 determines pursuant to reasonable monitoring proce- 11 dures described in subsection (f)(2)(C) that the indi- 12 vidual ceases to meet the conditions described in 13 subsection (f)(2) for being a working owner (unless 14 the individual again meets those conditions), except 15 as may be required by section 601. 16 ‘‘(7) The group or association, and any health 17 coverage offered by the group or association, shall 18 comply with the nondiscrimination provisions under 19 subsection (e). 20 ‘‘(8) The group or association shall not be a 21 health insurance issuer, or owned or controlled by 22 such a health insurance issuer or by a subsidiary or 23 affiliate of such a health insurance issuer, other 24 than to the extent such entities participate in the 25 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 742 IH group or association in their capacity as employer 1 members of the group or association. 2 ‘‘(c) SUBSTANTIAL BUSINESS PURPOSE.— 3 ‘‘(1) IN GENERAL.—For purposes of subsection 4 (b)(1), a substantial business purpose shall exist if 5 the group or association would be a viable entity in 6 the absence of sponsoring an employee benefit plan. 7 ‘‘(2) BUSINESS PURPOSE.—For purposes of 8 subsection (b)(1) and paragraph (1), a business pur- 9 pose shall— 10 ‘‘(A) include promoting common business 11 interests of the members of the group or asso- 12 ciation or the common economic interests in a 13 given trade or employer community; and 14 ‘‘(B) not be required to be a for-profit ac- 15 tivity. 16 ‘‘(d) COMMONALITY OF INTEREST.— 17 ‘‘(1) IN GENERAL.—Subject to paragraph (3), 18 employer members of the group or association shall 19 be treated as having a commonality of interest for 20 purposes of subsection (b)(5) if— 21 ‘‘(A) the employers are in the same trade, 22 industry, line of business, or profession; or 23 ‘‘(B) each employer has a principal place 24 of business in the same region that does not ex- 25 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 742 IH ceed the boundaries of a single State or a met- 1 ropolitan area (even if the metropolitan area in- 2 cludes more than 1 State). 3 ‘‘(2) SAME TRADE, INDUSTRY, OR LINE OF 4 BUSINESS.—In the case of a group or association 5 that is sponsoring a group health plan under this 6 section and that is itself an employer member of the 7 group or association, the group or association shall 8 be deemed for purposes of paragraph (1)(A) to be 9 in the same trade, industry, line of business, or pro- 10 fession, as applicable, as the other employer mem- 11 bers of the group or association. 12 ‘‘(3) NONDISCRIMINATION.—The standards 13 under paragraph (1) shall not be implemented in a 14 manner that is subterfuge for discrimination as is 15 prohibited under subsection (e). 16 ‘‘(e) NONDISCRIMINATION.— 17 ‘‘(1) IN GENERAL.—A group or association of 18 employers sponsoring a group health plan under this 19 section, and any health coverage sponsored by such 20 group or association, shall comply with each of the 21 following: 22 ‘‘(A) The group or association shall not 23 condition employer membership in the group or 24 association on any health factor of any indi- 25 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 742 IH vidual who is or may become eligible to partici- 1 pate in the group health plan sponsored by the 2 group or association. 3 ‘‘(B) The group health plan sponsored by 4 the group or association shall comply with the 5 rules under section 2590.702(b) of title 29, 6 Code of Federal Regulations (as in effect on 7 June 21, 2018), with respect to nondiscrimina- 8 tion in rules for eligibility for benefits, subject 9 to subparagraph (D). 10 ‘‘(C) The group health plan sponsored by 11 the group or association shall comply with the 12 rules under section 2590.702(c) of title 29, 13 Code of Federal Regulations (as in effect on 14 June 21, 2018), with respect to nondiscrimina- 15 tion in premiums or contributions required by 16 any participant or beneficiary for coverage 17 under the plan, subject to subparagraph (D). 18 ‘‘(D) In applying subparagraphs (B) and 19 (C), the group or association may not treat the 20 employees of different employer members of the 21 group or association as distinct groups of simi- 22 larly situated individuals based on a health fac- 23 tor of 1 or more individuals. 24 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 742 IH ‘‘(2) DEFINITION OF HEALTH FACTOR.—For 1 purposes of this subsection, the term ‘health factor’ 2 has the meaning given such term in section 3 2590.702(a) of title 29, Code of Federal Regulations 4 (as in effect on June 21, 2018). 5 ‘‘(f) DUAL TREATMENT OF WORKING OWNERS AS 6 EMPLOYERS AND EMPLOYEES.— 7 ‘‘(1) IN GENERAL.—A person determined in ac- 8 cordance with paragraph (2) to be a working owner 9 of a trade or business may qualify as both an em- 10 ployer and as an employee of the trade or business 11 for purposes of the requirements under subsection 12 (b), including the requirements under paragraphs 13 (2) and (6) of such subsection. 14 ‘‘(2) WORKING OWNER.— 15 ‘‘(A) ELIGIBILITY.—A person shall qualify 16 as a ‘working owner’ if a responsible fiduciary 17 of the group health plan reasonably determines 18 that the person— 19 ‘‘(i) does not have any common law 20 employees; 21 ‘‘(ii) has an ownership right of any 22 nature in a trade or business, whether in- 23 corporated or unincorporated, including a 24 partner and other self-employed individual; 25 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 742 IH ‘‘(iii) is earning wages or self-employ- 1 ment income from the trade or business 2 for providing personal services to the trade 3 or business; and 4 ‘‘(iv) either— 5 ‘‘(I) works on average at least 20 6 hours per week, or at least 80 hours 7 per month, providing personal services 8 to the person’s trade or business; or 9 ‘‘(II) has wages or self-employ- 10 ment income from such trade or busi- 11 ness that at least equals the person’s 12 cost of coverage for participation by 13 the person, and any covered bene- 14 ficiaries, in the group health plan 15 sponsored by the group or association 16 in which the person is participating. 17 ‘‘(B) DETERMINATION.—The determina- 18 tion under subparagraph (A) shall be made 19 when the person first becomes eligible for cov- 20 erage under the group health plan. 21 ‘‘(C) REASONABLE MONITORING PROCE- 22 DURES.—A responsible fiduciary of the group 23 health plan shall, through reasonable moni- 24 toring procedures, periodically confirm the con- 25 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 742 IH tinued eligibility of a person to qualify as a 1 working owner under subparagraph (A) for pur- 2 poses of meeting the requirements under sub- 3 section (b) for the group health plan sponsored 4 under this section. 5 ‘‘(g) APPLICABILITY.— 6 ‘‘(1) FULLY INSURED.—This section shall apply 7 beginning on September 1, 2022, with respect to a 8 group or association of employers sponsoring a 9 group health plan that is fully insured. 10 ‘‘(2) PLANS EXPANDING TO INCLUDE BROADER 11 GROUP.—This section shall apply beginning on Jan- 12 uary 1, 2022, with respect to a group or association 13 of employers sponsoring a group health plan that— 14 ‘‘(A) is not fully insured; 15 ‘‘(B) was in existence on June 21, 2018; 16 ‘‘(C) meets the requirements that applied 17 with respect to such plan before June 21, 2018; 18 and 19 ‘‘(D) chooses to be a plan sponsored under 20 this section (and subject to the requirements 21 under subsections (b) through (f)). 22 ‘‘(3) OTHER ASSOCIATION HEALTH PLANS.— 23 This section shall apply beginning on April 1, 2022, 24 VerDate Sep 11 2014 22:07 Feb 22, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H742.IH H742 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 742 IH with respect to any other group or association of em- 1 ployers sponsoring a group health plan. 2 ‘‘(4) OTHER CRITERIA IN ADVISORY OPIN- 3 IONS.—The criteria under this section shall not in- 4 validate any criteria provided in an advisory opinion, 5 in effect on or after the date of enactment of the 6 FLEX Act, that the Secretary may use to determine 7 if a group or association of employers is an employer 8 under section 3(5) for purposes of sponsoring a 9 group health plan. 10 ‘‘(h) DETERMINATION OF EMPLOYER OR JOINT EM- 11 PLOYER STATUS.— 12 ‘‘(1) IN GENERAL.—Participating in or facili- 13 tating a group health plan sponsored by a bona fide 14 group or association of employers pursuant to sub- 15 section (a) shall not be construed a [Text truncated for display. 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