CHOICE Arrangement Act

118TH CONGRESS 1ST SESSION H. R. 3799 AN ACT To amend the Internal Revenue Code of 1986 to provide for health reimbursement arrangements integrated with individual health insurance coverage. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 2 •HR 3799 EH TITLE I—ASSOCIATION HEALTH 1 PLANS ACT 2 SEC. 101. SHORT TITLE. 3 This title may be cited as the ‘‘Association Health 4 Plans Act’’. 5 SEC. 102. TREATMENT OF GROUP OR ASSOCIATION OF EM- 6 PLOYERS. 7 (a) IN GENERAL.—Section 3(5) of the Employee Re- 8 tirement Income Security Act of 1974 (29 U.S.C. 9 1002(5)) is amended— 10 (1) by striking ‘‘The term’’ and inserting ‘‘(A) 11 The term’’; and 12 (2) by adding at the end the following: 13 ‘‘(B) For purposes of subparagraph (A), a group or 14 association of employers shall be treated as an ‘employer’, 15 regardless of whether the employers composing such group 16 or association are in the same industry, trade, or profes- 17 sion, if such group or association— 18 ‘‘(i)(I) has established and maintains an em- 19 ployee welfare benefit plan that is a group health 20 plan (as defined in section 733(a)(1)); 21 ‘‘(II) provides coverage under such plan to at 22 least 51 employees after all of the employees em- 23 ployed by all of the employer members of such group 24 3 •HR 3799 EH or association have been aggregated and counted to- 1 gether as described in subparagraph (D); 2 ‘‘(III) has been actively in existence for at least 3 2 years prior to establishing and maintaining an em- 4 ployer welfare benefit plan that is a group health 5 plan (as defined in section 733(a)(1)); 6 ‘‘(IV) has been formed and maintained in good 7 faith for purposes other than providing medical care 8 (as defined in section 733(a)(2)) through the pur- 9 chase of insurance or otherwise; 10 ‘‘(V) does not condition membership in the 11 group or association on any health status-related 12 factor (as described in section 702(a)(1)) relating to 13 any individual; 14 ‘‘(VI) makes coverage under such plan available 15 to all employer members of such group or associa- 16 tion regardless of any health status-related factor 17 (as described in section 702(a)(1)) relating to such 18 employer members; 19 ‘‘(VII) does not provide coverage under such 20 plan to any individual other than an employee of an 21 employer member of such group or association; 22 ‘‘(VIII) has established a governing board with 23 by-laws or other similar indications of formality to 24 manage and operate such plan in both form and 25 4 •HR 3799 EH substance, of which at least 75 percent of the board 1 members shall be made up of employer members of 2 such group or association participating in the plan 3 that are duly elected by each participating employer 4 member casting 1 vote during a scheduled election; 5 ‘‘(IX) is not a health insurance issuer (as de- 6 fined in section 733(b)(2)), and is not owned or con- 7 trolled by such a health insurance issuer or by a 8 subsidiary or affiliate of such a health insurance 9 issuer, other than to the extent such a health insur- 10 ance issuer— 11 ‘‘(aa) may participate in the group or asso- 12 ciation as a member; and 13 ‘‘(bb) may provide services such as assist- 14 ance with plan development, marketing, and ad- 15 ministrative services to such group or associa- 16 tion; 17 ‘‘(ii) meets any set of criteria to qualify for 18 such treatment in an advisory opinion issued by the 19 Secretary prior to the date of enactment of the As- 20 sociation Health Plans Act; or 21 ‘‘(iii) meets any other set of criteria to qualify 22 for such treatment that the Secretary by regulation 23 may provide. 24 5 •HR 3799 EH ‘‘(C)(i) For purposes of subparagraph (B), a self-em- 1 ployed individual shall be treated as— 2 ‘‘(I) an employer who may become a member of 3 a group or association of employers; 4 ‘‘(II) an employee who may participate in an 5 employee welfare benefit plan established and main- 6 tained by such group or association; and 7 ‘‘(III) a participant of such plan subject to the 8 eligibility determination and monitoring require- 9 ments set forth in clause (iii). 10 ‘‘(ii) For purposes of this subparagraph, the term 11 ‘self-employed individual’ means an individual who— 12 ‘‘(I) does not have any common law employees; 13 ‘‘(II) has an ownership right in a trade or busi- 14 ness, regardless of whether such trade or business is 15 incorporated or unincorporated; 16 ‘‘(III) earns wages (as defined in section 17 3121(a) of the Internal Revenue Code of 1986) or 18 self-employment income (as defined in section 19 1402(b) of such Code) from such trade or business; 20 and 21 ‘‘(IV) works at least 10 hours per week or 40 22 hours per month providing personal services to such 23 trade or business. 24 6 •HR 3799 EH ‘‘(iii) The board of a group or association of employ- 1 ers shall— 2 ‘‘(I) initially determine whether an individual 3 meets the requirements under clause (ii) to be con- 4 sidered a self-employed individual for the purposes 5 of being treated as an— 6 ‘‘(aa) employer member of such group or 7 association (in accordance with clause (i)(I)); 8 and 9 ‘‘(bb) employee who may participate in the 10 employee welfare benefit plan established and 11 maintained by such group or association (in ac- 12 cordance with clause (i)(II)); 13 ‘‘(II) through reasonable monitoring proce- 14 dures, periodically determine whether the individual 15 continues to meet such requirements; and 16 ‘‘(III) if the board determines that an indi- 17 vidual no longer meets such requirements, not make 18 such plan coverage available to such individual (or 19 dependents thereof) for any plan year following the 20 plan year during which the board makes such deter- 21 mination. If, subsequent to a determination that an 22 individual no longer meets such requirements, such 23 individual furnishes evidence of satisfying such re- 24 7 •HR 3799 EH quirements, such individual (and dependents thereof) 1 shall be eligible to receive plan coverage. 2 ‘‘(D) For purposes of subparagraph (B), all of the 3 employees (including self-employed individuals) employed 4 by all of the employer members (including self-employed 5 individuals) of a group or association of employers shall 6 be— 7 ‘‘(i) treated as employed by a single employer; 8 and 9 ‘‘(ii) aggregated and counted together for pur- 10 poses of any regulation of an employee welfare ben- 11 efit plan established and maintained by such group 12 or association.’’. 13 (b) DETERMINATION OF EMPLOYER OR JOINT EM- 14 PLOYER STATUS.—The provision of employee welfare ben- 15 efit plan coverage by a group or association of employers 16 shall not be construed as evidence for establishing an em- 17 ployer or joint employer relationship under any Federal 18 or State law. 19 SEC. 103. RULES APPLICABLE TO GROUP HEALTH PLANS 20 ESTABLISHED AND MAINTAINED BY A GROUP 21 OR ASSOCIATION OF EMPLOYERS. 22 Part 7 of subtitle B of title I of the Employee Retire- 23 ment Income Security Act of 1974 (29 U.S.C. 1181, et 24 seq.) is amended by adding at the end the following: 25 8 •HR 3799 EH ‘‘SEC. 736. RULES APPLICABLE TO GROUP HEALTH PLANS 1 ESTABLISHED AND MAINTAINED BY A GROUP 2 OR ASSOCIATION OF EMPLOYERS. 3 ‘‘(a) PREMIUM RATES FOR A GROUP OR ASSOCIA- 4 TION OF EMPLOYERS.— 5 ‘‘(1)(A) In the case of a group health plan es- 6 tablished and maintained by a group or association 7 of employers described in section 3(5)(B), such plan 8 may— 9 ‘‘(i) establish base premium rates formed 10 on an actuarially sound, modified community 11 rating methodology that considers the pooling 12 of all plan participant claims; and 13 ‘‘(ii) utilize the specific risk profile of each 14 employer member of such group or association 15 to determine contribution rates for each such 16 employer member’s share of a premium by ac- 17 tuarially adjusting above or below the estab- 18 lished base premium rates. 19 ‘‘(B) For purposes of paragraph (1), the term 20 ‘employer member’ means— 21 ‘‘(i) an employer who is a member of such 22 group or association of employers and employs 23 at least 1 common law employee; or 24 ‘‘(ii) a group made up solely of self-em- 25 ployed individuals, within which all of the self- 26 9 •HR 3799 EH employed individual members of such group or 1 association are aggregated together as a single 2 employer member group, provided the group in- 3 cludes at least 20 self-employed individual 4 members. 5 ‘‘(2) In the event a group or association is 6 made up solely of self-employed individuals (and no 7 employers with at least 1 common law employee are 8 members of such group or association), the group 9 health plan established by such group or association 10 shall— 11 ‘‘(A) treat all self-employed individuals 12 who are members of such group or association 13 as a single risk pool; 14 ‘‘(B) pool all plan participant claims; and 15 ‘‘(C) charge each plan participant the 16 same premium rate. 17 ‘‘(b) DISCRIMINATION AND PRE-EXISTING CONDI- 18 TION PROTECTIONS.—A group health plan established 19 and maintained by a group or association of employers de- 20 scribed in section 3(5)(B) shall be prohibited from— 21 ‘‘(1) establishing any rule for eligibility (includ- 22 ing continued eligibility) of any individual (including 23 an employee of an employer member or a self-em- 24 ployed individual, or a dependent of such employee 25 10 •HR 3799 EH or self-employed individual) to enroll for benefits 1 under the terms of the plan that discriminates based 2 on any health status-related factor that relates to 3 such individual (consistent with the rules under sec- 4 tion 702(a)(1)); 5 ‘‘(2) requiring an individual (including an em- 6 ployee of an employer member or a self-employed in- 7 dividual, or a dependent of such employee or self- 8 employed individual), as a condition of enrollment or 9 continued enrollment under the plan, to pay a pre- 10 mium or contribution that is greater than the pre- 11 mium or contribution for a similarly situated indi- 12 vidual enrolled in the plan based on any health sta- 13 tus-related factor that relates to such individual 14 (consistent with the rules under section 702(b)(1)); 15 and 16 ‘‘(3) denying coverage under such plan on the 17 basis of a pre-existing condition (consistent with the 18 rules under section 2704 of the Public Health Serv- 19 ice Act).’’. 20 SEC. 104. RULE OF CONSTRUCTION. 21 Nothing in this title shall be construed to exempt a 22 group health plan which is an employee welfare benefit 23 plan offered through a group or association of employers 24 from the requirements of part 7 of subtitle B of title I 25 11 •HR 3799 EH of the Employee Retirement Income Security Act of 1974 1 (29 U.S.C. 1181 et. seq.), including the provisions of part 2 A of title XXVII of the Public Health Service Act as incor- 3 porated by reference into this Act through section 715. 4 TITLE II—CHOICE 5 ARRANGEMENT ACT 6 SEC. 201. SHORT TITLE. 7 This title may be cited as the ‘‘Custom Health Option 8 and Individual Care Expense Arrangement Act’’ or the 9 ‘‘CHOICE Arrangement Act’’. 10 SEC. 202. TREATMENT OF HEALTH REIMBURSEMENT AR- 11 RANGEMENTS INTEGRATED WITH INDI- 12 VIDUAL MARKET COVERAGE. 13 (a) IN GENERAL.—Section 9815(b) of the Internal 14 Revenue Code of 1986 is amended— 15 (1) by striking ‘‘EXCEPTION.—Notwithstanding 16 subsection (a)’’ and inserting the following: ‘‘EXCEP- 17 TIONS.— 18 ‘‘(1) SELF-INSURED GROUP HEALTH PLANS.— 19 Notwithstanding subsection (a)’’, and 20 (2) by adding at the end the following new 21 paragraph: 22 ‘‘(2) CUSTOM HEALTH OPTION AND INDIVIDUAL 23 CARE EXPENSE ARRANGEMENTS.— 24 12 •HR 3799 EH ‘‘(A) IN GENERAL.—For purposes of this 1 subchapter, a custom health option and indi- 2 vidual care expense arrangement shall be treat- 3 ed as meeting the requirements of sections 4 2711 and 2713 of title XXVII of the Public 5 Health Service Act. 6 ‘‘(B) CUSTOM HEALTH OPTION AND INDI- 7 VIDUAL CARE EXPENSE ARRANGEMENTS DE- 8 FINED.—For purposes of this section, the term 9 ‘custom health option and individual care ex- 10 pense arrangement’ means a health reimburse- 11 ment arrangement— 12 ‘‘(i) which is an employer-provided 13 group health plan funded solely by em- 14 ployer contributions to provide payments 15 or reimbursements for medical care subject 16 to a maximum fixed dollar amount for a 17 period, 18 ‘‘(ii) under which such payments or 19 reimbursements may only be made for 20 medical care provided during periods dur- 21 ing which the individual is covered— 22 ‘‘(I) under individual health in- 23 surance coverage (other than coverage 24 13 •HR 3799 EH that consists solely of excepted bene- 1 fits), or 2 ‘‘(II) under part A and B of title 3 XVIII of the Social Security Act or 4 part C of such title, 5 ‘‘(iii) which meets the nondiscrimina- 6 tion requirements of subparagraph (C), 7 ‘‘(iv) which meets the substantiation 8 requirements of subparagraph (D), and 9 ‘‘(v) which meets the notice require- 10 ments of subparagraph (E). 11 ‘‘(C) NONDISCRIMINATION.— 12 ‘‘(i) IN GENERAL.—An arrangement 13 meets the requirements of this subpara- 14 graph if an employer offering such ar- 15 rangement to an employee within a speci- 16 fied class of employee— 17 ‘‘(I) offers such arrangement to 18 all employees within such specified 19 class on the same terms, and 20 ‘‘(II) does not offer any other 21 group health plan to any employees 22 within such specified class. 23 ‘‘(ii) SPECIFIED CLASS OF EM- 24 PLOYEE.—For purposes of this subpara- 25 14 •HR 3799 EH graph, any of the following may be des- 1 ignated as a specified class of employee: 2 ‘‘(I) Full-time employees. 3 ‘‘(II) Part-time employees. 4 ‘‘(III) Salaried employees. 5 ‘‘(IV) Non-salaried employees. 6 ‘‘(V) Employees whose primary 7 site of employment is in the same rat- 8 ing area. 9 ‘‘(VI) Employees who are in- 10 cluded in a unit of employees covered 11 under a collective bargaining agree- 12 ment to which the employer is subject 13 (determined under rules similar to the 14 rules of section 105(h)). 15 ‘‘(VII) Employees who have not 16 met a group health plan, or health in- 17 surance issuer offering group health 18 insurance coverage, waiting period re- 19 quirement that satisfies the of section 20 2708 of the Public Health Service 21 Act. 22 ‘‘(VIII) Seasonal employees. 23 ‘‘(IX) Employees who are non- 24 resident aliens and who receive no 25 15 •HR 3799 EH earned income (within the meaning of 1 section 911(d)(2)) from the employer 2 which constitutes income from sources 3 within the United States (within the 4 meaning of section 861(a)(3)). 5 ‘‘(X) Such other classes of em- 6 ployees as the Secretary may des- 7 ignate. 8 An employer may designate (in su [Text truncated for display. 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