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<PRE>[DOCID: f:s2035is.txt]






107th CONGRESS
  2d Session
                                S. 2035

 To provide for the establishment of health plan purchasing alliances.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 20, 2002

Mr. Jeffords (for himself, Mrs. Clinton, and Ms. Snowe) introduced the 
 following bill; which was read twice and referred to the Committee on 
                 Health, Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL


 
 To provide for the establishment of health plan purchasing alliances.

    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 ``Health Plan Purchasing Alliance Act 
of 2002''.

SEC. 2. DEFINITIONS.

    In this Act:
            (1) Health plan purchasing alliance.--The term ``health 
        plan purchasing alliance'' means employer groups that, on a 
        voluntary basis and in accordance with this section, form an 
        alliance for the purpose of purchasing insurance plans offered 
        by health insurance plan issuers.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (3) Small employer group.--The term ``small employer 
        group'' means all employees employed by the same employer. The 
        maximum number of employees in the small employer group shall 
        be defined by the health care purchasing alliance.
            (4) State.--The term ``State'' means the 50 States, the 
        District of Columbia, and the Commonwealth of Puerto Rico.

SEC. 3. GRANT PROGRAM FOR STATE-BASED ESTABLISHMENT OF ALLIANCES.

    (a) Program Establishment.--The Secretary may establish a program 
to award grants to eligible entities, including States, to facilitate 
the development and establishment, in accordance with this Act, of 
State-based or State-directed health plan purchasing alliances to 
afford greater access to, and lower costs of, health benefits for small 
employer groups and individuals.
    (b) Eligible Entities.--To be eligible to receive a grant under 
subsection (a), an entity shall--
            (1) be--
                    (A) a State agency;
                    (B) a nonprofit entity organized for the purpose of 
                establishing a health plan purchasing alliance; or
                    (C) a for-profit cooperative organization whose 
                profits are shared on a pro-rata basis among the 
                members of the cooperative;
            (2) prepare and submit to the Secretary an application, at 
        such time, in such manner, and containing such information and 
        assurances as the Secretary may require (including evidence of 
        compliance with applicable requirements of this Act);
            (3) provide documentation to the Secretary of a 
        determination by the Governor of the State involved that the 
        proposed project is in the best interests of the State; and
            (4) otherwise comply with the provisions of subsections (b) 
        through (f) of section 5.
    (c) Use of Funds.--
            (1) In general.--Except as provided in paragraph (2), funds 
        made available under a grant under this section may be used by 
        the grantee to pay the costs associated with the development of 
        a health plan purchasing alliance, the provision of technical 
        assistance concerning the alliance, and the capitalization of 
        the alliance.
            (2) Exception.--Funds made available under a grant under 
        this section may not be used for the operating costs of the 
        health plan purchasing alliance after the date that is 6 months 
        after the date on which the alliance began operations.
    (d) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out the program under subsection (a), $50,000,000 
for each of the fiscal years 2002 through 2006.
    (e) Duration.--The period of a grant under this section shall not 
exceed 30 months.

SEC. 4. FEHBP ALLIANCES.

    (a) Governors' Option.--The Governor of a State that elects not to 
apply for a grant under section 3, or not to provide the documentation 
described in section 3(b)(3), may, with respect to the entire State or 
to a geographic region of the State, request that the Secretary 
establish an FEHBP alliance in coordination with the Federal Employees' 
Health Benefit Program under chapter 89 of title 5, United States Code.
    (b) Operation of Program.--The Secretary, to the extent the 
Secretary considers appropriate, upon receipt of a request pursuant to 
subsection (a), and with the concurrence of the Director of the Office 
of Personnel Management (referred to in this section as the 
``Director''), may use funds available under this section to establish 
a State-based FEHBP alliance in accordance with the provisions of this 
Act and in coordination with the Federal Employees' Health Benefit 
Program.
    (c) Powers of FEHBP Alliance.--A State-based FEHBP alliance 
established under this section may--
            (1) use the name of the Federal Employees' Health Benefit 
        Program plan in its marketing activities;
            (2) require that a health plan issuer that participates in 
        the Federal Employees' Health Benefit Program and that offers 
        health benefit coverage to purchasers in the private sector 
        also offer the same health benefit coverage to eligible 
        individuals and to the small employer groups that are 
        participating in the State-based FEHBP alliance, at prices that 
        are negotiated with the alliance;
            (3) request that the Director terminate the participation 
        of any health plan issuer in the Federal Employees' Health 
        Benefit Program if the Director determines that such issuer has 
        failed to comply with the requirements imposed on the issuer 
        under paragraph (2) (and the Director may consider such a 
failure sufficient grounds for termination); and
            (4) negotiate with health plan issuers not participating in 
        the Federal Employees' Health Benefit Program for the provision 
        of health benefits coverage in the small group market.
    (d) Separate Rating.--Health plans offered through a State-based 
FEHBP alliance and individuals purchasing coverage through such an 
alliance shall be considered as separate groups and be distinct from 
any group of plans or Federal employees participating in the Federal 
Employees' Health Benefit Program.

SEC. 5. PRIVATE HEALTH PLAN PURCHASING ALLIANCES.

    (a) Certification.--
            (1) Requirement.--If small employer groups or a group of 
        individuals and small employer groups, that desire to form, on 
        a voluntary basis, a health plan purchasing alliance in 
        accordance with this section, appropriately notifies the State 
        and the Secretary of such desire, the State, upon a 
        determination that such group meets the requirements of this 
        section and any other requirements established by State law, 
        shall certify the group as a health plan purchasing alliance. 
        The State shall make a determination of whether such group 
        meets the requirements of this section in a timely fashion and 
        shall oversee the operations of such alliance in order to 
        ensure continued compliance with the requirements of this 
        section. Each such alliance shall be registered with the 
        Secretary.
            (2) State refusal to certify.--
                    (A) In general.--If a State fails to implement a 
                program for certifying health plan purchasing alliances 
                in accordance with the standards under this section, 
                the Secretary shall certify and oversee the operations 
              
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  of such alliances in such State.
                    (B) Exception.--The Secretary shall not certify a 
                health plan purchasing alliance described in this 
                section if, upon the submission of an application by 
                the State to the Secretary, the Secretary determines 
                that under a State law in effect on the date of 
                enactment of this Act, all small employers or 
                individuals have a means readily available that 
                ensures--
                            (i) that individuals and employees have a 
                        choice of multiple, unaffiliated health plan 
                        issuers;
                            (ii) that health plan coverage is subject 
                        to State premium rating requirements that are 
                        not based on the factors described in 
                        subsection (e)(3), that such requirements 
                        ensure a fair rating in a manner so that 
                        premiums shall be reasonable relative to rates, 
                        and that such requirements contain a mandatory 
                        minimum loss ratio; and
                            (iii) that comparative health plan 
                        materials are disseminated consistent with 
                        subsection (d)(1)(D);
                and that otherwise meets the objectives of this Act.
            (3) Interstate alliances.--For purposes of this section, a 
        health plan purchasing alliance operating in more than one 
        State shall be certified by the State in which the alliance is 
        domiciled. Each plan and alliance shall be qualified and 
        certified in each State in which it operates. States may enter 
        into alliance agreements for the purpose of overseeing the 
        operation of such alliances. For purposes of this subsection, 
        an alliance shall be considered to be domiciled in the State in 
        which most of the members of the alliance reside.
    (b) Board of Directors.--
            (1) In general.--Each health plan purchasing alliance shall 
        be governed by a Board of Directors that shall be responsible 
        for ensuring the performance of the duties of the alliance 
        under this section. The Board shall be composed of a broad 
        cross-section of representatives of the employers, employees, 
        and individuals participating in the alliance. Employer groups 
        participating in a health care purchasing alliance should be 
        represented on the Board by both employers and employees.
            (2) Limitation on compensation.--A health plan purchasing 
        alliance may not provide compensation to members of the Board 
        of Directors. The alliance may provide reimbursements to such 
        members for the reasonable and necessary expenses incurred by 
        the members in the performance of their duties as members of 
        the Board.
    (c) Membership and Marketing Area.--
            (1) Membership.--A health plan purchasing alliance shall 
        establish limits on the maximum size of an employer, as 
        determined by its number of employees, that may become a member 
        of the alliance, and may determine whether to permit 
        individuals to become members. Upon the establishment of such 
        membership criteria, the alliance shall, except as provided in 
        paragraph (2), accept all employers, employees, and individuals 
        residing within the area served by the alliance who meet such 
        requirements as members on a first-come, first-served basis, or 
        on another basis established by the State to ensure equitable 
        access to the alliance. The purchasing alliance shall not 
        discriminate or deny membership on the basis of health status, 
        age, race, sex, occupation, or insurability.
            (2) Marketing area.--A State may establish rules regarding 
        the geographic area that must be served by health plan 
        purchasing alliances to ensure that alliances do not 
        discriminate on the basis of the health status or insurability 
        of the populations that reside in the area served. A State may 
        not use such rules to limit arbitrarily the number of health 
        plan purchasing alliances.
    (d) Duties and Responsibilities.--
            (1) In general.--A health plan purchasing alliance shall--
                    (A) objectively evaluate potential health plan 
                issuers and enter into agreements with multiple, 
                unaffiliated health plan issuers, except that the 
                requirement of this subparagraph shall not apply in 
                regions (such as remote or frontier areas) in which 
                compliance with such requirement is not possible;
                    (B) enter into agreements with employers and 
                individuals who become members of the alliance;
                    (C) participate in any program of risk-adjustment 
                or reinsurance, or any similar program, that is 
                established by the State;
                    (D) prepare and disseminate comparative health plan 
                materials (including information about cost, quality, 
                benefits, and other information determined necessary by 
                the State to permit a comparison of all health plans 
                offered through the alliance to small employers, 
                employees, and individuals);
                    (E) broadly solicit and actively market to all 
                eligible employers and individuals residing within the 
                service area;
                    (F) act as an ombudsman for group health plan or 
                individual health plan enrollees; and
                    (G) offer to all employers, employees, and 
                individuals participating in the health purchasing 
                alliance an open enrollment period of at least 30 days 
                per calendar year.
            (2) Permissible activities.--A health plan purchasing 
        alliance may perform such other functions as necessary to 
        further the purposes of this Act, including--
                    (A) collecting and distributing premiums and 
                performing other administrative functions;
                    (B) collecting and analyzing surveys of enrollee 
                satisfaction or grievances;
                    (C) charging membership fee to enrollees (such fees 
                may not be based on health status) and charging 
                participation fees to alliance health plan issuers; and
                    (D) negotiating with health care providers and 
                health plan issuers.
    (e) Limitations on Alliance Activities.--A health plan purchasing 
alliance shall not--
            (1) perform any activity relating to the licensing of 
        health plan issuers;
            (2) assume financial risk directly or indirectly on behalf 
        of members of a health plan purchasing alliance relating to any 
        group health plan or individual health plan;
            (3) establish eligibility, enrollment, or premium 
        contribution requirements for participants or beneficiaries in 
        all health plans based on health status, medical condition, 
        claims experience, receipt of health care, medical history, 
        evidence of insurability, genetic information, or disability;
            (4) operate on a for-profit or other basis where the legal 
        structure of the alliance permits profits to be made and not 
        returned to the members of the alliance; or
            (5) perform any other activities that conflict or are 
        inconsistent with the performance of its duties under this Act.
    (f) Conflict of Interest.--
            (1) Prohibition.--No individual, partnership, or 
        corporation shall serve on the board of a health plan 
        purchasing alliance, b
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e employed by such an alliance, receive 
        compensation from such an alliance, or initiate or finance such 
        an alliance if such individual, partnership, or corporation--
                    (A) fails to discharge the duties and 
                responsibilities of such individual, partnership or 
                corporation in a manner that is solely in the interest 
                of the alliance and the members of the alliance; or
                    (B) derives personal financial benefit (other than 
                in the form of ordinary compensation received) from the 
                sale of, or has a financial interest in health plans or 
                related financial entities, services or products sold 
                by or distributed through that alliance.
            (2) Contracts with third parties.--Nothing in paragraph (1) 
        shall be construed to prohibit the board of directors of a 
        health plan purchasing alliance, or its officers, at the 
        initiative and under this direction of the board, from 
        contracting with third parties to provide administrative, 
        marketing, consultive, or other services to the alliance.
    (g) Limited Preemption of Certain State Laws.--
            (1) In general.--With respect to a health plan purchasing 
        alliance that meets the requirements of this section (including 
        an alliance under section 3), any State law that sets 
        restrictions on the organization of groups for the purpose of 
        purchasing health insurance, or that prohibits groups from 
        combining for that purpose, is preempted with respect to an 
        alliance that meets the requirements of this Act.
            (2) Health plan issuers.--
                    (A) Rating.--Except as provided in subparagraph 
                (B), a health plan issuer offering a group health plan 
                or individual health plan through a health plan 
                purchasing alliance that meets the requirements of this 
section (including an alliance under section 3) shall comply with all 
State rating requirements that would otherwise apply if the health plan 
were offered outside of the alliance.
                    (B) Premium rate exception.--A State law that 
                imposes premium rate requirements is preempted to the 
                extent that it would prohibit a health plan issuer from 
                reducing premium rates under an agreement with a health 
                plan purchasing alliance that meets the requirements of 
                this section (including an alliance under section 3) to 
                reflect savings derived from administrative costs, 
                marketing costs, profit margins, economies of scale, or 
                other factors, except that any such reduction in 
                premium rates may not be based on the health status, 
                demographic factors, industry type, duration, or other 
                indicators of health risk of the members of the 
                alliance.
                    (C) Benefits.--Except as provided in subparagraph 
                (D), a health plan issuer offering a health plan 
                through a health plan purchasing alliance (including an 
                alliance under section 3) shall comply with all State 
                mandated benefit laws that require the offering of any 
                services, category of care, or services of any class or 
                type of provider.
                    (D) Alternative benefit plan exception.--In those 
                States that have enacted laws authorizing the issuance 
                of alternative benefit plans to small employers, health 
                plan issuers may offer such alternative benefit plans 
                through a health plan purchasing alliance that meets 
                the requirements of this section (including an alliance 
                under section 3).
            (3) Rule of construction.--Nothing in this Act shall be 
        construed to preempt a State law if such law prohibits the 
        variance of premium rates of employers, employees, or 
        individuals participating as members in a health purchasing 
        alliance in excess of the amount of such variations that would 
        be permitted under such State laws among individuals, 
        employers, and employees that are not participating in the 
        health purchasing alliance.

SEC. 6. RULES OF CONSTRUCTION.

    Nothing in this Act shall be construed to--
            (1) require that a State organize, operate, or otherwise 
        create health plan purchasing alliances;
            (2) otherwise require the establishment of health plan 
        purchasing alliances;
            (3) require individuals, plan sponsors, or employers to 
        purchase health insurance plans through a health plan 
        purchasing alliance;
            (4) preempt a State from requiring licensure for 
        individuals who are involved in directly supplying advice or 
        selling health plans on behalf of a purchasing alliance;
            (5) require that a health plan purchasing alliance be the 
        only type of purchasing arrangement permitted to operate in a 
        State;
            (6) confer authority upon a State that the State would not 
        otherwise have to regulate health plan issuers or employee 
        health benefits plans;
            (7) confer authority upon a State (or the Federal 
        Government) that the State (or Federal Government) would not 
        otherwise have to regulate group purchasing arrangements, 
        coalitions, association plans, or other similar entities that 
        do not desire to become a health plan purchasing alliance in 
        accordance with this section; or
            (8) except as specifically provided otherwise in this 
        subsection, prevent the application of State laws and 
        regulations otherwise applicable to health plan issuers 
        offering group health plans or individual health plans through 
        a health plan purchasing alliance.

SEC. 7. ENFORCEMENT.

    For purposes of enforcement only, the requirements of parts 4 and 5 
of subtitle B of title I of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1101 et seq.) shall apply to a health plan 
purchasing alliance certified by the Secretary under section 5(a)(2) of 
this Act as if such alliance were an employee welfare benefit plan.
                                 &lt;all&gt;

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