42 U.S.C. § 18041 — State flexibility in operation and en-

Page 9113 TITLE 42—THE PUBLIC HEALTH AND WELFARE § 18041 1 See References in Text note below. 2 So in original. Probably should be ‘‘Service’’. Statutory Notes and Related Subsidiaries TERMINATION OF PROVISION Pub. L. 111–148, title X, § 10104(j)(1), Mar. 23, 2010, 124 Stat. 901, provided that: ‘‘Subparagraph (B) of section 1313(a)(6) of this Act [42 U.S.C. 18033(a)(6)(B)] is hereby deemed null, void, and of no effect.’’ PART C—STATE FLEXIBILITY RELATING TO EXCHANGES § 18041. State flexibility in operation and en- forcement of Exchanges and related require- ments (a) Establishment of standards (1) In general The Secretary shall, as soon as practicable after March 23, 2010, issue regulations setting standards for meeting the requirements under this title,1 and the amendments made by this title,1 with respect to— (A) the establishment and operation of Ex- changes (including SHOP Exchanges); (B) the offering of qualified health plans through such Exchanges; (C) the establishment of the reinsurance and risk adjustment programs under part E; and (D) such other requirements as the Sec- retary determines appropriate. The preceding sentence shall not apply to standards for requirements under subtitles A and C (and the amendments made by such sub- titles) for which the Secretary issues regula- tions under the Public Health Service Act [42 U.S.C. 201 et seq.]. (2) Consultation In issuing the regulations under paragraph (1), the Secretary shall consult with the Na- tional Association of Insurance Commis- sioners and its members and with health in- surance issuers, consumer organizations, and such other individuals as the Secretary selects in a manner designed to ensure balanced rep- resentation among interested parties. (b) State action Each State that elects, at such time and in such manner as the Secretary may prescribe, to apply the requirements described in subsection (a) shall, not later than January 1, 2014, adopt and have in effect— (1) the Federal standards established under subsection (a); or (2) a State law or regulation that the Sec- retary determines implements the standards within the State. (c) Failure to establish Exchange or implement requirements (1) In general If— (A) a State is not an electing State under subsection (b); or (B) the Secretary determines, on or before January 1, 2013, that an electing State— (i) will not have any required Exchange operational by January 1, 2014; or (ii) has not taken the actions the Sec- retary determines necessary to imple- ment— (I) the other requirements set forth in the standards under subsection (a); or (II) the requirements set forth in sub- titles A and C and the amendments made by such subtitles; the Secretary shall (directly or through agree- ment with a not-for-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other re- quirements. (2) Enforcement authority The provisions of section 2736(b) 1 of the Pub- lic Health Services 2 Act [42 U.S.C. 300gg–22(b)] shall apply to the enforcement under para- graph (1) of requirements of subsection (a)(1) (without regard to any limitation on the ap- plication of those provisions to group health plans). (d) No interference with State regulatory author- ity Nothing in this title 1 shall be construed to preempt any State law that does not prevent the application of the provisions of this title.1 (e) Presumption for certain State-operated Ex- changes (1) In general In the case of a State operating an Exchange before January 1, 2010, and which has insured a percentage of its population not less than the percentage of the population projected to be covered nationally after the implementa- tion of this Act, that seeks to operate an Ex- change under this section, the Secretary shall presume that such Exchange meets the stand- ards under this section unless the Secretary determines, after completion of the process es- tablished under paragraph (2), that the Ex- change does not comply with such standards. (2) Process The Secretary shall establish a process to work with a State described in paragraph (1) to provide assistance necessary to assist the State’s Exchange in coming into compliance with the standards for approval under this sec- tion. (Pub. L. 111–148, title I, § 1321, Mar. 23, 2010, 124 Stat. 186.) Editorial Notes REFERENCES IN TEXT This title, referred to in subsecs. (a)(1) and (d), is title I of Pub. L. 111–148, Mar. 23, 2010, 124 Stat. 130, which enacted this chapter and enacted, amended, and trans- ferred numerous other sections and notes in the Code. For complete classification of title I to the Code, see Tables. Subtitles A and C, referred to in subsecs. (a)(1) and (c)(1)(B)(ii)(II), are subtitles A (§§ 1001–1004) and C (§§ 1201–1255), respectively, of title I of Pub. L. 111–148, Mar. 23, 2010, 124 Stat. 130, 154. Subtitle A enacted sec- tions 300gg–11 to 300gg–19, 300gg–93, and 300gg–94 of this Page 9114 TITLE 42—THE PUBLIC HEALTH AND WELFARE § 18042 title, transferred sections 300gg–4 to 300gg–7 and 300gg–13 of this title to sections 300gg–25 to 300gg–28 and 300gg–9 of this title, respectively, amended sections 300gg–11, 300gg–12, and 300gg–21 to 300gg–23 of this title, and enacted provisions set out as a note under section 300gg–11 of this title. Subtitle C enacted subchapter II of this chapter and sections 300gg to 300gg–2 and 300gg–4 to 300gg–7 of this title, transferred section 300gg of this title to section 300gg–3 of this title, amended sections 300gg–1 and 300gg–4 of this title, and enacted provisions set out as a note under section 300gg of this title. For complete classification of subtitles A and C to the Code, see Tables. The Public Health Service Act, referred to in subsec. (a)(1), is act July 1, 1944, ch. 373, 58 Stat. 682, which is classified generally to chapter 6A (§ 201 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 201 of this title and Tables. Section 2736 of the Public Health Service Act, re- ferred to in subsec. (c)(2), was renumbered section 2723 of that Act by Pub. L. 111–148, § 1563(c)(13)(C) (formerly § 1562(c)(13)(C)), Mar. 23, 2010, 124 Stat. 269, and is classi- fied to section 300gg–22 of this title. This Act, referred to in subsec. (e)(1), is Pub. L. 111–148, Mar. 23, 2010, 124 Stat. 119, known as the Pa- tient Protection and Affordable Care Act. For complete classification of this Act to the Code, see Short Title note set out under section 18001 of this title and Tables. § 18042. Federal program to assist establishment and operation of nonprofit, member-run health insurance issuers (a) Establishment of program (1) In general The Secretary shall establish a program to carry out the purposes of this section to be known as the Consumer Operated and Oriented Plan (CO–OP) program. (2) Purpose It is the purpose of the CO–OP program to foster the creation of qualified nonprofit health insurance issuers to offer qualified health plans in the individual and small group markets in the States in which the issuers are licensed to offer such plans. (b) Loans and grants under the CO–OP program (1) In general The Secretary shall provide through the CO–OP program for the awarding to persons applying to become qualified nonprofit health insurance issuers of— (A) loans to provide assistance to such per- son in meeting its start-up costs; and (B) grants to provide assistance to such person in meeting any solvency require- ments of States in which the person seeks to be licensed to issue qualified health plans. (2) Requirements for awarding loans and grants (A) In general In awarding loans and grants under the CO–OP program, the Secretary shall— (i) take into account the recommenda- tions of the advisory board established under paragraph (3); (ii) give priority to applicants that will offer qualified health plans on a Statewide basis, will utilize integrated care models, and have significant private support; and (iii) ensure that there is sufficient fund- ing to establish at least 1 qualified non- profit health insurance issuer in each State, except that nothing in this clause shall prohibit the Secretary from funding the establishment of multiple qualified nonprofit health insurance issuers in any State if the funding is sufficient to do so. (B) States without issuers in program If no health insurance issuer applies to be a qualified nonprofit health insurance issuer within a State, the Secretary may use amounts appropriated under this section for the awarding of grants to encourage the es- tablishment of a qualified nonprofit health insurance issuer within the State or the ex- pansion of a qualified nonprofit health insur- ance issuer from another State to the State. (C) Agreement (i) In general The Secretary shall require any person receiving a loan or grant under the CO–OP program to enter into an agreement with the Secretary which requires such person to meet (and to continue to meet)— (I) any requirement under this section for such person to be treated as a quali- fied nonprofit health insurance issuer; and (II) any requirements contained in the agreement for such person to receive such loan or grant. (ii) Restrictions on use of Federal funds The agreement shall include a require- ment that no portion of the funds made available by any loan or grant under this section may be used— (I) for carrying on propaganda, or oth- erwise attempting, to influence legisla- tion; or (II) for marketing. Nothing in this clause shall be construed to allow a person to take any action pro- hibited by section 501(c)(29) of title 26. (iii) Failure to meet requirements If the Secretary determines that a per- son has failed to meet any requirement de- scribed in clause (i) or (ii) and has failed to correct such failure within a reasonable period of time of when the person first knows (or reasonably should have known) of such failure, such person shall repay to the Secretary an amount equal to the sum of— (I) 110 percent of the aggregate amount of loans and grants received under this section; plus (II) interest on the aggregate amount of loans and grants received under this section for the period the loans or grants were outstanding. The Secretary shall notify the Secretary of the Treasury of any determination under this section of a failure that results in the termination of an issuer’s tax-ex- empt status under section 501(c)(29) of such title. (D) Time for awarding loans and grants The Secretary shall not later than July 1, 2013, award the loans and grants under the