I

104TH CONGRESS

2D SESSION H. R. 2893

To provide increased access to health care benefits, to provide increased

portability of health care benefits, to provide increased security of health

care benefits, to increase the purchasing power of individuals and small

employers, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 25, 1996

Mrs. ROUKEMA introduced the following bill; which was referred to the Committee on Commerce, and in addition to the Committees on Ways and

Means and Economic and Educational Opportunities, 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 provide increased access to health care benefits, to provide

increased portability of health care benefits, to provide

increased security of health care benefits, to increase

the purchasing power of individuals and small employers,

and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Health Insurance Reform Act of 1996’’.
2

HR 2893 IH

1 (b) TABLE OF CONTENTS.—The table of contents for

2 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Definitions.

TITLE I—HEALTH CARE ACCESS, PORTABILITY, AND

RENEWABILITY

Subtitle A—Group Market Rules

Sec. 101. Guaranteed availability of health coverage.

Sec. 102. Guaranteed renewability of health coverage.

Sec. 103. Portability of health coverage and limitation on preexisting condition

exclusions.

Sec. 104. Special enrollment periods.

Sec. 105. Disclosure of information.

Subtitle B—Individual Market Rules

Sec. 110. Individual health plan portability.

Sec. 111. Guaranteed renewability of individual health coverage.

Sec. 112. State flexibility in individual market reforms.

Sec. 113. Definition.

Subtitle C—COBRA Clarifications

Sec. 121. Cobra clarifications.

Subtitle D—Private Health Plan Purchasing Cooperatives

Sec. 131. Private health plan purchasing cooperatives.

TITLE II—APPLICATION AND ENFORCEMENT OF STANDARDS

Sec. 201. Applicability.

Sec. 202. Enforcement of standards.

TITLE III—MISCELLANEOUS PROVISIONS

Sec. 301. HMOs allowed to offer plans with deductibles to individuals with

medical savings accounts.

Sec. 302. Health coverage availability study.

Sec. 303. Effective date.

Sec. 304. Severability.

3 SEC. 2. DEFINITIONS.

4 As used in this Act:

5 (1) BENEFICIARY.—The term ‘‘beneficiary’’ has

6 the meaning given such term under section 3(8) of
3

HR 2893 IH

1 the Employee Retirement Income Security Act of

2 1974 (29 U.S.C. 1002(8)).

3 (2) EMPLOYEE.—The term ‘‘employee’’ has the

4 meaning given such term under section 3(6) of the

5 Employee Retirement Income Security Act of 1974

6 (29 U.S.C. 1002(6)).

7 (3) EMPLOYER.—The term ‘‘employer’’ has the

8 meaning given such term under section 3(5) of the

9 Employee Retirement Income Security Act of 1974

10 (29 U.S.C. 1002(5)), except that such term shall in11 clude only employers of two or more employees.

12 (4) EMPLOYEE HEALTH BENEFIT PLAN.—

13 (A) IN GENERAL.—The term ‘‘employee

14 health benefit plan’’ means any employee wel15 fare benefit plan, governmental plan, or church

16 plan (as defined under paragraphs (1), (32),

17 and (33) of section 3 of the Employee Retire18 ment Income Security Act of 1974 (29 U.S.C.

19 1002 (1), (32), and (33))) that provides or pays

20 for health benefits (such as provider and hos21 pital benefits) for participants and beneficiaries

22 whether—

23 (i) directly;
4

HR 2893 IH

1 (ii) through a group health plan of2 fered by a health plan issuer as defined in

3 paragraph (8); or

4 (iii) otherwise.

5 (B) RULE OF CONSTRUCTION.—An em6 ployee health benefit plan shall not be con7 strued to be a group health plan, an individual

8 health plan, or a health plan issuer.

9 (C) ARRANGEMENTS NOT INCLUDED.—

10 Such term does not include the following, or

11 any combination thereof:

12 (i) Coverage only for accident, or dis13 ability income insurance, or any combina14 tion thereof.

15 (ii) Medicare supplemental health in16 surance (as defined under section

17 1882(g)(1) of the Social Security Act).

18 (iii) Coverage issued as a supplement

19 to liability insurance.

20 (iv) Liability insurance, including gen21 eral liability insurance and automobile li22 ability insurance.

23 (v) Workers compensation or similar

24 insurance.
5

HR 2893 IH

1 (vi) Automobile medical payment in2 surance.

3 (vii) Coverage for a specified disease

4 or illness.

5 (viii) Hospital or fixed indemnity in6 surance.

7 (ix) Short-term limited duration in8 surance.

9 (x) Credit-only, dental-only, or vision10 only insurance.

11 (xi) A health insurance policy provid12 ing benefits only for long-term care, nurs13 ing home care, home health care, commu14 nity-based care, or any combination there15 of.

16 (5) FAMILY.—

17 (A) IN GENERAL.—The term ‘‘family’’

18 means an individual, the individual’s spouse,

19 and the child of the individual (if any).

20 (B) CHILD.—For purposes of subpara21 graph (A), the term ‘‘child’’ means any individ22 ual who is a child within the meaning of section

23 151(c)(3) of the Internal Revenue Code of

24 1986.

25 (6) GROUP HEALTH PLAN.—
6

HR 2893 IH

1 (A) IN GENERAL.—The term ‘‘group

2 health plan’’ means any contract, policy, certifi3 cate or other arrangement offered by a health

4 plan issuer to a group purchaser that provides

5 or pays for health benefits (such as provider

6 and hospital benefits) in connection with an em7 ployee health benefit plan.

8 (B) ARRANGEMENTS NOT INCLUDED.—

9 Such term does not include the following, or

10 any combination thereof:

11 (i) Coverage only for accident, or dis12 ability income insurance, or any combina13 tion thereof.

14 (ii) Medicare supplemental health in15 surance (as defined under section

16 1882(g)(1) of the Social Security Act).

17 (iii) Coverage issued as a supplement

18 to liability insurance.

19 (iv) Liability insurance, including gen20 eral liability insurance and automobile li21 ability insurance.

22 (v) Workers compensation or similar

23 insurance.

24 (vi) Automobile medical payment in25 surance.
7

HR 2893 IH

1 (vii) Coverage for a specified disease

2 or illness.

3 (viii) Hospital or fixed indemnity in4 surance.

5 (ix) Short-term limited duration in6 surance.

7 (x) Credit-only, dental-only, or vision8 only insurance.

9 (xi) A health insurance policy provid10 ing benefits only for long-term care, nurs11 ing home care, home health care, commu12 nity-based care, or any combination there13 of.

14 (7) GROUP PURCHASER.—The term ‘‘group

15 purchaser’’ means any person (as defined under

16 paragraph (9) of section 3 of the Employee Retire17 ment Income Security Act of 1974 (29 U.S.C.

18 1002(9)) or entity that purchases or pays for health

19 benefits (such as provider or hospital benefits) on

20 behalf of two or more participants or beneficiaries in

21 connection with an employee health benefit plan. A

22 health plan purchasing cooperative established under

23 section 131 shall not be considered to be a group

24 purchaser.
8

HR 2893 IH

1 (8) HEALTH PLAN ISSUER.—The term ‘‘health

2 plan issuer’’ means any entity that is licensed (prior

3 to or after the date of enactment of this Act) by a

4 State to offer a group health plan or an individual

5 health plan.

6 (9) PARTICIPANT.—The term ‘‘participant’’ has

7 the meaning given such term under section 3(7) of

8 the Employee Retirement Income Security Act of

9 1974 (29 U.S.C. 1002(7)).

10 (10) PLAN SPONSOR.—The term ‘‘plan spon11 sor’’ has the meaning given such term under section

12 3(16)(B) of the Employee Retirement Income Secu13 rity Act of 1974 (29 U.S.C. 1002(16)(B)).

14 (11) SECRETARY.—The term ‘‘Secretary’’, un15 less specifically provided otherwise, means the Sec16 retary of Labor.

17 (12) STATE.—The term ‘‘State’’ means each of

18 the several States, the District of Columbia, Puerto

19 Rico, the United States Virgin Islands, Guam,

20 American Samoa, and the Commonwealth of the

21 Northern Mariana Islands.
9

HR 2893 IH

1 TITLE I—HEALTH CARE ACCESS,

2 PORTABILITY, AND RENEW3 ABILITY

4 Subtitle A—Group Market Rules

5 SEC. 101. GUARANTEED AVAILABILITY OF HEALTH COV6 ERAGE.

7 (a) IN GENERAL.—

8 (1) NONDISCRIMINATION.—Except as provided

9 in subsection (b), section 102 and section 103—

10 (A) a health plan issuer offering a group

11 health plan may not decline to offer whole

12 group coverage to a group purchaser desiring to

13 purchase such coverage; and

14 (B) an employee health benefit plan or a

15 health plan issuer offering a group health plan

16 may establish eligibility, continuation of eligi17 bility, enrollment, or premium contribution re18 quirements under the terms of such plan, ex19 cept that such requirements shall not be based

20 on health status, medical condition, claims ex21 perience, receipt of health care, medical history,

22 evidence of insurability, or disability.

23 (2) HEALTH PROMOTION AND DISEASE PRE24 VENTION.—Nothing in this subsection shall prevent

25 an employee health benefit plan or a health plan is-
10

HR 2893 IH

1 suer from establishing premium discounts or modify2 ing otherwise applicable copayments or deductibles

3 in return for adherence to programs of health pro4 motion and disease prevention.

5 (b) APPLICATION OF CAPACITY LIMITS.—

6 (1) IN GENERAL.—Subject to paragraph (2), a

7 health plan issuer offering a group health plan may

8 cease offering coverage to group purchasers under

9 the plan if—

10 (A) the health plan issuer ceases to offer

11 coverage to any additional group purchasers;

12 and

13 (B) the health plan issuer can demonstrate

14 to the applicable certifying authority (as defined

15 in section 202(d)), if required, that its financial

16 or provider capacity to serve previously covered

17 participants and beneficiaries (and additional

18 participants and beneficiaries who will be ex19 pected to enroll because of their affiliation with

20 a group purchaser or such previously covered

21 participants or beneficiaries) will be impaired if

22 the health plan issuer is required to offer cov23 erage to additional group purchasers.

24 Such health plan issuer shall be prohibited from of25 fering coverage after a cessation in offering coverage
11

HR 2893 IH

1 under this paragraph for a 6-month period or until

2 the health plan issuer can demonstrate to the appli3 cable certifying authority (as defined in section

4 202(d)) that the health plan issuer has adequate ca5 pacity, whichever is later.

6 (2) FIRST-COME-FIRST-SERVED.—A health plan

7 issuer offering a group health plan is only eligible to

8 exercise the limitations provided for in paragraph

9 (1) if the health plan issuer offers coverage to group

10 purchasers under such plan on a first-come-first11 served basis or other basis established by a State to

12 ensure a fair opportunity to enroll in the plan and

13 avoid risk selection.

14 (c) CONSTRUCTION.—

15 (1) MARKETING OF GROUP HEALTH PLANS.—

16 Nothing in this section shall be construed to prevent

17 a State from requiring health plan issuers offering

18 group health plans to actively market such plans.

19 (2) INVOLUNTARY OFFERING OF GROUP

20 HEALTH PLANS.—Nothing in this section shall be

21 construed to require a health plan issuer to involun22 tarily offer group health plans in a particular mar23 ket. For the purposes of this paragraph, the term

24 ‘‘market’’ means either the large employer market or

25 the small employer market (as defined under appli-
12

HR 2893 IH

1 cable State law, or if not so defined, an employer

2 with not more than 50 employees).

3 SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COV4 ERAGE.

5 (a) IN GENERAL.—

6 (1) GROUP PURCHASER.—Subject to sub7 sections (b) and (c), a group health plan shall be re8 newed or continued in force by a health plan issuer

9 at the option of the group purchaser, except that the

10 requirement of this subparagraph shall not apply in

11 the case of—

12 (A) the nonpayment of premiums or con13 tributions by the group purchaser in accordance

14 with the terms of the group health plan or

15 where the health plan issuer has not received

16 timely premium payments;

17 (B) fraud or misrepresentation of material

18 fact on the part of the group purchaser;

19 (C) the termination of the group health

20 plan in accordance with subsection (b); or

21 (D) the failure of the group purchaser to

22 meet contribution or participation requirements

23 in accordance with paragraph (3).

24 (2) PARTICIPANT.—Subject to subsections (b)

25 and (c), coverage under an employee health benefit
13

HR 2893 IH

1 plan or group health plan shall be renewed or con2 tinued in force, if the group purchaser elects to con3 tinue to provide coverage under such plan, at the op4 tion of the participant (or beneficiary where such

5 right exists under the terms of the plan or under ap6 plicable law), except that the requirement of this

7 paragraph shall not apply in the case of—

8 (A) the nonpayment of premiums or con9 tributions by the participant or beneficiary in

10 accordance with the terms of the employee

11 health benefit plan or group health plan or

12 where such plan has not received timely pre13 mium payments;

14 (B) fraud or misrepresentation of material

15 fact on the part of the participant or bene16 ficiary relating to an application for coverage or

17 claim for benefits;

18 (C) the termination of the employee health

19 benefit plan or group health plan;

20 (D) loss of eligibility for continuation cov21 erage as described in part 6 of subtitle B of

22 title I of the Employee Retirement Income Se23 curity Act of 1974 (29 U.S.C. 1161 et seq.); or

24 (E) failure of a participant or beneficiary

25 to meet requirements for eligibility for coverage
14

HR 2893 IH

1 under an employee health benefit plan or group

2 health plan that are not prohibited by this Act.

3 (3) RULES OF CONSTRUCTION.—Nothing in

4 this subsection, nor in section 101(a), shall be con5 strued to—

6 (A) preclude a health plan issuer from es7 tablishing employer contribution rules or group

8 participation rules for group health plans as al9 lowed under applicable State law;

10 (B) preclude a plan defined in section

11 3(37) of the Employee Retirement Income Se12 curity Act of 1974 (29 U.S.C. 1102(37)) from

13 establishing employer contribution rules or

14 group participation rules; or

15 (C) permit individuals to decline coverage

16 under an employee health benefit plan if such

17 right is not otherwise available under such plan.

18 (b) TERMINATION OF GROUP HEALTH PLANS.—

19 (1) PARTICULAR TYPE OF GROUP HEALTH

20 PLAN NOT OFFERED.—In any case in which a health

21 plan issuer decides to discontinue offering a particu22 lar type of group health plan, a group health plan

23 of such type may be discontinued by the health plan

24 issuer only if—
15

HR 2893 IH

1 (A) the health plan issuer provides notice

2 to each group purchaser covered under a group

3 health plan of this type (and participants and

4 beneficiaries covered under such group health

5 plan) of such discontinuation at least 90 days

6 prior to the date of the discontinuation of such

7 plan;

8 (B) the health plan issuer offers to each

9 group purchaser covered under a group health

10 plan of this type, the option to purchase any

11 other group health plan currently being offered

12 by the health plan issuer; and

13 (C) in exercising the option to discontinue

14 a group health plan of this type and in offering

15 one or more replacement plans, the health plan

16 issuer acts uniformly without regard to the

17 health status or insurability of participants or

18 beneficiaries covered under the group health

19 plan, or new participants or beneficiaries who

20 may become eligible for coverage under the

21 group health plan.

22 (2) DISCONTINUANCE OF ALL GROUP HEALTH

23 PLANS.—

24 (A) IN GENERAL.—In any case in which a

25 health plan issuer elects to discontinue offering
16

HR 2893 IH

1 all group health plans in a State, a group

2 health plan may be discontinued by the health

3 plan issuer only if—

4 (i) the health plan issuer provides no5 tice to the applicable certifying authority

6 (as defined in section 202(d)) and to each

7 group purchaser (and participants and

8 beneficiaries covered under such group

9 health plan) of such discontinuation at

10 least 180 days prior to the date of the ex11 piration of such plan; and

12 (ii) all group health plans issued or

13 delivered for issuance in the State are dis14 continued and coverage under such plans is

15 not renewed.

16 (B) APPLICATION OF PROVISIONS.—The

17 provisions of this paragraph and paragraph (3)

18 may be applied separately by a health plan is19 suer—

20 (i) to all group health plans offered to

21 small employers (as defined under applica22 ble State law, or if not so defined, an em23 ployer with not more than 50 employees);

24 or
17

HR 2893 IH

1 (ii) to all other group health plans of2 fered by the health plan issuer in the

3 State.

4 (3) PROHIBITION ON MARKET REENTRY.—In

5 the case of a discontinuation under paragraph (2),

6 the health plan issuer may not provide for the issu7 ance of any group health plan in the market sector

8 (as described in paragraph (2)(B)) in which issuance

9 of such group health plan was discontinued in the

10 State involved during the 5-year period beginning on

11 the date of the discontinuation of the last group

12 health plan not so renewed.

13 (c) TREATMENT OF NETWORK PLANS.—

14 (1) GEOGRAPHIC LIMITATIONS.—A network

15 plan (as defined in paragraph (2)) may deny contin16 ued participation under such plan to participants or

17 beneficiaries who neither live, reside, nor work in an

18 area in which such network plan is offered, but only

19 if such denial is applied uniformly, without regard to

20 health status or the insurability of particular partici21 pants or beneficiaries.

22 (2) NETWORK PLAN.—As used in paragraph

23 (1), the term ‘‘network plan’’ means an employee

24 health benefit plan or a group health plan that ar25 ranges for the financing and delivery of health care
18

HR 2893 IH

1 services to participants or beneficiaries covered

2 under such plan, in whole or in part, through ar3 rangements with providers.

4 (d) COBRA COVERAGE.—Nothing in subsection

5 (a)(2)(E) or subsection (c) shall be construed to affect any

6 right to COBRA continuation coverage as described in

7 part 6 of subtitle B of title I of the Employee Retirement

8 Income Security Act of 1974 (29 U.S.C. 1161 et seq.).

9 SEC. 103. PORTABILITY OF HEALTH COVERAGE AND LIMI10 TATION ON PREEXISTING CONDITION EXCLU11 SIONS.

12 (a) IN GENERAL.—An employee health benefit plan

13 or a health plan issuer offering a group health plan may

14 impose a limitation or exclusion of benefits relating to

15 treatment of a preexisting condition based on the fact that

16 the condition existed prior to the coverage of the partici17 pant or beneficiary under the plan only if—

18 (1) the limitation or exclusion extends for a pe19 riod of not more than 12 months after the date of

20 enrollment in the plan;

21 (2) the limitation or exclusion does not apply to

22 an individual who, within 30 days of the date of

23 birth or placement for adoption (as determined

24 under section 609(c)(3)(B) of the Employee Retire-
19

HR 2893 IH

1 ment Income Security Act of 1974 (29 U.S.C.

2 1169(c)(3)(B)), was covered under the plan; and

3 (3) the limitation or exclusion does not apply to

4 a pregnancy.

5 (b) CREDITING OF PREVIOUS QUALIFYING COV6 ERAGE.—

7 (1) IN GENERAL.—Subject to paragraph (4), an

8 employee health benefit plan or a health plan issuer

9 offering a group health plan shall provide that if a

10 participant or beneficiary is in a period of previous

11 qualifying coverage as of the date of enrollment

12 under such plan, any period of exclusion or limita13 tion of coverage with respect to a preexisting condi14 tion shall be reduced by 1 month for each month in

15 which the participant or beneficiary was in the pe16 riod of previous qualifying coverage. With respect to

17 an individual described in subsection (a)(2) who

18 maintains continuous coverage, no limitation or ex19 clusion of benefits relating to treatment of a pre20 existing condition may be applied to a child within

21 the child’s first 12 months of life or within 12

22 months after the placement of a child for adoption.

23 (2) DISCHARGE OF DUTY.—An employee health

24 benefit plan shall provide documentation of coverage

25 to participants and beneficiaries whose coverage is
20

HR 2893 IH

1 terminated under the plan. Pursuant to regulations

2 promulgated by the Secretary, the duty of an em3 ployee health benefit plan to verify previous qualify4 ing coverage with respect to a participant or bene5 ficiary is effectively discharged when such employee

6 health benefit plan provides documentation to a par7 ticipant or beneficiary that includes the following in8 formation:

9 (A) the dates that the participant or bene10 ficiary was covered under the plan; and

11 (B) the benefits and cost-sharing arrange12 ment available to the participant or beneficiary

13 under such plan.

14 An employee health benefit plan shall retain the doc15 umentation provided to a participant or beneficiary

16 under subparagraphs (A) and (B) for at least the

17 12-month period following the date on which the

18 participant or beneficiary ceases to be covered under

19 the plan. Upon request, an employee health benefit

20 plan shall provide a second copy of such documenta21 tion to such participant or beneficiary within the 12-

22 month period following the date of such ineligibility.

23 (3) DEFINITIONS.—As used in this section:
21

HR 2893 IH

1 (A) PREVIOUS QUALIFYING COVERAGE.—

2 The term ‘‘previous qualifying coverage’’ means

3 the period beginning on the date—

4 (i) a participant or beneficiary is en5 rolled under an employee health benefit

6 plan or a group health plan, and ending on

7 the date the participant or beneficiary is

8 not so enrolled; or

9 (ii) an individual is enrolled under an

10 individual health plan (as defined in sec11 tion 113) or under a public or private

12 health plan established under Federal or

13 State law, and ending on the date the indi14 vidual is not so enrolled;

15 for a continuous period of more than 30 days

16 (without regard to any waiting period).

17 (B) LIMITATION OR EXCLUSION OF BENE18 FITS RELATING TO TREATMENT OF A PRE19 EXISTING CONDITION.—The term ‘‘limitation or

20 exclusion of benefits relating to treatment of a

21 preexisting condition’’ means a limitation or ex22 clusion of benefits imposed on an individual

23 based on a preexisting condition of such individ24 ual.
22

HR 2893 IH

1 (4) EFFECT OF PREVIOUS COVERAGE.—An em2 ployee health benefit plan or a health plan issuer of3 fering a group health plan may impose a limitation

4 or exclusion of benefits relating to the treatment of

5 a preexisting condition, subject to the limits in sub6 section (a)(1), only to the extent that such service

7 or benefit was not previously covered under the

8 group health plan, employee health benefit plan, or

9 individual health plan in which the participant or

10 beneficiary was enrolled immediately prior to enroll11 ment in the plan involved.

12 (c) LATE ENROLLEES.—Except as provided in sec13 tion 104, with respect to a participant or beneficiary en14 rolling in an employee health benefit plan or a group

15 health plan during a time that is other than the first op16 portunity to enroll during an enrollment period of at least

17 30 days, coverage with respect to benefits or services relat18 ing to the treatment of a preexisting condition in accord19 ance with subsections (a) and (b) may be excluded, except

20 the period of such exclusion may not exceed 18 months

21 beginning on the date of coverage under the plan.

22 (d) AFFILIATION PERIODS.—With respect to a par23 ticipant or beneficiary who would otherwise be eligible to

24 receive benefits under an employee health benefit plan or

25 a group health plan but for the operation of a preexisting
23

HR 2893 IH

1 condition limitation or exclusion, if such plan does not uti2 lize a limitation or exclusion of benefits relating to the

3 treatment of a preexisting condition, such plan may im4 pose an affiliation period on such participant or bene5 ficiary not to exceed 60 days (or in the case of a late par6 ticipant or beneficiary described in subsection (c), 90

7 days) from the date on which the participant or bene8 ficiary would otherwise be eligible to receive benefits under

9 the plan. An employee health benefit plan or a health plan

10 issuer offering a group health plan may also use alter11 native methods to address adverse selection as approved

12 by the applicable certifying authority (as defined in section

13 202(d)). During such an affiliation period, the plan may

14 not be required to provide health care services or benefits

15 and no premium shall be charged to the participant or

16 beneficiary.

17 (e) PREEXISTING CONDITION.—For purposes of this

18 section, the term ‘‘preexisting condition’’ means a condi19 tion, regardless of the cause of the condition, for which

20 medical advice, diagnosis, care, or treatment was rec21 ommended or received within the 6-month period ending

22 on the day before the effective date of the coverage (with23 out regard to any waiting period).

24 (f) STATE FLEXIBILITY.—Nothing in this section

25 shall be construed to preempt State laws that—
24

HR 2893 IH

1 (1) require health plan issuers to impose a limi2 tation or exclusion of benefits relating to the treat3 ment of a preexisting condition for periods that are

4 shorter than those provided for under this section;

5 or

6 (2) allow individuals, participants, and bene7 ficiaries to be considered to be in a period of pre8 vious qualifying coverage if such individual, partici9 pant, or beneficiary experiences a lapse in coverage

10 that is greater than the 30-day period provided for

11 under subsection (b)(3);

12 unless such laws are preempted by section 514 of the Em13 ployee Retirement Income Security Act of 1974 (29

14 U.S.C. 1144).

15 SEC. 104. SPECIAL ENROLLMENT PERIODS.

16 In the case of a participant, beneficiary or family

17 member who—

18 (1) through marriage, separation, divorce,

19 death, birth or placement of a child for adoption, ex20 periences a change in family composition affecting

21 eligibility under a group health plan, individual

22 health plan, or employee health benefit plan;

23 (2) experiences a change in employment status,

24 as described in section 603(2) of the Employee Re25 tirement Income Security Act of 1974 (29 U.S.C.
25

HR 2893 IH

1 1163(2)), that causes the loss of eligibility for cov2 erage, other than COBRA continuation coverage

3 under a group health plan, individual health plan, or

4 employee health benefit plan; or

5 (3) experiences a loss of eligibility under a

6 group health plan, individual health plan, or em7 ployee health benefit plan because of a change in the

8 employment status of a family member;

9 each employee health benefit plan and each group health

10 plan shall provide for a special enrollment period extend11 ing for a reasonable time after such event that would per12 mit the participant to change the individual or family basis

13 of coverage or to enroll in the plan if coverage would have

14 been available to such individual, participant, or bene15 ficiary but for failure to enroll during a previous enroll16 ment period. Such a special enrollment period shall ensure

17 that a child born or placed for adoption shall be deemed

18 to be covered under the plan as of the date of such birth

19 or placement for adoption if such child is enrolled within

20 30 days of the date of such birth or placement for adop21 tion.

22 SEC. 105. DISCLOSURE OF INFORMATION.

23 (a) DISCLOSURE OF INFORMATION BY HEALTH PLAN

24 ISSUERS.—
26

HR 2893 IH

1 (1) IN GENERAL.—In connection with the offer2 ing of any group health plan to a small employer (as

3 defined under applicable State law, or if not so de4 fined, an employer with not more than 50 employ5 ees), a health plan issuer shall make a reasonable

6 disclosure to such employer, as part of its solicita7 tion and sales materials, of—

8 (A) the provisions of such group health

9 plan concerning the health plan issuer’s right to

10 change premium rates and the factors that may

11 affect changes in premium rates;

12 (B) the provisions of such group health

13 plan relating to renewability of coverage;

14 (C) the provisions of such group health

15 plan relating to any preexisting condition provi16 sion; and

17 (D) descriptive information about the ben18 efits and premiums available under all group

19 health plans for which the employer is qualified.

20 Information shall be provided to small employers

21 under this paragraph in a manner determined to be

22 understandable by the average small employer, and

23 shall be sufficiently accurate and comprehensive to

24 reasonably inform small employers, participants and
27

HR 2893 IH

1 beneficiaries of their rights and obligations under

2 the group health plan.

3 (2) EXCEPTION.—With respect to the require4 ment of paragraph (1), any information that is pro5 prietary and trade secret information under applica6 ble law shall not be subject to the disclosure require7 ments of such paragraph.

8 (3) CONSTRUCTION.—Nothing in this sub9 section shall be construed to preempt State report10 ing and disclosure requirements to the extent that

11 such requirements are not preempted under section

12 514 of the Employee Retirement Income Security

13 Act of 1974 (29 U.S.C. 1144).

14 (b) DISCLOSURE OF INFORMATION TO PARTICIPANTS

15 AND BENEFICIARIES.—

16 (1) IN GENERAL.—Section 104(b)(1) of the

17 Employee Retirement Income Security Act of 1974

18 (29 U.S.C. 1024(b)(1)) is amended in the matter

19 following subparagraph (B)—

20 (A) by striking ‘‘102(a)(1),’’ and inserting

21 ‘‘102(a)(1) that is not a material reduction in

22 covered services or benefits provided,’’; and

23 (B) by adding at the end thereof the fol24 lowing new sentences: ‘‘If there is a modifica25 tion or change described in section 102(a)(1)
28

HR 2893 IH

1 that is a material reduction in covered services

2 or benefits provided, a summary description of

3 such modification or change shall be furnished

4 to participants not later than 60 days after the

5 date of the adoption of the modification or

6 change. In the alternative, the plan sponsors

7 may provide such description at regular inter8 vals of not more than 90 days. The Secretary

9 shall issue regulations within 180 days after the

10 date of enactment of the Health Insurance Re11 form Act of 1996, providing alternative mecha12 nisms to delivery by mail through which em13 ployee health benefit plans may notify partici14 pants of material reductions in covered services

15 or benefits.’’.

16 (2) PLAN DESCRIPTION AND SUMMARY.—Sec17 tion 102(b) of the Employee Retirement Income Se18 curity Act of 1974 (29 U.S.C. 1022(b)) is amend19 ed—

20 (A) by inserting ‘‘including the office or

21 title of the individual who is responsible for ap22 proving or denying claims for coverage of bene23 fits’’ after ‘‘type of administration of the plan’’;

24 (B) by inserting ‘‘including the name of

25 the organization responsible for financing
29

HR 2893 IH

1 claims’’ after ‘‘source of financing of the plan’’;

2 and

3 (C) by inserting ‘‘including the office, con4 tact, or title of the individual at the Depart5 ment of Labor through which participants may

6 seek assistance or information regarding their

7 rights under this Act and the Health Insurance

8 Reform Act of 1996 with respect to health ben9 efits that are not offered through a group

10 health plan.’’ after ‘‘benefits under the plan’’.

11 Subtitle B—Individual Market

12 Rules

13 SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.

14 (a) LIMITATION ON REQUIREMENTS.—

15 (1) IN GENERAL.—With respect to an individ16 ual desiring to enroll in an individual health plan, if

17 such individual is in a period of previous qualifying

18 coverage (as defined in section 103(b)(3)(A)(i))

19 under one or more group health plans or employee

20 health benefit plans that commenced 18 or more

21 months prior to the date on which such individual

22 desires to enroll in the individual plan, a health plan

23 issuer described in paragraph (3) may not decline to

24 offer coverage to such individual, or deny enrollment

25 to such individual based on the health status, medi-
30

HR 2893 IH

1 cal condition, claims experience, receipt of health

2 care, medical history, evidence of insurability, or dis3 ability of the individual, except as described in sub4 sections (b) and (c).

5 (2) HEALTH PROMOTION AND DISEASE PRE6 VENTION.—Nothing in this subsection shall be con7 strued to prevent a health plan issuer offering an in8 dividual health plan from establishing premium dis9 counts or modifying otherwise applicable copayments

10 or deductibles in return for adherence to programs

11 of health promotion or disease prevention.

12 (3) HEALTH PLAN ISSUER.—A health plan is13 suer described in this paragraph is a health plan is14 suer that issues or renews individual health plans.

15 (4) PREMIUMS.—Nothing in this subsection

16 shall be construed to affect the determination of a

17 health plan issuer as to the amount of the premium

18 payable under an individual health plan under appli19 cable State law.

20 (b) ELIGIBILITY FOR OTHER GROUP COVERAGE.—

21 The provisions of subsection (a) shall not apply to an indi22 vidual who is eligible for coverage under a group health

23 plan or an employee health benefit plan, or who has had

24 coverage terminated under a group health plan or em25 ployee health benefit plan for failure to make required pre-
31

HR 2893 IH

1 mium payments or contributions, or for fraud or misrepre2 sentation of material fact, or who is otherwise eligible for

3 continuation coverage as described in part 6 of subtitle

4 B of title I of the Employee Retirement Income Security

5 Act of 1974 (29 U.S.C. 1161 et seq.) or under an equiva6 lent State program.

7 (c) APPLICATION OF CAPACITY LIMITS.—

8 (1) IN GENERAL.—Subject to paragraph (2), a

9 health plan issuer offering coverage to individuals

10 under an individual health plan may cease enrolling

11 individuals under the plan if—

12 (A) the health plan issuer ceases to enroll

13 any new individuals; and

14 (B) the health plan issuer can demonstrate

15 to the applicable certifying authority (as defined

16 in section 202(d)), if required, that its financial

17 or provider capacity to serve previously covered

18 individuals will be impaired if the health plan

19 issuer is required to enroll additional individ20 uals.

21 Such a health plan issuer shall be prohibited from

22 offering coverage after a cessation in offering cov23 erage under this paragraph for a 6-month period or

24 until the health plan issuer can demonstrate to the

25 applicable certifying authority (as defined in section
32

HR 2893 IH

1 202(d)) that the health plan issuer has adequate ca2 pacity, whichever is later.

3 (2) FIRST-COME-FIRST-SERVED.—A health plan

4 issuer offering coverage to individuals under an indi5 vidual health plan is only eligible to exercise the lim6 itations provided for in paragraph (1) if the health

7 plan issuer provides for enrollment of individuals

8 under such plan on a first-come-first-served basis or

9 other basis established by a State to ensure a fair

10 opportunity to enroll in the plan and avoid risk se11 lection.

12 (d) MARKET REQUIREMENTS.—

13 (1) IN GENERAL.—The provisions of subsection

14 (a) shall not be construed to require that a health

15 plan issuer offering group health plans to group pur16 chasers offer individual health plans to individuals.

17 (2) CONVERSION POLICIES.—A health plan is18 suer offering group health plans to group purchasers

19 under this Act shall not be deemed to be a health

20 plan issuer offering an individual health plan solely

21 because such health plan issuer offers a conversion

22 policy.

23 (3) MARKETING OF PLANS.—Nothing in this

24 section shall be construed to prevent a State from

25 requiring health plan issuers offering coverage to in-
33

HR 2893 IH

1 dividuals under an individual health plan to actively

2 market such plan.

3 SEC. 111. GUARANTEED RENEWABILITY OF INDIVIDUAL

4 HEALTH COVERAGE.

5 (a) IN GENERAL.—Subject to subsections (b) and (c),

6 coverage for individuals under an individual health plan

7 shall be renewed or continued in force by a health plan

8 issuer at the option of the individual, except that the re9 quirement of this subsection shall not apply in the case

10 of—

11 (1) the nonpayment of premiums or contribu12 tions by the individual in accordance with the terms

13 of the individual health plan or where the health

14 plan issuer has not received timely premium pay15 ments;

16 (2) fraud or misrepresentation of material fact

17 on the part of the individual; or

18 (3) the termination of the individual health plan

19 in accordance with subsection (b).

20 (b) TERMINATION OF INDIVIDUAL HEALTH

21 PLANS.—

22 (1) PARTICULAR TYPE OF INDIVIDUAL HEALTH

23 PLAN NOT OFFERED.—In any case in which a health

24 plan issuer decides to discontinue offering a particu25 lar type of individual health plan to individuals, an
34

HR 2893 IH

1 individual health plan may be discontinued by the

2 health plan issuer only if—

3 (A) the health plan issuer provides notice

4 to each individual covered under the plan of

5 such discontinuation at least 90 days prior to

6 the date of the expiration of the plan;

7 (B) the health plan issuer offers to each

8 individual covered under the plan the option to

9 purchase any other individual health plan cur10 rently being offered by the health plan issuer to

11 individuals; and

12 (C) in exercising the option to discontinue

13 the individual health plan and in offering one or

14 more replacement plans, the health plan issuer

15 acts uniformly without regard to the health sta16 tus or insurability of particular individuals.

17 (2) DISCONTINUANCE OF ALL INDIVIDUAL

18 HEALTH PLANS.—In any case in which a health plan

19 issuer elects to discontinue all individual health

20 plans in a State, an individual health plan may be

21 discontinued by the health plan issuer only if—

22 (A) the health plan issuer provides notice

23 to the applicable certifying authority (as defined

24 in section 202(d)) and to each individual cov25 ered under the plan of such discontinuation at
35

HR 2893 IH

1 least 180 days prior to the date of the dis2 continuation of the plan; and

3 (B) all individual health plans issued or

4 delivered for issuance in the State are discon5 tinued and coverage under such plans is not re6 newed.

7 (3) PROHIBITION ON MARKET REENTRY.—In

8 the case of a discontinuation under paragraph (2),

9 the health plan issuer may not provide for the issu10 ance of any individual health plan in the State in11 volved during the 5-year period beginning on the

12 date of the discontinuation of the last plan not so

13 renewed.

14 (c) TREATMENT OF NETWORK PLANS.—

15 (1) GEOGRAPHIC LIMITATIONS.—A health plan

16 issuer which offers a network plan (as defined in

17 paragraph (2)) may deny continued participation

18 under the plan to individuals who neither live, re19 side, nor work in an area in which the individual

20 health plan is offered, but only if such denial is ap21 plied uniformly, without regard to health status or

22 the insurability of particular individuals.

23 (2) NETWORK PLAN.—As used in paragraph

24 (1), the term ‘‘network plan’’ means an individual

25 health plan that arranges for the financing and de-
36

HR 2893 IH

1 livery of health care services to individuals covered

2 under such health plan, in whole or in part, through

3 arrangements with providers.

4 SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET RE5 FORMS.

6 (a) IN GENERAL.—With respect to any State law

7 with respect to which the Governor of the State notifies

8 the Secretary of Health and Human Services that such

9 State law will achieve the goals of sections 110 and 111,

10 and that is in effect on, or enacted after, the date of enact11 ment of this Act (such as laws providing for guaranteed

12 issue, open enrollment by one or more health plan issuers,

13 high-risk pools, or mandatory conversion policies), such

14 State law shall apply in lieu of the standards described

15 in sections 110 and 111 unless the Secretary of Health

16 and Human Services determines, after considering the cri17 teria described in subsection (b)(1), in consultation with

18 the Governor and Insurance Commissioner or chief insur19 ance regulatory official of the State, that such State law

20 does not achieve the goals of providing access to affordable

21 health care coverage for those individuals described in sec22 tions 110 and 111.

23 (b) DETERMINATION.—
37

HR 2893 IH

1 (1) IN GENERAL.—In making a determination

2 under subsection (a), the Secretary of Health and

3 Human Services shall only—

4 (A) evaluate whether the State law or pro5 gram provides guaranteed access to affordable

6 coverage to individuals described in sections

7 110 and 111;

8 (B) evaluate whether the State law or pro9 gram provides coverage for preexisting condi10 tions (as defined in section 103(e)) that were

11 covered under the individuals’ previous group

12 health plan or employee health benefit plan for

13 individuals described in sections 110 and 111;

14 (C) evaluate whether the State law or pro15 gram provides individuals described in sections

16 110 and 111 with a choice of health plans or

17 a health plan providing comprehensive coverage;

18 and

19 (D) evaluate whether the application of the

20 standards described in sections 110 and 111

21 will have an adverse impact on the number of

22 individuals in such State having access to af23 fordable coverage.

24 (2) NOTICE OF INTENT.—If, within 6 months

25 after the date of enactment of this Act, the Governor
38

HR 2893 IH

1 of a State notifies the Secretary of Health and

2 Human Services that the State intends to enact a

3 law, or modify an existing law, described in sub4 section (a), the Secretary of Health and Human

5 Services may not make a determination under such

6 subsection until the expiration of the 12-month pe7 riod beginning on the date on which such notifica8 tion is made, or until January 1, 1998, whichever is

9 later. With respect to a State that provides notice

10 under this paragraph and that has a legislature that

11 does not meet within the 12-month period beginning

12 on the date of enactment of this Act, the Secretary

13 shall not make a determination under subsection (a)

14 prior to January 1, 1998.

15 (3) NOTICE TO STATE.—If the Secretary of

16 Health and Human Services determines that a State

17 law or program does not achieve the goals described

18 in subsection (a), the Secretary of Health and

19 Human Services shall provide the State with ade20 quate notice and reasonable opportunity to modify

21 such law or program to achieve such goals prior to

22 making a final determination under subsection (a).

23 (c) ADOPTION OF NAIC MODEL.—If, not later than

24 9 months after the date of enactment of this Act—
39

HR 2893 IH

1 (1) the National Association of Insurance Com2 missioners (hereafter referred to as the ‘‘NAIC’’),

3 through a process which the Secretary of Health and

4 Human Services determines has included consulta5 tion with representatives of the insurance industry

6 and consumer groups, adopts a model standard or

7 standards for reform of the individual health insur8 ance market; and

9 (2) the Secretary of Health and Human Serv10 ices determines, within 30 days of the adoption of

11 such NAIC standard or standards, that such stand12 ards comply with the goals of sections 110 and 111;

13 a State that elects to adopt such model standards or sub14 stantially adopt such model standards shall be deemed to

15 have met the requirements of sections 110 and 111 and

16 shall not be subject to a determination under subsection

17 (a).

18 SEC. 113. DEFINITION.

19 (a) IN GENERAL.—As used in this title, the term ‘‘in20 dividual health plan’’ means any contract, policy, certifi21 cate or other arrangement offered to individuals by a

22 health plan issuer that provides or pays for health benefits

23 (such as provider and hospital benefits) and that is not

24 a group health plan under section 2(6).
40

HR 2893 IH

1 (b) ARRANGEMENTS NOT INCLUDED.—Such term

2 does not include the following, or any combination thereof:

3 (1) Coverage only for accident, or disability in4 come insurance, or any combination thereof.

5 (2) Medicare supplemental health insurance (as

6 defined under section 1882(g)(1) of the Social Secu7 rity Act).

8 (3) Coverage issued as a supplement to liability

9 insurance.

10 (4) Liability insurance, including general liabil11 ity insurance and automobile liability insurance.

12 (5) Workers’ compensation or similar insurance.

13 (6) Automobile medical payment insurance.

14 (7) Coverage for a specified disease or illness.

15 (8) Hospital or fixed indemnity insurance.

16 (9) Short-term limited duration insurance.

17 (10) Credit-only, dental-only, or vision-only in18 surance.

19 (11) A health insurance policy providing bene20 fits only for long-term care, nursing home care,

21 home health care, community-based care, or any

22 combination thereof.

23 Subtitle C—COBRA Clarifications

24 SEC. 121. COBRA CLARIFICATIONS.

25 (a) PUBLIC HEALTH SERVICE ACT.—
41

HR 2893 IH

1 (1) PERIOD OF COVERAGE.—Section 2202(2) of

2 the Public Health Service Act (42 U.S.C. 300bb3 2(2)) is amended—

4 (A) in subparagraph (A)—

5 (i) by transferring the sentence imme6 diately preceding clause (iv) so as to ap7 pear immediately following such clause

8 (iv); and

9 (ii) in the last sentence (as so trans10 ferred)—

11 (I) by inserting ‘‘, or a bene12 ficiary-family member of the individ13 ual,’’ after ‘‘an individual’’; and

14 (II) by striking ‘‘at the time of a

15 qualifying event described in section

16 2203(2)’’ and inserting ‘‘at any time

17 during the initial 18-month period of

18 continuing coverage under this title’’;

19 (B) in subparagraph (D)(i), by inserting

20 before ‘‘, or’’ the following: ‘‘, except that the

21 exclusion or limitation contained in this clause

22 shall not be considered to apply to a plan under

23 which a preexisting condition or exclusion does

24 not apply to an individual otherwise eligible for

25 continuation coverage under this section be-
42

HR 2893 IH

1 cause of the provision of the Health Insurance

2 Reform Act of 1996’’; and

3 (C) in subparagraph (E), by striking ‘‘at

4 the time of a qualifying event described in sec5 tion 2203(2)’’ and inserting ‘‘at any time dur6 ing the initial 18-month period of continuing

7 coverage under this title’’.

8 (2) ELECTION.—Section 2205(1)(C) of the

9 Public Health Service Act (42 U.S.C. 300bb10 5(1)(C)) is amended—

11 (A) in clause (i), by striking ‘‘or’’ at the

12 end thereof;

13 (B) in clause (ii), by striking the period

14 and inserting ‘‘, or’’; and

15 (C) by adding at the end thereof the fol16 lowing new clause:

17 ‘‘(iii) in the case of an individual de18 scribed in the last sentence of section

19 2202(2)(A), or a beneficiary-family mem20 ber of the individual, the date such individ21 ual is determined to have been disabled.’’.

22 (3) NOTICES.—Section 2206(3) of the Public

23 Health Service Act (42 U.S.C. 300bb-6(3)) is

24 amended by striking ‘‘at the time of a qualifying

25 event described in section 2203(2)’’ and inserting
43

HR 2893 IH

1 ‘‘at any time during the initial 18-month period of

2 continuing coverage under this title’’.

3 (4) BIRTH OR ADOPTION OF A CHILD.—Section

4 2208(3)(A) of the Public Health Service Act (42

5 U.S.C. 300bb-8(3)(A)) is amended by adding at the

6 end thereof the following new flush sentence:

7 ‘‘Such term shall also include a child who is born to

8 or placed for adoption with the covered employee

9 during the period of continued coverage under this

10 title.’’.

11 (b) EMPLOYEE RETIREMENT INCOME SECURITY ACT

12 OF 1974.—

13 (1) PERIOD OF COVERAGE.—Section 602(2) of

14 the Employee Retirement Income Security Act of

15 1974 (29 U.S.C. 1162(2)) is amended—

16 (A) in the last sentence of subparagraph

17 (A)—

18 (i) by inserting ‘‘, or a beneficiary19 family member of the individual,’’ after

20 ‘‘an individual’’; and

21 (ii) by striking ‘‘at the time of a

22 qualifying event described in section

23 603(2)’’ and inserting ‘‘at any time during

24 the initial 18-month period of continuing

25 coverage under this part’’;
44

HR 2893 IH

1 (B) in subparagraph (D)(i), by inserting

2 before ‘‘, or’’ the following: ‘‘, except that the

3 exclusion or limitation contained in this clause

4 shall not be considered to apply to a plan under

5 which a preexisting condition or exclusion does

6 not apply to an individual otherwise eligible for

7 continuation coverage under this section be8 cause of the provision of the Health Insurance

9 Reform Act of 1996’’; and

10 (C) in subparagraph (E), by striking ‘‘at

11 the time of a qualifying event described in sec12 tion 603(2)’’ and inserting ‘‘at any time during

13 the initial 18-month period of continuing cov14 erage under this part’’.

15 (2) ELECTION.—Section 605(1)(C) of the Em16 ployee Retirement Income Security Act of 1974 (29

17 U.S.C. 1165(1)(C)) is amended—

18 (A) in clause (i), by striking ‘‘or’’ at the

19 end thereof;

20 (B) in clause (ii), by striking the period

21 and inserting ‘‘, or’’; and

22 (C) by adding at the end thereof the fol23 lowing new clause:

24 ‘‘(iii) in the case of an individual de25 scribed in the last sentence of section
45

HR 2893 IH

1 602(2)(A), or a beneficiary-family member

2 of the individual, the date such individual

3 is determined to have been disabled.’’.

4 (3) NOTICES.—Section 606(3) of the Employee

5 Retirement Income Security Act of 1974 (29 U.S.C.

6 1166(3)) is amended by striking ‘‘at the time of a

7 qualifying event described in section 603(2)’’ and in8 serting ‘‘at any time during the initial 18-month pe9 riod of continuing coverage under this part’’.

10 (4) BIRTH OR ADOPTION OF A CHILD.—Section

11 607(3)(A) of the Employee Retirement Income Secu12 rity Act of 1974 (29 U.S.C. 1167(3)) is amended by

13 adding at the end thereof the following new flush

14 sentence:

15 ‘‘Such term shall also include a child who is born to

16 or placed for adoption with the covered employee

17 during the period of continued coverage under this

18 part.’’.

19 (c) INTERNAL REVENUE CODE OF 1986.—

20 (1) PERIOD OF COVERAGE.—Section

21 4980B(f)(2)(B) of the Internal Revenue Code of

22 1986 is amended—

23 (A) in the last sentence of clause (i) by

24 striking ‘‘at the time of a qualifying event de25 scribed in paragraph (3)(B)’’ and inserting ‘‘at
46

HR 2893 IH

1 any time during the initial 18-month period of

2 continuing coverage under this section’’;

3 (B) in clause (iv)(I), by inserting before ‘‘,

4 or’’ the following: ‘‘, except that the exclusion

5 or limitation contained in this subclause shall

6 not be considered to apply to a plan under

7 which a preexisting condition or exclusion does

8 not apply to an individual otherwise eligible for

9 continuation coverage under this subsection be10 cause of the provision of the Health Insurance

11 Reform Act of 1996’’; and

12 (C) in clause (v), by striking ‘‘at the time

13 of a qualifying event described in paragraph

14 (3)(B)’’ and inserting ‘‘at any time during the

15 initial 18-month period of continuing coverage

16 under this section’’.

17 (2) ELECTION.—Section 4980B(f)(5)(A)(iii) of

18 the Internal Revenue Code of 1986 is amended—

19 (A) in subclause (I), by striking ‘‘or’’ at

20 the end thereof;

21 (B) in subclause (II), by striking the pe22 riod and inserting ‘‘, or’’; and

23 (C) by adding at the end thereof the fol24 lowing new subclause:
47

HR 2893 IH

1 ‘‘(III) in the case of an qualified

2 beneficiary described in the last sen3 tence of paragraph (2)(B)(i), the date

4 such individual is determined to have

5 been disabled.’’.

6 (3) NOTICES.—Section 4980B(f)(6)(C) of the

7 Internal Revenue Code of 1986 is amended by strik8 ing ‘‘at the time of a qualifying event described in

9 paragraph (3)(B)’’ and inserting ‘‘at any time dur10 ing the initial 18-month period of continuing cov11 erage under this section’’.

12 (4) BIRTH OR ADOPTION OF A CHILD.—Section

13 4980B(g)(1)(A) of the Internal Revenue Code of

14 1986 is amended by adding at the end thereof the

15 following new flush sentence:

16 ‘‘Such term shall also include a child who

17 is born to or placed for adoption with the

18 covered employee during the period of con19 tinued coverage under this section.’’.

20 (d) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to qualifying events occurring on

22 or after the date of the enactment of this Act for plan

23 years beginning after December 31, 1997.

24 (e) NOTIFICATION OF CHANGES.—Not later than 60

25 days prior to the date on which this section becomes effec-
48

HR 2893 IH

1 tive, each group health plan (covered under title XXII of

2 the Public Health Service Act, part 6 of subtitle B of title

3 I of the Employee Retirement Income Security Act of

4 1974, and section 4980B(f) of the Internal Revenue Code

5 of 1986) shall notify each qualified beneficiary who has

6 elected continuation coverage under such title, part or sec7 tion of the amendments made by this section.

8 Subtitle D—Private Health Plan

9 Purchasing Cooperatives

10 SEC. 131. PRIVATE HEALTH PLAN PURCHASING COOPERA11 TIVES.

12 (a) DEFINITION.—As used in this Act, the term

13 ‘‘health plan purchasing cooperative’’ means a group of

14 individuals or employers that, on a voluntary basis and

15 in accordance with this section, form a cooperative for the

16 purpose of purchasing individual health plans or group

17 health plans offered by health plan issuers. A health plan

18 issuer, agent, broker or any other individual or entity en19 gaged in the sale of insurance may not underwrite a coop20 erative.

21 (b) CERTIFICATION.—

22 (1) IN GENERAL.—If a group described in sub23 section (a) desires to form a health plan purchasing

24 cooperative in accordance with this section and such

25 group appropriately notifies the State and the Sec-
49

HR 2893 IH

1 retary of such desire, the State, upon a determina2 tion that such group meets the requirements of this

3 section, shall certify the group as a health plan pur4 chasing cooperative. The State shall make a deter5 mination of whether such group meets the require6 ments of this section in a timely fashion. Each such

7 cooperative shall also be registered with the Sec8 retary.

9 (2) STATE REFUSAL TO CERTIFY.—If a State

10 fails to implement a program for certifying health

11 plan purchasing cooperatives in accordance with the

12 standards under this Act, the Secretary shall certify

13 and oversee the operations of such cooperatives in

14 such State.

15 (3) INTERSTATE COOPERATIVES.—For purposes

16 of this section, a health plan purchasing cooperative

17 operating in more than one State shall be certified

18 by the State in which the cooperative is domiciled.

19 States may enter into cooperative agreements for the

20 purpose of certifying and overseeing the operation of

21 such cooperatives. For purposes of this subsection, a

22 cooperative shall be considered to be domiciled in the

23 State in which most of the members of the coopera24 tive reside.

25 (c) BOARD OF DIRECTORS.—
50

HR 2893 IH

1 (1) IN GENERAL.—Each health plan purchasing

2 cooperative shall be governed by a Board of Direc3 tors that shall be responsible for ensuring the per4 formance of the duties of the cooperative under this

5 section. The Board shall be composed of a broad

6 cross-section of representatives of employers, em7 ployees, and individuals participating in the coopera8 tive. A health plan issuer, agent, broker or any other

9 individual or entity engaged in the sale of individual

10 health plans or group health plans may not hold or

11 control any right to vote with respect to a coopera12 tive.

13 (2) LIMITATION ON COMPENSATION.—A health

14 plan purchasing cooperative may not provide com15 pensation to members of the Board of Directors.

16 The cooperative may provide reimbursements to

17 such members for the reasonable and necessary ex18 penses incurred by the members in the performance

19 of their duties as members of the Board.

20 (3) CONFLICT OF INTEREST.—No member of

21 the Board of Directors (or family members of such

22 members) nor any management personnel of the co23 operative may be employed by, be a consultant for,

24 be a member of the board of directors of, be affili25 ated with an agent of, or otherwise be a representa-
51

HR 2893 IH

1 tive of any health plan issuer, health care provider,

2 or agent or broker. Nothing in the preceding sen3 tence shall limit a member of the Board from pur4 chasing coverage offered through the cooperative.

5 (d) MEMBERSHIP AND MARKETING AREA.—

6 (1) MEMBERSHIP.—A health plan purchasing

7 cooperative may establish limits on the maximum

8 size of employers who may become members of the

9 cooperative, and may determine whether to permit

10 individuals to become members. Upon the establish11 ment of such membership requirements, the coopera12 tive shall, except as provided in subparagraph (B),

13 accept all employers (or individuals) residing within

14 the area served by the cooperative who meet such re15 quirements as members on a first-come, first-served

16 basis, or on another basis established by the State

17 to ensure equitable access to the cooperative.

18 (2) MARKETING AREA.—A State may establish

19 rules regarding the geographic area that must be

20 served by a health plan purchasing cooperative. With

21 respect to a State that has not established such

22 rules, a health plan purchasing cooperative operating

23 in the State shall define the boundaries of the area

24 to be served by the cooperative, except that such

25 boundaries may not be established on the basis of
52

HR 2893 IH

1 health status or insurability of the populations that

2 reside in the area.

3 (e) DUTIES AND RESPONSIBILITIES.—

4 (1) IN GENERAL.—A health plan purchasing co5 operative shall—

6 (A) enter into agreements with multiple,

7 unaffiliated health plan issuers, except that the

8 requirement of this subparagraph shall not

9 apply in regions (such as remote or frontier

10 areas) in which compliance with such require11 ment is not possible;

12 (B) enter into agreements with employers

13 and individuals who become members of the co14 operative;

15 (C) participate in any program of risk-ad16 justment or reinsurance, or any similar pro17 gram, that is established by the State;

18 (D) prepare and disseminate comparative

19 health plan materials (including information

20 about cost, quality, benefits, and other informa21 tion concerning group health plans and individ22 ual health plans offered through the coopera23 tive);
53

HR 2893 IH

1 (E) actively market to all eligible employ2 ers and individuals residing within the service

3 area; and

4 (F) act as an ombudsman for group health

5 plan or individual health plan enrollees.

6 (2) PERMISSIBLE ACTIVITIES.—A health plan

7 purchasing cooperative may perform such other

8 functions as necessary to further the purposes of

9 this Act, including—

10 (A) collecting and distributing premiums

11 and performing other administrative functions;

12 (B) collecting and analyzing surveys of en13 rollee satisfaction;

14 (C) charging membership fee to enrollees

15 (such fees may not be based on health status)

16 and charging participation fees to health plan

17 issuers;

18 (D) cooperating with (or accepting as

19 members) employers who provide health bene20 fits directly to participants and beneficiaries

21 only for the purpose of negotiating with provid22 ers; and

23 (E) negotiating with health care providers

24 and health plan issuers.
54

HR 2893 IH

1 (f) LIMITATIONS ON COOPERATIVE ACTIVITIES.—A

2 health plan purchasing cooperative shall not—

3 (1) perform any activity relating to the licens4 ing of health plan issuers;

5 (2) assume financial risk directly or indirectly

6 on behalf of members of a health plan purchasing

7 cooperative relating to any group health plan or in8 dividual health plan;

9 (3) establish eligibility, continuation of eligi10 bility, enrollment, or premium contribution require11 ments for participants, beneficiaries, or individuals

12 based on health status, medical condition, claims ex13 perience, receipt of health care, medical history, evi14 dence of insurability, or disability;

15 (4) operate on a for-profit or other basis where

16 the legal structure of the cooperative permits profits

17 to be made and not returned to the members of the

18 cooperative, except that a for-profit health plan pur19 chasing cooperative may be formed by a nonprofit

20 organization—

21 (A) in which membership in such organiza22 tion is not based on health status, medical con23 dition, claims experience, receipt of health care,

24 medical history, evidence of insurability, or dis25 ability; and
55

HR 2893 IH

1 (B) that accepts as members all employers

2 or individuals on a first-come, first-served basis,

3 subject to any established limit on the maxi4 mum size of and employer that may become a

5 member; or

6 (5) perform any other activities that conflict or

7 are inconsistent with the performance of its duties

8 under this Act.

9 (g) LIMITED PREEMPTION OF CERTAIN STATE

10 LAWS.—

11 (1) IN GENERAL.—With respect to a health

12 plan purchasing cooperative that meets the require13 ments of this section, State fictitious group laws

14 shall be preempted.

15 (2) HEALTH PLAN ISSUERS.—

16 (A) RATING.—With respect to a health

17 plan issuer offering a group health plan or indi18 vidual health plan through a health plan pur19 chasing cooperative that meets the requirements

20 of this section, State premium rating require21 ment laws, except to the extent provided under

22 subparagraph (B), shall be preempted unless

23 such laws permit premium rates negotiated by

24 the cooperative to be less than rates that would

25 otherwise be permitted under State law, if such
56

HR 2893 IH

1 rating differential is not based on differences in

2 health status or demographic factors.

3 (B) EXCEPTION.—State laws referred to in

4 subparagraph (A) shall not be preempted if

5 such laws—

6 (i) prohibit the variance of premium

7 rates among employers, plan sponsors, or

8 individuals that are members of a health

9 plan purchasing cooperative in excess of

10 the amount of such variations that would

11 be permitted under such State rating laws

12 among employers, plan sponsors, and indi13 viduals that are not members of the coop14 erative; and

15 (ii) prohibit a percentage increase in

16 premium rates for a new rating period that

17 is in excess of that which would be per18 mitted under State rating laws.

19 (C) BENEFITS.—Except as provided in

20 subparagraph (D), a health plan issuer offering

21 a group health plan or individual health plan

22 through a health plan purchasing cooperative

23 shall comply with all State mandated benefit

24 laws that require the offering of any services,
57

HR 2893 IH

1 category or care, or services of any class or type

2 of provider.

3 (D) EXCEPTION.—In those States that

4 have enacted laws authorizing the issuance of

5 alternative benefit plans to small employers,

6 health plan issuers may offer such alternative

7 benefit plans through a health plan purchasing

8 cooperative that meets the requirements of this

9 section.

10 (h) RULES OF CONSTRUCTION.—Nothing in this sec11 tion shall be construed to—

12 (1) require that a State organize, operate, or

13 otherwise create health plan purchasing cooperatives;

14 (2) otherwise require the establishment of

15 health plan purchasing cooperatives;

16 (3) require individuals, plan sponsors, or em17 ployers to purchase group health plans or individual

18 health plans through a health plan purchasing coop19 erative;

20 (4) require that a health plan purchasing coop21 erative be the only type of purchasing arrangement

22 permitted to operate in a State;

23 (5) confer authority upon a State that the State

24 would not otherwise have to regulate health plan is25 suers or employee health benefits plans; or
58

HR 2893 IH

1 (6) confer authority upon a State (or the Fed2 eral Government) that the State (or Federal Govern3 ment) would not otherwise have to regulate group

4 purchasing arrangements, coalitions, or other similar

5 entities that do not desire to become a health plan

6 purchasing cooperative in accordance with this sec7 tion.

8 (i) APPLICATION OF ERISA.—For purposes of en9 forcement only, the requirements of parts 4 and 5 of sub10 title B of title I of the Employee Retirement Income Secu11 rity Act of 1974 (29 U.S.C. 1101) shall apply to a health

12 plan purchasing cooperative as if such plan were an em13 ployee welfare benefit plan.

14 TITLE II—APPLICATION AND

15 ENFORCEMENT OF STANDARDS

16 SEC. 201. APPLICABILITY.

17 (a) CONSTRUCTION.—

18 (1) ENFORCEMENT.—

19 (A) IN GENERAL.—A requirement or

20 standard imposed under this Act on a group

21 health plan or individual health plan offered by

22 a health plan issuer shall be deemed to be a re23 quirement or standard imposed on the health

24 plan issuer. Such requirements or standards

25 shall be enforced by the State insurance com-
59

HR 2893 IH

1 missioner for the State involved or the official

2 or officials designated by the State to enforce

3 the requirements of this Act. In the case of a

4 group health plan offered by a health plan is5 suer in connection with an employee health ben6 efit plan, the requirements or standards im7 posed under this Act shall be enforced with re8 spect to the health plan issuer by the State in9 surance commissioner for the State involved or

10 the official or officials designated by the State

11 to enforce the requirements of this Act.

12 (B) LIMITATION.—Except as provided in

13 subsection (c), the Secretary shall not enforce

14 the requirements or standards of this Act as

15 they relate to health plan issuers, group health

16 plans, or individual health plans. In no case

17 shall a State enforce the requirements or stand18 ards of this Act as they relate to employee

19 health benefit plans.

20 (2) PREEMPTION OF STATE LAW.—Nothing in

21 this Act shall be construed to prevent a State from

22 establishing, implementing, or continuing in effect

23 standards and requirements—

24 (A) not prescribed in this Act; or
60

HR 2893 IH

1 (B) related to the issuance, renewal, or

2 portability of health insurance or the establish3 ment or operation of group purchasing arrange4 ments, that are consistent with, and are not in

5 direct conflict with, this Act and provide greater

6 protection or benefit to participants, bene7 ficiaries or individuals.

8 (b) RULE OF CONSTRUCTION.—Nothing in this Act

9 shall be construed to affect or modify the provisions of

10 section 514 of the Employee Retirement Income Security

11 Act of 1974 (29 U.S.C. 1144).

12 (c) CONTINUATION.—Nothing in this Act shall be

13 construed as requiring a group health plan or an employee

14 health benefit plan to provide benefits to a particular par15 ticipant or beneficiary in excess of those provided under

16 the terms of such plan.

17 SEC. 202. ENFORCEMENT OF STANDARDS.

18 (a) HEALTH PLAN ISSUERS.—Each State shall re19 quire that each group health plan and individual health

20 plan issued, sold, renewed, offered for sale or operated in

21 such State by a health plan issuer meet the standards es22 tablished under this Act pursuant to an enforcement plan

23 filed by the State with the Secretary. A State shall submit

24 such information as required by the Secretary demonstrat-
61

HR 2893 IH

1 ing effective implementation of the State enforcement

2 plan.

3 (b) EMPLOYEE HEALTH BENEFIT PLANS.—With re4 spect to employee health benefit plans, the Secretary shall

5 enforce the reform standards established under this Act

6 in the same manner as provided for under sections 502,

7 504, 506, and 510 of the Employee Retirement Income

8 Security Act of 1974 (29 U.S.C. 1132, 1134, 1136, and

9 1140). The civil penalties contained in paragraphs (1) and

10 (2) of section 502(c) of such Act (29 U.S.C. 1132(c)(1)

11 and (2)) shall apply to any information required by the

12 Secretary to be disclosed and reported under this section.

13 (c) FAILURE TO IMPLEMENT PLAN.—In the case of

14 the failure of a State to substantially enforce the stand15 ards and requirements set forth in this Act with respect

16 to group health plans and individual health plans as pro17 vided for under the State enforcement plan filed under

18 subsection (a), the Secretary, in consultation with the Sec19 retary of Health and Human Services, shall implement an

20 enforcement plan meeting the standards of this Act in

21 such State. In the case of a State that fails to substan22 tially enforce the standards and requirements set forth in

23 this Act, each health plan issuer operating in such State

24 shall be subject to civil enforcement as provided for under

25 sections 502, 504, 506, and 510 of the Employee Retire-
62

HR 2893 IH

1 ment Income Security Act of 1974 (29 U.S.C. 1132, 1134,

2 1136, and 1140). The civil penalties contained in para3 graphs (1) and (2) of section 502(c) of such Act (29

4 U.S.C. 1132(c)(1) and (2)) shall apply to any information

5 required by the Secretary to be disclosed and reported

6 under this section.

7 (d) APPLICABLE CERTIFYING AUTHORITY.—As used

8 in this title, the term ‘‘applicable certifying authority’’

9 means, with respect to—

10 (1) health plan issuers, the State insurance

11 commissioner or official or officials designated by

12 the State to enforce the requirements of this Act for

13 the State involved; and

14 (2) an employee health benefit plan, the Sec15 retary.

16 (e) REGULATIONS.—The Secretary may promulgate

17 such regulations as may be necessary or appropriate to

18 carry out this Act.

19 (f) TECHNICAL AMENDMENT.—Section 508 of the

20 Employee Retirement Income Security Act of 1974 (29

21 U.S.C. 1138) is amended by inserting ‘‘and under the

22 Health Insurance Reform Act of 1996’’ before the period.
63

HR 2893 IH

1 TITLE III—MISCELLANEOUS

2 PROVISIONS

3 SEC. 301. HMOS ALLOWED TO OFFER PLANS WITH

4 DEDUCTIBLES TO INDIVIDUALS WITH MEDI5 CAL SAVINGS ACCOUNTS.

6 Section 1301(b) of the Public Health Service Act (42

7 U.S.C. 300e(b)) is amended by adding at the end the fol8 lowing new paragraph:

9 ‘‘(6)(A) If a member certifies that a medical

10 savings account has been established for the benefit

11 of such member, a health maintenance organization

12 may, at the request of such member reduce the basic

13 health services payment otherwise determined under

14 paragraph (1) by requiring the payment of a deduct15 ible by the member for basic health services.

16 ‘‘(B) For purposes of this paragraph, the term

17 ‘medical savings account’ means an account which,

18 by its terms, allows the deposit of funds and the use

19 of such funds and income derived from the invest20 ment of such funds for the payment of the deduct21 ible described in subparagraph (A).’’.

22 SEC. 302. HEALTH COVERAGE AVAILABILITY STUDY.

23 (a) IN GENERAL.—The Secretary of Health and

24 Human Services, in consultation with the Secretary, rep25 resentatives of State officials, consumers, and other rep-
64

HR 2893 IH

1 resentatives of individuals and entities that have expertise

2 in health insurance and employee benefits, shall conduct

3 a two-part study, and prepare and submit reports, in ac4 cordance with this section.

5 (b) EVALUATION OF AVAILABILITY.—Not later than

6 January 1, 1998, the Secretary of Health and Human

7 Services shall prepare and submit to the appropriate com8 mittees of Congress a report, concerning—

9 (1) an evaluation, based on the experience of

10 States, expert opinions, and such additional data as

11 may be available, of the various mechanisms used to

12 ensure the availability of reasonably priced health

13 coverage to employers purchasing group coverage

14 and to individuals purchasing coverage on a non15 group basis; and

16 (2) whether standards that limit the variation

17 in premiums will further the purposes of this Act.

18 (c) EVALUATION OF EFFECTIVENESS.—Not later

19 than January 1, 1999, the Secretary of Health and

20 Human Services shall prepare and submit to the appro21 priate committees of Congress a report, concerning the ef22 fectiveness of the provisions of this Act and the various

23 State laws, in ensuring the availability of reasonably

24 priced health coverage to employers purchasing group cov-
65

HR 2893 IH

1 erage and individuals purchasing coverage on a non-group

2 basis.

3 SEC. 303. EFFECTIVE DATE.

4 Except as otherwise provided for in this Act, the pro5 visions of this Act shall apply as follows:

6 (1) With respect to group health plans and in7 dividual health plans, such provisions shall apply to

8 plans offered, sold, issued, renewed, in effect, or op9 erated on or after January 1, 1997; and

10 (2) With respect to employee health benefit

11 plans, on the first day of the first plan year begin12 ning on or after January 1, 1997.

13 SEC. 304. SEVERABILITY.

14 If any provision of this Act or the application of such

15 provision to any person or circumstance is held to be un16 constitutional, the remainder of this Act and the applica17 tion of the provisions of such to any person or cir18 cumstance shall not be affected thereby.

Æ

HR 2893 IH——2

HR 2893 IH——3

HR 2893 IH——4

HR 2893 IH——5