I

104TH CONGRESS

1ST SESSION H. R. 2836

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

DECEMBER 22, 1995

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

Educational Opportunities and Ways and Means, 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.

4 This Act may be cited as the ‘‘Health Insurance Re5 form Act of 1996’’.
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1 SEC. 2. DEFINITIONS.

2 As used in this Act:

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

4 the same meaning given such term under section

5 3(8) of the Employee Retirement Income Security

6 Act of 1974 (29 U.S.C. 1102(8)).

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

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

9 the Employee Retirement Income Security Act of

10 1974 (29 U.S.C. 1002(6)).

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

12 same meaning given such term under section 3(6) of

13 the Employee Retirement Income Security Act of

14 1974 (29 U.S.C. 1002(6)), except that such term

15 shall only include employers of two or more employ16 ees.

17 (4) FAMILY.—

18 (A) IN GENERAL.—The term ‘‘family’’ in19 cludes an individual, the individual’s spouse,

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

21 (B) CHILD.—For purposes of subpara22 graph (A), the term ‘‘child’’ means any individ23 ual who is a child within the meaning of section

24 151(c)(3) of the Internal Revenue Code of

25 1986, and under 19 years of age.
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1 (5) GROUP HEALTH PLAN.—The term ‘‘group

2 health plan’’ means any employee welfare benefit

3 plan, governmental plan, or church plan (as defined

4 under paragraphs (1), (32) and (33) of section 3 of

5 the Employee Retirement Income Security Act of

6 1974 (29 U.S.C. 1002(1), (32) and (33))) that

7 maintains (or makes contributions to) a health plan.

8 (6) HEALTH PLAN.—The term ‘‘health plan’’

9 means any plan or arrangement that provides, or

10 pays for health benefits (such as physician and hos11 pital benefits) directly or through insurance, reim12 bursement, or otherwise. Such term does not include

13 the following, or any combination thereof:

14 (A) Coverage only for accidental death,

15 dismemberment, dental, or vision.

16 (B) Coverage providing wages or payments

17 in lieu of wages for any period during which the

18 employee is absent from work on account of

19 sickness or injury.

20 (C) A medicare supplemental policy (as de21 fined in section 1882(g)(1) of the Social Secu22 rity Act).

23 (D) Coverage issued as a supplement to li24 ability insurance.
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1 (E) Workers’ compensation or similar in2 surance.

3 (F) Automobile medical payment insur4 ance.

5 (G) A long-term care insurance policy, in6 cluding a nursing home fixed indemnity policy.

7 (H) Any plan or arrangement not de8 scribed in any preceding subparagraph that

9 provides for benefit payments, on a periodic

10 basis, for a specified disease or illness or period

11 of hospitalization without regard to the costs in12 curred or services rendered during the period to

13 which the payments relate.

14 (I) Coverage provided through a State risk

15 pool, uncompensated care pool, or similar sub16 sidized program.

17 (7) INDIVIDUAL HEALTH PLAN.—The term ‘‘in18 dividual health plan’’ means a health plan marketed

19 to individuals.

20 (8) INSURED HEALTH PLAN.—The term ‘‘in21 sured health plan’’ means, with respect to an em22 ployee welfare benefit plan (as defined under section

23 3(1) of the Employee Retirement Income Security

24 Act of 1974 (29 U.S.C. 1002(1))), a health plan

25 that is a contract for health benefits with an insurer
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1 that is subject to State regulation in accordance

2 with section 514(b)(2)(A) of the Employee Retire3 ment Income Security Act of 1974 (29 U.S.C.

4 1144(b)(2)(A)).

5 (9) INSURER.—The term ‘‘insurer’’ means—

6 (A) a licensed insurance company;

7 (B) a prepaid hospital or medical service

8 plan;

9 (C) a network plan (such as a preferred

10 provider organization) or heath maintenance or11 ganization; or

12 (D) any other entity (other than an entity

13 described in paragraph (12)), except for those

14 entities described in section 514(b)(6)(A)(i) of

15 the Employee Retirement Income Security Act

16 of 1974 (29 U.S.C. 1144(b)(6)(A)(i)) providing

17 a plan of health insurance or health benefits;

18 with respect to which State insurance laws apply

19 and are not preempted under section 514 of the Em20 ployee Retirement Income Security Act of 1974 (29

21 U.S.C. 1144).

22 (10) PARTICIPANT.—The term ‘‘participant’’

23 means any person who is eligible, or is required to

24 be eligible, to receive benefits under a group health

25 plan.
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1 (11) PLAN SPONSOR.—The term ‘‘plan spon2 sor’’ has the same meaning given such term under

3 section 3(16)(B) of the Employee Retirement In4 come Security Act of 1974 (29 U.S.C.

5 1002(16)(B)).

6 (12) SECRETARY.—The term ‘‘Secretary’’, un7 less specifically provided otherwise, means the Sec8 retary of Labor.

9 (13) SELF-INSURED HEALTH PLAN.—The term

10 ‘‘self-insured health plan’’ means a group health

11 plan that is not an insured health plan.

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

13 the several States, the District of Columbia, Puerto

14 Rico, the United States Virgin Islands, Guam,

15 American Samoa, and the Commonwealth of the

16 Northern Mariana Islands.

17 TITLE I—HEALTH CARE ACCESS,

18 PORTABILITY, AND RENEW19 ABILITY

20 Subtitle A—Group Health Plan

21 Rules

22 SEC. 101. GUARANTEED AVAILABILITY OF HEALTH COV23 ERAGE.

24 (a) IN GENERAL.—
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1 (1) GROUP HEALTH PLANS.—Except as pro2 vided in subsection (b) and section 103—

3 (A) an insurer may not decline to provide

4 whole group coverage to employers; and

5 (B) a group health plan (whether an in6 sured health plan or self-insured health plan)

7 may not establish eligibility, continuation, en8 rollment, or contribution requirements for par9 ticipants or beneficiaries;

10 based on health status, medical condition, claims ex11 perience, receipt of health care, medical history, evi12 dence of insurability, or disability of a participant or

13 beneficiary.

14 (2) HEALTH PROMOTION OR DISEASE PREVEN15 TION.—Nothing in this subsection shall prevent a

16 group health plan from establishing discounts for

17 participation in programs of health promotion or

18 disease prevention.

19 (b) APPLICATION OF CAPACITY LIMITS.—

20 (1) IN GENERAL.—Subject to paragraph (2), an

21 insurer offering coverage in connection with a group

22 health plan may cease enrolling employers under the

23 plan if—

24 (A) the insurer ceases to enroll any new

25 employers, participants and beneficiaries; and
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1 (B) the insurer can demonstrate to the ap2 plicable certifying authority (as defined in sec3 tion 202(d)), if required, that its financial or

4 provider capacity to serve previously covered

5 participants and beneficiaries (and additional

6 participants and beneficiaries who will be ex7 pected to enroll because of their affiliation with

8 the group health plan or such previously cov9 ered participants or beneficiaries) will be im10 paired if the insurer is required to enroll addi11 tional employers, participants and beneficiaries.

12 Such an insurer shall be prohibited from

13 recommencing enrollment after a cessation in enroll14 ment under this paragraph for a 6-month period

15 after such cessation or until the insurer can dem16 onstrate to the applicable certifying authority (as de17 fined in section 202(d)) that the insurer has ade18 quate capacity, whichever is later.

19 (2) FIRST-COME-FIRST-SERVED.—An insurer

20 offering coverage in connection with a group health

21 plan is only eligible to exercise the limitations pro22 vided for in paragraph (1) if the insurer provides for

23 enrollment of employers (including participants and

24 beneficiaries) under such plan on a first-come-first25 served basis (except in the case of additional employ-
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1 ers, participants and beneficiaries described in para2 graph (1)(B)).

3 (c) CONSTRUCTION.—Nothing in this section shall be

4 construed to prevent a State from requiring insurers offer5 ing group health plans to actively market such plans.

6 SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COV7 ERAGE.

8 (a) IN GENERAL.—

9 (1) PLAN SPONSOR.—Subject to subsections (b)

10 and (c), a group health plan that is an insured

11 health plan shall be renewed or continued in force at

12 the option of the plan sponsor, except that the re13 quirement of this subparagraph shall not apply in

14 the case of—

15 (A) the nonpayment of premiums or con16 tributions by the plan sponsor in accordance

17 with the terms of the plan or where the insurer

18 has not received timely premium payments;

19 (B) fraud or misrepresentation of material

20 fact on the part of the plan sponsor;

21 (C) the termination of the plan in accord22 ance with subsection (b); or

23 (D) the failure of the plan sponsor to meet

24 contribution or participation requirements in

25 accordance with paragraph (3).
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1 (2) PARTICIPANT.—Subject to subsections (b)

2 and (c), coverage under a group health plan (wheth3 er an insured health plan or a self-insured health

4 plan) shall be renewed or continued in force, if the

5 plan sponsor elects to continue to provide coverage

6 under such plan, at the option of the participant or

7 beneficiary, except that the requirement of this para8 graph shall not apply in the case of—

9 (A) the nonpayment of premiums or con10 tributions by the participant or beneficiary in

11 accordance with the terms of the plan or where

12 the plan has not received timely premium pay13 ments;

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 plan in accord19 ance with subsection (b); or

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.).

24 (3) CONTRIBUTION AND PARTICIPATION

25 RULES.—Nothing in this subsection shall be con-
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1 strued to preclude an insurer from establishing em2 ployer contribution rules or group participation rules

3 for plan sponsors in connection with an insured

4 group health plan consistent with applicable State

5 law.

6 (b) TERMINATION OF HEALTH PLANS.—

7 (1) HEALTH PLAN NOT OFFERED.—In any case

8 in which an insurer is no longer going to continue

9 to offer a group health plan to plan sponsors, par10 ticipants or beneficiaries, the plan may be discon11 tinued by the insurer if—

12 (A) the insurer provides notice to each

13 plan sponsor (and participants and beneficiaries

14 covered under the group health plan) of such

15 termination at least 90 days prior to the date

16 of the expiration of such plan;

17 (B) the insurer offers to each plan sponsor

18 the option to purchase any other group health

19 plan currently being offered; and

20 (C) in exercising the option to discontinue

21 the group health plan and in offering one or

22 more replacement plans, the insurer acts uni23 formly without regard to the health status or

24 insurability of participants or beneficiaries, or

25 new participants or beneficiaries.
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1 (2) INSURER NOT OFFERING PLAN.—

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

3 an insurer is no longer offering any group

4 health plan in a State, the plan may be discon5 tinued by the insurer if—

6 (i) the insurer provides notice to the

7 applicable certifying authority (as defined

8 in section 202(d)) and to each plan spon9 sor (and participants and beneficiaries cov10 ered under such plan) of such termination

11 at least 180 days prior to the date of the

12 expiration of the plan; and

13 (ii) all such plans issued or delivered

14 for issuance in the State are discontinued

15 and coverage under such plans is

16 nonrenewed.

17 (B) APPLICATION OF PROVISIONS.—The

18 provisions of this paragraph and paragraph (3)

19 may be applied separately by an insurer—

20 (i) to all group health plans of small

21 employers (as defined under applicable

22 State law, or employers with not more

23 than 50 employees if such term is not de24 fined in State law) covering participants or

25 participants and beneficiaries; or
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1 (ii) to all other group health plans of2 fered by the insurer in the State.

3 (3) PROHIBITION ON MARKET REENTRY.—In

4 the case of a termination under paragraph (2), the

5 insurer may not provide for the issuance of any in6 sured group health plan that was terminated in the

7 State involved during the 5-year period beginning on

8 the date of the termination of the last plan not so

9 renewed.

10 (c) TREATMENT OF NETWORK PLANS.—

11 (1) GEOGRAPHIC LIMITATIONS.—A group

12 health plan which is a network plan (as defined in

13 paragraph (2)) or a health maintenance organization

14 plan may deny continued participation under the

15 plan to participants or beneficiaries who neither live,

16 reside, nor work in an area in which the group

17 health plan is offered, but only if such denial is ap18 plied uniformly, without regard to health status or

19 the insurability of particular participants or bene20 ficiaries.

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

22 (1), the term ‘‘network plan’’ means a health plan

23 that arranges for the financing and delivery of

24 health care services to participants or beneficiaries

25 covered under such health plan, in whole or in part,
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1 through arrangements with providers to furnish

2 health care services.

3 SEC. 103. PORTABILITY OF HEALTH COVERAGE AND LIMI4 TATION ON PREEXISTING CONDITION EXCLU5 SIONS.

6 (a) IN GENERAL.—A group health plan (whether an

7 insured health plan or a self-insured health plan) may im8 pose a limitation or exclusion of benefits relating to treat9 ment of a preexisting condition based on the fact that the

10 condition existed prior to the effective date of the plan

11 with respect to a participant or beneficiary only if—

12 (1) the limitation or exclusion extends for a pe13 riod of not more than 12 months after the date of

14 enrollment in the health plan;

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

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

17 birth, was covered under the plan; and

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

19 a pregnancy existing on the effective date of cov20 erage.

21 (b) CREDITING OF QUALIFYING PREVIOUS COV22 ERAGE.—

23 (1) IN GENERAL.—A group health plan (wheth24 er an insured health plan or a self-insured health

25 plan) shall provide that if a participant or bene-
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1 ficiary is in a period of previous qualifying coverage

2 as of the date of enrollment under such plan, any

3 period of exclusion or limitation of coverage with re4 spect to a preexisting condition shall be reduced by

5 1 month for each month in which the participant or

6 beneficiary was in the period of qualifying previous

7 coverage.

8 (2) DISCHARGE OF DUTY.—The duty of an in9 surer or plan sponsor to verify previous qualifying

10 coverage with respect to a participant or beneficiary

11 is effectively discharged when such insurer or plan

12 sponsor provides documentation to a participant or

13 beneficiary at the time such participant or bene14 ficiary becomes ineligible for coverage under the

15 group health plan verifying—

16 (A) the dates that the participant or bene17 ficiary was covered under such previous qualify18 ing coverage; and

19 (B) the benefits and cost-sharing arrange20 ment available to the participant or beneficiary

21 under such previous qualifying coverage.

22 (3) DEFINITION.—The term ‘‘previous qualify23 ing coverage’’ means the period beginning on the

24 date a participant or beneficiary is enrolled under a

25 health plan and ends on the date the participant or
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1 beneficiary is not so enrolled for a continuous period

2 of more than 30 days (without regard to any waiting

3 period).

4 (4) CONSTRUCTION.—Nothing in this sub5 section shall be construed to prohibit a preexisting

6 condition exclusion, subject to the limits in sub7 section (a)(1), for a service or benefit related to a

8 preexisting condition if such service or benefit was

9 not previously covered under the health plan in

10 which the individual was enrolled immediately prior

11 to enrollment in the plan involved.

12 (c) LATE ENROLLEES.—With respect to a partici13 pant or beneficiary enrolling in a group health plan

14 (whether an insured health plan or a self-insured health

15 plan) during a time that is other than the first opportunity

16 to enroll during an enrollment period of at least 30 days,

17 the plan may exclude coverage with respect to services re18 lated to the treatment of a preexisting condition in accord19 ance with subsections (a) and (b), except the period of

20 such exclusion may not exceed 18 months beginning on

21 the date of coverage under the plan.

22 (d) WAITING PERIODS.—With respect to participants

23 or beneficiaries who have become eligible to enroll in a

24 group health plan (whether an insured health plan or a

25 self-insured health plan), if such plan does not utilize a
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1 preexisting condition exclusion, such plan may impose a

2 waiting period on such participants or beneficiaries not to

3 exceed 60 days (or in the case of a late participant or

4 beneficiary described in subsection (c), 90 days) prior to

5 the date on which coverage under the plan becomes effec6 tive. A group health plan may also use alternative methods

7 to address adverse selection as approved by the applicable

8 certifying authority (as defined in section 202(d)). During

9 such a waiting period, the plan may not be required to

10 provide health care services or benefits and no premium

11 shall be charged to the participants or beneficiaries.

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

13 section, the term ‘‘preexisting condition’’ means a condi14 tion for which medical advice, diagnosis, care, or treat15 ment was recommended or received within the 6-month

16 period ending on the day before the effective date of the

17 coverage (without regard to any waiting period).

18 (f) STATE FLEXIBILITY.—Nothing in this Act shall

19 be construed to preempt State laws that limit the exclu20 sions or limitations for preexisting conditions to periods

21 that are shorter than those provided for under this section

22 so long as such laws are not in violation of section 514

23 of the Employee Retirement Income Security Act of 1974

24 (29 U.S.C. 1144).
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1 SEC. 104. SPECIAL ENROLLMENT PERIODS.

2 In the case of a participant, beneficiary or family

3 member who—

4 (1) through marriage, separation, divorce,

5 death, birth or adoption of a child, experiences a

6 change in family composition affecting health insur7 ance coverage;

8 (2) experiences a change in employment status

9 (including a significant change in the terms and con10 ditions of employment) or in continuation coverage;

11 or

12 (3) experiences a loss of health insurance cov13 erage because of a change in the employment status

14 of a family member;

15 each group health plan (whether insured or self-insured)

16 shall provide for a special enrollment period at the time

17 of such event which would permit the participant, bene18 ficiary or family member to change the individual or fam19 ily basis of coverage or to enroll in the plan if coverage

20 would have been available to such individual but for failure

21 to enroll during a previous enrollment period. Such a spe22 cial enrollment period shall ensure that a child born or

23 adopted shall be deemed to be covered under the plan as

24 of the date of such birth or adoption if such child is en25 rolled within 30 days of the date of such birth or adoption.
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1 SEC. 105. DISCLOSURE OF INFORMATION.

2 (a) IN GENERAL.—In connection with the offering

3 for sale of any group health plan to a small employer (as

4 defined under applicable State law, or employers with not

5 more than 50 employees if such term is not defined in

6 State law), an insurer shall make a reasonable disclosure

7 to the employer, as part of its solicitation and sales mate8 rials, of—

9 (1) the provisions of the group health plan con10 cerning the insurer’s right to change premium rates

11 and the factors that affect changes in premium

12 rates;

13 (2) the provisions of such plan relating to re14 newability of policies and contracts;

15 (3) the provisions of such plan relating to any

16 preexisting condition provision; and

17 (4) descriptive information about the benefits

18 and premiums available under all group health plans

19 for which the employer is qualified.

20 Information shall be provided under this subsection in a

21 manner determined to be understandable by the average

22 small employer or plan sponsor, and shall be sufficiently

23 accurate and comprehensive to reasonably inform employ24 ers, participants and beneficiaries of their rights and obli25 gations under the plan.
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1 (b) EXCEPTION.—With respect to the requirement of

2 subsection (a), any information that is proprietary and

3 trade secret information under applicable law shall not be

4 subject to the disclosure requirements of such subsection.

5 (c) CONSTRUCTION.—Nothing in this section shall be

6 construed to preempt State reporting and disclosure re7 quirements or reporting and disclosure requirements

8 under the Employee Retirement Income Security Act of

9 1974.

10 Subtitle B—Individual Health Plan

11 Rules

12 SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.

13 (a) LIMITATION ON REQUIREMENTS.—

14 (1) IN GENERAL.—With respect to an individ15 ual desiring to enroll in an individual health plan, if

16 such individual is in a period of previous qualifying

17 coverage (as defined in section 103(b)(3)) under a

18 group health plan that commenced 12 or more

19 months prior to the date on which such individual

20 desires to enroll in such a plan, an insurer described

21 in paragraph (3) may not establish eligibility, con22 tinuation, or enrollment requirements based on the

23 health status, medical condition, claims experience,

24 receipt of health care, medical history, evidence of

25 insurability, or disability of the individual.
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1 (2) HEALTH PROMOTION AND DISEASE PRE2 VENTION.—Nothing in this subsection shall be con3 strued to prevent an insurer from establishing dis4 counts for participation in programs of health pro5 motion or disease prevention.

6 (3) INSURER.—An insurer described in this

7 paragraph is an insurer that issues or renews any

8 type or form of health plan to individuals.

9 (4) PREMIUMS.—Nothing in this subsection

10 shall be construed to affect the determination of an

11 insurer as to the amount of the premium payable

12 under a health plan issued to individuals under ap13 plicable State law.

14 (b) ELIGIBILITY FOR OTHER GROUP COVERAGE.—

15 The provisions of subsection (a) shall not apply to an indi16 vidual who is eligible for coverage under a group health

17 plan, or who has had coverage terminated under a group

18 health plan for failure to make required premium pay19 ments or contributions, or for fraud or misrepresentation

20 of material fact, or who is otherwise eligible for continu21 ation coverage as described in section 602 of the Employee

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

23 1162).
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1 (c) MARKET REQUIREMENTS.—The provisions of

2 subsection (a) shall not be construed to require that an

3 insurer be an insurer of individuals.

4 SEC. 111. GUARANTEED RENEWABILITY OF INDIVIDUAL

5 HEALTH COVERAGE.

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

7 coverage for individuals under an individual health plan

8 shall be renewed or continued in force at the option of

9 the individual, except that the requirement of this sub10 section shall not apply in the case of—

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

13 of the plan or where the plan has not received timely

14 premium payments;

15 (2) fraud or misrepresentation of material fact

16 on the part of the individual; or

17 (3) the termination of the plan in accordance

18 with subsection (b).

19 (b) TERMINATION OF HEALTH PLANS.—

20 (1) HEALTH PLAN NOT OFFERED.—In any case

21 in which an insurer is no longer going to continue

22 to offer an individual health plan to individuals, the

23 plan may be discontinued by the insurer if—

24 (A) the insurer provides notice to each in25 dividual covered under the plan of such termi-
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1 nation at least 90 days prior to the date of the

2 expiration of the plan;

3 (B) the insurer offers to each individual

4 covered under the plan the option to purchase

5 any other health plan currently being offered to

6 individuals; and

7 (C) in exercising the option to discontinue

8 the plan and in offering one or more replace9 ment plans, the insurer acts uniformly without

10 regard to the health status or insurability of in11 dividuals.

12 (2) INSURER NOT OFFERING PLAN.—In any

13 case in which an insurer is no longer offering any

14 individual health plan in a State, the plan may be

15 discontinued by the insurer if—

16 (A) the insurer provides notice to the ap17 plicable certifying authority (as defined in sec18 tion 202(d)) and to each individual covered

19 under the plan of such termination at least 180

20 days prior to the date of the expiration of the

21 plan; and

22 (B) all such plans issued or delivered for

23 issuance in the State are discontinued and cov24 erage under such plans is nonrenewed.
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1 (3) PROHIBITION ON MARKET REENTRY.—In

2 the case of a termination under paragraph (2), the

3 insurer may not provide for the issuance of any indi4 vidual health plan in the State involved during the

5 5-year period beginning on the date of the termi6 nation of the last plan not so renewed.

7 (c) TREATMENT OF NETWORK PLANS.—

8 (1) GEOGRAPHIC LIMITATIONS.—An individual

9 health plan which is a network plan (as defined in

10 paragraph (2)) or a health maintenance organization

11 plan may deny continued participation under the

12 plan to individuals who neither live, reside, nor work

13 in an area in which the individual health plan is of14 fered, but only if such denial is applied uniformly,

15 without regard to health status or the insurability of

16 particular individuals.

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

18 (1), the term ‘‘network plan’’ means a health plan

19 that arranges for the financing and delivery of

20 health care services to individuals covered under

21 such health plan, in whole or in part, through ar22 rangements with providers to furnish health care

23 services.
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1 SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET RE2 FORMS.

3 With respect to any State law in effect on, or enacted

4 after, the date of enactment of this Act, such as guarantee

5 issue, open enrollment, high-risk pools, or mandatory con6 version policies, such State law shall apply in lieu of the

7 standards described in sections 110 and 111 unless the

8 Secretary of Health and Human Services determines that

9 such State law is not as effective in providing access to

10 affordable health care coverage as the standards described

11 in sections 110 and 111.

12 SEC. 113. INDIVIDUAL HEALTH COVERAGE AVAILABILITY

13 STUDY.

14 (a) IN GENERAL.—Not later than January 1, 1997,

15 the Secretary of Health and Human Services, in consulta16 tion with the Secretary, representatives of State officials,

17 consumers, and other representatives of individuals and

18 entities that have expertise in health insurance and em19 ployee benefit issues, shall conduct a study, and prepare

20 and submit to the appropriate committees of Congress a

21 report, concerning—

22 (1) the most appropriate way, in light of the ex23 perience of the various States, expert opinions, and

24 such additional data as may be available, to ensure

25 the availability of reasonably priced health insurance
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1 to individuals purchasing coverage on a non-group

2 basis;

3 (2) the need for Federal standards that limit

4 the variation in health insurance premiums charged

5 to individuals and groups of different characteristics

6 in order to achieve the purposes of this Act; and

7 (3) the effectiveness of the provisions of this

8 Act, and State insurance reform laws, in stabilizing

9 the small group health insurance market by provid10 ing for the broad pooling of risk.

11 (b) RECOMMENDATIONS.—The report submitted

12 under subsection (a) shall contain the recommendations

13 of the Secretary of Health and Human Services and the

14 Secretary for additional Federal legislation, if any, that

15 is needed to ensure the availability of reasonably priced

16 health insurance for individuals and employers.

17 Subtitle C—COBRA Clarifications

18 SEC. 121. COBRA CLARIFICATIONS.

19 (a) PUBLIC HEALTH SERVICE ACT.—

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

21 the Public Health Service Act (42 U.S.C. 300bb–

22 2(2)) is amended—

23 (A) in subparagraph (A)—

24 (i) by transferring the sentence imme25 diately preceding clause (iv) so as to ap-
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1 pear immediately following such clause

2 (iv); and

3 (ii) in the last sentence (as so trans4 ferred)—

5 (I) by inserting ‘‘, or a bene6 ficiary-family member of the individ7 ual,’’ after ‘‘an individual’’; and

8 (II) by striking ‘‘at the time of a

9 qualifying event described in section

10 2203(2)’’ and inserting ‘‘at any time

11 during the initial 18-month period of

12 continuing coverage under this title’’;

13 and

14 (B) in subparagraph (E), by striking ‘‘at

15 the time of a qualifying event described in sec16 tion 2203(2)’’ and inserting ‘‘at any time dur17 ing the initial 18-month period of continuing

18 coverage under this title’’.

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

20 Public Health Service Act (42 U.S.C. 300bb–

21 5(1)(C)) is amended—

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

23 end thereof;

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

25 and inserting ‘‘, or’’; and
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1 (C) by adding at the end thereof the fol2 lowing new clause:

3 ‘‘(iii) in the case of an individual de4 scribed in the last sentence of section

5 2202(2)(A), or a beneficiary-family mem6 ber of the individual, the date such individ7 ual is determined to have been disabled.’’.

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

9 Health Service Act (42 U.S.C. 300bb–6(3)) is

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

11 event described in section 2203(2)’’ and inserting

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

13 continuing coverage under this title’’.

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

15 2208(3)(A) of the Public Health Service Act (42

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

17 end thereof the following new flush sentence:

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

19 or adopted by the covered employee during the pe20 riod of continued coverage under this title.’’.

21 (b) EMPLOYEE RETIREMENT INCOME SECURITY ACT

22 OF 1974.—

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

24 the Employee Retirement Income Security Act of

25 1974 (29 U.S.C. 1162(2)) is amended—
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1 (A) in the last sentence of subparagraph

2 (A)—

3 (i) by inserting ‘‘, or a beneficiary4 family member of the individual,’’ after

5 ‘‘an individual’’; and

6 (ii) by striking ‘‘at the time of a

7 qualifying event described in section

8 603(2)’’ and inserting ‘‘at any time during

9 the initial 18-month period of continuing

10 coverage under this part’’; and

11 (B) in subparagraph (E), by striking ‘‘at

12 the time of a qualifying event described in sec13 tion 603(2)’’ and inserting ‘‘at any time during

14 the initial 18-month period of continuing cov15 erage under this part’’.

16 (2) ELECTION.—Section 605(1)(C) of the Em17 ployee Retirement Income Security Act of 1974 (29

18 U.S.C. 1165(1)(C)) is amended—

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

20 end thereof;

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

22 and inserting ‘‘, or’’; and

23 (C) by adding at the end thereof the fol24 lowing new clause:
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1 ‘‘(iii) in the case of an individual de2 scribed in the last sentence of section

3 602(2)(A), or a beneficiary-family member

4 of the individual, the date such individual

5 is determined to have been disabled.’’.

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

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

8 1166(3)) is amended by striking ‘‘at the time of a

9 qualifying event described in section 603(2)’’ and in10 serting ‘‘at any time during the initial 18-month pe11 riod of continuing coverage under this part’’.

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

13 607(3)(A) of the Employee Retirement Income Secu14 rity Act of 1974 (29 U.S.C. 1167(3)) is amended by

15 adding at the end thereof the following new flush

16 sentence:

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

18 or adopted by the covered employee during the pe19 riod of continued coverage under this part.’’.

20 (c) INTERNAL REVENUE CODE OF 1986.—

21 (1) PERIOD OF COVERAGE.—Section

22 4980B(f)(2)(B) of the Internal Revenue Code of

23 1986 is amended—

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

25 striking ‘‘at the time of a qualifying event de-
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1 scribed in paragraph (3)(B)’’ and inserting ‘‘at

2 any time during the initial 18-month period of

3 continuing coverage under this section’’; and

4 (B) in clause (v), by striking ‘‘at the time

5 of a qualifying event described in paragraph

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

7 initial 18-month period of continuing coverage

8 under this section’’.

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

10 the Internal Revenue Code of 1986 is amended—

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

12 the end thereof;

13 (B) in subclause (II), by striking the pe14 riod and inserting ‘‘, or’’; and

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

17 ‘‘(III) in the case of an qualified

18 beneficiary described in the last sen19 tence of paragraph (2)(B)(i), the date

20 such individual is determined to have

21 been disabled.’’.

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

23 Internal Revenue Code of 1986 is amended by strik24 ing ‘‘at the time of a qualifying event described in

25 paragraph (3)(B)’’ and inserting ‘‘at any time dur-
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1 ing the initial 18-month period of continuing cov2 erage under this section’’.

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

4 4980B(g)(1)(A) of the Internal Revenue Code of

5 1986 is amended by adding at the end thereof the

6 following new flush sentence:

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

8 born to or adopted by the covered employee

9 during the period of continued coverage under

10 this section.’’.

11 (d) EFFECTIVE DATE.—The amendment made by

12 this section shall apply to qualifying events occurring on

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

14 years beginning after December 31, 1997.

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

16 days after the date of enactment of this Act, each group

17 health plan (covered under title XXII of the Public Health

18 Service Act, part 6 of subtitle A of title I of the Employee

19 Retirement Income Security Act of 1974, and section

20 4980B(f) of the Internal Revenue Code of 1986) shall no21 tify each qualified beneficiary who has elected continuation

22 coverage under such title, part or section of the amend23 ments made by this section.
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1 Subtitle D—Private Health Plan

2 Purchasing Coalitions

3 SEC. 131. PRIVATE HEALTH PLAN PURCHASING COALI4 TIONS.

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

6 ‘‘health plan purchasing coalition’’ means a group of indi7 viduals or employers that, on a voluntary basis and in ac8 cordance with this section, form an entity for the purpose

9 of purchasing insured health plans or negotiating with in10 sured health plans and providers. An insurer, agent,

11 broker or any other individual or entity engaged in the

12 sale of insurance may not form or underwrite a coalition.

13 (b) CERTIFICATION.—

14 (1) IN GENERAL.—A State shall certify health

15 plan purchasing coalitions that meet the require16 ments of this section. Each coalition shall be char17 tered under State law and registered with the Sec18 retary.

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

20 fails to implement a program for certifying health

21 plan purchasing coalitions in accordance with the

22 standards under this Act, the Secretary shall certify

23 and oversee the operations of such coalitions in such

24 State.
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1 (3) MULTI-STATE COALITIONS.—For purposes

2 of this section, a health plan purchasing coalition

3 operating in more than one State shall be certified

4 by the State in which the coalition is domiciled, pur5 suant to an agreement between the States in which

6 the coalition conducts business.

7 (d) BOARD OF DIRECTORS.—

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

9 coalition shall be governed by a Board of Directors

10 that shall be responsible for ensuring the perform11 ance of the duties of the coalition under this section.

12 The Board shall be composed of a broad cross-sec13 tion of representatives of employers, employees, and

14 individuals participating in the coalition. An insurer,

15 agent, broker or any other individual or entity en16 gaged in the sale of insurance may not hold or con17 trol any right to vote with respect to a coalition.

18 (2) LIMITATION ON COMPENSATION.—A health

19 plan purchasing coalition may not provide compensa20 tion to members of the Board of Directors. The coa21 lition may provide reimbursements to such members

22 for the reasonable and necessary expenses incurred

23 by the members in the performance of their duties

24 as members of the Board.
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1 (3) CONFLICT OF INTEREST.—No member of

2 the Board of Directors (or family members of such

3 members) nor any management personnel of the coa4 lition may be employed by, be a consultant for, be

5 a member of the board of directors of, be affiliated

6 with an agent of, or otherwise be a representative of

7 any health plan or other insurer, health care pro8 vider, or agent or broker. Nothing in the preceding

9 sentence shall limit a member of the Board from

10 purchasing coverage from a health plan offered

11 through the coalition.

12 (e) MEMBERSHIP AND MARKETING AREA.—

13 (1) MEMBERSHIP.—

14 (A) IN GENERAL.—A health plan purchas15 ing coalition may establish limits on the size of

16 employers who may become members of the co17 alition, and may determine whether to permit

18 individuals to become members. Upon the es19 tablishment of such membership requirements,

20 the coalition shall, except as provided in sub21 paragraph (B), accept all employers (or individ22 uals) residing within the area served by the coa23 lition who meet such requirements as members

24 on a first come, first-served basis.
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1 (B) CAPACITY LIMITS.—A health plan pur2 chasing coalition may cease accepting employers

3 or individuals as members of the coalition if—

4 (i) the coalition ceases to permit any

5 new employers or individuals to become

6 members; and

7 (ii) the coalition can demonstrate to

8 the State (or the Secretary in the case of

9 coalitions certified by the Secretary) that

10 the financial or other capacity of the coali11 tion to serve current members will be im12 paired if the coalition is required to accept

13 other members.

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

15 rules regarding the geographic area that must be

16 served by a health plan purchasing coalition. With

17 respect to a State that has not established such

18 rules, a health plan purchasing coalition operating in

19 the State shall define the boundaries of the area to

20 be served by the coalition, except that such bound21 aries may not be established on the basis of health

22 status or insurability.

23 (f) DUTIES AND RESPONSIBILITIES.—

24 (1) IN GENERAL.—A health plan purchasing co25 alition shall—
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1 (A) enter into agreements with insured

2 health plans;

3 (B) enter into agreements with employers

4 and individuals who become members of the co5 alition;

6 (C) participate in any program of risk-ad7 justment or reinsurance, or any similar pro8 gram, that is established by the State;

9 (D) contract and negotiate with health

10 care providers and health plans;

11 (E) prepare and disseminate comparative

12 health plan materials (including information

13 about cost, quality, benefits, and other informa14 tion concerning health plans offered through

15 the coalition);

16 (F) actively market to all eligible employ17 ers and individuals residing within the service

18 area; and

19 (G) act as an ombudsman for health plan

20 enrollees.

21 (2) PERMISSIBLE ACTIVITIES.—A health plan

22 purchasing coalition may perform such other func23 tions as necessary to further the purposes of this

24 Act, including—
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1 (A) the collection and distribution of pre2 miums and the performance of other adminis3 trative functions;

4 (B) the collection and analysis of surveys

5 of health plan enrollee satisfaction;

6 (C) the charging of membership fee to en7 rollees (such fees may not be based on health

8 status) and the charging of participation fees to

9 health plans; and

10 (D) cooperating with (or accepting as

11 members) employers who self-insure for the

12 purpose of negotiating with providers.

13 (g) LIMITATIONS ON COALITION ACTIVITIES.—A

14 health plan purchasing coalition shall not—

15 (1) perform any activity relating to the licens16 ing of health plans;

17 (2) assume financial risk in relating to any

18 health plan;

19 (3) perform any other activities that conflict or

20 are inconsistent with the performance of its duties

21 under this Act; or

22 (4) establish eligibility, continuation, enroll23 ment, or contribution requirements for employees or

24 employers and individuals based on the health sta25 tus, medical condition, claims experience, receipt of
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1 health care, medical history, evidence of insurability,

2 or disability of any individual.

3 (h) LIMITED PREEMPTION OF CERTAIN STATE

4 LAWS.—

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

6 plan purchasing coalition that meets the require7 ments of this section, the following State laws shall

8 be preempted:

9 (A) State fictitious group laws.

10 (B) State rating requirement laws, except

11 to the extent necessary to comply with the re12 quirements of paragraph (2).

13 (C) Other State laws that directly conflict

14 with the requirements in this section.

15 (2) RATING REQUIREMENT LAWS.—With re16 spect to a State rating requirement law, the coali17 tion—

18 (A) may not permit premium rates to vary

19 among employers or individuals that are mem20 bers of a health plan purchasing coalition in ex21 cess of the amount of such variations that

22 would be permitted under such State rating

23 laws among employers that are not members of

24 the coalition; and
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1 (B) with respect to premium rates nego2 tiated by the coalition, may permit such rates

3 to be less than rates that would otherwise be

4 permitted under State law if such rating dif5 ferential is not based on differences in health

6 status or demographic factors.

7 (i) RULES OF CONSTRUCTION.—Nothing in this sec8 tion shall be construed to—

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

10 otherwise create health care purchasing coalitions;

11 (2) otherwise require the establishment of

12 health care purchasing coalitions;

13 (3) require individuals or employers to purchase

14 health plans through a health plan purchasing coali15 tion;

16 (4) require that a health plan purchasing coali17 tion be the only type of health insurance purchasing

18 arrangement permitted to operate in a State; or

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

20 would not otherwise have to regulate health plans

21 (whether insured or self-insured).

22 (j) APPLICATION OF ERISA.—The requirements of

23 parts 4 and 5 of subtitle B of title I of the Employee Re24 tirement Income Security Act of 1974 (29 U.S.C. 1101)

25 shall apply to a health plan purchasing coalition.
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1 TITLE II—APPLICATION AND

2 ENFORCEMENT OF STANDARDS

3 SEC. 201. APPLICABILITY.

4 (a) CONSTRUCTION.—

5 (1) IN GENERAL.—A requirement or standard

6 imposed on an insured health plan under this Act

7 shall be deemed to be a requirement or standard im8 posed on the insurer. A requirement or standard im9 posed on a self-insured health plan under this Act

10 shall be deemed to be a requirement or standard im11 posed on the plan sponsor.

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

13 this Act shall be construed to prevent a State from

14 establishing, implementing, or continuing in effect

15 standards and requirements related to the issuance,

16 renewal, or rating of health insurance, or other

17 standards or requirements related to health insur18 ance, unless such standards are in direct conflict

19 with the standards or requirements established

20 under this Act.

21 SEC. 202. ENFORCEMENT OF STANDARDS.

22 (a) INSURED HEALTH PLANS.—Each State shall re23 quire that each insured health plan issued, sold, renewed,

24 offered for sale or operated in such State meet the insur25 ance reform standards established under this Act pursu-
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1 ant to an enforcement plan filed by the State with the

2 Secretary. A State shall submit such information as re3 quired by the Secretary demonstrating effective implemen4 tation of the State enforcement plan.

5 (b) SELF-INSURED HEALTH PLANS.—In the case of

6 self-insured health plans, the Secretary shall enforce the

7 reform standards established under this Act. A plan fail8 ing to meet such standards shall be subject to civil en9 forcement as provided for under section 502 of the Em10 ployee Retirement Income Security Act of 1974 (29

11 U.S.C. 1132) and for penalties as provided for under para12 graphs (1) and (2) of section 502(a) of such Act (relating

13 to failure to provide requested information and failure to

14 file required reports).

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

16 the failure of a State to enforce the standards and require17 ments set forth in this Act, the Secretary, in consultation

18 with the Secretary of Health and Human Services, shall

19 implement an enforcement plan meeting the standards of

20 this Act in such State. In the case of a State that fails

21 to enforce the standards and requirements set forth in this

22 Act, each health plan operating in such State shall be sub23 ject to civil enforcement as provided for under section 502

24 of the Employee Retirement Income Security Act of 1974

25 (29 U.S.C. 1132) and for penalties as provided for under
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1 paragraphs (1) and (2) of subsection (a) of such section

2 (relating to failure to provide requested information and

3 failure to file required reports).

4 (d) APPLICABLE CERTIFYING AUTHORITY.—As used

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

6 means, with respect to—

7 (1) insured health plans, the State insurance

8 commissioner for the State involved; and

9 (2) a self-insured health plan, the Secretary.

10 TITLE III—MISCELLANEOUS

11 PROVISIONS

12 SEC. 301. HMOS ALLOWED TO OFFER PLANS WITH

13 DEDUCTIBLES TO INDIVIDUALS WITH MEDI14 CAL SAVINGS ACCOUNTS.

15 (a) IN GENERAL.—Section 1301(b) of the Public

16 Health Service Act (42 U.S.C. 300e(b)) is amended by

17 adding at the end the following new paragraph:

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

19 savings account has been established for the benefit

20 of such member, a health maintenance organization

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

22 health services payment otherwise determined under

23 paragraph (1) by requiring the payment of a deduct24 ible by the member for basic health services.
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1 ‘‘(B) For purposes of this paragraph, the term

2 ‘medical savings account’ means an account which,

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

4 of such funds and income derived from the invest5 ment of such funds for the payment of the deduct6 ible described in subparagraph (A).’’.

7 (b) SENSE OF THE SENATE.—It is the sense of the

8 Senate that the Congress should take measures to further

9 the purposes of this Act, including any necessary changes

10 to the Internal Revenue Code of 1986 to encourage groups

11 and individuals to obtain health coverage, and to promote

12 access, equity, portability, affordability, and security of

13 health benefits.

14 SEC. 302. EFFECTIVE DATE.

15 The provisions of this Act shall apply to health plans

16 offered, sold, issued, renewed, or operated on or after Jan17 uary 1, 1997.

18 SEC. 303. SEVERABILITY.

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

20 provision to any person or circumstance is held to be un21 constitutional, the remainder of this Act and the applica22 tion of the provisions of such to any person or cir23 cumstance shall not be affected thereby.

Æ

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