I

104TH CONGRESS

2D SESSION H. R. 3043

To amend the Internal Revenue Code of 1986 to promote the continuity

and portability of health insurance coverage by restricting discrimination

based on health status, limiting use of preexisting condition exclusions,

and making COBRA continuation coverage more affordable.

IN THE HOUSE OF REPRESENTATIVES

MARCH 7, 1996

Mrs. JOHNSON of Connecticut introduced the following bill; which was referred

to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to promote

the continuity and portability of health insurance coverage by restricting discrimination based on health status, limiting use of preexisting condition exclusions, and

making COBRA continuation coverage more affordable.

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 ‘‘Working Families

5 Health Access Act of 1996’’.
2

•HR 3043 IH

1 SEC. 2. PROMOTING THE CONTINUITY AND PORTABILITY

2 OF HEALTH COVERAGE.

3 (a) IN GENERAL.—Subtitle D of the Internal Reve4 nue Code of 1986 is amended by inserting after chapter

5 44 the following new chapter:

6 ‘‘‘‘CHAPTER 45—CONTINUITY AND

7 PORTABILITY OF HEALTH COVERAGE

‘‘Sec. 4986. Imposition of tax.

‘‘Sec. 4987. Nondiscrimination based on health status.

‘‘Sec. 4988. Limited use of preexisting condition exclusions.

‘‘Sec. 4989. Guaranteed renewability of health insurance coverage.

‘‘Sec. 4990. Relation to State standards.

‘‘Sec. 4991. Definitions.

8 ‘‘SEC. 4986. IMPOSITION OF TAX FOR FAILURE TO MEET

9 CONTINUITY AND PORTABILITY STANDARDS.

10 ‘‘(a) INSURED HEALTH PLANS.—

11 ‘‘(1) IN GENERAL.—In the case of any health

12 insurance policy which fails to meet the applicable

13 standards specified in this chapter at any time dur14 ing a calendar year, there is hereby imposed a tax

15 equal to 25 percent of the premiums received under

16 such policy during the calendar year.

17 ‘‘(2) LIABILITY FOR TAX.—The tax imposed by

18 paragraph (1) shall be paid by the issuer of the pol19 icy.

20 ‘‘(3) TREATMENT OF PREPAID HEALTH COV21 ERAGE.—For purposes of this subsection:
3

•HR 3043 IH

1 ‘‘(A) IN GENERAL.—In the case of any

2 prepaid health arrangement—

3 ‘‘(i) such arrangement shall be treated

4 as a health insurance policy,

5 ‘‘(ii) the payments or premiums re6 ferred to in subparagraph (B)(i) shall be

7 treated as premiums received for a health

8 insurance policy, and

9 ‘‘(iii) the person referred to in sub10 paragraph (B)(i) shall be treated as the is11 suer.

12 ‘‘(B) PREPAID HEALTH ARRANGEMENT.—

13 For purposes of subparagraph (A), the term

14 ‘prepaid health arrangement’ means an ar15 rangement under which—

16 ‘‘(i) fixed payments or premiums are

17 received as consideration for any person’s

18 agreement to provide or arrange for the

19 provision of accident or health coverage to

20 regardless of how such coverage is pro21 vided or arranged to be provided, and

22 ‘‘(ii) substantially all of the risks of

23 the rates of utilization of services is as24 sumed by such person or the provider of

25 such services.
4

•HR 3043 IH

1 ‘‘(4) INSURANCE POLICY.—For purposes of this

2 subsection, the term ‘insurance policy’ means any

3 policy or other instrument whereby a contract of in4 surance is issued, renewed, or extended.

5 ‘‘(5) PREMIUM.—For purposes of this sub6 section, the term ‘premium’ means the gross amount

7 of premiums and other consideration (including ad8 vance premiums, deposits, fees, and assessments)

9 arising from policies issued by a person acting as the

10 primary insurer, adjusted for any return or addi11 tional premiums paid as a result of endorsements,

12 cancellations, audits, or retrospective rating.

13 ‘‘(b) SELF-INSURED HEALTH PLANS.—

14 ‘‘(1) IN GENERAL.—In the case of a self-in15 sured health plan which fails to meet the applicable

16 standards specified in this chapter at any time dur17 ing a calendar year, there is hereby imposed a tax

18 equal to 25 percent of the health coverage expendi19 tures for such calendar year under such plan.

20 ‘‘(2) LIABILITY FOR TAX.—The tax imposed by

21 paragraph (1) shall be paid by the plan sponsor.

22 ‘‘(3) SELF-INSURED HEALTH PLAN.—For pur23 poses of this subsection, the term ‘self-insured

24 health plan’ means any plan for providing accident
5

•HR 3043 IH

1 or health coverage if any portion of such coverage is

2 provided other than through an insurance policy.

3 ‘‘(4) HEALTH COVERAGE EXPENDITURES.—For

4 purposes of this subsection, the health coverage ex5 penditures of any self-insured health plan for any

6 calendar year are the aggregate expenditures for

7 such year for health coverage provided under such

8 plan.

9 ‘‘(c) LIMITATIONS ON IMPOSITION.—

10 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

11 DISCOVERED EXERCISING REASONABLE DILI12 GENCE.—No tax shall be imposed under this section

13 on any failure for which it is established to the satis14 faction of the Secretary that none of the persons lia15 ble for the tax knew, or exercising reasonable dili16 gence would have known, that such failure existed.

17 ‘‘(2) TAX NOT TO APPLY TO CERTAIN FAILURES

18 CORRECTED WITHIN 30 DAYS.—No tax shall be im19 posed by subsection (a) or (b) on any failure if—

20 ‘‘(A) such failure was due to reasonable

21 cause and not to willful neglect, and

22 ‘‘(B) such failure is corrected during the

23 30-day period beginning on the 1st date any

24 person liable for the tax knew, or exercising
6

•HR 3043 IH

1 reasonable diligence would have known, that

2 such failure existed.

3 ‘‘(3) WAIVER BY SECRETARY.—In the case of a

4 failure which is due to reasonable cause and not to

5 willful neglect, the Secretary may waive part or all

6 of the tax imposed by this section to the extent that

7 the payment of such tax would be excessive relative

8 to the failure involved.

9 ‘‘SEC. 4987. NONDISCRIMINATION BASED ON HEALTH STA10 TUS.

11 ‘‘(a) COVERAGE UNDER GROUP HEALTH PLANS.—

12 A group health plan and a carrier offering health insur13 ance coverage in connection with such a plan may not es14 tablish or impose eligibility, continuation, enrollment, or

15 contribution requirements for an individual based on fac16 tors directly related to the health status, genetic pre17 disposition, medical condition, claims experience, receipt

18 of health care, medical history, disability, or evidence of

19 insurability of the individual.

20 ‘‘(b) INDIVIDUAL COVERAGE.—

21 ‘‘(1) IN GENERAL.—A carrier offering health

22 insurance coverage (other than in connection with a

23 group health plan) may not establish or impose eligi24 bility, continuation, or enrollment requirements for a

25 qualifying individual (as defined in paragraph (2))
7

•HR 3043 IH

1 based on factors directly related to the health status,

2 genetic predisposition, medical condition, claims ex3 perience, receipt of health care, medical history, dis4 ability, or evidence of insurability of the individual.

5 ‘‘(2) QUALIFYING INDIVIDUAL DEFINED.—For

6 purposes of paragraph (1), the term ‘qualifying indi7 vidual’ means an individual who meets all of the fol8 lowing requirements:

9 ‘‘(A) The individual is in a period of quali10 fying previous coverage (as defined in para11 graph (3)) which is at least 12 months long.

12 ‘‘(B) The individual is not eligible for cov13 erage under any group health plan and has not

14 lost such coverage due to a failure to make re15 quired premium payments or contributions or

16 due to fraud or misrepresentation of material

17 fact. For purposes of this subparagraph, con18 tinuation coverage under section 4980B shall

19 not be considered to be coverage under a group

20 health plan.

21 ‘‘(C) If the individual’s most recent cov22 erage during the period of qualifying previous

23 coverage under subparagraph (A) was health

24 insurance coverage not in connection with a
8

•HR 3043 IH

1 group health plan, such coverage was discon2 tinued or terminated—

3 ‘‘(i) by the carrier or individual on the

4 basis of a change in residence of the indi5 vidual so that the individual no longer re6 sided within a service area of the carrier

7 with respect to such coverage,

8 ‘‘(ii) by the carrier on the basis of a

9 change in the individual’s status so that

10 the individual was no longer eligible for de11 pendent coverage, if the individual pre12 viously was only eligible for such coverage

13 as a dependent,

14 ‘‘(iii) by the carrier on the basis of the

15 discontinuation of such coverage by the

16 carrier in accordance with the require17 ments of section 4989(b)(2), or

18 ‘‘(iv) by the individual at a time that

19 the individual obtained less expensive or

20 less extensive coverage (as defined by the

21 Secretary of Health and Human Services).

22 Nothing in subparagraph (C) shall be construed as

23 preventing a carrier from waiving the application of

24 clauses (i) through (iv) of such subparagraph during

25 an annual open enrollment period or otherwise.
9

•HR 3043 IH

1 ‘‘(3) PERIOD OF QUALIFYING PREVIOUS COV2 ERAGE DEFINED.—For purposes of this chapter, the

3 term ‘period of qualifying previous coverage’ means

4 the period—

5 ‘‘(A) beginning on the date an individual is

6 enrolled under a group health plan or is pro7 vided health insurance coverage, and

8 ‘‘(B) ending on the date the individual is

9 neither covered under a group health plan or

10 covered under health insurance coverage (in11 cluding coverage described in section

12 4991(2)(D)) for a continuous period of more

13 than 2 months.

14 ‘‘SEC. 4988. LIMITED USE OF PREEXISTING CONDITION EX15 CLUSIONS.

16 ‘‘(a) IN GENERAL.—A carrier offering health insur17 ance coverage and a group health plan may impose a limi18 tation or exclusion of benefits relating to treatment of a

19 condition based on the fact that the condition is a preexist20 ing condition (as defined in subsection (c)) only if the fol21 lowing requirements are met:

22 ‘‘(1) LIMITATION TO 3-MONTH LOOK-BACK.—

23 The condition was diagnosed or treated (or is a con24 dition which a reasonably prudent person would have

25 sought medical care diagnosis or treatment) during
10

•HR 3043 IH

1 the period not more than 3 months before the date

2 of enrollment for such coverage or under such plan.

3 ‘‘(2) LIMITATION ON EXCLUSION PERIOD.—

4 ‘‘(A) GENERAL RULE OF MAXIMUM OF 6-

5 MONTH EXCLUSION.—Subject to paragraph (3),

6 the limitation or exclusion extends for a period

7 not more than 6 months (or 12 months in the

8 case of a late enrollee described in subpara9 graph (B)) after such date of enrollment.

10 ‘‘(B) LATE ENROLLEE DESCRIBED.—

11 ‘‘(i) IN GENERAL.—Except as pro12 vided in clause (ii), a late enrollee de13 scribed in this subparagraph with respect

14 to a group health plan is an individual who

15 becomes covered under the plan but who,

16 at the time the individual first was eligible

17 to elect such coverage, had elected not to

18 be covered under the plan.

19 ‘‘(ii) EXCEPTION FOR INDIVIDUALS

20 WITH CONTINUOUS COVERAGE.—An indi21 vidual shall not be considered to be a late

22 enrollee with respect to a plan if the indi23 vidual establishes that, with respect to the

24 period beginning on the date the individual

25 first could have obtained coverage under
11

•HR 3043 IH

1 the plan and until the date the individual

2 was so covered, there was no period of

3 more than 2 months during all of which

4 the individual neither had health insurance

5 coverage (including coverage described in

6 subparagraph (C) or (D) of section

7 4991(2)) or was covered under any group

8 health plan.

9 ‘‘(3) CREDIT FOR PREVIOUS QUALIFYING COV10 ERAGE.—In the case of an individual who is in a pe11 riod of qualifying previous coverage (as defined in

12 section 4987(b)(3)) as of the date of enrollment for

13 health insurance coverage or under the group health

14 plan, the limitation or exclusion period under para15 graph (2)(A) shall be reduced by the length of such

16 period of qualifying previous coverage.

17 ‘‘(4) EXCEPTION FOR TREATMENT OF PREG18 NANCY.—The limitation or exclusion does not apply

19 to treatment relating to pregnancy.

20 ‘‘(5) EXCEPTION FOR CERTAIN DEPENDENT

21 COVERAGE.—

22 ‘‘(A) NEWBORNS.—The limitation or exclu23 sion does not apply to a child who has health

24 insurance coverage (or is covered under a group

25 health plan) as a dependent within 1 month of
12

•HR 3043 IH

1 the birthdate until such time as the child does

2 not have such coverage (or is not so covered)

3 for a continuous period of more than 2 months.

4 ‘‘(B) ADOPTED CHILDREN.—The limita5 tion or exclusion does not apply (beginning on

6 the date of adoption) to an adopted child who

7 has health insurance coverage (or is covered

8 under a group health plan) within 1 month of

9 such date until such time as the child does not

10 have such coverage (or is not so covered) for a

11 continuous period of more than 2 months.

12 ‘‘(6) VOLUNTARY WAIVER.—The look-back pe13 riod described in paragraph (1) and the maximum

14 period of exclusion under paragraph (2)(A) may ex15 tend over a longer period than the period specified

16 in the respective subsection if the individual involved

17 waives the protection provided under such para18 graph.

19 ‘‘(b) LIMITATION ON USE OF DELAYED COVERAGE

20 IN LIEU OF PREEXISTING EXCLUSION LIMITATIONS.—

21 ‘‘(1) IN GENERAL.—A carrier offering health

22 insurance coverage and a group health plan provid23 ing coverage, with respect to an individual, may

24 delay the effective date of coverage of the individual

25 beyond the first date of the month beginning after
13

•HR 3043 IH

1 the date of election of the coverage only if the fol2 lowing requirements are met:

3 ‘‘(A) LIMITATION ON DELAY PERIOD.—

4 Subject to paragraph (2), such additional delay

5 does not extend over a period of longer than 2

6 months (or 3 months in the case of a late en7 rollee described in subsection (a)(2)(B)).

8 ‘‘(B) NO SUBSEQUENT APPLICATION OF

9 ANY PREEXISTING EXCLUSION.—After the pe10 riod of such additional delay, no limitation or

11 exclusion described in subsection (a) may be ap12 plied.

13 ‘‘(C) NO PREMIUMS.—No premium or re14 quired contribution may be charged for the pe15 riod before the effective date of coverage.

16 Nothing in this paragraph shall waive the applicable

17 requirements of subsection (a).

18 ‘‘(2) VOLUNTARY WAIVER.—The additional

19 delay may extend over a period longer than the pe20 riod specified under paragraph (1)(A) if the individ21 ual involved waives the protection provided under

22 such paragraph.

23 ‘‘(c) PREEXISTING CONDITION DEFINED.—

24 ‘‘(1) IN GENERAL.—For purposes of this sec25 tion, the term ‘preexisting condition’ means, with re-
14

•HR 3043 IH

1 spect to coverage under health insurance coverage or

2 under a group health plan, a condition which was di3 agnosed or treated, or a condition for which a rea4 sonably prudent person would have sought medical

5 care diagnosis or treatment, within the 3-month pe6 riod ending on the day before the date of enrollment

7 (without regard to any delayed coverage period).

8 ‘‘(2) TREATMENT OF INFORMATION RELATING

9 TO GENETIC PREDISPOSITION.—For purposes of this

10 section, information relating to one’s genetic pre11 disposition alone shall not be considered to be a pre12 existing condition, so long as treatment of the condi13 tion to which the predisposition is applicable has not

14 been (or should not have been) sought during the 3-

15 month period described in paragraph (1).

16 ‘‘SEC. 4989. GUARANTEED RENEWABILITY OF HEALTH IN17 SURANCE COVERAGE.

18 ‘‘(a) IN GENERAL.—Except as provided in subsection

19 (b), a carrier offering health insurance coverage shall

20 guarantee that such coverage may be renewed or contin21 ued in force at the option of the policyholder or contract22 holder.

23 ‘‘(b) GROUNDS FOR REFUSAL TO RENEW.—
15

•HR 3043 IH

1 ‘‘(1) IN GENERAL.—Subject to paragraphs (3)

2 and (4), a carrier offering health insurance coverage

3 may cancel or refuse to renew such coverage—

4 ‘‘(A) for nonpayment of premium or con5 tribution in accordance with the terms of the

6 coverage;

7 ‘‘(B) for fraud or misrepresentation of ma8 terial fact;

9 ‘‘(C) because of a general discontinuation

10 or termination of that type of coverage, but

11 only if the conditions described in clause (i) or

12 (ii) of paragraph (2)(A) are met;

13 ‘‘(D) in the case of coverage offered in

14 connection with a group health plan, for failure

15 of the plan to maintain participation rules con16 sistent with paragraph (4); or

17 ‘‘(E) in the case of coverage that is con18 tinuation coverage under section 4980B, for

19 loss of eligibility to continue such coverage.

20 ‘‘(2) CONDITIONS FOR DISCONTINUATION.—

21 ‘‘(A) IN GENERAL.—

22 ‘‘(i) NONDISCRIMINATORY SUBSTI23 TUTION OF ALTERNATIVE COVERAGE.—

24 The conditions described in this clause are

25 the following:
16

•HR 3043 IH

1 ‘‘(I) The carrier provides notice

2 to each group purchaser covered

3 under the type of health insurance

4 coverage involved (and participants

5 and beneficiaries covered under such

6 coverage offered in connection with a

7 group health plan) of the discontinu8 ation of coverage at least 90 days

9 prior to the date of such discontinu10 ation.

11 ‘‘(II) The carrier is no longer of12 fering health insurance coverage of

13 the type involved to new policyholders

14 or contractholders.

15 ‘‘(III) The carrier is offering to

16 the previously covered policyholder or

17 contractholder the option to purchase

18 any other type of health insurance

19 coverage currently being offered to

20 new policyholders or contractholders.

21 ‘‘(IV) The discontinuation or ter22 mination of coverage and option to re23 place with other coverage is made uni24 formly without regard to the health
17

•HR 3043 IH

1 status or insurability of any person

2 provided health insurance coverage.

3 ‘‘(ii) GENERAL DISCONTINUATION OF

4 COVERAGE IN A STATE.—The conditions

5 described in this clause are as follows:

6 ‘‘(I) The carrier is discontinuing

7 and not renewing all types of health

8 insurance coverage within a class of

9 coverage (as defined in subparagraph

10 (B)) in a State.

11 ‘‘(II) The carrier provides notice

12 to each purchaser within the class of

13 coverage involved (and participants

14 and beneficiaries covered under such

15 coverage offered in connection with a

16 group health plan) of the discontinu17 ation of coverage at least 180 days

18 prior to the date of such discontinu19 ation.

20 ‘‘(B) CLASSES OF COVERAGE.—For pur21 poses of subparagraph (A)(ii), each of the fol22 lowing is considered a separate class of health

23 insurance coverage:
18

•HR 3043 IH

1 ‘‘(i) INDIVIDUAL COVERAGE.—Health

2 insurance coverage not offered in connec3 tion with any group health plan.

4 ‘‘(ii) SMALL EMPLOYER GROUP COV5 ERAGE.—Health insurance coverage of6 fered to small employers (as defined by

7 State law) in connection with any group

8 health plan for covered employees and

9 their dependents.

10 ‘‘(iii) OTHER GROUP COVERAGE.—

11 Health insurance coverage offered in con12 nection with a group health plan and not

13 described in clause (ii).

14 ‘‘(C) PROHIBITION ON MARKET RE15 ENTRY.—In the case of a discontinuation of a

16 type or class coverage in a State under this

17 paragraph, the carrier may not provide for the

18 issuance of any health insurance coverage with19 in the type or class of coverage discontinued in

20 the State involved during the 5-year period be21 ginning on the date of the discontinuation of

22 the last coverage not so renewed.

23 ‘‘(3) APPLICATION OF GEOGRAPHIC LIMITA24 TIONS TO COVERAGE PROVIDED THROUGH A NET25 WORK ARRANGEMENT.—
19

•HR 3043 IH

1 ‘‘(A) IN GENERAL.—Coverage under health

2 insurance coverage or under a group health

3 plan that consists primarily of coverage through

4 a network arrangement (as defined in subpara5 graph (B)) may be denied to individuals who

6 neither live nor reside in the service area of the

7 arrangement, but only if such denial is applied

8 uniformly, without regard to the health status

9 or the insurability of particular individuals.

10 ‘‘(B) NETWORK ARRANGEMENTS.—For

11 purposes of subparagraph (A), the term ‘net12 work arrangement’ means, with respect to a

13 group health plan or under health insurance

14 coverage, an arrangement under such plan or

15 coverage whereby providers agree to provide

16 items and services covered under the arrange17 ment to individuals covered under the plan or

18 who have such coverage.

19 ‘‘(4) MINIMUM PARTICIPATION REQUIRE20 MENTS.—A carrier that offers health insurance cov21 erage in connection with a group health plan that

22 covers the employees of one or more employers may

23 require to provide that a minimum percentage of eli24 gible employees of such an employer obtain such cov25 erage if such percentage is applied uniformly to all
20

•HR 3043 IH

1 such coverage offered to employers of comparable

2 size.

3 ‘‘SEC. 4990. RELATION TO STATE STANDARDS.

4 ‘‘(a) IN GENERAL.—Nothing in this chapter shall

5 prevent a State from establishing, implementing, or con6 tinuing in effect standards related to health insurance cov7 erage (including the issuance, renewal, or rating of such

8 coverage) if such standards are at least as stringent as

9 the standards established under this chapter with respect

10 to such coverage.

11 ‘‘(b) CONSTRUCTION.—Nothing in this chapter shall

12 be construed to preempt State laws that—

13 ‘‘(1) require carriers to impose a shorter look14 back period than that specified in section

15 4988(a)(1),

16 ‘‘(2) require carriers to impose a limitation or

17 exclusion of benefits relating to the treatment of a

18 preexisting condition for periods that are shorter

19 than those provided for under section 4988(a)(2)(A),

20 or

21 ‘‘(3) allow individuals to be considered to be in

22 a period of qualifying previous coverage if such indi23 vidual experiences a lapse in coverage that is greater

24 than the period specified in section

25 4988(a)(2)(B)(ii);
21

•HR 3043 IH

1 unless such laws are preempted by section 514 of the Em2 ployee Retirement Income Security Act of 1974 (29

3 U.S.C. 1144).

4 ‘‘SEC. 4991. DEFINITIONS.

5 ‘‘For purposes of this chapter—

6 ‘‘(1) CARRIER.—The term ‘carrier’ means—

7 ‘‘(A) a licensed insurance company;

8 ‘‘(B) an entity offering prepaid hospital or

9 medical service plan;

10 ‘‘(C) a health maintenance organization;

11 and

12 ‘‘(D) any similar entity which (i) is en13 gaged in the business of providing a plan of

14 health insurance or health benefits or services

15 and (ii) is regulated under State law for sol16 vency.

17 ‘‘(2) HEALTH INSURANCE COVERAGE.—

18 ‘‘(A) IN GENERAL.—Except as provided in

19 subparagraph (B), the term ‘health insurance

20 coverage’ means any hospital or medical service

21 policy or certificate, hospital or medical service

22 plan contract, or health maintenance organiza23 tion group contract offered by a carrier.
22

•HR 3043 IH

1 ‘‘(B) EXCEPTION.—Such term does not in2 clude any of the following (or any combination

3 of the following):

4 ‘‘(i) Coverage only for accident, den5 tal, vision, or disability income, or any

6 combination thereof.

7 ‘‘(ii) Medicare supplemental health in8 surance.

9 ‘‘(iii) Coverage issued as a supplement

10 to liability insurance.

11 ‘‘(iv) Liability insurance, including

12 general liability insurance and automobile

13 liability insurance.

14 ‘‘(v) Workers’ compensation or similar

15 insurance.

16 ‘‘(vi) Automobile medical-payment in17 surance.

18 ‘‘(vii) Coverage providing wages or

19 payments in lieu of wages for any period

20 during which an employee is absent from

21 work on account of sickness or injury.

22 ‘‘(viii) A long-term care insurance cov23 erage, including a nursing home fixed in24 demnity policy (unless the Secretary of

25 Health and Human Services, in consulta-
23

•HR 3043 IH

1 tion with the Secretaries of Labor and of

2 the Treasury, determines that such cov3 erage is sufficiently comprehensive so that

4 it should be treated as health insurance

5 coverage.

6 ‘‘(ix) Any coverage not described in

7 any preceding clause which consists of ben8 efit payments, on a periodic basis, for a

9 specified disease or illness or period of hos10 pitalization without regard to the costs in11 curred or services rendered during the pe12 riod to which the payments relate.

13 ‘‘(x) Such other coverage as the Sec14 retary of Health and Human Services, in

15 consultation with the Secretaries of Labor

16 and of the Treasury, determines is not

17 health insurance coverage.

18 ‘‘(C) TREATMENT OF STATE RISK

19 POOLS.—Except for purposes of sections

20 4987(b)(3), 4988(a)(2)(B)(ii), and 4988(a)(3),

21 such term does not include coverage provided

22 through a State risk pool, uncompensated care

23 pool or similar subsidized program.

24 ‘‘(D) PUBLIC PLANS COUNTED FOR PUR25 POSES OF QUALIFYING PREVIOUS COVERAGE.—
24

•HR 3043 IH

1 For purposes of sections 4987(b)(3),

2 4988(a)(2)(B)(ii), and 4988(a)(3), such term

3 also includes coverage under any of the follow4 ing:

5 ‘‘(i) The medicare program under title

6 XVIII of the Social Security Act.

7 ‘‘(ii) A State plan under title XIX of

8 such Act.

9 ‘‘(iii) A program of the Indian Health

10 Service.

11 ‘‘(iv) The Civilian Health and Medical

12 Program of the Uniformed Services

13 (CHAMPUS) under title 10, United States

14 Code.

15 ‘‘(v) Any other similar governmental

16 health insurance program (including a pro17 gram described in subparagraph (C)).

18 ‘‘(3) GROUP HEALTH PLAN.—The term ‘group

19 health plan’ has the meaning given such term in sec20 tion 5000(b)(1), but does not include any type of

21 coverage excluded from the definition of health in22 surance coverage under paragraph (2)(B) or (C) and

23 does not include any plan unless at least one of the

24 following requirements is met:
25

•HR 3043 IH

1 ‘‘(A) Any portion of the premium or bene2 fits under the plan is paid by or on behalf of

3 the employer.

4 ‘‘(B) An eligible employee or dependent is

5 reimbursed, whether through wage adjustments

6 or otherwise, by or on behalf of the employer

7 for any portion of the premium.

8 ‘‘(C) The health benefit plan is treated by

9 the employer, or any of the eligible employees

10 or dependents, as part of a plan or program for

11 the purposes of section 162, section 25, or sec12 tion 106 of the Internal Revenue Code of 1986.

13 ‘‘(4) STATE.—The term ‘State’ includes the

14 District of Columbia, Puerto Rico, the Virgin Is15 lands, Guam, American Samoa, and the Northern

16 Mariana Islands.’’

17 (b) EFFECTIVE DATE.—

18 (1) IN GENERAL.—The amendments made by

19 subsection (a) shall apply to individuals who com20 mence health insurance coverage or coverage under

21 a group health plan after the first day of the first

22 month beginning more than 6 months after the date

23 of the enactment of this Act.
26

•HR 3043 IH

1 (2) PLAN YEAR EXCEPTION.—Such amend2 ments shall not apply to plan years ending before

3 the first day referred to in paragraph (1).

4 (c) CLERICAL AMENDMENT.—The table of chapters

5 for subtitle D is amended by inserting after the item relat6 ing to chapter 44 the following new item:

‘‘CHAPTER 45. Continuity and portability of health coverage.’’

7 SEC. 3. CHANGES IN COBRA CONTINUATION REQUIRE8 MENTS RELATING TO DIVORCES, LEGAL SEP9 ARATIONS, AND ANNULMENTS.

10 (a) CONTINUATION COVERAGE FOR CERTAIN FOR11 MERLY COVERED DEPENDENT SPOUSES AND CHIL12 DREN.—Section 4980B(f) of the Internal Revenue Code

13 of 1986 is amended by adding at the end the following

14 new paragraph:

15 ‘‘(9) CAPTURE OF DELAYED DIVORCE OR SEPA16 RATION.—

17 ‘‘(A) IN GENERAL.—For purposes of this

18 section, if a covered employee disenrolls from

19 coverage (or fails to renew coverage of) a quali20 fied beneficiary within the 12-month period pre21 ceding the date of the divorce or legal separa22 tion of the employee from the employee’s

23 spouse, the divorce or separation shall be treat24 ed as a qualifying event described in paragraph

25 (3)(C) and the loss of coverage shall be consid-
27

•HR 3043 IH

1 ered to be a result (and by reason) of such

2 event.

3 ‘‘(B) EXCEPTION.—Subparagraph (A)

4 shall not apply to a qualified beneficiary if—

5 ‘‘(i) the beneficiary waives the rights

6 under such subparagraph, or

7 ‘‘(ii) the qualified beneficiary at the

8 time of the qualifying event or at the time

9 of the disenrollment or failure to renew

10 coverage has coverage under a group

11 health plan (other than by reason of this

12 paragraph) if the plan does not contain

13 any exclusion or limitation with respect to

14 any preexisting condition of such bene15 ficiary.’’

16 (b) TREATMENT OF PERIOD BEFORE DELAYED DI17 VORCE OR SEPARATION.—Subparagraph (D) of section

18 4980B(f)(2) of such Code is amended by adding at the

19 end the following new sentence: ‘‘For purposes of applying

20 any preexisting condition limitation or restriction, any pe21 riod beginning on the date of the disenrollment or failure

22 to renew coverage referred to in paragraph (9)(A) and

23 ending on the date of the divorce or separation referred

24 to in such paragraph shall not be treated as a break in
28

•HR 3043 IH

1 coverage if such paragraph applies to the qualified bene2 ficiary.’’.

3 (c) TREATMENT OF ANNULMENTS.—Section

4 4980B(g) of such Code is amended by adding at the end

5 the following new paragraph:

6 ‘‘(5) TREATMENT OF ANNULMENT AS DI7 VORCE.—The term ‘divorce’ includes an annul8 ment.’’.

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

10 this section shall apply to divorces, legal separations, and

11 annulments occurring more than 60 days after the date

12 of the enactment of this Act.

13 SEC. 4. TERMINATION OF COBRA CONTINUATION IN CASE

14 OF ELIGIBILITY FOR GROUP HEALTH COV15 ERAGE WITHOUT IMPOSITION OF PREEXIST16 ING CONDITION EXCLUSION.

17 (a) IN GENERAL.—Section 4980B(f)(2)(B)(iv)(I) of

18 the Internal Revenue Code of 1986 is amended—

19 (1) insert ‘‘, or eligible for coverage in the case

20 of an employee,’’ after ‘‘otherwise)’’, and

21 (2) by inserting ‘‘or for which the period in

22 which such an exclusion or limitation may be applied

23 has ended under section 4988(a)(2)’’ after ‘‘of such

24 beneficiary’’.

25 (b) EFFECTIVE DATE.—
29

•HR 3043 IH

1 (1) IN GENERAL.—The amendments made by

2 subsection (a) shall apply to individuals who com3 mence health insurance coverage or coverage under

4 a group health plan after the first day of the first

5 month beginning more than 6 months after the date

6 of the enactment of this Act.

7 (2) PLAN YEAR EXCEPTION.—Such amend8 ments shall not apply to plan years ending before

9 the first day referred to in paragraph (1).

Æ

HR 3043 IH——2