I

104TH CONGRESS

1ST SESSION H. R. 1604

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 and available.

IN THE HOUSE OF REPRESENTATIVES

MAY 10, 1995

Mrs. JOHNSON of Connecticut (for herself and Mr. THOMAS of California) 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

and available.

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 1995’’.
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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:
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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 re20 gardless of how such coverage is provided

21 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.
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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
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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
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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, medical condi17 tion, claims experience, receipt of health care, medical his18 tory, disability, or evidence of insurability of the individ19 ual.

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))
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1 based on factors directly related to the health status,

2 medical condition, claims experience, receipt of

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

4 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 6 months long.

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

14 continuation coverage under section 4980B)

15 and has not lost such coverage but for a failure

16 to make required premium payments or con17 tributions or due to fraud or misrepresentation

18 of material fact.

19 ‘‘(C) If the individual’s most recent cov20 erage during the period of qualifying previous

21 coverage under subparagraph (A) was health

22 insurance coverage not in connection with a

23 group health plan, such coverage was discon24 tinued or terminated by the carrier only on the

25 basis of—
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1 ‘‘(i) a change in residence of the indi2 vidual so that the individual no longer re3 sided within a service area of the carrier

4 with respect to such coverage, or

5 ‘‘(ii) a change in the individual’s sta6 tus so that the individual was no longer el7 igible for dependent coverage, if the indi8 vidual previously was only eligible for such

9 coverage as a dependent.

10 Nothing in subparagraph (C) shall be construed as

11 preventing a carrier from waiving the application of

12 such subparagraph during an annual open enroll13 ment period or otherwise.

14 ‘‘(3) PERIOD OF QUALIFYING PREVIOUS COV15 ERAGE DEFINED.—For purposes of this chapter, the

16 term ‘period of qualifying previous coverage’ means

17 the period—

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

19 enrolled under a group health plan or is pro20 vided health insurance coverage, and

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

22 neither covered under a group health plan or

23 covered under health insurance coverage (in24 cluding coverage described in section
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1 4991(2)(D)) for a continuous period of more

2 than 2 months.

3 ‘‘SEC. 4988. LIMITED USE OF PREEXISTING CONDITION EX4 CLUSIONS.

5 ‘‘(a) IN GENERAL.—A carrier offering health insur6 ance coverage and a group health plan may impose a limi7 tation or exclusion of benefits relating to treatment of a

8 condition based on the fact that the condition is a preexist9 ing condition (as defined in subsection (c)) only if the fol10 lowing requirements are met:

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

12 The condition was diagnosed or treated during the

13 period not more than 3 months before the date of

14 enrollment for such coverage or under such plan.

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

16 ‘‘(A) GENERAL RULE OF MAXIMUM OF 6-

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

18 the limitation or exclusion extends for a period

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

20 case of a late enrollee described in subpara21 graph (B)) after such date of enrollment.

22 ‘‘(B) LATE ENROLLEE DESCRIBED.—

23 ‘‘(i) IN GENERAL.—Except as pro24 vided in clause (ii), a late enrollee de25 scribed in this subparagraph with respect
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1 to a group health plan is an individual who

2 becomes covered under the plan but who,

3 at the time the individual first was eligible

4 to elect such coverage, had elected not to

5 be covered under the plan.

6 ‘‘(ii) EXCEPTION FOR INDIVIDUALS

7 WITH CONTINUOUS COVERAGE.—An indi8 vidual shall not be considered to be a late

9 enrollee with respect to a plan if the indi10 vidual establishes that, with respect to the

11 period beginning on the date the individual

12 first could have obtained coverage under

13 the plan and until the date the individual

14 was so covered, there was no period of

15 more than 2 months during all of which

16 the individual neither had health insurance

17 coverage (including coverage described in

18 subparagraph (C) or (D) of section

19 4991(2)) or was covered under any group

20 health plan.

21 ‘‘(3) CREDIT FOR PREVIOUS QUALIFYING COV22 ERAGE.—In the case of an individual who is in a pe23 riod of qualifying previous coverage (as defined in

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

25 health insurance coverage or under the group health
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1 plan, the limitation or exclusion period under para2 graph (2)(A) shall be reduced by the length of such

3 period of qualifying previous coverage.

4 ‘‘(4) EXCEPTION FOR TREATMENT OF PREG5 NANCY.—The limitation or exclusion does not apply

6 to treatment relating to pregnancy.

7 ‘‘(5) EXCEPTION FOR CERTAIN DEPENDENT

8 COVERAGE.—

9 ‘‘(A) NEWBORNS.—The limitation or exclu10 sion does not apply to a child who has health

11 insurance coverage (or is covered under a group

12 health plan) as a dependent within 1 month of

13 the birthdate until such time as the child does

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

15 for a continuous period of more than 2 months.

16 ‘‘(B) ADOPTED CHILDREN.—The limita17 tion or exclusion does not apply (beginning on

18 the date of adoption) to an adopted child who

19 has health insurance coverage (or is covered

20 under a group health plan) within 1 month of

21 such date until such time as the child does not

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

23 continuous period of more than 2 months.

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

25 IN LIEU OF PREEXISTING EXCLUSION LIMITATIONS.—
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1 ‘‘(1) IN GENERAL.—A carrier offering health

2 insurance coverage and a group health plan provid3 ing coverage, with respect to an individual, may

4 delay the effective date of coverage of the individual

5 beyond the first date of the month beginning after

6 the date of election of the coverage only if the fol7 lowing requirements are met:

8 ‘‘(A) LIMITATION ON DELAY PERIOD.—

9 Subject to paragraph (2), such additional delay

10 does not extend over a period of longer than 2

11 months (or 3 months in the case of a late en12 rollee described in subsection (a)(2)(B)).

13 ‘‘(B) NO SUBSEQUENT APPLICATION OF

14 ANY PREEXISTING EXCLUSION.—After the pe15 riod of such additional delay, no limitation or

16 exclusion described in subsection (a) may be ap17 plied.

18 ‘‘(C) NO PREMIUMS.—No premium or re19 quired contribution may be charged for the pe20 riod before the effective date of coverage.

21 Nothing in this paragraph shall waive the applicable

22 requirements of subsection (a).

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

24 delay may extend over a period longer than the pe25 riod specified under paragraph (1)(A) if the individ-
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1 ual involved waives the protection provided under

2 such paragraph.

3 ‘‘(c) PREEXISTING CONDITION DEFINED.—For pur4 poses of this section, the term ‘preexisting condition’

5 means, with respect to coverage under health insurance

6 coverage or under a group health plan, a condition which

7 was diagnosed or treated for a condition, or for which a

8 reasonably prudent person would have sought medical care

9 diagnosis or treatment, within the 3-month period ending

10 on the day before the date of enrollment (without regard

11 to any delayed coverage period).

12 ‘‘SEC. 4989. GUARANTEED RENEWABILITY OF HEALTH IN13 SURANCE COVERAGE.

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

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

16 guarantee that such coverage may be renewed or contin17 ued in force at the option of the policyholder or contract18 holder.

19 ‘‘(b) GROUNDS FOR REFUSAL TO RENEW.—

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

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

22 may cancel or refuse to renew such coverage—

23 ‘‘(A) for nonpayment of premium or con24 tribution in accordance with the terms of the

25 coverage;
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1 ‘‘(B) for fraud or misrepresentation of ma2 terial fact;

3 ‘‘(C) because of a general discontinuation

4 or termination of coverage, but only if the car5 rier provides prior notice of such discontinu6 ation or termination and if the conditions de7 scribed in clause (i) or (ii) of paragraph (2)(A)

8 are met;

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

10 connection with a group health plan, for failure

11 of the plan to maintain participation rules con12 sistent with paragraph (4); or

13 ‘‘(E) in the case of coverage that is con14 tinuation coverage under section 4980B, for

15 loss of eligibility to continue such coverage.

16 ‘‘(2) CONDITIONS FOR DISCONTINUATION.—

17 ‘‘(A) IN GENERAL.—

18 ‘‘(i) NONDISCRIMINATORY SUBSTI19 TUTION OF ALTERNATIVE COVERAGE.—

20 The conditions described in this clause are

21 the following:

22 ‘‘(I) The carrier is no longer of23 fering health insurance coverage to

24 new policyholders or contractholders.
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1 ‘‘(II) The carrier is offering to

2 the previously covered policyholder or

3 contractholder the option to purchase

4 any other health insurance coverage

5 currently being offered to new policy6 holders or contractholders.

7 ‘‘(III) The discontinuation or ter8 mination of coverage and option to re9 place with other coverage is made uni10 formly without regard to the health

11 status or insurability of any person

12 provided health insurance coverage.

13 ‘‘(ii) GENERAL DISCONTINUATION OF

14 COVERAGE IN A STATE.—The conditions

15 described in this clause are that the carrier

16 is discontinuing and not renewing all

17 health insurance coverage within a class of

18 coverage (as defined in subparagraph (B))

19 in a State.

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:
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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 ‘‘(3) APPLICATION OF GEOGRAPHIC LIMITA15 TIONS TO COVERAGE PROVIDED THROUGH A NET16 WORK ARRANGEMENT.—

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

18 insurance or under a group health plan that

19 consists primarily of coverage through a net20 work arrangement (as defined in subparagraph

21 (B)) may be denied to individuals who neither

22 live nor reside in the service area of the ar23 rangement, but only if such denial is applied

24 uniformly, without regard to the health status

25 or the insurability of particular individuals.
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1 ‘‘(B) NETWORK ARRANGEMENTS.—For

2 purposes of subparagraph (A), the term ‘net3 work arrangement’ means, with respect to a

4 group health plan or under health insurance

5 coverage, an arrangement under such plan or

6 coverage whereby providers agree to provide

7 items and services covered under the arrange8 ment to individuals covered under the plan or

9 who have such coverage.

10 ‘‘(4) MINIMUM PARTICIPATION REQUIRE11 MENTS.—A carrier that offers health insurance cov12 erage in connection with a group health plan that

13 covers the employees of one or more employers may

14 require that a minimum percentage of eligible em15 ployees of such an employer obtain such coverage if

16 such percentage is applied uniformly to all such cov17 erage offered to employers of comparable size.

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

19 ‘‘Nothing in this chapter shall prevent a State from

20 establishing, implementing, or continuing in effect stand21 ards related to health insurance coverage (including the

22 issuance, renewal, or rating of such coverage) if such

23 standards are at least as stringent as the standards estab24 lished under this chapter with respect to such coverage.
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1 ‘‘SEC. 4991. DEFINITIONS.

2 ‘‘For purposes of this chapter—

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

4 ‘‘(A) a licensed insurance company;

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

6 medical service plan;

7 ‘‘(C) a health maintenance organization;

8 and

9 ‘‘(D) any similar entity which (i) is en10 gaged in the business of providing a plan of

11 health insurance or health benefits or services

12 and (ii) is regulated under State law for sol13 vency.

14 ‘‘(2) HEALTH INSURANCE COVERAGE.—

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

16 subparagraph (B), the term ‘health insurance

17 coverage’ means any hospital or medical service

18 policy or certificate, hospital or medical service

19 plan contract, or health maintenance organiza20 tion group contract offered by a carrier.

21 ‘‘(B) EXCEPTION.—Such term does not in22 clude any of the following (or any combination

23 of the following):

24 ‘‘(i) Coverage only for accident, den25 tal, vision, or disability income, or any

26 combination thereof.
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1 ‘‘(ii) Medicare supplemental health in2 surance.

3 ‘‘(iii) Coverage issued as a supplement

4 to liability insurance.

5 ‘‘(iv) Liability insurance, including

6 general liability insurance and automobile

7 liability insurance.

8 ‘‘(v) Workers’ compensation or similar

9 insurance.

10 ‘‘(vi) Automobile medical-payment in11 surance.

12 ‘‘(vii) Coverage providing wages or

13 payments in lieu of wages for any period

14 during which an employee is absent from

15 work on account of sickness or injury.

16 ‘‘(viii) A long-term care insurance cov17 erage, including a nursing home fixed in18 demnity policy (unless the Secretary of

19 Health and Human Services, in consulta20 tion with the Secretaries of Labor and of

21 the Treasury, determines that such cov22 erage is sufficiently comprehensive so that

23 it should be treated as health insurance

24 coverage.)
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1 ‘‘(ix) Any coverage not described in

2 any preceding clause which consists of ben3 efit payments, on a periodic basis, for a

4 specified disease or illness or period of hos5 pitalization without regard to the costs in6 curred or services rendered during the pe7 riod to which the payments relate.

8 ‘‘(x) Such other coverage as the Sec9 retary of Health and Human Services, in

10 consultation with the Secretaries of Labor

11 and of the Treasury, determines is not

12 health insurance coverage.

13 ‘‘(C) TREATMENT OF STATE RISK

14 POOLS.—Except for purposes of sections

15 4987(b)(3), 4988(a)(2)(B)(ii), and 4988(a)(3),

16 such term does not include coverage provided

17 through a State risk pool, uncompensated care

18 pool or similar subsidized program.

19 ‘‘(D) PUBLIC PLANS COUNTED FOR PUR20 POSES OF QUALIFYING PREVIOUS COVERAGE.—

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

22 4988(a)(2)(B)(ii), and 4988(a)(3), such term

23 also includes coverage under any of the follow24 ing:
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1 ‘‘(i) The medicare program under title

2 XVIII of the Social Security Act.

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

4 such Act.

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

6 Service.

7 ‘‘(iv) The Civilian Health and Medical

8 Program of the Uniformed Services

9 (CHAMPUS) under title 10, United States

10 Code.

11 ‘‘(v) Any other similar governmental

12 health insurance program (including a pro13 gram described in subparagraph (C)).

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

15 health plan’ has the meaning given such term in sec16 tion 5000(b)(1), but does not include any type of

17 coverage excluded from the definition of health in18 surance coverage under paragraph (2)(B) or (C) and

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

20 following requirements is met:

21 ‘‘(A) Any portion of the premium or bene22 fits under the plan is paid by or on behalf of

23 the employer.

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

25 reimbursed, whether through wage adjustments
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1 or otherwise, by or on behalf of the employer

2 for any portion of the premium.

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

4 the employer, or any of the eligible employees

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

6 the purposes of section 162, section 25, or sec7 tion 106 of the Internal Revenue Code of 1986.

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

9 District of Columbia, Puerto Rico, the Virgin Is10 lands, Guam, American Samoa, and the Northern

11 Mariana Islands.’’

12 (b) EFFECTIVE DATE.—

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

14 subsection (a) shall apply to individuals who com15 mence health insurance coverage or coverage under

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

17 month beginning more than 6 months after the date

18 of the enactment of this Act.

19 (2) PLAN YEAR EXCEPTION.—Such amend20 ments shall not apply to plan years ending before

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

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

23 for subtitle D is amended by inserting after the item relat24 ing to chapter 44 the following new item:

‘‘CHAPTER 45. Continuity and portability of health coverage.’’
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1 SEC. 3. CHANGES IN COBRA CONTINUATION REQUIRE2 MENTS.

3 (a) MORE AFFORDABLE COVERAGE THROUGH RE4 QUIREMENT OF LOWER-COST HEALTH PLAN CHOICES.—

5 (1) IN GENERAL.—Section 4980B(f) of the In6 ternal Revenue Code of 1986 is amended—

7 (A) in paragraph (1), by striking ‘‘, con8 tinuation coverage under the plan’’ and insert9 ing ‘‘and as selected by the qualified beneficiary

10 under this subsection, continuation coverage of

11 the type described in subparagraph (A), (F)(i),

12 or (F)(ii) of paragraph (2)’’;

13 (B) in paragraph (2)(A), by striking ‘‘The

14 coverage’’ and inserting ‘‘Unless the coverage is

15 the type of coverage described in clause (i) or

16 (ii) of subparagraph (F), the coverage’’;

17 (C) in paragraph (2)(C)—

18 (i) in clause (i), by inserting ‘‘(or in

19 the case of alternative continuation cov20 erage described in clause (i) or (ii) of sub21 paragraph (F), 69 percent or 52 percent,

22 respectively, of such applicable premium)’’

23 after ‘‘for such period’’, and

24 (ii) in the last sentence by inserting ‘‘,

25 ‘69 percent’, or ‘52 percent’ ’’ after ‘‘ ‘102
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1 percent’ ’’ and by inserting ‘‘, ‘100 per2 cent’, or ‘75 percent’, respectively,’’;

3 (D) by adding at the end of paragraph (2)

4 the following new subparagraph:

5 ‘‘(F) TYPES OF ALTERNATIVE CONTINU6 ATION COVERAGE REQUIRED.—

7 ‘‘(i) COVERAGE WITH TWO-THIRDS AC8 TUARIAL VALUE.—The type of coverage

9 described in this clause is coverage

10 which—

11 ‘‘(I) has an actuarial value (de12 termined with respect to the similarly

13 situated beneficiaries referred to in

subparagraph (A)) of not less than 2 14 ⁄3

15 of the actuarial value (determined

16 with respect to such beneficiaries) of

17 the reference coverage, and

18 ‘‘(II) meets the requirements of

19 clause (iii).

20 ‘‘(ii) COVERAGE WITH ONE-HALF AC21 TUARIAL VALUE.—The type of coverage

22 described in this clause is coverage

23 which—

24 ‘‘(I) has an actuarial value (de25 termined with respect to the similarly
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1 situated beneficiaries referred to in

subparagraph (A)) of not less than 1 2 ⁄2

3 of the actuarial value (determined

4 with respect to such beneficiaries) of

5 the reference coverage, and

6 ‘‘(II) meets the requirements of

7 clause (iii).

8 ‘‘(iii) REQUIREMENTS RELATING TO

9 GENERAL AVAILABILITY AND PREEXISTING

10 CONDITIONS.—Coverage meets the require11 ments of this clause if the coverage—

12 ‘‘(I) is made available to all

13 qualified beneficiaries who become eli14 gible for coverage under this sub15 section after the effective date of this

16 subparagraph, and

17 ‘‘(II) does not impose any restric18 tion or limitation on coverage based

19 on a preexisting condition unless such

20 restriction or limitation could be im21 posed under the coverage described in

22 subparagraph (A).

23 ‘‘(iv) REFERENCE COVERAGE DE24 FINED.—For purposes of this subpara25 graph, the term ‘reference coverage’
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1 means, with respect to a group health

2 plan, the costliest continuation coverage

3 available under subparagraph (A) under

4 the plan, excluding coverage in which an

5 insignificant proportion of the eligible indi6 viduals is enrolled.’’; and

7 (E) by adding at the end of paragraph (4)

8 the following new subparagraph:

9 ‘‘(D) COMPUTATION BASED ON FULL COV10 ERAGE.—For purposes of this section, the ap11 plicable premium shall be computed based on

12 the type of coverage described in paragraph

13 (2)(A).’’

14 (2) EFFECTIVE DATE.—The amendments made

15 by this subsection shall apply to plan years begin16 ning on or after the first day of the first month be17 ginning at least 6 months after the date of the en18 actment of this Act.

19 (b) CONTINUATION COVERAGE FOR CERTAIN FOR20 MERLY COVERED DEPENDENT SPOUSES AND CHIL21 DREN.—

22 (1) IN GENERAL.—Section 4980B(f) of such

23 Code is amended by adding at the end the following

24 new paragraph:
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1 ‘‘(9) CAPTURE OF DELAYED DIVORCE OR SEPA2 RATION.—

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

4 section, if a covered employee disenrolls from

5 coverage (or fails to renew coverage of) a quali6 fied beneficiary within the 12-month period pre7 ceding the date of the divorce or legal separa8 tion of the employee from the employee’s

9 spouse, the divorce or separation shall be treat10 ed as a qualifying event described in paragraph

11 (3)(C) and the loss of coverage shall be consid12 ered to be a result (and by reason) of such

13 event.

14 ‘‘(B) EXCEPTION.—Subparagraph (A)

15 shall not apply to a qualified beneficiary if—

16 ‘‘(i) the beneficiary waives the rights

17 under such subparagraph, or

18 ‘‘(ii) the qualified beneficiary at the

19 time of the qualifying event or at the time

20 of the disenrollment or failure to renew

21 coverage has coverage under a group

22 health plan (other than by reason of this

23 paragraph) if the plan does not contain

24 any exclusion or limitation with respect to
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1 any preexisting condition of such bene2 ficiary.’’.

3 (2) TREATMENT OF PERIOD BEFORE DELAYED

4 DIVORCE OR SEPARATION.—Subparagraph (D) of

5 section 4980B(f)(2) of such Act is amended by add6 ing at the end the following new sentence: ‘‘For pur7 poses of applying any preexisting condition limita8 tion or restriction, any period beginning on the date

9 of the disenrollment or failure to renew coverage re10 ferred to in paragraph (9)(A) and ending on the

11 date of the divorce or separation referred to in such

12 paragraph shall not be treated as a break in cov13 erage if such paragraph applies to the qualified ben14 eficiary.’’.

15 (3) TREATMENT OF ANNULMENTS.—Section

16 4980B(g) of such Code is amended by adding at the

17 end the following new paragraph:

18 ‘‘(5) TREATMENT OF ANNULMENT AS DI19 VORCE.—The term ‘divorce’ includes an annul20 ment.’’.

21 (4) EFFECTIVE DATE.—The amendments made

22 by this section shall apply to divorces, legal separa23 tions, and annulments occurring more than 60 days

24 after the date of the enactment of this Act.
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1 (c) ELIMINATION OF TERMINATION OF CONTINU2 ATION COVERAGE BY REASON OF MEDICARE ELIGIBILITY

3 THROUGH END STAGE RENAL DISEASE.—

4 (1) IN GENERAL.—Subclause (II) of section

5 4980B(f)(2)(B)(iv) of such Code is amended by in6 serting ‘‘other than by reason of section 226A of

7 such Act’’ after ‘‘the Social Security Act’’.

8 (2) EFFECTIVE DATE.—The amendment made

9 by this subsection shall apply to covered employees

10 and qualified beneficiaries who become entitled to

11 benefits under title XVIII of the Social Security Act

12 pursuant to section 226A of such Act on or after the

13 first day of the first month that begins after the

14 date of the enactment of this Act.

Æ

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