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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1526 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 1526

 To limit discrimination in health insurance coverage based on health 
status or past claims experience and to reform the provision of health 
                   coverage to small employer groups.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

 Mr. Durbin (for himself, Mr. Reynolds, Mr. Smith of New Jersey, Mrs. 
  Byrne, Mr. Hastings, and Mr. Pastor) introduced the following bill; 
  which was referred jointly to the Committees on Ways and Means, and 
                          Energy and Commerce

_______________________________________________________________________

                                 A BILL

 
 To limit discrimination in health insurance coverage based on health 
status or past claims experience and to reform the provision of health 
                   coverage to small employer groups.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Health Insurance Fairness Act of 
1993''.

SEC. 2. HEALTH PLAN STANDARDS.

    The Social Security Act is amended by adding at the end the 
following new title:

                   ``TITLE XXI--HEALTH PLAN STANDARDS

                   ``Part A--Individual Health Plans

``SEC. 2101. PROHIBITION OF DISCRIMINATION BASED ON HEALTH STATUS FOR 
              COVERAGE, BENEFITS, AND PREMIUMS.

    ``(a) In General.--Except as provided under subsection (b), an 
individual health plan, and any person which issues such a plan, may 
not deny, limit, or condition the coverage under (or benefits of) the 
plan with respect to health services, or vary the premiums charged for 
such coverage, based on the health status, claims experience, receipt 
of health care, medical history, or lack of evidence of insurability, 
of an individual.
    ``(b) Exception for Certain Pre-Existing Conditions.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, individual health plans may exclude coverage 
        of services related to treatment of a preexisting condition, 
        but the period of such exclusion may not exceed 24 months. The 
        exclusion of coverage shall not apply to services furnished to 
        newborns who are covered at the time of birth.
            ``(2)  Crediting of previous coverage.--
                    ``(A) In general.--An individual health plan shall 
                provide that if an individual under such plan is in a 
                period of continuous coverage (as defined in 
                subparagraph (B)(i)) with respect to particular 
                services as of the date of application for coverage 
                under such plan (determined without regard to any 
                waiting period under such plan), any period of 
                exclusion of coverage with respect to a preexisting 
                condition for such services or type of services shall 
                be reduced by 1 month for each month in the period of 
                continuous coverage.
                    ``(B) Definitions.--As used in this subsection:
                            ``(i) Period of continuous coverage.--The 
                        term `period of continuous coverage' means, 
                        with respect to particular services, the period 
                        beginning on the date an individual is enrolled 
                        under an individual or group health plan or 
                        under title XVIII or XIX of the Social Security 
                        Act which provides substantially the same or 
                        similar benefits with respect to such services 
                        and ends on the date the individual is not so 
                        enrolled for a continuous period of more than 3 
                        months.
                            ``(ii) Preexisting condition.--The term 
                        `preexisting condition' means a condition which 
                        has been diagnosed or treated during the 1-year 
                        period ending on the day before the first date 
                        of such coverage.
            ``(3) Exception.--
                    ``(A) In general.--Subsection (a) shall not affect 
                an individual health plan's variation of premiums based 
                only on the age, sex, or geographic area of residence 
                of an individual.
                    ``(B) Waiting period.--An individual health plan 
                may offer to an individual to waive an exclusion of 
                coverage with respect to a preexisting condition for 
                which an exclusion could otherwise be applied under 
                this subsection in exchange for an increase in the 
                premium during the period in which the exclusion could 
                otherwise be applied. If the individual rejects this 
                offer, the limitations on premiums and exclusions that 
                would apply in the absence of such offer shall continue 
                to apply.

                      ``Part B--Group Health Plans

   ``Subpart 1--Prohibition of Discrimination Based on Health Status

``SEC. 2111. PROHIBITION OF DISCRIMINATION BASED ON HEALTH STATUS FOR 
              COVERAGE, BENEFITS, AND PREMIUMS.

    ``(a) In General.--Except as provided under subsection (b), a group 
health plan, and any person which issues such a plan, may not deny, 
limit, or condition the coverage under (or benefits of) the plan with 
respect to health services, or vary the premiums charged for such 
coverage, based on the health status, claims experience, receipt of 
health care, medical history, or lack of evidence of insurability, of 
an individual.
    ``(b) Exception for Certain Pre-Existing Conditions.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, group health plans may exclude coverage of 
        services related to treatment of a preexisting condition, but 
        the period of such exclusion may not exceed 6 months. The 
        exclusion of coverage shall not apply to services furnished to 
        newborns who are covered at the time of birth.
            ``(2)  Crediting of previous coverage.--
                    ``(A) In general.--A group health plan shall 
                provide that if an individual under such plan is in a 
                period of continuous coverage (as defined in 
                subparagraph (B)(i)) with respect to particular 
                services as of the date of coverage under such plan 
                (determined without regard to any waiting period under 
                such plan), any period of exclusion of coverage with 
                respect to a preexisting condition for such services or 
                type of services shall be reduced by 1 month for each 
                month in the period of continuous coverage.
                    ``(B) Definitions.--As used in this subsection:
                            ``(i) Period of continuous coverage.--The 
                        term `period of continuous coverage' means, 
                        with respect to particular services, the period 
                        beginning on the date an individual is enrolled 
                        under an individual or group health plan or 
                        title XVIII or XIX of the Social Security Act 
                        which provides substantially the same or 
                        similar benefits with respect to such services 
                        and ends on the date the individual is not so 
                        enrolled for a continuous period of more than 3 
                        months.
                            ``(ii) Preexisting condition.--The term 
                        `preexisting condition' means a condition which 
                        has been diagnosed or treated during the 3-
                        month period ending on the day before the first 
                        date of such coverage.

``SEC. 2112. PROHIBITION OF RATE VARIATION IN GROUP HEALTH PLANS BASED 
              ON HEALTH STATUS.

    ``A person that issues a group health plan with respect to a group 
may not vary premiums charged for coverage with respect to health 
services based on the health status, claims experience, receipt of 
health care, medical history, or lack of evidence of insurability, of a 
member of the group.

  ``Subpart 2--Requirements for Health Plans Issued to Small Employers

``SEC. 2121. GENERAL REQUIREMENTS FOR HEALTH PLANS ISSUED TO SMALL 
              EMPLOYERS.

    ``(a) Registration.--Each insurer (as defined in section 
2133(b)(1)) shall register with the Secretary and with any applicable 
regulatory authority for each State in which it issues or offers a 
health plan to small employers.
    ``(b) Guaranteed Eligibility.--
            ``(1) In general.--No insurer may exclude from coverage 
        under a health plan any eligible employee, the spouse or any 
        dependent child of the eligible employee to whom coverage is 
        made available by a small employer.
            ``(2) Waiting periods.--Paragraph (1) shall not apply to 
        any period an eligible employee is excluded from coverage under 
        the health plan solely by reason of a requirement applicable to 
        all employees that a minimum period of service with the small 
        employer is required before the employee is eligible for such 
        coverage.
    ``(c) Guaranteed Issue.--
            ``(1) In general.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this subsection, an insurer that offers a 
                health plan to small employers in a geographic area in 
                a community must offer the same plan to any other small 
                employer located in the area. Such requirement shall 
                apply on a continuous, year-round basis.
                    ``(B) State alternative.--Subparagraph (A) shall 
                not apply to a community in a State if the Secretary 
                certifies that the State has implemented an alternative 
                approach for assuring the availability for all small 
                employers in the community of health insurance that 
                provides the same benefits at the same premium as would 
                have applied if subparagraph (A) had continued to 
                apply.
            ``(2) Treatment of health maintenance organizations.--
                    ``(A) Geographic limitations.--A health maintenance 
                organization may deny enrollment to employees (and 
                family members) of a small employer if the employees 
                are located outside the service area of the 
                organization, but only if such denial is applied 
                uniformly without regard to health status or 
                insurability.
                    ``(B) Size limits.--A health maintenance 
                organization may apply to the Secretary to cease 
                enrolling new small employer groups in its health plan 
                (or in a geographic area served by the plan) if--
                            ``(i) it ceases to enroll any new employer 
                        groups, and
                            ``(ii) it can demonstrate that its 
                        financial or administrative capacity to serve 
                        previously enrolled groups and individuals (and 
                        additional individuals who will be expected to 
                        enroll because of affiliation with such 
                        previously enrolled groups) will be impaired if 
                        it is required to enroll new employer groups.
            ``(3) Grounds for refusal to renew.--
                    ``(A) In general.--An insurer may refuse to renew, 
                or may terminate, a health plan under this subpart only 
                for--
                            ``(i) nonpayment of premiums,
                            ``(ii) fraud or misrepresentation,
                            ``(iii) failure to maintain minimum 
                        participation rates (consistent with 
                        subparagraph (B)), or
                            ``(iv) in the case of a managed care plan, 
                        the employer leaves the geographic service area 
                        of the plan.
                    ``(B) Minimum participation rates.--An insurer may 
                require, with respect to a health plan issued to a 
                small employer, that a minimum percentage of eligible 
                employees who do not otherwise have health insurance 
                are enrolled in such plan, so long as such percentage 
                is enforced uniformly for all plans offered to 
                employers of comparable size.
    ``(d) Minimum Plan Period.--An insurer may not offer to, or issue 
with respect to, a small employer a health plan with a term of less 
than 12 months.
    ``(e) Notices and Renewal Periods.--
            ``(1) Notice on expiration.--An insurer providing health 
        plans to small employers shall provide for notice, at least 60 
        days before the date of expiration of the health plan, of the 
        terms for renewal of the plan. Except with respect to rates and 
        administrative changes, the terms of renewal (including 
        benefits) shall be the same as the terms of issuance.
            ``(2) Period of renewal.--The period of renewal of each 
        small employer health plan shall be for a period of not less 
        than 12 months.
    ``(f) Guaranteed Renewability.--
            ``(1) In general.--
                    ``(A) General rule.--Subject to the succeeding 
                provisions of this subsection, an insurer shall ensure 
                that a health plan issued to a small employer be 
                renewed, at the option of the small employer, unless 
                the plan is terminated for a reason specified in 
                subparagraph (B) or in subsection (c)(3)(A).
                    ``(B) Termination of small employer business.--An 
                insurer need not renew a health plan with respect to a 
                small employer if the insurer--
                            ``(i) elects not to renew all of its health 
                        plans issued to small employers in a State; and
                            ``(ii) provides notice to the Secretary, 
                        any applicable regulatory authority in the 
                        State, and to each small employer covered under 
                        the plan of such termination at least 180 days 
                        before the date of expiration of the plan.
                In the case of such a termination, the insurer may not 
                provide for issuance of any health plan to a small 
                employer in the State during the 5-year period 
                beginning on the date of termination of the last plan 
                not so renewed.

``SEC. 2122. REQUIREMENTS RELATED TO RESTRICTIONS ON RATING PRACTICES.

    ``(a) Limit on Variation of Reference Premium Rates Between Blocks 
of Business.--
            ``(1) In general.--The index rate for any block of business 
        of an insurer may not exceed the index rate for any other block 
        of business by more than 20 percent.
            ``(2) Exceptions.--Paragraph (1) shall not apply to a block 
        of business if--
                    ``(A) the block is one for which the insurer does 
                not reject, and never has rejected, small employers 
                included within the definition of employers eligible 
                for the block of business or otherwise eligible 
                employees and dependents who enroll on a timely basis, 
                based upon their claims experience, health status, 
                industry, or occupation,
                    ``(B) the insurer does not transfer, and never has 
                transferred, a health plan involuntarily into or out of 
                the block of business, and
                    ``(C) the block of business is currently available 
                for purchase at the time an exception to paragraph (1) 
                is sought by the insurer.
    ``(b) Use of Community Rating in Premium Rates Within a Block of 
Business.--
            ``(1) Limiting variations on premium to age and sex.--
        Subject to paragraph (5), the reference premium rate charged 
        for a health plan offered to small employers within a community 
        (as defined under the plan consistent with paragraph (3)) with 
        similar benefits for a type of family enrollment (described in 
        paragraph (4)) shall be the same for all small employers in the 
        same block of business in the community.
            ``(2) Age and sex adjustment to community-rating.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                health plan offered to a small employer may provide for 
                an adjustment to the reference premium rate based on 
                age and gender of covered individuals. Any such 
                adjustment shall be applied consistently to all small 
                employers.
                    ``(B) Limitation on adjustment.--The adjustment 
                under subparagraph (A) may not result, with respect to 
                health plans with similar benefits in a community in a 
                block of business, in premium rates that vary from the 
                index rate by more than 25 percent of the index rate.
            ``(3) Specification of community.--For purposes of 
        paragraph (1), no insurer may use a geographic area that is 
        smaller than a metropolitan statistical area as a community.
            ``(4) Types of family enrollment.--Each health plan offered 
        to a small employer shall permit enrollment of (and shall 
        compute premiums separately for) individuals based on each of 
        the following beneficiary classes:
                    ``(A) 1 adult.
                    ``(B) A married couple without children.
                    ``(C) A married couple with 1 or more children, or 
                1 adult with 1 or more children.
            ``(5) Additional variations.--
                    ``(A) In general.--Subject to subparagraph (B), a 
                health plan offered to a small employer may provide for 
                an adjustment to premium rates based on features of the 
                plan that involve the use of managed care, the pursuit 
                of healthy lifestyles, and other factors within the 
                control of plan beneficiaries that cut costs by 
                reducing the need for health care services and not by 
                reducing the benefits associated with such services. 
                Any such adjustment shall be applied consistently to 
                all small employers.
                    ``(B) Limitation on adjustment.--The adjustment 
                under subparagraph (A) may not result, with respect to 
                health plans with similar benefits in a community in a 
                block of business with respect to an age and gender 
                class of covered individuals, in premium rates that 
                vary from the rate described in subparagraph (C) by 
                more than 25 percent of such rate.
                    ``(C) Rate.--For purposes of subparagraph (B), the 
                rate described in this paragraph, for an age and gender 
                class of covered individuals within a block of business 
                for each rating period in a community, is 133\1/3\ 
                percent of the lowest premium rate charged or which 
                could have been charged for individuals in such class 
                by the insurer under a rating system for that block of 
                business to small employers in the community for health 
                plans with the same or similar coverage.
    ``(c) Limit on Transfer of Employers Among Blocks of Business.--
            ``(1) An insurer may not transfer a small employer from one 
        block of business to another without the consent of the 
        employer.
            ``(2) An insurer may not offer to transfer a small employer 
        from one block of business to another unless--
                    ``(A) the offer is made without regard to age, sex, 
                geography, claims experience, health status, industry, 
                occupation or the date on which the policy was issued, 
                and
                    ``(B) the same offer is made to all other small 
                employers in the same block of business.
    ``(d) Limits on Variation in Premium Increases.--The percentage 
increase in the premium rate charged to a small employer for a new 
rating period (determined on an annual basis) may not exceed the sum of 
the percentage change in the base premium rate plus 5 percentage 
points.
    ``(e) Definitions.--In this section:
            ``(1) Block of business.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `block of business' means, 
                with respect to an insurer, all of the small employers 
                with a health plan issued by the insurer (as shown on 
                the records of the insurer).
                    ``(B) Distinct groups.--A distinct group of small 
                employers with health plans issued by an insurer may be 
                treated as a block of business by such insurer if all 
                of the plans in such group--
                            ``(i) are marketed primarily by direct mail 
                        or are not marketed primarily by direct mail,
                            ``(ii) have been acquired from another 
                        insurer as a distinct group, or
                            ``(iii) are provided through an association 
                        with membership of not less than 25 small 
                        employers that has been formed for purposes 
                        other than obtaining health insurance.
            ``(2) Index rate.--The term `index rate' means, with 
        respect to a block of business, 133\1/3\ percent of the 
        reference premium rate for the block of business.
            ``(3) Reference premium rate.--The term `reference premium 
        rate' means, for each block of business for each rating period 
        in a community, the lowest premium rate charged or which could 
        have been charged, for the most favorable actuarial class, by 
        the insurer under a rating system for that block of business to 
        small employers in the community for health plans with the same 
        or similar coverage. Such a rate shall be determined without 
        regard to an adjustment under subsection (b)(5).
    ``(f) Full Disclosure of Rating Practices.--
            ``(1) In general.--At the time an insurer offers a health 
        plan to a small employer, the insurer shall fully disclose to 
        the employer all of the following:
                    ``(A) Rating practices for small employer health 
                plans, including rating practices for different 
                populations and benefit designs.
                    ``(B) The extent to which premium rates for the 
                small employer are established or adjusted based upon 
                the actual or expected variation in claims costs or 
                health condition of the employees and of such small 
                employer and their dependents.
                    ``(C) The provisions concerning the insurer's right 
                to change premium rates, the extent to which premiums 
                can be modified, and the factors which affect changes 
                in premium rates.
            ``(2) Notice on expiration.--An insurer providing health 
        plans to small employers shall provide for notice, at least 60 
        days before the date of expiration of the health plan, of the 
        terms for renewal of the plan.
    ``(g) Actuarial Certification.--Each insurer shall file annually 
with the Secretary and any applicable regulatory authority a written 
statement by a member of the American Academy of Actuaries (or other 
individual acceptable to such authority) that, based upon an 
examination by the individual which includes a review of the 
appropriate records and of the actuarial assumptions of the insurer and 
methods used by the insurer in establishing premium rates for small 
employer health plans--
            ``(1) the insurer is in compliance with the applicable 
        provisions of this section, and
            ``(2) the rating methods are actuarially sound.
Each insurer shall retain a copy of such statement for examination at 
its principal place of business.

           ``Part C--Establishment of Standards; Definitions

``SEC. 2131. STANDARDS AND REQUIREMENTS.

    ``(a) Approval Required.--
            ``(1) In general.--No individual or group policy may be 
        issued under a health plan (as defined in section 2133(a)) on 
        or after the effective date specified in subsection (d) (and no 
        new contract may be offered under such plan with respect to any 
        small employer beginning on or after such effective date) 
        unless the plan has been certified by the Secretary (in 
        accordance with such procedures as the Secretary establishes) 
        or approved by a State regulatory program (approved under 
        subsection (b)) as meeting the applicable standards established 
        under section 2132 by such effective date.
            ``(2) Plan disapproved.--If the Secretary determines that a 
        health plan does not meet such applicable standards on or after 
        such effective date, no coverage may be provided under the plan 
        to individuals not enrolled as of the date of the determination 
        and the plan may not be continued for plan years beginning 
        after the date of such determination until the Secretary 
        determines that such plan is in compliance with such standards.
    ``(b) Certified by State Approved Programs.--
            ``(1) In general.--If the Secretary determines that a State 
        has in effect an effective regulatory program for the 
        application of the standards established under section 2132 to 
        health plans, the Secretary may approve such program for 
        purposes of certification of health plans under this part.
            ``(2) Annual reports.--As a condition for the continued 
        approval of such a regulatory program, the State shall report 
        to the Secretary annually such information as the Secretary may 
        require with respect to the performance of the program. Such 
        information shall include the health plans certified under the 
        program, the compliance of such plans with the standards 
        established under section 2132, and enforcement actions taken 
        to ensure such compliance.
            ``(3) Periodic secretarial review of state regulatory 
        programs.--The Secretary annually shall review State regulatory 
        programs approved under paragraph (1) to determine if they 
        continue to meet and enforce the standards for approval. If the 
        Secretary initially determines that a State regulatory program 
        no longer meets such standards, the Secretary shall provide the 
        State an opportunity to adopt such a plan of correction that 
        would bring such program into compliance with such standards. 
        If the Secretary makes a final determination that the State 
        regulatory program fails to meet and enforce such standards 
        after such an opportunity, the Secretary shall disapprove such 
        program and reassume responsibility for certification of all 
        health plans in that State.
            ``(4) GAO audits.--The Comptroller General shall conduct 
        periodic reviews on a sample of State regulatory programs 
        approved under paragraph (1) to determine their compliance with 
        the requirements of such paragraph. The Comptroller General 
        shall report to the Secretary and Congress on the findings of 
        such reviews.
    ``(c) Excise Tax Sanctions.--For application of excise tax in the 
case of a nonconforming plan, see section 5000A of the Internal Revenue 
Code of 1986.
    ``(d) Effective Date.--The effective date specified in this 
subsection is--
            ``(1) January 1, 1994, with respect to the standards 
        established to carry out section 2111,
            ``(2) January 1, 1995, with respect to the standards 
        established to carry out part A, section 2112, and section 
        2121, and
            ``(3) January 1, 1996, with respect to the standards 
        established to carry out section 2122, applicable to premiums 
        for months beginning with January 1996.

``SEC. 2132. ESTABLISHMENT OF STANDARDS.

    ``(a) Establishment of Standards.--The Secretary shall develop, 
establish, and publish, by not later than 3 months before the 
respective effective date specified under section 2131(d), specific 
standards to implement the requirements of parts A and B and to be 
applied under section 5000A of the Internal Revenue Code of 1986.
    ``(b) More Stringent State Standards Permitted.--A State may 
implement standards that are more stringent than the standards 
established under this section to meet the requirements under parts A 
and B.
    ``(c) Telephone Information System.--The Secretary shall provide 
for the establishment of a toll-free telephone information and 
complaint system which provides for--
            ``(1) a system for the receipt and disposition of consumer 
        complaints or inquiries regarding compliance of health plans 
        with the standards, and
            ``(2) information to small employers about insurers in the 
        area of the employers that offer health plans that meet the 
        standards.

``SEC. 2133. DEFINITIONS.

    ``(a) Health Plan; Group Health Plan; Individual Health Plan.--As 
used in this title:
            ``(1) Health plan.--The term `health plan' means any 
        hospital or medical service policy or certificate, hospital or 
        medical service plan contract, health maintenance organization 
        group contract, or a multiple employer welfare arrangement, 
        but--
                    ``(A) does not include any of the following offered 
                by an insurer--
                            ``(i) accident only, vision only, dental 
                        only, disability only, or long-term care only 
                        insurance,
                            ``(ii) coverage issued as a supplement to 
                        liability insurance,
                            ``(iii) workmen's compensation or similar 
                        insurance,
                            ``(iv) automobile medical-payment 
                        insurance, or
                            ``(v) a medicare supplemental policy; and
                    ``(B) for purposes of subpart 2 of part B only, 
                does not include a qualified health maintenance 
                organization (as defined in section 1310(d) of the 
                Public Health Service Act).
            ``(2) Group health plan.--The term `group health plan' has 
        the meaning given such term by section 5000(b)(1) of the 
        Internal Revenue Code of 1986.
            ``(3) Individual health plan.--The term `individual health 
        plan' means a health plan which is not a group health plan.
    ``(b) Insurer and Health Maintenance Organization.--As used in this 
title:
            ``(1) Insurer.--The term `insurer' means any person that 
        offers to provide coverage under a health plan to a small 
        employer.
            ``(2) Health maintenance organization.--The term `health 
        maintenance organization' has the meaning given the term 
        `eligible organization' in section 1876(b).
    ``(c) General Definitions.--As used in this title:
            ``(1) Applicable regulatory authority.--The term 
        `applicable regulatory authority' means, with respect to a 
        health plan in a State with a regulatory program approved under 
        section 2131(b), the State commissioner or superintendent of 
        insurance or other State authority responsible for regulation 
        of health insurance.
            ``(2) Small employer.--The term `small employer' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 51 eligible employees on a 
        typical business day. For the purposes of this paragraph, the 
        term `employee' includes a self-employed individual. Section 
        5000A(b)(3) of the Internal Revenue Code of 1986 shall apply 
        for purposes of the preceding sentence.
            ``(3) Eligible employee.--The term `eligible employee' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 17\1/2\ hours of service 
        per week for that employer.''.

SEC. 3. EXCISE TAX ON PREMIUMS RECEIVED ON HEALTH PLANS WHICH DO NOT 
              MEET CERTAIN REQUIREMENTS.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 1986 
(relating to taxes on group health plans) is amended by adding at the 
end thereof the following new section:

``SEC. 5000A. FAILURE TO SATISFY CERTAIN STANDARDS FOR HEALTH PLANS.

    ``(a) General Rule.--
            ``(1) Title xxi standards.--
                    ``(A) Tax.--In the case of any health plan, there 
                is hereby imposed a tax on the failure of the plan (or 
                the person issuing the plan) to meet at any time during 
                any taxable year the applicable standards established 
                under section 2131 of title XXI of the Social Security 
                Act.
                    ``(B) Determination of violations.--The Secretary 
                of Health and Human Services shall determine whether a 
                plan or person meets the standards requirements of such 
                title.
            ``(2) Small employer self-insuring for health benefits.--In 
        the case of a small employer, there is hereby imposed a tax on 
        expenditures for a health plan that is not an insured health 
        plan.
    ``(b) Amount of Tax.--
            ``(1) In general.--
                    ``(A) Title xxi standards.--The amount of tax 
                imposed by subsection (a)(1) by reason of 1 or more 
                failures during a taxable year shall be equal to 25 
                percent of the gross premiums received during such 
                taxable year with respect to all health plans issued by 
                the person on whom such tax is imposed (or in the case 
                of a violation of a standard established with respect 
                to a requirement of subpart 2 of part B of title XXI of 
                the Social Security Act issued by the person to small 
                employers).
                    ``(B) Small employer self-insurance.--The amount of 
                tax imposed by subsection (a)(2) by reason of 1 or more 
                failures during a taxable year shall be equal to 25 
                percent of the expenditures under any uninsured health 
                plan during such taxable year.
            ``(2) Gross premiums.--For purposes of paragraph (1), gross 
        premiums shall include any consideration received with respect 
        to any health plan.
            ``(3) Controlled groups.--For purposes of paragraph (1)--
                    ``(A) Controlled group of corporations.--All 
                corporations which are members of the same controlled 
                group of corporations shall be treated as 1 person. For 
                purposes of the preceding sentence, the term 
                `controlled group of corporations' has the meaning 
                given to such term by section 1563(a), except that--
                            ``(i) `more than 50 percent' shall be 
                        substituted for `at least 80 percent' each 
                        place it appears in section 1563(a)(1), and
                            ``(ii) the determination shall be made 
                        without regard to subsections (a)(4) and 
                        (e)(3)(C) of section 1563.
                    ``(B) Partnerships, proprietorships, etc., which 
                are under common control.--Under regulations prescribed 
                by the Secretary, all trades or business (whether or 
                not incorporated) which are under common control shall 
                be treated as 1 person. The regulations prescribed 
                under this subparagraph shall be based on principles 
                similar to the principles which apply in the case of 
                subparagraph (A).
    ``(c) Limitation on Tax.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed by 
        subsection (a) with respect to any failure for which it is 
        established to the satisfaction of the Secretary that the 
        person on whom the tax is imposed did not know, and exercising 
        reasonable diligence would not have known, that such failure 
        existed.
            ``(2) Tax not to apply where failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) with respect 
        to any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the 1st date any of the persons on 
                whom the tax is imposed knew, or exercising reasonable 
                diligence would have known, that such failure existed.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(d) Definitions.--For purposes of this section:
            ``(1) Health plan.--The term `health plan' has the meaning 
        given such term in section 2133(a)(1) of the Social Security 
        Act.
            ``(2) Small employer.--The term `small employer' means, 
        with respect to a calendar year, an employer that normally 
        employs more than 1 but less than 51 eligible employees on a 
        typical business day. For the purposes of this paragraph, the 
        term `employee' includes a self-employed individual. Subsection 
        (b)(3) shall also apply for purposes of the preceding sentence.
            ``(3) Eligible employee.--The term `eligible employee' 
        means, with respect to an employer, an employee who normally 
        performs on a monthly basis at least 17\1/2\ hours of service 
        per week for that employer.''
    (b) Nondeductibility of Tax.--Paragraph (6) of section 275(a) of 
such Code (relating to nondeductibility of certain taxes) is amended by 
inserting ``47,'' after ``46,''.
    (c) Clerical Amendments.--The table of sections for such chapter 47 
is amended by adding at the end thereof the following new item:

                              ``Sec. 5000A. Failure to satisfy certain 
                                        standards for health 
                                        insurance.''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by subsections (a) and 
        (c) shall take effect on the date of the enactment of this Act.
            (2) Nondeductibility of tax.--The amendment made by 
        subsection (b) shall apply to taxable years beginning after 
        December 31, 1992.

SEC. 4. GAO STUDY AND REPORT ON RATING REQUIREMENTS FOR SMALL GROUP 
              HEALTH INSURANCE.

    The Comptroller General of the United States shall study and report 
to the Congress by no later than January 1, 1996, on the impact of the 
standards for rating practices for small group health insurance 
established under section 2122 of the Social Security Act on the 
availability and price of insurance offered to small employers. The 
study shall also include the Comptroller General's recommendations for 
adjusting the rating standards to eliminate variation in premiums 
associated with demographic factors.

                                 <all>

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