I

104TH CONGRESS

1ST SESSION H. R. 439

To promote portability of health insurance by limiting discrimination in health

coverage based on health status or past claims experience.

IN THE HOUSE OF REPRESENTATIVES

JANUARY 9, 1995

Mr. HAYES (for himself and Mr. MCCRERY) introduced the following bill;

which was referred to the Committee on Commerce and, in addition, to

the Committee on Economic and Educational Opportunities, for a period

to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee

concerned

A BILL

To promote portability of health insurance by limiting discrimination in health coverage based on health status

or past claims experience.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Health Insurance Eq5 uity Act of 1995’’.

6 SEC. 2. HEALTH INSURANCE STANDARDS.

7 The Social Security Act is amended by adding at the

8 end the following new title:
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1 ‘‘TITLE XXI—STANDARDS FOR HEALTH

2 COVERAGE

3 ‘‘SEC. 2101. PROHIBITION OF DISCRIMINATION BASED ON

4 HEALTH STATUS FOR COVERAGE, BENEFITS,

5 AND PREMIUMS.

6 ‘‘(a) IN GENERAL.—Except as provided under sub7 section (b), an insurer or group health plan providing

8 health coverage may not deny, limit, or condition the

9 health coverage or benefits with respect to health services,

10 or vary the premiums charged for such coverage, based

11 on the health status, claims experience, receipt of health

12 care, medical history, or lack of evidence of insurability,

13 of an individual.

14 ‘‘(b) EXCEPTION FOR CERTAIN PREEXISTING CONDI15 TIONS.—

16 ‘‘(1) IN GENERAL.—Subject to the succeeding

17 provisions of this subsection, an insurer or group

18 health plan providing health coverage may exclude

19 coverage of services related to treatment of a pre20 existing condition, but the period of such exclusion

21 may not exceed 6 months. The exclusion of coverage

22 shall not apply to services furnished to newborns

23 who are covered at the time of birth or to treatment

24 of conditions relating to pregnancy.

25 ‘‘(2) CREDITING OF PREVIOUS COVERAGE.—
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1 ‘‘(A) IN GENERAL.—An insurer or group

2 health plan providing health coverage shall pro3 vide that if a covered individual is in a period

4 of continuous coverage (as defined in subpara5 graph (B)(i)) with respect to particular services

6 as of the date of application for coverage (de7 termined without regard to any waiting period

8 for coverage), any period of exclusion of cov9 erage with respect to a preexisting condition for

10 such services or type of services shall be re11 duced by 1 month for each month in the period

12 of continuous coverage.

13 ‘‘(B) DEFINITIONS.—As used in this sub14 section:

15 ‘‘(i) PERIOD OF CONTINUOUS COV16 ERAGE.—The term ‘period of continuous

17 coverage’ means, with respect to particular

18 services, the period beginning on the date

19 an individual has health coverage (includ20 ing coverage under title XVIII or XIX)

21 which provides substantially the same or

22 similar benefits with respect to such serv23 ices and ends on the date the individual

24 does not have such coverage for a continu25 ous period of more than 3 months.
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1 ‘‘(ii) PREEXISTING CONDITION.—The

2 term ‘preexisting condition’ means a condi3 tion which has been diagnosed or treated

4 during the 6-month period ending on the

5 day before the first date of such coverage.

6 ‘‘(3) EXCEPTION.—

7 ‘‘(A) IN GENERAL.—Subsection (a) shall

8 not affect a variation of premiums based only

9 on the age, sex, or geographic area of residence

10 of an individual.

11 ‘‘(B) WAITING PERIOD.—An insurer or

12 group health plan providing health coverage

13 may offer to an individual to waive an exclusion

14 of coverage with respect to a preexisting condi15 tion for which an exclusion could otherwise be

16 applied under this subsection in exchange for

17 an increase in the premium during the period

18 in which the exclusion could otherwise be ap19 plied. If the individual rejects this offer, the

20 limitations on premiums and exclusions that

21 would apply in the absence of such offer shall

22 continue to apply.

23 ‘‘(c) APPLICATION OF RULES BY CERTAIN HEALTH

24 MAINTENANCE ORGANIZATIONS.—A health maintenance

25 organization that provides health insurance coverage shall
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1 not be considered as failing to meet the requirements of

2 section 1301 of the Public Health Service Act notwith3 standing that it provides for an exclusion of the coverage

4 based on a preexisting condition consistent with the provi5 sions of this section so long as such exclusion is applied

6 consistent with the provisions of this section. Nothing in

7 this section shall be construed as requiring such an organi8 zation to impose such an exclusion.

9 ‘‘SEC. 2102. ENROLLMENT AND RENEWAL PRACTICES FOR

10 HEALTH INSURANCE COVERAGE.

11 ‘‘(a) CONSTRUCTION INVOLVING APPLICATION OF

12 CAPACITY LIMITS FOR HEALTH INSURANCE COV13 ERAGE.—

14 ‘‘(1) IN GENERAL.—Subject to paragraph (2)

15 and subsection (b), nothing in this title shall be con16 strued as preventing an insurer providing health in17 surance coverage to individuals or small employers

18 in an area from ceasing to enroll individuals or small

19 employers under such coverage if—

20 ‘‘(A) the insurer ceases to enroll any new

21 individuals or small employers; and

22 ‘‘(B) the insurer can demonstrate to the

23 State insurance commissioner that the insurer’s

24 financial or provider capacity to serve pre25 viously covered individuals or small employers
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1 (and additional individuals who will be expected

2 to enroll because of affiliation with such pre3 viously covered individuals or small employers)

4 will be impaired if it is required to enroll addi5 tional individuals or small employers.

6 ‘‘(2) FIRST-COME-FIRST-SERVED.—An insurer

7 is only eligible to exercise the limitations provided

8 for in paragraph (1) if such insurer provides for en9 rollment of individuals or small employers on a first10 come-first-served basis (except in the case of addi11 tional individuals or small employers described in

12 paragraph (1)(B)).

13 ‘‘(b) REQUIREMENTS RELATING TO RENEWAL OF

14 HEALTH INSURANCE COVERAGE.—

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graphs (2) and (3), an insurer that provides health

17 insurance coverage to an individual or small em18 ployer shall not deny, cancel, or refuse to renew such

19 coverage of the individual or small employer.

20 ‘‘(2) GROUNDS FOR REFUSAL TO RENEW.—An

21 insurer may deny, cancel, refuse to renew, or termi22 nate health insurance coverage within a type of cov23 erage option described in paragraph (4) in an area

24 described in paragraph (6) only—

25 ‘‘(A) for nonpayment of premiums;
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1 ‘‘(B) for fraud on the part of the individ2 ual or small employer;

3 ‘‘(C) with respect to an individual, for mis4 representation of material facts on the part of

5 the individual relating to an application for cov6 erage or claim for benefits;

7 ‘‘(D) in the case of coverage provided

8 through a geographically limited managed care

9 arrangement, the individual or employer leaves

10 the geographic service area in which the cov11 erage is provided; or

12 ‘‘(E) subject to paragraph (3), because the

13 insurer elects not to renew any health insurance

14 coverage for individuals or small employers in

15 the area within such type of coverage option

16 and provides notice of such election to the State

17 insurance commissioner and to each such em18 ployer and individual covered in the area at

19 least 180 days before the effective date of such

20 nonrenewal.

21 ‘‘(3) PROHIBITION ON MARKET REENTRY.—In

22 the case of an election described in paragraph (2)(E)

23 by an insurer for an area for a type of coverage op24 tion, the insurer may not provide for any health in25 surance coverage to an individual or small employer
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1 in the area within the type of coverage option during

2 the 5-year period beginning on the effective date of

3 the nonrenewal for the area and for the type of cov4 erage option.

5 ‘‘(4) OPTIONS.—For purposes of this sub6 section, each of the following is a ‘type of coverage

7 option’:

8 ‘‘(A) FEE-FOR-SERVICE OPTION.—Health

9 insurance coverage is considered to provide a

10 ‘fee-for-service option’ if, regardless of whether

11 covered individuals may receive benefits through

12 a provider network, benefits with respect to the

13 covered items and services in the coverage are

14 made available for such items and services pro15 vided through any lawful provider of such cov16 ered items and services and payment is made to

17 such a provider whether or not there is a con18 tractual arrangement between the provider and

19 the carrier or plan.

20 ‘‘(B) MANAGED CARE OPTION.—Health in21 surance coverage is considered to provide a

22 ‘managed care option’ if benefits with respect to

23 the covered items and services in the coverage

24 are made available exclusively through a pro-
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1 vider network, except in the case of emergency

2 services and as otherwise required under law.

3 ‘‘(C) POINT-OF-SERVICE OPTION.—Health

4 insurance coverage is considered to provide a

5 ‘point-of-service option’ if the benefits with re6 spect to covered items and services in the cov7 erage are made available principally through a

8 managed care arrangement, with the choice of

9 the enrollee to obtain such benefits for items

10 and services provided through any lawful pro11 vider of such covered items and services. The

12 coverage may provide for different cost sharing

13 schedules based on whether the items and serv14 ices are provided through such an arrangement

15 or outside such an arrangement.

16 ‘‘(5) MANAGED CARE ARRANGEMENTS.—In this

17 subsection:

18 ‘‘(A) MANAGED CARE ARRANGEMENT.—

19 The term ‘managed care arrangement’ means,

20 with respect to health insurance coverage, an

21 arrangement under such coverage under which

22 providers agree to provide items and services

23 covered under the arrangement to individuals

24 who have such coverage.
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1 ‘‘(B) PROVIDER NETWORK.—The term

2 ‘provider network’ means, with respect to health

3 insurance coverage, providers who have entered

4 into an agreement described in subparagraph

5 (A).

6 ‘‘(6) LIMITATIONS ON AREA.—An area de7 scribed in this paragraph is an area in which there

8 is no division of any of the following:

9 ‘‘(A) A 3-digit zip code.

10 ‘‘(B) Any county, parish, or borough.

11 ‘‘(C) All portions of a metropolitan statis12 tical area.

13 ‘‘SEC. 2103. ENFORCEMENT.

14 ‘‘(a) HEALTH INSURANCE COVERAGE.—

15 ‘‘(1) ENFORCEMENT THROUGH STATE INSUR16 ANCE COMMISSIONER.—

17 ‘‘(A) ESTABLISHMENT OF ENFORCEMENT

18 PROGRAMS.—Each State, through its State in19 surance commissioner, is responsible for estab20 lishing a program to enforce requirements of

21 this title with respect to insurers (and health

22 coverage offered by insurers) in the State. The

23 State shall provide the Secretary of Health and

24 Human Services annually (for years beginning

25 with 1996) with such description of the pro-
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1 gram established to enforce adequately such re2 quirements as the Secretary specifies.

3 ‘‘(B) MORE STRINGENT STATE STANDARDS

4 PERMITTED.—A State may implement stand5 ards that are more stringent than the standards

6 established under this title.

7 ‘‘(C) AUTHORIZATION OF APPROPRIATIONS

8 FOR STATE ENFORCEMENT PROGRAMS.—There

9 are authorized to be appropriated to the Sec10 retary of Health and Human Services (for each

11 fiscal year beginning with fiscal year 1996)

12 such sums as may be necessary to provide for

13 grants to States to provide for enforcement pro14 grams described in subparagraph (A). Such

15 grants shall be made available in such amounts

16 and subject to such reasonable terms and condi17 tions as the Secretary shall provide.

18 ‘‘(2) FEDERAL FALLBACK ENFORCEMENT.—

19 ‘‘(A) REVIEW AND CONTINGENCY.—The

20 Secretary annually shall review State enforce21 ment programs under paragraph (1)(A) to de22 termine if they provide for adequate enforce23 ment of the requirements of this title. If the

24 Secretary initially determines that such a pro25 gram does not provide for such enforcement,
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1 the Secretary shall notify the State and provide

2 the State an opportunity to adopt such a plan

3 of correction that would provide for adequate

4 enforcement. If the Secretary makes a final de5 termination that the State program fails to pro6 vide for an adequate enforcement program after

7 such an opportunity, the succeeding provisions

8 of this paragraph shall apply with respect to in9 surers and health insurance coverage in the

10 State until the Secretary has been provided a

11 description of an adequate enforcement pro12 gram.

13 ‘‘(B) CIVIL MONEY PENALTIES.—

14 ‘‘(i) IN GENERAL.—If this paragraph

15 applies in a State in a year, subject to

16 clause (ii), an insurer in that State that

17 fails to comply with a requirement applica18 ble to the insurer or health insurance cov19 erage under this title is subject to a civil

20 money penalty of $150 for each day during

21 which such failure persists for each indi22 vidual to which such failure relates.

23 ‘‘(ii) LIMITATION.—The amount of

24 the penalty imposed by this subparagraph

25 for an insurer with respect to health insur-
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1 ance coverage shall not exceed 25 percent

2 of the amounts received under the plan for

3 coverage during the period such failure

4 persists.

5 ‘‘(C) EXCEPTIONS.—

6 ‘‘(i) CORRECTIONS WITHIN 30 DAYS.—

7 No civil money penalty shall be imposed

8 under this paragraph by reason of any fail9 ure if—

10 ‘‘(I) such failure was due to rea11 sonable cause and not to willful ne12 glect, and

13 ‘‘(II) such failure is corrected

14 within the 30-day period beginning on

15 the earliest date the insurer knew, or

16 exercising reasonable diligence would

17 have known, that such failure existed.

18 ‘‘(ii) WAIVER BY SECRETARY.—In the

19 case of a failure which is due to reasonable

20 cause and not to willful neglect, the Sec21 retary may waive part or all of the penalty

22 imposed by this paragraph to the extent

23 that payment of such penalty would be ex24 cessive relative to the failure involved.
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1 ‘‘(D) PROCEDURES.—The Secretary by

2 regulation shall provide for procedures for the

3 imposition of civil money penalties under this

4 paragraph. Such procedures shall assure writ5 ten notice and opportunity for a determination

6 to be made on the record after a hearing at

7 which the insurer is entitled to be represented

8 by counsel, to present witnesses, and to cross9 examine witnesses against the insurer. The pro10 visions of subsections (e), (f), (j), and (k) of

11 section 1128A shall apply to determinations

12 and civil money penalties under this paragraph

13 in the same manner as they apply to determina14 tions and civil money penalties under such sec15 tion.

16 ‘‘(b) ENFORCEMENT BY DEPARTMENT OF LABOR

17 FOR GROUP HEALTH PLANS.—

18 ‘‘(1) IN GENERAL.—For purposes of part 5 of

19 subtitle B of title I of the Employee Retirement In20 come Security Act of 1974, the provisions of sections

21 2101 and 2102 shall be deemed to be provisions of

22 title I of such Act irrespective of exclusions under

23 section 4(b) of such Act.

24 ‘‘(2) REGULATORY AUTHORITY.—With respect

25 to the regulatory authority of the Secretary of Labor
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1 under this title pursuant to paragraph (1), section

2 505 of the Employee Retirement Income Security

3 Act of 1974 (29 U.S.C. 1135) shall apply.

4 ‘‘SEC. 2104. DEFINITIONS.

5 ‘‘For purposes of this title:

6 ‘‘(1) GROUP HEALTH PLAN.—The term ‘group

7 health plan’ means an employee welfare benefit plan

8 providing medical care (as defined in section 213(d)

9 of the Internal Revenue Code of 1986) to partici10 pants or beneficiaries directly or through insurance,

11 reimbursement, or otherwise, but does not include

12 any type of coverage excluded from the definition of

13 an health insurance coverage under paragraph

14 (3)(B).

15 ‘‘(2) HEALTH COVERAGE.—The term ‘health

16 coverage’ means health insurance coverage provided

17 by an insurer or medical care provided under a

18 group health plan.

19 ‘‘(3) HEALTH INSURANCE COVERAGE.—

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

21 subparagraph (B), the term ‘health insurance

22 coverage’ means any hospital or medical service

23 policy or certificate, hospital or medical service

24 plan contract, or health maintenance organiza25 tion group contract offered by an insurer.
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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, disability income, or long-term

6 care insurance, or any 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 for a specified disease

19 or illness.

20 ‘‘(viii) A hospital or fixed indemnity

21 policy.

22 ‘‘(4) INSURER.—The term ‘insurer’ means a li23 censed insurance company, an entity offering pre24 paid hospital or medical services, and a health main-
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1 tenance organization, and includes a similar organi2 zation regulated under State law for solvency.

3 ‘‘(5) SMALL EMPLOYER.—The term ‘small em4 ployer’ means, with respect to a calendar year, an

5 employer (as defined in section 3(5) of the Employee

6 Retirement Income Security Act of 1974) that nor7 mally employs on a typical business day more than

8 1 but less than 50 employees who normally perform

9 on a monthly basis at least 30 hours of service per

10 week for that employer. For the purposes of this

11 paragraph, the term ‘employee’ includes a self-em12 ployed individual. For purposes of determining if an

13 employer is a small employer, rules similar to the

14 rules of subsections (b) and (c) of section 414 of the

15 Internal Revenue Code of 1986 shall apply.

16 ‘‘(6) STATE INSURANCE COMMISSIONER.—The

17 term ‘State insurance commissioner’ includes a State

18 superintendent of insurance or other State authority

19 responsible for regulation of health insurance.’’.

20 SEC. 3. EFFECTIVE DATE.

21 The requirements of title XXI of the Social Security

22 Act, as added by section 2, shall apply with respect to—

23 (1) group health plans for plan years beginning

24 after December 31, 1995, and
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1 (2) insurers as of January 1, 1996, for health

2 insurance coverage issued or renewed on or after

3 such date.

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