I

107TH CONGRESS

1ST SESSION H. R. 1255

To amend title XVIII of the Social Security Act and the Employee Retirement

Income Security Act of 1974 to improve access to health insurance

and Medicare benefits for individuals ages 55 to 65, to amend the

Internal Revenue Code of 1986 to allow a 50 percent credit against

income tax for payment of such premiums and of premiums for certain

COBRA continuation coverage, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 27, 2001

Mr. STARK (for himself, Mr. BROWN of Ohio, Mr. GEPHARDT, Mr. DINGELL,

Mr. RANGEL, Mr. BONIOR, Mr. WAXMAN, Mr. GORDON, Mr. THOMPSON

of Mississippi, Mr. FILNER, Mr. MCGOVERN, Ms. MCCARTHY of Missouri, Mr. FROST, Mr. CLAY, Mr. GEORGE MILLER of California, Mr.

KUCINICH, Mr. GONZALEZ, Mr. PAYNE, Mr. PALLONE, Mr. BRADY of

Pennsylvania, Mr. GUTIERREZ, Ms. SLAUGHTER, Ms. BERKLEY, Ms.

MILLENDER-MCDONALD, Mr. GREEN of Texas, Mr. HINCHEY, Ms.

SCHAKOWSKY, Mr. DEUTSCH, Mr. EVANS, Mr. FRANK, Mr. WEINER, Mr.

STUPAK, Mr. KILDEE, Mr. CROWLEY, Mr. LANTOS, Mr. BARRETT, Mr.

TIERNEY, Mr. LAFALCE, and Mr. MATSUI) introduced the following bill;

which was referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and Education and the

Workforce, 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 amend title XVIII of the Social Security Act and the

Employee Retirement Income Security Act of 1974 to

improve access to health insurance and Medicare benefits

for individuals ages 55 to 65, to amend the Internal

Revenue Code of 1986 to allow a 50 percent credit
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against income tax for payment of such premiums and

of premiums for certain COBRA continuation coverage,

and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Medicare Early Access and Tax Credit Act of 2001’’.

6 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; table of contents.

TITLE I—ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62-

TO-65 YEARS OF AGE

Sec. 101. Access to Medicare benefits for individuals 62-to-65 years of age.

‘‘PART D—PURCHASE OF MEDICARE BENEFITS BY CERTAIN INDIVIDUALS

AGE 62-TO-65 YEARS OF AGE

‘‘Sec. 1859. Program benefits; eligibility.

‘‘Sec. 1859A. Enrollment process; coverage.

‘‘Sec. 1859B. Premiums.

‘‘Sec. 1859C. Payment of premiums.

‘‘Sec. 1859D. Medicare Early Access Trust Fund.

‘‘Sec. 1859E. Oversight and accountability.

‘‘Sec. 1859F. Administration and miscellaneous.

TITLE II—ACCESS TO MEDICARE BENEFITS FOR DISPLACED

WORKERS 55-TO-62 YEARS OF AGE

Sec. 201. Access to Medicare benefits for displaced workers 55-to-62 years of

age.

TITLE III—COBRA PROTECTION FOR EARLY RETIREES

Subtitle A—Amendments to the Employee Retirement Income Security Act of

1974

Sec. 301. COBRA continuation benefits for certain retired workers who lose retiree health coverage.

Subtitle B—Amendments to the Public Health Service Act

Sec. 311. COBRA continuation benefits for certain retired workers who lose retiree health coverage.

Subtitle C—Amendments to the Internal Revenue Code of 1986
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Sec. 321. COBRA continuation benefits for certain retired workers who lose retiree health coverage.

TITLE IV—50 PERCENT CREDIT AGAINST INCOME TAX FOR

MEDICARE BUY-IN PREMIUMS AND FOR CERTAIN COBRA CONTINUATION COVERAGE PREMIUMS

Sec. 401. 50 percent income tax credit for medicare buy-in premiums and for

certain COBRA continuation coverage premiums.

1 TITLE I—ACCESS TO MEDICARE

2 BENEFITS FOR INDIVIDUALS

3 62-TO-65 YEARS OF AGE

4 SEC. 101. ACCESS TO MEDICARE BENEFITS FOR INDIVID5 UALS 62-TO-65 YEARS OF AGE.

6 (a) IN GENERAL.—Title XVIII of the Social Security

7 Act is amended—

8 (1) by redesignating section 1859 and part D

9 as section 1858 and part E, respectively; and

10 (2) by inserting after such section the following

11 new part:

12 ‘‘PART D—PURCHASE OF MEDICARE BENEFITS BY

13 CERTAIN INDIVIDUALS AGE 62-TO-65 YEARS OF AGE

14 ‘‘SEC. 1859. PROGRAM BENEFITS; ELIGIBILITY.

15 ‘‘(a) ENTITLEMENT TO MEDICARE BENEFITS FOR

16 ENROLLED INDIVIDUALS.—

17 ‘‘(1) IN GENERAL.—An individual enrolled

18 under this part is entitled to the same benefits

19 under this title as an individual entitled to benefits

20 under part A and enrolled under part B.

21 ‘‘(2) DEFINITIONS.—For purposes of this part:
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1 ‘‘(A) FEDERAL OR STATE COBRA CONTINU2 ATION PROVISION.—The term ‘Federal or State

3 COBRA continuation provision’ has the mean4 ing given the term ‘COBRA continuation provi5 sion’ in section 2791(d)(4) of the Public Health

6 Service Act and includes a comparable State

7 program, as determined by the Secretary.

8 ‘‘(B) FEDERAL HEALTH INSURANCE PRO9 GRAM DEFINED.—The term ‘Federal health in10 surance program’ means any of the following:

11 ‘‘(i) MEDICARE.—Part A or part B of

12 this title (other than by reason of this

13 part).

14 ‘‘(ii) MEDICAID.—A State plan under

15 title XIX.

16 ‘‘(iii) FEHBP.—The Federal employ17 ees health benefit program under chapter

18 89 of title 5, United States Code.

19 ‘‘(iv) TRICARE.—The TRICARE

20 program (as defined in section 1072(7) of

21 title 10, United States Code).

22 ‘‘(v) ACTIVE DUTY MILITARY.—Health

23 benefits under title 10, United States

24 Code, to an individual as a member of the

25 uniformed services of the United States.
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1 ‘‘(C) GROUP HEALTH PLAN.—The term

2 ‘group health plan’ has the meaning given such

3 term in section 2791(a)(1) of the Public Health

4 Service Act.

5 ‘‘(b) ELIGIBILITY OF INDIVIDUALS AGE 62-TO-65

6 YEARS OF AGE.—

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

8 an individual who meets the following requirements

9 with respect to a month is eligible to enroll under

10 this part with respect to such month:

11 ‘‘(A) AGE.—As of the last day of the

12 month, the individual has attained 62 years of

13 age, but has not attained 65 years of age.

14 ‘‘(B) MEDICARE ELIGIBILITY (BUT FOR

15 AGE).—The individual would be eligible for ben16 efits under part A or part B for the month if

17 the individual were 65 years of age.

18 ‘‘(C) NOT ELIGIBLE FOR COVERAGE

19 UNDER GROUP HEALTH PLANS OR FEDERAL

20 HEALTH INSURANCE PROGRAMS.—The indi21 vidual is not eligible for benefits or coverage

22 under a Federal health insurance program (as

23 defined in subsection (a)(2)(B)) or under a

24 group health plan (other than such eligibility

25 merely through a Federal or State COBRA con-
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1 tinuation provision) as of the last day of the

2 month involved.

3 ‘‘(2) LIMITATION ON ELIGIBILITY IF TERMI4 NATED ENROLLMENT.—If an individual described in

5 paragraph (1) enrolls under this part and coverage

6 of the individual is terminated under section

7 1859A(d) (other than because of age), the individual

8 is not again eligible to enroll under this subsection

9 unless the following requirements are met:

10 ‘‘(A) NEW COVERAGE UNDER GROUP

11 HEALTH PLAN OR FEDERAL HEALTH INSUR12 ANCE PROGRAM.—After the date of termination

13 of coverage under such section, the individual

14 obtains coverage under a group health plan or

15 under a Federal health insurance program.

16 ‘‘(B) SUBSEQUENT LOSS OF NEW COV17 ERAGE.—The individual subsequently loses eli18 gibility for the coverage described in subpara19 graph (A) and exhausts any eligibility the indi20 vidual may subsequently have for coverage

21 under a Federal or State COBRA continuation

22 provision.

23 ‘‘(3) CHANGE IN HEALTH PLAN ELIGIBILITY

24 DOES NOT AFFECT COVERAGE.—In the case of an

25 individual who is eligible for and enrolls under this
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1 part under this subsection, the individual’s continued

2 entitlement to benefits under this part shall not be

3 affected by the individual’s subsequent eligibility for

4 benefits or coverage described in paragraph (1)(C),

5 or entitlement to such benefits or coverage.

6 ‘‘SEC. 1859A. ENROLLMENT PROCESS; COVERAGE.

7 ‘‘(a) IN GENERAL.—An individual may enroll in the

8 program established under this part only in such manner

9 and form as may be prescribed by regulations, and only

10 during an enrollment period prescribed by the Secretary

11 consistent with the provisions of this section. Such regula12 tions shall provide a process under which—

13 ‘‘(1) individuals eligible to enroll as of a month

14 are permitted to pre-enroll during a prior month

15 within an enrollment period described in subsection

16 (b); and

17 ‘‘(2) each individual seeking to enroll under sec18 tion 1859(b) is notified, before enrolling, of the de19 ferred monthly premium amount the individual will

20 be liable for under section 1859C(b) upon attaining

21 65 years of age as determined under section

22 1859B(c)(3).

23 ‘‘(b) ENROLLMENT PERIODS.—
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1 ‘‘(1) INDIVIDUALS 62-TO-65 YEARS OF AGE.—In

2 the case of individuals eligible to enroll under this

3 part under section 1859(b)—

4 ‘‘(A) INITIAL ENROLLMENT PERIOD.—If

5 the individual is eligible to enroll under such

6 section for January 2002, the enrollment period

7 shall begin on November 1, 2001, and shall end

8 on February 28, 2002. Any such enrollment be9 fore January 1, 2002, is conditioned upon com10 pliance with the conditions of eligibility for Jan11 uary 2002.

12 ‘‘(B) SUBSEQUENT PERIODS.—If the indi13 vidual is eligible to enroll under such section for

14 a month after January 2002, the enrollment pe15 riod shall begin on the first day of the second

16 month before the month in which the individual

17 first is eligible to so enroll and shall end four

18 months later. Any such enrollment before the

19 first day of the third month of such enrollment

20 period is conditioned upon compliance with the

21 conditions of eligibility for such third month.

22 ‘‘(2) AUTHORITY TO CORRECT FOR GOVERN23 MENT ERRORS.—The provisions of section 1837(h)

24 apply with respect to enrollment under this part in
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1 the same manner as they apply to enrollment under

2 part B.

3 ‘‘(c) DATE COVERAGE BEGINS.—

4 ‘‘(1) IN GENERAL.—The period during which

5 an individual is entitled to benefits under this part

6 shall begin as follows, but in no case earlier than

7 January 1, 2002:

8 ‘‘(A) In the case of an individual who en9 rolls (including pre-enrolls) before the month in

10 which the individual satisfies eligibility for en11 rollment under section 1859, the first day of

12 such month of eligibility.

13 ‘‘(B) In the case of an individual who en14 rolls during or after the month in which the in15 dividual first satisfies eligibility for enrollment

16 under such section, the first day of the fol17 lowing month.

18 ‘‘(2) AUTHORITY TO PROVIDE FOR PARTIAL

19 MONTHS OF COVERAGE.—Under regulations, the

20 Secretary may, in the Secretary’s discretion, provide

21 for coverage periods that include portions of a

22 month in order to avoid lapses of coverage.

23 ‘‘(3) LIMITATION ON PAYMENTS.—No payments

24 may be made under this title with respect to the ex25 penses of an individual enrolled under this part un-
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1 less such expenses were incurred by such individual

2 during a period which, with respect to the individual,

3 is a coverage period under this section.

4 ‘‘(d) TERMINATION OF COVERAGE.—

5 ‘‘(1) IN GENERAL.—An individual’s coverage

6 period under this part shall continue until the indi7 vidual’s enrollment has been terminated at the ear8 liest of the following:

9 ‘‘(A) GENERAL PROVISIONS.—

10 ‘‘(i) NOTICE.—The individual files no11 tice (in a form and manner prescribed by

12 the Secretary) that the individual no

13 longer wishes to participate in the insur14 ance program under this part.

15 ‘‘(ii) NONPAYMENT OF PREMIUMS.—

16 The individual fails to make payment of

17 premiums required for enrollment under

18 this part.

19 ‘‘(iii) MEDICARE ELIGIBILITY.—The

20 individual becomes entitled to benefits

21 under part A or enrolled under part B

22 (other than by reason of this part).

23 ‘‘(B) TERMINATION BASED ON AGE.—The

24 individual attains 65 years of age.

25 ‘‘(2) EFFECTIVE DATE OF TERMINATION.—
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1 ‘‘(A) NOTICE.—The termination of a cov2 erage period under paragraph (1)(A)(i) shall

3 take effect at the close of the month following

4 for which the notice is filed.

5 ‘‘(B) NONPAYMENT OF PREMIUM.—The

6 termination of a coverage period under para7 graph (1)(A)(ii) shall take effect on a date de8 termined under regulations, which may be de9 termined so as to provide a grace period in

10 which overdue premiums may be paid and cov11 erage continued. The grace period determined

12 under the preceding sentence shall not exceed

13 60 days; except that it may be extended for an

14 additional 30 days in any case where the Sec15 retary determines that there was good cause for

16 failure to pay the overdue premiums within

17 such 60-day period.

18 ‘‘(C) AGE OR MEDICARE ELIGIBILITY.—

19 The termination of a coverage period under

20 paragraph (1)(A)(iii) or (1)(B) shall take effect

21 as of the first day of the month in which the

22 individual attains 65 years of age or becomes

23 entitled to benefits under part A or enrolled for

24 benefits under part B (other than by reason of

25 this part).
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1 ‘‘SEC. 1859B. PREMIUMS.

2 ‘‘(a) AMOUNT OF MONTHLY PREMIUMS.—

3 ‘‘(1) BASE MONTHLY PREMIUMS.—The Sec4 retary shall, during September of each year (begin5 ning with 1998), determine the following premium

6 rates which shall apply with respect to coverage pro7 vided under this title for any month in the suc8 ceeding year:

9 ‘‘(A) BASE MONTHLY PREMIUM FOR INDI10 VIDUALS 62 YEARS OF AGE OR OLDER.—A base

11 monthly premium for individuals 62 years of

age or older, equal to 1 12 ⁄12 of the base annual

13 premium rate computed under subsection (b)

14 for each premium area.

15 ‘‘(2) DEFERRED MONTHLY PREMIUMS FOR IN16 DIVIDUALS 62 YEARS OF AGE OR OLDER.—The Sec17 retary shall, during September of each year (begin18 ning with 2001), determine under subsection (c) the

19 amount of deferred monthly premiums that shall

20 apply with respect to individuals who first obtain

21 coverage under this part under section 1859(b) in

22 the succeeding year.

23 ‘‘(3) ESTABLISHMENT OF PREMIUM AREAS.—

24 For purposes of this part, the term ‘premium area’

25 means such an area as the Secretary shall specify to

26 carry out this part. The Secretary from time to time
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1 may change the boundaries of such premium areas.

2 The Secretary shall seek to minimize the number of

3 such areas specified under this paragraph.

4 ‘‘(b) BASE ANNUAL PREMIUM FOR INDIVIDUALS 62

5 YEARS OF AGE OR OLDER.—

6 ‘‘(1) NATIONAL, PER CAPITA AVERAGE.—The

7 Secretary shall estimate the average, annual per

8 capita amount that would be payable under this title

9 with respect to individuals residing in the United

10 States who meet the requirement of section

11 1859(b)(1)(A) as if all such individuals were eligible

12 for (and enrolled) under this title during the entire

13 year (and assuming that section 1862(b)(2)(A)(i)

14 did not apply).

15 ‘‘(2) GEOGRAPHIC ADJUSTMENT.—The Sec16 retary shall adjust the amount determined under

17 paragraph (1) for each premium area (specified

18 under subsection (a)(3)) in order to take into ac19 count such factors as the Secretary deems appro20 priate and shall limit the maximum premium under

21 this paragraph in a premium area to assure partici22 pation in all areas throughout the United States.

23 ‘‘(3) BASE ANNUAL PREMIUM.—The base an24 nual premium under this subsection for months in a

25 year for individuals 62 years of age or older residing
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1 in a premium area is equal to the average, annual

2 per capita amount estimated under paragraph (1)

3 for the year, adjusted for such area under paragraph

4 (2).

5 ‘‘(c) DEFERRED PREMIUM RATE FOR INDIVIDUALS

6 62 YEARS OF AGE OR OLDER.—The deferred premium

7 rate for individuals with a group of individuals who obtain

8 coverage under section 1859(b) in a year shall be com9 puted by the Secretary as follows:

10 ‘‘(1) ESTIMATION OF NATIONAL, PER CAPITA

11 ANNUAL AVERAGE EXPENDITURES FOR ENROLL12 MENT GROUP.—The Secretary shall estimate the av13 erage, per capita annual amount that will be paid

14 under this part for individuals in such group during

15 the period of enrollment under section 1859(b). In

16 making such estimate for coverage beginning in a

17 year before 2005, the Secretary may base such esti18 mate on the average, per capita amount that would

19 be payable if the program had been in operation over

20 a previous period of at least 4 years.

21 ‘‘(2) DIFFERENCE BETWEEN ESTIMATED EX22 PENDITURES AND ESTIMATED PREMIUMS.—Based

23 on the characteristics of individuals in such group,

24 the Secretary shall estimate during the period of
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1 coverage of the group under this part under section

2 1859(b) the amount by which—

3 ‘‘(A) the amount estimated under para4 graph (1); exceeds

5 ‘‘(B) the average, annual per capita

6 amount of premiums that will be payable for

7 months during the year under section 1859C(a)

8 for individuals in such group (including pre9 miums that would be payable if there were no

10 terminations in enrollment under clause (i) or

11 (ii) of section 1859A(d)(1)(A)).

12 ‘‘(3) ACTUARIAL COMPUTATION OF DEFERRED

13 MONTHLY PREMIUM RATES.—The Secretary shall

14 determine deferred monthly premium rates for indi15 viduals in such group in a manner so that—

16 ‘‘(A) the estimated actuarial value of such

17 premiums payable under section 1859C(b), is

18 equal to

19 ‘‘(B) the estimated actuarial present value

20 of the differences described in paragraph (2).

21 Such rate shall be computed for each individual in

22 the group in a manner so that the rate is based on

23 the number of months between the first month of

24 coverage based on enrollment under section 1859(b)
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1 and the month in which the individual attains 65

2 years of age.

3 ‘‘(4) DETERMINANTS OF ACTUARIAL PRESENT

4 VALUES.—The actuarial present values described in

5 paragraph (3) shall reflect—

6 ‘‘(A) the estimated probabilities of survival

7 at ages 62 through 84 for individuals enrolled

8 during the year; and

9 ‘‘(B) the estimated effective average inter10 est rates that would be earned on investments

11 held in the trust funds under this title during

12 the period in question.

13 ‘‘SEC. 1859C. PAYMENT OF PREMIUMS.

14 ‘‘(a) PAYMENT OF BASE MONTHLY PREMIUM.—

15 ‘‘(1) IN GENERAL.—The Secretary shall provide

16 for payment and collection of the base monthly pre17 mium, determined under section 1859B(a)(1) for the

18 age (and age cohort, if applicable) of the individual

19 involved and the premium area in which the indi20 vidual principally resides, in the same manner as for

21 payment of monthly premiums under section 1840,

22 except that, for purposes of applying this section,

23 any reference in such section to the Federal Supple24 mentary Medical Insurance Trust Fund is deemed a
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1 reference to the Trust Fund established under sec2 tion 1859D.

3 ‘‘(2) PERIOD OF PAYMENT.—In the case of an

4 individual who participates in the program estab5 lished by this title, the base monthly premium shall

6 be payable for the period commencing with the first

7 month of the individual’s coverage period and ending

8 with the month in which the individual’s coverage

9 under this title terminates.

10 ‘‘(b) PAYMENT OF DEFERRED PREMIUM FOR INDI11 VIDUALS COVERED AFTER ATTAINING AGE 62.—

12 ‘‘(1) RATE OF PAYMENT.—

13 ‘‘(A) IN GENERAL.—In the case of an indi14 vidual who is covered under this part for a

15 month pursuant to an enrollment under section

16 1859(b), subject to subparagraph (B), the indi17 vidual is liable for payment of a deferred pre18 mium in each month during the period de19 scribed in paragraph (2) in an amount equal to

20 the full deferred monthly premium rate deter21 mined for the individual under section

22 1859B(c).

23 ‘‘(B) SPECIAL RULES FOR THOSE WHO

24 DISENROLL EARLY.—
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1 ‘‘(i) IN GENERAL.—If such an individ2 ual’s enrollment under such section is ter3 minated under clause (i) or (ii) of section

4 1859A(d)(1)(A), subject to clause (ii), the

5 amount of the deferred premium otherwise

6 established under this paragraph shall be

7 pro-rated to reflect the number of months

8 of coverage under this part under such en9 rollment compared to the maximum num10 ber of months of coverage that the indi11 vidual would have had if the enrollment

12 were not so terminated.

13 ‘‘(ii) ROUNDING TO 12-MONTH MIN14 IMUM COVERAGE PERIODS.—In applying

15 clause (i), the number of months of cov16 erage (if not a multiple of 12) shall be

17 rounded to the next highest multiple of 12

18 months, except that in no case shall this

19 clause result in a number of months of

20 coverage exceeding the maximum number

21 of months of coverage that the individual

22 would have had if the enrollment were not

23 so terminated.

24 ‘‘(2) PERIOD OF PAYMENT.—The period de25 scribed in this paragraph for an individual is the pe-
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1 riod beginning with the first month in which the in2 dividual has attained 65 years of age and ending

3 with the month before the month in which the indi4 vidual attains 85 years of age.

5 ‘‘(3) COLLECTION.—In the case of an individual

6 who is liable for a premium under this subsection,

7 the amount of the premium shall be collected in the

8 same manner as the premium for enrollment under

9 such part is collected under section 1840, except

10 that any reference in such section to the Federal

11 Supplementary Medical Insurance Trust Fund is

12 deemed to be a reference to the Medicare Early Ac13 cess Trust Fund established under section 1859D.

14 ‘‘(c) APPLICATION OF CERTAIN PROVISIONS.—The

15 provisions of section 1840 (other than subsection (h))

16 shall apply to premiums collected under this section in the

17 same manner as they apply to premiums collected under

18 part B, except that any reference in such section to the

19 Federal Supplementary Medical Insurance Trust Fund is

20 deemed a reference to the Trust Fund established under

21 section 1859D.

22 ‘‘SEC. 1859D. MEDICARE EARLY ACCESS TRUST FUND.

23 ‘‘(a) ESTABLISHMENT OF TRUST FUND.—

24 ‘‘(1) IN GENERAL.—There is hereby created on

25 the books of the Treasury of the United States a
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1 trust fund to be known as the ‘Medicare Early Ac2 cess Trust Fund’ (in this section referred to as the

3 ‘Trust Fund’). The Trust Fund shall consist of such

4 gifts and bequests as may be made as provided in

5 section 201(i)(1) and such amounts as may be de6 posited in, or appropriated to, such fund as provided

7 in this title.

8 ‘‘(2) PREMIUMS.—Premiums collected under

9 section 1859B shall be transferred to the Trust

10 Fund.

11 ‘‘(b) INCORPORATION OF PROVISIONS.—

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

13 subsections (b) through (i) of section 1841 shall

14 apply with respect to the Trust Fund and this title

15 in the same manner as they apply with respect to

16 the Federal Supplementary Medical Insurance Trust

17 Fund and part B, respectively.

18 ‘‘(2) MISCELLANEOUS REFERENCES.—In apply19 ing provisions of section 1841 under paragraph

20 (1)—

21 ‘‘(A) any reference in such section to ‘this

22 part’ is construed to refer to this part D;

23 ‘‘(B) any reference in section 1841(h) to

24 section 1840(d) and in section 1841(i) to sec25 tions 1840(b)(1) and 1842(g) are deemed ref-
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1 erences to comparable authority exercised under

2 this part; and

3 ‘‘(C) payments may be made under section

4 1841(g) to the Trust Funds under sections

5 1817 and 1841 as reimbursement to such funds

6 for payments they made for benefits provided

7 under this part.

8 ‘‘SEC. 1859E. OVERSIGHT AND ACCOUNTABILITY.

9 ‘‘(a) THROUGH ANNUAL REPORTS OF TRUSTEES.—

10 The Board of Trustees of the Medicare Early Access

11 Trust Fund under section 1859D(b)(1) shall report on an

12 annual basis to Congress concerning the status of the

13 Trust Fund and the need for adjustments in the program

14 under this part to maintain financial solvency of the pro15 gram under this part.

16 ‘‘(b) PERIODIC GAO REPORTS.—The Comptroller

17 General of the United States shall periodically submit to

18 Congress reports on the adequacy of the financing of cov19 erage provided under this part. The Comptroller General

20 shall include in such report such recommendations for ad21 justments in such financing and coverage as the Comp22 troller General deems appropriate in order to maintain fi23 nancial solvency of the program under this part.
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1 ‘‘SEC. 1859F. ADMINISTRATION AND MISCELLANEOUS.

2 ‘‘(a) TREATMENT FOR PURPOSES OF TITLE.—Ex3 cept as otherwise provided in this part—

4 ‘‘(1) individuals enrolled under this part shall

5 be treated for purposes of this title as though the in6 dividual were entitled to benefits under part A and

7 enrolled under part B; and

8 ‘‘(2) benefits described in section 1859 shall be

9 payable under this title to such individuals in the

10 same manner as if such individuals were so entitled

11 and enrolled.

12 ‘‘(b) NOT TREATED AS MEDICARE PROGRAM FOR

13 PURPOSES OF MEDICAID PROGRAM.—For purposes of ap14 plying title XIX (including the provision of medicare cost15 sharing assistance under such title), an individual who is

16 enrolled under this part shall not be treated as being enti17 tled to benefits under this title.

18 ‘‘(c) NOT TREATED AS MEDICARE PROGRAM FOR

19 PURPOSES OF COBRA CONTINUATION PROVISIONS.—In

20 applying a COBRA continuation provision (as defined in

21 section 2791(d)(4) of the Public Health Service Act), any

22 reference to an entitlement to benefits under this title

23 shall not be construed to include entitlement to benefits

24 under this title pursuant to the operation of this part.’’.

25 (b) CONFORMING AMENDMENTS TO SOCIAL SECU26 RITY ACT PROVISIONS.—
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1 (1) Section 201(i)(1) of the Social Security Act

2 (42 U.S.C. 401(i)(1)) is amended by striking ‘‘or the

3 Federal Supplementary Medical Insurance Trust

4 Fund’’ and inserting ‘‘the Federal Supplementary

5 Medical Insurance Trust Fund, and the Medicare

6 Early Access Trust Fund’’.

7 (2) Section 201(g)(1)(A) of such Act (42

8 U.S.C. 401(g)(1)(A)) is amended by striking ‘‘and

9 the Federal Supplementary Medical Insurance Trust

10 Fund established by title XVIII’’ and inserting ‘‘,

11 the Federal Supplementary Medical Insurance Trust

12 Fund, and the Medicare Early Access Trust Fund

13 established by title XVIII’’.

14 (3) Section 1820(i) of such Act (42 U.S.C.

15 1395i–4(i)) is amended by striking ‘‘part D’’ and in16 serting ‘‘part E’’.

17 (4) Part C of title XVIII of such Act is

18 amended—

19 (A) in section 1851(a)(2)(B) (42 U.S.C.

20 1395w–21(a)(2)(B)), by striking ‘‘1859(b)(3)’’

21 and inserting ‘‘1858(b)(3)’’;

22 (B) in section 1851(a)(2)(C) (42 U.S.C.

23 1395w–21(a)(2)(C)), by striking ‘‘1859(b)(2)’’

24 and inserting ‘‘1858(b)(2)’’;
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1 (C) in section 1852(a)(1) (42 U.S.C.

2 1395w–22(a)(1)), by striking ‘‘1859(b)(3)’’ and

3 inserting ‘‘1858(b)(3)’’;

4 (D) in section 1852(a)(3)(B)(ii) (42

5 U.S.C. 1395w–22(a)(3)(B)(ii)), by striking

6 ‘‘1859(b)(2)(B)’’ and inserting

7 ‘‘1858(b)(2)(B)’’;

8 (E) in section 1853(a)(1)(A) (42 U.S.C.

9 1395w–23(a)(1)(A)), by striking ‘‘1859(e)(4)’’

10 and inserting ‘‘1858(e)(4)’’; and

11 (F) in section 1853(a)(3)(D) (42 U.S.C.

12 1395w–23(a)(3)(D)), by striking ‘‘1859(e)(4)’’

13 and inserting ‘‘1858(e)(4)’’.

14 (5) Section 1853(c) of such Act (42 U.S.C.

15 1395w–23(c)) is amended—

16 (A) in paragraph (1), by striking ‘‘or (7)’’

17 and inserting ‘‘, (7), or (8)’’, and

18 (B) by adding at the end the following:

19 ‘‘(8) ADJUSTMENT FOR EARLY ACCESS.—In ap20 plying this subsection with respect to individuals en21 titled to benefits under part D, the Secretary shall

22 provide for an appropriate adjustment in the

23 Medicare+Choice capitation rate as may be appro24 priate to reflect differences between the population
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1 served under such part and the population under

2 parts A and B.’’.

3 (c) OTHER CONFORMING AMENDMENTS.—

4 (1) Section 138(b)(4) of the Internal Revenue

5 Code of 1986 is amended by striking ‘‘1859(b)(3)’’

6 and inserting ‘‘1858(b)(3)’’.

7 (2)(A) Section 602(2)(D)(ii) of the Employee

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

9 1162(2)) is amended by inserting ‘‘(not including an

10 individual who is so entitled pursuant to enrollment

11 under section 1859A)’’ after ‘‘Social Security Act’’.

12 (B) Section 2202(2)(D)(ii) of the Public Health

13 Service Act (42 U.S.C. 300bb–2(2)(D)(ii)) is amend14 ed by inserting ‘‘(not including an individual who is

15 so entitled pursuant to enrollment under section

16 1859A)’’ after ‘‘Social Security Act’’.

17 (C) Section 4980B(f)(2)(B)(i)(V) of the Inter18 nal Revenue Code of 1986 is amended by inserting

19 ‘‘(not including an individual who is so entitled pur20 suant to enrollment under section 1859A)’’ after

21 ‘‘Social Security Act’’.
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1 TITLE II—ACCESS TO MEDICARE

2 BENEFITS FOR DISPLACED

3 WORKERS 55-TO-62 YEARS OF

4 AGE

5 SEC. 201. ACCESS TO MEDICARE BENEFITS FOR DISPLACED

6 WORKERS 55-TO-62 YEARS OF AGE.

7 (a) ELIGIBILITY.—Section 1859 of the Social Secu8 rity Act, as inserted by section 101(a)(2), is amended by

9 adding at the end the following new subsection:

10 ‘‘(c) DISPLACED WORKERS AND SPOUSES.—

11 ‘‘(1) DISPLACED WORKERS.—Subject to para12 graph (3), an individual who meets the following re13 quirements with respect to a month is eligible to en14 roll under this part with respect to such month:

15 ‘‘(A) AGE.—As of the last day of the

16 month, the individual has attained 55 years of

17 age, but has not attained 62 years of age.

18 ‘‘(B) MEDICARE ELIGIBILITY (BUT FOR

19 AGE).—The individual would be eligible for ben20 efits under part A or part B for the month if

21 the individual were 65 years of age.

22 ‘‘(C) LOSS OF EMPLOYMENT-BASED COV23 ERAGE.—

24 ‘‘(i) ELIGIBLE FOR UNEMPLOYMENT

25 COMPENSATION.—The individual meets the
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1 requirements relating to period of covered

2 employment and conditions of separation

3 from employment to be eligible for unem4 ployment compensation (as defined in sec5 tion 85(b) of the Internal Revenue Code of

6 1986), based on a separation from employ7 ment occurring on or after July 1, 2001.

8 The previous sentence shall not be con9 strued as requiring the individual to be re10 ceiving such unemployment compensation.

11 ‘‘(ii) LOSS OF EMPLOYMENT-BASED

12 COVERAGE.—Immediately before the time

13 of such separation of employment, the indi14 vidual was covered under a group health

15 plan on the basis of such employment, and,

16 because of such loss, is no longer eligible

17 for coverage under such plan (including

18 such eligibility based on the application of

19 a Federal or State COBRA continuation

20 provision) as of the last day of the month

21 involved.

22 ‘‘(iii) PREVIOUS CREDITABLE COV23 ERAGE FOR AT LEAST 1 YEAR.—As of the

24 date on which the individual loses coverage

25 described in clause (ii), the aggregate of
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1 the periods of creditable coverage (as de2 termined under section 2701(c) of the

3 Public Health Service Act) is 12 months or

4 longer.

5 ‘‘(D) EXHAUSTION OF AVAILABLE COBRA

6 CONTINUATION BENEFITS.—

7 ‘‘(i) IN GENERAL.—In the case of an

8 individual described in clause (ii) for a

9 month described in clause (iii)—

10 ‘‘(I) the individual (or spouse)

11 elected coverage described in clause

12 (ii); and

13 ‘‘(II) the individual (or spouse)

14 has continued such coverage for all

15 months described in clause (iii) in

16 which the individual (or spouse) is eli17 gible for such coverage.

18 ‘‘(ii) INDIVIDUALS TO WHOM COBRA

19 CONTINUATION COVERAGE MADE AVAIL20 ABLE.—An individual described in this

21 clause is an individual—

22 ‘‘(I) who was offered coverage

23 under a Federal or State COBRA

24 continuation provision at the time of
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1 loss of coverage eligibility described in

2 subparagraph (C)(ii); or

3 ‘‘(II) whose spouse was offered

4 such coverage in a manner that per5 mitted coverage of the individual at

6 such time.

7 ‘‘(iii) MONTHS OF POSSIBLE COBRA

8 CONTINUATION COVERAGE.—A month de9 scribed in this clause is a month for which

10 an individual described in clause (ii) could

11 have had coverage described in such clause

12 as of the last day of the month if the indi13 vidual (or the spouse of the individual, as

14 the case may be) had elected such coverage

15 on a timely basis.

16 ‘‘(E) NOT ELIGIBLE FOR COVERAGE

17 UNDER FEDERAL HEALTH INSURANCE PRO18 GRAM OR GROUP HEALTH PLANS.—The indi19 vidual is not eligible for benefits or coverage

20 under a Federal health insurance program or

21 under a group health plan (whether on the

22 basis of the individual’s employment or employ23 ment of the individual’s spouse) as of the last

24 day of the month involved.
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1 ‘‘(2) SPOUSE OF DISPLACED WORKER.—Subject

2 to paragraph (3), an individual who meets the fol3 lowing requirements with respect to a month is eligi4 ble to enroll under this part with respect to such

5 month:

6 ‘‘(A) AGE.—As of the last day of the

7 month, the individual has not attained 62 years

8 of age.

9 ‘‘(B) MARRIED TO DISPLACED WORKER.—

10 The individual is the spouse of an individual at

11 the time the individual enrolls under this part

12 under paragraph (1) and loses coverage de13 scribed in paragraph (1)(C)(ii) because the in14 dividual’s spouse lost such coverage.

15 ‘‘(C) MEDICARE ELIGIBILITY (BUT FOR

16 AGE); EXHAUSTION OF ANY COBRA CONTINU17 ATION COVERAGE; AND NOT ELIGIBLE FOR COV18 ERAGE UNDER FEDERAL HEALTH INSURANCE

19 PROGRAM OR GROUP HEALTH PLAN.—The indi20 vidual meets the requirements of subparagraphs

21 (B), (D), and (E) of paragraph (1).

22 ‘‘(3) CHANGE IN HEALTH PLAN ELIGIBILITY

23 AFFECTS CONTINUED ELIGIBILITY.—For provision

24 that terminates enrollment under this section in the

25 case of an individual who becomes eligible for cov-
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1 erage under a group health plan or under a Federal

2 health insurance program, see section

3 1859A(d)(1)(C).

4 ‘‘(4) REENROLLMENT PERMITTED.—Nothing in

5 this subsection shall be construed as preventing an

6 individual who, after enrolling under this subsection,

7 terminates such enrollment from subsequently re8 enrolling under this subsection if the individual is el9 igible to enroll under this subsection at that time.’’.

10 (b) ENROLLMENT.—Section 1859A of such Act, as

11 so inserted, is amended—

12 (1) in subsection (a), by striking ‘‘and’’ at the

13 end of paragraph (1), by striking the period at the

14 end of paragraph (2) and inserting ‘‘; and’’, and by

15 adding at the end the following new paragraph:

16 ‘‘(3) individuals whose coverage under this part

17 would terminate because of subsection (d)(1)(B)(ii)

18 are provided notice and an opportunity to continue

19 enrollment in accordance with section

20 1859E(c)(1).’’;

21 (2) in subsection (b), by inserting after Not22 withstanding any other provision of law, (1) the fol23 lowing:

24 ‘‘(2) DISPLACED WORKERS AND SPOUSES.—In

25 the case of individuals eligible to enroll under this
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1 part under section 1859(c), the following rules

2 apply:

3 ‘‘(A) INITIAL ENROLLMENT PERIOD.—If

4 the individual is first eligible to enroll under

5 such section for January 2002, the enrollment

6 period shall begin on November 1, 2001, and

7 shall end on February 28, 2002. Any such en8 rollment before January 1, 2002, is conditioned

9 upon compliance with the conditions of eligi10 bility for January 2002.

11 ‘‘(B) SUBSEQUENT PERIODS.—If the indi12 vidual is eligible to enroll under such section for

13 a month after January 2002, the enrollment pe14 riod based on such eligibility shall begin on the

15 first day of the second month before the month

16 in which the individual first is eligible to so en17 roll (or reenroll) and shall end four months

18 later.’’;

19 (3) in subsection (d)(1), by amending subpara20 graph (B) to read as follows:

21 ‘‘(B) TERMINATION BASED ON AGE.—

22 ‘‘(i) AT AGE 65.—Subject to clause

23 (ii), the individual attains 65 years of age.

24 ‘‘(ii) AT AGE 62 FOR DISPLACED

25 WORKERS AND SPOUSES.—In the case of
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1 an individual enrolled under this part pur2 suant to section 1859(c), subject to sub3 section (a)(1), the individual attains 62

4 years of age.’’;

5 (4) in subsection (d)(1), by adding at the end

6 the following new subparagraph:

7 ‘‘(C) OBTAINING ACCESS TO EMPLOYMENT8 BASED COVERAGE OR FEDERAL HEALTH INSUR9 ANCE PROGRAM FOR INDIVIDUALS UNDER 62

10 YEARS OF AGE.—In the case of an individual

11 who has not attained 62 years of age, the indi12 vidual is covered (or eligible for coverage) as a

13 participant or beneficiary under a group health

14 plan or under a Federal health insurance pro15 gram.’’;

16 (5) in subsection (d)(2), by amending subpara17 graph (C) to read as follows:

18 ‘‘(C) AGE OR MEDICARE ELIGIBILITY.—

19 ‘‘(i) IN GENERAL.—The termination

20 of a coverage period under paragraph

21 (1)(A)(iii) or (1)(B)(i) shall take effect as

22 of the first day of the month in which the

23 individual attains 65 years of age or be24 comes entitled to benefits under part A or

25 enrolled for benefits under part B.
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1 ‘‘(ii) DISPLACED WORKERS.—The ter2 mination of a coverage period under para3 graph (1)(B)(ii) shall take effect as of the

4 first day of the month in which the indi5 vidual attains 62 years of age, unless the

6 individual has enrolled under this part pur7 suant to section 1859(b) and section

8 1859E(c)(1).’’; and

9 (6) in subsection (d)(2), by adding at the end

10 the following new subparagraph:

11 ‘‘(D) ACCESS TO COVERAGE.—The termi12 nation of a coverage period under paragraph

13 (1)(C) shall take effect on the date on which

14 the individual is eligible to begin a period of

15 creditable coverage (as defined in section

16 2701(c) of the Public Health Service Act)

17 under a group health plan or under a Federal

18 health insurance program.’’.

19 (c) PREMIUMS.—Section 1859B of such Act, as so

20 inserted, is amended—

21 (1) in subsection (a)(1), by adding at the end

22 the following:

23 ‘‘(B) BASE MONTHLY PREMIUM FOR INDI24 VIDUALS UNDER 62 YEARS OF AGE.—A base

25 monthly premium for individuals under 62
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years of age, equal to 1 1 ⁄12 of the base annual

2 premium rate computed under subsection (d)(3)

3 for each premium area and age cohort.’’; and

4 (2) by adding at the end the following new sub5 section:

6 ‘‘(d) BASE MONTHLY PREMIUM FOR INDIVIDUALS

7 UNDER 62 YEARS OF AGE.—

8 ‘‘(1) NATIONAL, PER CAPITA AVERAGE FOR AGE

9 GROUPS.—

10 ‘‘(A) ESTIMATE OF AMOUNT.—The Sec11 retary shall estimate the average, annual per

12 capita amount that would be payable under this

13 title with respect to individuals residing in the

14 United States who meet the requirement of sec15 tion 1859(c)(1)(A) within each of the age co16 horts established under subparagraph (B) as if

17 all such individuals within such cohort were eli18 gible for (and enrolled) under this title during

19 the entire year (and assuming that section

20 1862(b)(2)(A)(i) did not apply).

21 ‘‘(B) AGE COHORTS.—For purposes of

22 subparagraph (A), the Secretary shall establish

23 separate age cohorts in 5 year age increments

24 for individuals who have not attained 60 years
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1 of age and a separate cohort for individuals who

2 have attained 60 years of age.

3 ‘‘(2) GEOGRAPHIC ADJUSTMENT.—The Sec4 retary shall adjust the amount determined under

5 paragraph (1)(A) for each premium area (specified

6 under subsection (a)(3)) in the same manner and to

7 the same extent as the Secretary provides for adjust8 ments under subsection (b)(2).

9 ‘‘(3) BASE ANNUAL PREMIUM.—The base an10 nual premium under this subsection for months in a

11 year for individuals in an age cohort under para12 graph (1)(B) in a premium area is equal to 165 per13 cent of the average, annual per capita amount esti14 mated under paragraph (1) for the age cohort and

15 year, adjusted for such area under paragraph (2).

16 ‘‘(4) PRO-RATION OF PREMIUMS TO REFLECT

17 COVERAGE DURING A PART OF A MONTH.—If the

18 Secretary provides for coverage of portions of a

19 month under section 1859A(c)(2), the Secretary

20 shall pro-rate the premiums attributable to such cov21 erage under this section to reflect the portion of the

22 month so covered.’’.

23 (d) ADMINISTRATIVE PROVISIONS.—Section 1859F

24 of such Act, as so inserted, is amended by adding at the

25 end the following:
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1 ‘‘(d) ADDITIONAL ADMINISTRATIVE PROVISIONS.—

2 ‘‘(1) PROCESS FOR CONTINUED ENROLLMENT

3 OF DISPLACED WORKERS WHO ATTAIN 62 YEARS OF

4 AGE.—The Secretary shall provide a process for the

5 continuation of enrollment of individuals whose en6 rollment under section 1859(c) would be terminated

7 upon attaining 62 years of age. Under such process

8 such individuals shall be provided appropriate and

9 timely notice before the date of such termination

10 and of the requirement to enroll under this part pur11 suant to section 1859(b) in order to continue entitle12 ment to benefits under this title after attaining 62

13 years of age.

14 ‘‘(2) ARRANGEMENTS WITH STATES FOR DE15 TERMINATIONS RELATING TO UNEMPLOYMENT COM16 PENSATION ELIGIBILITY.—The Secretary may pro17 vide for appropriate arrangements with States for

18 the determination of whether individuals in the State

19 meet or would meet the requirements of section

20 1859(c)(1)(C)(i).’’.

21 (e) CONFORMING AMENDMENT TO HEADING TO

22 PART.—The heading of part D of title XVIII of the Social

23 Security Act, as so inserted, is amended by striking ‘‘62’’

24 and inserting ‘‘55’’.
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1 TITLE III—COBRA PROTECTION

2 FOR EARLY RETIREES

3 Subtitle A—Amendments to the

4 Employee Retirement Income

5 Security Act of 1974

6 SEC. 301. COBRA CONTINUATION BENEFITS FOR CERTAIN

7 RETIRED WORKERS WHO LOSE RETIREE

8 HEALTH COVERAGE.

9 (a) ESTABLISHMENT OF NEW QUALIFYING

10 EVENT.—

11 (1) IN GENERAL.—Section 603 of the Employee

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

13 1163) is amended by inserting after paragraph (6)

14 the following new paragraph:

15 ‘‘(7) The termination or substantial reduction

16 in benefits (as defined in section 607(7)) of group

17 health plan coverage as a result of plan changes or

18 termination in the case of a covered employee who

19 is a qualified retiree.’’.

20 (2) QUALIFIED RETIREE; QUALIFIED BENE21 FICIARY; AND SUBSTANTIAL REDUCTION DE22 FINED.—Section 607 of such Act (29 U.S.C. 1167)

23 is amended—

24 (A) in paragraph (3)—
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1 (i) in subparagraph (A), by inserting

2 ‘‘except as otherwise provided in this para3 graph,’’ after ‘‘means,’’; and

4 (ii) by adding at the end the following

5 new subparagraph:

6 ‘‘(D) SPECIAL RULE FOR QUALIFYING RE7 TIREES AND DEPENDENTS.—In the case of a

8 qualifying event described in section 603(7), the

9 term ‘qualified beneficiary’ means a qualified

10 retiree and any other individual who, on the day

11 before such qualifying event, is a beneficiary

12 under the plan on the basis of the individual’s

13 relationship to such qualified retiree.’’; and

14 (B) by adding at the end the following new

15 paragraphs:

16 ‘‘(6) QUALIFIED RETIREE.—The term ‘qualified

17 retiree’ means, with respect to a qualifying event de18 scribed in section 603(7), a covered employee who,

19 at the time of the event—

20 ‘‘(A) has attained 55 years of age; and

21 ‘‘(B) was receiving group health coverage

22 under the plan by reason of the retirement of

23 the covered employee.

24 ‘‘(7) SUBSTANTIAL REDUCTION.—The term

25 ‘substantial reduction’—
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1 ‘‘(A) means, as determined under regula2 tions of the Secretary and with respect to a

3 qualified beneficiary, a reduction in the average

4 actuarial value of benefits under the plan

5 (through reduction or elimination of benefits,

6 an increase in premiums, deductibles, copay7 ments, and coinsurance, or any combination

8 thereof), since the date of commencement of

9 coverage of the beneficiary by reason of the re10 tirement of the covered employee (or, if later,

11 January 6, 2001), in an amount equal to at

12 least 50 percent of the total average actuarial

13 value of the benefits under the plan as of such

14 date (taking into account an appropriate ad15 justment to permit comparison of values over

16 time); and

17 ‘‘(B) includes an increase in premiums re18 quired to an amount that exceeds the premium

19 level described in the fourth sentence of section

20 602(3).’’.

21 (b) DURATION OF COVERAGE THROUGH AGE 65.—

22 Section 602(2)(A) of such Act (29 U.S.C. 1162(2)(A)) is

23 amended—

24 (1) in clause (ii), by inserting ‘‘or 603(7)’’ after

25 ‘‘603(6)’’;
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1 (2) in clause (iv), by striking ‘‘or 603(6)’’ and

2 inserting ‘‘, 603(6), or 603(7)’’;

3 (3) by redesignating clause (iv) as clause (vi);

4 (4) by redesignating clause (v) as clause (iv)

5 and by moving such clause to immediately follow

6 clause (iii); and

7 (5) by inserting after such clause (iv) the fol8 lowing new clause:

9 ‘‘(v) SPECIAL RULE FOR CERTAIN DE10 PENDENTS IN CASE OF TERMINATION OR

11 SUBSTANTIAL REDUCTION OF RETIREE

12 HEALTH COVERAGE.—In the case of a

13 qualifying event described in section

14 603(7), in the case of a qualified bene15 ficiary described in section 607(3)(D) who

16 is not the qualified retiree or spouse of

17 such retiree, the later of—

18 ‘‘(I) the date that is 36 months

19 after the earlier of the date the quali20 fied retiree becomes entitled to bene21 fits under title XVIII of the Social Se22 curity Act, or the date of the death of

23 the qualified retiree; or
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1 ‘‘(II) the date that is 36 months

2 after the date of the qualifying

3 event.’’.

4 (c) TYPE OF COVERAGE IN CASE OF TERMINATION

5 OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV6 ERAGE.—Section 602(1) of such Act (29 U.S.C. 1162(1))

7 is amended—

8 (1) by striking ‘‘The coverage’’ and inserting

9 the following:

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

11 subparagraph (B), the coverage’’; and

12 (2) by adding at the end the following:

13 ‘‘(B) CERTAIN RETIREES.—In the case of

14 a qualifying event described in section 603(7),

15 in applying the first sentence of subparagraph

16 (A) and the fourth sentence of paragraph (3),

17 the coverage offered that is the most prevalent

18 coverage option (as determined under regula19 tions of the Secretary) continued under the

20 group health plan (or, if none, under the most

21 prevalent other plan offered by the same plan

22 sponsor) shall be treated as the coverage de23 scribed in such sentence, or (at the option of

24 the plan and qualified beneficiary) such other
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1 coverage option as may be offered and elected

2 by the qualified beneficiary involved.’’.

3 (d) INCREASED LEVEL OF PREMIUMS PERMITTED.—

4 Section 602(3) of such Act (29 U.S.C. 1162(3)) is amend5 ed by adding at the end the following new sentence: ‘‘In

6 the case of an individual provided continuation coverage

7 by reason of a qualifying event described in section

8 603(7), any reference in subparagraph (A) of this para9 graph to ‘102 percent of the applicable premium’ is

10 deemed a reference to ‘125 percent of the applicable pre11 mium for employed individuals (and their dependents, if

12 applicable) for the coverage option referred to in para13 graph (1)(B)’.’’.

14 (e) NOTICE.—Section 606(a) of such Act (29 U.S.C.

15 1166) is amended—

16 (1) in paragraph (4)(A), by striking ‘‘or (6)’’

17 and inserting ‘‘(6), or (7)’’; and

18 (2) by adding at the end the following:

19 ‘‘The notice under paragraph (4) in the case of a quali20 fying event described in section 603(7) shall be provided

21 at least 90 days before the date of the qualifying event.’’.

22 (f) EFFECTIVE DATES.—

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

24 this section (other than subsection (e)(2)) shall

25 apply to qualifying events occurring on or after Jan-
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1 uary 6, 2001. In the case of a qualifying event oc2 curring on or after such date and before the date of

3 the enactment of this Act, such event shall be

4 deemed (for purposes of such amendments) to have

5 occurred on the date of the enactment of this Act.

6 (2) ADVANCE NOTICE OF TERMINATIONS AND

7 REDUCTIONS.—The amendment made by subsection

8 (e)(2) shall apply to qualifying events occurring

9 after the date of the enactment of this Act, except

10 that in no case shall notice be required under such

11 amendment before such date.

12 Subtitle B—Amendments to the

13 Public Health Service Act

14 SEC. 311. COBRA CONTINUATION BENEFITS FOR CERTAIN

15 RETIRED WORKERS WHO LOSE RETIREE

16 HEALTH COVERAGE.

17 (a) ESTABLISHMENT OF NEW QUALIFYING

18 EVENT.—

19 (1) IN GENERAL.—Section 2203 of the Public

20 Health Service Act (42 U.S.C. 300bb–3) is amended

21 by inserting after paragraph (5) the following new

22 paragraph:

23 ‘‘(6) The termination or substantial reduction

24 in benefits (as defined in section 2208(6)) of group

25 health plan coverage as a result of plan changes or
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1 termination in the case of a covered employee who

2 is a qualified retiree.’’.

3 (2) QUALIFIED RETIREE; QUALIFIED BENE4 FICIARY; AND SUBSTANTIAL REDUCTION DE5 FINED.—Section 2208 of such Act (42 U.S.C.

6 300bb–8) is amended—

7 (A) in paragraph (3)—

8 (i) in subparagraph (A), by inserting

9 ‘‘except as otherwise provided in this para10 graph,’’ after ‘‘means,’’; and

11 (ii) by adding at the end the following

12 new subparagraph:

13 ‘‘(C) SPECIAL RULE FOR QUALIFYING RE14 TIREES AND DEPENDENTS.—In the case of a

15 qualifying event described in section 2203(6),

16 the term ‘qualified beneficiary’ means a quali17 fied retiree and any other individual who, on

18 the day before such qualifying event, is a bene19 ficiary under the plan on the basis of the indi20 vidual’s relationship to such qualified retiree.’’;

21 and

22 (B) by adding at the end the following new

23 paragraphs:

24 ‘‘(5) QUALIFIED RETIREE.—The term ‘qualified

25 retiree’ means, with respect to a qualifying event de-
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1 scribed in section 2203(6), a covered employee who,

2 at the time of the event—

3 ‘‘(A) has attained 55 years of age; and

4 ‘‘(B) was receiving group health coverage

5 under the plan by reason of the retirement of

6 the covered employee.

7 ‘‘(6) SUBSTANTIAL REDUCTION.—The term

8 ‘substantial reduction’—

9 ‘‘(A) means, as determined under regula10 tions of the Secretary of Labor and with respect

11 to a qualified beneficiary, a reduction in the av12 erage actuarial value of benefits under the plan

13 (through reduction or elimination of benefits,

14 an increase in premiums, deductibles, copay15 ments, and coinsurance, or any combination

16 thereof), since the date of commencement of

17 coverage of the beneficiary by reason of the re18 tirement of the covered employee (or, if later,

19 January 6, 2001), in an amount equal to at

20 least 50 percent of the total average actuarial

21 value of the benefits under the plan as of such

22 date (taking into account an appropriate ad23 justment to permit comparison of values over

24 time); and
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1 ‘‘(B) includes an increase in premiums re2 quired to an amount that exceeds the premium

3 level described in the fourth sentence of section

4 2202(3).’’.

5 (b) DURATION OF COVERAGE THROUGH AGE 65.—

6 Section 2202(2)(A) of such Act (42 U.S.C. 300bb–

7 2(2)(A)) is amended—

8 (1) by redesignating clause (iii) as clause (iv);

9 and

10 (2) by inserting after clause (ii) the following

11 new clause:

12 ‘‘(iii) SPECIAL RULE FOR CERTAIN

13 DEPENDENTS IN CASE OF TERMINATION

14 OR SUBSTANTIAL REDUCTION OF RETIREE

15 HEALTH COVERAGE.—In the case of a

16 qualifying event described in section

17 2203(6), in the case of a qualified bene18 ficiary described in section 2208(3)(C) who

19 is not the qualified retiree or spouse of

20 such retiree, the later of—

21 ‘‘(I) the date that is 36 months

22 after the earlier of the date the quali23 fied retiree becomes entitled to bene24 fits under title XVIII of the Social Se-
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1 curity Act, or the date of the death of

2 the qualified retiree; or

3 ‘‘(II) the date that is 36 months

4 after the date of the qualifying

5 event.’’.

6 (c) TYPE OF COVERAGE IN CASE OF TERMINATION

7 OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV8 ERAGE.—Section 2202(1) of such Act (42 U.S.C. 300bb–

9 2(1)) is amended—

10 (1) by striking ‘‘The coverage’’ and inserting

11 the following:

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

13 subparagraph (B), the coverage’’; and

14 (2) by adding at the end the following:

15 ‘‘(B) CERTAIN RETIREES.—In the case of

16 a qualifying event described in section 2203(6),

17 in applying the first sentence of subparagraph

18 (A) and the fourth sentence of paragraph (3),

19 the coverage offered that is the most prevalent

20 coverage option (as determined under regula21 tions of the Secretary of Labor) continued

22 under the group health plan (or, if none, under

23 the most prevalent other plan offered by the

24 same plan sponsor) shall be treated as the cov25 erage described in such sentence, or (at the op-
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1 tion of the plan and qualified beneficiary) such

2 other coverage option as may be offered and

3 elected by the qualified beneficiary involved.’’.

4 (d) INCREASED LEVEL OF PREMIUMS PERMITTED.—

5 Section 2202(3) of such Act (42 U.S.C. 300bb–2(3)) is

6 amended by adding at the end the following new sentence:

7 ‘‘In the case of an individual provided continuation cov8 erage by reason of a qualifying event described in section

9 2203(6), any reference in subparagraph (A) of this para10 graph to ‘102 percent of the applicable premium’ is

11 deemed a reference to ‘125 percent of the applicable pre12 mium for employed individuals (and their dependents, if

13 applicable) for the coverage option referred to in para14 graph (1)(B)’.’’.

15 (e) NOTICE.—Section 2206(a) of such Act (42 U.S.C.

16 300bb–6(a)) is amended—

17 (1) in paragraph (4)(A), by striking ‘‘or (4)’’

18 and inserting ‘‘(4), or (6)’’; and

19 (2) by adding at the end the following:

20 ‘‘The notice under paragraph (4) in the case of a quali21 fying event described in section 2203(6) shall be provided

22 at least 90 days before the date of the qualifying event.’’.

23 (f) EFFECTIVE DATES.—

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

25 this section (other than subsection (e)(2)) shall
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1 apply to qualifying events occurring on or after Jan2 uary 6, 2001. In the case of a qualifying event oc3 curring on or after such date and before the date of

4 the enactment of this Act, such event shall be

5 deemed (for purposes of such amendments) to have

6 occurred on the date of the enactment of this Act.

7 (2) ADVANCE NOTICE OF TERMINATIONS AND

8 REDUCTIONS.—The amendment made by subsection

9 (e)(2) shall apply to qualifying events occurring

10 after the date of the enactment of this Act, except

11 that in no case shall notice be required under such

12 amendment before such date.

13 Subtitle C—Amendments to the

14 Internal Revenue Code of 1986

15 SEC. 321. COBRA CONTINUATION BENEFITS FOR CERTAIN

16 RETIRED WORKERS WHO LOSE RETIREE

17 HEALTH COVERAGE.

18 (a) ESTABLISHMENT OF NEW QUALIFYING

19 EVENT.—

20 (1) IN GENERAL.—Section 4980B(f)(3) of the

21 Internal Revenue Code of 1986 is amended by in22 serting after subparagraph (F) the following new

23 subparagraph:

24 ‘‘(G) The termination or substantial reduc25 tion in benefits (as defined in subsection (g)(6))
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1 of group health plan coverage as a result of

2 plan changes or termination in the case of a

3 covered employee who is a qualified retiree.’’.

4 (2) QUALIFIED RETIREE; QUALIFIED BENE5 FICIARY; AND SUBSTANTIAL REDUCTION DE6 FINED.—Section 4980B(g) of such Code is

7 amended—

8 (A) in paragraph (1)—

9 (i) in subparagraph (A), by inserting

10 ‘‘except as otherwise provided in this para11 graph,’’ after ‘‘means,’’; and

12 (ii) by adding at the end the following

13 new subparagraph:

14 ‘‘(E) SPECIAL RULE FOR QUALIFYING RE15 TIREES AND DEPENDENTS.—In the case of a

16 qualifying event described in subsection

17 (f)(3)(G), the term ‘qualified beneficiary’ means

18 a qualified retiree and any other individual who,

19 on the day before such qualifying event, is a

20 beneficiary under the plan on the basis of the

21 individual’s relationship to such qualified re22 tiree.’’; and

23 (B) by adding at the end the following new

24 paragraphs:
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1 ‘‘(5) QUALIFIED RETIREE.—The term ‘qualified

2 retiree’ means, with respect to a qualifying event de3 scribed in subsection (f)(3)(G), a covered employee

4 who, at the time of the event—

5 ‘‘(A) has attained 55 years of age; and

6 ‘‘(B) was receiving group health coverage

7 under the plan by reason of the retirement of

8 the covered employee.

9 ‘‘(6) SUBSTANTIAL REDUCTION.—The term

10 ‘substantial reduction’—

11 ‘‘(A) means, as determined under regula12 tions of the Secretary of Labor and with respect

13 to a qualified beneficiary, a reduction in the av14 erage actuarial value of benefits under the plan

15 (through reduction or elimination of benefits,

16 an increase in premiums, deductibles, copay17 ments, and coinsurance, or any combination

18 thereof), since the date of commencement of

19 coverage of the beneficiary by reason of the re20 tirement of the covered employee (or, if later,

21 January 6, 2001), in an amount equal to at

22 least 50 percent of the total average actuarial

23 value of the benefits under the plan as of such

24 date (taking into account an appropriate ad-
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1 justment to permit comparison of values over

2 time); and

3 ‘‘(B) includes an increase in premiums re4 quired to an amount that exceeds the premium

5 level described in the fourth sentence of sub6 section (f)(2)(C).’’.

7 (b) DURATION OF COVERAGE THROUGH AGE 65.—

8 Section 4980B(f)(2)(B)(i) of such Code is amended—

9 (1) in subclause (II), by inserting ‘‘or (3)(G)’’

10 after ‘‘(3)(F)’’;

11 (2) in subclause (IV), by striking ‘‘or (3)(F)’’

12 and inserting ‘‘, (3)(F), or (3)(G)’’;

13 (3) by redesignating subclause (IV) as sub14 clause (VI);

15 (4) by redesignating subclause (V) as subclause

16 (IV) and by moving such clause to immediately fol17 low subclause (III); and

18 (5) by inserting after such subclause (IV) the

19 following new subclause:

20 ‘‘(V) SPECIAL RULE FOR CER21 TAIN DEPENDENTS IN CASE OF TER22 MINATION OR SUBSTANTIAL REDUC23 TION OF RETIREE HEALTH COV24 ERAGE.—In the case of a qualifying

25 event described in paragraph (3)(G),
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1 in the case of a qualified beneficiary

2 described in subsection (g)(1)(E) who

3 is not the qualified retiree or spouse

4 of such retiree, the later of—

5 ‘‘(a) the date that is 36

6 months after the earlier of the

7 date the qualified retiree becomes

8 entitled to benefits under title

9 XVIII of the Social Security Act,

10 or the date of the death of the

11 qualified retiree; or

12 ‘‘(b) the date that is 36

13 months after the date of the

14 qualifying event.’’.

15 (c) TYPE OF COVERAGE IN CASE OF TERMINATION

16 OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV17 ERAGE.—Section 4980B(f)(2)(A) of such Code is

18 amended—

19 (1) by striking ‘‘The coverage’’ and inserting

20 the following:

21 ‘‘(i) IN GENERAL.—Except as pro22 vided in clause (ii), the coverage’’; and

23 (2) by adding at the end the following:

24 ‘‘(ii) CERTAIN RETIREES.—In the

25 case of a qualifying event described in
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1 paragraph (3)(G), in applying the first

2 sentence of clause (i) and the fourth sen3 tence of subparagraph (C), the coverage

4 offered that is the most prevalent coverage

5 option (as determined under regulations of

6 the Secretary of Labor) continued under

7 the group health plan (or, if none, under

8 the most prevalent other plan offered by

9 the same plan sponsor) shall be treated as

10 the coverage described in such sentence, or

11 (at the option of the plan and qualified

12 beneficiary) such other coverage option as

13 may be offered and elected by the qualified

14 beneficiary involved.’’.

15 (d) INCREASED LEVEL OF PREMIUMS PERMITTED.—

16 Section 4980B(f)(2)(C) of such Code is amended by add17 ing at the end the following new sentence: ‘‘In the case

18 of an individual provided continuation coverage by reason

19 of a qualifying event described in paragraph (3)(G), any

20 reference in clause (i) of this subparagraph to ‘102 per21 cent of the applicable premium’ is deemed a reference to

22 ‘125 percent of the applicable premium for employed indi23 viduals (and their dependents, if applicable) for the cov24 erage option referred to in subparagraph (A)(ii)’.’’.
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1 (e) NOTICE.—Section 4980B(f)(6) of such Code is

2 amended—

3 (1) in subparagraph (D)(i), by striking ‘‘or

4 (F)’’ and inserting ‘‘(F), or (G)’’; and

5 (2) by adding at the end the following:

6 ‘‘The notice under subparagraph (D)(i) in the case of a

7 qualifying event described in paragraph (3)(G) shall be

8 provided at least 90 days before the date of the qualifying

9 event.’’.

10 (f) EFFECTIVE DATES.—

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

12 this section (other than subsection (e)(2)) shall

13 apply to qualifying events occurring on or after Jan14 uary 6, 2001. In the case of a qualifying event oc15 curring on or after such date and before the date of

16 the enactment of this Act, such event shall be

17 deemed (for purposes of such amendments) to have

18 occurred on the date of the enactment of this Act.

19 (2) ADVANCE NOTICE OF TERMINATIONS AND

20 REDUCTIONS.—The amendment made by subsection

21 (e)(2) shall apply to qualifying events occurring

22 after the date of the enactment of this Act, except

23 that in no case shall notice be required under such

24 amendment before such date.
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1 TITLE IV—50 PERCENT CREDIT

2 AGAINST INCOME TAX FOR

3 MEDICARE BUY-IN PREMIUMS

4 AND FOR CERTAIN COBRA

5 CONTINUATION COVERAGE

6 PREMIUMS

7 SEC. 401. 50 PERCENT INCOME TAX CREDIT FOR MEDICARE

8 BUY-IN PREMIUMS AND FOR CERTAIN COBRA

9 CONTINUATION COVERAGE PREMIUMS.

10 (a) IN GENERAL.—Subpart A of part IV of sub11 chapter A of chapter 1 of the Internal Revenue Code of

12 1986 (relating to nonrefundable personal credits) is

13 amended by inserting after section 25A the following new

14 section:

15 ‘‘SEC. 25B. MEDICARE BUY-IN PREMIUMS AND CERTAIN

16 COBRA CONTINUATION COVERAGE PRE17 MIUMS.

18 ‘‘(a) IN GENERAL.—In the case of an individual,

19 there shall be allowed as a credit against the tax imposed

20 by this chapter for the taxable year an amount equal to

21 50 percent of the amount paid during such year as—

22 ‘‘(1) qualified continuation health coverage pre23 miums, and

24 ‘‘(2) medicare buy-in coverage premiums.

25 ‘‘(b) DEFINITIONS.—For purposes of this section—
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1 ‘‘(1) QUALIFIED CONTINUATION HEALTH COV2 ERAGE PREMIUMS.—The term ‘qualified continu3 ation health coverage premiums’ means, for any pe4 riod, premiums paid for continuation coverage (as

5 defined in section 4980B(f)) under a group health

6 plan for such period but only if failure to offer such

7 coverage to the taxpayer for such period would con8 stitute a failure by such health plan to meet the re9 quirements of section 4980B(f) and only if the con10 tinuation coverage is provided because of a quali11 fying event described in section 4980B(f)(3)(G).

12 ‘‘(2) MEDICARE BUY-IN COVERAGE PRE13 MIUMS.—The term ‘medicare buy-in coverage pre14 miums’ means premiums paid under part D of title

15 XVIII of the Social Security Act.’’

16 (b) CLERICAL AMENDMENT.—The table of sections

17 for subpart A of part IV of subchapter A of chapter 1

18 of such Code is amended by inserting after the item relat19 ing to section 25A the following new item:

‘‘Sec. 25B. Medicare buy-in premiums and certain COBRA continuation coverage premiums.’’

20 (c) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to taxable years beginning after

22 December 31, 2002.

Æ