I

107TH CONGRESS

1ST SESSION H. R. 1078

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

Income Security Act of 1974, the Public Health Service Act, and the

Internal Revenue Code of 1986 to provide for an election for retirees

55-to-65 years of age who lose employer-based coverage to acquire health

care coverage under the Medicare Program or under COBRA continuation benefits, and to amend the Employee Retirement Income Security

Act of 1974 to provide for advance notice of material reductions in

covered services under group health plans.

IN THE HOUSE OF REPRESENTATIVES

MARCH 15, 2001

Mr. KLECZKA 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, the Employee Retirement Income Security Act of 1974, the Public Health Service Act, and the Internal Revenue Code

of 1986 to provide for an election for retirees 55-to65 years of age who lose employer-based coverage to

acquire health care coverage under the Medicare Program or under COBRA continuation benefits, and to

amend the Employee Retirement Income Security Act

of 1974 to provide for advance notice of material reductions in covered services under group health plans.
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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 ‘‘Broken Promises Re5 tiree Health Coverage Act of 2001’’.

6 TITLE I—ACCESS TO MEDICARE

7 FOR INDIVIDUALS LOSING

8 RETIREE HEALTH COVERAGE

9 SEC. 101. ACCESS TO MEDICARE FOR INDIVIDUALS LOSING

10 RETIREE HEALTH COVERAGE.

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

12 Act is amended by inserting after section 1818A the fol13 lowing new section:

14 ‘‘MEDICARE BENEFITS FOR CERTAIN INDIVIDUALS WHO

15 ARE 55 TO 65 YEARS OF AGE

16 ‘‘SEC. 1818B. (a) ELIGIBILITY TO ENROLL.—

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

18 an individual who meets the following requirements

19 with respect to a month is eligible to enroll in the

20 insurance program under this part with respect to

21 such month:

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

23 month, the individual has attained 55 years of

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

25 ‘‘(B) MEDICARE ELIGIBILITY (BUT FOR

26 AGE).—The individual would be eligible for ben-
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1 efits under this part for the month if the indi2 vidual were 65 years of age.

3 ‘‘(C) NOT ELIGIBLE FOR COVERAGE

4 UNDER GROUP HEALTH PLANS OR FEDERAL

5 HEALTH INSURANCE PROGRAMS.—The indi6 vidual is not eligible for benefits or coverage

7 under a Federal health insurance program (as

8 defined in subsection (e)(2), other than under

9 this section) or under a group health plan (in10 cluding such eligibility merely through a Fed11 eral or State COBRA continuation provision) as

12 of the last day of the month involved.

13 ‘‘(D) LOSS OF RETIREE HEALTH COV14 ERAGE.—The individual was covered under a

15 group health plan as a qualified retiree, but a

16 termination of such coverage occurred not more

17 than 90 days before the date the individual

18 seeks enrollment under this section.

19 ‘‘(E) NOT IMPRISONED.—As of the first

20 day of such month, the individual is not impris21 oned under Federal, State, or local authority.

22 ‘‘(2) LIMITATION ON ELIGIBILITY IF TERMI23 NATED ENROLLMENT.—If an individual described in

24 paragraph (1) enrolls under this section and cov25 erage of the individual is terminated under sub-
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1 section (d) (other than because of age), the indi2 vidual is not again eligible to enroll under this sec3 tion unless the following requirements are met:

4 ‘‘(A) NEW COVERAGE UNDER GROUP

5 HEALTH PLAN OR FEDERAL HEALTH INSUR6 ANCE PROGRAM.—After the date of termination

7 of coverage under such paragraph, the indi8 vidual obtains coverage under a group health

9 plan or under a Federal health insurance pro10 gram (other than under this section).

11 ‘‘(B) SUBSEQUENT LOSS OF NEW COV12 ERAGE.—The individual subsequently loses eli13 gibility for the coverage described in subpara14 graph (A) and exhausts any eligibility the indi15 vidual may subsequently have for coverage

16 under a Federal or State COBRA continuation

17 provision.

18 ‘‘(3) CHANGE IN HEALTH PLAN ELIGIBILITY

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

20 individual who is eligible for and enrolls under this

21 section, the individual’s continued entitlement to

22 benefits under this part shall not be affected by the

23 individual’s subsequent eligibility for benefits or cov24 erage described in paragraph (1)(C), or entitlement

25 to such benefits or coverage.
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1 ‘‘(b) ENROLLMENT PROCESS.—

2 ‘‘(1) IN GENERAL.—An individual may enroll

3 under this section only in such manner and form as

4 may be prescribed by regulations, and only during

5 an enrollment period prescribed by the Secretary

6 consistent with the provisions of this subsection.

7 Such regulations shall provide a process under which

8 individuals eligible to enroll as of a month are per9 mitted to pre-enroll during a prior month within an

10 enrollment period described in paragraph (2).

11 ‘‘(2) ENROLLMENT PERIODS.—

12 ‘‘(A) IN GENERAL.—

13 ‘‘(i) INITIAL ENROLLMENT PERIOD.—

14 If the individual is eligible to enroll under

15 this section for October 1, 2001, the en16 rollment period shall begin on August 1,

17 2001, and shall end on December 31,

18 2001. Any such enrollment before October

19 1, 2001, is conditioned upon compliance

20 with the conditions of eligibility for Octo21 ber 1, 2001.

22 ‘‘(ii) SUBSEQUENT PERIODS.—If the

23 individual is eligible to enroll under such

24 section for a month after October 2001,

25 the enrollment period shall begin on the
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1 first day of the second month before the

2 month in which the individual first is eligi3 ble to so enroll and shall end four months

4 later. Any such enrollment before the first

5 day of the third month of such enrollment

6 period is conditioned upon compliance with

7 the conditions of eligibility for such third

8 month.

9 ‘‘(B) AUTHORITY TO CORRECT FOR GOV10 ERNMENT ERRORS.—The provisions of section

11 1837(h) apply with respect to enrollment under

12 this part in the same manner as they apply to

13 enrollment under part B.

14 ‘‘(c) DATE COVERAGE BEGINS.—

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

16 an individual is entitled to benefits pursuant to an

17 enrollment under this section shall begin as follows,

18 but in no case earlier than October 1, 2001:

19 ‘‘(A) In the case of an individual who en20 rolls (including pre-enrolls) before the month in

21 which the individual satisfies eligibility for en22 rollment under subsection (a), the first day of

23 such month of eligibility.

24 ‘‘(B) In the case of an individual who en25 rolls during or after the month in which the in-
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1 dividual first satisfies eligibility for enrollment

2 under such subsection, the first day of the fol3 lowing month.

4 ‘‘(2) AUTHORITY TO PROVIDE FOR PARTIAL

5 MONTHS OF COVERAGE.—Under regulations, the

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

7 for coverage periods that include portions of a

8 month in order to avoid lapses of coverage.

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

10 may be made under this title with respect to the ex11 penses of an individual enrolled under this section

12 unless such expenses were incurred by such indi13 vidual during a period which, with respect to the in14 dividual, is a coverage period under this subsection.

15 ‘‘(d) TERMINATION OF COVERAGE.—

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

17 period under this section shall continue until the in18 dividual’s enrollment has been terminated at the ear19 liest of the following:

20 ‘‘(A) GENERAL PROVISIONS.—

21 ‘‘(i) NOTICE.—The individual files no22 tice (in a form and manner prescribed by

23 the Secretary) that the individual no

24 longer wishes to participate in the insur25 ance program under this part.
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1 ‘‘(ii) NONPAYMENT OF PREMIUMS.—

2 The individual fails to make payment of

3 premiums required for enrollment under

4 this part.

5 ‘‘(iii) MEDICARE ELIGIBILITY ON

6 OTHER BASIS.—The individual becomes en7 titled to benefits under this part other

8 than by reason of this section.

9 ‘‘(B) TERMINATION BASED ON AGE.—The

10 individual attains 65 years of age.

11 ‘‘(2) EFFECTIVE DATE OF TERMINATION.—

12 ‘‘(A) NOTICE.—The termination of a cov13 erage period under paragraph (1)(A)(i) shall

14 take effect at the close of the month following

15 for which the notice is filed.

16 ‘‘(B) NONPAYMENT OF PREMIUM.—The

17 termination of a coverage period under para18 graph (1)(A)(ii) shall take effect on a date de19 termined under regulations, which may be de20 termined so as to provide a grace period in

21 which overdue premiums may be paid and cov22 erage continued. The grace period determined

23 under the preceding sentence shall not exceed

24 60 days; except that it may be extended for an

25 additional 30 days in any case where the Sec-
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1 retary determines that there was good cause for

2 failure to pay the overdue premiums within

3 such 60-day period.

4 ‘‘(C) AGE OR MEDICARE ELIGIBILITY.—

5 The termination of a coverage period under

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

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

8 individual attains 65 years of age or becomes

9 otherwise entitled to benefits under this part.

10 ‘‘(e) PREMIUMS.—

11 ‘‘(1) IN GENERAL.—Premiums for enrollment

12 under this section shall be paid to the Secretary in

13 an amount determined under paragraph (2). Such

14 premiums shall be paid at such times, and in such

15 manner, as the Secretary shall by regulations pre16 scribe, and shall be deposited in the Treasury to the

17 credit of the Federal Hospital Insurance Trust Fund

18 established under section 1817.

19 ‘‘(2) AMOUNT OF PREMIUM.—The amount of

20 premium for a month occurring during—

21 ‘‘(A) fiscal year 2002, is equal to $400;

22 and

23 ‘‘(B) a succeeding fiscal year is the

24 amount specified under this paragraph for the

25 previous fiscal year increased by the percentage
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1 increase in the consumer price index for all

2 urban consumers (all items; United States city

3 average) for the 12-month period ending with

4 July preceding the beginning of the fiscal year.

5 ‘‘(3) PERIOD OF APPLICABILITY OF PRE6 MIUMS.—Such premiums shall be payable for the pe7 riod commencing with the first month of an individ8 ual’s coverage period and ending with the month in

9 which the individual dies or, if earlier, in which the

10 individual’s coverage period terminates under sub11 section (d).

12 ‘‘(f) DEFINITIONS.—For purposes of this section:

13 ‘‘(1) QUALIFIED RETIREE.—The term ‘qualified

14 retiree’ means an individual who, immediately before

15 the occurrence of the termination of coverage of

16 such individual under a group health plan—

17 ‘‘(A) had attained 55 years of age; and

18 ‘‘(B) was receiving such coverage by rea19 son of the retirement of the individual.

20 ‘‘(2) FEDERAL OR STATE COBRA CONTINU21 ATION PROVISION.—The term ‘Federal or State

22 COBRA continuation provision’ has the meaning

23 given the term ‘COBRA continuation provision’ in

24 section 2791(d)(4) of the Public Health Service Act
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1 and includes a comparable State program, as deter2 mined by the Secretary.

3 ‘‘(3) FEDERAL HEALTH INSURANCE PROGRAM

4 DEFINED.—The term ‘Federal health insurance pro5 gram’ means any of the following:

6 ‘‘(A) MEDICARE.—This title (other than by

7 reason of this section).

8 ‘‘(B) MEDICAID.—A State plan under title

9 XIX.

10 ‘‘(C) FEHBP.—The Federal employees

11 health benefit program under chapter 89 of title

12 5, United States Code.

13 ‘‘(D) TRICARE.—The TRICARE pro14 gram (as defined in section 1072(7) of title 10,

15 United States Code).

16 ‘‘(E) ACTIVE DUTY MILITARY.—Health

17 benefits under title 10, United States Code, to

18 an individual as a member of the uniformed

19 services of the United States.

20 ‘‘(5) GROUP HEALTH PLAN.—The term ‘group

21 health plan’ has the meaning given such term in sec22 tion 2791(a)(1) of the Public Health Service Act.’’.

23 (b) CONFORMING AMENDMENTS.—

24 (1) Section 1905(p)(3)(A) of the Social Secu25 rity Act (42 U.S.C. 1396d(p)(3)(A)) is amended by
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1 striking ‘‘or 1818A’’ and inserting ‘‘, 1818A, or

2 1818B’’.

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

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

5 1162(2)) is amended by inserting ‘‘(not including an

6 individual who is so entitled pursuant to enrollment

7 under section 1818B)’’ after ‘‘Social Security Act’’.

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

9 Service Act (42 U.S.C. 300bb–2(2)(D)(ii)) is amend10 ed by inserting ‘‘(not including an individual who is

11 so entitled pursuant to enrollment under section

12 1818B)’’ after ‘‘Social Security Act’’.

13 (C) Section 4980B(f)(2)(B)(i)(V) of the Inter14 nal Revenue Code of 1986 is amended by inserting

15 ‘‘(not including an individual who is so entitled pur16 suant to enrollment under section 1818B)’’ after

17 ‘‘Social Security Act’’.

18 SEC. 102. PROTECTIONS UNDER MEDIGAP FOR RETIRED

19 WORKERS WHO LOSE RETIREE HEALTH BEN20 EFITS.

21 (a) PROVIDING FOR MEDIGAP OPEN ENROLLMENT

22 PERIOD.—Section 1882(s)(2)(A) of the Social Security

23 Act (42 U.S.C. 1395ss(s)(2)(A)) is amended—

24 (1) by inserting ‘‘(i)’’ before ‘‘in the case of’’;

25 and
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1 (2) by inserting before the period at the end the

2 following: ‘‘, or (ii) in the case of an individual who

3 enrolls in part B pursuant to a special enrollment

4 period provided under section 1837(i)(4), the 6-

5 month period beginning with the first month as of

6 the first day of which the individual is enrolled

7 under part B pursuant to such enrollment’’.

8 (b) EFFECTIVE DATE.—The amendments made by

9 this section shall take effect on the date of the enactment

10 of this Act and apply to any involuntary termination of

11 coverage under a group health plan.

12 TITLE II—COBRA PROTECTION

13 FOR EARLY RETIREES

14 Subtitle A—Amendments to the

15 Employee Retirement Income

16 Security Act of 1974

17 SEC. 201. COBRA CONTINUATION BENEFITS FOR CERTAIN

18 RETIRED WORKERS WHO LOSE RETIREE

19 HEALTH COVERAGE.

20 (a) ESTABLISHMENT OF NEW QUALIFYING

21 EVENT.—

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

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

24 1163) is amended by inserting after paragraph (6)

25 the following new paragraph:
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1 ‘‘(7) The termination of benefits of group

2 health plan coverage as a result of plan changes or

3 termination in the case of a covered employee who

4 is a qualified retiree.’’.

5 (2) QUALIFIED RETIREE; AND QUALIFIED BEN6 EFICIARY DEFINED.—Section 607 of such Act (29

7 U.S.C. 1167) is amended—

8 (A) in paragraph (3)—

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

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

17 term ‘qualified beneficiary’ means a qualified

18 retiree and any other individual who, on the day

19 before such qualifying event, is a beneficiary

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

21 relationship to such qualified retiree.’’; and

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

23 paragraphs:

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

25 retiree’ means, with respect to a qualifying event de-
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1 scribed in section 603(7), a covered employee who,

2 at the time of the event—

3 ‘‘(A) has attained 55 years of age;

4 ‘‘(B) was receiving group health coverage

5 under the plan by reason of the retirement of

6 the covered employee; and

7 ‘‘(C) is not enrolled under section 1818B

8 of the Social Security Act (relating to Medicare

9 benefits for certain individuals who are 55 to

10 65 years of age)’’.

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

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

13 amended—

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

15 ‘‘603(6)’’;

16 (2) in clause (iv), by striking ‘‘or 603(6)’’ and

17 inserting ‘‘, 603(6), or 603(7)’’;

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

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

20 and by moving such clause to immediately follow

21 clause (iii); and

22 (5) by inserting after such clause (iv) the fol23 lowing new clause:

24 ‘‘(v) SPECIAL RULE FOR CERTAIN DE25 PENDENTS IN CASE OF TERMINATION OF
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1 RETIREE HEALTH COVERAGE.—In the case

2 of a qualifying event described in section

3 603(7), in the case of a qualified bene4 ficiary described in section 607(3)(D) who

5 is not the qualified retiree or spouse of

6 such retiree, the later of—

7 ‘‘(I) the date that is 36 months

8 after the earlier of the date the quali9 fied retiree becomes entitled to bene10 fits under title XVIII of the Social Se11 curity Act, or the date of the death of

12 the qualified retiree; or

13 ‘‘(II) the date that is 36 months

14 after the date of the qualifying

15 event.’’.

16 (c) TYPE OF COVERAGE IN CASE OF TERMINATION

17 OF RETIREE HEALTH COVERAGE.—Section 602(1) of

18 such Act (29 U.S.C. 1162(1)) is amended—

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

20 the following:

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

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

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

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

25 a qualifying event described in section 603(7),
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1 in applying the first sentence of subparagraph

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

3 the coverage offered that is the most prevalent

4 coverage option (as determined under regula5 tions of the Secretary) continued under the

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

7 prevalent other plan offered by the same plan

8 sponsor) shall be treated as the coverage de9 scribed in such sentence, or (at the option of

10 the plan and qualified beneficiary) such other

11 coverage option as may be offered and elected

12 by the qualified beneficiary involved.’’.

13 (d) INCREASED LEVEL OF PREMIUMS PERMITTED.—

14 Section 602(3) of such Act (29 U.S.C. 1162(3)) is amend15 ed by adding at the end the following new sentence: ‘‘In

16 the case of an individual provided continuation coverage

17 by reason of a qualifying event described in section

18 603(7), any reference in subparagraph (A) of this para19 graph to ‘102 percent of the applicable premium’ is

20 deemed a reference to ‘110 percent of the applicable pre21 mium for employed individuals (and their dependents, if

22 applicable) for the coverage option referred to in para23 graph (1)(B)’.’’.

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

25 1166) is amended—
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1 (1) in paragraph (4)(A), by striking ‘‘or (6)’’

2 and inserting ‘‘(6), or (7)’’; and

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

4 ‘‘The notice under paragraph (4) in the case of a quali5 fying event described in section 603(7) shall be provided

6 at least 90 days before the date of the qualifying event.

7 Such notice shall include information with respect to eligi8 bility for enrollment under section 1818B of the Social

9 Security Act (relating to medicare benefits for certain in10 dividuals who are 55 to 65 years of age).’’.

11 (f) ELECTION OF MEDICARE COVERAGE IN LIEU OF

12 CONTINUATION COVERAGE.—Section 607(3) of such Act

13 (29 U.S.C. 1167(3)) (as amended by subsection (a)(2))

14 is amended further by adding at the end the following new

15 subparagraph:

16 ‘‘(E) EXCLUSION FOR CERTAIN INDIVID17 UALS ELECTING MEDICARE ENROLLMENT.—

18 Such term does not include an individual who

19 is enrolled under section 1818B of the Social

20 Security Act (relating to Medicare benefits for

21 certain individuals who are 55 to 65 years of

22 age).’’.

23 (g) 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 during plan

2 years ending after August 1, 1996. In the case of

3 a qualifying event occurring on or after such date

4 and before the date of the enactment of this Act,

5 such event shall be deemed (for purposes of such

6 amendments) to have occurred on the date of the en7 actment of this Act.

8 (2) ADVANCE NOTICE OF TERMINATIONS AND

9 REDUCTIONS.—The amendment made by subsection

10 (e)(2) shall apply to qualifying events occurring on

11 or after February 10, 2001.

12 Subtitle B—Amendments to the

13 Public Health Service Act

14 SEC. 211. 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 of benefits of group

24 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; AND QUALIFIED BEN4 EFICIARY; DEFINED.—Section 2208 of such Act (42

5 U.S.C. 300bb–8) is amended—

6 (A) in paragraph (3)—

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

8 ‘‘except as otherwise provided in this para9 graph,’’ after ‘‘means,’’; and

10 (ii) by adding at the end the following

11 new subparagraph:

12 ‘‘(C) SPECIAL RULE FOR QUALIFYING RE13 TIREES AND DEPENDENTS.—In the case of a

14 qualifying event described in section 2203(6),

15 the term ‘qualified beneficiary’ means a quali16 fied retiree and any other individual who, on

17 the day before such qualifying event, is a bene18 ficiary under the plan on the basis of the indi19 vidual’s relationship to such qualified retiree.’’;

20 and

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

22 paragraphs:

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

24 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;

4 ‘‘(B) was receiving group health coverage

5 under the plan by reason of the retirement of

6 the covered employee; and

7 ‘‘(C) is not enrolled under section 1818B

8 of the Social Security Act (relating to Medicare

9 benefits for certain individuals who are 55 to

10 65 years of age).’’.

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

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

13 2(2)(A)) is amended—

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

15 and

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

17 new clause:

18 ‘‘(iii) SPECIAL RULE FOR CERTAIN

19 DEPENDENTS IN CASE OF TERMINATION

20 OF RETIREE HEALTH COVERAGE.—In the

21 case of a qualifying event described in sec22 tion 2203(6), in the case of a qualified

23 beneficiary described in section 2208(3)(C)

24 who is not the qualified retiree or spouse

25 of such retiree, the later of—
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1 ‘‘(I) the date that is 36 months

2 after the earlier of the date the quali3 fied retiree becomes entitled to bene4 fits under title XVIII of the Social Se5 curity Act, or the date of the death of

6 the qualified retiree; or

7 ‘‘(II) the date that is 36 months

8 after the date of the qualifying

9 event.’’.

10 (c) TYPE OF COVERAGE IN CASE OF TERMINATION

11 OF RETIREE HEALTH COVERAGE.—Section 2202(1) of

12 such Act (42 U.S.C. 300bb–2(1)) is amended—

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

14 the following:

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

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

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

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

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

20 in applying the first sentence of subparagraph

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

22 the coverage offered that is the most prevalent

23 coverage option (as determined under regula24 tions of the Secretary of Labor) continued

25 under the group health plan (or, if none, under
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1 the most prevalent other plan offered by the

2 same plan sponsor) shall be treated as the cov3 erage described in such sentence, or (at the op4 tion of the plan and qualified beneficiary) such

5 other coverage option as may be offered and

6 elected by the qualified beneficiary involved.’’.

7 (d) INCREASED LEVEL OF PREMIUMS PERMITTED.—

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

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

10 ‘‘In the case of an individual provided continuation cov11 erage by reason of a qualifying event described in section

12 2203(6), any reference in subparagraph (A) of this para13 graph to ‘102 percent of the applicable premium’ is

14 deemed a reference to ‘110 percent of the applicable pre15 mium for employed individuals (and their dependents, if

16 applicable) for the coverage option referred to in para17 graph (1)(B)’.’’.

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

19 300bb–6(a)) is amended—

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

21 and inserting ‘‘(4), or (6)’’; and

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

23 ‘‘The notice under paragraph (4) in the case of a quali24 fying event described in section 2203(6) shall be provided

25 at least 90 days before the date of the qualifying event.
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1 Such notice shall include information with respect to eligi2 bility for enrollment under section 1818B of the Social

3 Security Act (relating to medicare benefits for certain in4 dividuals who are 55 to 65 years of age).’’.

5 (f) ELECTION OF MEDICARE COVERAGE IN LIEU OF

6 CONTINUATION COVERAGE.—Section 2208(3) of such Act

7 (42 U.S.C. 300bb–8(3)) (as amended by subsection

8 (a)(2)) is amended further by adding at the end the fol9 lowing new subparagraph:

10 ‘‘(D) EXCLUSION FOR CERTAIN INDIVID11 UALS ELECTING MEDICARE ENROLLMENT.—

12 Such term does not include an individual who

13 is enrolled under section 1818B of the Social

14 Security Act (relating to medicare benefits for

15 certain individuals who are 55 to 65 years of

16 age).’’.

17 (g) EFFECTIVE DATES.—

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

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

20 apply to qualifying events occurring during plan

21 years ending after August 1, 1996. In the case of

22 a qualifying event occurring on or after such date

23 and before the date of the enactment of this Act,

24 such event shall be deemed (for purposes of such
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1 amendments) to have occurred on the date of the en2 actment of this Act.

3 (2) ADVANCE NOTICE OF TERMINATIONS AND

4 REDUCTIONS.—The amendment made by subsection

5 (e)(2) shall apply to qualifying events occurring on

6 or after February 10, 2001.

7 Subtitle C—Amendments to the

8 Internal Revenue Code of 1986

9 SEC. 221. COBRA CONTINUATION BENEFITS FOR CERTAIN

10 RETIRED WORKERS WHO LOSE RETIREE

11 HEALTH COVERAGE.

12 (a) ESTABLISHMENT OF NEW QUALIFYING

13 EVENT.—

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

15 Internal Revenue Code of 1986 is amended by in16 serting after subparagraph (F) the following new

17 subparagraph:

18 ‘‘(G) The termination of benefits of group

19 health plan coverage as a result of plan changes

20 or termination in the case of a covered em21 ployee who is a qualified retiree.’’.

22 (2) QUALIFIED RETIREE; AND QUALIFIED BEN23 EFICIARY; DEFINED.—Section 4980B(g) of such

24 Code is amended—

25 (A) in paragraph (1)—
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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 ‘‘(E) SPECIAL RULE FOR QUALIFYING RE7 TIREES AND DEPENDENTS.—In the case of a

8 qualifying event described in subsection

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

10 a qualified retiree and any other individual who,

11 on the day before such qualifying event, is a

12 beneficiary under the plan on the basis of the

13 individual’s relationship to such qualified re14 tiree.’’; and

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

16 paragraphs:

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

18 retiree’ means, with respect to a qualifying event de19 scribed in subsection (f)(3)(G), a covered employee

20 who, at the time of the event—

21 ‘‘(A) has attained 55 years of age;

22 ‘‘(B) was receiving group health coverage

23 under the plan by reason of the retirement of

24 the covered employee; and
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1 ‘‘(C) is not enrolled under section 1818B

2 of the Social Security Act (relating to Medicare

3 benefits for certain individuals who are 55 to

4 65 years of age).’’.

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

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

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

8 after ‘‘(3)(F)’’;

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

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

11 (3) by redesignating subclause (IV) as sub12 clause (VI);

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

14 (IV) and by moving such clause to immediately fol15 low subclause (III); and

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

17 following new subclause:

18 ‘‘(V) SPECIAL RULE FOR CER19 TAIN DEPENDENTS IN CASE OF TER20 MINATION OF RETIREE HEALTH COV21 ERAGE.—In the case of a qualifying

22 event described in paragraph (3)(G),

23 in the case of a qualified beneficiary

24 described in subsection (g)(1)(E) who
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1 is not the qualified retiree or spouse

2 of such retiree, the later of—

3 ‘‘(a) the date that is 36

4 months after the earlier of the

5 date the qualified retiree becomes

6 entitled to benefits under title

7 XVIII of the Social Security Act,

8 or the date of the death of the

9 qualified retiree; or

10 ‘‘(b) the date that is 36

11 months after the date of the

12 qualifying event.’’.

13 (c) TYPE OF COVERAGE IN CASE OF TERMINATION

14 OF RETIREE HEALTH COVERAGE.—Section

15 4980B(f)(2)(A) of such Code is amended—

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

17 the following:

18 ‘‘(i) IN GENERAL.—Except as pro19 vided in clause (ii), the coverage’’; and

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

21 ‘‘(ii) CERTAIN RETIREES.—In the

22 case of a qualifying event described in

23 paragraph (3)(G), in applying the first

24 sentence of clause (i) and the fourth sen25 tence of subparagraph (C), the coverage
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1 offered that is the most prevalent coverage

2 option (as determined under regulations of

3 the Secretary of Labor) continued under

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

5 the most prevalent other plan offered by

6 the same plan sponsor) shall be treated as

7 the coverage described in such sentence, or

8 (at the option of the plan and qualified

9 beneficiary) such other coverage option as

10 may be offered and elected by the qualified

11 beneficiary involved.’’.

12 (d) INCREASED LEVEL OF PREMIUMS PERMITTED.—

13 Section 4980B(f)(2)(C) of such Code is amended by add14 ing at the end the following new sentence: ‘‘In the case

15 of an individual provided continuation coverage by reason

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

17 reference in clause (i) of this subparagraph to ‘102 per18 cent of the applicable premium’ is deemed a reference to

19 ‘110 percent of the applicable premium for employed indi20 viduals (and their dependents, if applicable) for the cov21 erage option referred to in subparagraph (A)(ii)’.’’.

22 (e) NOTICE.—Section 4980B(f)(6) of such Code is

23 amended—

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

25 (F)’’ and inserting ‘‘(F), or (G)’’; and
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1 (2) by adding at the end the following:

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

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

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

5 event. Such notice shall include information with respect

6 to eligibility for enrollment under section 1818B of the

7 Social Security Act (relating to medicare benefits for cer8 tain individuals who are 55 to 65 years of age).’’.

9 (f) ELECTION OF MEDICARE COVERAGE IN LIEU OF

10 CONTINUATION COVERAGE.—Section 4980B(g)(1) of

11 such Code (as amended by subsection (a)(2)) is amended

12 further by adding at the end the following new subpara13 graph:

14 ‘‘(F) EXCLUSION FOR CERTAIN INDIVID15 UALS ELECTING MEDICARE ENROLLMENT.—

16 Such term does not include an individual who

17 is enrolled under section 1818B of the Social

18 Security Act (relating to Medicare benefits for

19 certain individuals who are 55 to 65 years of

20 age).’’.

21 (g) EFFECTIVE DATES.—

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

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

24 apply to qualifying events occurring during plan

25 years ending after August 1, 1996. In the case of
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1 a qualifying event occurring on or after such date

2 and before the date of the enactment of this Act,

3 such event shall be deemed (for purposes of such

4 amendments) to have occurred on the date of the en5 actment 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 on

9 or after February 10, 2001.

10 TITLE III—NOTICE

11 REQUIREMENTS

12 SEC. 301. ADVANCE NOTICE OF MATERIAL REDUCTIONS IN

13 COVERED SERVICES UNDER GROUP HEALTH

14 PLANS.

15 (a) ADVANCE NOTICE.—

16 (1) IN GENERAL.—Section 104(b)(1) of the

17 Employee Retirement Income Security Act of 1974

18 (29 U.S.C. 1024(b)(1)) is amended—

19 (A) by redesignating subparagraphs (A)

20 and (B) as clauses (i) and (ii), respectively;

21 (B) by striking ‘‘(1) The administrator’’

22 and inserting ‘‘(1)(A) The administrator’’;

23 (C) by striking ‘‘The administrator’’ the

24 second place it appears and inserting the fol25 lowing:
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1 ‘‘(B) The administrator’’;

2 (D) by striking ‘‘If there is a modification’’

3 and inserting the following:

4 ‘‘(C) If there is a modification’’; and

5 (E) by adding at the end the following new

6 subparagraph:

7 ‘‘(D) Notwithstanding subparagraph (C), a summary

8 description of any material modification described in sec9 tion 102(a)(1) that is a reduction in covered services or

10 benefits provided in the case of a group health plan (as

11 defined in section 733(a)(1)) relating to retiree health

12 benefits shall be furnished to participants and bene13 ficiaries not later than 180 days before the effective date

14 of the modification. In any case in which an individual

15 first becomes a participant under a group health plan dur16 ing any such 180-day period with respect to such a modi17 fication or (in the case of any other beneficiary under the

18 plan) first receives benefits under the plan during such

19 180-day period, the requirements of the preceding sen20 tence may be met by providing the summary description

21 of such modification not later than the date on which such

22 individual first becomes a participant or such other bene23 ficiary first receives benefits under the plan.’’.

24 (2) DETERMINATION BY SECRETARY.—Section

25 104 of such Act (29 U.S.C. 1024) is further amend-
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1 ed by redesignating subsection (d) as subsection (e)

2 and by inserting after subsection (c) the following

3 new subsection:

4 ‘‘(d) A material modification described in section

5 102(a)(1) that is a reduction in covered services or bene6 fits provided in the case of a group health plan (as defined

7 in section 733(a)(1))) relating to retiree health benefits

8 that is subject to the requirements of subsection (b)(1)(D)

9 may not take effect until after 6 months after the Sec10 retary receives written notice of the modification from the

11 administrator and after the Secretary determines that

12 such modification does not violate the plan, including col13 lective bargaining agreements. The determination of

14 whether any such modification constitutes such a violation

15 shall be made by the Secretary during such 6-month pe16 riod, and any such modification shall be deemed not to

17 be effective until the Secretary issues such determination.

18 Any such determination shall be treated as a final order

19 subject to review under section 502(k).’’.

20 (3) ADVANCE NOTICE TO SECRETARY.—Section

21 104(b)(1) of such Act (29 U.S.C. 1024(b)(1)) is

22 amended, in the fourth sentence following subpara23 graph (B), by inserting before the period the fol24 lowing: ‘‘, or in the case of any such modification

25 that is a reduction in covered services or benefits
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1 provided in the case of a group health plan relating

2 to retiree health benefits, not later than 180 days

3 before the effective date of such modification.’’.

4 (4) CIVIL PENALTY.—Section 502(c)(1) of such

5 Act (29 U.S.C. 1132(c)(1)) is amended by striking

6 ‘‘or section 101(e)(1)’’ and inserting ‘‘, section

7 101(e)(1), or section 104(b)(1)(D)’’.

8 (b) ENFORCEMENT.—

9 (1) REQUIREMENTS.—Section 4980B of the In10 ternal Revenue Code of 1986 is amended by redesig11 nating subsection (g) as subsection (h) and by in12 serting after subsection (f) the following new sub13 section:

14 ‘‘(g) NOTICE OF MODIFICATION IN HEALTH BENE15 FITS.—

16 ‘‘(1) IN GENERAL.—A group health plan meets

17 the requirements of this subsection, in the case of a

18 material modification described in section 102(a)(1)

19 of the Employee Retirement Income Security Act of

20 1974 that is a reduction in covered services or bene21 fits provided in the case of a group health plan (as

22 defined in section 733(a)(1) of such Act) relating to

23 retiree health benefits, if—

24 ‘‘(A) the plan sponsor complies with sec25 tion 104(b)(1)(D) of such Act; and
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1 ‘‘(B) such modification takes effect only

2 after the Secretary of Labor makes the deter3 mination required by section 104(d) of such Act

4 that such modification does not violate the plan,

5 including collective bargaining agreements.

6 ‘‘(2) NONCOMPLIANCE PERIOD.—For the pur7 poses of subsection (b), the noncompliance period

8 with respect to this subsection shall be determined

9 without regard to paragraph (2)(B)(ii) of subsection

10 (b).’’.

11 (2) CONFORMING AMENDMENTS.—

12 (A) Subsection (a) of section 4980B of

13 such Code is amended by striking ‘‘subsection

14 (f)’’ and inserting ‘‘subsections (f) and (g)’’.

15 (B) Clause (iv)(II) of section

16 4980B(f)(2)(B) of such Code is amended by

17 striking ‘‘subsection (g)(1)(D)’’ and inserting

18 ‘‘subsection (h)(1)(D)’’.

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

20 this section shall apply with respect to material modifica21 tions occurring on or after February 10, 2001.

Æ