E 1004 CONGRESSIONAL RECORD — Extensions of Remarks May 11, 1995

‘‘(B) An eligible employee or dependent is

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

employer for any portion of the premium.

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

the employer, or any of the eligible employees or dependents, as part of a plan or program for the purposes of section 162, section

25, or section 106 of the Internal Revenue

Code of 1986.

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

District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the

Northern Mariana Islands.’’

(b) EFFECTIVE DATE.—

(1) IN GENERAL.—The amendments made by

subsection (a) shall apply to individuals who

commence health insurance coverage or coverage under a group health plan after the

first day of the first month beginning more

than 6 months after the date of the enactment of this Act.

(2) PLAN YEAR EXCEPTION.—Such amendments shall not apply to plan years ending

before the first day referred to in paragraph

(1).

(c) CLERICAL AMENDMENT.—The table of

chapters for subtitle D is amended by inserting after the item relating to chapter 44 the

following new item:

‘‘CHAPTER 45. Continuity and portability of

health coverage.’’

SEC. 3. CHANGES IN COBRA CONTINUATION REQUIREMENTS.

(a) MORE AFFORDABLE COVERAGE THROUGH

REQUIREMENT OF LOWER-COST HEALTH PLAN

CHOICES.—

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

(A) in paragraph (1), by striking ‘‘, continuation coverage under the plan’’ and inserting ‘‘and as selected by the qualified beneficiary under this subsection, continuation

coverage of the type described in subparagraph (A), (F)(i), or (F)(ii) of paragraph (2)’’;

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

coverage’’ and inserting ‘‘Unless the coverage is the type of coverage described in

clause (i) or (ii) of subparagraph (F), the coverage’’;

(C) in paragraph (2)(C)—

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

case of alternative continuation coverage described in clause (i) or (ii) of subparagraph

(F), 69 percent or 52 percent, respectively, of

such applicable premium)’’ after ‘‘for such

period’’, and

(ii) in the last sentence by inserting ‘‘, ‘69

percent’, or ‘52 percent’’’ after ‘‘ ‘102 percent’’’ and by inserting ‘‘, ‘100 percent’, or ‘75

percent’, respectively,’’;

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

the following new subparagraph:

‘‘(F) TYPES OF ALTERNATIVE CONTINUATION

COVERAGE REQUIRED.—

‘‘(i) COVERAGE WITH TWO-THIRDS ACTUARIAL

VALUE.—The type of coverage described in

this clause is coverage which—

‘‘(I) has an actuarial value (determined

with respect to the similarly situated beneficiaries referred to in subparagraph (A)) of

not less than 2⁄3 of the actuarial value (determined with respect to such beneficiaries) of

the reference coverage, and

‘‘(II) meets the requirements of clause (iii).

‘‘(ii) COVERAGE WITH ONE-HALF ACTUARIAL

VALUE.—The type of coverage described in

this clause is coverage which—

‘‘(I) has an actuarial value (determined

with respect to the similarly situated beneficiaries referred to in subparagraph (A)) of

not less than 1⁄2 of the actuarial value (determined with respect to such beneficiaries) of

the reference coverage, and

‘‘(II) meets the requirements of clause (iii).

‘‘(iii) REQUIREMENTS RELATING TO GENERAL

AVAILABILITY AND PREEXISTING CONDITIONS.—

Coverage meets the requirements of this

clause if the coverage—

‘‘(I) is made available to all qualified beneficiaries who become eligible for coverage

under this subsection after the effective date

of this subparagraph, and

‘‘(II) does not impose any restriction or

limitation on coverage based on a preexisting condition unless such restriction or limitation could be imposed under the coverage

described in subparagraph (A).

‘‘(iv) REFERENCE COVERAGE DEFINED.—For

purposes of this subparagraph, the term ‘reference coverage’ means, with respect to a

group health plan, the costliest continuation

coverage available under subparagraph (A)

under the plan, excluding coverage in which

an insignificant proportion of the eligible individuals is enrolled.’’; and

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

the following new subparagraph:

‘‘(D) COMPUTATION BASED ON FULL COVERAGE.—For purposes of this section, the applicable premium shall be computed based on

the type of coverage described in paragraph

(2)(A).’’

(2) EFFECTIVE DATE.—The amendments

made by this subsection shall apply to plan

years beginning on or after the first day of

the first month beginning at least 6 months

after the date of the enactment of this Act.

(b) CONTINUATION COVERAGE FOR CERTAIN

FORMERLY COVERED DEPENDENT SPOUSES AND

CHILDREN.—

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

Code is amended by adding at the end the

following new paragraph:

‘‘(9) CAPTURE OF DELAYED DIVORCE OR SEPARATION.—

‘‘(A) IN GENERAL.—For purposes of this section, if a covered employee disenrolls from

coverage (or fails to renew coverage of) a

qualified beneficiary within the 12-month period preceding the date of the divorce or

legal separation of the employee from the

employee’s spouse, the divorce or separation

shall be treated as a qualifying event described in paragraph (3)(C) and the loss of

coverage shall be considered to be a result

(and by reason) of such event.

‘‘(B) EXCEPTION.—Subparagraph (A) shall

not apply to a qualified beneficiary if—

‘‘(i) the beneficiary waives the rights under

such subparagraph, or

‘‘(ii) the qualified beneficiary at the time

of the qualifying event or at the time of the

disenrollment or failure to renew coverage

has coverage under a group health plan

(other than by reason of this paragraph) if

the plan does not contain any exclusion or

limitation with respect to any preexisting

condition of such beneficiary.’’

(2) TREATMENT OF PERIOD BEFORE DELAYED

DIVORCE OR SEPARATION.—Subparagraph (D)

of section 4980B(f)(2) of such Act is amended

by adding at the end the following new sentence: ‘‘For purposes of applying any preexisting condition limitation or restriction,

any period beginning on the date of the

disenrollment or failure to renew coverage

referred to in paragraph (9)(A) and ending on

the date of the divorce or separation referred

to in such paragraph shall not be treated as

a break in coverage if such paragraph applies

to the qualified beneficiary.’’.

(3) TREATMENT OF ANNULMENTS.—Section

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

at the end the following new paragraph:

‘‘(5) TREATMENT OF ANNULMENT AS DIVORCE.—The term ‘divorce’ includes an annulment.’’.

(4) EFFECTIVE DATE.—The amendments

made by this section shall apply to divorces,

legal separations, and annulments occurring

more than 60 days after the date of the enactment of this Act.

(c) ELIMINATION OF TERMINATION OF CONTINUATION COVERAGE BY REASON OF MEDICARE

ELIGIBILITY THROUGH END STAGE RENAL DISEASE.—

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

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

inserting ‘‘other than by reason of section

226A of such Act’’ after ‘‘the Social Security

Act’’.

(2) EFFECTIVE DATE.—The amendment

made by this subsection shall apply to covered employees and qualified beneficiaries

who become entitled to benefits under title

XVIII of the Social Security Act pursuant to

section 226A of such Act on or after the first

day of the first month that begins after the

date of the enactment of this Act.

THE MEDIGAP CONSUMER

PROTECTION ACT OF 1995

f

HON. RICHARD J. DURBIN OF ILLINOIS

IN THE HOUSE OF REPRESENTATIVES

Thursday, May 11, 1995

Mr. DURBIN. Mr. Speaker, today I am introducing the Medigap Consumer Protection Act

of 1995, which will help millions of seniors

hang on to the private health insurance they

purchase to pay for the deductibles and services which are not covered by Medicare.

In recent years, insurance companies have

increasingly sold Medigap policies whose premiums are determined using a method known

as ‘‘attained age rating’’. An attained age policy offers the buyer lower premiums at an

early age but its premiums increase as a result of the aging of the policyholder. At various

age thresholds the insurer raises premiums to

reflect the expected greater use of health care

by older policyholders. Due to the high inflation rate in the cost of health care, all Medigap

policy premiums increase with time, but the

premiums of attained age policies increase

much more sharply.

The Medigap Consumer Protection Act

would prohibit annual Medigap premium increases from being based on the age or aging

of the policyholder. This would prohibit insurance companies from selling any more attained age Medigap policies. Ten States already prohibit attained age rating for Medigap:

Arkansas, Connecticut, Florida, Georgia,

Idaho, Maine, Massachusetts, Minnesota, New

York, and Washington. The bill would allow

people who have already purchased attained

age policies to keep them if they choose to do

so. However, insurance companies would

have to offer these policyholders the option of

changing their insurance coverage to a policy

not based on attained age rating, for example,

a community rated or issue age rated policy.

Most Medigap purchasers, and many insurance agents, do not understand how attained

age rating works, so prospective policy buyers

often have a difficult time in making an informed decision. Senior citizens who purchase

attained age policies and later face unexpectedly large premium increases as they age find

it difficult to change policies because they usually must face a 6-month waiting period for

pre-existing health conditions. When seniors

enter the Medicare system—usually at age

65—they have a 6-month window of opportunity during which they can sign up for

Medigap insurance without being denied coverage because of pre-existing conditions. At

all other times they are subject to such a preexisting condition waiting period.
May 11, 1995 CONGRESSIONAL RECORD — Extensions of Remarks E 1005

The Medigap Consumer Protection Act

would direct the National Association of Insurance Commissioners [NAIC] to develop guidelines to eliminate attained age rating which

would then be implemented in all States. The

NAIC, founded in 1871, is the Nation’s oldest

association of State public officials. It is composed of the chief insurance regulators of all

50 States, the District of Columbia and the 4

U.S. territories. In the past, Congress has requested similar action from the NAIC, which

has successfully completed these requests.

For instance, the Omnibus Budget Reconciliation Act of 1990 instructed NAIC to develop model standardized benefit packages for

the Medigap market. After holding public hearings, and consulting with interested parties,

the NAIC completed the standards, which

were approved by the Secretary of Health and

Human Services and became law.

I would like to include in the RECORD the following excerpt from a Consumer Reports article of August 1994 which describes the attained-age pricing problem in the Medigap

market:

Many companies have changed the way

they price policies so they can bait consumers with low premiums at the outset and trap

them with very high increases later on.

In 1989, most carriers used either ‘‘community rates’’ or ‘‘issue-age rates’’ to price

their policies. With community rates, all

policyholders, young or old, pay the same

premium. With issue-age rates, premiums

will vary depending on the age of the buyer.

But in either case, the annual premium will

go up only to reflect inflation in the cost of

benefits; it will not rise because you get

older. Both community and issue-age rates

protect policyholders from steep annual increases.

Now, however, more and more insurance

companies are restoring to a less benign

strategy as ‘‘attained-age’’ pricing. It allows

companies to gain a competitive advantage

by selling cheap policies to 65-year-olds when

they enter the Medicare-supplement market.

With attained-age pricing, the initial premiums, especially for those between 65 and

69, are usually lower than for issue-age or

community-rated policies. But there’s a

catch: Premiums will rise steeply as the policyholder gets older.

In 1990, 31 percent of all Blue Cross-Blue

Shield affiliates sold policies with attainedage rates. In 1993, 55 percent did. At the same

time, the proportion of Blue Cross-Blue

Shield plans offering community rates has

dropped from 51 percent to 21 percent. AARP/

Prudential still offers community rates but

finds its initial premiums have become less

competitive for policyholders age 65 to 69.

Attained-age policies are hazardous to policyholders. By age 75, 80, or 85, a policyholder may find that coverage has become

unaffordable—just when the onset of poor

health could make it impossible to buy a

new, less expensive policy. Take, for example, an attained-age Plan F offered by New

York Life and an issue-age Plan F offered by

United American. For someone age 65, the

New York Life policy is about $114 a year

cheaper. But by age 80, the New York Life

policyholder would have spent a total of

$5000 more than the buyer of the United

American policy.

Buyers are rarely warned of these consequences. Neither insurers nor agents are

required to tell consumers how expensive attained-age policies will become over time. A

sales brochure from California Blue Cross,

which boasts one of the state’s hottest-selling Medicare supplements, says nothing

about rate increases; it doesn’t even mention

that rates are calculated on an attained-age

basis. Of the 17 agents our reporter heard,

only one discussed the way his company’s

rates were set—and he thoroughly confused

the three methods. ‘‘The vast majority of

agents don’t understand attained-age pricing, so they can’t possibly explain it to their

customers,’’ says Mark McAndrew, president

of United American.

Only 10 states—Arkansas, Connecticut,

Florida, Georgia, Idaho, Maine, Massachusetts, Minnesota, New York, and Washington—either require that insurers use community rates or specifically ban attained-age

policies. In most other states, insurers are

shifting to attained-age policies. United

American, a large seller of Medicare-supplement policies, has just notified state insurance regulators that it plans to switch from

issue-age to attained-age rates. ‘‘We think

attained-age rates are a bad thing, but our

agents had to eat,’’ explains Joyce Lane, a

United American Vice president.

Mr. Speaker, Bonnie Burns, a private contractor for California’s Health Insurance Counseling and Advocacy Program delivered the

following testimony before the House Health

and Environment Subcommittee earlier this

year:

The danger [with attained age rating] is

that just when people begin to need more

and more medical care, they will also be hit

with much higher premiums. Alternative

methods of calculating premiums mean that

older beneficiaries will almost always pay

less than with attained age rates. The impact of sharply increased premiums is minimized.

Most seniors are in the middle class or

below and are already spending about 23 percent of their income on health care expenses

according to the AARP, while those under 65

spend about 8 percent. As people age their income and resources go down over time, particularly for older widowed women, and out

of pocket costs for health care consume an

increasingly larger part of their income.

Their ability to absorb additional costs in

premiums, deductibles and coinsurance is

limited.

Mr. Speaker, affordable premiums and reliable health care coverage are crucial issues

for millions of elderly Americans on fixed incomes. At age 65, virtually all Americans recognize the importance of good health coverage. Seniors face rapidly increasing health

costs as they reach their seventies and

eighties. It is inappropriate to lure seniors into

attained age policies which they will not be

able to afford if they live for a decade or two.

That is why Consumers’ Union and the National Council of Senior Citizens have written

letters strongly supporting the Medigap

Consumer Protection Act.

I would like to close, Mr. Speaker, by describing a few of the things the Medigap

Consumer Protection Act will not do:

The Medigap Consumer Protection Act does

not place price controls on the insurance industry. Under this bill each insurance carrier

will continue to set its own rates and can

charge as much or as little as it feels is prudent as long as it continues to meet the loss

ratio requirements which are already in place

under current law.

The Medigap Consumer Protection Act does

not diminish valuable consumer choice. Attained age rating makes it more difficult and

confusing for consumers to make price comparisons and compare different policies. Attained age rating confuses prospective

policybuyers and insurance agents. Attained

age rating deceives the average Medigap purchaser into purchasing coverage which they

may not be able to afford later in life. This bill

only prohibits the sale of any more of those

policies that Consumer Reports correctly described as bait and trap policies.

The Medigap Consumer Protection Act will

not force insurance carriers out of business.

Under current law, insurance carriers must

meet loss ratio requirements of 65 percent for

the individual market and 75 percent for the

group market. Loss ratios represent how much

an insurance company must spend on benefits

for each dollar it collects in premiums. For instance, a carrier selling Medigap policies to individuals must offer an average of at least 65

cents in benefits for each dollar it collects in

premiums. This bill will still allow insurance

carriers to clear up to 35 cents on each dollar

in premiums they collect.

I hope that my colleagues on both sides of

the aisle will join me in cosponsoring the

Medigap Consumer Protection Act and in

working toward its enactment so we can help

seniors retain affordable, private Medigap coverage as they grow older. This legislation simply eliminates a type of policy that ropes seniors into policies with deceptively low initial

premiums followed by sharp increases when

those consumers may no longer have the option of switching to a competing policy.

PASSAIC HIGH SCHOOL INDIANS

fHON. WILLIAM J. MARTINI OF NEW JERSEY

IN THE HOUSE OF REPRESENTATIVES

Thursday, May 11, 1995

Mr. MARTINI. Mr. Speaker, I would like to

take this opportunity to commemorate one of

the greatest high school basketball teams of

all time, the 1919–25 Passaic High School Indians. Over that 6-year stretch, the Indians enjoyed the longest winning streak ever for a

high school, college, or professional team.

They won an incredible 159 games in a row.

From December 17, 1919, to February 6,

1925, Passaic High was unbeatable. In an era

of low-scoring basketball, they outscored their

opponents by an average of 39 points, topping

100 points a dozen times. They once crushed

an opponent 145 to 5.

While these teams were blessed with great

players, such dominance transcends individual

stars and usually begins with the coach. It was

Prof. Ernest Blood that led the charge for

these young men for so many years. Blood

began playing basketball just a year after it

was invented, and soon after he stopped playing he was coaching. In Potsdam, NY, his

high school team did not lose to another high

school team from 1906 to 1915.

A move to Passaic. NJ, in 1918 brought him

to the job that would make him famous. Although his first season was marred by a defeat in the State championship, the streak

began on the first day of the 1919 season.

Win after win turned into State championship

after State championship. As the streak progressed, the team became the center of attention for this industrial city: A factory whistle

would indicate the results of the game, two

loud blasts for a win, one long blast for a loss.

Blood’s foresight and desire kept the team

ahead of its time, and he eventually led them