I
104TH CONGRESS
2D SESSION
H. R. 2893
To provide increased access to health care benefits, to provide increased
portability of health care benefits, to provide increased security of health
care benefits, to increase the purchasing power of individuals and small
employers, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 25, 1996
Mrs. ROUKEMA introduced the following bill; which was referred to the Com-
mittee on Commerce, and in addition to the Committees on Ways and
Means and Economic and Educational Opportunities, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee con-
cerned
A BILL
To provide increased access to health care benefits, to provide
increased portability of health care benefits, to provide
increased security of health care benefits, to increase
the purchasing power of individuals and small employers,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Health Insurance Reform Act of 1996’’.
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(b) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
TITLE I—HEALTH CARE ACCESS, PORTABILITY, AND
RENEWABILITY
Subtitle A—Group Market Rules
Sec. 101. Guaranteed availability of health coverage.
Sec. 102. Guaranteed renewability of health coverage.
Sec. 103. Portability of health coverage and limitation on preexisting condition
exclusions.
Sec. 104. Special enrollment periods.
Sec. 105. Disclosure of information.
Subtitle B—Individual Market Rules
Sec. 110. Individual health plan portability.
Sec. 111. Guaranteed renewability of individual health coverage.
Sec. 112. State flexibility in individual market reforms.
Sec. 113. Definition.
Subtitle C—COBRA Clarifications
Sec. 121. Cobra clarifications.
Subtitle D—Private Health Plan Purchasing Cooperatives
Sec. 131. Private health plan purchasing cooperatives.
TITLE II—APPLICATION AND ENFORCEMENT OF STANDARDS
Sec. 201. Applicability.
Sec. 202. Enforcement of standards.
TITLE III—MISCELLANEOUS PROVISIONS
Sec. 301. HMOs allowed to offer plans with deductibles to individuals with
medical savings accounts.
Sec. 302. Health coverage availability study.
Sec. 303. Effective date.
Sec. 304. Severability.
SEC. 2. DEFINITIONS.
As used in this Act:
(1) BENEFICIARY.—The term ‘‘beneficiary’’ has
the meaning given such term under section 3(8) of
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the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1002(8)).
(2) EMPLOYEE.—The term ‘‘employee’’ has the
meaning given such term under section 3(6) of the
Employee Retirement Income Security Act of 1974
(29 U.S.C. 1002(6)).
(3) EMPLOYER.—The term ‘‘employer’’ has the
meaning given such term under section 3(5) of the
Employee Retirement Income Security Act of 1974
(29 U.S.C. 1002(5)), except that such term shall in-
clude only employers of two or more employees.
(4) EMPLOYEE HEALTH BENEFIT PLAN.—
(A) IN
GENERAL.—The term ‘‘employee
health benefit plan’’ means any employee wel-
fare benefit plan, governmental plan, or church
plan (as defined under paragraphs (1), (32),
and (33) of section 3 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1002 (1), (32), and (33))) that provides or pays
for health benefits (such as provider and hos-
pital benefits) for participants and beneficiaries
whether—
(i) directly;
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(ii) through a group health plan of-
fered by a health plan issuer as defined in
paragraph (8); or
(iii) otherwise.
(B) RULE
OF
CONSTRUCTION.—An em-
ployee health benefit plan shall not be con-
strued to be a group health plan, an individual
health plan, or a health plan issuer.
(C) ARRANGEMENTS
NOT
INCLUDED.—
Such term does not include the following, or
any combination thereof:
(i) Coverage only for accident, or dis-
ability income insurance, or any combina-
tion thereof.
(ii) Medicare supplemental health in-
surance 
(as 
defined 
under 
section
1882(g)(1) of the Social Security Act).
(iii) Coverage issued as a supplement
to liability insurance.
(iv) Liability insurance, including gen-
eral liability insurance and automobile li-
ability insurance.
(v) Workers compensation or similar
insurance.
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(vi) Automobile medical payment in-
surance.
(vii) Coverage for a specified disease
or illness.
(viii) Hospital or fixed indemnity in-
surance.
(ix) Short-term limited duration in-
surance.
(x) Credit-only, dental-only, or vision-
only insurance.
(xi) A health insurance policy provid-
ing benefits only for long-term care, nurs-
ing home care, home health care, commu-
nity-based care, or any combination there-
of.
(5) FAMILY.—
(A) IN
GENERAL.—The term ‘‘family’’
means an individual, the individual’s spouse,
and the child of the individual (if any).
(B) CHILD.—For purposes of subpara-
graph (A), the term ‘‘child’’ means any individ-
ual who is a child within the meaning of section
151(c)(3) of the Internal Revenue Code of
1986.
(6) GROUP HEALTH PLAN.—
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(vii) Coverage for a specified disease
or illness.
(viii) Hospital or fixed indemnity in-
surance.
(ix) Short-term limited duration in-
surance.
(x) Credit-only, dental-only, or vision-
only insurance.
(xi) A health insurance policy provid-
ing benefits only for long-term care, nurs-
ing home care, home health care, commu-
nity-based care, or any combination there-
of.
(7) GROUP
PURCHASER.—The term ‘‘group
purchaser’’ means any person (as defined under
paragraph (9) of section 3 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1002(9)) or entity that purchases or pays for health
benefits (such as provider or hospital benefits) on
behalf of two or more participants or beneficiaries in
connection with an employee health benefit plan. A
health plan purchasing cooperative established under
section 131 shall not be considered to be a group
purchaser.
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(8) HEALTH PLAN ISSUER.—The term ‘‘health
plan issuer’’ means any entity that is licensed (prior
to or after the date of enactment of this Act) by a
State to offer a group health plan or an individual
health plan.
(9) PARTICIPANT.—The term ‘‘participant’’ has
the meaning given such term under section 3(7) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1002(7)).
(10) PLAN SPONSOR.—The term ‘‘plan spon-
sor’’ has the meaning given such term under section
3(16)(B) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1002(16)(B)).
(11) SECRETARY.—The term ‘‘Secretary’’, un-
less specifically provided otherwise, means the Sec-
retary of Labor.
(12) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, Puerto
Rico, the United States Virgin Islands, Guam,
American Samoa, and the Commonwealth of the
Northern Mariana Islands.
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TITLE I—HEALTH CARE ACCESS,
PORTABILITY, 
AND 
RENEW-
ABILITY
Subtitle A—Group Market Rules
SEC. 101. GUARANTEED AVAILABILITY OF HEALTH COV-
ERAGE.
(a) IN GENERAL.—
(1) NONDISCRIMINATION.—Except as provided
in subsection (b), section 102 and section 103—
(A) a health plan issuer offering a group
health plan may not decline to offer whole
group coverage to a group purchaser desiring to
purchase such coverage; and
(B) an employee health benefit plan or a
health plan issuer offering a group health plan
may establish eligibility, continuation of eligi-
bility, enrollment, or premium contribution re-
quirements under the terms of such plan, ex-
cept that such requirements shall not be based
on health status, medical condition, claims ex-
perience, receipt of health care, medical history,
evidence of insurability, or disability.
(2) HEALTH
PROMOTION
AND
DISEASE
PRE-
VENTION.—Nothing in this subsection shall prevent
an employee health benefit plan or a health plan is-
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suer from establishing premium discounts or modify-
ing otherwise applicable copayments or deductibles
in return for adherence to programs of health pro-
motion and disease prevention.
(b) APPLICATION OF CAPACITY LIMITS.—
(1) IN GENERAL.—Subject to paragraph (2), a
health plan issuer offering a group health plan may
cease offering coverage to group purchasers under
the plan if—
(A) the health plan issuer ceases to offer
coverage to any additional group purchasers;
and
(B) the health plan issuer can demonstrate
to the applicable certifying authority (as defined
in section 202(d)), if required, that its financial
or provider capacity to serve previously covered
participants and beneficiaries (and additional
participants and beneficiaries who will be ex-
pected to enroll because of their affiliation with
a group purchaser or such previously covered
participants or beneficiaries) will be impaired if
the health plan issuer is required to offer cov-
erage to additional group purchasers.
Such health plan issuer shall be prohibited from of-
fering coverage after a cessation in offering coverage
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under this paragraph for a 6-month period or until
the health plan issuer can demonstrate to the appli-
cable certifying authority (as defined in section
202(d)) that the health plan issuer has adequate ca-
pacity, whichever is later.
(2) FIRST-COME-FIRST-SERVED.—A health plan
issuer offering a group health plan is only eligible to
exercise the limitations provided for in paragraph
(1) if the health plan issuer offers coverage to group
purchasers under such plan on a first-come-first-
served basis or other basis established by a State to
ensure a fair opportunity to enroll in the plan and
avoid risk selection.
(c) CONSTRUCTION.—
(1) MARKETING OF GROUP HEALTH PLANS.—
Nothing in this section shall be construed to prevent
a State from requiring health plan issuers offering
group health plans to actively market such plans.
(2) 
INVOLUNTARY
OFFERING
OF
GROUP
HEALTH PLANS.—Nothing in this section shall be
construed to require a health plan issuer to involun-
tarily offer group health plans in a particular mar-
ket. For the purposes of this paragraph, the term
‘‘market’’ means either the large employer market or
the small employer market (as defined under appli-
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cable State law, or if not so defined, an employer
with not more than 50 employees).
SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COV-
ERAGE.
(a) IN GENERAL.—
(1) GROUP
PURCHASER.—Subject to sub-
sections (b) and (c), a group health plan shall be re-
newed or continued in force by a health plan issuer
at the option of the group purchaser, except that the
requirement of this subparagraph shall not apply in
the case of—
(A) the nonpayment of premiums or con-
tributions by the group purchaser in accordance
with the terms of the group health plan or
where the health plan issuer has not received
timely premium payments;
(B) fraud or misrepresentation of material
fact on the part of the group purchaser;
(C) the termination of the group health
plan in accordance with subsection (b); or
(D) the failure of the group purchaser to
meet contribution or participation requirements
in accordance with paragraph (3).
(2) PARTICIPANT.—Subject to subsections (b)
and (c), coverage under an employee health benefit
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plan or group health plan shall be renewed or con-
tinued in force, if the group purchaser elects to con-
tinue to provide coverage under such plan, at the op-
tion of the participant (or beneficiary where such
right exists under the terms of the plan or under ap-
plicable law), except that the requirement of this
paragraph shall not apply in the case of—
(A) the nonpayment of premiums or con-
tributions by the participant or beneficiary in
accordance with the terms of the employee
health benefit plan or group health plan or
where such plan has not received timely pre-
mium payments;
(B) fraud or misrepresentation of material
fact on the part of the participant or bene-
ficiary relating to an application for coverage or
claim for benefits;
(C) the termination of the employee health
benefit plan or group health plan;
(D) loss of eligibility for continuation cov-
erage as described in part 6 of subtitle B of
title I of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1161 et seq.); or
(E) failure of a participant or beneficiary
to meet requirements for eligibility for coverage
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under an employee health benefit plan or group
health plan that are not prohibited by this Act.
(3) RULES
OF CONSTRUCTION.—Nothing in
this subsection, nor in section 101(a), shall be con-
strued to—
(A) preclude a health plan issuer from es-
tablishing employer contribution rules or group
participation rules for group health plans as al-
lowed under applicable State law;
(B) preclude a plan defined in section
3(37) of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1102(37)) from
establishing employer contribution rules or
group participation rules; or
(C) permit individuals to decline coverage
under an employee health benefit plan if such
right is not otherwise available under such plan.
(b) TERMINATION OF GROUP HEALTH PLANS.—
(1) PARTICULAR
TYPE
OF
GROUP
HEALTH
PLAN NOT OFFERED.—In any case in which a health
plan issuer decides to discontinue offering a particu-
lar type of group health plan, a group health plan
of such type may be discontinued by the health plan
issuer only if—
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(A) the health plan issuer provides notice
to each group purchaser covered under a group
health plan of this type (and participants and
beneficiaries covered under such group health
plan) of such discontinuation at least 90 days
prior to the date of the discontinuation of such
plan;
(B) the health plan issuer offers to each
group purchaser covered under a group health
plan of this type, the option to purchase any
other group health plan currently being offered
by the health plan issuer; and
(C) in exercising the option to discontinue
a group health plan of this type and in offering
one or more replacement plans, the health plan
issuer acts uniformly without regard to the
health status or insurability of participants or
beneficiaries covered under the group health
plan, or new participants or beneficiaries who
may become eligible for coverage under the
group health plan.
(2) DISCONTINUANCE OF ALL GROUP HEALTH
PLANS.—
(A) IN GENERAL.—In any case in which a
health plan issuer elects to discontinue offering
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all group health plans in a State, a group
health plan may be discontinued by the health
plan issuer only if—
(i) the health plan issuer provides no-
tice to the applicable certifying authority
(as defined in section 202(d)) and to each
group purchaser (and participants and
beneficiaries covered under such group
health plan) of such discontinuation at
least 180 days prior to the date of the ex-
piration of such plan; and
(ii) all group health plans issued or
delivered for issuance in the State are dis-
continued and coverage under such plans is
not renewed.
(B) APPLICATION
OF
PROVISIONS.—The
provisions of this paragraph and paragraph (3)
may be applied separately by a health plan is-
suer—
(i) to all group health plans offered to
small employers (as defined under applica-
ble State law, or if not so defined, an em-
ployer with not more than 50 employees);
or
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(ii) to all other group health plans of-
fered by the health plan issuer in the
State.
(3) PROHIBITION
ON
MARKET
REENTRY.—In
the case of a discontinuation under paragraph (2),
the health plan issuer may not provide for the issu-
ance of any group health plan in the market sector
(as described in paragraph (2)(B)) in which issuance
of such group health plan was discontinued in the
State involved during the 5-year period beginning on
the date of the discontinuation of the last group
health plan not so renewed.
(c) TREATMENT OF NETWORK PLANS.—
(1) GEOGRAPHIC
LIMITATIONS.—A network
plan (as defined in paragraph (2)) may deny contin-
ued participation under such plan to participants or
beneficiaries who neither live, reside, nor work in an
area in which such network plan is offered, but only
if such denial is applied uniformly, without regard to
health status or the insurability of particular partici-
pants or beneficiaries.
(2) NETWORK
PLAN.—As used in paragraph
(1), the term ‘‘network plan’’ means an employee
health benefit plan or a group health plan that ar-
ranges for the financing and delivery of health care
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services to participants or beneficiaries covered
under such plan, in whole or in part, through ar-
rangements with providers.
(d) COBRA COVERAGE.—Nothing in subsection
(a)(2)(E) or subsection (c) shall be construed to affect any
right to COBRA continuation coverage as described in
part 6 of subtitle B of title I of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1161 et seq.).
SEC. 103. PORTABILITY OF HEALTH COVERAGE AND LIMI-
TATION ON PREEXISTING CONDITION EXCLU-
SIONS.
(a) IN GENERAL.—An employee health benefit plan
or a health plan issuer offering a group health plan may
impose a limitation or exclusion of benefits relating to
treatment of a preexisting condition based on the fact that
the condition existed prior to the coverage of the partici-
pant or beneficiary under the plan only if—
(1) the limitation or exclusion extends for a pe-
riod of not more than 12 months after the date of
enrollment in the plan;
(2) the limitation or exclusion does not apply to
an individual who, within 30 days of the date of
birth or placement for adoption (as determined
under section 609(c)(3)(B) of the Employee Retire-
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ment Income Security Act of 1974 (29 U.S.C.
1169(c)(3)(B)), was covered under the plan; and
(3) the limitation or exclusion does not apply to
a pregnancy.
(b) CREDITING
OF PREVIOUS QUALIFYING COV-
ERAGE.—
(1) IN GENERAL.—Subject to paragraph (4), an
employee health benefit plan or a health plan issuer
offering a group health plan shall provide that if a
participant or beneficiary is in a period of previous
qualifying coverage as of the date of enrollment
under such plan, any period of exclusion or limita-
tion of coverage with respect to a preexisting condi-
tion shall be reduced by 1 month for each month in
which the participant or beneficiary was in the pe-
riod of previous qualifying coverage. With respect to
an individual described in subsection (a)(2) who
maintains continuous coverage, no limitation or ex-
clusion of benefits relating to treatment of a pre-
existing condition may be applied to a child within
the child’s first 12 months of life or within 12
months after the placement of a child for adoption.
(2) DISCHARGE OF DUTY.—An employee health
benefit plan shall provide documentation of coverage
to participants and beneficiaries whose coverage is
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terminated under the plan. Pursuant to regulations
promulgated by the Secretary, the duty of an em-
ployee health benefit plan to verify previous qualify-
ing coverage with respect to a participant or bene-
ficiary is effectively discharged when such employee
health benefit plan provides documentation to a par-
ticipant or beneficiary that includes the following in-
formation:
(A) the dates that the participant or bene-
ficiary was covered under the plan; and
(B) the benefits and cost-sharing arrange-
ment available to the participant or beneficiary
under such plan.
An employee health benefit plan shall retain the doc-
umentation provided to a participant or beneficiary
under subparagraphs (A) and (B) for at least the
12-month period following the date on which the
participant or beneficiary ceases to be covered under
the plan. Upon request, an employee health benefit
plan shall provide a second copy of such documenta-
tion to such participant or beneficiary within the 12-
month period following the date of such ineligibility.
(3) DEFINITIONS.—As used in this section:
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(A) PREVIOUS QUALIFYING COVERAGE.—
The term ‘‘previous qualifying coverage’’ means
the period beginning on the date—
(i) a participant or beneficiary is en-
rolled under an employee health benefit
plan or a group health plan, and ending on
the date the participant or beneficiary is
not so enrolled; or
(ii) an individual is enrolled under an
individual health plan (as defined in sec-
tion 113) or under a public or private
health plan established under Federal or
State law, and ending on the date the indi-
vidual is not so enrolled;
for a continuous period of more than 30 days
(without regard to any waiting period).
(B) LIMITATION OR EXCLUSION OF BENE-
FITS
RELATING
TO
TREATMENT
OF
A
PRE-
EXISTING CONDITION.—The term ‘‘limitation or
exclusion of benefits relating to treatment of a
preexisting condition’’ means a limitation or ex-
clusion of benefits imposed on an individual
based on a preexisting condition of such individ-
ual.
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(4) EFFECT OF PREVIOUS COVERAGE.—An em-
ployee health benefit plan or a health plan issuer of-
fering a group health plan may impose a limitation
or exclusion of benefits relating to the treatment of
a preexisting condition, subject to the limits in sub-
section (a)(1), only to the extent that such service
or benefit was not previously covered under the
group health plan, employee health benefit plan, or
individual health plan in which the participant or
beneficiary was enrolled immediately prior to enroll-
ment in the plan involved.
(c) LATE ENROLLEES.—Except as provided in sec-
tion 104, with respect to a participant or beneficiary en-
rolling in an employee health benefit plan or a group
health plan during a time that is other than the first op-
portunity to enroll during an enrollment period of at least
30 days, coverage with respect to benefits or services relat-
ing to the treatment of a preexisting condition in accord-
ance with subsections (a) and (b) may be excluded, except
the period of such exclusion may not exceed 18 months
beginning on the date of coverage under the plan.
(d) AFFILIATION PERIODS.—With respect to a par-
ticipant or beneficiary who would otherwise be eligible to
receive benefits under an employee health benefit plan or
a group health plan but for the operation of a preexisting
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condition limitation or exclusion, if such plan does not uti-
lize a limitation or exclusion of benefits relating to the
treatment of a preexisting condition, such plan may im-
pose an affiliation period on such participant or bene-
ficiary not to exceed 60 days (or in the case of a late par-
ticipant or beneficiary described in subsection (c), 90
days) from the date on which the participant or bene-
ficiary would otherwise be eligible to receive benefits under
the plan. An employee health benefit plan or a health plan
issuer offering a group health plan may also use alter-
native methods to address adverse selection as approved
by the applicable certifying authority (as defined in section
202(d)). During such an affiliation period, the plan may
not be required to provide health care services or benefits
and no premium shall be charged to the participant or
beneficiary.
(e) PREEXISTING CONDITION.—For purposes of this
section, the term ‘‘preexisting condition’’ means a condi-
tion, regardless of the cause of the condition, for which
medical advice, diagnosis, care, or treatment was rec-
ommended or received within the 6-month period ending
on the day before the effective date of the coverage (with-
out regard to any waiting period).
(f) STATE FLEXIBILITY.—Nothing in this section
shall be construed to preempt State laws that—
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(1) require health plan issuers to impose a limi-
tation or exclusion of benefits relating to the treat-
ment of a preexisting condition for periods that are
shorter than those provided for under this section;
or
(2) allow individuals, participants, and bene-
ficiaries to be considered to be in a period of pre-
vious qualifying coverage if such individual, partici-
pant, or beneficiary experiences a lapse in coverage
that is greater than the 30-day period provided for
under subsection (b)(3);
unless such laws are preempted by section 514 of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1144).
SEC. 104. SPECIAL ENROLLMENT PERIODS.
In the case of a participant, beneficiary or family
member who—
(1) through marriage, separation, divorce,
death, birth or placement of a child for adoption, ex-
periences a change in family composition affecting
eligibility under a group health plan, individual
health plan, or employee health benefit plan;
(2) experiences a change in employment status,
as described in section 603(2) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
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1163(2)), that causes the loss of eligibility for cov-
erage, other than COBRA continuation coverage
under a group health plan, individual health plan, or
employee health benefit plan; or
(3) experiences a loss of eligibility under a
group health plan, individual health plan, or em-
ployee health benefit plan because of a change in the
employment status of a family member;
each employee health benefit plan and each group health
plan shall provide for a special enrollment period extend-
ing for a reasonable time after such event that would per-
mit the participant to change the individual or family basis
of coverage or to enroll in the plan if coverage would have
been available to such individual, participant, or bene-
ficiary but for failure to enroll during a previous enroll-
ment period. Such a special enrollment period shall ensure
that a child born or placed for adoption shall be deemed
to be covered under the plan as of the date of such birth
or placement for adoption if such child is enrolled within
30 days of the date of such birth or placement for adop-
tion.
SEC. 105. DISCLOSURE OF INFORMATION.
(a) DISCLOSURE OF INFORMATION BY HEALTH PLAN
ISSUERS.—
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(1) IN GENERAL.—In connection with the offer-
ing of any group health plan to a small employer (as
defined under applicable State law, or if not so de-
fined, an employer with not more than 50 employ-
ees), a health plan issuer shall make a reasonable
disclosure to such employer, as part of its solicita-
tion and sales materials, of—
(A) the provisions of such group health
plan concerning the health plan issuer’s right to
change premium rates and the factors that may
affect changes in premium rates;
(B) the provisions of such group health
plan relating to renewability of coverage;
(C) the provisions of such group health
plan relating to any preexisting condition provi-
sion; and
(D) descriptive information about the ben-
efits and premiums available under all group
health plans for which the employer is qualified.
Information shall be provided to small employers
under this paragraph in a manner determined to be
understandable by the average small employer, and
shall be sufficiently accurate and comprehensive to
reasonably inform small employers, participants and
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beneficiaries of their rights and obligations under
the group health plan.
(2) EXCEPTION.—With respect to the require-
ment of paragraph (1), any information that is pro-
prietary and trade secret information under applica-
ble law shall not be subject to the disclosure require-
ments of such paragraph.
(3) CONSTRUCTION.—Nothing in this sub-
section shall be construed to preempt State report-
ing and disclosure requirements to the extent that
such requirements are not preempted under section
514 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1144).
(b) DISCLOSURE OF INFORMATION TO PARTICIPANTS
AND BENEFICIARIES.—
(1) IN
GENERAL.—Section 104(b)(1) of the
Employee Retirement Income Security Act of 1974
(29 U.S.C. 1024(b)(1)) is amended in the matter
following subparagraph (B)—
(A) by striking ‘‘102(a)(1),’’ and inserting
‘‘102(a)(1) that is not a material reduction in
covered services or benefits provided,’’; and
(B) by adding at the end thereof the fol-
lowing new sentences: ‘‘If there is a modifica-
tion or change described in section 102(a)(1)
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that is a material reduction in covered services
or benefits provided, a summary description of
such modification or change shall be furnished
to participants not later than 60 days after the
date of the adoption of the modification or
change. In the alternative, the plan sponsors
may provide such description at regular inter-
vals of not more than 90 days. The Secretary
shall issue regulations within 180 days after the
date of enactment of the Health Insurance Re-
form Act of 1996, providing alternative mecha-
nisms to delivery by mail through which em-
ployee health benefit plans may notify partici-
pants of material reductions in covered services
or benefits.’’.
(2) PLAN DESCRIPTION AND SUMMARY.—Sec-
tion 102(b) of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1022(b)) is amend-
ed—
(A) by inserting ‘‘including the office or
title of the individual who is responsible for ap-
proving or denying claims for coverage of bene-
fits’’ after ‘‘type of administration of the plan’’;
(B) by inserting ‘‘including the name of
the organization responsible for financing
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claims’’ after ‘‘source of financing of the plan’’;
and
(C) by inserting ‘‘including the office, con-
tact, or title of the individual at the Depart-
ment of Labor through which participants may
seek assistance or information regarding their
rights under this Act and the Health Insurance
Reform Act of 1996 with respect to health ben-
efits that are not offered through a group
health plan.’’ after ‘‘benefits under the plan’’.
Subtitle B—Individual Market
Rules
SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.
(a) LIMITATION ON REQUIREMENTS.—
(1) IN GENERAL.—With respect to an individ-
ual desiring to enroll in an individual health plan, if
such individual is in a period of previous qualifying
coverage (as defined in section 103(b)(3)(A)(i))
under one or more group health plans or employee
health benefit plans that commenced 18 or more
months prior to the date on which such individual
desires to enroll in the individual plan, a health plan
issuer described in paragraph (3) may not decline to
offer coverage to such individual, or deny enrollment
to such individual based on the health status, medi-
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cal condition, claims experience, receipt of health
care, medical history, evidence of insurability, or dis-
ability of the individual, except as described in sub-
sections (b) and (c).
(2) HEALTH
PROMOTION
AND
DISEASE
PRE-
VENTION.—Nothing in this subsection shall be con-
strued to prevent a health plan issuer offering an in-
dividual health plan from establishing premium dis-
counts or modifying otherwise applicable copayments
or deductibles in return for adherence to programs
of health promotion or disease prevention.
(3) HEALTH PLAN ISSUER.—A health plan is-
suer described in this paragraph is a health plan is-
suer that issues or renews individual health plans.
(4) PREMIUMS.—Nothing in this subsection
shall be construed to affect the determination of a
health plan issuer as to the amount of the premium
payable under an individual health plan under appli-
cable State law.
(b) ELIGIBILITY FOR OTHER GROUP COVERAGE.—
The provisions of subsection (a) shall not apply to an indi-
vidual who is eligible for coverage under a group health
plan or an employee health benefit plan, or who has had
coverage terminated under a group health plan or em-
ployee health benefit plan for failure to make required pre-
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mium payments or contributions, or for fraud or misrepre-
sentation of material fact, or who is otherwise eligible for
continuation coverage as described in part 6 of subtitle
B of title I of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1161 et seq.) or under an equiva-
lent State program.
(c) APPLICATION OF CAPACITY LIMITS.—
(1) IN GENERAL.—Subject to paragraph (2), a
health plan issuer offering coverage to individuals
under an individual health plan may cease enrolling
individuals under the plan if—
(A) the health plan issuer ceases to enroll
any new individuals; and
(B) the health plan issuer can demonstrate
to the applicable certifying authority (as defined
in section 202(d)), if required, that its financial
or provider capacity to serve previously covered
individuals will be impaired if the health plan
issuer is required to enroll additional individ-
uals.
Such a health plan issuer shall be prohibited from
offering coverage after a cessation in offering cov-
erage under this paragraph for a 6-month period or
until the health plan issuer can demonstrate to the
applicable certifying authority (as defined in section
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202(d)) that the health plan issuer has adequate ca-
pacity, whichever is later.
(2) FIRST-COME-FIRST-SERVED.—A health plan
issuer offering coverage to individuals under an indi-
vidual health plan is only eligible to exercise the lim-
itations provided for in paragraph (1) if the health
plan issuer provides for enrollment of individuals
under such plan on a first-come-first-served basis or
other basis established by a State to ensure a fair
opportunity to enroll in the plan and avoid risk se-
lection.
(d) MARKET REQUIREMENTS.—
(1) IN GENERAL.—The provisions of subsection
(a) shall not be construed to require that a health
plan issuer offering group health plans to group pur-
chasers offer individual health plans to individuals.
(2) CONVERSION POLICIES.—A health plan is-
suer offering group health plans to group purchasers
under this Act shall not be deemed to be a health
plan issuer offering an individual health plan solely
because such health plan issuer offers a conversion
policy.
(3) MARKETING
OF
PLANS.—Nothing in this
section shall be construed to prevent a State from
requiring health plan issuers offering coverage to in-
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dividuals under an individual health plan to actively
market such plan.
SEC. 111. GUARANTEED RENEWABILITY OF INDIVIDUAL
HEALTH COVERAGE.
(a) IN GENERAL.—Subject to subsections (b) and (c),
coverage for individuals under an individual health plan
shall be renewed or continued in force by a health plan
issuer at the option of the individual, except that the re-
quirement of this subsection shall not apply in the case
of—
(1) the nonpayment of premiums or contribu-
tions by the individual in accordance with the terms
of the individual health plan or where the health
plan issuer has not received timely premium pay-
ments;
(2) fraud or misrepresentation of material fact
on the part of the individual; or
(3) the termination of the individual health plan
in accordance with subsection (b).
(b) 
TERMINATION
OF
INDIVIDUAL
HEALTH
PLANS.—
(1) PARTICULAR TYPE OF INDIVIDUAL HEALTH
PLAN NOT OFFERED.—In any case in which a health
plan issuer decides to discontinue offering a particu-
lar type of individual health plan to individuals, an
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individual health plan may be discontinued by the
health plan issuer only if—
(A) the health plan issuer provides notice
to each individual covered under the plan of
such discontinuation at least 90 days prior to
the date of the expiration of the plan;
(B) the health plan issuer offers to each
individual covered under the plan the option to
purchase any other individual health plan cur-
rently being offered by the health plan issuer to
individuals; and
(C) in exercising the option to discontinue
the individual health plan and in offering one or
more replacement plans, the health plan issuer
acts uniformly without regard to the health sta-
tus or insurability of particular individuals.
(2) DISCONTINUANCE
OF
ALL
INDIVIDUAL
HEALTH PLANS.—In any case in which a health plan
issuer elects to discontinue all individual health
plans in a State, an individual health plan may be
discontinued by the health plan issuer only if—
(A) the health plan issuer provides notice
to the applicable certifying authority (as defined
in section 202(d)) and to each individual cov-
ered under the plan of such discontinuation at
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least 180 days prior to the date of the dis-
continuation of the plan; and
(B) all individual health plans issued or
delivered for issuance in the State are discon-
tinued and coverage under such plans is not re-
newed.
(3) PROHIBITION
ON
MARKET
REENTRY.—In
the case of a discontinuation under paragraph (2),
the health plan issuer may not provide for the issu-
ance of any individual health plan in the State in-
volved during the 5-year period beginning on the
date of the discontinuation of the last plan not so
renewed.
(c) TREATMENT OF NETWORK PLANS.—
(1) GEOGRAPHIC LIMITATIONS.—A health plan
issuer which offers a network plan (as defined in
paragraph (2)) may deny continued participation
under the plan to individuals who neither live, re-
side, nor work in an area in which the individual
health plan is offered, but only if such denial is ap-
plied uniformly, without regard to health status or
the insurability of particular individuals.
(2) NETWORK
PLAN.—As used in paragraph
(1), the term ‘‘network plan’’ means an individual
health plan that arranges for the financing and de-
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livery of health care services to individuals covered
under such health plan, in whole or in part, through
arrangements with providers.
SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET RE-
FORMS.
(a) IN GENERAL.—With respect to any State law
with respect to which the Governor of the State notifies
the Secretary of Health and Human Services that such
State law will achieve the goals of sections 110 and 111,
and that is in effect on, or enacted after, the date of enact-
ment of this Act (such as laws providing for guaranteed
issue, open enrollment by one or more health plan issuers,
high-risk pools, or mandatory conversion policies), such
State law shall apply in lieu of the standards described
in sections 110 and 111 unless the Secretary of Health
and Human Services determines, after considering the cri-
teria described in subsection (b)(1), in consultation with
the Governor and Insurance Commissioner or chief insur-
ance regulatory official of the State, that such State law
does not achieve the goals of providing access to affordable
health care coverage for those individuals described in sec-
tions 110 and 111.
(b) DETERMINATION.—
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(1) IN GENERAL.—In making a determination
under subsection (a), the Secretary of Health and
Human Services shall only—
(A) evaluate whether the State law or pro-
gram provides guaranteed access to affordable
coverage to individuals described in sections
110 and 111;
(B) evaluate whether the State law or pro-
gram provides coverage for preexisting condi-
tions (as defined in section 103(e)) that were
covered under the individuals’ previous group
health plan or employee health benefit plan for
individuals described in sections 110 and 111;
(C) evaluate whether the State law or pro-
gram provides individuals described in sections
110 and 111 with a choice of health plans or
a health plan providing comprehensive coverage;
and
(D) evaluate whether the application of the
standards described in sections 110 and 111
will have an adverse impact on the number of
individuals in such State having access to af-
fordable coverage.
(2) NOTICE OF INTENT.—If, within 6 months
after the date of enactment of this Act, the Governor
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of a State notifies the Secretary of Health and
Human Services that the State intends to enact a
law, or modify an existing law, described in sub-
section (a), the Secretary of Health and Human
Services may not make a determination under such
subsection until the expiration of the 12-month pe-
riod beginning on the date on which such notifica-
tion is made, or until January 1, 1998, whichever is
later. With respect to a State that provides notice
under this paragraph and that has a legislature that
does not meet within the 12-month period beginning
on the date of enactment of this Act, the Secretary
shall not make a determination under subsection (a)
prior to January 1, 1998.
(3) NOTICE
TO
STATE.—If the Secretary of
Health and Human Services determines that a State
law or program does not achieve the goals described
in subsection (a), the Secretary of Health and
Human Services shall provide the State with ade-
quate notice and reasonable opportunity to modify
such law or program to achieve such goals prior to
making a final determination under subsection (a).
(c) ADOPTION OF NAIC MODEL.—If, not later than
9 months after the date of enactment of this Act—
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(1) the National Association of Insurance Com-
missioners (hereafter referred to as the ‘‘NAIC’’),
through a process which the Secretary of Health and
Human Services determines has included consulta-
tion with representatives of the insurance industry
and consumer groups, adopts a model standard or
standards for reform of the individual health insur-
ance market; and
(2) the Secretary of Health and Human Serv-
ices determines, within 30 days of the adoption of
such NAIC standard or standards, that such stand-
ards comply with the goals of sections 110 and 111;
a State that elects to adopt such model standards or sub-
stantially adopt such model standards shall be deemed to
have met the requirements of sections 110 and 111 and
shall not be subject to a determination under subsection
(a).
SEC. 113. DEFINITION.
(a) IN GENERAL.—As used in this title, the term ‘‘in-
dividual health plan’’ means any contract, policy, certifi-
cate or other arrangement offered to individuals by a
health plan issuer that provides or pays for health benefits
(such as provider and hospital benefits) and that is not
a group health plan under section 2(6).
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(b) ARRANGEMENTS NOT INCLUDED.—Such term
does not include the following, or any combination thereof:
(1) Coverage only for accident, or disability in-
come insurance, or any combination thereof.
(2) Medicare supplemental health insurance (as
defined under section 1882(g)(1) of the Social Secu-
rity Act).
(3) Coverage issued as a supplement to liability
insurance.
(4) Liability insurance, including general liabil-
ity insurance and automobile liability insurance.
(5) Workers’ compensation or similar insurance.
(6) Automobile medical payment insurance.
(7) Coverage for a specified disease or illness.
(8) Hospital or fixed indemnity insurance.
(9) Short-term limited duration insurance.
(10) Credit-only, dental-only, or vision-only in-
surance.
(11) A health insurance policy providing bene-
fits only for long-term care, nursing home care,
home health care, community-based care, or any
combination thereof.
Subtitle C—COBRA Clarifications
SEC. 121. COBRA CLARIFICATIONS.
(a) PUBLIC HEALTH SERVICE ACT.—
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(1) PERIOD OF COVERAGE.—Section 2202(2) of
the Public Health Service Act (42 U.S.C. 300bb-
2(2)) is amended—
(A) in subparagraph (A)—
(i) by transferring the sentence imme-
diately preceding clause (iv) so as to ap-
pear immediately following such clause
(iv); and
(ii) in the last sentence (as so trans-
ferred)—
(I) by inserting ‘‘, or a bene-
ficiary-family member of the individ-
ual,’’ after ‘‘an individual’’; and
(II) by striking ‘‘at the time of a
qualifying event described in section
2203(2)’’ and inserting ‘‘at any time
during the initial 18-month period of
continuing coverage under this title’’;
(B) in subparagraph (D)(i), by inserting
before ‘‘, or’’ the following: ‘‘, except that the
exclusion or limitation contained in this clause
shall not be considered to apply to a plan under
which a preexisting condition or exclusion does
not apply to an individual otherwise eligible for
continuation coverage under this section be-
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cause of the provision of the Health Insurance
Reform Act of 1996’’; and
(C) in subparagraph (E), by striking ‘‘at
the time of a qualifying event described in sec-
tion 2203(2)’’ and inserting ‘‘at any time dur-
ing the initial 18-month period of continuing
coverage under this title’’.
(2) ELECTION.—Section 2205(1)(C) of the
Public Health Service Act (42 U.S.C. 300bb-
5(1)(C)) is amended—
(A) in clause (i), by striking ‘‘or’’ at the
end thereof;
(B) in clause (ii), by striking the period
and inserting ‘‘, or’’; and
(C) by adding at the end thereof the fol-
lowing new clause:
‘‘(iii) in the case of an individual de-
scribed in the last sentence of section
2202(2)(A), or a beneficiary-family mem-
ber of the individual, the date such individ-
ual is determined to have been disabled.’’.
(3) NOTICES.—Section 2206(3) of the Public
Health Service Act (42 U.S.C. 300bb-6(3)) is
amended by striking ‘‘at the time of a qualifying
event described in section 2203(2)’’ and inserting
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‘‘at any time during the initial 18-month period of
continuing coverage under this title’’.
(4) BIRTH OR ADOPTION OF A CHILD.—Section
2208(3)(A) of the Public Health Service Act (42
U.S.C. 300bb-8(3)(A)) is amended by adding at the
end thereof the following new flush sentence:
‘‘Such term shall also include a child who is born to
or placed for adoption with the covered employee
during the period of continued coverage under this
title.’’.
(b) EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974.—
(1) PERIOD OF COVERAGE.—Section 602(2) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1162(2)) is amended—
(A) in the last sentence of subparagraph
(A)—
(i) by inserting ‘‘, or a beneficiary-
family member of the individual,’’ after
‘‘an individual’’; and
(ii) by striking ‘‘at the time of a
qualifying 
event 
described 
in 
section
603(2)’’ and inserting ‘‘at any time during
the initial 18-month period of continuing
coverage under this part’’;
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(B) in subparagraph (D)(i), by inserting
before ‘‘, or’’ the following: ‘‘, except that the
exclusion or limitation contained in this clause
shall not be considered to apply to a plan under
which a preexisting condition or exclusion does
not apply to an individual otherwise eligible for
continuation coverage under this section be-
cause of the provision of the Health Insurance
Reform Act of 1996’’; and
(C) in subparagraph (E), by striking ‘‘at
the time of a qualifying event described in sec-
tion 603(2)’’ and inserting ‘‘at any time during
the initial 18-month period of continuing cov-
erage under this part’’.
(2) ELECTION.—Section 605(1)(C) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1165(1)(C)) is amended—
(A) in clause (i), by striking ‘‘or’’ at the
end thereof;
(B) in clause (ii), by striking the period
and inserting ‘‘, or’’; and
(C) by adding at the end thereof the fol-
lowing new clause:
‘‘(iii) in the case of an individual de-
scribed in the last sentence of section
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602(2)(A), or a beneficiary-family member
of the individual, the date such individual
is determined to have been disabled.’’.
(3) NOTICES.—Section 606(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1166(3)) is amended by striking ‘‘at the time of a
qualifying event described in section 603(2)’’ and in-
serting ‘‘at any time during the initial 18-month pe-
riod of continuing coverage under this part’’.
(4) BIRTH OR ADOPTION OF A CHILD.—Section
607(3)(A) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1167(3)) is amended by
adding at the end thereof the following new flush
sentence:
‘‘Such term shall also include a child who is born to
or placed for adoption with the covered employee
during the period of continued coverage under this
part.’’.
(c) INTERNAL REVENUE CODE OF 1986.—
(1) 
PERIOD
OF
COVERAGE.—Section
4980B(f)(2)(B) of the Internal Revenue Code of
1986 is amended—
(A) in the last sentence of clause (i) by
striking ‘‘at the time of a qualifying event de-
scribed in paragraph (3)(B)’’ and inserting ‘‘at
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any time during the initial 18-month period of
continuing coverage under this section’’;
(B) in clause (iv)(I), by inserting before ‘‘,
or’’ the following: ‘‘, except that the exclusion
or limitation contained in this subclause shall
not be considered to apply to a plan under
which a preexisting condition or exclusion does
not apply to an individual otherwise eligible for
continuation coverage under this subsection be-
cause of the provision of the Health Insurance
Reform Act of 1996’’; and
(C) in clause (v), by striking ‘‘at the time
of a qualifying event described in paragraph
(3)(B)’’ and inserting ‘‘at any time during the
initial 18-month period of continuing coverage
under this section’’.
(2) ELECTION.—Section 4980B(f)(5)(A)(iii) of
the Internal Revenue Code of 1986 is amended—
(A) in subclause (I), by striking ‘‘or’’ at
the end thereof;
(B) in subclause (II), by striking the pe-
riod and inserting ‘‘, or’’; and
(C) by adding at the end thereof the fol-
lowing new subclause:
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‘‘(III) in the case of an qualified
beneficiary described in the last sen-
tence of paragraph (2)(B)(i), the date
such individual is determined to have
been disabled.’’.
(3) NOTICES.—Section 4980B(f)(6)(C) of the
Internal Revenue Code of 1986 is amended by strik-
ing ‘‘at the time of a qualifying event described in
paragraph (3)(B)’’ and inserting ‘‘at any time dur-
ing the initial 18-month period of continuing cov-
erage under this section’’.
(4) BIRTH OR ADOPTION OF A CHILD.—Section
4980B(g)(1)(A) of the Internal Revenue Code of
1986 is amended by adding at the end thereof the
following new flush sentence:
‘‘Such term shall also include a child who
is born to or placed for adoption with the
covered employee during the period of con-
tinued coverage under this section.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to qualifying events occurring on
or after the date of the enactment of this Act for plan
years beginning after December 31, 1997.
(e) NOTIFICATION OF CHANGES.—Not later than 60
days prior to the date on which this section becomes effec-
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tive, each group health plan (covered under title XXII of
the Public Health Service Act, part 6 of subtitle B of title
I of the Employee Retirement Income Security Act of
1974, and section 4980B(f) of the Internal Revenue Code
of 1986) shall notify each qualified beneficiary who has
elected continuation coverage under such title, part or sec-
tion of the amendments made by this section.
Subtitle D—Private Health Plan
Purchasing Cooperatives
SEC. 131. PRIVATE HEALTH PLAN PURCHASING COOPERA-
TIVES.
(a) DEFINITION.—As used in this Act, the term
‘‘health plan purchasing cooperative’’ means a group of
individuals or employers that, on a voluntary basis and
in accordance with this section, form a cooperative for the
purpose of purchasing individual health plans or group
health plans offered by health plan issuers. A health plan
issuer, agent, broker or any other individual or entity en-
gaged in the sale of insurance may not underwrite a coop-
erative.
(b) CERTIFICATION.—
(1) IN GENERAL.—If a group described in sub-
section (a) desires to form a health plan purchasing
cooperative in accordance with this section and such
group appropriately notifies the State and the Sec-
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retary of such desire, the State, upon a determina-
tion that such group meets the requirements of this
section, shall certify the group as a health plan pur-
chasing cooperative. The State shall make a deter-
mination of whether such group meets the require-
ments of this section in a timely fashion. Each such
cooperative shall also be registered with the Sec-
retary.
(2) STATE REFUSAL TO CERTIFY.—If a State
fails to implement a program for certifying health
plan purchasing cooperatives in accordance with the
standards under this Act, the Secretary shall certify
and oversee the operations of such cooperatives in
such State.
(3) INTERSTATE COOPERATIVES.—For purposes
of this section, a health plan purchasing cooperative
operating in more than one State shall be certified
by the State in which the cooperative is domiciled.
States may enter into cooperative agreements for the
purpose of certifying and overseeing the operation of
such cooperatives. For purposes of this subsection, a
cooperative shall be considered to be domiciled in the
State in which most of the members of the coopera-
tive reside.
(c) BOARD OF DIRECTORS.—
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(1) IN GENERAL.—Each health plan purchasing
cooperative shall be governed by a Board of Direc-
tors that shall be responsible for ensuring the per-
formance of the duties of the cooperative under this
section. The Board shall be composed of a broad
cross-section of representatives of employers, em-
ployees, and individuals participating in the coopera-
tive. A health plan issuer, agent, broker or any other
individual or entity engaged in the sale of individual
health plans or group health plans may not hold or
control any right to vote with respect to a coopera-
tive.
(2) LIMITATION ON COMPENSATION.—A health
plan purchasing cooperative may not provide com-
pensation to members of the Board of Directors.
The cooperative may provide reimbursements to
such members for the reasonable and necessary ex-
penses incurred by the members in the performance
of their duties as members of the Board.
(3) CONFLICT OF INTEREST.—No member of
the Board of Directors (or family members of such
members) nor any management personnel of the co-
operative may be employed by, be a consultant for,
be a member of the board of directors of, be affili-
ated with an agent of, or otherwise be a representa-
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tive of any health plan issuer, health care provider,
or agent or broker. Nothing in the preceding sen-
tence shall limit a member of the Board from pur-
chasing coverage offered through the cooperative.
(d) MEMBERSHIP AND MARKETING AREA.—
(1) MEMBERSHIP.—A health plan purchasing
cooperative may establish limits on the maximum
size of employers who may become members of the
cooperative, and may determine whether to permit
individuals to become members. Upon the establish-
ment of such membership requirements, the coopera-
tive shall, except as provided in subparagraph (B),
accept all employers (or individuals) residing within
the area served by the cooperative who meet such re-
quirements as members on a first-come, first-served
basis, or on another basis established by the State
to ensure equitable access to the cooperative.
(2) MARKETING AREA.—A State may establish
rules regarding the geographic area that must be
served by a health plan purchasing cooperative. With
respect to a State that has not established such
rules, a health plan purchasing cooperative operating
in the State shall define the boundaries of the area
to be served by the cooperative, except that such
boundaries may not be established on the basis of
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health status or insurability of the populations that
reside in the area.
(e) DUTIES AND RESPONSIBILITIES.—
(1) IN GENERAL.—A health plan purchasing co-
operative shall—
(A) enter into agreements with multiple,
unaffiliated health plan issuers, except that the
requirement of this subparagraph shall not
apply in regions (such as remote or frontier
areas) in which compliance with such require-
ment is not possible;
(B) enter into agreements with employers
and individuals who become members of the co-
operative;
(C) participate in any program of risk-ad-
justment or reinsurance, or any similar pro-
gram, that is established by the State;
(D) prepare and disseminate comparative
health plan materials (including information
about cost, quality, benefits, and other informa-
tion concerning group health plans and individ-
ual health plans offered through the coopera-
tive);
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(E) actively market to all eligible employ-
ers and individuals residing within the service
area; and
(F) act as an ombudsman for group health
plan or individual health plan enrollees.
(2) PERMISSIBLE ACTIVITIES.—A health plan
purchasing cooperative may perform such other
functions as necessary to further the purposes of
this Act, including—
(A) collecting and distributing premiums
and performing other administrative functions;
(B) collecting and analyzing surveys of en-
rollee satisfaction;
(C) charging membership fee to enrollees
(such fees may not be based on health status)
and charging participation fees to health plan
issuers;
(D) cooperating with (or accepting as
members) employers who provide health bene-
fits directly to participants and beneficiaries
only for the purpose of negotiating with provid-
ers; and
(E) negotiating with health care providers
and health plan issuers.
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(f) LIMITATIONS ON COOPERATIVE ACTIVITIES.—A
health plan purchasing cooperative shall not—
(1) perform any activity relating to the licens-
ing of health plan issuers;
(2) assume financial risk directly or indirectly
on behalf of members of a health plan purchasing
cooperative relating to any group health plan or in-
dividual health plan;
(3) establish eligibility, continuation of eligi-
bility, enrollment, or premium contribution require-
ments for participants, beneficiaries, or individuals
based on health status, medical condition, claims ex-
perience, receipt of health care, medical history, evi-
dence of insurability, or disability;
(4) operate on a for-profit or other basis where
the legal structure of the cooperative permits profits
to be made and not returned to the members of the
cooperative, except that a for-profit health plan pur-
chasing cooperative may be formed by a nonprofit
organization—
(A) in which membership in such organiza-
tion is not based on health status, medical con-
dition, claims experience, receipt of health care,
medical history, evidence of insurability, or dis-
ability; and
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(B) that accepts as members all employers
or individuals on a first-come, first-served basis,
subject to any established limit on the maxi-
mum size of and employer that may become a
member; or
(5) perform any other activities that conflict or
are inconsistent with the performance of its duties
under this Act.
(g) LIMITED
PREEMPTION
OF
CERTAIN
STATE
LAWS.—
(1) IN
GENERAL.—With respect to a health
plan purchasing cooperative that meets the require-
ments of this section, State fictitious group laws
shall be preempted.
(2) HEALTH PLAN ISSUERS.—
(A) RATING.—With respect to a health
plan issuer offering a group health plan or indi-
vidual health plan through a health plan pur-
chasing cooperative that meets the requirements
of this section, State premium rating require-
ment laws, except to the extent provided under
subparagraph (B), shall be preempted unless
such laws permit premium rates negotiated by
the cooperative to be less than rates that would
otherwise be permitted under State law, if such
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rating differential is not based on differences in
health status or demographic factors.
(B) EXCEPTION.—State laws referred to in
subparagraph (A) shall not be preempted if
such laws—
(i) prohibit the variance of premium
rates among employers, plan sponsors, or
individuals that are members of a health
plan purchasing cooperative in excess of
the amount of such variations that would
be permitted under such State rating laws
among employers, plan sponsors, and indi-
viduals that are not members of the coop-
erative; and
(ii) prohibit a percentage increase in
premium rates for a new rating period that
is in excess of that which would be per-
mitted under State rating laws.
(C) BENEFITS.—Except as provided in
subparagraph (D), a health plan issuer offering
a group health plan or individual health plan
through a health plan purchasing cooperative
shall comply with all State mandated benefit
laws that require the offering of any services,
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category or care, or services of any class or type
of provider.
(D) EXCEPTION.—In those States that
have enacted laws authorizing the issuance of
alternative benefit plans to small employers,
health plan issuers may offer such alternative
benefit plans through a health plan purchasing
cooperative that meets the requirements of this
section.
(h) RULES OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed to—
(1) require that a State organize, operate, or
otherwise create health plan purchasing cooperatives;
(2) otherwise require the establishment of
health plan purchasing cooperatives;
(3) require individuals, plan sponsors, or em-
ployers to purchase group health plans or individual
health plans through a health plan purchasing coop-
erative;
(4) require that a health plan purchasing coop-
erative be the only type of purchasing arrangement
permitted to operate in a State;
(5) confer authority upon a State that the State
would not otherwise have to regulate health plan is-
suers or employee health benefits plans; or
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(6) confer authority upon a State (or the Fed-
eral Government) that the State (or Federal Govern-
ment) would not otherwise have to regulate group
purchasing arrangements, coalitions, or other similar
entities that do not desire to become a health plan
purchasing cooperative in accordance with this sec-
tion.
(i) APPLICATION OF ERISA.—For purposes of en-
forcement only, the requirements of parts 4 and 5 of sub-
title B of title I of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1101) shall apply to a health
plan purchasing cooperative as if such plan were an em-
ployee welfare benefit plan.
TITLE II—APPLICATION AND
ENFORCEMENT OF STANDARDS
SEC. 201. APPLICABILITY.
(a) CONSTRUCTION.—
(1) ENFORCEMENT.—
(A) IN
GENERAL.—A requirement or
standard imposed under this Act on a group
health plan or individual health plan offered by
a health plan issuer shall be deemed to be a re-
quirement or standard imposed on the health
plan issuer. Such requirements or standards
shall be enforced by the State insurance com-
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missioner for the State involved or the official
or officials designated by the State to enforce
the requirements of this Act. In the case of a
group health plan offered by a health plan is-
suer in connection with an employee health ben-
efit plan, the requirements or standards im-
posed under this Act shall be enforced with re-
spect to the health plan issuer by the State in-
surance commissioner for the State involved or
the official or officials designated by the State
to enforce the requirements of this Act.
(B) LIMITATION.—Except as provided in
subsection (c), the Secretary shall not enforce
the requirements or standards of this Act as
they relate to health plan issuers, group health
plans, or individual health plans. In no case
shall a State enforce the requirements or stand-
ards of this Act as they relate to employee
health benefit plans.
(2) PREEMPTION OF STATE LAW.—Nothing in
this Act shall be construed to prevent a State from
establishing, implementing, or continuing in effect
standards and requirements—
(A) not prescribed in this Act; or
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(B) related to the issuance, renewal, or
portability of health insurance or the establish-
ment or operation of group purchasing arrange-
ments, that are consistent with, and are not in
direct conflict with, this Act and provide greater
protection or benefit to participants, bene-
ficiaries or individuals.
(b) RULE OF CONSTRUCTION.—Nothing in this Act
shall be construed to affect or modify the provisions of
section 514 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1144).
(c) CONTINUATION.—Nothing in this Act shall be
construed as requiring a group health plan or an employee
health benefit plan to provide benefits to a particular par-
ticipant or beneficiary in excess of those provided under
the terms of such plan.
SEC. 202. ENFORCEMENT OF STANDARDS.
(a) HEALTH PLAN ISSUERS.—Each State shall re-
quire that each group health plan and individual health
plan issued, sold, renewed, offered for sale or operated in
such State by a health plan issuer meet the standards es-
tablished under this Act pursuant to an enforcement plan
filed by the State with the Secretary. A State shall submit
such information as required by the Secretary demonstrat-
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ing effective implementation of the State enforcement
plan.
(b) EMPLOYEE HEALTH BENEFIT PLANS.—With re-
spect to employee health benefit plans, the Secretary shall
enforce the reform standards established under this Act
in the same manner as provided for under sections 502,
504, 506, and 510 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1132, 1134, 1136, and
1140). The civil penalties contained in paragraphs (1) and
(2) of section 502(c) of such Act (29 U.S.C. 1132(c)(1)
and (2)) shall apply to any information required by the
Secretary to be disclosed and reported under this section.
(c) FAILURE TO IMPLEMENT PLAN.—In the case of
the failure of a State to substantially enforce the stand-
ards and requirements set forth in this Act with respect
to group health plans and individual health plans as pro-
vided for under the State enforcement plan filed under
subsection (a), the Secretary, in consultation with the Sec-
retary of Health and Human Services, shall implement an
enforcement plan meeting the standards of this Act in
such State. In the case of a State that fails to substan-
tially enforce the standards and requirements set forth in
this Act, each health plan issuer operating in such State
shall be subject to civil enforcement as provided for under
sections 502, 504, 506, and 510 of the Employee Retire-
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ment Income Security Act of 1974 (29 U.S.C. 1132, 1134,
1136, and 1140). The civil penalties contained in para-
graphs (1) and (2) of section 502(c) of such Act (29
U.S.C. 1132(c)(1) and (2)) shall apply to any information
required by the Secretary to be disclosed and reported
under this section.
(d) APPLICABLE CERTIFYING AUTHORITY.—As used
in this title, the term ‘‘applicable certifying authority’’
means, with respect to—
(1) health plan issuers, the State insurance
commissioner or official or officials designated by
the State to enforce the requirements of this Act for
the State involved; and
(2) an employee health benefit plan, the Sec-
retary.
(e) REGULATIONS.—The Secretary may promulgate
such regulations as may be necessary or appropriate to
carry out this Act.
(f) TECHNICAL AMENDMENT.—Section 508 of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1138) is amended by inserting ‘‘and under the
Health Insurance Reform Act of 1996’’ before the period.
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TITLE III—MISCELLANEOUS
PROVISIONS
SEC. 
301. 
HMOS 
ALLOWED 
TO 
OFFER 
PLANS 
WITH
DEDUCTIBLES TO INDIVIDUALS WITH MEDI-
CAL SAVINGS ACCOUNTS.
Section 1301(b) of the Public Health Service Act (42
U.S.C. 300e(b)) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(6)(A) If a member certifies that a medical
savings account has been established for the benefit
of such member, a health maintenance organization
may, at the request of such member reduce the basic
health services payment otherwise determined under
paragraph (1) by requiring the payment of a deduct-
ible by the member for basic health services.
‘‘(B) For purposes of this paragraph, the term
‘medical savings account’ means an account which,
by its terms, allows the deposit of funds and the use
of such funds and income derived from the invest-
ment of such funds for the payment of the deduct-
ible described in subparagraph (A).’’.
SEC. 302. HEALTH COVERAGE AVAILABILITY STUDY.
(a) IN GENERAL.—The Secretary of Health and
Human Services, in consultation with the Secretary, rep-
resentatives of State officials, consumers, and other rep-
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resentatives of individuals and entities that have expertise
in health insurance and employee benefits, shall conduct
a two-part study, and prepare and submit reports, in ac-
cordance with this section.
(b) EVALUATION OF AVAILABILITY.—Not later than
January 1, 1998, the Secretary of Health and Human
Services shall prepare and submit to the appropriate com-
mittees of Congress a report, concerning—
(1) an evaluation, based on the experience of
States, expert opinions, and such additional data as
may be available, of the various mechanisms used to
ensure the availability of reasonably priced health
coverage to employers purchasing group coverage
and to individuals purchasing coverage on a non-
group basis; and
(2) whether standards that limit the variation
in premiums will further the purposes of this Act.
(c) EVALUATION
OF EFFECTIVENESS.—Not later
than January 1, 1999, the Secretary of Health and
Human Services shall prepare and submit to the appro-
priate committees of Congress a report, concerning the ef-
fectiveness of the provisions of this Act and the various
State laws, in ensuring the availability of reasonably
priced health coverage to employers purchasing group cov-
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erage and individuals purchasing coverage on a non-group
basis.
SEC. 303. EFFECTIVE DATE.
Except as otherwise provided for in this Act, the pro-
visions of this Act shall apply as follows:
(1) With respect to group health plans and in-
dividual health plans, such provisions shall apply to
plans offered, sold, issued, renewed, in effect, or op-
erated on or after January 1, 1997; and
(2) With respect to employee health benefit
plans, on the first day of the first plan year begin-
ning on or after January 1, 1997.
SEC. 304. SEVERABILITY.
If any provision of this Act or the application of such
provision to any person or circumstance is held to be un-
constitutional, the remainder of this Act and the applica-
tion of the provisions of such to any person or cir-
cumstance shall not be affected thereby.
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