I
104TH CONGRESS
1ST SESSION
H. R. 1604
To amend the Internal Revenue Code of 1986 to promote the continuity
and portability of health insurance coverage by restricting discrimination
based on health status, limiting use of preexisting condition exclusions,
and making COBRA continuation coverage more affordable and available.
IN THE HOUSE OF REPRESENTATIVES
MAY 10, 1995
Mrs. JOHNSON of Connecticut (for herself and Mr. THOMAS of California) in-
troduced the following bill; which was referred to the Committee on Ways
and Means
A BILL
To amend the Internal Revenue Code of 1986 to promote
the continuity and portability of health insurance cov-
erage by restricting discrimination based on health sta-
tus, limiting use of preexisting condition exclusions, and
making COBRA continuation coverage more affordable
and available.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Working Families
Health Access Act of 1995’’.
SEC. 2. PROMOTING THE CONTINUITY AND PORTABILITY
OF HEALTH COVERAGE.
(a) IN GENERAL.—Subtitle D of the Internal Reve-
nue Code of 1986 is amended by inserting after chapter
44 the following new chapter:
‘‘CHAPTER 45—CONTINUITY AND
PORTABILITY OF HEALTH COVERAGE
‘‘Sec. 4986.
Imposition of tax.
‘‘Sec. 4987.
Nondiscrimination based on health status.
‘‘Sec. 4988.
Limited use of preexisting condition exclusions.
‘‘Sec. 4989.
Guaranteed renewability of health insurance coverage.
‘‘Sec. 4990.
Relation to State standards.
‘‘Sec. 4991.
Definitions.
‘‘SEC. 4986. IMPOSITION OF TAX FOR FAILURE TO MEET
CONTINUITY AND PORTABILITY STANDARDS.
‘‘(a) INSURED HEALTH PLANS.—
‘‘(1) IN GENERAL.—In the case of any health
insurance policy which fails to meet the applicable
standards specified in this chapter at any time dur-
ing a calendar year, there is hereby imposed a tax
equal to 25 percent of the premiums received under
such policy during the calendar year.
‘‘(2) LIABILITY FOR TAX.—The tax imposed by
paragraph (1) shall be paid by the issuer of the pol-
icy.
‘‘(3) TREATMENT
OF
PREPAID
HEALTH
COV-
ERAGE.—For purposes of this subsection:
‘‘(A) IN
GENERAL.—In the case of any
prepaid health arrangement—
‘‘(i) such arrangement shall be treated
as a health insurance policy,
‘‘(ii) the payments or premiums re-
ferred to in subparagraph (B)(i) shall be
treated as premiums received for a health
insurance policy, and
‘‘(iii) the person referred to in sub-
paragraph (B)(i) shall be treated as the is-
suer.
‘‘(B) PREPAID HEALTH ARRANGEMENT.—
For purposes of subparagraph (A), the term
‘prepaid health arrangement’ means an ar-
rangement under which—
‘‘(i) fixed payments or premiums are
received as consideration for any person’s
agreement to provide or arrange for the
provision of accident or health coverage re-
gardless of how such coverage is provided
or arranged to be provided, and
‘‘(ii) substantially all of the risks of
the rates of utilization of services is as-
sumed by such person or the provider of
such services.
‘‘(4) INSURANCE POLICY.—For purposes of this
subsection, the term ‘insurance policy’ means any
policy or other instrument whereby a contract of in-
surance is issued, renewed, or extended.
‘‘(5) PREMIUM.—For purposes of this sub-
section, the term ‘premium’ means the gross amount
of premiums and other consideration (including ad-
vance premiums, deposits, fees, and assessments)
arising from policies issued by a person acting as the
primary insurer, adjusted for any return or addi-
tional premiums paid as a result of endorsements,
cancellations, audits, or retrospective rating.
‘‘(b) SELF-INSURED HEALTH PLANS.—
‘‘(1) IN GENERAL.—In the case of a self-in-
sured health plan which fails to meet the applicable
standards specified in this chapter at any time dur-
ing a calendar year, there is hereby imposed a tax
equal to 25 percent of the health coverage expendi-
tures for such calendar year under such plan.
‘‘(2) LIABILITY FOR TAX.—The tax imposed by
paragraph (1) shall be paid by the plan sponsor.
‘‘(3) SELF-INSURED HEALTH PLAN.—For pur-
poses of this subsection, the term ‘self-insured
health plan’ means any plan for providing accident
or health coverage if any portion of such coverage is
provided other than through an insurance policy.
‘‘(4) HEALTH COVERAGE EXPENDITURES.—For
purposes of this subsection, the health coverage ex-
penditures of any self-insured health plan for any
calendar year are the aggregate expenditures for
such year for health coverage provided under such
plan.
‘‘(c) LIMITATIONS ON IMPOSITION.—
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT
DISCOVERED
EXERCISING
REASONABLE
DILI-
GENCE.—No tax shall be imposed under this section
on any failure for which it is established to the satis-
faction of the Secretary that none of the persons lia-
ble for the tax knew, or exercising reasonable dili-
gence would have known, that such failure existed.
‘‘(2) TAX NOT TO APPLY TO CERTAIN FAILURES
CORRECTED WITHIN 30 DAYS.—No tax shall be im-
posed by subsection (a) or (b) on any failure if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the
30-day period beginning on the 1st date any
person liable for the tax knew, or exercising
reasonable diligence would have known, that
such failure existed.
‘‘(3) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by this section to the extent that
the payment of such tax would be excessive relative
to the failure involved.
‘‘SEC. 4987. NONDISCRIMINATION BASED ON HEALTH STA-
TUS.
‘‘(a) COVERAGE UNDER GROUP HEALTH PLANS.—
A group health plan and a carrier offering health insur-
ance coverage in connection with such a plan may not es-
tablish or impose eligibility, continuation, enrollment, or
contribution requirements for an individual based on fac-
tors directly related to the health status, medical condi-
tion, claims experience, receipt of health care, medical his-
tory, disability, or evidence of insurability of the individ-
ual.
‘‘(b) INDIVIDUAL COVERAGE.—
‘‘(1) IN GENERAL.—A carrier offering health
insurance coverage (other than in connection with a
group health plan) may not establish or impose eligi-
bility, continuation, or enrollment requirements for a
qualifying individual (as defined in paragraph (2))
based on factors directly related to the health status,
medical condition, claims experience, receipt of
health care, medical history, disability, or evidence of
insurability of the individual.
‘‘(2) QUALIFYING INDIVIDUAL DEFINED.—For
purposes of paragraph (1), the term ‘qualifying indi-
vidual’ means an individual who meets all of the fol-
lowing requirements:
‘‘(A) The individual is in a period of quali-
fying previous coverage (as defined in para-
graph (3)) which is at least 6 months long.
‘‘(B) The individual is not eligible for cov-
erage under any group health plan (including
continuation coverage under section 4980B)
and has not lost such coverage but for a failure
to make required premium payments or con-
tributions or due to fraud or misrepresentation
of material fact.
‘‘(C) If the individual’s most recent cov-
erage during the period of qualifying previous
coverage under subparagraph (A) was health
insurance coverage not in connection with a
group health plan, such coverage was discon-
tinued or terminated by the carrier only on the
basis of—
‘‘(i) a change in residence of the indi-
vidual so that the individual no longer re-
sided within a service area of the carrier
with respect to such coverage, or
‘‘(ii) a change in the individual’s sta-
tus so that the individual was no longer el-
igible for dependent coverage, if the indi-
vidual previously was only eligible for such
coverage as a dependent.
Nothing in subparagraph (C) shall be construed as
preventing a carrier from waiving the application of
such subparagraph during an annual open enroll-
ment period or otherwise.
‘‘(3) PERIOD OF QUALIFYING PREVIOUS COV-
ERAGE DEFINED.—For purposes of this chapter, the
term ‘period of qualifying previous coverage’ means
the period—
‘‘(A) beginning on the date an individual is
enrolled under a group health plan or is pro-
vided health insurance coverage, and
‘‘(B) ending on the date the individual is
neither covered under a group health plan or
covered under health insurance coverage (in-
cluding 
coverage 
described 
in 
section
4991(2)(D)) for a continuous period of more
than 2 months.
‘‘SEC. 4988. LIMITED USE OF PREEXISTING CONDITION EX-
CLUSIONS.
‘‘(a) IN GENERAL.—A carrier offering health insur-
ance coverage and a group health plan may impose a limi-
tation or exclusion of benefits relating to treatment of a
condition based on the fact that the condition is a preexist-
ing condition (as defined in subsection (c)) only if the fol-
lowing requirements are met:
‘‘(1) LIMITATION
TO
3-MONTH
LOOK-BACK.—
The condition was diagnosed or treated during the
period not more than 3 months before the date of
enrollment for such coverage or under such plan.
‘‘(2) LIMITATION ON EXCLUSION PERIOD.—
‘‘(A) GENERAL RULE OF MAXIMUM OF 6-
MONTH EXCLUSION.—Subject to paragraph (3),
the limitation or exclusion extends for a period
not more than 6 months (or 12 months in the
case of a late enrollee described in subpara-
graph (B)) after such date of enrollment.
‘‘(B) LATE ENROLLEE DESCRIBED.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), a late enrollee de-
scribed in this subparagraph with respect
to a group health plan is an individual who
becomes covered under the plan but who,
at the time the individual first was eligible
to elect such coverage, had elected not to
be covered under the plan.
‘‘(ii) EXCEPTION
FOR
INDIVIDUALS
WITH
CONTINUOUS
COVERAGE.—An indi-
vidual shall not be considered to be a late
enrollee with respect to a plan if the indi-
vidual establishes that, with respect to the
period beginning on the date the individual
first could have obtained coverage under
the plan and until the date the individual
was so covered, there was no period of
more than 2 months during all of which
the individual neither had health insurance
coverage (including coverage described in
subparagraph (C) or (D) of section
4991(2)) or was covered under any group
health plan.
‘‘(3) CREDIT FOR PREVIOUS QUALIFYING COV-
ERAGE.—In the case of an individual who is in a pe-
riod of qualifying previous coverage (as defined in
section 4987(b)(3)) as of the date of enrollment for
health insurance coverage or under the group health
plan, the limitation or exclusion period under para-
graph (2)(A) shall be reduced by the length of such
period of qualifying previous coverage.
‘‘(4) EXCEPTION
FOR
TREATMENT
OF
PREG-
NANCY.—The limitation or exclusion does not apply
to treatment relating to pregnancy.
‘‘(5) EXCEPTION
FOR
CERTAIN
DEPENDENT
COVERAGE.—
‘‘(A) NEWBORNS.—The limitation or exclu-
sion does not apply to a child who has health
insurance coverage (or is covered under a group
health plan) as a dependent within 1 month of
the birthdate until such time as the child does
not have such coverage (or is not so covered)
for a continuous period of more than 2 months.
‘‘(B) ADOPTED
CHILDREN.—The limita-
tion or exclusion does not apply (beginning on
the date of adoption) to an adopted child who
has health insurance coverage (or is covered
under a group health plan) within 1 month of
such date until such time as the child does not
have such coverage (or is not so covered) for a
continuous period of more than 2 months.
‘‘(b) LIMITATION ON USE OF DELAYED COVERAGE
IN LIEU OF PREEXISTING EXCLUSION LIMITATIONS.—
‘‘(ii) Medicare supplemental health in-
surance.
‘‘(iii) Coverage issued as a supplement
to liability insurance.
‘‘(iv) Liability insurance, including
general liability insurance and automobile
liability insurance.
‘‘(v) Workers’ compensation or similar
insurance.
‘‘(vi) Automobile medical-payment in-
surance.
‘‘(vii) Coverage providing wages or
payments in lieu of wages for any period
during which an employee is absent from
work on account of sickness or injury.
‘‘(viii) A long-term care insurance cov-
erage, including a nursing home fixed in-
demnity policy (unless the Secretary of
Health and Human Services, in consulta-
tion with the Secretaries of Labor and of
the Treasury, determines that such cov-
erage is sufficiently comprehensive so that
it should be treated as health insurance
coverage.)