requirements relating to period of covered
employment and conditions of separation
from employment to be eligible for unem-
ployment compensation (as defined in sec-
tion 85(b) of the Internal Revenue Code of
1986), based on a separation from employ-
ment occurring on or after January 1,
1998. The previous sentence shall not be
construed as requiring the individual to be
receiving such unemployment compensa-
tion.
‘‘(ii) LOSS
OF
EMPLOYMENT-BASED
COVERAGE.—Immediately before the time
of such separation of employment, the indi-
vidual was covered under a group health
plan on the basis of such employment, and,
because of such loss, is no longer eligible
for coverage under such plan (including
such eligibility based on the application of
a Federal or State COBRA continuation
provision) as of the last day of the month
involved.
‘‘(iii) PREVIOUS
CREDITABLE
COV-
ERAGE FOR AT LEAST 1 YEAR.—As of the
date on which the individual loses coverage
described in clause (ii), the aggregate of
the periods of creditable coverage (as de-
termined under section 2701(c) of the
Public Health Service Act) is 12 months or
longer.
‘‘(D) EXHAUSTION OF AVAILABLE COBRA
CONTINUATION BENEFITS.—
‘‘(i) IN GENERAL.—In the case of an
individual described in clause (ii) for a
month described in clause (iii)—
‘‘(I) the individual (or spouse)
elected coverage described in clause
(ii); and
‘‘(II) the individual (or spouse)
has continued such coverage for all
months described in clause (iii) in
which the individual (or spouse) is eli-
gible for such coverage.
‘‘(ii) INDIVIDUALS TO WHOM COBRA
CONTINUATION
COVERAGE
MADE
AVAIL-
ABLE.—An individual described in this
clause is an individual—
‘‘(I) who was offered coverage
under a Federal or State COBRA
continuation provision at the time of
loss of coverage eligibility described in
subparagraph (C)(ii); or
‘‘(II) whose spouse was offered
such coverage in a manner that per-
mitted coverage of the individual at
such time.
‘‘(iii) MONTHS
OF
POSSIBLE
COBRA
CONTINUATION COVERAGE.—A month de-
scribed in this clause is a month for which
an individual described in clause (ii) could
have had coverage described in such clause
as of the last day of the month if the indi-
vidual (or the spouse of the individual, as
the case may be) had elected such coverage
on a timely basis.
‘‘(E) 
NOT
ELIGIBLE
FOR
COVERAGE
UNDER
FEDERAL
HEALTH
INSURANCE
PRO-
GRAM OR GROUP HEALTH PLANS.—The individ-
ual is not eligible for benefits or coverage under
a Federal health insurance program or under a
group health plan (whether on the basis of the
individual’s employment or employment of the
individual’s spouse) as of the last day of the
month involved.
‘‘(2) SPOUSE OF DISPLACED WORKER.—Subject
to paragraph (3), an individual who meets the fol-
lowing requirements with respect to a month is eligi-
ble to enroll under this part with respect to such
month:
‘‘(A) AGE.—As of the last day of the
month, the individual has not attained 62 years
of age.
‘‘(B) MARRIED TO DISPLACED WORKER.—
The individual is the spouse of an individual at
the time the individual enrolls under this part
under paragraph (1) and loses coverage de-
scribed in paragraph (1)(C)(ii) because the in-
dividual’s spouse lost such coverage.
‘‘(C) MEDICARE
ELIGIBILITY
(BUT
FOR
AGE); EXHAUSTION OF ANY COBRA CONTINU-
ATION COVERAGE; AND NOT ELIGIBLE FOR COV-
ERAGE UNDER FEDERAL HEALTH INSURANCE
PROGRAM OR GROUP HEALTH PLAN.—The indi-
vidual meets the requirements of subparagraphs
(B), (D), and (E) of paragraph (1).
‘‘(3) CHANGE
IN
HEALTH
PLAN
ELIGIBILITY
AFFECTS
CONTINUED
ELIGIBILITY.—For provision
that terminates enrollment under this section in the
case of an individual who becomes eligible for cov-
erage under a group health plan or under a Federal
health 
insurance 
program, 
see 
section
1859A(d)(1)(C).
‘‘(4) REENROLLMENT PERMITTED.—Nothing in
this subsection shall be construed as preventing an
individual who, after enrolling under this subsection,
terminates such enrollment from subsequently re-
enrolling under this subsection if the individual is el-
igible to enroll under this subsection at that time.’’.
(b) ENROLLMENT.—Section 1859A of such Act, as
so inserted, is amended—
(1) in subsection (a), by striking ‘‘and’’ at the
end of paragraph (1), by striking the period at the
end of paragraph (2) and inserting ‘‘; and’’, and by
adding at the end the following new paragraph:
‘‘(3) individuals whose coverage under this part
would terminate because of subsection (d)(1)(B)(ii)
are provided notice and an opportunity to continue
enrollment 
in 
accordance 
with 
section
1859E(c)(1).’’;
(2) in subsection (b), by inserting after ‘‘Not-
withstanding any other provision of law, (1)’’ the fol-
lowing:
‘‘(2) DISPLACED WORKERS AND SPOUSES.—In
the case of individuals eligible to enroll under this
part under section 1859(c), the following rules
apply:
‘‘(A) INITIAL
ENROLLMENT
PERIOD.—If
the individual is first eligible to enroll under
such section for July 1999, the enrollment pe-
riod shall begin on May 1, 1999, and shall end
on August 31, 1999. Any such enrollment be-
fore July 1, 1999, is conditioned upon compli-
ance with the conditions of eligibility for July
1999.
‘‘(B) SUBSEQUENT PERIODS.—If the indi-
vidual is eligible to enroll under such section for
a month after July 1999, the enrollment period
based on such eligibility shall begin on the first
day of the second month before the month in
which the individual first is eligible to so enroll
(or reenroll) and shall end four months later.’’;
(3) in subsection (d)(1), by amending subpara-
graph (B) to read as follows:
‘‘(B) TERMINATION BASED ON AGE.—
‘‘(i) AT
AGE
65.—Subject to clause
(ii), the individual attains 65 years of age.
‘‘(ii) AT
AGE
FOR
DISPLACED
WORKERS AND SPOUSES.—In the case of
an individual enrolled under this part pur-
suant to section 1859(c), subject to sub-
section (a)(1), the individual attains 62
years of age.’’;
(4) in subsection (d)(1), by adding at the end
the following new subparagraph:
‘‘(C) OBTAINING ACCESS TO EMPLOYMENT-
BASED COVERAGE OR FEDERAL HEALTH INSUR-
ANCE
PROGRAM
FOR
INDIVIDUALS
UNDER
YEARS OF AGE.—In the case of an individual
who has not attained 62 years of age, the indi-
vidual is covered (or eligible for coverage) as a
participant or beneficiary under a group health
plan or under a Federal health insurance pro-
gram.’’;
(5) in subsection (d)(2), by amending subpara-
graph (C) to read as follows:
‘‘(C) AGE OR MEDICARE ELIGIBILITY.—
‘‘(i) IN
GENERAL.—The termination
of a coverage period under paragraph
(1)(A)(iii) or (1)(B)(i) shall take effect as
of the first day of the month in which the
individual attains 65 years of age or be-
comes entitled to benefits under part A or
enrolled for benefits under part B.
‘‘(ii) DISPLACED WORKERS.—The ter-
mination of a coverage period under para-
graph (1)(B)(ii) shall take effect as of the
first day of the month in which the individ-
ual attains 62 years of age, unless the in-
dividual has enrolled under this part pur-
suant to section 1859(b) and section
1859E(c)(1).’’; and
(6) in subsection (d)(2), by adding at the end
the following new subparagraph:
‘‘(D) ACCESS TO COVERAGE.—The termi-
nation of a coverage period under paragraph
(1)(C) shall take effect on the date on which
the individual is eligible to begin a period of
creditable coverage (as defined in section
2701(c) of the Public Health Service Act)
under a group health plan or under a Federal
health insurance program.’’.
(c) PREMIUMS.—Section 1859B of such Act, as so
inserted, is amended—
(1) in subsection (a)(1), by adding at the end
the following:
‘‘(B) BASE MONTHLY PREMIUM FOR INDI-
VIDUALS UNDER 62 YEARS OF AGE.—A base
monthly premium for individuals under 62
years of age, equal to 1⁄12 of the base annual
premium rate computed under subsection (d)(3)
for each premium area and age cohort.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(d) BASE MONTHLY PREMIUM FOR INDIVIDUALS
UNDER 62 YEARS OF AGE.—
‘‘(1) NATIONAL, PER CAPITA AVERAGE FOR AGE
GROUPS.—
‘‘(A) ESTIMATE
OF
AMOUNT.—The Sec-
retary shall estimate the average, annual per
capita amount that would be payable under this
title with respect to individuals residing in the
United States who meet the requirement of sec-
tion 1859(c)(1)(A) within each of the age co-
horts established under subparagraph (B) as if
all such individuals within such cohort were eli-
gible for (and enrolled) under this title during
the entire year (and assuming that section
1862(b)(2)(A)(i) did not apply).
‘‘(B) AGE
COHORTS.—For purposes of
subparagraph (A), the Secretary shall establish
separate age cohorts in 5 year age increments
for individuals who have not attained 60 years
of ages and a separate cohort for individuals
who have attained 60 years of age.
‘‘(2) GEOGRAPHIC
ADJUSTMENT.—The Sec-
retary shall adjust the amount determined under
paragraph (1)(A) for each premium area (specified
under subsection (a)(3)) in the same manner and to
the same extent as the Secretary provides for adjust-
ments under subsection (b)(2).
‘‘(3) BASE ANNUAL PREMIUM.—The base an-
nual premium under this subsection for months in a
year for individuals in an age cohort under para-
graph (1)(B) in a premium area is equal to 165 per-
cent of the average, annual per capita amount esti-
mated under paragraph (1) for the age cohort and
year, adjusted for such area under paragraph (2).
‘‘(4) PRO-RATION OF PREMIUMS TO REFLECT
COVERAGE DURING A PART OF A MONTH.—If the
Secretary provides for coverage of portions of a
month under section 1859A(c)(2), the Secretary
shall pro-rate the premiums attributable to such cov-
erage under this section to reflect the portion of the
month so covered.’’.
(d) ADMINISTRATIVE PROVISIONS.—Section 1859F
of such Act, as so inserted, is amended by adding at the
end the following:
‘‘(d) ADDITIONAL ADMINISTRATIVE PROVISIONS.—
‘‘(1) PROCESS FOR CONTINUED ENROLLMENT
OF DISPLACED WORKERS WHO ATTAIN 62 YEARS OF
AGE.—The Secretary shall provide a process for the
continuation of enrollment of individuals whose en-
rollment under section 1859(c) would be terminated
upon attaining 62 years of age. Under such process
such individuals shall be provided appropriate and
timely notice before the date of such termination
and of the requirement to enroll under this part pur-
suant to section 1859(b) in order to continue entitle-
ment to benefits under this title after attaining 62
years of age.
‘‘(2) ARRANGEMENTS WITH STATES FOR DE-
TERMINATIONS RELATING TO UNEMPLOYMENT COM-
PENSATION ELIGIBILITY.—The Secretary may pro-
vide for appropriate arrangements with States for
the determination of whether individuals in the State
meet or would meet the requirements of section
1859(c)(1)(C)(i).’’.‘‘
(e) CONFORMING AMENDMENT
TO HEADING
TO
PART.—The heading of part D of title XVIII of the Social
Security Act, as so inserted, is amended by striking ‘‘62’’
and inserting ‘‘55’’.
TITLE III—COBRA PROTECTION
FOR EARLY RETIREES
Subtitle A—Amendments to the
Employee 
Retirement 
Income
Security Act of 1974
SEC. 301. COBRA CONTINUATION BENEFITS FOR CERTAIN
RETIRED 
WORKERS 
WHO 
LOSE 
RETIREE
HEALTH COVERAGE.
(a) 
ESTABLISHMENT
OF
NEW
QUALIFYING
EVENT.—
(1) IN GENERAL.—Section 603 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1163) is amended by inserting after paragraph (6)
the following new paragraph:
‘‘(7) The termination or substantial reduction
in benefits (as defined in section 607(7)) of group
health plan coverage as a result of plan changes or
termination in the case of a covered employee who
is a qualified retiree.’’.
(2) QUALIFIED
RETIREE; QUALIFIED
BENE-
FICIARY; 
AND
SUBSTANTIAL
REDUCTION
DE-
FINED.—Section 607 of such Act (29 U.S.C. 1167)
is amended—
(A) in paragraph (3)—
(i) in subparagraph (A), by inserting
‘‘except as otherwise provided in this para-
graph,’’ after ‘‘means,’’; and
(ii) by adding at the end the following
new subparagraph:
‘‘(D) SPECIAL RULE FOR QUALIFYING RE-
TIREES AND DEPENDENTS.—In the case of a
qualifying event described in section 603(7), the
term ‘qualified beneficiary’ means a qualified
retiree and any other individual who, on the day
before such qualifying event, is a beneficiary
under the plan on the basis of the individual’s
relationship to such qualified retiree.’’; and
(B) by adding at the end the following new
paragraphs:
‘‘(6) QUALIFIED RETIREE.—The term ‘qualified
retiree’ means, with respect to a qualifying event de-
scribed in section 603(7), a covered employee who,
at the time of the event—
‘‘(A) has attained 55 years of age; and
‘‘(B) was receiving group health coverage
under the plan by reason of the retirement of
the covered employee.
‘‘(7) SUBSTANTIAL
REDUCTION.—The term
‘substantial reduction’—
‘‘(A) means, as determined under regula-
tions of the Secretary and with respect to a
qualified beneficiary, a reduction in the average
actuarial value of benefits under the plan
(through reduction or elimination of benefits,
an increase in premiums, deductibles, copay-
ments, and coinsurance, or any combination
thereof), since the date of commencement of
coverage of the beneficiary by reason of the re-
tirement of the covered employee (or, if later,
January 6, 1998), in an amount equal to at
least 50 percent of the total average actuarial
value of the benefits under the plan as of such
date (taking into account an appropriate ad-
justment to permit comparison of values over
time); and
‘‘(B) includes an increase in premiums re-
quired to an amount that exceeds the premium
level described in the fourth sentence of section
602(3).’’.
(b) DURATION OF COVERAGE THROUGH AGE 65.—
Section 602(2)(A) of such Act (29 U.S.C. 1162(2)(A)) is
amended—
(1) in clause (ii), by inserting ‘‘or 603(7)’’ after
‘‘603(6)’’;
(2) in clause (iv), by striking ‘‘or 603(6)’’ and
inserting ‘‘, 603(6), or 603(7)’’;
(3) by redesignating clause (iv) as clause (vi);
(4) by redesignating clause (v) as clause (iv)
and by moving such clause to immediately follow
clause (iii); and
(5) by inserting after such clause (iv) the fol-
lowing new clause:
‘‘(v) SPECIAL RULE FOR CERTAIN DE-
PENDENTS IN CASE OF TERMINATION OR
SUBSTANTIAL
REDUCTION
OF
RETIREE
HEALTH
COVERAGE.—In the case of a
qualifying 
event 
described 
in 
section
603(7), in the case of a qualified bene-
ficiary described in section 607(3)(D) who
is not the qualified retiree or spouse of
such retiree, the later of—
‘‘(I) the date that is 36 months
after the earlier of the date the quali-
fied retiree becomes entitled to bene-
fits under title XVIII of the Social Se-
curity Act, or the date of the death of
the qualified retiree; or
‘‘(II) the date that is 36 months
after the date of the qualifying
event.’’.
(c) TYPE OF COVERAGE IN CASE OF TERMINATION
OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV-
ERAGE.—Section 602(1) of such Act (29 U.S.C. 1162(1))
is amended—
(1) by striking ‘‘The coverage’’ and inserting
the following:
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the coverage’’; and
(2) by adding at the end the following:
‘‘(B) CERTAIN RETIREES.—In the case of
a qualifying event described in section 603(7),
in applying the first sentence of subparagraph
(A) and the fourth sentence of paragraph (3),
the coverage offered that is the most prevalent
coverage option (as determined under regula-
tions of the Secretary) continued under the
group health plan (or, if none, under the most
prevalent other plan offered by the same plan
sponsor) shall be treated as the coverage de-
scribed in such sentence, or (at the option of
the plan and qualified beneficiary) such other
coverage option as may be offered and elected
by the qualified beneficiary involved.’’.
(d) INCREASED LEVEL OF PREMIUMS PERMITTED.—
Section 602(3) of such Act (29 U.S.C. 1162(3)) is amend-
ed by adding at the end the following new sentence: ‘‘In
the case of an individual provided continuation coverage
by reason of a qualifying event described in section
603(7), any reference in subparagraph (A) of this para-
graph to ‘102 percent of the applicable premium’ is
deemed a reference to ‘125 percent of the applicable pre-
mium for employed individuals (and their dependents, if
applicable) for the coverage option referred to in para-
graph (1)(B)’.’’.
(e) NOTICE.—Section 606(a) of such Act (29 U.S.C.
1166) is amended—
(1) in paragraph (4)(A), by striking ‘‘or (6)’’
and inserting ‘‘(6), or (7)’’; and
(2) by adding at the end the following:
‘‘The notice under paragraph (4) in the case of a qualify-
ing event described in section 603(7) shall be provided at
least 90 days before the date of the qualifying event.’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section (other than subsection (e)(2)) shall
apply to qualifying events occurring on or after Jan-
uary 6, 1998. In the case of a qualifying event oc-
curring on or after such date and before the date of
the enactment of this Act, such event shall be
deemed (for purposes of such amendments) to have
occurred on the date of the enactment of this Act.
(2) ADVANCE NOTICE OF TERMINATIONS AND
REDUCTIONS.—The amendment made by subsection
(e)(2) shall apply to qualifying events occurring
after the date of the enactment of this Act, except
that in no case shall notice be required under such
amendment before such date.
Subtitle B—Amendments to the
Public Health Service Act
SEC. 311. COBRA CONTINUATION BENEFITS FOR CERTAIN
RETIRED 
WORKERS 
WHO 
LOSE 
RETIREE
HEALTH COVERAGE.
(a) 
ESTABLISHMENT
OF
NEW
QUALIFYING
EVENT.—
(1) IN GENERAL.—Section 2203 of the Public
Health Service Act (42 U.S.C. 300bb–3) is amended
by inserting after paragraph (5) the following new
paragraph:
‘‘(6) The termination or substantial reduction
in benefits (as defined in section 2208(6)) of group
health plan coverage as a result of plan changes or
termination in the case of a covered employee who
is a qualified retiree.’’.
(2) QUALIFIED
RETIREE; QUALIFIED
BENE-
FICIARY; 
AND
SUBSTANTIAL
REDUCTION
DE-
FINED.—Section 2208 of such Act (42 U.S.C.
300bb–8) is amended—
(A) in paragraph (3)—
(i) in subparagraph (A), by inserting
‘‘except as otherwise provided in this para-
graph,’’ after ‘‘means,’’; and
(ii) by adding at the end the following
new subparagraph:
‘‘(C) SPECIAL RULE FOR QUALIFYING RE-
TIREES AND DEPENDENTS.—In the case of a
qualifying event described in section 2203(6),
the term ‘qualified beneficiary’ means a quali-
fied retiree and any other individual who, on
the day before such qualifying event, is a bene-
ficiary under the plan on the basis of the indi-
vidual’s relationship to such qualified retiree.’’;
and
(B) by adding at the end the following new
paragraphs:
‘‘(5) QUALIFIED RETIREE.—The term ‘qualified
retiree’ means, with respect to a qualifying event de-
scribed in section 2203(6), a covered employee who,
at the time of the event—
‘‘(A) has attained 55 years of age; and
‘‘(B) was receiving group health coverage
under the plan by reason of the retirement of
the covered employee.
‘‘(6) SUBSTANTIAL
REDUCTION.—The term
‘substantial reduction’—
‘‘(A) means, as determined under regula-
tions of the Secretary of Labor and with respect
to a qualified beneficiary, a reduction in the av-
erage actuarial value of benefits under the plan
(through reduction or elimination of benefits,
an increase in premiums, deductibles, copay-
ments, and coinsurance, or any combination
thereof), since the date of commencement of
coverage of the beneficiary by reason of the re-
tirement of the covered employee (or, if later,
January 6, 1998), in an amount equal to at
least 50 percent of the total average actuarial
value of the benefits under the plan as of such
date (taking into account an appropriate ad-
justment to permit comparison of values over
time); and
‘‘(B) includes an increase in premiums re-
quired to an amount that exceeds the premium
level described in the fourth sentence of section
2202(3).’’.
(b) DURATION OF COVERAGE THROUGH AGE 65.—
Section 2202(2)(A) of such Act (42 U.S.C. 300bb–
2(2)(A)) is amended—
(1) by redesignating clause (iii) as clause (iv);
and
(2) by inserting after clause (ii) the following
new clause:
‘‘(iii) SPECIAL
RULE
FOR
CERTAIN
DEPENDENTS
IN
CASE
OF
TERMINATION
OR SUBSTANTIAL REDUCTION OF RETIREE
HEALTH
COVERAGE.—In the case of a
qualifying 
event 
described 
in 
section
2203(6), in the case of a qualified bene-
ficiary described in section 2208(3)(C) who
is not the qualified retiree or spouse of
such retiree, the later of—
‘‘(I) the date that is 36 months
after the earlier of the date the quali-
fied retiree becomes entitled to bene-
fits under title XVIII of the Social Se-
curity Act, or the date of the death of
the qualified retiree; or
‘‘(II) the date that is 36 months
after the date of the qualifying
event.’’.
(c) TYPE OF COVERAGE IN CASE OF TERMINATION
OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV-
ERAGE.—Section 2202(1) of such Act (42 U.S.C. 300bb–
2(1)) is amended—
(1) by striking ‘‘The coverage’’ and inserting
the following:
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the coverage’’; and
(2) by adding at the end the following:
‘‘(B) CERTAIN RETIREES.—In the case of
a qualifying event described in section 2203(6),
in applying the first sentence of subparagraph
(A) and the fourth sentence of paragraph (3),
the coverage offered that is the most prevalent
coverage option (as determined under regula-
tions of the Secretary of Labor) continued
under the group health plan (or, if none, under
the most prevalent other plan offered by the
same plan sponsor) shall be treated as the cov-
erage described in such sentence, or (at the op-
tion of the plan and qualified beneficiary) such
other coverage option as may be offered and
elected by the qualified beneficiary involved.’’.
(d) INCREASED LEVEL OF PREMIUMS PERMITTED.—
Section 2202(3) of such Act (42 U.S.C. 300bb–2(3)) is
amended by adding at the end the following new sentence:
‘‘In the case of an individual provided continuation cov-
erage by reason of a qualifying event described in section
2203(6), any reference in subparagraph (A) of this para-
graph to ‘102 percent of the applicable premium’ is
deemed a reference to ‘125 percent of the applicable pre-
mium for employed individuals (and their dependents, if
applicable) for the coverage option referred to in para-
graph (1)(B)’.’’.
(e) NOTICE.—Section 2206(a) of such Act (42 U.S.C.
300bb–6(a)) is amended—
(1) in paragraph (4)(A), by striking ‘‘or (4)’’
and inserting ‘‘(4), or (6)’’; and
(2) by adding at the end the following:
‘‘The notice under paragraph (4) in the case of a qualify-
ing event described in section 2203(6) shall be provided
at least 90 days before the date of the qualifying event.’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section (other than subsection (e)(2)) shall
apply to qualifying events occurring on or after Jan-
uary 6, 1998. In the case of a qualifying event oc-
curring on or after such date and before the date
of the enactment of this Act, such event shall be
deemed (for purposes of such amendments) to have
occurred on the date of the enactment of this Act.
(2) ADVANCE NOTICE OF TERMINATIONS AND
REDUCTIONS.—The amendment made by subsection
(e)(2) shall apply to qualifying events occurring
after the date of the enactment of this Act, except
that in no case shall notice be required under such
amendment before such date.
Subtitle C—Amendments to the
Internal Revenue Code of 1986
SEC. 321. COBRA CONTINUATION BENEFITS FOR CERTAIN
RETIRED 
WORKERS 
WHO 
LOSE 
RETIREE
HEALTH COVERAGE.
(a) 
ESTABLISHMENT
OF
NEW
QUALIFYING
EVENT.—
(1) IN GENERAL.—Section 4980B(f)(3) of the
Internal Revenue Code of 1986 is amended by in-
serting after subparagraph (F) the following new
subparagraph:
‘‘(G) The termination or substantial reduc-
tion in benefits (as defined in subsection (g)(6))
of group health plan coverage as a result of
plan changes or termination in the case of a
covered employee who is a qualified retiree.’’.
(2) QUALIFIED
RETIREE; QUALIFIED
BENE-
FICIARY; 
AND
SUBSTANTIAL
REDUCTION
DE-
FINED.—Section 4980B(g) of such Code is amend-
ed—
(A) in paragraph (1)—
(i) in subparagraph (A), by inserting
‘‘except as otherwise provided in this para-
graph,’’ after ‘‘means,’’; and
(ii) by adding at the end the following
new subparagraph:
‘‘(E) SPECIAL RULE FOR QUALIFYING RE-
TIREES AND DEPENDENTS.—In the case of a
qualifying 
event 
described 
in 
subsection
(f)(3)(G), the term ‘qualified beneficiary’ means
a qualified retiree and any other individual who,
on the day before such qualifying event, is a
beneficiary under the plan on the basis of the
individual’s relationship to such qualified re-
tiree.’’; and
(B) by adding at the end the following new
paragraphs:
‘‘(5) QUALIFIED RETIREE.—The term ‘qualified
retiree’ means, with respect to a qualifying event de-
scribed in subsection (f)(3)(G), a covered employee
who, at the time of the event—
‘‘(A) has attained 55 years of age; and
‘‘(B) was receiving group health coverage
under the plan by reason of the retirement of
the covered employee.
‘‘(6) SUBSTANTIAL
REDUCTION.—The term
‘substantial reduction’—
‘‘(A) means, as determined under regula-
tions of the Secretary of Labor and with respect
to a qualified beneficiary, a reduction in the av-
erage actuarial value of benefits under the plan
(through reduction or elimination of benefits,
an increase in premiums, deductibles, copay-
ments, and coinsurance, or any combination
thereof), since the date of commencement of
coverage of the beneficiary by reason of the re-
tirement of the covered employee (or, if later,
January 6, 1998), in an amount equal to at
least 50 percent of the total average actuarial
value of the benefits under the plan as of such
date (taking into account an appropriate ad-
justment to permit comparison of values over
time); and
‘‘(B) includes an increase in premiums re-
quired to an amount that exceeds the premium
level described in the fourth sentence of sub-
section (f)(2)(C).’’.
(b) DURATION OF COVERAGE THROUGH AGE 65.—
Section 4980B(f)(2)(B)(i) of such Code is amended—
(1) in subclause (II), by inserting ‘‘or (3)(G)’’
after ‘‘(3)(F)’’;
(2) in subclause (IV), by striking ‘‘or (3)(F)’’
and inserting ‘‘, (3)(F), or (3)(G)’’;
(3) by redesignating subclause (IV) as sub-
clause (VI);
(4) by redesignating subclause (V) as subclause
(IV) and by moving such clause to immediately fol-
low subclause (III); and
(5) by inserting after such subclause (IV) the
following new subclause:
‘‘(V) SPECIAL
RULE
FOR
CER-
TAIN DEPENDENTS IN CASE OF TER-
MINATION
OR
SUBSTANTIAL
REDUC-
TION
OF
RETIREE
HEALTH
COV-
ERAGE.—In the case of a qualifying
event described in paragraph (3)(G),
in the case of a qualified beneficiary
described in subsection (g)(1)(E) who
is not the qualified retiree or spouse
of such retiree, the later of—
‘‘(a) the date that is 36
months after the earlier of the
date the qualified retiree becomes
entitled to benefits under title
XVIII of the Social Security Act,
or the date of the death of the
qualified retiree; or
‘‘(b) the date that is 36
months after the date of the
qualifying event.’’.
(c) TYPE OF COVERAGE IN CASE OF TERMINATION
OR SUBSTANTIAL REDUCTION OF RETIREE HEALTH COV-
ERAGE.—Section 4980B(f)(2)(A) of such Code is amend-
ed—
(1) by striking ‘‘The coverage’’ and inserting
the following:
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the coverage’’; and
(2) by adding at the end the following:
‘‘(ii) CERTAIN
RETIREES.—In the
case of a qualifying event described in
paragraph (3)(G), in applying the first
sentence of clause (i) and the fourth sen-
tence of subparagraph (C), the coverage
offered that is the most prevalent coverage
option (as determined under regulations of
the Secretary of Labor) continued under
the group health plan (or, if none, under
the most prevalent other plan offered by
the same plan sponsor) shall be treated as
the coverage described in such sentence, or
(at the option of the plan and qualified
beneficiary) such other coverage option as
may be offered and elected by the qualified
beneficiary involved.’’.
(d) INCREASED LEVEL OF PREMIUMS PERMITTED.—
Section 4980B(f)(2)(C) of such Code is amended by add-
ing at the end the following new sentence: ‘‘In the case
of an individual provided continuation coverage by reason
of a qualifying event described in paragraph (3)(G), any
reference in clause (i) of this subparagraph to ‘102 per-
cent of the applicable premium’ is deemed a reference to
‘125 percent of the applicable premium for employed indi-
viduals (and their dependents, if applicable) for the cov-
erage option referred to in subparagraph (A)(ii)’.’’.
(e) NOTICE.—Section 4980B(f)(6) of such Code is
amended—
(1) in subparagraph (D)(i), by striking ‘‘or
(F)’’ and inserting ‘‘(F), or (G)’’; and
(2) by adding at the end the following:
‘‘The notice under subparagraph (D)(i) in the case of a
qualifying event described in paragraph (3)(G) shall be
provided at least 90 days before the date of the qualifying
event.’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section (other than subsection (e)(2)) shall
apply to qualifying events occurring on or after Jan-
uary 6, 1998. In the case of a qualifying event oc-
curring on or after such date and before the date of
the enactment of this Act, such event shall be
deemed (for purposes of such amendments) to have
occurred on the date of the enactment of this Act.
(2) ADVANCE NOTICE OF TERMINATIONS AND
REDUCTIONS.—The amendment made by subsection
(e)(2) shall apply to qualifying events occurring
after the date of the enactment of this Act, except
that in no case shall notice be required under such
amendment before such date.
TITLE IV—FINANCING
SEC. 401. REFERENCE TO FINANCING PROVISIONS.
Any increase in payments under the medicare pro-
gram under title XVIII of the Social Security Act that
results from the enactment of this Act shall be offset by
reductions in payments under such program pursuant to
the anti-fraud and anti-abuse provisions enacted as part
of the Medicare Fraud and Overpayment Act of 1998.
TITLE V—PROVISION OF PRE-
MIUM ASSISTANCE FOR LOW-
INCOME INDIVIDUALS PUR-
CHASING EARLY COVERAGE
UNDER THE MEDICARE PRO-
GRAM
SEC. 501. PROVISION OF PREMIUM ASSISTANCE FOR LOW-
INCOME INDIVIDUALS PURCHASING EARLY
COVERAGE 
UNDER 
THE 
MEDICARE 
PRO-
GRAM.
(a) IN GENERAL.—Section 1902(a)(10) of the Social
Security Act (42 U.S.C. 1396a(a)(10)) is amended—
(1) in subparagraph (E)—
(A) by striking ‘‘and’’ at the end of clause
(iii), and
(B) by adding at the end the following new
clause:
‘‘(v) for making medical assistance avail-
able consistent with section 1916(d)(2) for
medicare cost-sharing described in section
1905(p)(3)(A)(iii) for individuals who have en-
rolled for benefits under part D of title XVIII,
whose income (as determined in the same man-
ner as income is determined under section
1905(p) for qualified medicare beneficiaries)
does not exceed 200 percent of the official pov-
erty line (referred to in such section) applicable
to a family of the size involved, and who are not
otherwise entitled to medical assistance under
the plan;’’; and
(2) in the matter following subparagraph (F)—
(A) by striking ‘‘and’’ before ‘‘(XIII)’’, and
(B) by inserting before the semicolon at
the end the following: ‘‘, and (XIV) the medical
assistance made available to an individual de-
scribed in subparagraph (E)(v) shall be limited
to medical assistance for medicare cost-sharing
described in the last sentence of section
1905(p)(3)’’.
(b) 
SLIDING
SCALE
FOR
BENEFITS.—Section
1916(d) of such Act (42 U.S.C. 1396o(d)) is amended—
(1) by inserting ‘‘(1)’’ after ‘‘(d)’’, and
(2) by adding at the end the following:
‘‘(2) With respect to an individual described in sec-
tion 1902(a)(10)(E)(v), the State plan of a State shall
provide for the charging of a premium (expressed as a per-
centage of the medicare cost-sharing described in the last
sentence of paragraph (3) of section 1905(p)(3) provided
with respect to the individual) according to a sliding scale
under which such percentage increases from 10 percent
to 100 percent, in reasonable increments (as determined
by the Secretary), as the individual’s income increases
from 100 percent of the official poverty line (referred to
in such section) to 200 percent of such poverty line.’’.
(c) 100 PERCENT FEDERAL MEDICAL ASSISTANCE
PERCENTAGE.—The first sentence of section 1905(b) of
such Act (42 U.S.C. 1396d(b)) is amended—
(1) by striking ‘‘and’’ before ‘‘(3)’’, and
(2) by inserting before the period at the end the
following: ‘‘, and (4) the Federal medical assistance
percentage shall be 100 percent with respect to med-
ical 
assistance 
provided 
under 
section
1902(a)(10)(E)(v)’’.
(d) MEDICARE COST-SHARING INCLUDING BUY-IN
PREMIUM.—Section 1905(p)(3) of such Act (42 U.S.C.
1396d(p)(3)) is amended by adding at the end the follow-
ing: ‘‘Such term also includes premiums under part D of
title XVIII but only with respect to individuals described
in section 1902(a)(10)(E)(v).’’.
(e) TREATMENT OF TERRITORIES.—Section 1108(g)
of such Act (42 U.S.C. 1308(g)) is amended by adding
at the end the following new paragraph:
‘‘(3) Notwithstanding the preceding provisions of this
subsection, with respect to fiscal year 1999 and any fiscal
year thereafter, the amount otherwise determined under
this subsection (and subsection (f)) for the fiscal year for
a Commonwealth or territory shall be increased by the
ratio (as estimated by the Secretary) of—
‘‘(A) the aggregate amount of payments made
to the 50 States and the District of Columbia for
the fiscal year under title XIX that are attributable
to the amendments made by the Early Medicare Ac-
cess and Affordability Act of 1998; to
‘‘(B) the aggregate amount of total payments
made to such States and District for the fiscal year
under such title.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to premiums for months beginning
with July 1999.
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