ual involved waives the protection provided under
such paragraph.
‘‘(c) PREEXISTING CONDITION DEFINED.—For pur-
poses of this section, the term ‘preexisting condition’
means, with respect to coverage under health insurance
coverage or under a group health plan, a condition which
was diagnosed or treated for a condition, or for which a
reasonably prudent person would have sought medical care
diagnosis or treatment, within the 3-month period ending
on the day before the date of enrollment (without regard
to any delayed coverage period).
‘‘SEC. 4989. GUARANTEED RENEWABILITY OF HEALTH IN-
SURANCE COVERAGE.
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), a carrier offering health insurance coverage shall
guarantee that such coverage may be renewed or contin-
ued in force at the option of the policyholder or contract-
holder.
‘‘(b) GROUNDS FOR REFUSAL TO RENEW.—
‘‘(1) IN GENERAL.—Subject to paragraphs (3)
and (4), a carrier offering health insurance coverage
may cancel or refuse to renew such coverage—
‘‘(A) for nonpayment of premium or con-
tribution in accordance with the terms of the
coverage;
‘‘(B) for fraud or misrepresentation of ma-
terial fact;
‘‘(C) because of a general discontinuation
or termination of coverage, but only if the car-
rier provides prior notice of such discontinu-
ation or termination and if the conditions de-
scribed in clause (i) or (ii) of paragraph (2)(A)
are met;
‘‘(D) in the case of coverage offered in
connection with a group health plan, for failure
of the plan to maintain participation rules con-
sistent with paragraph (4); or
‘‘(E) in the case of coverage that is con-
tinuation coverage under section 4980B, for
loss of eligibility to continue such coverage.
‘‘(2) CONDITIONS FOR DISCONTINUATION.—
‘‘(A) IN GENERAL.—
‘‘(i) 
NONDISCRIMINATORY
SUBSTI-
TUTION
OF
ALTERNATIVE
COVERAGE.—
The conditions described in this clause are
the following:
‘‘(I) The carrier is no longer of-
fering health insurance coverage to
new policyholders or contractholders.
‘‘(II) The carrier is offering to
the previously covered policyholder or
contractholder the option to purchase
any other health insurance coverage
currently being offered to new policy-
holders or contractholders.
‘‘(III) The discontinuation or ter-
mination of coverage and option to re-
place with other coverage is made uni-
formly without regard to the health
status or insurability of any person
provided health insurance coverage.
‘‘(ii) GENERAL DISCONTINUATION OF
COVERAGE
IN
A
STATE.—The conditions
described in this clause are that the carrier
is discontinuing and not renewing all
health insurance coverage within a class of
coverage (as defined in subparagraph (B))
in a State.
‘‘(B) CLASSES
OF
COVERAGE.—For pur-
poses of subparagraph (A)(ii), each of the fol-
lowing is considered a separate class of health
insurance coverage:
‘‘(i) INDIVIDUAL COVERAGE.—Health
insurance coverage not offered in connec-
tion with any group health plan.
‘‘(ii) SMALL EMPLOYER GROUP COV-
ERAGE.—Health insurance coverage of-
fered to small employers (as defined by
State law) in connection with any group
health plan for covered employees and
their dependents.
‘‘(iii) OTHER
GROUP
COVERAGE.—
Health insurance coverage offered in con-
nection with a group health plan and not
described in clause (ii).
‘‘(3) APPLICATION
OF
GEOGRAPHIC
LIMITA-
TIONS TO COVERAGE PROVIDED THROUGH A NET-
WORK ARRANGEMENT.—
‘‘(A) IN GENERAL.—Coverage under health
insurance or under a group health plan that
consists primarily of coverage through a net-
work arrangement (as defined in subparagraph
(B)) may be denied to individuals who neither
live nor reside in the service area of the ar-
rangement, but only if such denial is applied
uniformly, without regard to the health status
or the insurability of particular individuals.
‘‘(B) 
NETWORK
ARRANGEMENTS.—For
purposes of subparagraph (A), the term ‘net-
work arrangement’ means, with respect to a
group health plan or under health insurance
coverage, an arrangement under such plan or
coverage whereby providers agree to provide
items and services covered under the arrange-
ment to individuals covered under the plan or
who have such coverage.
‘‘(4) 
MINIMUM
PARTICIPATION
REQUIRE-
MENTS.—A carrier that offers health insurance cov-
erage in connection with a group health plan that
covers the employees of one or more employers may
require that a minimum percentage of eligible em-
ployees of such an employer obtain such coverage if
such percentage is applied uniformly to all such cov-
erage offered to employers of comparable size.
‘‘SEC. 4990. RELATION TO STATE STANDARDS.
‘‘Nothing in this chapter shall prevent a State from
establishing, implementing, or continuing in effect stand-
ards related to health insurance coverage (including the
issuance, renewal, or rating of such coverage) if such
standards are at least as stringent as the standards estab-
lished under this chapter with respect to such coverage.
‘‘SEC. 4991. DEFINITIONS.
‘‘For purposes of this chapter—
‘‘(1) CARRIER.—The term ‘carrier’ means—
‘‘(A) a licensed insurance company;
‘‘(B) an entity offering prepaid hospital or
medical service plan;
‘‘(C) a health maintenance organization;
and
‘‘(D) any similar entity which (i) is en-
gaged in the business of providing a plan of
health insurance or health benefits or services
and (ii) is regulated under State law for sol-
vency.
‘‘(2) HEALTH INSURANCE COVERAGE.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘health insurance
coverage’ means any hospital or medical service
policy or certificate, hospital or medical service
plan contract, or health maintenance organiza-
tion group contract offered by a carrier.
‘‘(B) EXCEPTION.—Such term does not in-
clude any of the following (or any combination
of the following):
‘‘(i) Coverage only for accident, den-
tal, vision, or disability income, or any
combination thereof.
‘‘(ix) Any coverage not described in
any preceding clause which consists of ben-
efit payments, on a periodic basis, for a
specified disease or illness or period of hos-
pitalization without regard to the costs in-
curred or services rendered during the pe-
riod to which the payments relate.
‘‘(x) Such other coverage as the Sec-
retary of Health and Human Services, in
consultation with the Secretaries of Labor
and of the Treasury, determines is not
health insurance coverage.
‘‘(C) 
TREATMENT
OF
STATE
RISK
POOLS.—Except 
for 
purposes 
of 
sections
4987(b)(3), 4988(a)(2)(B)(ii), and 4988(a)(3),
such term does not include coverage provided
through a State risk pool, uncompensated care
pool or similar subsidized program.
‘‘(D) PUBLIC PLANS COUNTED FOR PUR-
POSES OF QUALIFYING PREVIOUS COVERAGE.—
For 
purposes 
of 
sections 
4987(b)(3),
4988(a)(2)(B)(ii), and 4988(a)(3), such term
also includes coverage under any of the follow-
ing:
‘‘(i) The medicare program under title
XVIII of the Social Security Act.
‘‘(ii) A State plan under title XIX of
such Act.
‘‘(iii) A program of the Indian Health
Service.
‘‘(iv) The Civilian Health and Medical
Program 
of 
the 
Uniformed 
Services
(CHAMPUS) under title 10, United States
Code.
‘‘(v) Any other similar governmental
health insurance program (including a pro-
gram described in subparagraph (C)).
‘‘(3) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning given such term in sec-
tion 5000(b)(1), but does not include any type of
coverage excluded from the definition of health in-
surance coverage under paragraph (2)(B) or (C) and
does not include any plan unless at least one of the
following requirements is met:
‘‘(A) Any portion of the premium or bene-
fits under the plan is paid by or on behalf of
the employer.
‘‘(B) An eligible employee or dependent is
reimbursed, whether through wage adjustments
or otherwise, by or on behalf of the employer
for any portion of the premium.
‘‘(C) The health benefit plan is treated by
the employer, or any of the eligible employees
or dependents, as part of a plan or program for
the purposes of section 162, section 25, or sec-
tion 106 of the Internal Revenue Code of 1986.
‘‘(4) STATE.—The term ‘State’ includes the
District of Columbia, Puerto Rico, the Virgin Is-
lands, Guam, American Samoa, and the Northern
Mariana Islands.’’
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
subsection (a) shall apply to individuals who com-
mence health insurance coverage or coverage under
a group health plan after the first day of the first
month beginning more than 6 months after the date
of the enactment of this Act.
(2) PLAN
YEAR
EXCEPTION.—Such amend-
ments shall not apply to plan years ending before
the first day referred to in paragraph (1).
(c) CLERICAL AMENDMENT.—The table of chapters
for subtitle D is amended by inserting after the item relat-
ing to chapter 44 the following new item:
‘‘CHAPTER 45. Continuity and portability of health coverage.’’
SEC. 3. CHANGES IN COBRA CONTINUATION REQUIRE-
MENTS.
(a) MORE AFFORDABLE COVERAGE THROUGH RE-
QUIREMENT OF LOWER-COST HEALTH PLAN CHOICES.—
(1) IN GENERAL.—Section 4980B(f) of the In-
ternal Revenue Code of 1986 is amended—
(A) in paragraph (1), by striking ‘‘, con-
tinuation coverage under the plan’’ and insert-
ing ‘‘and as selected by the qualified beneficiary
under this subsection, continuation coverage of
the type described in subparagraph (A), (F)(i),
or (F)(ii) of paragraph (2)’’;
(B) in paragraph (2)(A), by striking ‘‘The
coverage’’ and inserting ‘‘Unless the coverage is
the type of coverage described in clause (i) or
(ii) of subparagraph (F), the coverage’’;
(C) in paragraph (2)(C)—
(i) in clause (i), by inserting ‘‘(or in
the case of alternative continuation cov-
erage described in clause (i) or (ii) of sub-
paragraph (F), 69 percent or 52 percent,
respectively, of such applicable premium)’’
after ‘‘for such period’’, and
(ii) in the last sentence by inserting ‘‘,
‘69 percent’, or ‘52 percent’ ’’ after ‘‘ ‘102
percent’ ’’ and by inserting ‘‘, ‘100 per-
cent’, or ‘75 percent’, respectively,’’;
(D) by adding at the end of paragraph (2)
the following new subparagraph:
‘‘(F) TYPES
OF
ALTERNATIVE
CONTINU-
ATION COVERAGE REQUIRED.—
‘‘(i) COVERAGE WITH TWO-THIRDS AC-
TUARIAL
VALUE.—The type of coverage
described in this clause is coverage
which—
‘‘(I) has an actuarial value (de-
termined with respect to the similarly
situated beneficiaries referred to in
subparagraph (A)) of not less than 2⁄3
of the actuarial value (determined
with respect to such beneficiaries) of
the reference coverage, and
‘‘(II) meets the requirements of
clause (iii).
‘‘(ii) COVERAGE WITH ONE-HALF AC-
TUARIAL
VALUE.—The type of coverage
described in this clause is coverage
which—
‘‘(I) has an actuarial value (de-
termined with respect to the similarly
situated beneficiaries referred to in
subparagraph (A)) of not less than 1⁄2
of the actuarial value (determined
with respect to such beneficiaries) of
the reference coverage, and
‘‘(II) meets the requirements of
clause (iii).
‘‘(iii) REQUIREMENTS
RELATING
TO
GENERAL AVAILABILITY AND PREEXISTING
CONDITIONS.—Coverage meets the require-
ments of this clause if the coverage—
‘‘(I) is made available to all
qualified beneficiaries who become eli-
gible for coverage under this sub-
section after the effective date of this
subparagraph, and
‘‘(II) does not impose any restric-
tion or limitation on coverage based
on a preexisting condition unless such
restriction or limitation could be im-
posed under the coverage described in
subparagraph (A).
‘‘(iv) REFERENCE
COVERAGE
DE-
FINED.—For purposes of this subpara-
graph, 
the 
term 
‘reference 
coverage’
means, with respect to a group health
plan, the costliest continuation coverage
available under subparagraph (A) under
the plan, excluding coverage in which an
insignificant proportion of the eligible indi-
viduals is enrolled.’’; and
(E) by adding at the end of paragraph (4)
the following new subparagraph:
‘‘(D) COMPUTATION BASED ON FULL COV-
ERAGE.—For purposes of this section, the ap-
plicable premium shall be computed based on
the type of coverage described in paragraph
(2)(A).’’
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to plan years begin-
ning on or after the first day of the first month be-
ginning at least 6 months after the date of the en-
actment of this Act.
(b) CONTINUATION COVERAGE FOR CERTAIN FOR-
MERLY
COVERED
DEPENDENT
SPOUSES
AND
CHIL-
DREN.—
(1) IN
GENERAL.—Section 4980B(f) of such
Code is amended by adding at the end the following
new paragraph:
‘‘(9) CAPTURE OF DELAYED DIVORCE OR SEPA-
RATION.—
‘‘(A) IN GENERAL.—For purposes of this
section, if a covered employee disenrolls from
coverage (or fails to renew coverage of) a quali-
fied beneficiary within the 12-month period pre-
ceding the date of the divorce or legal separa-
tion of the employee from the employee’s
spouse, the divorce or separation shall be treat-
ed as a qualifying event described in paragraph
(3)(C) and the loss of coverage shall be consid-
ered to be a result (and by reason) of such
event.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to a qualified beneficiary if—
‘‘(i) the beneficiary waives the rights
under such subparagraph, or
‘‘(ii) the qualified beneficiary at the
time of the qualifying event or at the time
of the disenrollment or failure to renew
coverage has coverage under a group
health plan (other than by reason of this
paragraph) if the plan does not contain
any exclusion or limitation with respect to
any preexisting condition of such bene-
ficiary.’’.
(2) TREATMENT OF PERIOD BEFORE DELAYED
DIVORCE
OR
SEPARATION.—Subparagraph (D) of
section 4980B(f)(2) of such Act is amended by add-
ing at the end the following new sentence: ‘‘For pur-
poses of applying any preexisting condition limita-
tion or restriction, any period beginning on the date
of the disenrollment or failure to renew coverage re-
ferred to in paragraph (9)(A) and ending on the
date of the divorce or separation referred to in such
paragraph shall not be treated as a break in cov-
erage if such paragraph applies to the qualified ben-
eficiary.’’.
(3) TREATMENT
OF
ANNULMENTS.—Section
4980B(g) of such Code is amended by adding at the
end the following new paragraph:
‘‘(5) TREATMENT
OF
ANNULMENT
AS
DI-
VORCE.—The term ‘divorce’ includes an annul-
ment.’’.
(4) EFFECTIVE DATE.—The amendments made
by this section shall apply to divorces, legal separa-
tions, and annulments occurring more than 60 days
after the date of the enactment of this Act.
(c) ELIMINATION OF TERMINATION OF CONTINU-
ATION COVERAGE BY REASON OF MEDICARE ELIGIBILITY
THROUGH END STAGE RENAL DISEASE.—
(1) IN
GENERAL.—Subclause (II) of section
4980B(f)(2)(B)(iv) of such Code is amended by in-
serting ‘‘other than by reason of section 226A of
such Act’’ after ‘‘the Social Security Act’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to covered employees
and qualified beneficiaries who become entitled to
benefits under title XVIII of the Social Security Act
pursuant to section 226A of such Act on or after the
first day of the first month that begins after the
date of the enactment of this Act.
Æ
HR 1604 IH——2