H. R. 3103—129
protection shall permit the signature to be on an
application or on a separate form.
‘‘(XI) Section 23 (relating to prohibition against
preexisting conditions and probationary periods in
replacement policies or certificates).
‘‘(ii) MODEL ACT.—The following requirements of
the model Act:
‘‘(I) Section 6C (relating to preexisting condi-
tions).
‘‘(II) Section 6D (relating to prior hospitaliza-
tion).
‘‘(B) DEFINITIONS.—For purposes of this paragraph—
‘‘(i) MODEL PROVISIONS.—The terms ‘model regula-
tion’ and ‘model Act’ mean the long-term care insur-
ance model regulation, and the long-term care insur-
ance model Act, respectively, promulgated by the
National Association of Insurance Commissioners (as
adopted as of January 1993).
‘‘(ii) COORDINATION.—Any provision of the model
regulation or model Act listed under clause (i) or (ii)
of subparagraph (A) shall be treated as including any
other provision of such regulation or Act necessary
to implement the provision.
‘‘(iii) DETERMINATION.—For purposes of this section
and section 4980C, the determination of whether any
requirement of a model regulation or the model Act
has been met shall be made by the Secretary.
‘‘(3) DISCLOSURE REQUIREMENT.—The requirement of this
paragraph is met with respect to any contract if such contract
meets the requirements of section 4980C(d).
‘‘(4) NONFORFEITURE REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of this paragraph
are met with respect to any level premium contract,
if the issuer of such contract offers to the policyholder,
including any group policyholder, a nonforfeiture provision
meeting the requirements of subparagraph (B).
‘‘(B) REQUIREMENTS OF PROVISION.—The nonforfeiture
provision required under subparagraph (A) shall meet the
following requirements:
‘‘(i) The nonforfeiture provision shall be appro-
priately captioned.
‘‘(ii) The nonforfeiture provision shall provide for
a benefit available in the event of a default in the
payment of any premiums and the amount of the bene-
fit may be adjusted subsequent to being initially
granted only as necessary to reflect changes in claims,
persistency, and interest as reflected in changes in
rates for premium paying contracts approved by the
Secretary for the same contract form.
‘‘(iii) The nonforfeiture provision shall provide at
least one of the following:
‘‘(I) Reduced paid-up insurance.
‘‘(II) Extended term insurance.
‘‘(III) Shortened benefit period.
‘‘(IV) Other similar offerings approved by the
Secretary.
H. R. 3103—135
Subtitle E—State Insurance Pools
SEC. 341. EXEMPTION FROM INCOME TAX FOR STATE-SPONSORED
ORGANIZATIONS PROVIDING HEALTH COVERAGE FOR
HIGH-RISK INDIVIDUALS.
(a) IN GENERAL.—Subsection (c) of section 501 (relating to
list of exempt organizations) is amended by adding at the end
the following new paragraph:
‘‘(26) Any membership organization if—
‘‘(A) such organization is established by a State exclu-
sively to provide coverage for medical care (as defined
in section 213(d)) on a not-for-profit basis to individuals
described in subparagraph (B) through—
‘‘(i) insurance issued by the organization, or
‘‘(ii) a health maintenance organization under an
arrangement with the organization,
‘‘(B) the only individuals receiving such coverage
through the organization are individuals—
‘‘(i) who are residents of such State, and
‘‘(ii) who, by reason of the existence or history
of a medical condition—
‘‘(I) are unable to acquire medical care cov-
erage for such condition through insurance or from
a health maintenance organization, or
‘‘(II) are able to acquire such coverage only
at a rate which is substantially in excess of the
rate for such coverage through the membership
organization,
‘‘(C) the composition of the membership in such
organization is specified by such State, and
‘‘(D) no part of the net earnings of the organization
inures to the benefit of any private shareholder or indi-
vidual.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years beginning after December 31, 1996.
SEC. 342. EXEMPTION FROM INCOME TAX FOR STATE-SPONSORED
WORKMEN’S COMPENSATION REINSURANCE ORGANIZA-
TIONS.
(a) IN GENERAL.—Subsection (c) of section 501 (relating to
list of exempt organizations), as amended by section 341, is amended
by adding at the end the following new paragraph:
‘‘(27) Any membership organization if—
‘‘(A) such organization is established before June 1,
1996, by a State exclusively to reimburse its members
for losses arising under workmen’s compensation acts,
‘‘(B) such State requires that the membership of such
organization consist of—
‘‘(i) all persons who issue insurance covering work-
men’s compensation losses in such State, and
‘‘(ii) all persons and governmental entities who
self-insure against such losses, and
‘‘(C) such organization operates as a non-profit
organization by—
H. R. 3103—136
‘‘(i) returning surplus income to its members or
workmen’s compensation policyholders on a periodic
basis, and
‘‘(ii) reducing initial premiums in anticipation of
investment income.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years ending after the date of the enactment
of this Act.
Subtitle F—Organizations Subject to
Section 833
SEC. 351. ORGANIZATIONS SUBJECT TO SECTION 833.
(a) IN GENERAL.—Section 833(c) (relating to organization to
which section applies) is amended by adding at the end the following
new paragraph:
‘‘(4) TREATMENT AS EXISTING BLUE CROSS OR BLUE SHIELD
ORGANIZATION.—
‘‘(A) IN GENERAL.—Paragraph (2) shall be applied to
an organization described in subparagraph (B) as if it were
a Blue Cross or Blue Shield organization.
‘‘(B) APPLICABLE
ORGANIZATION.—An organization is
described in this subparagraph if it—
‘‘(i) is organized under, and governed by, State
laws which are specifically and exclusively applicable
to not-for-profit health insurance or health service type
organizations, and
‘‘(ii) is not a Blue Cross or Blue Shield organization
or health maintenance organization.’’.
(b) EFFECTIVE DATE.—The amendment made by this section
shall apply to taxable years ending after December 31, 1996.
Subtitle G—IRA Distributions to the
Unemployed
SEC. 361. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE USED WITH-
OUT ADDITIONAL TAX TO PAY FINANCIALLY DEVASTATING
MEDICAL EXPENSES.
(a) IN GENERAL.—Section 72(t)(3)(A) is amended by striking
‘‘(B),’’.
(b) DISTRIBUTIONS FOR PAYMENT OF HEALTH INSURANCE PRE-
MIUMS OF CERTAIN UNEMPLOYED INDIVIDUALS.—Paragraph (2) of
section 72(t) is amended by adding at the end the following new
subparagraph:
‘‘(D) DISTRIBUTIONS TO UNEMPLOYED INDIVIDUALS FOR
HEALTH INSURANCE PREMIUMS.—
‘‘(i) IN GENERAL.—Distributions from an individual
retirement plan to an individual after separation from
employment—
‘‘(I) if such individual has received unemploy-
ment compensation for 12 consecutive weeks under
any Federal or State unemployment compensation
law by reason of such separation,