I
104TH CONGRESS
2D SESSION
H. R. 3043
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.
IN THE HOUSE OF REPRESENTATIVES
MARCH 7, 1996
Mrs. JOHNSON of Connecticut introduced 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.
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 1996’’.
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 to
regardless of how such coverage is pro-
vided 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, genetic pre-
disposition, medical condition, claims experience, receipt
of health care, medical history, disability, or evidence of
insurability of the individual.
‘‘(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,
genetic predisposition, medical condition, claims ex-
perience, receipt of health care, medical history, dis-
ability, 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 12 months long.
‘‘(B) The individual is not eligible for cov-
erage under any group health plan and has not
lost such coverage due to a failure to make re-
quired premium payments or contributions or
due to fraud or misrepresentation of material
fact. For purposes of this subparagraph, con-
tinuation coverage under section 4980B shall
not be considered to be coverage under a group
health plan.
‘‘(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—
‘‘(i) by the carrier or individual on the
basis of 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,
‘‘(ii) by the carrier on the basis of a
change in the individual’s status so that
the individual was no longer eligible for de-
pendent coverage, if the individual pre-
viously was only eligible for such coverage
as a dependent,
‘‘(iii) by the carrier on the basis of the
discontinuation of such coverage by the
carrier in accordance with the require-
ments of section 4989(b)(2), or
‘‘(iv) by the individual at a time that
the individual obtained less expensive or
less extensive coverage (as defined by the
Secretary of Health and Human Services).
Nothing in subparagraph (C) shall be construed as
preventing a carrier from waiving the application of
clauses (i) through (iv) of such subparagraph during
an annual open enrollment 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 (or is a con-
dition which a reasonably prudent person would have
sought medical care diagnosis or treatment) during