I
103D CONGRESS
1ST SESSION
H. R. 1526
To limit discrimination in health insurance coverage based on health status
or past claims experience and to reform the provision of health coverage
to small employer groups.
IN THE HOUSE OF REPRESENTATIVES
Mr. DURBIN (for himself, Mr. REYNOLDS, Mr. SMITH of New Jersey, Mrs.
BYRNE, Mr. HASTINGS, and Mr. PASTOR) introduced the following bill;
which was referred jointly to the Committees on Ways and Means, and
Energy and Commerce
A BILL
To limit discrimination in health insurance coverage based
on health status or past claims experience and to reform
the provision of health coverage to small employer
groups.
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 ‘‘Health Insurance Fair-
ness Act of 1993’’.
SEC. 2. HEALTH PLAN STANDARDS.
The Social Security Act is amended by adding at the
end the following new title:
‘‘TITLE XXI—HEALTH PLAN STANDARDS
‘‘PART A—INDIVIDUAL HEALTH PLANS
‘‘SEC. 2101. PROHIBITION OF DISCRIMINATION BASED ON
HEALTH STATUS FOR COVERAGE, BENEFITS,
AND PREMIUMS.
‘‘(a) IN GENERAL.—Except as provided under sub-
section (b), an individual health plan, and any person
which issues such a plan, may not deny, limit, or condition
the coverage under (or benefits of) the plan with respect
to health services, or vary the premiums charged for such
coverage, based on the health status, claims experience,
receipt of health care, medical history, or lack of evidence
of insurability, of an individual.
‘‘(b) EXCEPTION FOR CERTAIN PRE-EXISTING CON-
DITIONS.—
‘‘(1) IN GENERAL.—Subject to the succeeding
provisions of this subsection, individual health plans
may exclude coverage of services related to treat-
ment of a preexisting condition, but the period of
such exclusion may not exceed 24 months. The ex-
clusion of coverage shall not apply to services fur-
nished to newborns who are covered at the time of
birth.
‘‘(2) CREDITING OF PREVIOUS COVERAGE.—
‘‘(A) IN GENERAL.—An individual health
plan shall provide that if an individual under
such plan is in a period of continuous coverage
(as defined in subparagraph (B)(i)) with re-
spect to particular services as of the date of ap-
plication for coverage under such plan (deter-
mined without regard to any waiting period
under such plan), any period of exclusion of
coverage with respect to a preexisting condition
for such services or type of services shall be re-
duced by 1 month for each month in the period
of continuous coverage.
‘‘(B) DEFINITIONS.—As used in this sub-
section:
‘‘(i) PERIOD
OF
CONTINUOUS
COV-
ERAGE.—The term ‘period of continuous
coverage’ means, with respect to particular
services, the period beginning on the date
an individual is enrolled under an individ-
ual or group health plan or under title
XVIII or XIX of the Social Security Act
which provides substantially the same or
similar benefits with respect to such serv-
ices and ends on the date the individual is
not so enrolled for a continuous period of
more than 3 months.
‘‘(ii) PREEXISTING CONDITION.—The
term ‘preexisting condition’ means a condi-
tion which has been diagnosed or treated
during the 1-year period ending on the day
before the first date of such coverage.
‘‘(3) EXCEPTION.—
‘‘(A) IN
GENERAL.—Subsection (a) shall
not affect an individual health plan’s variation
of premiums based only on the age, sex, or geo-
graphic area of residence of an individual.
‘‘(B) WAITING
PERIOD.—An individual
health plan may offer to an individual to waive
an exclusion of coverage with respect to a pre-
existing condition for which an exclusion could
otherwise be applied under this subsection in
exchange for an increase in the premium during
the period in which the exclusion could other-
wise be applied. If the individual rejects this
offer, the limitations on premiums and exclu-
sions that would apply in the absence of such
offer shall continue to apply.
‘‘PART B—GROUP HEALTH PLANS
‘‘Subpart 1—Prohibition of Discrimination Based on
Health Status
‘‘SEC. 2111. PROHIBITION OF DISCRIMINATION BASED ON
HEALTH STATUS FOR COVERAGE, BENEFITS,
AND PREMIUMS.
‘‘(a) IN GENERAL.—Except as provided under sub-
section (b), a group health plan, and any person which
issues such a plan, may not deny, limit, or condition the
coverage under (or benefits of) the plan with respect to
health services, or vary the premiums charged for such
coverage, based on the health status, claims experience,
receipt of health care, medical history, or lack of evidence
of insurability, of an individual.
‘‘(b) EXCEPTION FOR CERTAIN PRE-EXISTING CON-
DITIONS.—
‘‘(1) IN GENERAL.—Subject to the succeeding
provisions of this subsection, group health plans may
exclude coverage of services related to treatment of
a preexisting condition, but the period of such exclu-
sion may not exceed 6 months. The exclusion of cov-
erage shall not apply to services furnished to
newborns who are covered at the time of birth.
‘‘(2) CREDITING OF PREVIOUS COVERAGE.—
‘‘(A) IN GENERAL.—A group health plan
shall provide that if an individual under such
plan is in a period of continuous coverage (as
defined in subparagraph (B)(i)) with respect to
particular services as of the date of coverage
under such plan (determined without regard to
any waiting period under such plan), any period
of exclusion of coverage with respect to a pre-
existing condition for such services or type of
services shall be reduced by 1 month for each
month in the period of continuous coverage.
‘‘(B) DEFINITIONS.—As used in this sub-
section:
‘‘(i) PERIOD
OF
CONTINUOUS
COV-
ERAGE.—The term ‘period of continuous
coverage’ means, with respect to particular
services, the period beginning on the date
an individual is enrolled under an individ-
ual or group health plan or title XVIII or
XIX of the Social Security Act which pro-
vides substantially the same or similar ben-
efits with respect to such services and ends
on the date the individual is not so en-
rolled for a continuous period of more than
3 months.
‘‘(ii) PREEXISTING CONDITION.—The
term ‘preexisting condition’ means a condi-
tion which has been diagnosed or treated
during the 3-month period ending on the
day before the first date of such coverage.
‘‘SEC. 2112. PROHIBITION OF RATE VARIATION IN GROUP
HEALTH PLANS BASED ON HEALTH STATUS.
‘‘A person that issues a group health plan with re-
spect to a group may not vary premiums charged for cov-
erage with respect to health services based on the health
status, claims experience, receipt of health care, medical
history, or lack of evidence of insurability, of a member
of the group.
‘‘Subpart 2—Requirements for Health Plans Issued to
Small Employers
‘‘SEC. 2121. GENERAL REQUIREMENTS FOR HEALTH PLANS
ISSUED TO SMALL EMPLOYERS.
‘‘(a) REGISTRATION.—Each insurer (as defined in
section 2133(b)(1)) shall register with the Secretary and
with any applicable regulatory authority for each State in
which it issues or offers a health plan to small employers.
‘‘(b) GUARANTEED ELIGIBILITY.—
‘‘(1) IN
GENERAL.—No insurer may exclude
from coverage under a health plan any eligible em-
ployee, the spouse or any dependent child of the eli-
gible employee to whom coverage is made available
by a small employer.
‘‘(2) WAITING PERIODS.—Paragraph (1) shall
not apply to any period an eligible employee is ex-
cluded from coverage under the health plan solely by
reason of a requirement applicable to all employees
that a minimum period of service with the small em-
ployer is required before the employee is eligible for
such coverage.
‘‘(c) GUARANTEED ISSUE.—
‘‘(1) IN GENERAL.—
‘‘(A) IN
GENERAL.—Subject to the suc-
ceeding provisions of this subsection, an insurer
that offers a health plan to small employers in
a geographic area in a community must offer
the same plan to any other small employer lo-
cated in the area. Such requirement shall apply
on a continuous, year-round basis.
‘‘(B) 
STATE
ALTERNATIVE.—Subpara-
graph (A) shall not apply to a community in a
State if the Secretary certifies that the State
has implemented an alternative approach for
assuring the availability for all small employers
in the community of health insurance that pro-
vides the same benefits at the same premium as
would have applied if subparagraph (A) had
continued to apply.
‘‘(2) TREATMENT
OF
HEALTH
MAINTENANCE
ORGANIZATIONS.—
‘‘(A) 
GEOGRAPHIC
LIMITATIONS.—A
health maintenance organization may deny en-
rollment to employees (and family members) of
a small employer if the employees are located
outside the service area of the organization, but
only if such denial is applied uniformly without
regard to health status or insurability.
‘‘(B) SIZE LIMITS.—A health maintenance
organization may apply to the Secretary to
cease enrolling new small employer groups in its
health plan (or in a geographic area served by
the plan) if—
‘‘(i) it ceases to enroll any new em-
ployer groups, and
‘‘(ii) it can demonstrate that its finan-
cial or administrative capacity to serve pre-
viously enrolled groups and individuals
(and additional individuals who will be ex-
pected to enroll because of affiliation with
such previously enrolled groups) will be im-
paired if it is required to enroll new em-
ployer groups.
‘‘(3) GROUNDS FOR REFUSAL TO RENEW.—
‘‘(A) IN GENERAL.—An insurer may refuse
to renew, or may terminate, a health plan
under this subpart only for—
‘‘(i) nonpayment of premiums,
‘‘(ii) fraud or misrepresentation,
‘‘(iii) failure to maintain minimum
participation rates (consistent with sub-
paragraph (B)), or
‘‘(iv) in the case of a managed care
plan, the employer leaves the geographic
service area of the plan.
‘‘(B) MINIMUM
PARTICIPATION
RATES.—
An insurer may require, with respect to a
health plan issued to a small employer, that a
minimum percentage of eligible employees who
do not otherwise have health insurance are en-
rolled in such plan, so long as such percentage
is enforced uniformly for all plans offered to
employers of comparable size.
‘‘(d) MINIMUM PLAN PERIOD.—An insurer may not
offer to, or issue with respect to, a small employer a health
plan with a term of less than 12 months.
‘‘(e) NOTICES AND RENEWAL PERIODS.—
‘‘(1) NOTICE ON EXPIRATION.—An insurer pro-
viding health plans to small employers shall provide
for notice, at least 60 days before the date of expira-
tion of the health plan, of the terms for renewal of
the plan. Except with respect to rates and adminis-
trative changes, the terms of renewal (including ben-
efits) shall be the same as the terms of issuance.
‘‘(2) PERIOD OF RENEWAL.—The period of re-
newal of each small employer health plan shall be for
a period of not less than 12 months.
‘‘(f) GUARANTEED RENEWABILITY.—
‘‘(1) IN GENERAL.—
‘‘(A) GENERAL RULE.—Subject to the suc-
ceeding provisions of this subsection, an insurer
shall ensure that a health plan issued to a small
employer be renewed, at the option of the small
employer, unless the plan is terminated for a
reason specified in subparagraph (B) or in sub-
section (c)(3)(A).
‘‘(B) TERMINATION OF SMALL EMPLOYER
BUSINESS.—An insurer need not renew a health
plan with respect to a small employer if the in-
surer—
‘‘(i) elects not to renew all of its
health plans issued to small employers in a
State; and
‘‘(ii) provides notice to the Secretary,
any applicable regulatory authority in the
State, and to each small employer covered
under the plan of such termination at least
180 days before the date of expiration of
the plan.
In the case of such a termination, the insurer
may not provide for issuance of any health plan
to a small employer in the State during the 5-
year period beginning on the date of termi-
nation of the last plan not so renewed.
‘‘SEC. 2122. REQUIREMENTS RELATED TO RESTRICTIONS
ON RATING PRACTICES.
‘‘(a) LIMIT ON VARIATION OF REFERENCE PREMIUM
RATES BETWEEN BLOCKS OF BUSINESS.—
‘‘(1) IN
GENERAL.—The index rate for any
block of business of an insurer may not exceed the
index rate for any other block of business by more
than 20 percent.
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not
apply to a block of business if—
‘‘(A) the block is one for which the insurer
does not reject, and never has rejected, small
employers included within the definition of em-
ployers eligible for the block of business or oth-
erwise eligible employees and dependents who
enroll on a timely basis, based upon their claims
experience, health status, industry, or occupa-
tion,
‘‘(B) the insurer does not transfer, and
never has transferred, a health plan involuntar-
ily into or out of the block of business, and
‘‘(C) the block of business is currently
available for purchase at the time an exception
to paragraph (1) is sought by the insurer.
‘‘(b) USE
OF COMMUNITY RATING
IN PREMIUM
RATES WITHIN A BLOCK OF BUSINESS.—
‘‘(1) LIMITING
VARIATIONS
ON
PREMIUM
TO
AGE AND SEX.—Subject to paragraph (5), the ref-
erence premium rate charged for a health plan of-
fered to small employers within a community (as de-
fined under the plan consistent with paragraph (3))
with similar benefits for a type of family enrollment
(described in paragraph (4)) shall be the same for
all small employers in the same block of business in
the community.
‘‘(2) AGE AND SEX ADJUSTMENT TO COMMU-
NITY-RATING.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a health plan offered to a small em-
ployer may provide for an adjustment to the
reference premium rate based on age and
gender of covered individuals. Any such adjust-
ment shall be applied consistently to all small
employers.
‘‘(B) LIMITATION ON ADJUSTMENT.—The
adjustment under subparagraph (A) may not
result, with respect to health plans with similar
benefits in a community in a block of business,
in premium rates that vary from the index rate
by more than 25 percent of the index rate.
‘‘(3) SPECIFICATION OF COMMUNITY.—For pur-
poses of paragraph (1), no insurer may use a geo-
graphic area that is smaller than a metropolitan sta-
tistical area as a community.
‘‘(4) TYPES OF FAMILY ENROLLMENT.—Each
health plan offered to a small employer shall permit
enrollment of (and shall compute premiums sepa-
rately for) individuals based on each of the following
beneficiary classes:
‘‘(A) 1 adult.
‘‘(B) A married couple without children.
‘‘(C) A married couple with 1 or more chil-
dren, or 1 adult with 1 or more children.
‘‘(5) ADDITIONAL VARIATIONS.—
‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), a health plan offered to a small em-
ployer may provide for an adjustment to pre-
mium rates based on features of the plan that
involve the use of managed care, the pursuit of
healthy lifestyles, and other factors within the
control of plan beneficiaries that cut costs by
reducing the need for health care services and
not by reducing the benefits associated with
such services. Any such adjustment shall be ap-
plied consistently to all small employers.
‘‘(B) LIMITATION ON ADJUSTMENT.—The
adjustment under subparagraph (A) may not
result, with respect to health plans with similar
benefits in a community in a block of business
with respect to an age and gender class of cov-
ered individuals, in premium rates that vary
from the rate described in subparagraph (C) by
more than 25 percent of such rate.
‘‘(C) RATE.—For purposes of subpara-
graph (B), the rate described in this paragraph,
for an age and gender class of covered individ-
uals within a block of business for each rating
period in a community, is 1331⁄3 percent of the
lowest premium rate charged or which could
have been charged for individuals in such class
by the insurer under a rating system for that
block of business to small employers in the com-
munity for health plans with the same or simi-
lar coverage.
‘‘(c) LIMIT ON TRANSFER OF EMPLOYERS AMONG
BLOCKS OF BUSINESS.—
‘‘(1) An insurer may not transfer a small em-
ployer from one block of business to another without
the consent of the employer.
‘‘(2) An insurer may not offer to transfer a
small employer from one block of business to an-
other unless—
‘‘(A) the offer is made without regard to
age, sex, geography, claims experience, health
status, industry, occupation or the date on
which the policy was issued, and
‘‘(B) the same offer is made to all other
small employers in the same block of business.
‘‘(d) LIMITS
ON
VARIATION
IN
PREMIUM
IN-
CREASES.—The percentage increase in the premium rate
charged to a small employer for a new rating period (de-
termined on an annual basis) may not exceed the sum of
the percentage change in the base premium rate plus 5
percentage points.
‘‘(e) DEFINITIONS.—In this section:
‘‘(1) BLOCK OF BUSINESS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the term ‘block of business’
means, with respect to an insurer, all of the
small employers with a health plan issued by
the insurer (as shown on the records of the in-
surer).
‘‘(B) DISTINCT GROUPS.—A distinct group
of small employers with health plans issued by
an insurer may be treated as a block of busi-
ness by such insurer if all of the plans in such
group—
‘‘(i) are marketed primarily by direct
mail or are not marketed primarily by di-
rect mail,
‘‘(ii) have been acquired from another
insurer as a distinct group, or
‘‘(iii) are provided through an associa-
tion with membership of not less than 25
small employers that has been formed for
purposes other than obtaining health in-
surance.
‘‘(2) INDEX
RATE.—The term ‘index rate’
means, with respect to a block of business, 1331⁄3
percent of the reference premium rate for the block
of business.
‘‘(3) REFERENCE PREMIUM RATE.—The term
‘reference premium rate’ means, for each block of
business for each rating period in a community, the
lowest premium rate charged or which could have
been charged, for the most favorable actuarial class,
by the insurer under a rating system for that block
of business to small employers in the community for
health plans with the same or similar coverage. Such
a rate shall be determined without regard to an ad-
justment under subsection (b)(5).
‘‘(f) FULL DISCLOSURE OF RATING PRACTICES.—
‘‘(1) IN GENERAL.—At the time an insurer of-
fers a health plan to a small employer, the insurer
shall fully disclose to the employer all of the follow-
ing:
‘‘(A) Rating practices for small employer
health plans, including rating practices for dif-
ferent populations and benefit designs.