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SEC. 2. DEFINITIONS.
As used in this Act:
(1) BENEFICIARY.—The term ‘‘beneficiary’’ has
the same meaning given such term under section
3(8) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1102(8)).
(2) EMPLOYEE.—The term ‘‘employee’’ has the
same meaning given such term under section 3(6) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1002(6)).
(3) EMPLOYER.—The term ‘‘employer’’ has the
same meaning given such term under section 3(6) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1002(6)), except that such term
shall only include employers of two or more employ-
ees.
(4) FAMILY.—
(A) IN GENERAL.—The term ‘‘family’’ in-
cludes an individual, the individual’s spouse,
and the child of the individual (if any).
(B) CHILD.—For purposes of subpara-
graph (A), the term ‘‘child’’ means any individ-
ual who is a child within the meaning of section
151(c)(3) of the Internal Revenue Code of
1986, and under 19 years of age.
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(5) GROUP HEALTH PLAN.—The term ‘‘group
health plan’’ means any employee welfare benefit
plan, governmental plan, or church plan (as defined
under paragraphs (1), (32) and (33) of section 3 of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1002(1), (32) and (33))) that
maintains (or makes contributions to) a health plan.
(6) HEALTH PLAN.—The term ‘‘health plan’’
means any plan or arrangement that provides, or
pays for health benefits (such as physician and hos-
pital benefits) directly or through insurance, reim-
bursement, or otherwise. Such term does not include
the following, or any combination thereof:
(A) Coverage only for accidental death,
dismemberment, dental, or vision.
(B) Coverage providing wages or payments
in lieu of wages for any period during which the
employee is absent from work on account of
sickness or injury.
(C) A medicare supplemental policy (as de-
fined in section 1882(g)(1) of the Social Secu-
rity Act).
(D) Coverage issued as a supplement to li-
ability insurance.
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(E) Workers’ compensation or similar in-
surance.
(F) Automobile medical payment insur-
ance.
(G) A long-term care insurance policy, in-
cluding a nursing home fixed indemnity policy.
(H) Any plan or arrangement not de-
scribed in any preceding subparagraph that
provides for benefit payments, on a periodic
basis, for a specified disease or illness or period
of hospitalization without regard to the costs in-
curred or services rendered during the period to
which the payments relate.
(I) Coverage provided through a State risk
pool, uncompensated care pool, or similar sub-
sidized program.
(7) INDIVIDUAL HEALTH PLAN.—The term ‘‘in-
dividual health plan’’ means a health plan marketed
to individuals.
(8) INSURED HEALTH PLAN.—The term ‘‘in-
sured health plan’’ means, with respect to an em-
ployee welfare benefit plan (as defined under section
3(1) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1002(1))), a health plan
that is a contract for health benefits with an insurer
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that is subject to State regulation in accordance
with section 514(b)(2)(A) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1144(b)(2)(A)).
(9) INSURER.—The term ‘‘insurer’’ means—
(A) a licensed insurance company;
(B) a prepaid hospital or medical service
plan;
(C) a network plan (such as a preferred
provider organization) or heath maintenance or-
ganization; or
(D) any other entity (other than an entity
described in paragraph (12)), except for those
entities described in section 514(b)(6)(A)(i) of
the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1144(b)(6)(A)(i)) providing
a plan of health insurance or health benefits;
with respect to which State insurance laws apply
and are not preempted under section 514 of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1144).
(10) PARTICIPANT.—The term ‘‘participant’’
means any person who is eligible, or is required to
be eligible, to receive benefits under a group health
plan.
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(11) PLAN SPONSOR.—The term ‘‘plan spon-
sor’’ has the same meaning given such term under
section 3(16)(B) of the Employee Retirement In-
come 
Security 
Act 
of 
1974 
(29 
U.S.C.
1002(16)(B)).
(12) SECRETARY.—The term ‘‘Secretary’’, un-
less specifically provided otherwise, means the Sec-
retary of Labor.
(13) SELF-INSURED HEALTH PLAN.—The term
‘‘self-insured health plan’’ means a group health
plan that is not an insured health plan.
(14) STATE.—The term ‘‘State’’ means each of
the several States, the District of Columbia, Puerto
Rico, the United States Virgin Islands, Guam,
American Samoa, and the Commonwealth of the
Northern Mariana Islands.
TITLE I—HEALTH CARE ACCESS,
PORTABILITY, 
AND 
RENEW-
ABILITY
Subtitle A—Group Health Plan
Rules
SEC. 101. GUARANTEED AVAILABILITY OF HEALTH COV-
ERAGE.
(a) IN GENERAL.—
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(1) GROUP
HEALTH
PLANS.—Except as pro-
vided in subsection (b) and section 103—
(A) an insurer may not decline to provide
whole group coverage to employers; and
(B) a group health plan (whether an in-
sured health plan or self-insured health plan)
may not establish eligibility, continuation, en-
rollment, or contribution requirements for par-
ticipants or beneficiaries;
based on health status, medical condition, claims ex-
perience, receipt of health care, medical history, evi-
dence of insurability, or disability of a participant or
beneficiary.
(2) HEALTH PROMOTION OR DISEASE PREVEN-
TION.—Nothing in this subsection shall prevent a
group health plan from establishing discounts for
participation in programs of health promotion or
disease prevention.
(b) APPLICATION OF CAPACITY LIMITS.—
(1) IN GENERAL.—Subject to paragraph (2), an
insurer offering coverage in connection with a group
health plan may cease enrolling employers under the
plan if—
(A) the insurer ceases to enroll any new
employers, participants and beneficiaries; and
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(B) the insurer can demonstrate to the ap-
plicable certifying authority (as defined in sec-
tion 202(d)), if required, that its financial or
provider capacity to serve previously covered
participants and beneficiaries (and additional
participants and beneficiaries who will be ex-
pected to enroll because of their affiliation with
the group health plan or such previously cov-
ered participants or beneficiaries) will be im-
paired if the insurer is required to enroll addi-
tional employers, participants and beneficiaries.
Such 
an 
insurer 
shall 
be 
prohibited 
from
recommencing enrollment after a cessation in enroll-
ment under this paragraph for a 6-month period
after such cessation or until the insurer can dem-
onstrate to the applicable certifying authority (as de-
fined in section 202(d)) that the insurer has ade-
quate capacity, whichever is later.
(2) FIRST-COME-FIRST-SERVED.—An insurer
offering coverage in connection with a group health
plan is only eligible to exercise the limitations pro-
vided for in paragraph (1) if the insurer provides for
enrollment of employers (including participants and
beneficiaries) under such plan on a first-come-first-
served basis (except in the case of additional employ-
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ers, participants and beneficiaries described in para-
graph (1)(B)).
(c) CONSTRUCTION.—Nothing in this section shall be
construed to prevent a State from requiring insurers offer-
ing group health plans to actively market such plans.
SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COV-
ERAGE.
(a) IN GENERAL.—
(1) PLAN SPONSOR.—Subject to subsections (b)
and (c), a group health plan that is an insured
health plan shall be renewed or continued in force at
the option of the plan sponsor, except that the re-
quirement of this subparagraph shall not apply in
the case of—
(A) the nonpayment of premiums or con-
tributions by the plan sponsor in accordance
with the terms of the plan or where the insurer
has not received timely premium payments;
(B) fraud or misrepresentation of material
fact on the part of the plan sponsor;
(C) the termination of the plan in accord-
ance with subsection (b); or
(D) the failure of the plan sponsor to meet
contribution or participation requirements in
accordance with paragraph (3).
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(2) PARTICIPANT.—Subject to subsections (b)
and (c), coverage under a group health plan (wheth-
er an insured health plan or a self-insured health
plan) shall be renewed or continued in force, if the
plan sponsor elects to continue to provide coverage
under such plan, at the option of the participant or
beneficiary, except that the requirement of this para-
graph shall not apply in the case of—
(A) the nonpayment of premiums or con-
tributions by the participant or beneficiary in
accordance with the terms of the plan or where
the plan has not received timely premium pay-
ments;
(B) fraud or misrepresentation of material
fact on the part of the participant or bene-
ficiary relating to an application for coverage or
claim for benefits;
(C) the termination of the plan in accord-
ance with subsection (b); or
(D) loss of eligibility for continuation cov-
erage as described in part 6 of subtitle B of
title I of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1161 et seq.).
(3) 
CONTRIBUTION
AND
PARTICIPATION
RULES.—Nothing in this subsection shall be con-
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strued to preclude an insurer from establishing em-
ployer contribution rules or group participation rules
for plan sponsors in connection with an insured
group health plan consistent with applicable State
law.
(b) TERMINATION OF HEALTH PLANS.—
(1) HEALTH PLAN NOT OFFERED.—In any case
in which an insurer is no longer going to continue
to offer a group health plan to plan sponsors, par-
ticipants or beneficiaries, the plan may be discon-
tinued by the insurer if—
(A) the insurer provides notice to each
plan sponsor (and participants and beneficiaries
covered under the group health plan) of such
termination at least 90 days prior to the date
of the expiration of such plan;
(B) the insurer offers to each plan sponsor
the option to purchase any other group health
plan currently being offered; and
(C) in exercising the option to discontinue
the group health plan and in offering one or
more replacement plans, the insurer acts uni-
formly without regard to the health status or
insurability of participants or beneficiaries, or
new participants or beneficiaries.
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(2) INSURER NOT OFFERING PLAN.—
(A) IN GENERAL.—In any case in which
an insurer is no longer offering any group
health plan in a State, the plan may be discon-
tinued by the insurer if—
(i) the insurer provides notice to the
applicable certifying authority (as defined
in section 202(d)) and to each plan spon-
sor (and participants and beneficiaries cov-
ered under such plan) of such termination
at least 180 days prior to the date of the
expiration of the plan; and
(ii) all such plans issued or delivered
for issuance in the State are discontinued
and 
coverage 
under 
such 
plans 
is
nonrenewed.
(B) APPLICATION
OF
PROVISIONS.—The
provisions of this paragraph and paragraph (3)
may be applied separately by an insurer—
(i) to all group health plans of small
employers (as defined under applicable
State law, or employers with not more
than 50 employees if such term is not de-
fined in State law) covering participants or
participants and beneficiaries; or
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(ii) to all other group health plans of-
fered by the insurer in the State.
(3) PROHIBITION
ON
MARKET
REENTRY.—In
the case of a termination under paragraph (2), the
insurer may not provide for the issuance of any in-
sured group health plan that was terminated in the
State involved during the 5-year period beginning on
the date of the termination of the last plan not so
renewed.
(c) TREATMENT OF NETWORK PLANS.—
(1) 
GEOGRAPHIC
LIMITATIONS.—A 
group
health plan which is a network plan (as defined in
paragraph (2)) or a health maintenance organization
plan may deny continued participation under the
plan to participants or beneficiaries who neither live,
reside, nor work in an area in which the group
health plan is offered, but only if such denial is ap-
plied uniformly, without regard to health status or
the insurability of particular participants or bene-
ficiaries.
(2) NETWORK
PLAN.—As used in paragraph
(1), the term ‘‘network plan’’ means a health plan
that arranges for the financing and delivery of
health care services to participants or beneficiaries
covered under such health plan, in whole or in part,
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through arrangements with providers to furnish
health care services.
SEC. 103. PORTABILITY OF HEALTH COVERAGE AND LIMI-
TATION ON PREEXISTING CONDITION EXCLU-
SIONS.
(a) IN GENERAL.—A group health plan (whether an
insured health plan or a self-insured health plan) may im-
pose a limitation or exclusion of benefits relating to treat-
ment of a preexisting condition based on the fact that the
condition existed prior to the effective date of the plan
with respect to a participant or beneficiary only if—
(1) the limitation or exclusion extends for a pe-
riod of not more than 12 months after the date of
enrollment in the health plan;
(2) the limitation or exclusion does not apply to
an individual who, within 30 days of the date of
birth, was covered under the plan; and
(3) the limitation or exclusion does not apply to
a pregnancy existing on the effective date of cov-
erage.
(b) CREDITING
OF QUALIFYING PREVIOUS COV-
ERAGE.—
(1) IN GENERAL.—A group health plan (wheth-
er an insured health plan or a self-insured health
plan) shall provide that if a participant or bene-
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ficiary is in a period of previous qualifying coverage
as of the date of enrollment under such plan, any
period of exclusion or limitation of coverage with re-
spect to a preexisting condition shall be reduced by
1 month for each month in which the participant or
beneficiary was in the period of qualifying previous
coverage.
(2) DISCHARGE OF DUTY.—The duty of an in-
surer or plan sponsor to verify previous qualifying
coverage with respect to a participant or beneficiary
is effectively discharged when such insurer or plan
sponsor provides documentation to a participant or
beneficiary at the time such participant or bene-
ficiary becomes ineligible for coverage under the
group health plan verifying—
(A) the dates that the participant or bene-
ficiary was covered under such previous qualify-
ing coverage; and
(B) the benefits and cost-sharing arrange-
ment available to the participant or beneficiary
under such previous qualifying coverage.
(3) DEFINITION.—The term ‘‘previous qualify-
ing coverage’’ means the period beginning on the
date a participant or beneficiary is enrolled under a
health plan and ends on the date the participant or
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beneficiary is not so enrolled for a continuous period
of more than 30 days (without regard to any waiting
period).
(4) CONSTRUCTION.—Nothing in this sub-
section shall be construed to prohibit a preexisting
condition exclusion, subject to the limits in sub-
section (a)(1), for a service or benefit related to a
preexisting condition if such service or benefit was
not previously covered under the health plan in
which the individual was enrolled immediately prior
to enrollment in the plan involved.
(c) LATE ENROLLEES.—With respect to a partici-
pant or beneficiary enrolling in a group health plan
(whether an insured health plan or a self-insured health
plan) during a time that is other than the first opportunity
to enroll during an enrollment period of at least 30 days,
the plan may exclude coverage with respect to services re-
lated to the treatment of a preexisting condition in accord-
ance with subsections (a) and (b), except the period of
such exclusion may not exceed 18 months beginning on
the date of coverage under the plan.
(d) WAITING PERIODS.—With respect to participants
or beneficiaries who have become eligible to enroll in a
group health plan (whether an insured health plan or a
self-insured health plan), if such plan does not utilize a
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preexisting condition exclusion, such plan may impose a
waiting period on such participants or beneficiaries not to
exceed 60 days (or in the case of a late participant or
beneficiary described in subsection (c), 90 days) prior to
the date on which coverage under the plan becomes effec-
tive. A group health plan may also use alternative methods
to address adverse selection as approved by the applicable
certifying authority (as defined in section 202(d)). During
such a waiting period, the plan may not be required to
provide health care services or benefits and no premium
shall be charged to the participants or beneficiaries.
(e) PREEXISTING CONDITION.—For purposes of this
section, the term ‘‘preexisting condition’’ means a condi-
tion for which medical advice, diagnosis, care, or treat-
ment was recommended or received within the 6-month
period ending on the day before the effective date of the
coverage (without regard to any waiting period).
(f) STATE FLEXIBILITY.—Nothing in this Act shall
be construed to preempt State laws that limit the exclu-
sions or limitations for preexisting conditions to periods
that are shorter than those provided for under this section
so long as such laws are not in violation of section 514
of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1144).
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SEC. 104. SPECIAL ENROLLMENT PERIODS.
In the case of a participant, beneficiary or family
member who—
(1) through marriage, separation, divorce,
death, birth or adoption of a child, experiences a
change in family composition affecting health insur-
ance coverage;
(2) experiences a change in employment status
(including a significant change in the terms and con-
ditions of employment) or in continuation coverage;
or
(3) experiences a loss of health insurance cov-
erage because of a change in the employment status
of a family member;
each group health plan (whether insured or self-insured)
shall provide for a special enrollment period at the time
of such event which would permit the participant, bene-
ficiary or family member to change the individual or fam-
ily basis of coverage or to enroll in the plan if coverage
would have been available to such individual but for failure
to enroll during a previous enrollment period. Such a spe-
cial enrollment period shall ensure that a child born or
adopted shall be deemed to be covered under the plan as
of the date of such birth or adoption if such child is en-
rolled within 30 days of the date of such birth or adoption.
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SEC. 105. DISCLOSURE OF INFORMATION.
(a) IN GENERAL.—In connection with the offering
for sale of any group health plan to a small employer (as
defined under applicable State law, or employers with not
more than 50 employees if such term is not defined in
State law), an insurer shall make a reasonable disclosure
to the employer, as part of its solicitation and sales mate-
rials, of—
(1) the provisions of the group health plan con-
cerning the insurer’s right to change premium rates
and the factors that affect changes in premium
rates;
(2) the provisions of such plan relating to re-
newability of policies and contracts;
(3) the provisions of such plan relating to any
preexisting condition provision; and
(4) descriptive information about the benefits
and premiums available under all group health plans
for which the employer is qualified.
Information shall be provided under this subsection in a
manner determined to be understandable by the average
small employer or plan sponsor, and shall be sufficiently
accurate and comprehensive to reasonably inform employ-
ers, participants and beneficiaries of their rights and obli-
gations under the plan.
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(b) EXCEPTION.—With respect to the requirement of
subsection (a), any information that is proprietary and
trade secret information under applicable law shall not be
subject to the disclosure requirements of such subsection.
(c) CONSTRUCTION.—Nothing in this section shall be
construed to preempt State reporting and disclosure re-
quirements or reporting and disclosure requirements
under the Employee Retirement Income Security Act of
1974.
Subtitle B—Individual Health Plan
Rules
SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.
(a) LIMITATION ON REQUIREMENTS.—
(1) IN GENERAL.—With respect to an individ-
ual desiring to enroll in an individual health plan, if
such individual is in a period of previous qualifying
coverage (as defined in section 103(b)(3)) under a
group health plan that commenced 12 or more
months prior to the date on which such individual
desires to enroll in such a plan, an insurer described
in paragraph (3) may not establish eligibility, con-
tinuation, or enrollment requirements based on the
health status, medical condition, claims experience,
receipt of health care, medical history, evidence of
insurability, or disability of the individual.
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(2) HEALTH
PROMOTION
AND
DISEASE
PRE-
VENTION.—Nothing in this subsection shall be con-
strued to prevent an insurer from establishing dis-
counts for participation in programs of health pro-
motion or disease prevention.
(3) INSURER.—An insurer described in this
paragraph is an insurer that issues or renews any
type or form of health plan to individuals.
(4) PREMIUMS.—Nothing in this subsection
shall be construed to affect the determination of an
insurer as to the amount of the premium payable
under a health plan issued to individuals under ap-
plicable State law.
(b) ELIGIBILITY FOR OTHER GROUP COVERAGE.—
The provisions of subsection (a) shall not apply to an indi-
vidual who is eligible for coverage under a group health
plan, or who has had coverage terminated under a group
health plan for failure to make required premium pay-
ments or contributions, or for fraud or misrepresentation
of material fact, or who is otherwise eligible for continu-
ation coverage as described in section 602 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1162).
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(c) MARKET REQUIREMENTS.—The provisions of
subsection (a) shall not be construed to require that an
insurer be an insurer of individuals.
SEC. 111. GUARANTEED RENEWABILITY OF INDIVIDUAL
HEALTH COVERAGE.
(a) IN GENERAL.—Subject to subsections (b) and (c),
coverage for individuals under an individual health plan
shall be renewed or continued in force at the option of
the individual, except that the requirement of this sub-
section shall not apply in the case of—
(1) the nonpayment of premiums or contribu-
tions by the individual in accordance with the terms
of the plan or where the plan has not received timely
premium payments;
(2) fraud or misrepresentation of material fact
on the part of the individual; or
(3) the termination of the plan in accordance
with subsection (b).
(b) TERMINATION OF HEALTH PLANS.—
(1) HEALTH PLAN NOT OFFERED.—In any case
in which an insurer is no longer going to continue
to offer an individual health plan to individuals, the
plan may be discontinued by the insurer if—
(A) the insurer provides notice to each in-
dividual covered under the plan of such termi-
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nation at least 90 days prior to the date of the
expiration of the plan;
(B) the insurer offers to each individual
covered under the plan the option to purchase
any other health plan currently being offered to
individuals; and
(C) in exercising the option to discontinue
the plan and in offering one or more replace-
ment plans, the insurer acts uniformly without
regard to the health status or insurability of in-
dividuals.
(2) INSURER
NOT
OFFERING
PLAN.—In any
case in which an insurer is no longer offering any
individual health plan in a State, the plan may be
discontinued by the insurer if—
(A) the insurer provides notice to the ap-
plicable certifying authority (as defined in sec-
tion 202(d)) and to each individual covered
under the plan of such termination at least 180
days prior to the date of the expiration of the
plan; and
(B) all such plans issued or delivered for
issuance in the State are discontinued and cov-
erage under such plans is nonrenewed.
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(3) PROHIBITION
ON
MARKET
REENTRY.—In
the case of a termination under paragraph (2), the
insurer may not provide for the issuance of any indi-
vidual health plan in the State involved during the
5-year period beginning on the date of the termi-
nation of the last plan not so renewed.
(c) TREATMENT OF NETWORK PLANS.—
(1) GEOGRAPHIC LIMITATIONS.—An individual
health plan which is a network plan (as defined in
paragraph (2)) or a health maintenance organization
plan may deny continued participation under the
plan to individuals who neither live, reside, nor work
in an area in which the individual health plan is of-
fered, but only if such denial is applied uniformly,
without regard to health status or the insurability of
particular individuals.
(2) NETWORK
PLAN.—As used in paragraph
(1), the term ‘‘network plan’’ means a health plan
that arranges for the financing and delivery of
health care services to individuals covered under
such health plan, in whole or in part, through ar-
rangements with providers to furnish health care
services.
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SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET RE-
FORMS.
With respect to any State law in effect on, or enacted
after, the date of enactment of this Act, such as guarantee
issue, open enrollment, high-risk pools, or mandatory con-
version policies, such State law shall apply in lieu of the
standards described in sections 110 and 111 unless the
Secretary of Health and Human Services determines that
such State law is not as effective in providing access to
affordable health care coverage as the standards described
in sections 110 and 111.
SEC. 113. INDIVIDUAL HEALTH COVERAGE AVAILABILITY
STUDY.
(a) IN GENERAL.—Not later than January 1, 1997,
the Secretary of Health and Human Services, in consulta-
tion with the Secretary, representatives of State officials,
consumers, and other representatives of individuals and
entities that have expertise in health insurance and em-
ployee benefit issues, shall conduct a study, and prepare
and submit to the appropriate committees of Congress a
report, concerning—
(1) the most appropriate way, in light of the ex-
perience of the various States, expert opinions, and
such additional data as may be available, to ensure
the availability of reasonably priced health insurance
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to individuals purchasing coverage on a non-group
basis;
(2) the need for Federal standards that limit
the variation in health insurance premiums charged
to individuals and groups of different characteristics
in order to achieve the purposes of this Act; and
(3) the effectiveness of the provisions of this
Act, and State insurance reform laws, in stabilizing
the small group health insurance market by provid-
ing for the broad pooling of risk.
(b) RECOMMENDATIONS.—The report submitted
under subsection (a) shall contain the recommendations
of the Secretary of Health and Human Services and the
Secretary for additional Federal legislation, if any, that
is needed to ensure the availability of reasonably priced
health insurance for individuals and employers.
Subtitle C—COBRA Clarifications
SEC. 121. COBRA CLARIFICATIONS.
(a) PUBLIC HEALTH SERVICE ACT.—
(1) PERIOD OF COVERAGE.—Section 2202(2) of
the Public Health Service Act (42 U.S.C. 300bb–
2(2)) is amended—
(A) in subparagraph (A)—
(i) by transferring the sentence imme-
diately preceding clause (iv) so as to ap-
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pear immediately following such clause
(iv); and
(ii) in the last sentence (as so trans-
ferred)—
(I) by inserting ‘‘, or a bene-
ficiary-family member of the individ-
ual,’’ after ‘‘an individual’’; and
(II) by striking ‘‘at the time of a
qualifying event described in section
2203(2)’’ and inserting ‘‘at any time
during the initial 18-month period of
continuing coverage under this title’’;
and
(B) in subparagraph (E), by striking ‘‘at
the time of a qualifying event described in sec-
tion 2203(2)’’ and inserting ‘‘at any time dur-
ing the initial 18-month period of continuing
coverage under this title’’.
(2) ELECTION.—Section 2205(1)(C) of the
Public Health Service Act (42 U.S.C. 300bb–
5(1)(C)) is amended—
(A) in clause (i), by striking ‘‘or’’ at the
end thereof;
(B) in clause (ii), by striking the period
and inserting ‘‘, or’’; and
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(C) by adding at the end thereof the fol-
lowing new clause:
‘‘(iii) in the case of an individual de-
scribed in the last sentence of section
2202(2)(A), or a beneficiary-family mem-
ber of the individual, the date such individ-
ual is determined to have been disabled.’’.
(3) NOTICES.—Section 2206(3) of the Public
Health Service Act (42 U.S.C. 300bb–6(3)) is
amended by striking ‘‘at the time of a qualifying
event described in section 2203(2)’’ and inserting
‘‘at any time during the initial 18-month period of
continuing coverage under this title’’.
(4) BIRTH OR ADOPTION OF A CHILD.—Section
2208(3)(A) of the Public Health Service Act (42
U.S.C. 300bb–8(3)(A)) is amended by adding at the
end thereof the following new flush sentence:
‘‘Such term shall also include a child who is born to
or adopted by the covered employee during the pe-
riod of continued coverage under this title.’’.
(b) EMPLOYEE RETIREMENT INCOME SECURITY ACT
OF 1974.—
(1) PERIOD OF COVERAGE.—Section 602(2) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1162(2)) is amended—
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(A) in the last sentence of subparagraph
(A)—
(i) by inserting ‘‘, or a beneficiary-
family member of the individual,’’ after
‘‘an individual’’; and
(ii) by striking ‘‘at the time of a
qualifying 
event 
described 
in 
section
603(2)’’ and inserting ‘‘at any time during
the initial 18-month period of continuing
coverage under this part’’; and
(B) in subparagraph (E), by striking ‘‘at
the time of a qualifying event described in sec-
tion 603(2)’’ and inserting ‘‘at any time during
the initial 18-month period of continuing cov-
erage under this part’’.
(2) ELECTION.—Section 605(1)(C) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1165(1)(C)) is amended—
(A) in clause (i), by striking ‘‘or’’ at the
end thereof;
(B) in clause (ii), by striking the period
and inserting ‘‘, or’’; and
(C) by adding at the end thereof the fol-
lowing new clause:
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‘‘(iii) in the case of an individual de-
scribed in the last sentence of section
602(2)(A), or a beneficiary-family member
of the individual, the date such individual
is determined to have been disabled.’’.
(3) NOTICES.—Section 606(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1166(3)) is amended by striking ‘‘at the time of a
qualifying event described in section 603(2)’’ and in-
serting ‘‘at any time during the initial 18-month pe-
riod of continuing coverage under this part’’.
(4) BIRTH OR ADOPTION OF A CHILD.—Section
607(3)(A) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1167(3)) is amended by
adding at the end thereof the following new flush
sentence:
‘‘Such term shall also include a child who is born to
or adopted by the covered employee during the pe-
riod of continued coverage under this part.’’.
(c) INTERNAL REVENUE CODE OF 1986.—
(1) 
PERIOD
OF
COVERAGE.—Section
4980B(f)(2)(B) of the Internal Revenue Code of
1986 is amended—
(A) in the last sentence of clause (i) by
striking ‘‘at the time of a qualifying event de-
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scribed in paragraph (3)(B)’’ and inserting ‘‘at
any time during the initial 18-month period of
continuing coverage under this section’’; and
(B) in clause (v), by striking ‘‘at the time
of a qualifying event described in paragraph
(3)(B)’’ and inserting ‘‘at any time during the
initial 18-month period of continuing coverage
under this section’’.
(2) ELECTION.—Section 4980B(f)(5)(A)(iii) of
the Internal Revenue Code of 1986 is amended—
(A) in subclause (I), by striking ‘‘or’’ at
the end thereof;
(B) in subclause (II), by striking the pe-
riod and inserting ‘‘, or’’; and
(C) by adding at the end thereof the fol-
lowing new subclause:
‘‘(III) in the case of an qualified
beneficiary described in the last sen-
tence of paragraph (2)(B)(i), the date
such individual is determined to have
been disabled.’’.
(3) NOTICES.—Section 4980B(f)(6)(C) of the
Internal Revenue Code of 1986 is amended by strik-
ing ‘‘at the time of a qualifying event described in
paragraph (3)(B)’’ and inserting ‘‘at any time dur-
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ing the initial 18-month period of continuing cov-
erage under this section’’.
(4) BIRTH OR ADOPTION OF A CHILD.—Section
4980B(g)(1)(A) of the Internal Revenue Code of
1986 is amended by adding at the end thereof the
following new flush sentence:
‘‘Such term shall also include a child who is
born to or adopted by the covered employee
during the period of continued coverage under
this section.’’.
(d) EFFECTIVE DATE.—The amendment made by
this section shall apply to qualifying events occurring on
or after the date of the enactment of this Act for plan
years beginning after December 31, 1997.
(e) NOTIFICATION OF CHANGES.—Not later than 60
days after the date of enactment of this Act, each group
health plan (covered under title XXII of the Public Health
Service Act, part 6 of subtitle A of title I of the Employee
Retirement Income Security Act of 1974, and section
4980B(f) of the Internal Revenue Code of 1986) shall no-
tify each qualified beneficiary who has elected continuation
coverage under such title, part or section of the amend-
ments made by this section.
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Subtitle D—Private Health Plan
Purchasing Coalitions
SEC. 131. PRIVATE HEALTH PLAN PURCHASING COALI-
TIONS.
(a) DEFINITION.—As used in this Act, the term
‘‘health plan purchasing coalition’’ means a group of indi-
viduals or employers that, on a voluntary basis and in ac-
cordance with this section, form an entity for the purpose
of purchasing insured health plans or negotiating with in-
sured health plans and providers. An insurer, agent,
broker or any other individual or entity engaged in the
sale of insurance may not form or underwrite a coalition.
(b) CERTIFICATION.—
(1) IN GENERAL.—A State shall certify health
plan purchasing coalitions that meet the require-
ments of this section. Each coalition shall be char-
tered under State law and registered with the Sec-
retary.
(2) STATE REFUSAL TO CERTIFY.—If a State
fails to implement a program for certifying health
plan purchasing coalitions in accordance with the
standards under this Act, the Secretary shall certify
and oversee the operations of such coalitions in such
State.
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(3) MULTI-STATE COALITIONS.—For purposes
of this section, a health plan purchasing coalition
operating in more than one State shall be certified
by the State in which the coalition is domiciled, pur-
suant to an agreement between the States in which
the coalition conducts business.
(d) BOARD OF DIRECTORS.—
(1) IN GENERAL.—Each health plan purchasing
coalition shall be governed by a Board of Directors
that shall be responsible for ensuring the perform-
ance of the duties of the coalition under this section.
The Board shall be composed of a broad cross-sec-
tion of representatives of employers, employees, and
individuals participating in the coalition. An insurer,
agent, broker or any other individual or entity en-
gaged in the sale of insurance may not hold or con-
trol any right to vote with respect to a coalition.
(2) LIMITATION ON COMPENSATION.—A health
plan purchasing coalition may not provide compensa-
tion to members of the Board of Directors. The coa-
lition may provide reimbursements to such members
for the reasonable and necessary expenses incurred
by the members in the performance of their duties
as members of the Board.
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(3) CONFLICT OF INTEREST.—No member of
the Board of Directors (or family members of such
members) nor any management personnel of the coa-
lition may be employed by, be a consultant for, be
a member of the board of directors of, be affiliated
with an agent of, or otherwise be a representative of
any health plan or other insurer, health care pro-
vider, or agent or broker. Nothing in the preceding
sentence shall limit a member of the Board from
purchasing coverage from a health plan offered
through the coalition.
(e) MEMBERSHIP AND MARKETING AREA.—
(1) MEMBERSHIP.—
(A) IN GENERAL.—A health plan purchas-
ing coalition may establish limits on the size of
employers who may become members of the co-
alition, and may determine whether to permit
individuals to become members. Upon the es-
tablishment of such membership requirements,
the coalition shall, except as provided in sub-
paragraph (B), accept all employers (or individ-
uals) residing within the area served by the coa-
lition who meet such requirements as members
on a first come, first-served basis.
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(B) CAPACITY LIMITS.—A health plan pur-
chasing coalition may cease accepting employers
or individuals as members of the coalition if—
(i) the coalition ceases to permit any
new employers or individuals to become
members; and
(ii) the coalition can demonstrate to
the State (or the Secretary in the case of
coalitions certified by the Secretary) that
the financial or other capacity of the coali-
tion to serve current members will be im-
paired if the coalition is required to accept
other members.
(2) MARKETING AREA.—A State may establish
rules regarding the geographic area that must be
served by a health plan purchasing coalition. With
respect to a State that has not established such
rules, a health plan purchasing coalition operating in
the State shall define the boundaries of the area to
be served by the coalition, except that such bound-
aries may not be established on the basis of health
status or insurability.
(f) DUTIES AND RESPONSIBILITIES.—
(1) IN GENERAL.—A health plan purchasing co-
alition shall—
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(A) enter into agreements with insured
health plans;
(B) enter into agreements with employers
and individuals who become members of the co-
alition;
(C) participate in any program of risk-ad-
justment or reinsurance, or any similar pro-
gram, that is established by the State;
(D) contract and negotiate with health
care providers and health plans;
(E) prepare and disseminate comparative
health plan materials (including information
about cost, quality, benefits, and other informa-
tion concerning health plans offered through
the coalition);
(F) actively market to all eligible employ-
ers and individuals residing within the service
area; and
(G) act as an ombudsman for health plan
enrollees.
(2) PERMISSIBLE ACTIVITIES.—A health plan
purchasing coalition may perform such other func-
tions as necessary to further the purposes of this
Act, including—
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(A) the collection and distribution of pre-
miums and the performance of other adminis-
trative functions;
(B) the collection and analysis of surveys
of health plan enrollee satisfaction;
(C) the charging of membership fee to en-
rollees (such fees may not be based on health
status) and the charging of participation fees to
health plans; and
(D) cooperating with (or accepting as
members) employers who self-insure for the
purpose of negotiating with providers.
(g) LIMITATIONS
ON COALITION ACTIVITIES.—A
health plan purchasing coalition shall not—
(1) perform any activity relating to the licens-
ing of health plans;
(2) assume financial risk in relating to any
health plan;
(3) perform any other activities that conflict or
are inconsistent with the performance of its duties
under this Act; or
(4) establish eligibility, continuation, enroll-
ment, or contribution requirements for employees or
employers and individuals based on the health sta-
tus, medical condition, claims experience, receipt of
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health care, medical history, evidence of insurability,
or disability of any individual.
(h) LIMITED
PREEMPTION
OF
CERTAIN
STATE
LAWS.—
(1) IN
GENERAL.—With respect to a health
plan purchasing coalition that meets the require-
ments of this section, the following State laws shall
be preempted:
(A) State fictitious group laws.
(B) State rating requirement laws, except
to the extent necessary to comply with the re-
quirements of paragraph (2).
(C) Other State laws that directly conflict
with the requirements in this section.
(2) RATING
REQUIREMENT
LAWS.—With re-
spect to a State rating requirement law, the coali-
tion—
(A) may not permit premium rates to vary
among employers or individuals that are mem-
bers of a health plan purchasing coalition in ex-
cess of the amount of such variations that
would be permitted under such State rating
laws among employers that are not members of
the coalition; and
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(B) with respect to premium rates nego-
tiated by the coalition, may permit such rates
to be less than rates that would otherwise be
permitted under State law if such rating dif-
ferential is not based on differences in health
status or demographic factors.
(i) RULES OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed to—
(1) require that a State organize, operate, or
otherwise create health care purchasing coalitions;
(2) otherwise require the establishment of
health care purchasing coalitions;
(3) require individuals or employers to purchase
health plans through a health plan purchasing coali-
tion;
(4) require that a health plan purchasing coali-
tion be the only type of health insurance purchasing
arrangement permitted to operate in a State; or
(5) confer authority upon a State that the State
would not otherwise have to regulate health plans
(whether insured or self-insured).
(j) APPLICATION OF ERISA.—The requirements of
parts 4 and 5 of subtitle B of title I of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1101)
shall apply to a health plan purchasing coalition.
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TITLE II—APPLICATION AND
ENFORCEMENT OF STANDARDS
SEC. 201. APPLICABILITY.
(a) CONSTRUCTION.—
(1) IN GENERAL.—A requirement or standard
imposed on an insured health plan under this Act
shall be deemed to be a requirement or standard im-
posed on the insurer. A requirement or standard im-
posed on a self-insured health plan under this Act
shall be deemed to be a requirement or standard im-
posed on the plan sponsor.
(2) PREEMPTION OF STATE LAW.—Nothing in
this Act shall be construed to prevent a State from
establishing, implementing, or continuing in effect
standards and requirements related to the issuance,
renewal, or rating of health insurance, or other
standards or requirements related to health insur-
ance, unless such standards are in direct conflict
with the standards or requirements established
under this Act.
SEC. 202. ENFORCEMENT OF STANDARDS.
(a) INSURED HEALTH PLANS.—Each State shall re-
quire that each insured health plan issued, sold, renewed,
offered for sale or operated in such State meet the insur-
ance reform standards established under this Act pursu-
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ant to an enforcement plan filed by the State with the
Secretary. A State shall submit such information as re-
quired by the Secretary demonstrating effective implemen-
tation of the State enforcement plan.
(b) SELF-INSURED HEALTH PLANS.—In the case of
self-insured health plans, the Secretary shall enforce the
reform standards established under this Act. A plan fail-
ing to meet such standards shall be subject to civil en-
forcement as provided for under section 502 of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1132) and for penalties as provided for under para-
graphs (1) and (2) of section 502(a) of such Act (relating
to failure to provide requested information and failure to
file required reports).
(c) FAILURE TO IMPLEMENT PLAN.—In the case of
the failure of a State to enforce the standards and require-
ments set forth in this Act, the Secretary, in consultation
with the Secretary of Health and Human Services, shall
implement an enforcement plan meeting the standards of
this Act in such State. In the case of a State that fails
to enforce the standards and requirements set forth in this
Act, each health plan operating in such State shall be sub-
ject to civil enforcement as provided for under section 502
of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1132) and for penalties as provided for under
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paragraphs (1) and (2) of subsection (a) of such section
(relating to failure to provide requested information and
failure to file required reports).
(d) APPLICABLE CERTIFYING AUTHORITY.—As used
in this title, the term ‘‘applicable certifying authority’’
means, with respect to—
(1) insured health plans, the State insurance
commissioner for the State involved; and
(2) a self-insured health plan, the Secretary.
TITLE III—MISCELLANEOUS
PROVISIONS
SEC. 
301. 
HMOS 
ALLOWED 
TO 
OFFER 
PLANS 
WITH
DEDUCTIBLES TO INDIVIDUALS WITH MEDI-
CAL SAVINGS ACCOUNTS.
(a) IN GENERAL.—Section 1301(b) of the Public
Health Service Act (42 U.S.C. 300e(b)) is amended by
adding at the end the following new paragraph:
‘‘(6)(A) If a member certifies that a medical
savings account has been established for the benefit
of such member, a health maintenance organization
may, at the request of such member reduce the basic
health services payment otherwise determined under
paragraph (1) by requiring the payment of a deduct-
ible by the member for basic health services.
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‘‘(B) For purposes of this paragraph, the term
‘medical savings account’ means an account which,
by its terms, allows the deposit of funds and the use
of such funds and income derived from the invest-
ment of such funds for the payment of the deduct-
ible described in subparagraph (A).’’.
(b) SENSE OF THE SENATE.—It is the sense of the
Senate that the Congress should take measures to further
the purposes of this Act, including any necessary changes
to the Internal Revenue Code of 1986 to encourage groups
and individuals to obtain health coverage, and to promote
access, equity, portability, affordability, and security of
health benefits.
SEC. 302. EFFECTIVE DATE.
The provisions of this Act shall apply to health plans
offered, sold, issued, renewed, or operated on or after Jan-
uary 1, 1997.
SEC. 303. SEVERABILITY.
If any provision of this Act or the application of such
provision to any person or circumstance is held to be un-
constitutional, the remainder of this Act and the applica-
tion of the provisions of such to any person or cir-
cumstance shall not be affected thereby.
Æ
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