[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2893 Introduced in House (IH)]

  2d Session
                                H. R. 2893

    To provide increased access to health care benefits, to provide 
  increased portability of health care benefits, to provide increased 
 security of health care benefits, to increase the purchasing power of 
        individuals and small employers, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 25, 1996

 Mrs. Roukema introduced the following bill; which was referred to the 
 Committee on Commerce, and in addition to the Committees on Ways and 
 Means and Economic and Educational Opportunities, for a period to be 
subsequently determined by the Speaker, in each case for consideration 
  of such provisions as fall within the jurisdiction of the committee 
                               concerned

_______________________________________________________________________

                                 A BILL


 
    To provide increased access to health care benefits, to provide 
  increased portability of health care benefits, to provide increased 
 security of health care benefits, to increase the purchasing power of 
        individuals and small employers, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Insurance 
Reform Act of 1996''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
       TITLE I--HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY

                     Subtitle A--Group Market Rules

Sec. 101. Guaranteed availability of health coverage.
Sec. 102. Guaranteed renewability of health coverage.
Sec. 103. Portability of health coverage and limitation on preexisting 
                            condition exclusions.
Sec. 104. Special enrollment periods.
Sec. 105. Disclosure of information.
                  Subtitle B--Individual Market Rules

Sec. 110. Individual health plan portability.
Sec. 111. Guaranteed renewability of individual health coverage.
Sec. 112. State flexibility in individual market reforms.
Sec. 113. Definition.
                    Subtitle C--COBRA Clarifications

Sec. 121. Cobra clarifications.
        Subtitle D--Private Health Plan Purchasing Cooperatives

Sec. 131. Private health plan purchasing cooperatives.
           TITLE II--APPLICATION AND ENFORCEMENT OF STANDARDS

Sec. 201. Applicability.
Sec. 202. Enforcement of standards.
                  TITLE III--MISCELLANEOUS PROVISIONS

Sec. 301. HMOs allowed to offer plans with deductibles to individuals 
                            with medical savings accounts.
Sec. 302. Health coverage availability study.
Sec. 303. Effective date.
Sec. 304. Severability.

SEC. 2. DEFINITIONS.

    As used in this Act:
            (1) Beneficiary.--The term ``beneficiary'' has the meaning 
        given such term under section 3(8) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1002(8)).
            (2) Employee.--The term ``employee'' has the 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 meaning given 
        such term under section 3(5) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002(5)), except that such term 
        shall include only employers of two or more employees.
            (4) Employee health benefit plan.--
                    (A) In general.--The term ``employee health benefit 
                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 provides or pays 
                for health benefits (such as provider and hospital 
                benefits) for participants and beneficiaries whether--
                            (i) directly;
                            (ii) through a group health plan offered by 
                        a health plan issuer as defined in paragraph 
                        (8); or
                            (iii) otherwise.
                    (B) Rule of construction.--An employee health 
                benefit plan shall not be construed to be a group 
                health plan, an individual health plan, or a health 
                plan issuer.
                    (C) Arrangements not included.--Such term does not 
                include the following, or any combination thereof:
                            (i) Coverage only for accident, or 
                        disability income insurance, or any combination 
                        thereof.
                            (ii) Medicare supplemental health insurance 
                        (as defined under section 1882(g)(1) of the 
                        Social Security Act).
                            (iii) Coverage issued as a supplement to 
                        liability insurance.
                            (iv) Liability insurance, including general 
                        liability insurance and automobile liability 
                        insurance.
                            (v) Workers compensation or similar 
                        insurance.
                            (vi) Automobile medical payment insurance.
                            (vii) Coverage for a specified disease or 
                        illness.
                            (viii) Hospital or fixed indemnity 
                        insurance.
                            (ix) Short-term limited duration insurance.
                            (x) Credit-only, dental-only, or vision-
                        only insurance.
                            (xi) A health insurance policy providing 
                        benefits only for long-term care, nursing home 
                        care, home health care, community-based care, 
                        or any combination thereof.
            (5) Family.--
                    (A) In general.--The term ``family'' means an 
                individual, the individual's spouse, and the child of 
                the individual (if any).
                    (B) Child.--For purposes of subparagraph (A), the 
                term ``child'' means any individual who is a child 
                within the meaning of section 151(c)(3) of the Internal 
                Revenue Code of 1986.
            (6) Group health plan.--
                    (A) In general.--The term ``group health plan'' 
                means any contract, policy, certificate or other 
                arrangement offered by a health plan issuer to a group 
                purchaser that provides or pays for health benefits 
                (such as provider and hospital benefits) in connection 
                with an employee health benefit plan.
                    (B) Arrangements not included.--Such term does not 
                include the following, or any combination thereof:
                            (i) Coverage only for accident, or 
                        disability income insurance, or any combination 
                        thereof.
                            (ii) Medicare supplemental health insurance 
                        (as defined under section 1882(g)(1) of the 
                        Social Security Act).
                            (iii) Coverage issued as a supplement to 
                        liability insurance.
                            (iv) Liability insurance, including general 
                        liability insurance and automobile liability 
                        insurance.
                            (v) Workers compensation or similar 
                        insurance.
                            (vi) Automobile medical payment insurance.
                            (vii) Coverage for a specified disease or 
                        illness.
                            (viii) Hospital or fixed indemnity 
                        insurance.
                            (ix) Short-term limited duration insurance.
                            (x) Credit-only, dental-only, or vision-
                        only insurance.
                            (xi) A health insurance policy providing 
                        benefits only for long-term care, nursing home 
                        care, home health care, community-based care, 
                        or any combination thereof.
            (7) Group purchaser.--The term ``group purchaser'' means 
        any person (as defined under paragraph (9) of section 3 of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1002(9)) or entity that purchases or pays for health benefits 
        (such as provider or hospital benefits) on behalf of two or 
        more participants or beneficiaries in connection with an 
        employee health benefit plan. A health plan purchasing 
        cooperative established under section 131 shall not be 
        considered to be a group purchaser.
            (8) Health plan issuer.--The term ``health plan issuer'' 
        means any entity that is licensed (prior to or after the date 
        of enactment of this Act) by a State to offer a group health 
        plan or an individual health plan.
            (9) Participant.--The term ``participant'' has the meaning 
        given such term under section 3(7) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1002(7)).
            (10) Plan sponsor.--The term ``plan sponsor'' has the 
        meaning given such term under section 3(16)(B) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1002(16)(B)).
            (11) Secretary.--The term ``Secretary'', unless 
        specifically provided otherwise, means the Secretary of Labor.
            (12) 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 RENEWABILITY

                     Subtitle A--Group Market Rules

SEC. 101. GUARANTEED AVAILABILITY OF HEALTH COVERAGE.

    (a) In General.--
            (1) Nondiscrimination.--Except as provided in subsection 
        (b), section 102 and section 103--
                    (A) a health plan issuer offering a group health 
                plan may not decline to offer whole group coverage to a 
                group purchaser desiring to purchase such coverage; and
                    (B) an employee health benefit plan or a health 
                plan issuer offering a group health plan may establish 
                eligibility, continuation of eligibility, enrollment, 
                or premium contribution requirements under the terms of 
                such plan, except that such requirements shall not be 
                based on health status, medical condition, claims 
                experience, receipt of health care, medical history, 
                evidence of insurability, or disability.
            (2) Health promotion and disease prevention.--Nothing in 
        this subsection shall prevent an employee health benefit plan 
        or a health plan issuer from establishing premium discounts or 
        modifying otherwise applicable copayments or deductibles in 
        return for adherence to programs of health promotion and 
        disease prevention.
    (b) Application of Capacity Limits.--
            (1) In general.--Subject to paragraph (2), a health plan 
        issuer offering a group health plan may cease offering coverage 
        to group purchasers under the plan if--
                    (A) the health plan issuer ceases to offer coverage 
                to any additional group purchasers; and
                    (B) the health plan issuer can demonstrate to the 
                applicable certifying authority (as defined in section 
                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 expected to enroll because of 
                their affiliation with a group purchaser or such 
                previously covered participants or beneficiaries) will 
                be impaired if the health plan issuer is required to 
                offer coverage to additional group purchasers.
        Such health plan issuer shall be prohibited from offering 
        coverage after a cessation in offering coverage under this 
        paragraph for a 6-month period or until the health plan issuer 
        can demonstrate to the applicable certifying authority (as 
        defined in section 202(d)) that the health plan issuer has 
        adequate capacity, whichever is later.
            (2) First-come-first-served.--A health plan issuer offering 
        a group health plan is only eligible to exercise the 
        limitations provided for in paragraph (1) if the health plan 
        issuer offers coverage to group purchasers under such plan on a 
        first-come-first-served basis or other basis established by a 
        State to ensure a fair opportunity to enroll in the plan and 
        avoid risk selection.
    (c) Construction.--
            (1) Marketing of group health plans.--Nothing in this 
        section shall be construed to prevent a State from requiring 
        health plan issuers offering group health plans to actively 
        market such plans.
            (2) Involuntary offering of group health plans.--Nothing in 
        this section shall be construed to require a health plan issuer 
        to involuntarily offer group health plans in a particular 
        market. For the purposes of this paragraph, the term ``market'' 
        means either the large employer market or the small employer 
        market (as defined under applicable State law, or if not so 
        defined, an employer with not more than 50 employees).

SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COVERAGE.

    (a) In General.--
            (1) Group purchaser.--Subject to subsections (b) and (c), a 
        group health plan shall be renewed or continued in force by a 
        health plan issuer at the option of the group purchaser, except 
        that the requirement of this subparagraph shall not apply in 
        the case of--
                    (A) the nonpayment of premiums or contributions by 
                the group purchaser in accordance with the terms of the 
                group health plan or where the health plan issuer has 
                not received timely premium payments;
                    (B) fraud or misrepresentation of material fact on 
                the part of the group purchaser;
                    (C) the termination of the group health plan in 
                accordance with subsection (b); or
                    (D) the failure of the group purchaser to meet 
                contribution or participation requirements in 
                accordance with paragraph (3).
            (2) Participant.--Subject to subsections (b) and (c), 
        coverage under an employee health benefit plan or group health 
        plan shall be renewed or continued in force, if the group 
        purchaser elects to continue to provide coverage under such 
        plan, at the option of the participant (or beneficiary where 
        such right exists under the terms of the plan or under 
        applicable law), except that the requirement of this paragraph 
        shall not apply in the case of--
                    (A) the nonpayment of premiums or contributions by 
                the participant or beneficiary in accordance with the 
                terms of the employee health benefit plan or group 
                health plan or where such plan has not received timely 
                premium payments;
                    (B) fraud or misrepresentation of material fact on 
                the part of the participant or beneficiary relating to 
                an application for coverage or claim for benefits;
                    (C) the termination of the employee health benefit 
                plan or group health plan;
                    (D) loss of eligibility for continuation coverage 
                as described in part 6 of subtitle B of title I of the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1161 et seq.); or
                    (E) failure of a participant or beneficiary to meet 
                requirements for eligibility for coverage under an 
                employee health benefit plan or group health plan that 
                are not prohibited by this Act.
            (3) Rules of Construction.--Nothing in this subsection, nor 
        in section 101(a), shall be construed to--
                    (A) preclude a health plan issuer from establishing 
                employer contribution rules or group participation 
                rules for group health plans as allowed under 
                applicable State law;
                    (B) preclude a plan defined in section 3(37) of the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1102(37)) from establishing employer 
                contribution rules or group participation rules; or
                    (C) permit individuals to decline coverage under an 
                employee health benefit plan if such right is not 
                otherwise available under such plan.
    (b) Termination of Group Health Plans.--
            (1) Particular type of group health plan not offered.--In 
        any case in which a health plan issuer decides to discontinue 
        offering a particular type of group health plan, a group health 
        plan of such type may be discontinued by the health plan issuer 
        only if--
                    (A) the health plan issuer provides notice to each 
                group purchaser covered under a group health plan of 
                this type (and participants and beneficiaries covered 
                under such group health plan) of such discontinuation 
                at least 90 days prior to the date of the 
                discontinuation of such plan;
                    (B) the health plan issuer offers to each group 
                purchaser covered under a group health plan of this 
                type, the option to purchase any other group health 
                plan currently being offered by the health plan issuer; 
                and
                    (C) in exercising the option to discontinue a group 
                health plan of this type and in offering one or more 
                replacement plans, the health plan issuer acts 
                uniformly without regard to the health status or 
                insurability of participants or beneficiaries covered 
                under the group health plan, or new participants or 
                beneficiaries who may become eligible for coverage 
                under the group health plan.
            (2) Discontinuance of all group health plans.--
                    (A) In general.--In any case in which a health plan 
                issuer elects to discontinue offering all group health 
                plans in a State, a group health plan may be 
                discontinued by the health plan issuer only if--
                            (i) the health plan issuer provides notice 
                        to the applicable certifying authority (as 
                        defined in section 202(d)) and to each group 
                        purchaser (and participants and beneficiaries 
                        covered under such group health plan) of such 
                        discontinuation at least 180 days prior to the 
                        date of the expiration of such plan; and
                            (ii) all group health plans issued or 
                        delivered for issuance in the State are 
                        discontinued and coverage under such plans is 
                        not renewed.
                    (B) Application of provisions.--The provisions of 
                this paragraph and paragraph (3) may be applied 
                separately by a health plan issuer--
                            (i) to all group health plans offered to 
                        small employers (as defined under applicable 
                        State law, or if not so defined, an employer 
                        with not more than 50 employees); or
                            (ii) to all other group health plans 
                        offered by the health plan issuer in the State.
            (3) Prohibition on market reentry.--In the case of a 
        discontinuation under paragraph (2), the health plan issuer may 
        not provide for the issuance of any group health plan in the 
        market sector (as described in paragraph (2)(B)) in which 
        issuance of such group health plan was discontinued in the 
        State involved during the 5-year period beginning on the date 
        of the discontinuation of the last group health plan not so 
        renewed.
    (c) Treatment of Network Plans.--
            (1) Geographic limitations.--A network plan (as defined in 
        paragraph (2)) may deny continued participation under such plan 
        to participants or beneficiaries who neither live, reside, nor 
        work in an area in which such network plan is offered, but only 
        if such denial is applied uniformly, without regard to health 
        status or the insurability of particular participants or 
        beneficiaries.
            (2) Network plan.--As used in paragraph (1), the term 
        ``network plan'' means an employee health benefit plan or a 
        group health plan that arranges for the financing and delivery 
        of health care services to participants or beneficiaries 
        covered under such plan, in whole or in part, through 
        arrangements with providers.
    (d) COBRA Coverage.--Nothing in subsection (a)(2)(E) or subsection 
(c) shall be construed to affect any right to COBRA continuation 
coverage as described in part 6 of subtitle B of title I of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1161 et 
seq.).

SEC. 103. PORTABILITY OF HEALTH COVERAGE AND LIMITATION ON PREEXISTING 
              CONDITION EXCLUSIONS.

    (a) In General.--An employee health benefit plan or a health plan 
issuer offering a group health plan may impose a limitation or 
exclusion of benefits relating to treatment of a preexisting condition 
based on the fact that the condition existed prior to the coverage of 
the participant or beneficiary under the plan only if--
            (1) the limitation or exclusion extends for a period of not 
        more than 12 months after the date of enrollment in the plan;
            (2) the limitation or exclusion does not apply to an 
        individual who, within 30 days of the date of birth or 
        placement for adoption (as determined under section 
        609(c)(3)(B) of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1169(c)(3)(B)), was covered under the plan; and
            (3) the limitation or exclusion does not apply to a 
        pregnancy.
    (b) Crediting of Previous Qualifying Coverage.--
            (1) In general.--Subject to paragraph (4), an employee 
        health benefit plan or a health plan issuer offering a group 
        health plan shall provide that if a participant or beneficiary 
        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 respect to a preexisting condition 
        shall be reduced by 1 month for each month in which the 
        participant or beneficiary was in the period of previous 
        qualifying coverage. With respect to an individual described in 
        subsection (a)(2) who maintains continuous coverage, no 
        limitation or exclusion of benefits relating to treatment of a 
        preexisting condition may be applied to a child within the 
        child's first 12 months of life or within 12 months after the 
        placement of a child for adoption.
            (2) Discharge of duty.--An employee health benefit plan 
        shall provide documentation of coverage to participants and 
        beneficiaries whose coverage is terminated under the plan. 
        Pursuant to regulations promulgated by the Secretary, the duty 
        of an employee health benefit plan to verify previous 
        qualifying coverage with respect to a participant or 
        beneficiary is effectively discharged when such employee health 
        benefit plan provides documentation to a participant or 
        beneficiary that includes the following information:
                    (A) the dates that the participant or beneficiary 
                was covered under the plan; and
                    (B) the benefits and cost-sharing arrangement 
                available to the participant or beneficiary under such 
                plan.
        An employee health benefit plan shall retain the documentation 
        provided to a participant or beneficiary under subparagraphs 
        (A) and (B) for at least the 12-month period following the date 
        on which the participant or beneficiary ceases to be covered 
        under the plan. Upon request, an employee health benefit plan 
        shall provide a second copy of such documentation to such 
        participant or beneficiary within the 12-month period following 
        the date of such ineligibility.
            (3) Definitions.--As used in this section:
                    (A) Previous qualifying coverage.--The term 
                ``previous qualifying coverage'' means the period 
                beginning on the date--
                            (i) a participant or beneficiary is 
                        enrolled under an employee health benefit plan 
                        or a group health plan, and ending on the date 
                        the participant or beneficiary is not so 
                        enrolled; or
                            (ii) an individual is enrolled under an 
                        individual health plan (as defined in section 
                        113) or under a public or private health plan 
                        established under Federal or State law, and 
                        ending on the date the individual is not so 
                        enrolled;
                for a continuous period of more than 30 days (without 
                regard to any waiting period).
                    (B) Limitation or exclusion of benefits relating to 
                treatment of a preexisting condition.--The term 
                ``limitation or exclusion of benefits relating to 
                treatment of a preexisting condition'' means a 
                limitation or exclusion of benefits imposed on an 
                individual based on a preexisting condition of such 
                individual.
            (4) Effect of previous coverage.--An employee health 
        benefit plan or a health plan issuer offering a group health 
        plan may impose a limitation or exclusion of benefits relating 
        to the treatment of a preexisting condition, subject to the 
        limits in subsection (a)(1), only to the extent that such 
        service or benefit was not previously covered under the group 
        health plan, employee health benefit plan, or individual health 
        plan in which the participant or beneficiary was enrolled 
        immediately prior to enrollment in the plan involved.
    (c) Late Enrollees.--Except as provided in section 104, with 
respect to a participant or beneficiary enrolling in an employee health 
benefit plan or a group health plan during a time that is other than 
the first opportunity to enroll during an enrollment period of at least 
30 days, coverage with respect to benefits or services relating to the 
treatment of a preexisting condition in accordance with subsections (a) 
and (b) may be excluded, except the period of such exclusion may not 
exceed 18 months beginning on the date of coverage under the plan.
    (d) Affiliation Periods.--With respect to a participant or 
beneficiary who would otherwise be eligible to receive benefits under 
an employee health benefit plan or a group health plan but for the 
operation of a preexisting condition limitation or exclusion, if such 
plan does not utilize a limitation or exclusion of benefits relating to 
the treatment of a preexisting condition, such plan may impose an 
affiliation period on such participant or beneficiary not to exceed 60 
days (or in the case of a late participant or beneficiary described in 
subsection (c), 90 days) from the date on which the participant or 
beneficiary would otherwise be eligible to receive benefits under the 
plan. An employee health benefit plan or a health plan issuer offering 
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 an affiliation period, the plan 
may not be required to provide health care services or benefits and no 
premium shall be charged to the participant or beneficiary.
    (e)  Preexisting Condition.--For purposes of this section, the term 
``preexisting condition'' means a condition, regardless of the cause of 
the condition, for which medical advice, diagnosis, care, or treatment 
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 section shall be construed 
to preempt State laws that--
            (1) require health plan issuers to impose a limitation or 
        exclusion of benefits relating to the treatment of a 
        preexisting condition for periods that are shorter than those 
        provided for under this section; or
            (2) allow individuals, participants, and beneficiaries to 
        be considered to be in a period of previous qualifying coverage 
        if such individual, participant, or beneficiary experiences a 
        lapse in coverage that is greater than the 30-day period 
        provided for under subsection (b)(3);
unless such laws are preempted by section 514 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144).

SEC. 104. SPECIAL ENROLLMENT PERIODS.

    In the case of a participant, beneficiary or family member who--
            (1) through marriage, separation, divorce, death, birth or 
        placement of a child for adoption, experiences a change in 
        family composition affecting eligibility under a group health 
        plan, individual health plan, or employee health benefit plan;
            (2) experiences a change in employment status, as described 
        in section 603(2) of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1163(2)), that causes the loss of 
        eligibility for coverage, other than COBRA continuation 
        coverage under a group health plan, individual health plan, or 
        employee health benefit plan; or
            (3) experiences a loss of eligibility under a group health 
        plan, individual health plan, or employee health benefit plan 
        because of a change in the employment status of a family 
        member;
each employee health benefit plan and each group health plan shall 
provide for a special enrollment period extending for a reasonable time 
after such event that would permit the participant to change the 
individual or family basis of coverage or to enroll in the plan if 
coverage would have been available to such individual, participant, or 
beneficiary but for failure to enroll during a previous enrollment 
period. Such a special enrollment period shall ensure that a child born 
or placed for adoption shall be deemed to be covered under the plan as 
of the date of such birth or placement for adoption if such child is 
enrolled within 30 days of the date of such birth or placement for 
adoption.

SEC. 105. DISCLOSURE OF INFORMATION.

    (a) Disclosure of Information by Health Plan Issuers.--
            (1) In general.--In connection with the offering of any 
        group health plan to a small employer (as defined under 
        applicable State law, or if not so defined, an employer with 
        not more than 50 employees), a health plan issuer shall make a 
        reasonable disclosure to such employer, as part of its 
        solicitation and sales materials, of--
                    (A) the provisions of such group health plan 
                concerning the health plan issuer's right to change 
                premium rates and the factors that may affect changes 
                in premium rates;
                    (B) the provisions of such group health plan 
                relating to renewability of coverage;
                    (C) the provisions of such group health plan 
                relating to any preexisting condition provision; and
                    (D) descriptive information about the benefits and 
                premiums available under all group health plans for 
                which the employer is qualified.
        Information shall be provided to small employers under this 
        paragraph in a manner determined to be understandable by the 
        average small employer, and shall be sufficiently accurate and 
        comprehensive to reasonably inform small employers, 
        participants and beneficiaries of their rights and obligations 
        under the group health plan.
            (2) Exception.--With respect to the requirement of 
        paragraph (1), any information that is proprietary and trade 
        secret information under applicable law shall not be subject to 
        the disclosure requirements of such paragraph.
            (3) Construction.--Nothing in this subsection shall be 
        construed to preempt State reporting and disclosure 
        requirements to the extent that such requirements are not 
        preempted under section 514 of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1144).
    (b) Disclosure of Information to Participants and Beneficiaries.--
            (1) In general.--Section 104(b)(1) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(1)) 
        is amended in the matter following subparagraph (B)--
                    (A) by striking ``102(a)(1),'' and inserting 
                ``102(a)(1) that is not a material reduction in covered 
                services or benefits provided,''; and
                    (B) by adding at the end thereof the following new 
                sentences: ``If there is a modification or change 
                described in section 102(a)(1) that is a material 
                reduction in covered services or benefits provided, a 
                summary description of such modification or change 
                shall be furnished to participants not later than 60 
                days after the date of the adoption of the modification 
                or change. In the alternative, the plan sponsors may 
                provide such description at regular intervals of not 
                more than 90 days. The Secretary shall issue 
                regulations within 180 days after the date of enactment 
                of the Health Insurance Reform Act of 1996, providing 
                alternative mechanisms to delivery by mail through 
                which employee health benefit plans may notify 
                participants of material reductions in covered services 
                or benefits.''.
            (2) Plan description and summary.--Section 102(b) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1022(b)) is amended--
                    (A) by inserting ``including the office or title of 
                the individual who is responsible for approving or 
                denying claims for coverage of benefits'' after ``type 
                of administration of the plan'';
                    (B) by inserting ``including the name of the 
                organization responsible for financing claims'' after 
                ``source of financing of the plan''; and
                    (C) by inserting ``including the office, contact, 
                or title of the individual at the Department of Labor 
                through which participants may seek assistance or 
                information regarding their rights under this Act and 
                the Health Insurance Reform Act of 1996 with respect to 
                health benefits that are not offered through a group 
                health plan.'' after ``benefits under the plan''.

                  Subtitle B--Individual Market Rules

SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.

    (a) Limitation on Requirements.--
            (1) In general.--With respect to an individual 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)(A)(i)) under one or more group health plans or 
        employee health benefit plans that commenced 18 or more months 
        prior to the date on which such individual desires to enroll in 
        the individual plan, a health plan issuer described in 
        paragraph (3) may not decline to offer coverage to such 
        individual, or deny enrollment to such individual based on the 
        health status, medical condition, claims experience, receipt of 
        health care, medical history, evidence of insurability, or 
        disability of the individual, except as described in 
        subsections (b) and (c).
            (2) Health promotion and disease prevention.--Nothing in 
        this subsection shall be construed to prevent a health plan 
        issuer offering an individual health plan from establishing 
        premium discounts or modifying otherwise applicable copayments 
        or deductibles in return for adherence to programs of health 
        promotion or disease prevention.
            (3) Health plan issuer.--A health plan issuer described in 
        this paragraph is a health plan issuer that issues or renews 
        individual health plans.
            (4) Premiums.--Nothing in this subsection shall be 
        construed to affect the determination of a health plan issuer 
        as to the amount of the premium payable under an individual 
        health plan under applicable State law.
    (b) Eligibility for Other Group Coverage.--The provisions of 
subsection (a) shall not apply to an individual who is eligible for 
coverage under a group health plan or an employee health benefit plan, 
or who has had coverage terminated under a group health plan or 
employee health benefit plan for failure to make required premium 
payments or contributions, or for fraud or misrepresentation of 
material fact, or who is otherwise eligible for continuation coverage 
as described in part 6 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1161 et seq.) or 
under an equivalent State program.
    (c) Application of Capacity Limits.--
            (1) In general.--Subject to paragraph (2), a health plan 
        issuer offering coverage to individuals under an individual 
        health plan may cease enrolling individuals under the plan if--
                    (A) the health plan issuer ceases to enroll any new 
                individuals; and
                    (B) the health plan issuer can demonstrate to the 
                applicable certifying authority (as defined in section 
                202(d)), if required, that its financial or provider 
                capacity to serve previously covered individuals will 
                be impaired if the health plan issuer is required to 
                enroll additional individuals.
        Such a health plan issuer shall be prohibited from offering 
        coverage after a cessation in offering coverage under this 
        paragraph for a 6-month period or until the health plan issuer 
        can demonstrate to the applicable certifying authority (as 
        defined in section 202(d)) that the health plan issuer has 
        adequate capacity, whichever is later.
            (2) First-come-first-served.--A health plan issuer offering 
        coverage to individuals under an individual health plan is only 
        eligible to exercise the limitations provided for in paragraph 
        (1) if the health plan issuer provides for enrollment of 
        individuals under such plan on a first-come-first-served basis 
        or other basis established by a State to ensure a fair 
        opportunity to enroll in the plan and avoid risk selection.
    (d) Market Requirements.--
            (1) In general.--The provisions of subsection (a) shall not 
        be construed to require that a health plan issuer offering 
        group health plans to group purchasers offer individual health 
        plans to individuals.
            (2) Conversion policies.--A health plan issuer offering 
        group health plans to group purchasers under this Act shall not 
        be deemed to be a health plan issuer offering an individual 
        health plan solely because such health plan issuer offers a 
        conversion policy.
            (3) Marketing of plans.--Nothing in this section shall be 
        construed to prevent a State from requiring health plan issuers 
        offering coverage to individuals under an individual health 
        plan to actively market such plan.

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 by a health plan issuer at the option of the 
individual, except that the requirement of this subsection shall not 
apply in the case of--
            (1) the nonpayment of premiums or contributions by the 
        individual in accordance with the terms of the individual 
        health plan or where the health plan issuer 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 individual health plan in 
        accordance with subsection (b).
    (b) Termination of Individual Health Plans.--
            (1) Particular type of individual health plan not 
        offered.--In any case in which a health plan issuer decides to 
        discontinue offering a particular type of individual health 
        plan to individuals, an individual health plan may be 
        discontinued by the health plan issuer only if--
                    (A) the health plan issuer provides notice to each 
                individual covered under the plan of such 
                discontinuation at least 90 days prior to the date of 
                the expiration of the plan;
                    (B) the health plan issuer offers to each 
                individual covered under the plan the option to 
                purchase any other individual health plan currently 
                being offered by the health plan issuer to individuals; 
                and
                    (C) in exercising the option to discontinue the 
                individual health plan and in offering one or more 
                replacement plans, the health plan issuer acts 
                uniformly without regard to the health status or 
                insurability of particular individuals.
            (2) Discontinuance of all individual health plans.--In any 
        case in which a health plan issuer elects to discontinue all 
        individual health plans in a State, an individual health plan 
        may be discontinued by the health plan issuer only if--
                    (A) the health plan issuer provides notice to the 
                applicable certifying authority (as defined in section 
                202(d)) and to each individual covered under the plan 
                of such discontinuation at least 180 days prior to the 
                date of the discontinuation of the plan; and
                    (B) all individual health plans issued or delivered 
                for issuance in the State are discontinued and coverage 
                under such plans is not renewed.
            (3) Prohibition on market reentry.--In the case of a 
        discontinuation under paragraph (2), the health plan issuer may 
        not provide for the issuance of any individual health plan in 
        the State involved during the 5-year period beginning on the 
        date of the discontinuation of the last plan not so renewed.
    (c) Treatment of Network Plans.--
            (1) Geographic limitations.--A health plan issuer which 
        offers a network plan (as defined in paragraph (2)) 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 offered, 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 an individual 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 arrangements with providers.

SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET REFORMS.

    (a) In General.--With respect to any State law with respect to 
which the Governor of the State notifies the Secretary of Health and 
Human Services that such State law will achieve the goals of sections 
110 and 111, and that is in effect on, or enacted after, the date of 
enactment of this Act (such as laws providing for guaranteed issue, 
open enrollment by one or more health plan issuers, high-risk pools, or 
mandatory conversion 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, after considering the criteria 
described in subsection (b)(1), in consultation with the Governor and 
Insurance Commissioner or chief insurance regulatory official of the 
State, that such State law does not achieve the goals of providing 
access to affordable health care coverage for those individuals 
described in sections 110 and 111.
    (b) Determination.--
            (1) In general.--In making a determination under subsection 
        (a), the Secretary of Health and Human Services shall only--
                    (A) evaluate whether the State law or program 
                provides guaranteed access to affordable coverage to 
                individuals described in sections 110 and 111;
                    (B) evaluate whether the State law or program 
                provides coverage for preexisting conditions (as 
                defined in section 103(e)) that were covered under the 
                individuals' previous group health plan or employee 
                health benefit plan for individuals described in 
                sections 110 and 111;
                    (C) evaluate whether the State law or program 
                provides individuals described in sections 110 and 111 
                with a choice of health plans or a health plan 
                providing comprehensive coverage; and
                    (D) evaluate whether the application of the 
                standards described in sections 110 and 111 will have 
                an adverse impact on the number of individuals in such 
                State having access to affordable coverage.
            (2) Notice of intent.--If, within 6 months after the date 
        of enactment of this Act, the Governor of a State notifies the 
        Secretary of Health and Human Services that the State intends 
        to enact a law, or modify an existing law, described in 
        subsection (a), the Secretary of Health and Human Services may 
        not make a determination under such subsection until the 
        expiration of the 12-month period beginning on the date on 
        which such notification is made, or until January 1, 1998, 
        whichever is later. With respect to a State that provides 
        notice under this paragraph and that has a legislature that 
        does not meet within the 12-month period beginning on the date 
        of enactment of this Act, the Secretary shall not make a 
        determination under subsection (a) prior to January 1, 1998.
            (3) Notice to state.--If the Secretary of Health and Human 
        Services determines that a State law or program does not 
        achieve the goals described in subsection (a), the Secretary of 
        Health and Human Services shall provide the State with adequate 
        notice and reasonable opportunity to modify such law or program 
        to achieve such goals prior to making a final determination 
        under subsection (a).
    (c) Adoption of NAIC Model.--If, not later than 9 months after the 
date of enactment of this Act--
            (1) the National Association of Insurance Commissioners 
        (hereafter referred to as the ``NAIC''), through a process 
        which the Secretary of Health and Human Services determines has 
        included consultation with representatives of the insurance 
        industry and consumer groups, adopts a model standard or 
        standards for reform of the individual health insurance market; 
        and
            (2) the Secretary of Health and Human Services determines, 
        within 30 days of the adoption of such NAIC standard or 
        standards, that such standards comply with the goals of 
        sections 110 and 111;
a State that elects to adopt such model standards or substantially 
adopt such model standards shall be deemed to have met the requirements 
of sections 110 and 111 and shall not be subject to a determination 
under subsection (a).

SEC. 113. DEFINITION.

    (a) In General.--As used in this title, the term ``individual 
health plan'' means any contract, policy, certificate or other 
arrangement offered to individuals by a health plan issuer that 
provides or pays for health benefits (such as provider and hospital 
benefits) and that is not a group health plan under section 2(6).
    (b) Arrangements Not Included.--Such term does not include the 
following, or any combination thereof:
            (1) Coverage only for accident, or disability income 
        insurance, or any combination thereof.
            (2) Medicare supplemental health insurance (as defined 
        under section 1882(g)(1) of the Social Security Act).
            (3) Coverage issued as a supplement to liability insurance.
            (4) Liability insurance, including general liability 
        insurance and automobile liability insurance.
            (5) Workers' compensation or similar insurance.
            (6) Automobile medical payment insurance.
            (7) Coverage for a specified disease or illness.
            (8) Hospital or fixed indemnity insurance.
            (9) Short-term limited duration insurance.
            (10) Credit-only, dental-only, or vision-only insurance.
            (11) A health insurance policy providing benefits only for 
        long-term care, nursing home care, home health care, community-
        based care, or any combination thereof.

                    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 
                        immediately preceding clause (iv) so as to 
                        appear immediately following such clause (iv); 
                        and
                            (ii) in the last sentence (as so 
                        transferred)--
                                    (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 
                                2203(2)'' and inserting ``at any time 
                                during the initial 18-month period of 
                                continuing coverage under this title'';
                    (B) in subparagraph (D)(i), by inserting before ``, 
                or'' the following: ``, except that the exclusion or 
                limitation contained in this clause shall not be 
                considered to apply to a plan under which a preexisting 
                condition or exclusion does not apply to an individual 
                otherwise eligible for continuation coverage under this 
                section because of the provision of the Health 
                Insurance Reform Act of 1996''; and
                    (C) in subparagraph (E), 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''.
            (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
                    (C) by adding at the end thereof the following new 
                clause:
                            ``(iii) in the case of an individual 
                        described in the last sentence of section 
                        2202(2)(A), or a beneficiary-family member of 
                        the individual, the date such individual 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 placed 
        for adoption with the covered employee during the period 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--
                    (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'';
                    (B) in subparagraph (D)(i), by inserting before ``, 
                or'' the following: ``, except that the exclusion or 
                limitation contained in this clause shall not be 
                considered to apply to a plan under which a preexisting 
                condition or exclusion does not apply to an individual 
                otherwise eligible for continuation coverage under this 
                section because of the provision of the Health 
                Insurance Reform Act of 1996''; and
                    (C) in subparagraph (E), 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''.
            (2) Election.--Section 605(1)(C) of the Employee 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 following new 
                clause:
                            ``(iii) in the case of an individual 
                        described 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 inserting ``at any time during the initial 
        18-month period of continuing coverage under this part''.
            (4) Birth or adoption of a child.--Section 607(3)(A) of the 
        Employee Retirement Income Security 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 placed 
        for adoption with the covered employee during the period 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 described in 
                paragraph (3)(B)'' and inserting ``at any time during 
                the initial 18-month period of continuing coverage 
                under this section'';
                    (B) in clause (iv)(I), by inserting before ``, or'' 
                the following: ``, except that the exclusion or 
                limitation contained in this subclause shall not be 
                considered to apply to a plan under which a preexisting 
                condition or exclusion does not apply to an individual 
                otherwise eligible for continuation coverage under this 
                subsection because of the provision of the Health 
                Insurance Reform Act of 1996''; and
                    (C) 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 period and 
                inserting ``, or''; and
                    (C) by adding at the end thereof the following new 
                subclause:
                                    ``(III) in the case of an qualified 
                                beneficiary described in the last 
                                sentence 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 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''.
            (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 placed for adoption with the covered 
                        employee during the period of continued 
                        coverage under this section.''.
    (d) Effective Date.--The amendments 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 prior to the 
date on which this section becomes effective, each group health plan 
(covered under title XXII of the Public Health Service Act, part 6 of 
subtitle B of title I of the Employee Retirement Income Security Act of 
1974, and section 4980B(f) of the Internal Revenue Code of 1986) shall 
notify each qualified beneficiary who has elected continuation coverage 
under such title, part or section of the amendments made by this 
section.

        Subtitle D--Private Health Plan Purchasing Cooperatives

SEC. 131. PRIVATE HEALTH PLAN PURCHASING COOPERATIVES.

    (a) Definition.--As used in this Act, the term ``health plan 
purchasing cooperative'' means a group of individuals or employers 
that, on a voluntary basis and in accordance with this section, form a 
cooperative for the purpose of purchasing individual health plans or 
group health plans offered by health plan issuers. A health plan 
issuer, agent, broker or any other individual or entity engaged in the 
sale of insurance may not underwrite a cooperative.
    (b) Certification.--
            (1) In general.--If a group described in subsection (a) 
        desires to form a health plan purchasing cooperative in 
        accordance with this section and such group appropriately 
        notifies the State and the Secretary of such desire, the State, 
        upon a determination that such group meets the requirements of 
        this section, shall certify the group as a health plan 
        purchasing cooperative. The State shall make a determination of 
        whether such group meets the requirements of this section in a 
        timely fashion. Each such cooperative shall also be registered 
        with the Secretary.
            (2) State refusal to certify.--If a State fails to 
        implement a program for certifying health plan purchasing 
        cooperatives in accordance with the standards under this Act, 
        the Secretary shall certify and oversee the operations of such 
        cooperatives in such State.
            (3) Interstate cooperatives.--For purposes of this section, 
        a health plan purchasing cooperative operating in more than one 
        State shall be certified by the State in which the cooperative 
        is domiciled. States may enter into cooperative agreements for 
        the purpose of certifying and overseeing the operation of such 
        cooperatives. For purposes of this subsection, a cooperative 
        shall be considered to be domiciled in the State in which most 
        of the members of the cooperative reside.
    (c) Board of Directors.--
            (1) In general.--Each health plan purchasing cooperative 
        shall be governed by a Board of Directors that shall be 
        responsible for ensuring the performance of the duties of the 
        cooperative under this section. The Board shall be composed of 
        a broad cross-section of representatives of employers, 
        employees, and individuals participating in the cooperative. A 
        health plan issuer, agent, broker or any other individual or 
        entity engaged in the sale of individual health plans or group 
        health plans may not hold or control any right to vote with 
        respect to a cooperative.
            (2) Limitation on compensation.--A health plan purchasing 
        cooperative may not provide compensation to members of the 
        Board of Directors. The cooperative 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.
            (3) Conflict of interest.--No member of the Board of 
        Directors (or family members of such members) nor any 
        management personnel of the cooperative 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 issuer, health care provider, or agent or 
        broker. Nothing in the preceding sentence shall limit a member 
        of the Board from purchasing coverage offered through the 
        cooperative.
    (d) Membership and Marketing Area.--
            (1) Membership.--A health plan purchasing cooperative may 
        establish limits on the maximum size of employers who may 
        become members of the cooperative, and may determine whether to 
        permit individuals to become members. Upon the establishment of 
        such membership requirements, the cooperative shall, except as 
        provided in subparagraph (B), accept all employers (or 
        individuals) residing within the area served by the cooperative 
        who meet such requirements as members on a first-come, first-
        served basis, or on another basis established by the State to 
        ensure equitable access to the cooperative.
            (2) Marketing area.--A State may establish rules regarding 
        the geographic area that must be served by a health plan 
        purchasing cooperative. With respect to a State that has not 
        established such rules, a health plan purchasing cooperative 
        operating in the State shall define the boundaries of the area 
        to be served by the cooperative, except that such boundaries 
        may not be established on the basis of health status or 
        insurability of the populations that reside in the area.
    (e) Duties and Responsibilities.--
            (1) In general.--A health plan purchasing cooperative 
        shall--
                    (A) enter into agreements with multiple, 
                unaffiliated health plan issuers, except that the 
                requirement of this subparagraph shall not apply in 
                regions (such as remote or frontier areas) in which 
                compliance with such requirement is not possible;
                    (B) enter into agreements with employers and 
                individuals who become members of the cooperative;
                    (C) participate in any program of risk-adjustment 
                or reinsurance, or any similar program, that is 
                established by the State;
                    (D) prepare and disseminate comparative health plan 
                materials (including information about cost, quality, 
                benefits, and other information concerning group health 
                plans and individual health plans offered through the 
                cooperative);
                    (E) actively market to all eligible employers and 
                individuals residing within the service area; and
                    (F) act as an ombudsman for group health plan or 
                individual health plan enrollees.
            (2) Permissible activities.--A health plan purchasing 
        cooperative may perform such other functions as necessary to 
        further the purposes of this Act, including--
                    (A) collecting and distributing premiums and 
                performing other administrative functions;
                    (B) collecting and analyzing surveys of enrollee 
                satisfaction;
                    (C) charging membership fee to enrollees (such fees 
                may not be based on health status) and charging 
                participation fees to health plan issuers;
                    (D) cooperating with (or accepting as members) 
                employers who provide health benefits directly to 
                participants and beneficiaries only for the purpose of 
                negotiating with providers; and
                    (E) negotiating with health care providers and 
                health plan issuers.
    (f) Limitations on Cooperative Activities.--A health plan 
purchasing cooperative shall not--
            (1) perform any activity relating to the licensing of 
        health plan issuers;
            (2) assume financial risk directly or indirectly on behalf 
        of members of a health plan purchasing cooperative relating to 
        any group health plan or individual health plan;
            (3) establish eligibility, continuation of eligibility, 
        enrollment, or premium contribution requirements for 
        participants, beneficiaries, or individuals based on health 
        status, medical condition, claims experience, receipt of health 
        care, medical history, evidence of insurability, or disability;
            (4) operate on a for-profit or other basis where the legal 
        structure of the cooperative permits profits to be made and not 
        returned to the members of the cooperative, except that a for-
        profit health plan purchasing cooperative may be formed by a 
        nonprofit organization--
                    (A) in which membership in such organization is not 
                based on health status, medical condition, claims 
                experience, receipt of health care, medical history, 
                evidence of insurability, or disability; and
                    (B) that accepts as members all employers or 
                individuals on a first-come, first-served basis, 
                subject to any established limit on the maximum size of 
                and employer that may become a member; or
            (5) perform any other activities that conflict or are 
        inconsistent with the performance of its duties under this Act.
    (g) Limited Preemption of Certain State Laws.--
            (1) In general.--With respect to a health plan purchasing 
        cooperative that meets the requirements of this section, State 
        fictitious group laws shall be preempted.
            (2) Health plan issuers.--
                    (A) Rating.--With respect to a health plan issuer 
                offering a group health plan or individual health plan 
                through a health plan purchasing cooperative that meets 
                the requirements of this section, State premium rating 
                requirement laws, except to the extent provided under 
                subparagraph (B), shall be preempted unless such laws 
                permit premium rates negotiated by the cooperative to 
                be less than rates that would otherwise be permitted 
                under State law, if such rating differential is not 
                based on differences in health status or demographic 
                factors.
                    (B) Exception.--State laws referred to in 
                subparagraph (A) shall not be preempted if such laws--
                            (i) prohibit the variance of premium rates 
                        among employers, plan sponsors, or individuals 
                        that are members of a health plan purchasing 
                        cooperative in excess of the amount of such 
                        variations that would be permitted under such 
                        State rating laws among employers, plan 
                        sponsors, and individuals that are not members 
                        of the cooperative; and
                            (ii) prohibit a percentage increase in 
                        premium rates for a new rating period that is 
                        in excess of that which would be permitted 
                        under State rating laws.
                    (C) Benefits.--Except as provided in subparagraph 
                (D), a health plan issuer offering a group health plan 
                or individual health plan through a health plan 
                purchasing cooperative shall comply with all State 
                mandated benefit laws that require the offering of any 
                services, category or care, or services of any class or 
                type of provider.
                    (D) Exception.--In those States that have enacted 
                laws authorizing the issuance of alternative benefit 
                plans to small employers, health plan issuers may offer 
                such alternative benefit plans through a health plan 
                purchasing cooperative that meets the requirements of 
                this section.
    (h) Rules of Construction.--Nothing in this section shall be 
construed to--
            (1) require that a State organize, operate, or otherwise 
        create health plan purchasing cooperatives;
            (2) otherwise require the establishment of health plan 
        purchasing cooperatives;
            (3) require individuals, plan sponsors, or employers to 
        purchase group health plans or individual health plans through 
        a health plan purchasing cooperative;
            (4) require that a health plan purchasing cooperative be 
        the only type of purchasing arrangement permitted to operate in 
        a State;
            (5) confer authority upon a State that the State would not 
        otherwise have to regulate health plan issuers or employee 
        health benefits plans; or
            (6) confer authority upon a State (or the Federal 
        Government) that the State (or Federal Government) would not 
        otherwise have to regulate group purchasing arrangements, 
        coalitions, or other similar entities that do not desire to 
        become a health plan purchasing cooperative in accordance with 
        this section.
    (i) Application of ERISA.--For purposes of enforcement only, the 
requirements of parts 4 and 5 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1101) shall apply to 
a health plan purchasing cooperative as if such plan were an employee 
welfare benefit plan.

           TITLE II--APPLICATION AND ENFORCEMENT OF STANDARDS

SEC. 201. APPLICABILITY.

    (a) Construction.--
            (1) Enforcement.--
                    (A) In general.--A requirement or standard imposed 
                under this Act on a group health plan or individual 
                health plan offered by a health plan issuer shall be 
                deemed to be a requirement or standard imposed on the 
                health plan issuer. Such requirements or standards 
                shall be enforced by the State insurance commissioner 
                for the State involved or the official or officials 
                designated by the State to enforce the requirements of 
                this Act. In the case of a group health plan offered by 
                a health plan issuer in connection with an employee 
                health benefit plan, the requirements or standards 
                imposed under this Act shall be enforced with respect 
                to the health plan issuer by the State insurance 
                commissioner for the State involved or the official or 
                officials designated by the State to enforce the 
                requirements of this Act.
                    (B) Limitation.--Except as provided in subsection 
                (c), the Secretary shall not enforce the requirements 
                or standards of this Act as they relate to health plan 
                issuers, group health plans, or individual health 
                plans. In no case shall a State enforce the 
                requirements or standards of this Act as they relate to 
                employee health benefit plans.
            (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--
                    (A) not prescribed in this Act; or
                    (B) related to the issuance, renewal, or 
                portability of health insurance or the establishment or 
                operation of group purchasing arrangements, that are 
                consistent with, and are not in direct conflict with, 
                this Act and provide greater protection or benefit to 
                participants, beneficiaries or individuals.
    (b) Rule of Construction.--Nothing in this Act shall be construed 
to affect or modify the provisions of section 514 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144).
    (c) Continuation.--Nothing in this Act shall be construed as 
requiring a group health plan or an employee health benefit plan to 
provide benefits to a particular participant or beneficiary in excess 
of those provided under the terms of such plan.

SEC. 202. ENFORCEMENT OF STANDARDS.

    (a) Health Plan Issuers.--Each State shall require that each group 
health plan and individual health plan issued, sold, renewed, offered 
for sale or operated in such State by a health plan issuer meet the 
standards established under this Act pursuant to an enforcement plan 
filed by the State with the Secretary. A State shall submit such 
information as required by the Secretary demonstrating effective 
implementation of the State enforcement plan.
    (b) Employee Health Benefit Plans.--With respect to employee health 
benefit plans, the Secretary shall enforce the reform standards 
established under this Act in the same manner as provided for under 
sections 502, 504, 506, and 510 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132, 1134, 1136, and 1140). The civil 
penalties contained in paragraphs (1) and (2) of section 502(c) of such 
Act (29 U.S.C. 1132(c)(1) and (2)) shall apply to any information 
required by the Secretary to be disclosed and reported under this 
section.
    (c) Failure To Implement Plan.--In the case of the failure of a 
State to substantially enforce the standards and requirements set forth 
in this Act with respect to group health plans and individual health 
plans as provided for under the State enforcement plan filed under 
subsection (a), 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 substantially enforce the standards and requirements set forth 
in this Act, each health plan issuer operating in such State shall be 
subject to civil enforcement as provided for under sections 502, 504, 
506, and 510 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1132, 1134, 1136, and 1140). The civil penalties contained in 
paragraphs (1) and (2) of section 502(c) of such Act (29 U.S.C. 
1132(c)(1) and (2)) shall apply to any information required by the 
Secretary to be disclosed and reported under this section.
    (d) Applicable Certifying Authority.--As used in this title, the 
term ``applicable certifying authority'' means, with respect to--
            (1) health plan issuers, the State insurance commissioner 
        or official or officials designated by the State to enforce the 
        requirements of this Act for the State involved; and
            (2) an employee health benefit plan, the Secretary.
    (e) Regulations.--The Secretary may promulgate such regulations as 
may be necessary or appropriate to carry out this Act.
    (f) Technical Amendment.--Section 508 of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1138) is amended by inserting 
``and under the Health Insurance Reform Act of 1996'' before the 
period.

                  TITLE III--MISCELLANEOUS PROVISIONS

SEC. 301. HMOS ALLOWED TO OFFER PLANS WITH DEDUCTIBLES TO INDIVIDUALS 
              WITH MEDICAL SAVINGS ACCOUNTS.

    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 
        deductible by the member for basic health services.
            ``(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 investment of such funds for the payment of 
        the deductible described in subparagraph (A).''.

SEC. 302. HEALTH COVERAGE AVAILABILITY STUDY.

    (a) In General.--The Secretary of Health and Human Services, in 
consultation with the Secretary, representatives of State officials, 
consumers, and other representatives of individuals and entities that 
have expertise in health insurance and employee benefits, shall conduct 
a two-part study, and prepare and submit reports, in accordance with 
this section.
    (b) Evaluation of Availability.--Not later than January 1, 1998, 
the Secretary of Health and Human Services shall prepare and submit to 
the appropriate committees of Congress a report, concerning--
            (1) an evaluation, based on the experience of States, 
        expert opinions, and such additional data as may be available, 
        of the various mechanisms used to ensure the availability of 
        reasonably priced health coverage to employers purchasing group 
        coverage and to individuals purchasing coverage on a non-group 
        basis; and
            (2) whether standards that limit the variation in premiums 
        will further the purposes of this Act.
    (c) Evaluation of Effectiveness.--Not later than January 1, 1999, 
the Secretary of Health and Human Services shall prepare and submit to 
the appropriate committees of Congress a report, concerning the 
effectiveness of the provisions of this Act and the various State laws, 
in ensuring the availability of reasonably priced health coverage to 
employers purchasing group coverage and individuals purchasing coverage 
on a non-group basis.

SEC. 303. EFFECTIVE DATE.

    Except as otherwise provided for in this Act, the provisions of 
this Act shall apply as follows:
            (1) With respect to group health plans and individual 
        health plans, such provisions shall apply to plans offered, 
        sold, issued, renewed, in effect, or operated on or after 
        January 1, 1997; and
            (2) With respect to employee health benefit plans, on the 
        first day of the first plan year beginning on or after January 
        1, 1997.

SEC. 304. SEVERABILITY.

    If any provision of this Act or the application of such provision 
to any person or circumstance is held to be unconstitutional, the 
remainder of this Act and the application of the provisions of such to 
any person or circumstance shall not be affected thereby.
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