[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3043 Introduced in House (IH)]







104th CONGRESS
  2d Session
                                H. R. 3043

 To amend the Internal Revenue Code of 1986 to promote the continuity 
      and portability of health insurance coverage by restricting 
  discrimination based on health status, limiting use of preexisting 
   condition exclusions, and making COBRA continuation coverage more 
                              affordable.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 7, 1996

 Mrs. Johnson of Connecticut introduced the following bill; which was 
              referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to promote the continuity 
      and portability of health insurance coverage by restricting 
  discrimination based on health status, limiting use of preexisting 
   condition exclusions, and making COBRA continuation coverage more 
                              affordable.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Working Families Health Access Act 
of 1996''.

SEC. 2. PROMOTING THE CONTINUITY AND PORTABILITY OF HEALTH COVERAGE.

    (a) In General.--Subtitle D of the Internal Revenue Code of 1986 is 
amended by inserting after chapter 44 the following new chapter:

     ````CHAPTER 45--CONTINUITY AND PORTABILITY OF HEALTH COVERAGE

``Sec. 4986.  Imposition of tax.
``Sec. 4987.  Nondiscrimination based on health status.
``Sec. 4988.  Limited use of preexisting condition exclusions.
``Sec. 4989.  Guaranteed renewability of health insurance coverage.
``Sec. 4990.  Relation to State standards.
``Sec. 4991.  Definitions.

``SEC. 4986. IMPOSITION OF TAX FOR FAILURE TO MEET CONTINUITY AND 
              PORTABILITY STANDARDS.

    ``(a) Insured Health Plans.--
            ``(1) In general.--In the case of any health insurance 
        policy which fails to meet the applicable standards specified 
        in this chapter at any time during a calendar year, there is 
        hereby imposed a tax equal to 25 percent of the premiums 
        received under such policy during the calendar year.
            ``(2) Liability for tax.--The tax imposed by paragraph (1) 
        shall be paid by the issuer of the policy.
            ``(3) Treatment of prepaid health coverage.--For purposes 
        of this subsection:
                    ``(A) In general.--In the case of any prepaid 
                health arrangement--
                            ``(i) such arrangement shall be treated as 
                        a health insurance policy,
                            ``(ii) the payments or premiums referred to 
                        in subparagraph (B)(i) shall be treated as 
                        premiums received for a health insurance 
                        policy, and
                            ``(iii) the person referred to in 
                        subparagraph (B)(i) shall be treated as the 
                        issuer.
                    ``(B) Prepaid health arrangement.--For purposes of 
                subparagraph (A), the term `prepaid health arrangement' 
                means an arrangement under which--
                            ``(i) fixed payments or premiums are 
                        received as consideration for any person's 
                        agreement to provide or arrange for the 
                        provision of accident or health coverage to 
                        regardless of how such coverage is provided or 
                        arranged to be provided, and
                            ``(ii) substantially all of the risks of 
                        the rates of utilization of services is assumed 
                        by such person or the provider of such 
                        services.
            ``(4) Insurance policy.--For purposes of this subsection, 
        the term `insurance policy' means any policy or other 
        instrument whereby a contract of insurance is issued, renewed, 
        or extended.
            ``(5) Premium.--For purposes of this subsection, the term 
        `premium' means the gross amount of premiums and other 
        consideration (including advance premiums, deposits, fees, and 
        assessments) arising from policies issued by a person acting as 
        the primary insurer, adjusted for any return or additional 
        premiums paid as a result of endorsements, cancellations, 
        audits, or retrospective rating.
    ``(b) Self-Insured Health Plans.--
            ``(1) In general.--In the case of a self-insured health 
        plan which fails to meet the applicable standards specified in 
        this chapter at any time during a calendar year, there is 
        hereby imposed a tax equal to 25 percent of the health coverage 
        expenditures for such calendar year under such plan.
            ``(2) Liability for tax.--The tax imposed by paragraph (1) 
        shall be paid by the plan sponsor.
            ``(3) Self-insured health plan.--For purposes of this 
        subsection, the term `self-insured health plan' means any plan 
        for providing accident or health coverage if any portion of 
        such coverage is provided other than through an insurance 
        policy.
            ``(4) Health coverage expenditures.--For purposes of this 
        subsection, the health coverage expenditures of any self-
        insured health plan for any calendar year are the aggregate 
        expenditures for such year for health coverage provided under 
        such plan.
    ``(c) Limitations on Imposition.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed under 
        this section on any failure for which it is established to the 
        satisfaction of the Secretary that none of the persons liable 
        for the tax knew, or exercising reasonable diligence would have 
        known, that such failure existed.
            ``(2) Tax not to apply to certain failures corrected within 
        30 days.--No tax shall be imposed by subsection (a) or (b) on 
        any failure if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the 1st date any person liable for 
                the tax knew, or exercising reasonable diligence would 
                have known, that such failure existed.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by this 
        section to the extent that the payment of such tax would be 
        excessive relative to the failure involved.

``SEC. 4987. NONDISCRIMINATION BASED ON HEALTH STATUS.

    ``(a) Coverage Under Group Health Plans.--A group health plan and a 
carrier offering health insurance coverage in connection with such a 
plan may not establish or impose eligibility, continuation, enrollment, 
or contribution requirements for an individual based on factors 
directly related to the health status, genetic predisposition, medical 
condition, claims experience, receipt of health care, medical history, 
disability, or evidence of insurability of the individual.
    ``(b) Individual Coverage.--
            ``(1) In general.--A carrier offering health insurance 
        coverage (other than in connection with a group health plan) 
        may not establish or impose eligibility, continuation, or 
        enrollment requirements for a qualifying individual (as defined 
        in paragraph (2)) based on factors directly related to the 
health status, genetic predisposition, medical condition, claims 
experience, receipt of health care, medical history, disability, or 
evidence of insurability of the individual.
            ``(2) Qualifying individual defined.--For purposes of 
        paragraph (1), the term `qualifying individual' means an 
        individual who meets all of the following requirements:
                    ``(A) The individual is in a period of qualifying 
                previous coverage (as defined in paragraph (3)) which 
                is at least 12 months long.
                    ``(B) The individual is not eligible for coverage 
                under any group health plan and has not lost such 
                coverage due to a failure to make required premium 
                payments or contributions or due to fraud or 
                misrepresentation of material fact. For purposes of 
                this subparagraph, continuation coverage under section 
                4980B shall not be considered to be coverage under a 
                group health plan.
                    ``(C) If the individual's most recent coverage 
                during the period of qualifying previous coverage under 
                subparagraph (A) was health insurance coverage not in 
                connection with a group health plan, such coverage was 
                discontinued or terminated--
                            ``(i) by the carrier or individual on the 
                        basis of a change in residence of the 
                        individual so that the individual no longer 
                        resided within a service area of the carrier 
                        with respect to such coverage,
                            ``(ii) by the carrier on the basis of a 
                        change in the individual's status so that the 
                        individual was no longer eligible for dependent 
                        coverage, if the individual previously was only 
                        eligible for such coverage as a dependent,
                            ``(iii) by the carrier on the basis of the 
                        discontinuation of such coverage by the carrier 
                        in accordance with the requirements of section 
                        4989(b)(2), or
                            ``(iv) by the individual at a time that the 
                        individual obtained less expensive or less 
                        extensive coverage (as defined by the Secretary 
                        of Health and Human Services).
        Nothing in subparagraph (C) shall be construed as preventing a 
        carrier from waiving the application of clauses (i) through 
        (iv) of such subparagraph during an annual open enrollment 
        period or otherwise.
            ``(3) Period of qualifying previous coverage defined.--For 
        purposes of this chapter, the term `period of qualifying 
        previous coverage' means the period--
                    ``(A) beginning on the date an individual is 
                enrolled under a group health plan or is provided 
                health insurance coverage, and
                    ``(B) ending on the date the individual is neither 
                covered under a group health plan or covered under 
                health insurance coverage (including coverage described 
                in section 4991(2)(D)) for a continuous period of more 
                than 2 months.

``SEC. 4988. LIMITED USE OF PREEXISTING CONDITION EXCLUSIONS.

    ``(a) In General.--A carrier offering health insurance coverage and 
a group health plan may impose a limitation or exclusion of benefits 
relating to treatment of a condition based on the fact that the 
condition is a preexisting condition (as defined in subsection (c)) 
only if the following requirements are met:
            ``(1) Limitation to 3-month look-back.--The condition was 
        diagnosed or treated (or is a condition which a reasonably 
        prudent person would have sought medical care diagnosis or 
        treatment) during the period not more than 3 months before the 
date of enrollment for such coverage or under such plan.
            ``(2) Limitation on exclusion period.--
                    ``(A) General rule of maximum of 6-month 
                exclusion.--Subject to paragraph (3), the limitation or 
                exclusion extends for a period not more than 6 months 
                (or 12 months in the case of a late enrollee described 
                in subparagraph (B)) after such date of enrollment.
                    ``(B) Late enrollee described.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), a late enrollee described in this 
                        subparagraph with respect to a group health 
                        plan is an individual who becomes covered under 
                        the plan but who, at the time the individual 
                        first was eligible to elect such coverage, had 
                        elected not to be covered under the plan.
                            ``(ii) Exception for individuals with 
                        continuous coverage.--An individual shall not 
                        be considered to be a late enrollee with 
                        respect to a plan if the individual establishes 
                        that, with respect to the period beginning on 
                        the date the individual first could have 
                        obtained coverage under the plan and until the 
                        date the individual was so covered, there was 
                        no period of more than 2 months during all of 
                        which the individual neither had health 
                        insurance coverage (including coverage 
                        described in subparagraph (C) or (D) of section 
                        4991(2)) or was covered under any group health 
                        plan.
            ``(3) Credit for previous qualifying coverage.--In the case 
        of an individual who is in a period of qualifying previous 
        coverage (as defined in section 4987(b)(3)) as of the date of 
        enrollment for health insurance coverage or under the group 
        health plan, the limitation or exclusion period under paragraph 
        (2)(A) shall be reduced by the length of such period of 
        qualifying previous coverage.
            ``(4) Exception for treatment of pregnancy.--The limitation 
        or exclusion does not apply to treatment relating to pregnancy.
            ``(5) Exception for certain dependent coverage.--
                    ``(A) Newborns.--The limitation or exclusion does 
                not apply to a child who has health insurance coverage 
                (or is covered under a group health plan) as a 
                dependent within 1 month of the birthdate until such 
                time as the child does not have such coverage (or is 
                not so covered) for a continuous period of more than 2 
                months.
                    ``(B) Adopted children.--The limitation or 
                exclusion does not apply (beginning on the date of 
                adoption) to an adopted child who has health insurance 
                coverage (or is covered under a group health plan) 
                within 1 month of such date until such time as the 
                child does not have such coverage (or is not so 
                covered) for a continuous period of more than 2 months.
            ``(6) Voluntary waiver.--The look-back period described in 
        paragraph (1) and the maximum period of exclusion under 
        paragraph (2)(A) may extend over a longer period than the 
        period specified in the respective subsection if the individual 
        involved waives the protection provided under such paragraph.
    ``(b) Limitation on Use of Delayed Coverage In Lieu of Preexisting 
Exclusion Limitations.--
            ``(1) In general.--A carrier offering health insurance 
        coverage and a group health plan providing coverage, with 
        respect to an individual, may delay the effective date of 
        coverage of the individual beyond the first date of the month 
        beginning after the date of election of the coverage only if 
the following requirements are met:
                    ``(A) Limitation on delay period.--Subject to 
                paragraph (2), such additional delay does not extend 
                over a period of longer than 2 months (or 3 months in 
                the case of a late enrollee described in subsection 
                (a)(2)(B)).
                    ``(B) No subsequent application of any preexisting 
                exclusion.--After the period of such additional delay, 
                no limitation or exclusion described in subsection (a) 
                may be applied.
                    ``(C) No premiums.--No premium or required 
                contribution may be charged for the period before the 
                effective date of coverage.
        Nothing in this paragraph shall waive the applicable 
        requirements of subsection (a).
            ``(2) Voluntary waiver.--The additional delay may extend 
        over a period longer than the period specified under paragraph 
        (1)(A) if the individual involved waives the protection 
        provided under such paragraph.
    ``(c) Preexisting Condition Defined.--
            ``(1) In general.--For purposes of this section, the term 
        `preexisting condition' means, with respect to coverage under 
        health insurance coverage or under a group health plan, a 
        condition which was diagnosed or treated, or a condition for 
        which a reasonably prudent person would have sought medical 
        care diagnosis or treatment, within the 3-month period ending 
        on the day before the date of enrollment (without regard to any 
        delayed coverage period).
            ``(2) Treatment of information relating to genetic 
        predisposition.--For purposes of this section, information 
        relating to one's genetic predisposition alone shall not be 
        considered to be a preexisting condition, so long as treatment 
        of the condition to which the predisposition is applicable has 
        not been (or should not have been) sought during the 3-month 
        period described in paragraph (1).

``SEC. 4989. GUARANTEED RENEWABILITY OF HEALTH INSURANCE COVERAGE.

    ``(a) In General.--Except as provided in subsection (b), a carrier 
offering health insurance coverage shall guarantee that such coverage 
may be renewed or continued in force at the option of the policyholder 
or contractholder.
    ``(b) Grounds for Refusal to Renew.--
            ``(1) In general.--Subject to paragraphs (3) and (4), a 
        carrier offering health insurance coverage may cancel or refuse 
        to renew such coverage--
                    ``(A) for nonpayment of premium or contribution in 
                accordance with the terms of the coverage;
                    ``(B) for fraud or misrepresentation of material 
                fact;
                    ``(C) because of a general discontinuation or 
                termination of that type of coverage, but only if the 
                conditions described in clause (i) or (ii) of paragraph 
                (2)(A) are met;
                    ``(D) in the case of coverage offered in connection 
                with a group health plan, for failure of the plan to 
                maintain participation rules consistent with paragraph 
                (4); or
                    ``(E) in the case of coverage that is continuation 
                coverage under section 4980B, for loss of eligibility 
                to continue such coverage.
            ``(2) Conditions for discontinuation.--
                    ``(A) In general.--
                            ``(i) Nondiscriminatory substitution of 
                        alternative coverage.--The conditions described 
                        in this clause are the following:
                                    ``(I) The carrier provides notice 
                                to each group purchaser covered under 
                                the type of health insurance coverage 
                                involved (and participants and 
                                beneficiaries covered under such 
                                coverage offered in connection with a 
                                group health plan) of the 
                                discontinuation of coverage at least 90 
                                days prior to the date of such 
                                discontinuation.
                                    ``(II) The carrier is no longer 
                                offering health insurance coverage of 
                                the type involved to new policyholders 
                                or contractholders.
                                    ``(III) The carrier is offering to 
                                the previously covered policyholder or 
                                contractholder the option to purchase 
                                any other type of health insurance 
                                coverage currently being offered to new 
                                policyholders or contractholders.
                                    ``(IV) The discontinuation or 
                                termination of coverage and option to 
                                replace with other coverage is made 
                                uniformly without regard to the health 
                                status or insurability of any person 
                                provided health insurance coverage.
                            ``(ii) General discontinuation of coverage 
                        in a state.--The conditions described in this 
                        clause are as follows:
                                    ``(I) The carrier is discontinuing 
                                and not renewing all types of health 
                                insurance coverage within a class of 
                                coverage (as defined in subparagraph 
                                (B)) in a State.
                                    ``(II) The carrier provides notice 
                                to each purchaser within the class of 
                                coverage involved (and participants and 
                                beneficiaries covered under such 
                                coverage offered in connection with a 
                                group health plan) of the 
                                discontinuation of coverage at least 
                                180 days prior to the date of such 
                                discontinuation.
                    ``(B) Classes of coverage.--For purposes of 
                subparagraph (A)(ii), each of the following is 
                considered a separate class of health insurance 
                coverage:
                            ``(i) Individual coverage.--Health 
                        insurance coverage not offered in connection 
                        with any group health plan.
                            ``(ii) Small employer group coverage.--
                        Health insurance coverage offered to small 
                        employers (as defined by State law) in 
                        connection with any group health plan for 
                        covered employees and their dependents.
                            ``(iii) Other group coverage.--Health 
                        insurance coverage offered in connection with a 
                        group health plan and not described in clause 
                        (ii).
                    ``(C) Prohibition on market reentry.--In the case 
                of a discontinuation of a type or class coverage in a 
                State under this paragraph, the carrier may not provide 
                for the issuance of any health insurance coverage 
                within the type or class of coverage discontinued in 
                the State involved during the 5-year period beginning 
                on the date of the discontinuation of the last coverage 
                not so renewed.
            ``(3) Application of geographic limitations to coverage 
        provided through a network arrangement.--
                    ``(A) In general.--Coverage under health insurance 
                coverage or under a group health plan that consists 
                primarily of coverage through a network arrangement (as 
                defined in subparagraph (B)) may be denied to 
                individuals who neither live nor reside in the service 
                area of the arrangement, but only if such denial is 
                applied uniformly, without regard to the health status 
                or the insurability of particular individuals.
                    ``(B) Network arrangements.--For purposes of 
                subparagraph (A), the term `network arrangement' means, 
                with respect to a group health plan or under health 
                insurance coverage, an arrangement under such plan or 
                coverage whereby providers agree to provide items and 
                services covered under the arrangement to individuals 
                covered under the plan or who have such coverage.
            ``(4) Minimum participation requirements.--A carrier that 
        offers health insurance coverage in connection with a group 
        health plan that covers the employees of one or more employers 
        may require to provide that a minimum percentage of eligible 
        employees of such an employer obtain such coverage if such 
        percentage is applied uniformly to all such coverage offered to 
        employers of comparable size.

``SEC. 4990. RELATION TO STATE STANDARDS.

    ``(a) In General.--Nothing in this chapter shall prevent a State 
from establishing, implementing, or continuing in effect standards 
related to health insurance coverage (including the issuance, renewal, 
or rating of such coverage) if such standards are at least as stringent 
as the standards established under this chapter with respect to such 
coverage.
    ``(b) Construction.--Nothing in this chapter shall be construed to 
preempt State laws that--
            ``(1) require carriers to impose a shorter look-back period 
        than that specified in section 4988(a)(1),
            ``(2) require carriers 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 section 4988(a)(2)(A), or
            ``(3) allow individuals to be considered to be in a period 
        of qualifying previous coverage if such individual experiences 
        a lapse in coverage that is greater than the period specified 
        in section 4988(a)(2)(B)(ii);
unless such laws are preempted by section 514 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144).

``SEC. 4991. DEFINITIONS.

    ``For purposes of this chapter--
            ``(1) Carrier.--The term `carrier' means--
                    ``(A) a licensed insurance company;
                    ``(B) an entity offering prepaid hospital or 
                medical service plan;
                    ``(C) a health maintenance organization; and
                    ``(D) any similar entity which (i) is engaged in 
                the business of providing a plan of health insurance or 
                health benefits or services and (ii) is regulated under 
                State law for solvency.
            ``(2) Health insurance coverage.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `health insurance coverage' 
                means any hospital or medical service policy or 
                certificate, hospital or medical service plan contract, 
                or health maintenance organization group contract 
                offered by a carrier.
                    ``(B) Exception.--Such term does not include any of 
                the following (or any combination of the following):
                            ``(i) Coverage only for accident, dental, 
                        vision, or disability income, or any 
                        combination thereof.
                            ``(ii) Medicare supplemental health 
                        insurance.
                            ``(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 providing wages or 
                        payments in lieu of wages for any period during 
                        which an employee is absent from work on 
                        account of sickness or injury.
                            ``(viii) A long-term care insurance 
                        coverage, including a nursing home fixed 
                        indemnity policy (unless the Secretary of 
                        Health and Human Services, in consultation with 
                        the Secretaries of Labor and of the Treasury, 
                        determines that such coverage is sufficiently 
                        comprehensive so that it should be treated as 
                        health insurance coverage.
                            ``(ix) Any coverage not described in any 
                        preceding clause which consists of benefit 
                        payments, on a periodic basis, for a specified 
                        disease or illness or period of hospitalization 
                        without regard to the costs incurred or 
                        services rendered during the period to which 
                        the payments relate.
                            ``(x) Such other coverage as the Secretary 
                        of Health and Human Services, in consultation 
                        with the Secretaries of Labor and of the 
                        Treasury, determines is not health insurance 
                        coverage.
                    ``(C) Treatment of state risk pools.--Except for 
                purposes of sections 4987(b)(3), 4988(a)(2)(B)(ii), and 
                4988(a)(3), such term does not include coverage 
                provided through a State risk pool, uncompensated care 
                pool or similar subsidized program.
                    ``(D) Public plans counted for purposes of 
                qualifying previous coverage.--For purposes of sections 
                4987(b)(3), 4988(a)(2)(B)(ii), and 4988(a)(3), such 
                term also includes coverage under any of the following:
                            ``(i) The medicare program under title 
                        XVIII of the Social Security Act.
                            ``(ii) A State plan under title XIX of such 
                        Act.
                            ``(iii) A program of the Indian Health 
                        Service.
                            ``(iv) The Civilian Health and Medical 
                        Program of the Uniformed Services (CHAMPUS) 
                        under title 10, United States Code.
                            ``(v) Any other similar governmental health 
                        insurance program (including a program 
                        described in subparagraph (C)).
            ``(3) Group health plan.--The term `group health plan' has 
        the meaning given such term in section 5000(b)(1), but does not 
        include any type of coverage excluded from the definition of 
        health insurance coverage under paragraph (2)(B) or (C) and 
        does not include any plan unless at least one of the following 
        requirements is met:
                    ``(A) Any portion of the premium or benefits under 
                the plan is paid by or on behalf of the employer.
                    ``(B) An eligible employee or dependent is 
                reimbursed, whether through wage adjustments or 
                otherwise, by or on behalf of the employer for any 
                portion of the premium.
                    ``(C) The health benefit plan is treated by the 
                employer, or any of the eligible employees or 
                dependents, as part of a plan or program for the 
                purposes of section 162, section 25, or section 106 of 
                the Internal Revenue Code of 1986.
            ``(4) State.--The term `State' includes the District of 
        Columbia, Puerto Rico, the Virgin Islands, Guam, American 
        Samoa, and the Northern Mariana Islands.''
    (b) Effective Date.--
            (1) In general.--The amendments made by subsection (a) 
        shall apply to individuals who commence health insurance 
        coverage or coverage under a group health plan after the first 
        day of the first month beginning more than 6 months after the 
        date of the enactment of this Act.
            (2) Plan year exception.--Such amendments shall not apply 
        to plan years ending before the first day referred to in 
        paragraph (1).
    (c) Clerical Amendment.--The table of chapters for subtitle D is 
amended by inserting after the item relating to chapter 44 the 
following new item:

                              ``Chapter 45. Continuity and portability 
                                        of health coverage.''

SEC. 3. CHANGES IN COBRA CONTINUATION REQUIREMENTS RELATING TO 
              DIVORCES, LEGAL SEPARATIONS, AND ANNULMENTS.

    (a) Continuation Coverage for Certain Formerly Covered Dependent 
Spouses and Children.--Section 4980B(f) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(9) Capture of delayed divorce or separation.--
                    ``(A) In general.--For purposes of this section, if 
                a covered employee disenrolls from coverage (or fails 
                to renew coverage of) a qualified beneficiary within 
                the 12-month period preceding the date of the divorce 
                or legal separation of the employee from the employee's 
                spouse, the divorce or separation shall be treated as a 
                qualifying event described in paragraph (3)(C) and the 
                loss of coverage shall be considered to be a result 
                (and by reason) of such event.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a qualified beneficiary if--
                            ``(i) the beneficiary waives the rights 
                        under such subparagraph, or
                            ``(ii) the qualified beneficiary at the 
                        time of the qualifying event or at the time of 
                        the disenrollment or failure to renew coverage 
                        has coverage under a group health plan (other 
                        than by reason of this paragraph) if the plan 
                        does not contain any exclusion or limitation 
                        with respect to any preexisting condition of 
                        such beneficiary.''
    (b) Treatment of Period Before Delayed Divorce or Separation.--
Subparagraph (D) of section 4980B(f)(2) of such Code is amended by 
adding at the end the following new sentence: ``For purposes of 
applying any preexisting condition limitation or restriction, any 
period beginning on the date of the disenrollment or failure to renew 
coverage referred to in paragraph (9)(A) and ending on the date of the 
divorce or separation referred to in such paragraph shall not be 
treated as a break in coverage if such paragraph applies to the 
qualified beneficiary.''.
    (c) Treatment of Annulments.--Section 4980B(g) of such Code is 
amended by adding at the end the following new paragraph:
            ``(5) Treatment of annulment as divorce.--The term 
        `divorce' includes an annulment.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to divorces, legal separations, and annulments occurring more 
than 60 days after the date of the enactment of this Act.

SEC. 4. TERMINATION OF COBRA CONTINUATION IN CASE OF ELIGIBILITY FOR 
              GROUP HEALTH COVERAGE WITHOUT IMPOSITION OF PREEXISTING 
              CONDITION EXCLUSION.

    (a) In General.--Section 4980B(f)(2)(B)(iv)(I) of the Internal 
Revenue Code of 1986 is amended--
            (1) insert ``, or eligible for coverage in the case of an 
        employee,'' after ``otherwise)'', and
            (2) by inserting ``or for which the period in which such an 
        exclusion or limitation may be applied has ended under section 
        4988(a)(2)'' after ``of such beneficiary''.
    (b) Effective Date.--
            (1) In general.--The amendments made by subsection (a) 
        shall apply to individuals who commence health insurance 
        coverage or coverage under a group health plan after the first 
        day of the first month beginning more than 6 months after the 
        date of the enactment of this Act.
            (2) Plan year exception.--Such amendments shall not apply 
        to plan years ending before the first day referred to in 
        paragraph (1).
                                 <all>
HR 3043 IH----2