[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1028 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                S. 1028

    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 SENATE OF THE UNITED STATES

                July 13 (legislative day, July 10), 1995

  Mrs. Kassebaum (for herself, Mr. Kennedy, Mr. Frist, Mr. Dodd, Mr. 
Jeffords, Ms. Mikulski, Mr. Gregg, Mr. Wellstone, Mr. Gorton, Mr. Pell, 
  Mr. Hatch, Mr. Simon, Mr. Chafee, and Mr. Lieberman) introduced the 
 following bill; which was read twice and referred to the Committee on 
                       Labor and Human Resources

_______________________________________________________________________

                                 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.

    This Act may be cited as the ``Health Insurance Reform Act of 
1995''.

SEC. 2. DEFINITIONS.

    As used in this Act:
            (1) Beneficiary.--The term ``beneficiary'' has the same 
        meaning given such term under section 3(8) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1102(8)).
            (2) Employee.--The term ``employee'' has the same meaning 
        given such term under section 3(6) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1002(6)).
            (3) Employer.--The term ``employer'' has the same meaning 
        given such term under section 3(6) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1002(6)), except that 
        such term shall only include employers of two or more 
        employees.
            (4) Family.--
                    (A) In general.--The term ``family'' includes 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, and under 19 years of age.
            (5) Group health plan.--The term ``group health plan'' 
        means any employee welfare benefit plan, governmental plan, or 
        church plan (as defined under paragraphs (1), (32) and (33) of 
        section 3 of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1002(1), (32) and (33))) that maintains (or 
        makes contributions to) a health plan.
            (6) Health plan.--The term ``health plan'' means any plan 
        or arrangement that provides, or pays for health benefits (such 
        as physician and hospital benefits) directly or through 
        insurance, reimbursement, or otherwise. Such term does not 
        include the following, or any combination thereof:
                    (A) Coverage only for accidental death, 
                dismemberment, dental, or vision.
                    (B) Coverage providing wages or payments in lieu of 
                wages for any period during which the employee is 
                absent from work on account of sickness or injury.
                    (C) A medicare supplemental policy (as defined in 
                section 1882(g)(1) of the Social Security Act).
                    (D) Coverage issued as a supplement to liability 
                insurance.
                    (E) Workers' compensation or similar insurance.
                    (F) Automobile medical payment insurance.
                    (G) A long-term care insurance policy, including a 
                nursing home fixed indemnity policy.
                    (H) Any plan or arrangement not described in any 
                preceding subparagraph that provides for benefit 
                payments, on a periodic basis, for a specified disease 
                or illness or period of hospitalization without regard 
                to the costs incurred or services rendered during the 
                period to which the payments relate.
                    (I) Coverage provided through a State risk pool, 
                uncompensated care pool, or similar subsidized program.
            (7) Individual health plan.--The term ``individual health 
        plan'' means a health plan marketed to individuals.
            (8) Insured health plan.--The term ``insured health plan'' 
        means, with respect to an employee welfare benefit plan (as 
        defined under section 3(1) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1002(1))), a health plan that 
        is a contract for health benefits with an insurer that is 
        subject to State regulation in accordance with section 
        514(b)(2)(A) of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1144(b)(2)(A))).
            (9) Insurer.--The term ``insurer'' means--
                    (A) a licensed insurance company;
                    (B) a prepaid hospital or medical service plan;
                    (C) a network plan (such as a preferred provider 
                organization) or heath maintenance organization; or
                    (D) any other entity (other than an entity 
                described in paragraph (12)), except for those entities 
                described in section 514(b)(6)(A)(i) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1144(b)(6)(A)(i)) providing a plan of health insurance 
                or health benefits;
        with respect to which State insurance laws apply and are not 
        preempted under section 514 of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1144).
            (10) Participant.--The term ``participant'' means any 
        person who is eligible, or is required to be eligible, to 
        receive benefits under a group health plan.
            (11) Plan sponsor.--The term ``plan sponsor'' has the same 
        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)).
            (12) Secretary.--The term ``Secretary'', unless 
        specifically provided otherwise, means the Secretary of Labor.
            (13) Self-insured health plan.--The term ``self-insured 
        health plan'' means a group health plan that is not an insured 
        health plan.
            (14) State.--The term ``State'' means each of the several 
        States, the District of Columbia, Puerto Rico, the United 
        States Virgin Islands, Guam, American Samoa, and the 
        Commonwealth of the Northern Mariana Islands.

       TITLE I--HEALTH CARE ACCESS, PORTABILITY, AND RENEWABILITY

                  Subtitle A--Group Health Plan Rules

SEC. 101. GUARANTEED AVAILABILITY OF HEALTH COVERAGE.

    (a) In General.--
            (1) Group health plans.--Except as provided in subsection 
        (b) and section 103--
                    (A) an insurer may not decline to provide whole 
                group coverage to employers; and
                    (B) a group health plan (whether an insured health 
                plan or self-insured health plan) may not establish 
                eligibility, continuation, enrollment, or contribution 
                requirements for participants or beneficiaries;
        based on health status, medical condition, claims experience, 
        receipt of health care, medical history, evidence of 
        insurability, or disability of a participant or beneficiary.
            (3) Health promotion or disease prevention.--Nothing in 
        this subsection shall prevent a group health plan from 
        establishing discounts for participation in programs of health 
        promotion or disease prevention.
    (b) Application of Capacity Limits.--
            (1) In general.--Subject to paragraph (2), an insurer 
        offering coverage in connection with a group health plan may 
        cease enrolling employers under the plan if--
                    (A) the insurer ceases to enroll any new employers, 
                participants and beneficiaries; and
                    (B) the insurer 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 
                the group health plan or such previously covered 
                participants or beneficiaries) will be impaired if the 
                insurer is required to enroll additional employers, 
                participants and beneficiaries.
        Such an insurer shall be prohibited from recommencing 
        enrollment after a cessation in enrollment under this paragraph 
        for a 6-month period after such cessation or until the insurer 
        can demonstrate to the applicable certifying authority (as 
        defined in section 202(d)) that the insurer has adequate 
        capacity, whichever is later.
            (2) First-come-first-served.--An insurer offering coverage 
        in connection with a group health plan is only eligible to 
        exercise the limitations provided for in paragraph (1) if the 
        insurer provides for enrollment of employers (including 
        participants and beneficiaries) under such plan on a first-
        come-first-served basis (except in the case of additional 
        employers, participants and beneficiaries described in 
        paragraph (1)(B)).
    (c) Construction.--Nothing in this section shall be construed to 
prevent a State from requiring insurers offering group health plans to 
actively market such plans.

SEC. 102. GUARANTEED RENEWABILITY OF HEALTH COVERAGE.

    (a) In General.--
            (1) Plan sponsor.--Subject to subsections (b) and (c), a 
        group health plan that is an insured health plan shall be 
        renewed or continued in force at the option of the plan 
        sponsor, except that the requirement of this subparagraph shall 
        not apply in the case of--
                    (A) the nonpayment of premiums or contributions by 
                the plan sponsor in accordance with the terms of the 
                plan or where the insurer has not received timely 
                premium payments;
                    (B) fraud or misrepresentation of material fact on 
                the part of the plan sponsor;
                    (C) the termination of the plan in accordance with 
                subsection (b); or
                    (D) the failure of the plan sponsor to meet 
                contribution or participation requirements in 
                accordance with paragraph (3).
            (2) Participant.--Subject to subsections (b) and (c), 
        coverage under a group health plan (whether an insured health 
        plan or a self-insured health plan) shall be renewed or 
        continued in force, if the plan sponsor elects to continue to 
        provide coverage under such plan, at the option of the 
        participant or beneficiary, except that the requirement of this 
        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 plan or where the 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 plan in accordance with 
                subsection (b); or
                    (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.).
            (3) Contribution and participation rules.--Nothing in this 
        subsection shall be construed to preclude an insurer from 
        establishing employer contribution rules or group participation 
        rules for plan sponsors in connection with an insured group 
        health plan consistent with applicable State law.
    (b) Termination of Health Plans.--
            (1) Health plan not offered.--In any case in which an 
        insurer is no longer going to continue to offer a group health 
        plan to plan sponsors, participants or beneficiaries, the plan 
        may be discontinued by the insurer if--
                    (A) the insurer provides notice to each plan 
                sponsor (and participants and beneficiaries covered 
                under the group health plan) of such termination at 
                least 90 days prior to the date of the expiration of 
                such plan;
                    (B) the insurer offers to each plan sponsor, the 
                option to purchase any other group health plan 
                currently being offered; and
                    (C) in exercising the option to discontinue the 
                group health plan and in offering one or more 
                replacement plans, the insurer acts uniformly without 
                regard to the health status or insurability of 
                participants or beneficiaries, or new participants or 
                beneficiaries.
            (2) Insurer not offering plan.--
                    (A) In general.--In any case in which an insurer is 
                no longer offering any group health plan in a State, 
                the plan may be discontinued by the insurer if--
                            (i) the insurer provides notice to the 
                        applicable certifying authority (as defined in 
                        section 202(d)) and to each plan sponsor (and 
                        participants and beneficiaries covered under 
                        such plan) of such termination at least 180 
                        days prior to the date of the expiration of the 
                        plan; and
                            (ii) all such plans issued or delivered for 
                        issuance in the State are discontinued and 
                        coverage under such plans is nonrenewed.
                    (B) Application of provisions.--The provisions of 
                this paragraph and paragraph (3) may be applied 
                separately by an insurer--
                            (i) to all group health plans of small 
                        employers (as defined under applicable State 
                        law, or employers with not more than 50 
                        employees if such term is not defined in State 
                        law) covering participants or participants and 
                        beneficiaries; or
                            (ii) to all other group health plans 
                        offered by the insurer in the State.
            (3) Prohibition on market reentry.--In the case of a 
        termination under paragraph (2), the insurer may not provide 
        for the issuance of any insured group health plan that was 
        terminated in the State involved during the 5-year period 
        beginning on the date of the termination of the last plan not 
        so renewed.
    (c) Treatment of Network Plans.--
            (1) Geographic limitations.--A group health plan which is a 
        network plan (as defined in paragraph (2)) or a health 
        maintenance organization plan may deny continued participation 
        under the plan to participants or beneficiaries who neither 
        live, reside, nor work in an area in which the group health 
        plan is offered, but only if such denial is 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 a health plan that arranges for the 
        financing and delivery of health care services to participants 
        or beneficiaries covered under such health plan, in whole or in 
        part, through arrangements with providers to furnish health 
        care services.

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

    (a) In General.--A group health plan (whether an insured health 
plan or a self-insured 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 effective 
date of the plan with respect to a participant or beneficiary only if--
            (1) the limitation or exclusion extends for a period of not 
        more than 12 months after the date of enrollment in the health 
        plan;
            (2) the limitation or exclusion does not apply to an 
        individual who, within 30 days of the date of birth, was 
        covered under the plan; and
            (3) the limitation or exclusion does not apply to a 
        pregnancy existing on the effective date of coverage.
    (b) Crediting of Qualifying Previous Coverage.--
            (1) In general.--A group health plan (whether an insured 
        health plan or a self-insured 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 qualifying previous coverage.
            (2) Discharge of duty.--The duty of an insurer or plan 
        sponsor to verify previous qualifying coverage with respect to 
        a participant or beneficiary is effectively discharged when 
        such insurer or plan sponsor provides documentation to a 
        participant or beneficiary at the time such participant or 
        beneficiary becomes ineligible for coverage under the group 
        health plan verifying--
                    (A) the dates that the participant or beneficiary 
                was covered under such previous qualifying coverage; 
                and
                    (B) the benefits and cost-sharing arrangement 
                available to the participant or beneficiary under such 
                previous qualifying coverage.
            (3) Definition.--The term ``previous qualifying coverage'' 
        means the period beginning on the date a participant or 
        beneficiary is enrolled under a health plan and ends on the 
        date the participant or beneficiary is not so enrolled for a 
        continuous period of more than 30 days (without regard to any 
        waiting period).
            (4) Construction.--Nothing in this subsection shall be 
        construed to prohibit a preexisting condition exclusion, 
        subject to the limits in subsection (a)(1), for a service or 
        benefit related to a preexisting condition if such service or 
        benefit was not previously covered under the health plan in 
        which the individual was enrolled immediately prior to 
        enrollment in the plan involved.
    (c) Late Enrollees.--With respect to a participant or beneficiary 
enrolling in a group health plan (whether an insured health plan or a 
self-insured health plan) during a time that is other than the first 
opportunity to enroll during an enrollment period of at least 30 days, 
the plan may exclude coverage with respect to services related to the 
treatment of a preexisting condition in accordance with subsections (a) 
and (b), except the period of such exclusion may not exceed 18 months 
beginning on the date of coverage under the plan.
    (d) Waiting Periods.--With respect to participants or beneficiaries 
who have become eligible to enroll in a group health plan (whether an 
insured health plan or a self-insured health plan), if such plan does 
not utilize a preexisting condition exclusion, such plan may impose a 
waiting period on such participants or beneficiaries not to exceed 60 
days (or in the case of a late participant or beneficiary described in 
subsection (c), 90 days) prior to the date on which coverage under the 
plan becomes effective. A group health plan may also use alternative 
methods to address adverse selection as approved by the applicable 
certifying authority (as defined in section 202(d)). During such a 
waiting period, the plan may not be required to provide health care 
services or benefits and no premium shall be charged to the 
participants or beneficiaries.
    (e)  Preexisting Condition.--For purposes of this section, the term 
``preexisting condition'' means a 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 Act shall be construed to 
preempt State laws that limit the exclusions or limitations for 
preexisting conditions to periods that are shorter than those provided 
for under this section so long as such laws are not in violation of 
section 514 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1144).
SEC. 104. SPECIAL ENROLLMENT PERIODS.

    In the case of a participant, beneficiary or family member who--
            (1) through marriage, separation, divorce, death, birth or 
        adoption of a child, experiences a change in family composition 
        affecting health insurance coverage;
            (2) experiences a change in employment status (including a 
        significant change in the terms and conditions of employment) 
        or in continuation coverage; or
            (3) experiences a loss of health insurance coverage because 
        of a change in the employment status of a family member;
each group health plan (whether insured or self-insured) shall provide 
for a special enrollment period at the time of such event which would 
permit the participant, beneficiary or family member to change the 
individual or family basis of coverage or to enroll in the plan if 
coverage would have been available to such individual but for failure 
to enroll during a previous enrollment period. Such a special 
enrollment period shall ensure that a child born or adopted shall be 
deemed to be covered under the plan as of the date of such birth or 
adoption if such child is enrolled within 30 days of the date of such 
birth or adoption.

SEC. 105. DISCLOSURE OF INFORMATION.

    (a) In General.--In connection with the offering for sale of any 
group health plan to a small employer (as defined under applicable 
State law, or employers with not more than 50 employees if such term is 
not defined in State law), an insurer shall make a reasonable 
disclosure to the employer, as part of its solicitation and sales 
materials, of--
            (1) the provisions of the group health plan concerning the 
        insurer's right to change premium rates and the factors that 
        affect changes in premium rates;
            (2) the provisions of such plan relating to renewability of 
        policies and contracts;
            (3) the provisions of such plan relating to any preexisting 
        condition provision; and
            (4) descriptive information about the benefits and premiums 
        available under all group health plans for which the employer 
        is qualified.
Information shall be provided under this subsection in a manner 
determined to be understandable by the average small employer or plan 
sponsor, and shall be sufficiently accurate and comprehensive to 
reasonably inform employers, participants and beneficiaries of their 
rights and obligations under the plan.
    (b) Exception.--With respect to the requirement of subsection (a), 
any information that is proprietary and trade secret information under 
applicable law shall not be subject to the disclosure requirements of 
such subsection.
    (c) Construction.--Nothing in this section shall be construed to 
preempt State reporting and disclosure requirements or reporting and 
disclosure requirements under the Employee Retirement Income Security 
Act of 1974.

                Subtitle B--Individual Health Plan Rules

SEC. 110. INDIVIDUAL HEALTH PLAN PORTABILITY.

    (a) Limitation on Requirements.--
            (1) In general.--With respect to an 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)) under a group health plan that commenced 12 or more 
        months prior to the date on which such individual desires to 
        enroll in such a plan, an insurer described in paragraph (3) 
        may not establish eligibility, continuation, or enrollment 
        requirements based on the health status, medical condition, 
        claims experience, receipt of health care, medical history, 
        evidence of insurability, or disability of the individual.
            (2) Health promotion and disease prevention.--Nothing in 
        this subsection shall be construed to prevent an insurer from 
        establishing discounts for participation in programs of health 
        promotion or disease prevention.
            (3) Insurer.--An insurer described in this paragraph is an 
        insurer that issues or renews any type or form of health plan 
        to individuals.
            (4) Premiums.--Nothing in this subsection shall be 
        construed to affect the determination of an insurer as to the 
        amount of the premium payable under a health plan issued to 
        individuals under 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 who has had coverage terminated 
under a group health 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 
section 602 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1162).
    (c) Market Requirements.--The provisions of subsection (a) shall 
not be construed to require that an insurer be an insurer of 
individuals.

SEC. 111. GUARANTEED RENEWABILITY OF INDIVIDUAL HEALTH COVERAGE.

    (a) In General.--Subject to subsections (b) and (c), coverage for 
individuals under an individual health plan shall be renewed or 
continued in force at the option of the individual, except that the 
requirement of this 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 plan or where 
        the plan has not received timely premium payments;
            (2) fraud or misrepresentation of material fact on the part 
        of the individual; or
            (3) the termination of the plan in accordance with 
        subsection (b).
    (b) Termination of Health Plans.--
            (1) Health plan not offered.--In any case in which an 
        insurer is no longer going to continue to offer an individual 
        health plan to individuals, the plan may be discontinued by the 
        insurer if--
                    (A) the insurer provides notice to each individual 
                covered under the plan of such termination at least 90 
                days prior to the date of the expiration of the plan;
                    (B) the insurer offers to each individual covered 
                under the plan the option to purchase any other health 
                plan currently being offered to individuals; and
                    (C) in exercising the option to discontinue the 
                plan and in offering one or more replacement plans, the 
                insurer acts uniformly without regard to the health 
                status or insurability of individuals.
            (2) Insurer not offering plan.--In any case in which an 
        insurer is no longer offering any individual health plan in a 
        State, the plan may be discontinued by the insurer if--
                    (A) the insurer provides notice to the applicable 
                certifying authority (as defined in section 202(d)) and 
                to each individual covered under the plan of such 
                termination at least 180 days prior to the date of the 
                expiration of the plan; and
                    (B) all such plans issued or delivered for issuance 
                in the State are discontinued and coverage under such 
                plans is nonrenewed.
            (3) Prohibition on market reentry.--In the case of a 
        termination under paragraph (2), the insurer 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 
        termination of the last plan not so renewed.
    (c) Treatment of Network Plans.--
            (1) Geographic limitations.--An individual health plan 
        which is a network plan (as defined in paragraph (2)) or a 
        health maintenance organization plan may deny continued 
        participation under the plan to individuals who neither live, 
        reside, nor work in an area in which the individual health plan 
        is 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 a health plan that arranges for the 
        financing and delivery of health care services to individuals 
        covered under such health plan, in whole or in part, through 
        arrangements with providers to furnish health care services.
SEC. 112. STATE FLEXIBILITY IN INDIVIDUAL MARKET REFORMS.

    With respect to any State law in effect on, or enacted after, the 
date of enactment of this Act, such as guarantee issue, open 
enrollment, high-risk pools, or mandatory 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 that such State law is not as effective in providing access 
to affordable health care coverage as the standards described in 
sections 110 and 111.

SEC. 113. INDIVIDUAL HEALTH COVERAGE AVAILABILITY STUDY.

    (a) In General.--Not later than January 1, 1997, the Secretary of 
Health and Human Services, in consultation with the Secretary, 
representatives of State officials, consumers, and other 
representatives of individuals and entities that have expertise in 
health insurance and employee benefit issues, shall conduct a study, 
and prepare and submit to the appropriate committees of Congress a 
report, concerning--
            (1) the most appropriate way, in light of the experience of 
        the various States, expert opinions, and such additional data 
        as may be available, to ensure the availability of reasonably 
        priced health insurance to individuals purchasing coverage on a 
        non-group basis;
            (2) the need for Federal standards that limit the variation 
        in health insurance premiums charged to individuals and groups 
        of different characteristics in order to achieve the purposes 
        of this Act; and
            (3) the effectiveness of the provisions of this Act, and 
        State insurance reform laws, in stabilizing the small group 
        health insurance market by providing for the broad pooling of 
        risk.
    (b) Recommendations.--The report submitted under subsection (a) 
shall contain the recommendations of the Secretary of Health and Human 
Services and the Secretary for additional Federal legislation, if any, 
that is needed to ensure the availability of reasonably priced health 
insurance for individuals and employers.

                    Subtitle C--COBRA Clarifications

SEC. 121. COBRA CLARIFICATIONS.

    (a) Public Health Service Act.--
            (1) Period of coverage.--Section 2202(2) of the Public 
        Health Service Act (42 U.S.C. 300bb-2(2)) is amended--
                    (A) in subparagraph (A)--
                            (i) by transferring the sentence 
                        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''; 
                                and
                    (B) 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 
        adopted by 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''; and
                    (B) 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 
        adopted by 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''; and
                    (B) in clause (v), by striking ``at the time of a 
                qualifying event described in paragraph (3)(B)'' and 
                inserting ``at any time during the initial 18-month 
                period of continuing coverage under this section''.
            (2) Election.--Section 4980B(f)(5)(A)(iii) of the Internal 
        Revenue Code of 1986 is amended--
                    (A) in subclause (I), by striking ``or'' at the end 
                thereof;
                    (B) in subclause (II), by striking the 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 adopted by the covered employee during the period of 
                continued coverage under this section.''.
    (d) Effective Date.--The amendment made by this section shall apply 
to qualifying events occurring on or after the date of the enactment of 
this Act for plan years beginning after December 31, 1996.
    (e) Notification of Changes.--Not later than 60 days after the date 
of enactment of this Act, each group health plan (covered under title 
XXII of the Public Health Service Act, part 6 of subtitle A of title I 
of the Employee Retirement Income Security Act of 1974, and section 
4980B(f) of the Internal Revenue Code of 1986) shall 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 Coalitions

SEC. 131. PRIVATE HEALTH PLAN PURCHASING COALITIONS.

    (a) Definition.--As used in this Act, the term ``health plan 
purchasing coalition'' means a group of individuals or employers that, 
on a voluntary basis and in accordance with this section, form an 
entity for the purpose of purchasing insured health plans or 
negotiating with insured health plans and providers. An insurer, agent, 
broker or any other individual or entity engaged in the sale of 
insurance may not form or underwrite a coalition.
    (b) Certification.--
            (1) In general.--A State shall certify health plan 
        purchasing coalitions that meet the requirements of this 
        section. Each coalition shall be chartered under State law and 
        registered with the Secretary.
            (2) State refusal to certify.--If a State fails to 
        implement a program for certifying health plan purchasing 
        coalitions in accordance with the standards under this Act, the 
        Secretary shall certify and oversee the operations of such 
        coalitions in such State.
            (3) Multi-state coalitions.--For purposes of this section, 
        a health plan purchasing coalition operating in more than one 
        State shall be certified by the State in which the coalition is 
        domiciled, pursuant to an agreement between the States in which 
        the coalition conducts business.
    (d) Board of Directors.--
            (1) In general.--Each health plan purchasing coalition 
        shall be governed by a Board of Directors that shall be 
        responsible for ensuring the performance of the duties of the 
        coalition under this section. The Board shall be composed of a 
        broad cross-section of representatives of employers, employees, 
        and individuals participating in the coalition. An insurer, 
        agent, broker or any other individual or entity engaged in the 
        sale of insurance may not hold or control any right to vote 
        with respect to a coalition.
            (2) Limitation on compensation.--A health plan purchasing 
        coalition may not provide compensation to members of the Board 
        of Directors. The coalition 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 coalition may be employed by, be a 
        consultant for, be a member of the board of directors of, be 
        affiliated with an agent of, or otherwise be a representative 
        of any health plan or other insurer, health care provider, or 
        agent or broker. Nothing in the preceding sentence shall limit 
        a member of the Board from purchasing coverage from a health 
        plan offered through the coalition.
    (e) Membership and Marketing Area.--
            (1) Membership.--
                    (A) In general.--A health plan purchasing coalition 
                may establish limits on the size of employers who may 
                become members of the coalition, and may determine 
                whether to permit individuals to become members. Upon 
                the establishment of such membership requirements, the 
                coalition shall, except as provided in subparagraph 
                (B), accept all employers (or individuals) residing 
                within the area served by the coalition who meet such 
                requirements as members on a first come, first-served 
                basis.
                    (B) Capacity limits.--A health plan purchasing 
                coalition may cease accepting employers or individuals 
                as members of the coalition if--
                            (i) the coalition ceases to permit any new 
                        employers or individuals to become members; and
                            (ii) the coalition can demonstrate to the 
                        State (or the Secretary in the case of 
                        coalitions certified by the Secretary) that the 
                        financial or other capacity of the coalition to 
                        serve current members will be impaired if the 
                        coalition is required to accept other members.
            (2) Marketing area.--A State may establish rules regarding 
        the geographic area that must be served by a health plan 
        purchasing coalition. With respect to a State that has not 
        established such rules, a health plan purchasing coalition 
        operating in the State shall define the boundaries of the area 
        to be served by the coalition, except that such boundaries may 
        not be established on the basis of health status or 
        insurability.
    (f) Duties and Responsibilities.--
            (1) In general.--A health plan purchasing coalition shall--
                    (A) enter into agreements with insured health 
                plans;
                    (B) enter into agreements with employers and 
                individuals who become members of the coalition;
                    (C) participate in any program of risk-adjustment 
                or reinsurance, or any similar program, that is 
                established by the State;
                    (D) contract and negotiate with health care 
                providers and health plans;
                    (E) prepare and disseminate comparative health plan 
                materials (including information about cost, quality, 
                benefits, and other information concerning health plans 
                offered through the coalition);
                    (F) actively market to all eligible employers and 
                individuals residing within the service area; and
                    (G) act as an ombudsman for health plan enrollees.
            (2) Permissible activities.--A health plan purchasing 
        coalition may perform such other functions as necessary to 
        further the purposes of this Act, including--
                    (A) the collection and distribution of premiums and 
                the performance of other administrative functions;
                    (B) the collection and analysis of surveys of 
                health plan enrollee satisfaction;
                    (C) the charging of membership fee to enrollees 
                (such fees may not be based on health status) and the 
                charging of participation fees to health plans; and
                    (D) cooperating with (or accepting as members) 
                employers who self-insure for the purpose of 
                negotiating with providers.
    (g) Limitations on Coalition Activities.--A health plan purchasing 
coalition shall not--
            (1) perform any activity relating to the licensing of 
        health plans;
            (2) assume financial risk in relating to any health plan;
            (3) perform any other activities that conflict or are 
        inconsistent with the performance of its duties under this Act; 
        or
            (4) establish eligibility, continuation, enrollment, or 
        contribution requirements for employees or employers and 
        individuals based on the health status, medical condition, 
        claims experience, receipt of health care, medical history, 
        evidence of insurability, or disability of any individual.
    (h) Limited Preemption of Certain State Laws.--
            (1) In general.--With respect to a health plan purchasing 
        coalition that meets the requirements of this section, the 
        following State laws shall be preempted:
                    (A) State fictitious group laws.
                    (B) State rating requirement laws, except to the 
                extent necessary to comply with the requirements of 
                paragraph (2).
                    (C) Other State laws that directly conflict with 
                the requirements in this section.
            (2) Rating requirement laws.--With respect to a State 
        rating requirement law, the coalition--
                    (A) may not permit premium rates to vary among 
                employers or individuals that are members of a health 
                plan purchasing coalition in excess of the amount of 
                such variations that would be permitted under such 
                State rating laws among employers that are not members 
                of the coalition; and
                    (B) with respect to premium rates negotiated by the 
                coalition, may permit such rates 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.
    (i) Rules of Construction.--Nothing in this section shall be 
construed to--
            (1) require that a State organize, operate, or otherwise 
        create health care purchasing coalitions;
            (2) otherwise require the establishment of health care 
        purchasing coalitions;
            (3) require individuals or employers to purchase health 
        plans through a health plan purchasing coalition;
            (4) require that a health plan purchasing coalition be the 
        only type of health insurance purchasing arrangement permitted 
        to operate in a State; or
            (5) confer authority upon a State that the State would not 
        otherwise have to regulate health plans (whether insured or 
        self-insured).
    (j) Application of ERISA.--The requirements of parts 4 and 5 of 
subtitle B of title I of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1101) shall apply to a health plan purchasing 
coalition.
           TITLE II--APPLICATION AND ENFORCEMENT OF STANDARDS

SEC. 201. APPLICABILITY.

    (a) Construction.--
            (1) In general.--A requirement or standard imposed on an 
        insured health plan under this Act shall be deemed to be a 
        requirement or standard imposed on the insurer. A requirement 
        or standard imposed on a self-insured health plan under this 
        Act shall be deemed to be a requirement or standard imposed on 
        the plan sponsor.
            (2) Preemption of state law.--Nothing in this Act shall be 
        construed to prevent a State from establishing, implementing, 
        or continuing in effect standards and requirements related to 
        the issuance, renewal, or rating of health insurance, or other 
        standards or requirements related to health insurance, unless 
        such standards are in direct conflict with the standards or 
        requirements established under this Act.

SEC. 202. ENFORCEMENT OF STANDARDS.

    (a) Insured Health Plans.--Each State shall require that each 
insured health plan issued, sold, renewed, offered for sale or operated 
in such State meet the insurance reform 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) Self-Insured Health Plans.--In the case of self-insured health 
plans, the Secretary shall enforce the reform standards established 
under this Act. A plan failing to meet such standards shall be subject 
to civil enforcement as provided for under section 502 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1132) and for 
penalties as provided for under paragraphs (1) and (2) of section 
502(a) of such Act (relating to failure to provide requested 
information and failure to file required reports).
    (c) Failure to Implement Plan.--In the case of the failure of a 
State to enforce the standards and requirements set forth in this Act, 
the Secretary, in consultation with the Secretary of Health and Human 
Services, shall implement an enforcement plan meeting the standards of 
this Act in such State. In the case of a State that fails to enforce 
the standards and requirements set forth in this Act, each health plan 
operating in such State shall be subject to civil enforcement as 
provided for under section 502 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132) and for penalties as provided for 
under paragraphs (1) and (2) of subsection (a) of such section 
(relating to failure to provide requested information and failure to 
file required reports).
    (d) Applicable Certifying Authority.--As used in this title, the 
term ``applicable certifying authority'' means, with respect to--
            (1) insured health plans, the State insurance commissioner 
        for the State involved; and
            (2) a self-insured health plan, the Secretary.

                  TITLE III--MISCELLANEOUS PROVISIONS

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

    (a) In General.--Section 1301(b) of the Public Health Service Act 
(42 U.S.C. 300e(b)) is amended by adding at the end the following new 
paragraph:
            ``(6)(A) If a member certifies that a medical savings 
        account has been established for the benefit of such member, a 
        health maintenance organization may, at the request of such 
        member reduce the basic health services payment otherwise 
        determined under paragraph (1) by requiring the payment of a 
        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).''.
    (b) Sense of the Senate.--It is the sense of the Senate that the 
Congress should take measures to further the purposes of this Act, 
including any necessary changes to the Internal Revenue Code of 1986 to 
encourage groups and individuals to obtain health coverage, and to 
promote access, equity, portability, affordability, and security of 
health benefits.

SEC. 302. EFFECTIVE DATE.

    The provisions of this Act shall apply to health plans offered, 
sold, issued, renewed, or operated on or after January 1, 1996.

SEC. 303. 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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