[Congressional Record Volume 141, Number 33 (Wednesday, February 22, 1995)]
[Extensions of Remarks]
[Pages E397-E400]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


       THE ``ERISA TARGETED HEALTH INSURANCE REFORM ACT OF 1995''

                                 ______


                         HON. HARRIS W. FAWELL

                              of illinois

                    in the house of representatives

                      Wednesday, February 22, 1995
  Mr. FAWELL. Mr. Speaker, last year reform of health care focused on 
what was wrong with the system. This year reform should be driven by 
what is working in the system and how we can expand on what is being 
done. Yesterday, I introduced the ERISA Targeted Health Insurance 
Reform Act. I also introduced a related bill, the Targeted Individual 
Health Insurance Reform Market Act which I will explain separately.
  Joining as original cosponsors of the ERISA targeted bill are: My 
colleagues Representatives Bill Goodling, Dick Armey, Tim Petri, Marge 
Roukema, Cass Ballenger, Pete Hoekstra, Buck McKeon, Jan Meyers, Jim 
Talent, James Greenwood, Tim Hutchinson, Joe Knollenberg, Lindsey 
Graham, Dave Weldon, and David McIntosh.
  Our approach to fixing the problems--primarily lack of access to 
affordable coverage--is fundamentally different than that taken by the 
Clinton administration and Congress last year. In developing this 
legislation, we took the hippocratic oath: First, do no harm. We 
carefully target reforms to fix the problems without doing harm to the 
choice and quality of care enjoyed by most Americans. Moreover, we will 
not disturb the revolution in innovation and competition going on in 
the private sector--instead, we will build on it.
  The legislation we are introducing addresses the problem areas in 
health care insurance: portability, preexisting conditions, and 
affordable coverage for small employers.
  Most importantly, the framework builds on the successful and time-
tested cornerstone of employee benefits law, the Employee Retirement 
Income Security Act [ERISA]. Under ERISA, near universal coverage has 
been afforded the employees of larger companies, and this system is 
maintained in our legislation. But, we will offer small employers the 
opportunity to form multiple employer health plans to achieve the 
economies of scale and freedom from excessive regulation that have been 
ERISA's hallmark.
  The legislation's provisions for worker portability and limits on 
preexisting conditions under health plans will help eliminate job lock. 
It gives increased purchasing power for employers and employees. 
Increased health plan competition will mean more affordable choice of 
coverage for many Americans.
  Our legislation makes these targeted reforms without forcing 
Americans to give up their current coverage or restrict their choice of 
coverage--it should actually expand choice. Nor do we impose employer 
mandates, price controls, or a one-size-fits-all benefit package. 
Moreover, the legislation does not require any Government subsidies, 
expenditures, or taxes.
  We have worked with many organizations in developing this
   legislation and have received a number of letters supportive of our 
effort to begin the debate on health insurance reform. So far, we have 
supportive letters from: the National Federation of Independent 
Business, the U.S. Chamber of Commerce, the ERISA Industry Committee, 
the National Association of Wholesalers, the National Association of 
Manufacturers, the Self-Insurance Institute of America, Associated 
Builders and Contractors, the Association of Private Pension and 
Welfare Plans, the National Business Coalition on Health, the National 
Retail Federation, the National Restaurant Association, Mutual of 
  Omaha, and New York Life.I've attached a section by section analysis 
of the first bill, the ERISA Targeted Health Insurance Reform Act, that 
has five subtitles (A through E). I will now explain what is contained 
in subtitles A and B. Subtitle A, entitled ``Increased Availability and 
Continuity of Health Coverage for Employees and Their Families'' deals 
with the subject matter of portability, limitations on preexisting 
condition exclusions, and private standard setting organizations. 
Subtitle B, entitled ``Requirements for Insurers Providing Health 
Insurance Coverage to Group Health Plans of Small Employers'' contains 
fair rating standards and rules relating to insurance availability in 
the small group market. After I've explained this, I will, at another 
time, explain subtitles C, D, and E.
         The ERISA Targeted Health Insurance Reform Act of 1995


                                summary

       The ERISA Targeted Health Insurance Reform Act of 1995 
     presents a well-targeted and workable framework within which 
     incremental health insurance reform can be enacted this year.
       The framework builds on the successful and time-tested 
     cornerstone of employee benefits law set in 1974 under ERISA. 
     Under the umbrella of ERISA, near ``universal health 
     coverage'' has been afforded the employees of larger 
     companies. It is long-overdue that cost-conscious small 
     employers be given the opportunity to achieve the economies 
     of scale and freedom from excessive government regulation and 
     taxation that have been ERISA's hallmark. The problems of 
     uninsured families can be strongly attacked by removing 
     barriers and releasing the purchasing power of employers 
     acting 
      [[Page E398]]  jointly to voluntarily form ERISA multiple 
     employer health plans, both fully-insured and self-insured.
       The increased health plan competition stimulated under the 
     ERISA structure means that more affordable coverage will be 
     available to more Americans. The bill is friendly towards the 
     competitive revolution occurring in the health care 
     marketplace, and gives new vigor to the ability of providers, 
     insurers, and employers to bring cost-saving innovations into 
     the marketplace and into the 21st century.
       In addition to addressing the problems of the uninsured and 
     cost-control, the legislation contains important new 
     protections and freedoms for workers who must compete in a 
     more mobile workforce. No longer would covered workers face 
     job-lock because they fear the lack of access to health 
     insurance or denial of coverage because of a preexisting 
     health condition.
       The bill contains targeted but important elements of health 
     insurance reform including participation, portability, 
     renewability, utilization review, solvency, claims processing 
     and fair rating standards.
       The foundation of this bill, built upon ERISA, is to create 
     an unfettered 21st century framework in which employers, 
     employees, and their representatives are free to set the 
     level of their health benefit promises and in which those 
     promises will be better kept.


       what the erisa targeted health insurance reform bill does

     New protections and freedoms for workers in a mobile workforce

       Portability and limits on preexisting conditions under 
     health plans helps eliminate job-lock (e.g. if an employee 
     once chooses insurance coverage they do not have to again 
     satisfy a preexisting condition as long as some form of 
     coverage is continued).
       Participation standards require annual open enrollment and 
     limits exclusions based on certain age, service, and income 
     criteria.
       Insurers and multiple employer plans must guarantee the 
     renewal of health coverage.

         Increased purchasing power for employers and employees

       Barriers are removed for employers to voluntarily form 
     multiple employer health plans of the fully-insured and self-
     insured variety.
       Barriers are removed to the formation of employer health 
     coalitions enabling single and multiemployer plans to 
     negotiate agreements with providers.

   Let the market roar: Increased health plan competition means more 
                     affordable choice of coverage

       State benefit mandates are limited.
       State anti-managed-care laws are restructured and, instead, 
     uniform standards are encouraged.
       Restrictive state laws relating to Provider Health 
     Networks, Employer Health Coalitions, insured plans, and 
     self-insured plans are preempted.
       Buyer cost awareness is encouraged through Medisave plans.

   Access to fully-insured coverage expanded for employees of small 
                               employers

       Insurers must open their small group (under 51 employees) 
     markets to all eligible buyers.
       Fair rating standards limit premium variations among 
     similarly situated groups which balances the need to make 
     insurance more affordable, but avoids ``sticker shock'' for 
     the currently insured.

            Increased consumer protections under ERISA plans

       Claims processing and determinations must be timely and 
     participant remedies are improved.
       Under certain conditions, self-insured plans are required 
     to maintain unpaid claims reserves.


    what the erisa targeted health insurance reform bill does not do

       As important as what the Targeted bill does do, is what it 
     does not do.
       It does not force Americans to give up their current health 
     insurance coverage, nor does it restrict their choice of 
     coverage (in fact, it will help expand their choice).
       It does not impose employer mandates that result in lost 
     wages and lost jobs.
       It does not require any new federal spending or new taxes.
       It does not have unfunded state or local mandates.
       It does not have price controls or impose government-
     prescribed health care budgets that would lead to rationing 
     or lower quality of care.
       It does not establish a government-run health care system, 
     nor does it create a massive bureaucracy.
       It does not deny employers the right to self-insure, but 
     does allow more employers to do so.
       It does not impose a single, one-size-fits-all, national 
     benefits package determined by the government.

                                Title I

 Subtitle A--Increased availability and continuity of health coverage 
                    for employees and their families

       The purpose of this subtitle is to expand access to 
     affordable group health coverage for employers, employees, 
     and their families and to help eliminate job-lock and the 
     exclusion of such individuals from coverage due to 
     preexisting condition restrictions.
       Sec. 1001.--Access to affordable health plan coverage.
       This section adds a new ERISA Part 8 providing for 
     nondiscrimination, portability, renewability, and 
     participation standards under Subpart A; encouragement of 
     private standards--setting organizations for utilization 
     review and provider networks under Subpart B; and standards 
     and enforcement mechanisms applicable to insurers under 
     Subpart C.
      ERISA Part 8--Access and continuity of, Health Plan Coverage

       ``Sec. 800. Definitions and special rules.
Erisa Subpart A--Nondiscrimination, Portability, Renewability, and Plan 
                        Participation Standards

       ``Sec. 801. Nondiscrimination and limitations on 
     preexisting condition exclusions.
       ``Sec. 802. Portability.
       These sections of Part 8 of ERISA limit preexisting 
     condition restrictions under all employer group health 
     benefit plans, including self-funded plans. The same 
     provisions also apply to health insurance coverage sold in 
     the small group market. Section 8 provides that a child who 
     is covered at birth or adoption and remains covered shall not 
     be considered to have a preexisting condition at the time of 
     birth or adoption.
       The provisions will help end job-lock and assure continuous 
     availability of health coverage by prohibiting preexisting 
     condition restrictions for those who are continuously covered 
     and elect coverage when first eligible. Coverage is 
     considered ``continuous'' as long as any lapse in coverage is 
     not longer than 3 months (6 months for employees who 
     terminate employment). Generally, plans may not have more 
     than a 3/6 preexisting exclusion (i.e. treatments or 
     diagnoses in the 3 months prior to coverage could be excluded 
     from coverage for up to 6 months). Insurers in the small 
     group market can also offer 6/12 coverage.
       ``Sec. 803.--Requirements for renewability of coverage.
       This section prohibits employer health plans and health 
     insurance coverage offered by insurers from being canceled or 
     denied renewability except for reasons of: (a) nonpayment of 
     premiums, (b) fraud or misrepresentation, (c) noncompliance 
     with plan provisions, and (d) certain other conditions.
       ``Sec. 804.--Group Health Plan Participation Standards.
       Under this Section, group health plans may not require as a 
     condition of participation: (1) a waiting period beyond 90 
     days, (2) attainment of a specified age, (3) that an employee 
     be highly compensated, or (4) that an employee perform more 
     than a ``year of service'' as currently defined under ERISA. 
     Employer contributions to a group health plan are not 
     required.
       An annual enrollment period of 30 days must be provided to 
     enable employees to enroll in such coverage as provided under 
     the terms of each group health plan. Employees and dependents 
     may also enroll for coverage at the time of the loss of other 
     coverage (if such coverage was the reason for declining 
     enrollment when first eligible).

Subpart B--Encouragement of Private Standards Setting Organizations for 
   Provider Networks and Utilization Review Under Group Health Plans

       ``Sec. 811.--Encouragement of private standards setting 
     organizations for provider networks under group health plans.
       ``Sec. 812.--Encouragement of private standards setting 
     organizations for utilization review under group health 
     plans.
       This Subpart B of ERISA encourages the establishment of 
     private standards setting organizations to provide certain 
     guidelines which would be applicable to provider networks 
     under provider networks and to
        utilization review procedures under group health plans.The 
     standards which group health plans would look to from any 
     such private entity would be related to (1) reasonably prompt 
     access of individuals to covered services, (2) the extent to 
     which emergency services are provided to individuals outside 
     the provider network, (3) notification and review regarding 
     the termination of providers from a network, and (4) 
     conditions relating to utilization review, including timely 
     review and provider participation in such decisions.

        ERISA Subpart C--Establishment of Standards; Enforcement

       ``Sec. 821.--Establishment of standards applicable to 
     insurers offering health insurance coverage to group health 
     plans.
       ``Sec. 822.--Enforcement with respect to insurers offering 
     health insurance coverage to group health plans.
       ``Sec. 823.--Preemption.
       The standards applicable to group health plans under ERISA 
     Subparts A and B are generally enforced under ERISA Part 5.
       With respect to the standards applicable to insurers only, 
     and not to group health plans, states may (in accordance with 
     Sections 821 and 822) implement and enforce the nationally 
     uniform standards under Subparts A and B, including the 
     uniform regulations which may be recommended by the NAIC. 
     States that voluntarily elect to implement such standards 
     have the exclusive authority to enforce such standards as 
     they apply to insurers and not to the group health plans 
     which purchase health insurance coverage. In this fashion the 
     traditional regulation of insurers by the states is preserved 
     while the uniform regulation of group health plans under 
     ERISA is not disturbed.
       Pursuant to the preemption provisions under Section 823, a 
     state may not establish or enforce standards applicable to 
     insurers 
      [[Page E399]] which are different than the nationally 
     uniform standards under this subpart.

   Subtitle B--Requirements for insurers providing health insurance 
           coverage to group health plans of small employers

       Sec. 1101. ERISA requirements for insurers providing health 
     insurance coverage to group health plans for small employers.
       In general, the purpose of this subtitle, adding a new Part 
     8, Subpart D to ERISA, is to expand access to health 
     insurance by making private health insurance coverage 
     marketed to small employers more affordable and available 
     regardless of an employee's health status and previous claims 
     experience.

 ERISA Subpart D--Requirements for Insurers Providing Health Insurance 
           Coverage to Group Health Plans of Small Employers

       ``Sec. 831.--Definitions.
       ``Sec. 832.--Requirements for insurers to offer general, 
     catastrophic, and Medisave coverage to small employers.
       ``Sec. 833.--General, catastrophic, and Medisave coverage 
     defined.
       These sections provide for the availability of health 
     insurance coverage to all small employers from those insurers 
     who sell health insurance in the small group market. Insurers 
     would be required to open their general coverage market to 
     small employers and to offer a catastrophic plan with higher 
     cost-sharing provisions (unless the insurer is an HMO or does 
     not otherwise offer fee-for-service coverage). Insurers may 
     also offer a
      Medisave plan that includes catastrophic coverage with an 
     integrated family medical savings account. Among the 
     general policies offered must be a fee-for-service option, 
     a managed care option, and point-of-service option, but 
     only if these are made available by the insurer under 
     other policies of insurance. Insurers must accept every 
     small employer and every eligible employee of a small 
     employer who applies for coverage under a plan as long as 
     the plan meets the minimum participation requirements. The 
     initial and annual enrollment periods of 30 days 
     applicable to small group plans are identical to those 
     applicable to all group health plans under section 804.
       ``Sec. 834.--Use of fair rating, uniform marketing 
     materials, and miscellaneous consumer protections.
       ``Sec. 835.--Establishment of standards.
       ``Sec. 836.--Enforcement.
       ``Sec. 837.--Preemption.
       Under these sections, insurers must use fair rating 
     standards in setting initial and renewal premiums in the 
     small group market. In general, premiums may vary for age, 
     geographic area, family class, and administrative category 
     for a particular benefit design. Discounts for employer 
     wellness programs may also be given.
       When the fair rating standards are first effective, the 
     premiums of two employers having workforces with similar 
     demographic characteristics cannot vary by more than 50% 
     based on initial underwriting factors or in subsequent years, 
     based on claims experience. This rule and the permitted one 
     year surcharge for coverage containing the less restrictive 
     3/6 preexisting condition clause will help insulate currently 
     insured employers for the premium ``sticker shock'' which 
     could otherwise result from more restrictive rules. 
     Suggestions as to the extent to which this 50% variation may 
     be reduced over time without reducing coverage are solicited 
     from the NAIC and other interested parties.
       Such premium variations for individual employers 
     participating in a qualified association which is experience-
     rated is not permitted.
       Under sections 835 and 836 states may, but are not 
     required, to implement and enforce the nationally uniform 
     standards under sections 832-834, including the uniform 
     regulations which may be recommended by the NAIC. States that 
     voluntarily elect to implement such standards have the 
     exclusive authority to enforce such standards as they apply 
     to insurers only and not to the group health plans which 
     purchase health insurance coverage. A phase-in period of 
     three years after the effective date of such standards is 
     allowed for states to conform existing standards with the 
     uniform standards. After such period standards differing from 
     the uniform standards are preempted under section 837.
       Sec. 1102. Effective date.
       In general the requirements of ERISA Subpart D apply on 
     January 1, 1998 with regard to insurers offering health 
     insurance coverage to small employers.
    Subtitle C--Encouragement of multiple employer health plans and 
                               preemption

       The purpose of this subtitle is to improve access to health 
     coverage and lower insurance costs for both small and larger 
     employers by encouraging the establishment of multiple 
     employer purchasing arrangements, by eliminating costly state 
     regulations, and by freeing market forces and creating a more 
     competitive environment in which health care is delivered.
       Sec. 1201--Scope of State Regulation

               ERISA Subpart E--Scope of State Regulation

       ``Sec. 841--Prohibition of State benefit mandates for group 
     health plans.
       ``Sec. 842--Prohibition of provisions prohibiting employer 
     groups from purchasing health insurance.
       ``Sec. 843--Preemption of State anti-managed care laws.
       These sections facilitate the ability of employers to form 
     groups for the purpose of purchasing fully-insured health 
     insurance coverage. The provisions will help reduce costly 
     regulation and allow any group of employers to form any 
     arrangement to purchase insurance. The preemption of anti-
     managed care laws is intended to allow market forces to 
     operate to help contain health care costs.
       Section 841 will also help lower costs, eliminate inter-
     state barriers, and provide a level playing field between 
     insured and self-funded plans by eliminating burdensome and 
     expensive state mandates. Although states could continue to 
     mandate a comprehensive and basic benefit package, insurers 
     would be free to design and offer employers and employees the 
     type of coverage they want and can afford.
       Sec. 1202--Preemption of state laws for Multiple Employer 
     Benefits Plans meeting Federal Standards.

                 Part 7--Multiple Employer Health Plans

       Sec. 701. Definitions.
       Sec. 702. Exempted multiple employer health plans relieved 
     of certain restrictions on preemption of State law and 
     treated as employee welfare benefit plans.
       Sec. 703. Exemption procedure.
       Sec. 704. Eligibility Requirements.
       Sec. 705. Additional requirements applicable to exempted 
     multiple employer health plans.
       Sec. 706. Disclosure to participating employers by 
     arrangements providing medical care.
       Sec. 707. Maintenance of reserves.
       Sec. 708. Notice requirements for voluntary termination.
       Sec. 709. Corrective actions and mandatory termination.
       Sec. 710. Expiration, suspension, or revocation of 
     exemption.
       Sec. 711. Review of actions of the secretary.
       This section is designed to preserve well-run self-insured 
     plans and to put an end to the fraudulent scams perpetrated 
     by a few bogus unions and unscrupulous operators.
       The section adds a new Part 7 to title I of ERISA which 
     allows certain multiple employer welfare arrangements (MEWAS) 
     providing health benefits to receive an exemption from the 
     Department of Labor to become an ERISA multiple employer 
     health plan (MEHP). Entities eligible for such an exemption 
     include certain collectively-bargained and ``single-
     employer'' plans that otherwise fail to meet criteria 
     exempting them from the MEWA definition. Also certain 
     employer associations, employee leasing arrangements, and 
     provider health networks may also qualify. Arrangements 
     receiving an exemption would be subject to uniform standards 
     under ERISA regarding reporting, disclosure, fiduciary 
     requirements, and new funding/reserve requirements. 
     Regulations would be promulgated by the Department of Labor 
     in connection with the standards. Arrangements operating 
     multiple employer health plans would be required to notify 
     the states in which they operate. In addition, new 
     arrangements could not commence operations unless an 
     exemption is obtained. Failure to follow this procedure would 
     result in criminal penalties. States could enter into 
     agreements with the Department
      regarding the enforcement of the federal statutory and 
       exemption standards for exempted arrangements.Sec. 1203--
     Clarification of scope of preemption rules.
       Sec. 1204--Clarification of treatment of single employer 
     arrangement.
       Sec. 1205--Clarification of treatment of certain 
     collectively bargained arrangements.
       Sec. 1206--Employee leasing health care arrangement.
       Sec. 1207--Enforcement provisions relating to multiple 
     employer welfare arrangements and employee leasing health 
     care arrangement.
       Sec. 1208--Fling requirements for multiple employer welfare 
     arrangements providing health benefits.
       Sec. 1209--Cooperation between Federal and State 
     authorities Sec.
       Sec. 1210--Clarification of treatment of employer health 
     coalitions.
       Sec. 1211--Single annual filing for all participating 
     employers.
       Sec. 1212--Effective date; transitional rules.

Subtitle D--Remedies and enforcement with respect to group health plans

       This subtitle includes provisions for expediting the claim 
     process and clarifying the remedies available in the case of 
     claims disputes under ERISA group health plans.
       Sec. 1301.--Claims procedures for group health plans.
       This section expedites the claims process under ERISA 
     health plans by requiring that claims for medical benefits be 
     approved within 45 days of the filing completion date. A full 
     and fair review must also be provided within 45 days of the 
     review filing date. Requests for emergency preauthorization 
     must be provided within 10 days (or 48 hours in the case of 
     extreme emergencies), with the opportunity for a full and 
     fair review of each within the same time period for approval. 
     The same time frames for approval and review would apply to 
     requests for utilization review determinations and emergency 
     utilization review determinations.
       Sec. 1302.--Available court remedies.
       This section amends Section 502 of the Employee Retirement 
     Income Security Act of 1974 (ERISA) to provide for the 
     following court remedies in the case of a plaintiff prevails 
     in a claim for benefits: (1) a cease and 
      [[Page E400]] desist order, (2) a grant of benefits denied 
     or refused, (3) payment of prejudgment interest on the claims 
     for benefits under the plan, and (4) payment of reasonable 
     attorney's fees, and other reasonable costs relating to the 
     action. In addition, the Secretary may assess a civil penalty 
     against the insurer or the appropriate fiduciary of a group 
     health plan who engages in a pattern or practice of repeated 
     bad faith claims denials.
       Sec. 1303.--Effective Date.
       The amendments to ERISA in this Subtitle take effect 
     January 1, 1998.

Subtitle E--Funding and plan termination requirements for self-insured 
                           group health plans

       Sec. 1401.--Special rules Self-Insured Group Health Plans.
       This section adds a new section 610 to ERISA Part 6 
     providing for plan termination and funding requirements for 
     certain plans. Under subsection 610(b) the single-employer 
     self-insured group health plans maintained by small employers 
     are required to establish reserves in an amount equal to 25% 
     of expected annual incurred claims and expenses or the 
     estimated amount of incurred, but unpaid, claims, if greater. 
     Alternative means of meeting such requirements would take 
     into account factors such as the size of the plan, the 
     benefit design, the presence of stop-loss coverage, and
      either security, guarantee, or financial arrangements. The 
     self-insured plans maintained by large plan sponsors who 
     meet certain distress criteria would also have to file 
     notice and a financial plan demonstrating the basis for 
     the continued timely payment of benefits. A safe-harbor 
     for large plans meeting the above described reserve 
     requirements for small plans would be provided, thus 
     obviating the need to file such a notice in the event of 
     the distress of the plan sponsor. Multiemployer plans 
     would have to maintain contributions and assets at a level 
     so as to avoid becoming financially overburdened.
       New ERISA section 611 spells out the requirements for 
     notice and procedures related to the voluntary termination of 
     self-insured plans and to the mandatory termination by the 
     Secretary of Labor of such plans in the event of their 
     failure to meet reserve or other requirements.
       Sec. 1402.--Effective Date.
       Section 610 applies to plan years beginning on or after 
     January 1, 1998.
     

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