[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.

____________________