Private Health Insurance Continuation Coverage

SUMMARY ISSUE DEFINITION BACKGROUND AND ANALYSIS Expanding A c c e s s t o P r i v a t e H e a l t h I n s u r a n c e D e b a t e Over H e a l t h I n s u r a n c e C o n t i n u a t i o n L e g i s l a t i v e H i s t o r y o f C o n t i n u e d P r i v a t e H e a l t h I n s u r a n c e Coverage Regulatory Actions New Law What Does T i t l e X of COBRA Do? Tax Reform Act o f 1986 OBRA o f 1986 A c t i o n i n t h e 1 0 0 t h Congress House A c t i o n Senate Action LEG1 SLATION CHRONOLOGY CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS FOR ADD1 TIONAL READING PRIVATE HEALTH INSURANCE CONTINUATION COVERAGE Most Americans w i t h p r i v a t e g r o u p h e a l t h i n s u r a n c e a r e c o v e r e d through a n employer. I n t h e p a s t , t h a t c o v e r a g e was g e n e r a l l y d e p e n d e n t A change i n on b e i n g employed o r b e i n g r e l a t e d t o t h e employed w o r k e r . t h e i n d i v i d u a l ' s work o r f a m i l y s t a t u s o f t e n r e s u l t e d i n t h e l o s s o f t h a t coverage. I n A p r i l 1986, a new law was e n a c t e d which s h o u l d h e l p most i n d i v i d u a l s r e t a i n t h e i r h e a l t h i n s u r a n c e i n t h e e v e n t of a c h a n g e i n t h e i r work o r f a m i l y s t a t u s f o r 18 o r 36 months, d e p e n d i n g on t h e n a t u r e of t h e e v e n t . Under T i t l e X of t h e C o n s o l i d a t e d Omnibus Budget R e c o n c i l i a t i o n Act of 1 9 8 5 (COBRA, P.L. 99-2721, and s u b s e q u e n t amendments, a n e m p l o y e r w i t h 20 o r more employees i s r e q u i r e d t o p r o v i d e h i s o r h e r e m p l o y e e s and t h e i r f a m i l i e s t h e o p t i o n of c o n t i n u e d c o v e r a g e under t h e e m p l o y e r ' s group h e a l t h i n s u r a n c e p l a n i n t h e c a s e of c e r t a i n d e s i g n a t e d e v e n t s . The employer i s n o t r e q u i r e d t o pay f o r t h i s c o v e r a g e . Employers who f a i l t o p r o v i d e t h e c o n t i n u e d h e a l t h i n s u r a n c e o p t i o n a r e s u b j e c t t o p e n a l t i e s u n d e r t h e I n t e r n a l Revenue Code, and t h e Employee R e t i r e m e n t Income S e c u r i t y Act (ERISA); S t a t e and l o c a l g o v e r n m e n t s a r e s u b j e c t t o p e n a l t i e s under t h e P u b l i c Health S e r v i c e Act. COBRA was s i g n e d i n t o law on Apr. 7 , 1986. B e f o r e t h e end o f t h e y e a r , T i t l e X was m o d i f i e d t w i c e : The Tax Reform Act of 1986 (P.L. 99-514) i n c l u d e d t e c h n i c a l c o r r e c t i o n s , and t h e Omnibus Budget R e c o n c i l i a t i o n Act of 1986 (P.L. 99-509) p r o v i d e d f o r c o n t i n u a t i o n c o v e r a g e f o r r e t i r e e s i n c a s e s of bankruptcy. The Departments o f Labor and T r e a s u r y h a v e p r o v i d e d p r e l i m i n a r y g u i d a n c e on i m p l e m e n t a t i o n o f t h e T i t l e X p r o v i s i o n s . T i t l e X was e n a c t e d i n r e s p o n s e t o i n c r e a s i n g c o n g r e s s i o n a l c o n c e r n a b o u t t h e l a r g e number of Americans who l a c k h e a l t h i n s u r a n c e . I n 1985, a n e s t i m a t e d 35 m i l l i o n Americans u n d e r a g e 65 were w i t h o u t a n y h e a l t h i n s u r a n c e coverage. Some of t h e s e i n d i v i d u a l s would h a v e r e t a i n e d h e a l t h i n s u r a n c e had t h e y n o t l o s t i t a s a r e s u l t o f a l a y - o f f , o r a s a r e s u l t of t h e d e a t h o f o r d i v o r c e from t h e c o v e r e d worker. C o n g r e s s c o n s i d e r e d and e n a c t e d c o n t i n u a t i o n coverage l e g i s l a t i o n with t h e e x p e c t a t i o n t h a t i t would h e l p expand a c c e s s t o h e a l t h i n s u r a n c e c o v e r a g e f o r a t l e a s t t h e s e i n d i v i d u a l s. The 1 0 0 t h C o n g r e s s i s f a c e d w i t h c o m p e t i n g p r e s s u r e s i n r e s p e c t t o t h e new c o n t i n u e d h e a l t h i n s u r a n c e c o v e r a g e law. Some Members o f C o n g r e s s b e l i e v e t h a t COBRA went t o o f a r i n m a n d a t i n g t h a t e m p l o y e r s p r o v i d e t h e i r e m p l o y e e s and t h e i r employees' f a m i l i e s c o n t i n u e d c o v e r a g e . They a r g u e t h a t T i t l e X h a s r e s u l t e d i n e x t r a c o s t s f o r employers a s w e l l a s added a d m i n i s t r a t i v e burdens. They a l s o a r g u e t h a t t h e p e n a l t i e s f o r v i o l a t i n g T i t l e X a r e too severe. In c o n t r a s t , o t h e r s i n Congress b e l i e v e t h a t COBRA s h o u l d b e expanded t o i n c l u d e new e l i g i b i l i t y c a t e g o r i e s . ISSUE DEFIYITION Most Americans w i t h p r i v a t e g r o u p h e a l t h i n s u r a n c e a r e c o v e r e d through a n employer. I n t h e p a s t , t h a t c o v e r a g e was g e n e r a l l y d e p e n d e n t A change i n on b e i n g employed o r b e i n g r e l a t e d t o t h e employed worker. t h e i n d i v i d u a l ' s work o r f a m i l y s t a t u s o f t e n r e s u l t e d i n t h e Loss of coverage. I n A p r i l 1986, a new law was e n a c t e d which s h o u l d h e l p most i n d i v i d u a l s r e t a i n t h e i r h e a l t h i n s u r a n c e i n t h e e v e n t of a c h a n g e i n t h e i r work o r f a m i l y s t a t u s . Under T i t l e X o f t h e C o n s o l i d a t e d Omnibus Budget R e c o n c i l i a t i o n Act o f 1985 (COBRA, P.L. 99-2721, and s u b s e q u e n t amendments, a n employer w i t h 20 o r more employees i s r e q u i r e d t o p r o v i d e h i s o r h e r employees and t h e i r f a m i l i e s t h e o p t i o n of c o n t i n u e d c o v e r a g e under t h e employer's group h e a l t h insurance p l a n i n t h e c a s e of c e r t a i n designated events. The employer i s n o t r e q u i r e d t o pay f o r t h i s c o v e r a g e . The 1 0 0 t h Congress i s f a c e d w i t h competing p r e s s u r e s i n r e s p e c t t o Some i n C o n g r e s s b e l i e v e t h a t COBRA went t o o T i t l e X and i t s amendments. f a r i n m a n d a t i n g t h a t e m p l o y e r s p r o v i d e t h e i r employees and t h e i r employees' f a m i l i e s continued coverage. They a r g u e t h a t T i t l e X h a s r e s u l t e d i n new c o s t s f o r e m p l o y e r s a s w e l l a s a d d i t i o n a l a d m i n i s t r a t i v e b u r d e n s ; l e g i s l a t i o n h a s been i n t r o d u c e d t o p a r e b a c k e l i g i b i l i t y f o r L e g i s l a t i o n h a s a l s o been i n t r o d u c e d t o modify t h e s a n c t i o n s f o r T i t l e X. v i o l a t i n g T i t l e X. I n c o n t r a s t , some Members b e l i e v e t h a t COBRA s h o u l d be expanded t o b r i n g a d d i t i o n a l i n d i v i d u a l s u n d e r t h e c o n t i n u a t i o n of coverage o p t i o n . I n a n y e v e n t , Members of C o n g r e s s have r e c e i v e d , and a r e l i k e l y t o c o n t i n u e t o r e c e i v e , numerous i n q u i r i e s from t h e p u b l i c a b o u t t h e T i t l e X p r o v i s i o n s , b e c a u s e t h e law d i d n o t e l a b o r a t e on many o f t h e d e t a i l s r e l a t i n g t o e l i g i b i l i t y and e n f o r c e m e n t . I n a d d i t i o n , many e m p l o y e r s were n o t aware o f t h e enactment o f t h e c o n t i n u a t i o n o f c o v e r a g e requirement. Ekpanding Access t o P r i v a t e H e a l t h I n s u r a n c e T i t l e X of COBRA i s one of a number o f r e c e n t laws m a n d a t i n g t h a t p r i v a t e e m p l o y e r s who o f f e r h e a l t h i n s u r a n c e conform t o c e r t a i n F e d e r a l requirements. ( S e e CRS I s s u e B r i e f 87168, Mandated Employer P r o v i d e d Health Insurance.) One of t h e f a c t o r s l e a d i n g t o new F e d e r a l b e n e f i t r e q u i r e m e n t s on e m p l o y e r s i s t h e c o n c e r n o f C o n g r e s s a b o u t t h e l a r g e number of m e d i c a l l y u n i n s u r e d Americans. While most Americans u n d e r a g e 65 o b t a i n p r i v a t e h e a l t h i n s u r a n c e c o v e r a g e t h r o u g h t h e w o r k p l a c e , i n 1986 t h e r e w e r e a n e s t i m a t e d 25 t o 37 m i l l i o n Americans under a g e 65 who were w i t h o u t any h e a l t h i n s u r a n c e coverage. Surveys i n d i c a t e d t h a t a s u b s t a n t i a l number o f t h e u n i n s u r e d l o s t c o v e r a g e a s a r e s u l t o f t h e t e r m i n a t i o n of employment o r a change i n f a m i l y s t a t u s . For e x a m p l e , many w o r k e r s and t h e i r f a m i l i e s l o s t a c c e s s t o a n e m p l o y e r ' s h e a l t h i n s u r a n c e p l a n when t h e w o r k e r s were l a i d o f f . Coverage f o r t h e f a m i l y was a l s o l o s t i f t h e worker d i e d . Congress c o n s i d e r e d and e n a c t e d c o n t i n u a t i o n c o v e r a g e l e g i s l a t i o n w i t h t h e e x p e c t a t i o n t h a t i t would h e l p expand a c c e s s t o coverage f o r a t l e a s t these individuals. C o n t i n u a t i o n c o v e r a g e was n o t , however, e x p e c t e d t o l e a d t o c o v e r a g e o f t h e v a s t m a j o r i t y of u n i n s u r e d A m e r i c a n s , a g o a l f o r which o t h e r s o l u t i o n s would b e more appropriate. P r i o r t o t h e e n a c t m e n t of T i t l e X of COBRA, i f a n e m p l o y e e ' s j o b was t e r m i n a t e d ( v o l u n t a r i l y o r i n v o l u n t a r i ' l y ) , t h e i n s u r a n c e o f f e r e d by t h e employer a l s o t e r m i n a t e d . While t h e r e were e x c e p t i o n s , p a i d b e n e f i t s u s u a l l y t e r m i n a t e d w i t h i n 30 t o 60 d a y s a f t e r l e a v i n g t h e j o b . Continued c o v e r a g e , where t h e employee would h a v e t h e o p t i o n t o buy i n t o t h e e m p l o y e r ' s g r o u p p l a n , might be o f l o n g e r d u r a t i o n , b u t t h e r e was no c e r t a i n t y t h a t a n e m p l o y e r would p r o v i d e s u c h a n o p t i o n . In addition, in 1 9 8 5 , 10 S t a t e s mandated t h a t i n s u r a n c e p o l i c i e s s o l d i n t h e i r S t a t e s had t o i n c l u d e a c o n t i n u a t i o n of c o v e r a g e o p t i o n f o r l a i d - o f f w o r k e r s . However, s e l f - i n s u r e d e m p l o y e r s ( e m p l o y e r s which assume t h e r i s k o f t h e h e a l t h c a r e c o s t s of t h e i r employees r a t h e r t h a n p a s s i n g t h e r i s k o n t o i n s u r e r s ) were n o t r e g u l a t e d by t h e s e S t a t e - m a n d a t e d b e n e f i t l a w s , t h u s l e a v i n g a l a r g e p o r t i o n of t h e w o r k f o r c e u n a f f e c t e d by t h e m a n d a t e s . S e l f - i n s u r e d p l a n s a r e c o n s i d e r e d employee w e l f a r e b e n e f i t p l a n s and a r e r e g u l a t e d by t h e F e d e r a l Government u n d e r t h e Employee R e t i r e m e n t Income S e c u r i t y Act (ERISA). According t o r e s e a r c h e r s from t h e National C e n t e r f o r H e a l t h S e r v i c e s R e s e a r c h , 13% o r 1.4 m i l l i o n unemployed w o r k e r s l o s t h e a l t h i n s u r a n c e i n 1982 a s a d i r e c t r e s u l t of unemployment. These i n d i v i d u a l s had p r i v a t e h e a l t h i n s u r a n c e p r i o r t o t h e d a t e o f unemployment a n d were w i t h o u t s u c h c o v e r a g e f o r s e v e r a l months a f t e r t h e t e r m i n a t i o n of employment. A l s o , p r i o r t o COBRA, employer p r a c t i c e s v a r i e d g r e a t l y a s t o w h e t h e r a n y c o n t i n u a t i o n of c o v e r a g e would be a v a i l a b l e i n t h e e v e n t of a change i n f a m i l y s t a t u s . For example, d a t a from t h e Bureau o f Labor S t a t i s t i c s f o r 1985 i n d i c a t e t h a t a m a j o r i t y o f medium and l a r g e s i z e d f i r m s o f f e r e d some c o n t i n u e d c o v e r a g e t o t h e f a m i l i e s of d e c e a s e d w o r k e r s . T h a t c o v e r a g e r a n g e d , however, from l e s s t h a n 30 d a y s t o i n d e f i n i t e c o v e r a g e , sometimes l a s t i n g u n t i l t h e widow became e l i g i b l e f o r M e d i c a r e . About 12% o f t h e f i r m s f o r which t h e r e were d a t a r e p o r t e d n o c o n t i n u a t i o n coverage. Women w e r e e s p e c i a l l y l i k e l y t o h a v e been a f f e c t e d by a c h a n g e i n f a m i l y s t a t u s b e c a u s e , t r a d i t i o n a l l y , t h e i r h e a l t h i n s u r a n c e was d e p e n d e n t on b o t h m a r i t a l and employment s t a t u s . Host m a r r i e d women, w h e t h e r o r n o t i n t h e p a i d l a b o r f o r c e , have p r i v a t e i n s u r a n c e . However, i n 1977 ( t h e l a s t y e a r f o r which d a t a a r e a v a i l a b l e ) , o n l y SOX of a l l widows and 33% of a l l d i v o r c e d women, a g e s 35-64, who d i d n o t have p a i d j o b s had p r i v a t e i n s u r a n c e (1977 N a t i o n a l Medical C a r e E x p e n d i t u r e S u r v e y ) . A l a r g e number o f t h e s e women and t h e i r d e p e n d e n t c h i l d r e n r e l i e d on Medicaid f o r h e a l t h insurance. Of t h o s e women n o t i n t h e p a i d l a b o r f o r c e , more t h a n 40% o f a l l d i v o r c e d women and a b o u t 25% o f a l l widows, a g e s 35 t o 6 4 , d e p e n d e d on M e d i c a i d a s t h e i r o n l y s o u r c e of i n s u r a n c e . Debate o v e r Health I n s u r a n c e C o n t i n u a t i o n The p r i n c i p a l a d v o c a t e s f o r l e g i s l a t i o n t o p r o v i d e f o r f e d e r a l l y mandated c o n t i n u a t i o n c o v e r a g e were women's o r g a n i z a t i o n s , a l t h o u g h t h e y were l a t e r j o i n e d by o t h e r g r o u p s c o n c e r n e d a b o u t t h e m e d i c a l l y u n i n s u r e d . The a r g u m e n t s f o r and a g a i n s t t h e c o n t i n u e d c o v e r a g e l e g i s l a t i o n changed a s t h e v a r i o u s p r o p o s a l s were broadened t o i n c l u d e c o v e r a g e f o r t e r m i n a t e d employees. P r o p o n e n t s of a F e d e r a l h e a l t h i n s u r a n c e c o n t i n u a t i o n law o b s e r v e d t h a t f o r a l a r g e p e r c e n t a g e o f women, a c c e s s t o h e a l t h i n s u r a n c e was t h r o u g h t h e i r h u s b a n d ' s employer-based g r o u p . I t followed t h a t a Federal c o n t i n u a t i o n p r o v i s i o n was n e c e s s a r y t o p r o t e c t women and t h e i r fami l i e s from l o s i n g a c c e s s t o t h i s h e a l t h i n s u r a n c e when t h e husband d i e d , became e l i g i b l e f o r Medicare o r r e t i r e d . I n a d d i t i o n , i t was i m p o r t a n t t o p r o t e c t women from t h e l o s s o f c o v e r a g e t h a t r e s u l t e d from a d i v o r c e o r A t b e s t , t h e l o s s of t h e husband's coverage could legal separation. r e s u l t i n m a j o r i n c r e a s e s i n i n s u r a n c e c o s t s i f t h e woman a t t e m p t e d t o buy A t worst, the coverage through t h e p r i v a t e i n d i v i d u a l insurance market. woman might n o t be a b l e t o o b t a i n a n y p r i v a t e c o v e r a g e a t a l l i f s h e had a preexisting illness. She might t h e n go on t h e Medicaid r o l l s o r r e m a i n uninsured. P r o p o n e n t s of c o n t i n u a t i o n a l s o a s s e r t e d t h a t a F e d e r a l mandate would n o t n e c e s s a r i l y c o s t e m p l o y e r s any money. B e n e f i c i a r i e s c o u l d b e a s k e d by e m p l o y e r s t o pay t h e t o t a l c o s t of t h e premium, and a n y a d m i n i s t r a t i v e costs. I n a d d i t i o n , r e p o r t i n g and o t h e r a d m i n i s t r a t i v e r e q u i r e m e n t s c o u l d b e d e s i g n e d t o e n s u r e t h a t e m p l o y e r s d i d n o t i n c u r m a j o r new b u r d e n s . F i n a l l y , i t was a r g u e d t h a t e m p l o y e r s would u l t i m a t e l y s h a r e i n t h e s a v i n g s t o t h e community t h a t would r e s u l t from reduced s t r e s s on Medicaid and l o w e r l e v e l s of uncompensated c a r e , t h r o u g h Lower t a x e s and l o w e r h e a l t h i n s u r a n c e premiums f o r t h e i r a c t i v e w o r k e r s . Those who s t r o n g l y opposed t h e c o n t i n u a t i o n o f c o v e r a g e l e g i s l a t i o n a r g u e d t h a t i t was n o t a p p r o p r i a t e f o r t h e F e d e r a l Government t o r e g u l a t e employer-sponsored benefits. They p o i n t e d t o d a t a showing t h a t l a r g e numbers of e m p l o y e r s a l r e a d y o f f e r e d c o n t i n u a t i o n o f c o v e r a g e . They a l s o a r g u e d t h a t by f o r c i n g e m p l o y e r s t o o f f e r c o n t i n u a t i o n , t h e F e d e r a l Government would be d i s c o u r a g i n g e m p l o y e r s from p r o v i d i n g h e a l t h b e n e f i t s , and t h a t i n c r e a s i n g numbers o f e m p l o y e r s , e s p e c i a l l y s m a l l e r o n e s , would drop t h e i r health benefits entirely. However, most of t h e g r o u p s who were opposed t o c o n t i n u a t i o n indicated a willingness t o accept the l e g i s l a t i o n i f c e r t a i n modifications were i n c o r p o r a t e d . They u n s u c c e s s f u l l y p r e s s e d f o r a s h o r t e r d u r a t i o n of c o v e r a g e , t h e e l i m i n a t i o n of c o v e r a g e f o r l a i d - o f f employees and t h o s e who v o l u n t a r i l y t e r m i n a t e d t h e i r j o b s , h i g h e r b e n e f i c i a r y premiums t o a l l o w f o r what t h e y a r g u e d would be i n c r e a s e d a d m i n i s t r a t i v e c o s t s , and e n a c t m e n t o f a p r e e m p t i o n of State-mandated b e n e f i t s t o a l l o w u n i f o r m a d m i n i s t r a t i o n of h e a l t h b e n e f i t p l a n s t h a t encompassed employees i n more t h a n one S t a t e . I n p r e s s i n g f o r t h e s e changes, t h e s e groups argued t h a t most p e o p l e who were l a i d o f f would o b t a i n c o v e r a g e t h r o u g h t h e i r s p o u s e ' s e m p l o y e r - p r o v i d e d p l a n . I n a d d i t i o n , t h e y s a i d t h a t a s h o r t e r d u r a t i o n of c o v e r a g e and more n a r r o w d e f i n i t i o n s of q u a l i f i e d b e n e f i c i a r i e s w e r e needed t o p r e v e n t a d v e r s e s e l e c t i o n i n t o t h e i r p l a n s , i n which t h e r e would be a n a b o v e - a v e r a g e p r o b a b i l i t y t h a t i n d i v i d u a l s e n r o l l i n g i n t h e p l a n T h i s argument was most o f t e n used i n e f f o r t s t o would u s e i t s c o v e r a g e . r e d u c e c o v e r a g e f o r widows, d i v o r c e d s p o u s e s and d e p e n d e n t s . The r a t i o n a l e was t h a t t h e s e i n d i v i d u a l s were l i k e l y t o b e h i g h e r u s e r s of CRS- 5 IB87 182 08-26-88 h e a l t h c a r e t h a n , f o r example, a c t i v e workers. The t h e o r y was t h a t women and c h i l d r e n used h e a l t h s e r v i c e s more f r e q u e n t l y t h a n working males. They t h e r e f o r e , woui'd be l i k e l y t o e l e c t t h e c o n t i n u a t i o n of coverage option. The i n s u r e r s would f a c t o r i n t h i s h i g h e r u t i l i z a t i o n i n t h e r a t i n g of t h e employers' premiums, t h e r e b y d r i v i n g up t h e c o s t s of t h e employers' plans. L e g i s l a t i v e H i s t o r y o f Continued P r i v a t e H e a l t h I n s u r a n c e Coverage The p r i n c i p a l h e a l t h i n s u r a n c e c o n t i n u a t i o n p r o p o s a l s were i n c l u d e d i n t h e budget r e c o n c i l i a t i o n b i l l s f o r t h e FY86 budget (H.R. 3128, H.R. 3500, and S. 1730) and, a f t e r a s e t of complex p r o c e d u r a l s t e p s , were The f i n a l i n c o r p o r a t e d i n t h e House and S e n a t e v e r s i o n s of H.R. 3128. v e r s i o n o f T i t l e X of COBRA was t h e product o f c o n f e r e n c e committee n e g o t i a t i o n s among f i v e committees: t h r e e from t h e House ( E d u c a t i o n and Labor, Energy and Conrnerce, and Ways and Means) and two from t h e S e n a t e ( F i n a n c e , and Labor and Human Resources). ( S e e CRS Report 87-613, P r i v a t e H e a l t h I n s u r a n c e C o n t i n u a t i o n Coverage: L e g i s l a t i v e H i s t o r y of T i t l e X of COBRA. ) COBRA was signed i n t o law on Apr. 7 , 1986. Before t h e end o f t h e The Tax Reform Act of 1986 (P.L. y e a r , T i t l e X was modified twice: 99-514) i n c l u d e d t e c h n i c a l c o r r e c t i o n s , and t h e Omnibus Budget 99-509) provided f o r c o n t i n u a t i o n R e c o n c i l i a t i o n Act of 1986 (P.L. c o v e r a g e f o r r e t i r e e s i n c a s e s of bankruptcy. P r o p o s a l s (H.R. 4333, H.R. 4845, H.R. 5080, and S. 2238) a r e moving i n t h e 1 0 0 t h Congress t o change t h e s a n c t i o n s and make a v a r i e t y of t e c h n i c a l m o d i f i c a t i o n s . Regulatory Actions t h e I n t e r n a l Revenue Code, T i t l e X amends t h r e e s t a t u t e s : a d m i n i s t e r e d by t h e I n t e r n a l Revenue S e r v i c e of t h e Department of t h e T r e a s u r y ; ERISA, a d m i n i s t e r e d by t h e Department of Labor; and t h e P u b l i c H e a l t h S e r v i c e A c t , a d m i n i s t e r e d by t h e P u b l i c H e a l t h S e r v i c e o f t h e Department of H e a l t h and Human S e r v i c e s . I n t h i s regard, t h e conference r e p o r t f o r COBRA (H.Rept. 99-453, p. 562) s t a t e s : To a v o i d t h e i s s u a n c e of d u p l i c a t e and perhaps i n c o n s i s t e n t r e g u l a t i o n s , t h e c o n f e r e e s a u t h o r i z e d t h e S e c r e t a r y o f Labor t o promulgate r e g u l a t i o n s implementing t h e d i s c l o s u r e and r e p o r t i n g r e q u i r e m e n t s , and t h e S e c r e t a r y o f t h e T r e a s u r y t o i s s u e r e g u l a t i o n s d e f i n i n g r e q u i r e d c o v e r a g e , d e d u c t i o n s and inclusions. The S e c r e t a r y of H e a l t h and Human S e r v i c e s i s t o i s s u e r e g u l a t i o n s r e g a r d i n g t h e requirement t h a t S t a t e and l o c a l governments provide c o n t i n u a t i o n coverage for qualified beneficiaries. The c o n f e r e e s i n t e n d t h a t any r e g u l a t i o n i s s u e d by t h e S e c r e t a r y w i l l conform ( i n terms of a c t u a l r e q u i r e m e n t s ) w i t h t h o s e r e g u l a t i o n s i s s u e d by t h e S e c r e t a r y of t h e T r e a s u r y and Labor.. .. The c o n f e r e n c e r e p o r t a l s o s a y s t h a t "pending t h e p r o m u l g a t i o n of r e g u l a t i o n s , e m p l o y e r s a r e r e q u i r e d t o o p e r a t e i n good f a i t h c o m p l i a n c e w i t h a r e a s o n a b l e i n t e r p r e t a t i o n of t h e s e s u b s t a n t i v e r u l e s , n o t i c e r e q u i r e m e n t s , e t c . ( p . 5631." On J u n e 2 6 , 1986, t h e Department of Labor i s s u e d a t e c h n i c a l b u l l e t i n t o a s s i s t e m p l o y e r s and g r o u p h e a l t h p l a n s i n i n f o r m i n g w o r k e r s a b o u t t h e The b u l l e t i n a v a i l a b i l i t y o f e x t e n d e d h e a l t h c a r e c o v e r a g e u n d e r T i t l e X. c o n t a i n s a model n o t i c e s u m n a r i z i n g t h e r i g h t s and o b l i g a t i o n s o f e m p l o y e e s and t h e i r f a m i l i e s u n d e r T i t l e X. Employers may u s e t h i s model n o t i c e t o s a t i s f y t h e g e n e r a l n o t i f i c a t i o n r e q u i r e m e n t s of t h e law. On J u n e 1 5 , 1987, t h e I n t e r n a l Revenue S e r v i c e i s s u e d p r o p o s e d r e g u l a t i o n s r e l a t i n g t o T i t l e X and t h e r e l e v a n t p r o v i s i o n s i n t h e Tax Reform Act of 1986, which " c l a r i f y which p l a n s must o f f e r COBRA c o n t i n u a t i o n c o v e r a g e and t h e t a x c o n s e q u e n c e s of f a i l i n g t o d o s o . They a l s o p r o v i d e g u i d a n c e on a v a r i e t y of d e t a i l s , i n c l u d i n g t h e s c o p e of t h e c o n t i n u a t i o n coverage, who i s a q u a l i f i e d b e n e f i c i a r y , what i s a q u a l i f y i n g e v e n t , how e l e c t i o n s [ o f c o n t i n u e d c o v e r a g e ] a r e made, and when payment must be made." The I n t e r n a l Revenue S e r v i c e h a s n o t y e t i s s u e d p r o p o s e d r u l e s r e g a r d i n g c o m p u t a t i o n o f t h e a p p l i c a b l e premium t o be c h a r g e d f o r t h e c o n t i n u a t i o n c o v e r a g e , something t h a t i s e s p e c i a l l y r e l e v a n t t o t h e c a l c u l a t i o n of premiums f o r s e l f - i n s u r e d p l a n s . In a d d i t i o n , t h e proposed r e g u l a t i o n s do n o t c o v e r t h e amendments made by OBRA o f 1986 r e l a t i n g t o c e r t a i n b a n k r u p t c i e s a s q u a l i f y i n g e v e n t s . I n c o m p l i a n c e w i t h t h e l a n g u a g e of t h e c o n f e r e n c e r e p o r t on COBRA, t h e P u b l i c Health S e r v i c e does not plan t o i s s u e r e g u l a t i o n s u n t i l f i n a l r e g u l a t i o n s h a v e been promulgated by t h e Departments o f T r e a s u r y and Labor. The Department o f Labor i s c u r r e n t l y c o n s i d e r i n g w h e t h e r r e g u l a t i o n s a r e n e c e s s a r y r e g a r d i n g T i t l e X's d i s c l o s u r e and r e p o r t i n g requirements. What Does T i t l e X of COBRA Do? COBRA r e q u i r e s e m p l o y e r s w i t h 20 o r more employees t h a t o f f e r a g r o u p h e a l t h i n s u r a n c e p l a n t o o f f e r q u a l i f i e d employees and t h e i r f a m i l i e s t h e o p t i o n of c o n t i n u e d h e a l t h i n s u r a n c e a t g r o u p r a t e s when f a c e d w i t h l o s s of t h e i r c o v e r a g e b e c a u s e of c e r t a i n e v e n t s . Self-insured firms (ones which assume t h e r i s k of p a y i n g f o r t h e i r employees' h e a l t h c a r e c o s t s r a t h e r t h a n p a s s i n g t h a t r i s k onto i n s u r e r s ) a r e a l s o covered under T i t l e X. An employer i s c o n s i d e r e d a s h a v i n g n o r m a l l y employed 20 o r more employees d u r i n g a p a r t i c u l a r y e a r i f i t had 20 employees on a t l e a s t 50% of i t s w o r k i n g d a y s d u r i n g t h a t y e a r . An employer must comply w i t h COBRA e v e n i f he d o e s n o t c o n t r i b u t e t o t h e h e a l t h p l a n ; he need o n l y m a i n t a i n s u c h a p l a n t o come u n d e r t h e statute. Church p l a n s , t h e F e d e r a l Government, t h e government o f t h e D i s t r i c t o f Columbia, and t e r r i t o r i e s and p o s s e s s i o n s of t h e U n i t e d S t a t e s a r e e x c l u d e d from t h e COBRA c o n t i n u a t i o n r e q u i r e m e n t . CRS- 7 The e v e n t s t h a t t r i g g e r COBRA c o n t i n u a t i o n of coverage a r e d e f i n e d t o i n c l u d e : ( 1 ) t e r m i n a t i o n o r r e d u c t i o n i n h o u r s of employment ( f o r r e a s o n s o t h e r t h a n g r o s s m i s c o n d u c t ) , ( 2 ) t h e d e a t h of t h e employee, ( 3 ) d i v o r c e o r l e g a l s e p a r a t i o n from t h e employee, ( 4 ) t h e employee becomes e l i g i b l e f o r Medicare, and ( 5 ) t h e end o f a c h i l d ' s dependency under a p a r e n t ' s h e a l t h i n s u r a n c e p o l i c y . An e v e n t w i l l t r i g g e r c o n t i n u a t i o n i f , under t h e t e r m s of t h e e m p l o y e r ' s group h e a l t h p l a n , t h e e v e n t c a u s e s t h e employee, o r t h e s p o u s e , o r a dependent c h i l d o f t h e employee, t o l o s e c o v e r a g e under t h e p l a n . The l o s s of c o v e r a g e need n o t o c c u r i m n e d i a t e l y a f t e r t h e e v e n t , s o l o n g a s t h e l o s s of coverage w i l l o c c u r b e f o r e t h e end o f t h e maximum c o v e r a g e p e r i o d . T i t l e X has very s p e c i f i c e f f e c t i v e d a t e s ( s e e An e v e n t t h a t o c c u r r e d p r i o r t o t h e e f f e c t i v e d a t e w i l l n o t be below). c o n s i d e r e d a q u a l i f y i n g e v e n t f o r c o n t i n u a t i o n of coverage p u r p o s e s . When a c o v e r e d employee e x p e r i e n c e s t e r m i n a t i o n o r r e d u c t i o n i n h o u r s of employment, t h e n t h e c o n t i n u e d coverage of t h e employee and any q u a l i f i e d b e n e f i c i a r i e s must c o n t i n u e f o r 18 months. For a l l t h e o t h e r q u a l i f y i n g e v e n t s , t h e c o v e r a g e f o r t h e q u a l i f i e d b e n e f i c i a r i e s must be c o n t i n u e d f o r 3 years. The I n t e r n a l Revenue S e r v i c e ' s proposed r e g u l a t i o n s f o r T i t l e X p r o v i d e g u i d a n c e on who i s e l i g i b l e f o r COBRA c o n t i n u a t i o n c o v e r a g e and what c o n s t i t u t e s a q u a l i f y i n g e v e n t . For example, v o l u n t a r y t e r m i n a t i o n of employment i s a q u a l i f y i n g e v e n t . With t h e e x c e p t i o n of g r o s s m i s c o n d u c t , i t d o e s n o t m a t t e r whether t h e employee v o l u n t a r i l y q u i t , r e t i r e d , o r was d i s c h a r g e d . A s t r i k e o r r e d u c t i o n of work h o u r s a l s o a r e q u a l i f y i n g e v e n t s i f t h e y r e s u l t i n t h e l o s s of coverage. Newborn c h i l d r e n , a d o p t e d c h i l d r e n and spouses who j o i n t h e f a m i l y o f a q u a l i f i e d b e n e f i c i a r y a f t e r t h e day b e f o r e a q u a l i f y i n g e v e n t a r e n o t i n c l u d e d a s b e n e f i c i a r i e s f o r COBRA c o n t i n u a t i o n purposes. The c o n t i n u a t i o n coverage must be i d e n t i c a l t o t h a t provided t o s i m i l a r l y s i t u a t e d b e n e f i c i a r i e s who d i d not l o s e c o v e r a g e , and i t must g e n e r a l l y be t h e same a s t h e group h e a l t h p l a n coverage enjoyed by t h e q u a l i f i e d b e n e f i c i a r y imnediately before t h e qualifying event. The term It s i m i l a r l y s i t u a t e d " i s i n t e n d e d t o e n s u r e t h a t b e n e f i c i a r i e s who e l e c t , f o r example, c o n t i n u e d coverage under t h e employer's f a m i l y o p t i o n ( a s opposed t o t h e s e l f - o n l y o p t i o n ) r e c e i v e t h e i d e n t i c a l c o v e r a g e a s a c t i v e workers who e l e c t t h e f a m i l y o p t i o n . The e m p l o y e r ' s h e a l t h p l a n may r e q u i r e t h e employee o r b e n e f i c i a r y t o pay t h e premium f o r t h e c o n t i n u a t i o n c o v e r a g e , but t h e premium may n o t exceed 102X of t h e o t h e r w i s e a p p l i c a b l e premium f o r t h a t p e r i o d . The p l a n must a l l o w a q u a l i f i e d b e n e f i c i a r y t o pay f o r t h e c o v e r a g e i n monthly i n s t a l l m e n t s , a l t h o u g h a l t e r n a t i v e i n t e r v a l s may a l s o be o f f e r e d . T i t l e X s p e l l s o u t s p e c i f i c r u l e s f o r n o t i c e and e l e c t i o n of c o n t i n u a t i o n coverage. Once an employer's h e a l t h i n s u r a n c e p l a n becomes s u b j e c t t o t h e T i t l e X provisions, t h e plan i s r e q u i r e d t o n o t i f y i n w r i t i n g e a c h covered employee and h i s o r h e r spouse o f t h e i r r i g h t s t o c o n t i n u e d c o v e r a g e . The p l a n i s a l s o r e q u i r e d t o g i v e such n o t i c e when an A person q u a l i f i e d employee b e g i n s t o be covered under t h e h e a l t h p l a n . t o e l e c t c o n t i n u a t i o n coverage must do s o w i t h i n 60 days o f t h e d a t e a f t e r which c o v e r a g e under t h e group p l a n would o t h e r w i s e t e r m i n a t e , o r t h e d a t e t h a t t h e b e n e f i c i a r y i s s e n t n o t i c e of h i s o r h e r r i g h t t o e l e c t COBRA. I n g e n e r a l , t h e employer o r p l a n a d m i n i s t r a t o r i s r e s p o n s i b l e f o r d e t e r m i n i n g when a q u a l i f y i n g e v e n t h a s o c c u r r e d and n o t i f y i n g t h e eligible beneficiaries. However, e a c h c o v e r e d employee o r q u a l i f i e d b e n e f i c i a r y i s r e s p o n s i b l e f o r n o t i f y i n g t h e employer o r o t h e r p l a n a d m i n i s t r a t o r when t h e e v e n t i s a d e p e n d e n t c h i l d c e a s i n g t o be a d e p e n d e n t c h i l d of t h e c o v e r e d employee o r a d i v o r c e o r l e g a l s e p a r a t i o n of a c o v e r e d employee. The d u r a t i o n of COBRA c o n t i n u a t i o n c o v e r a g e i s f o r a t l e a s t t h e p e r i o d b e g i n n i n g on t h e d a t e o f t h e q u a l i f y i n g e v e n t and e n d i n g n o t b e f o r e t h e e a r l i e r of t h e f o l l o w i n g d a t e s : ( a ) t h e l a s t d a y o f t h e maximum c o v e r a g e p e r i o d ( f o r example, 18 months f o r a c o v e r e d w o r k e r who h a s t e r m i n a t e d employment), ( b ) t h e f i r s t day f o r which t i m e l y payment of t h e premium i s n o t made t o t h e p l a n w i t h r e s p e c t t o t h e q u a l i f i e d b e n e f i c i a r y , ( c ) t h e d a t e on which t h e employer c e a s e s t o m a i n t a i n a n y g r o u p h e a l t h p l a n , ( d ) t h e f i r s t d a t e a f t e r t h e d a t e of t h e e l e c t i o n on which t h e q u a l i f i e d b e n e f i c i a r y e l e c t s c o v e r a g e ( t h a t i s , i s a c t u a l l y c o v e r e d and n o t j u s t e l i g i b l e t o b e c o v e r e d ) under a n y g r o u p h e a l t h p l a n t h a t i s n o t m a i n t a i n e d by t h e employer, and ( e l t h e d a t e t h e q u a l i f i e d b e n e f i c i a r y i s e n t i t l e d t o Medicare b e n e f i t s . COBRA a l s o r e q u i r e s t h a t , i n some c a s e s , t h e e m p l o y e r ' s g r o u p h e a l t h p l a n o f f e r q u a l i f i e d b e n e f i c i a r i e s t h e o p t i o n of c o n v e r t i n g t o a n i n d i v i d u a l p o l i c y a t t h e end of t h e COBRA c o n t i n u a t i o n p e r i o d . This is o n l y t r u e f o r t h o s e p l a n s which p r o v i d e a c o n v e r s i o n o p t i o n t o s i m i l a r l y s i t u a t e d a c t i v e employees. C o n v e r s i o n e n a b l e s a n i n d i v i d u a l t o buy h e a l t h i n s u r a n c e from t h e e m p l o y e r ' s p l a n w i t h o u t b e i n g s u b j e c t t o m e d i c a l screening. While t h e premiums f o r an i n d i v i d u a l p o l i c y a r e h i g h e r t h a n f o r t h e g r o u p p o l i c y , t h e c o n v e r s i o n o p t i o n may be a t t r a c t i v e t o a p e r s o n who would o t h e r w i s e have d i f f i c u l t y o b t a i n i n g h e a l t h i n s u r a n c e b e c a u s e he o r s h e has a major i l l n e s s o r d i s a b i l i t y . Employers who f a i l t o p r o v i d e c o n t i n u e d h e a l t h c o v e r a g e c o u l d l o s e t h e i r t a x d e d u c t i b i l i t y f o r employer c o n t r i b u t i o n s t o t h e i r e m p l o y e e s ' h e a l t h i n s u r a n c e , and b e s u b j e c t t o p e n a l t i e s . S p e c i f i c a l l y , i f a group h e a l t h p l a n s u b j e c t t o COBRA f a i l s t o comply w i t h t h e l a w , t h e IRS c a n d i s a l l o w deduct i o n s f o r c o n t r i b u t i o n s o r o t h e r expenses paid o r i n c u r r e d i n c o n n e c t i o n w i t h a n y g r o u p h e a l t h p l a n t h a t t h e employer m a i n t a i n s . In a d d i t i o n , t h e income e x c l u s i o n u n d e r s e c t i o n 1 0 6 ( a ) of t h e I n t e r n a l Revenue Code i s d e n i e d t o c e r t a i n h i g h l y compensated employees o f t h a t employer. ( T h i s means t h a t f o r p l a n s o u t of c o m p l i a n c e , t h e IRS c a n deny t o h i g h l y compensated employees t h e e x c l u s i o n from t a x a b l e g r o s s income payments made by t h e employer f o r h e a l t h i n s u r a n c e c o v e r a g e . ) For group h e a l t h p l a n s c o v e r e d u n d e r ERISA, t h e g e n e r a l e n f o r c e m e n t p r o v i s i o n s of ERISA a p p l y : e m p l o y e r s and p l a n a d m i n i s t r a t o r s a r e s u b j e c t t o c i v i l a n d / o r c r i m i n a l l e g a l a c t i o n ( d e p e n d i n g on t h e a l l e g e d v i o l a t i o n ) , and c i v i l p e n a l t i e s o f up t o $100 p e r day would a p p l y f o r f a i l u r e t o p r o v i d e d t h e required notification. I n a d d i t i o n t o t h e new r e q u i r e m e n t s imposed on p r i v a t e s e c t o r employees, T i t l e X a l s o imposes s i m i l a r r e q u i r e m e n t s on g r o u p h e a l t h p l a n s m a i n t a i n e d by a n y S t a t e o r p o l i t i c a l s u b d i v i s i o n t h a t r e c e i v e s f u n d s u n d e r t h e P u b l i c H e a l t h S e r v i c e Act. T i t l e X became e f f e c t i v e f o r h e a l t h p l a n y e a r s b e g i n n i n g on o r a f t e r J u l y 1, 1986 ( g e n e r a l l y , h e a l t h i n s u r a n c e c o v e r a g e i s on a y e a r l y b a s i s and may s t a r t a t any p o i n t d u r i n g t h e c a l e n d a r y e a r ) . I n t h e c a s e of p l a n s e s t a b l i s h e d under c o l l e c t i v e b a r g a i n i n g agreements r a t i f i e d b e f o r e The c o n t i n u a t i o n p r o v i s i o n s COBRA was e n a c t e d , t h e r e i s a s p e c i a l r u l e . do n o t a p p l y t o p l a n y e a r s beginning b e f o r e t h e d a t e on which t h e agreement t e r m i n a t e s , o r b e f o r e Jan. 1, 1987, whichever i s l a t e r . The IRS h a s provided t h e f o l l o w i n g example t o h e l p c l a r i f y . Assume t h a t t h e p l a n y e a r of a c o l l e c t i v e l y b a r g a i n e d group h e a l t h p l a n i s t h e c a l e n d a r y e a r and t h a t , a s of Apr. 7 , 1986, t h e p l a n i s m a i n t a i n e d p u r s u a n t t o t h r e e c o l l e c t i v e b a r g a i n i n g agreements having e x p i r a t i o n d a t e s i n October 1987, F e b r u a r y 1988 and J u l y 1988. The p l a n must o f f e r h e a l t h i n s u r a n c e c o n t i n u a t i o n b e g i n n i n g on Jan. 1 , 1989. But t h e p l a n must b e g i n t o comply by J a n . 1, 1987, w i t h r e s p e c t t o a c o l l e c t i v e b a r g a i n i n g u n i t t h a t was n o t , a s of Apr. 7 , 1986, covered by one of t h o s e t h r e e agreements. Tax R e f o w Act o f 1986 I n t h e Tax Reform Act of 1986 (P.L. 99-514), Congress i n c l u d e d a number o f t e c h n i c a l c o r r e c t i o n s t o T i t l e X of COBRA. Some of t h e p r o v i s i o n s were c l a r i f i c a t i o n s and some imposed new p a r a m e t e r s on t h e n a t u r e of t h e c o n t i n u e d h e a l t h i n s u r a n c e b e n e f i t . Specifically, the p r o v i s i o n s (1) e s t a b l i s h a 60-day n o t i f i c a t i o n p e r i o d f o r c e r t a i n p o t e n t i a l b e n e f i c i a r i e s of c o n t i n u a t i o n i e g . , d i v o r c e d and l e g a l l y s e p a r a t e d s p o u s e s of covered employees), ( 2 ) s p e c i f y t h e maximum d u r a t i o n of c o n t i n u e d h e a l t h c o v e r a g e when t h e r e i s more t h a n one q u a l i f y i n g e v e n t ( i n no e v e n t may t h e coverage p e r i o d exceed 36 months), ( 3 ) c l a r i f y t h a t e a c h q u a l i f i e d b e n e f i c i a r y i s e n t i t l e d t o a s e p a r a t e e l e c t i o n of c o n t i n u a t i o n coverage, ( 4 ) s p e c i f y t h e l e n g t h of t h e grace period f o r non-payment of premiums, ( 5 ) c l a r i f y t h a t t h e c o n t i n u e d h e a l t h b e n e f i t s a r e t o be t r e a t e d i n t h e same manner a s b e n e f i t s f o r s i m i l a r l y s i t u a t e d b e n e f i c i a r i e s under t h e p l a n , ( 6 ) d e f i n e h e a l t h b e n e f i t s t o mean h e a l t h b e n e f i t p l a n s , i n c l u d i n g d e n t a l and v i s i o n c a r e , and ( 7 ) e x c l u d e a n o n - r e s i d e n t a l i e n w i t h no e a r n e d income from s o u r c e s w i t h i n t h e United S t a t e s from t h e d e f i n i t i o n of " q u a l i f i e d b e n e f i c i a r y . " The e f f e c t i v e d a t e f o r t h e s e p r o v i s i o n s i s t h e same a s f o r T i t l e X of COBRA. OBRA o f 1986 I n 1986, Congress c o n s i d e r e d an expansion of COBRA t o r e q u i r e t h a t employers p r o v i d e c o n t i n u e d h e a l t h c o v e r a g e t o l a i d - o f f workers f o r 4 months, d u r i n g which time t h e employer would c o n t i n u e t o pay whatever p o r t i o n o f t h e h e a l t h i n s u r a n c e premium h e o r s h e was p a y i n g b e f o r e t h e 4742 ( S t a r k ) , 5. 2402 (Kennedy), and S. 2403 l a y o f f ( S e e H.. ( D u r e n b e r g e r ) ) . While t h i s p r o v i s i o n d i d n o t p a s s , Congress d i d e n a c t a s a p a r t of t h e OBRA of 1986 (P.L. 99-509) a n e x p a n s i o n o f T i t l e X t o r e q u i r e c o n t i n u a t i o n coverage f o r r e t i r e e s i n c a s e s where t h e employer f i l e s f o r bankruptcy. T h i s p r o v i s i o n was m o t i v a t e d l a r g e l y by t h e b a n k r u p t c y f i l i n g o f LTV C o r p o r a t i o n , one of t h e N a t i o n ' s m j o r s t e e l m a n u f a c t u r e r s . LTV had 78,000 r e t i r e e s who were r e c e i v i n g h e a l t h b e n e f i t s under t h e company's p l a n , and who were t h r e a t e n e d w i t h t h e t e r m i n a t i o n of b e n e f i t s a s a r e s u l t of t h e bankruptcy a c t i o n . S p e c i f i c a l l y , OBRA a d d s a new q u a l i f y i n g e v e n t which c o n s i s t s of a p r o c e e d i n g i n a c a s e u n d e r t h e b a n k r u p t c y p r o v i s i o n s of T i t l e X I o f t h e U n i t e d S t a t e s Code, c o m e n c i n g on o r a f t e r J u l y 1, 1986. I n s u c h c a s e s , a l o s s o f a r e t i r e e ' s c o v e r a g e means a s u b s t a n t i a l e l i m i n a t i o n of t h e b e n e f i c i a r y ' s c o v e r a g e w i t h i n one y e a r b e f o r e o r a f t e r t h e d a t e t h e b a n k r u p t c y p r o c e e d i n g s commenced. The c o n t i n u e d c o v e r a g e e x t e n d s u n t i l t h e death of the r e t i r e e . For t h e s u r v i v i n g spouse o r t h e dependent c h i l d r e n of t h e c o v e r e d employee, t h e c o v e r a g e i s l i m i t e d t o 36 months. T h e s e amendments a p p l y i n a n y p l a n y e a r s e n d i n g d u r i n g t h e 12-month p e r i o d b e g i n n i n g J u l y 1, 1986, b u t o n l y w i t h r e s p e c t t o T i t l e II b a n k r u p t c y q u a l i f y i n g e v e n t s o r t h e d e a t h o f a c o v e r e d employee a f t e r t h e d a t e of bankruptcy. ( S e e CRS R e p o r t 87-196 A.) Action i n the 100th Congress C o n g r e s s i s c u r r e n t l y c o n s i d e r i n g s e v e r a l c h a n g e s t o T i t l e X of COBRA. Because House j u r i s d i c t i o n o v e r T i t l e X i s s h a r e d by t h r e e c o r n i t t e e s ( E d u c a t i o n and Labor, Ways and Heans, and Energy and C o r n e r c e ) , p r o p o s e d c h a n g e s on which a c t i o n i s a n t i c i p a t e d a r e found i n b i l l s t h r e e d i f f e r e n t b i l l s (H.R. 4333, H.R. 4845, and B.R. 5080). The s e n a t e ' s p r o p o s e d c h a n g e s a r e c o n t a i n e d i n S. 2238. House A c t i o n On J u l y 26, 1988, t h e House Ways and Means Committee r e p o r t e d H.R. 4333, t h e " ~ i s c e l l a n e o u s Revenue Act o f 1988" (H.Rept. 100-795). I t was p a s s e d by t h e House on August 4 (380-25). H.R. 4333 would r e p l a c e t h e c u r r e n t s a n c t i o n s u n d e r t h e I n t e r n a l Revenue Code f o r e m p l o y e r s t h a t v i o l a t e T i t l e X w i t h an e x c i s e t a x o f $100 p e r day d u r i n g t h e p e r i o d of noncompliance. The t a x would a p p l y s e p a r a t e l y w i t h r e s p e c t t o e a c h q u a l i f i e d b e n e f i c i a r y f o r whom t h e r e was a f a i l u r e t o s a t i s f y t h e h e a l t h care continuation rules. H.R. 4333 would l i m i t t h e l i a b i l i t y f o r e m p l o y e r s t o a s p e c i f i e d maximum, and would a l s o p r o v i d e t h a t i n s p e c i f i e d c a s e s , p e r s o n s o t h e r t h a n t h e employer ( s u c h a s t h e p l a n a d m i n i s t r a t o r ) would be l i a b l e f o r t h e e x c i s e t a x . On J u l y 2 7 , t h e House Ways and Heans C o r n i t t e e r e p o r t e d H.R. 4845, t h e " P e n s i o n R e l a t e d T e c h n i c a l C o r r e c t i o n s " b i l l (H.Rept. 100-801, P a r t H.R. 4845 i n c l u d e s c h a n g e s t o T i t l e X that amend t h e I n t e r n a l Revenue I). Code and ERISA. I t does n o t i n c l u d e changes t o t h e s a n c t i o n s f o r n o n c o m p l i a n c e ( s e e H.R. 4333). H.R. 4845 would ( 1 ) a l l o w p e r s o n s t o k e e p t h e i r c o n t i n u e d c o v e r a g e f o r 18 o r 36 months r e g a r d l e s s o f w h e t h e r t h e y became newly c o v e r e d u n d e r a n e m p l o y e r ' s g r o u p h e a l t h p l a n ( t h i s p r o v i s i o n i s intended t o allow c o n t i n u a t i o n coverage t o f i l l gaps c r e a t e d by p r e e x i s t i n g c o n d i t i o n c o v e r a g e e x c l u s i o n s i n t h e new e m p l o y e r ' s p o l i c y ) ; ( 2 ) modify t h e d e f i n i t i o n of employer ( f o r p u r p o s e s of T i t l e X o n l y ) t o i n c l u d e persons r e c e i v i n g o r performing s e r v i c e s o t h e r than i n an employer-employee r e l a t i o n s h i p ; ( 3 ) c l a r i f y that a p l a n m y n o t r e q u i r e t h e payment of a n y premium u n t i l 45 d a y s a f t e r t h e d a y on which t h e q u a l i f i e d b e n e f i c i a r y made t h e e l e c t i o n f o r c o n t i n u a t i o n c o v e r a g e ; and ( 4 ) p r o v i d e t h a t t h e maximum p e r i o d o f c o n t i n u a t i o n c o v e r a g e a v a i l a b l e t o a p e r s o n a s a r e s u l t o f a r e d u c t i o n o f h o u r s f o l l o w e d by j o b t e r m i n a t i o n i s 1 8 months. On August 1 0 , t h e Education and Labor Comnittee o r d e r e d r e p o r t e d i t s v e r s i o n of H.R. 4845. The b i l l would modify t h e c u r r e n t s a n c t i o n s t o p r o v i d e f o r a c i v i l p e n a l t y of $100 p e r day f o r noncompliance under T i t l e I o f ERISA, and would a u t h o r i z e t h e S e c r e t a r y of Labor t o s u e any p e r s o n L i a b l e under t h e new c i v i l p e n a l t y s e c t i o n t o c o l l e c t t h e p e n a l t y . A d d i t i o n a l p r o v i s i o n s r e l a t i n g t o s a n c t i o n s a r e s i m i l a r t o t h e Ways and Means v e r s i o n of H.R. 4845. Also s i m i l a r a r e p r o v i s i o n s r e l a t i n g t o t h e d e f i n i t i o n o f a n employer, and t h e 45 day a l l o w a n c e f o r payment. In a d d i t i o n , t h e E d u c a t i o n and Labor c o r n n i t t e e ' s b i l l would p r o v i d e s p e c i a l n o t i c e r u l e s f o r multiemployer p l a n s , and r e q u i r e t h e CAO t o conduct a s t u d y ( d u e t o Congress by Aug. 30, 1989) on t h e e x t e n t t o which employers have e s t a b l i s h e d o r l e n g t h e n e d t h e e l i g i b i l i t y p e r i o d f o r g r o u p h e a l t h c o v e r a g e a s a r e s u l t o f T i t l e X. F i n a l l y , t h e b i l l provides t h a t a person who i s n o t e l i g i b l e f o r c o n t i n u a t i o n coverage because of c o v e r a g e from a n o t h e r p l a n may e l e c t c o n t i n u a t i o n coverage under t h e p r i o r e m p l o y e r ' s p l a n i f , w i t h i n one y e a r from t h e d a t e of t h e q u a l i f y i n g e v e n t ( f o r example, t e r m i n a t i o n from employment 1, t h e new e m p l o y e r ' s p l a n r e j e c t s a c l a i m f o r payment based on a p r e e x i s t i n g c o n d i t i o n . However, t h e p r i o r e m p l o y e r ' s c o v e r a g e would o n l y be r e q u i r e d t o c o n t i n u e i f t h a t c o n d i t i o n would h a v e been covered under t h e p r i o r e m p l o y e r ' s p l a n had a q u a l i f y i n g event not occurred. H.R. 5080, i n t r o d u c e d by R e p r e s e n t a t i v e Rostenkowski on J u l y 14, 1988, would amend t h e P u b l i c H e a l t h S e r v i c e Act t o make t e c h n i c a l changes i n T i t l e X of COBRA. I n c l u d e d a r e changes t o modify t h e d e f i n i t i o n of employer and covered employee and t h e 45 day payment r u l e . H.R. 5080 was r e f e r r e d t o t h e House Energy and Commerce Comnittee. Senate Action On Aug. 3 , 1988, t h e S e n a t e Finance Comnittee r e p o r t e d S. 2238, t h e " T e c h n i c a l C o r r e c t i o n s Act of 1988" (S.Rept. 100-445). In respect t o T i t l e X, S. 2238 i s s i m i l a r t o H.R. 4845 a s r e p o r t e d by t h e Ways and I t would ( 1 ) a l l o w persons t o keep t h e i r c o n t i n u e d Means Committee. c o v e r a g e f o r 1 8 o r 36 months r e g a r d l e s s of whether t h e y became newly c o v e r e d under a n e m p l o y e r ' s group h e a l t h p l a n ; ( 2 ) modify t h e d e f i n i t i o n of employer t o i n c l u d e p e r s o n s r e c e i v i n g o r performing s e r v i c e s o t h e r t h a n i n a n employer-employee r e l a t i o n s h i p ; ( 3 ) c l a r i f y t h a t a p l a n may n o t r e q u i r e t h e payment of any premium u n t i l 45 days a f t e r t h e q u a l i f i e d b e n e f i c i a r y made t h e e l e c t i o n f o r c o n t i n u a t i o n coverage; and ( 4 ) p r o v i d e t h a t t h e maximum p e r i o d of c o n t i n u a t i o n coverage a v a i l a b l e t o a p e r s o n a s a r e s u l t o f a r e d u c t i o n of h o u r s followed by job t e r m i n a t i o n i s 18 months. LEG1 SLATION H.R. 1072 (Henry) Amends t h e I n t e r n a l Revenue Code of 1986, t h e Employee R e t i r e m e n t Income S e c u r i t y Act of 1974, and t h e P u b l i c H e a l t h S e r v i c e Act w i t h r e s p e c t t o two a s p e c t s of c o n t i n u a t i o n of h e a l t h c a r e c o v e r a g e . The b i l l p r o v i d e s t h a t ( 1 ) c o n t i n u a t i o n o f coverage i s t e r m i n a t e d upon e l i g i b i l i t y of a n i n d i v i d u a l t o p a r t i c i p a t e under a n o t h e r group p l a n , and ( 2 ) a n employee's r i g h t t o c o n t i n u a t i o n of t h e employee h a s worked f o r an I n t r o d u c e d Feb. 1 0 , 1987; r e f e r r e d on Energy and Comnerce, and on Ways c o v e r a g e d o e s n o t go i n t o e f f e c t u n t i l employer f o r a p e r i o d o f 90 d a y s . t o C o m n i t t e e s on E d u c a t i o n and L a b o r , and Means. H.R. 4136 ( P e l o s i ) Requires employers t o extend h e a l t h i n s u r a n c e c o n t i n u a t i o n coverage f o r up t o 29 months t o former employees on S o c i a l S e c u r i t y d i s a b i l i t y insurance. P e r m i t s e m p l o y e r s t o c h a r g e t h e s e f o r m e r employees a premium e q u a l t o 152% o f t h e c o s t of c o v e r a g e d u r i n g t h e 11 a d d i t i o n a l months of coverage. I n t r o d u c e d Mar. 1 0 , 1988; r e f e r r e d t o Committees on Energy and Comnerce, on E d u c a t i o n and L a b o r , and on Ways and Means. H.R. 4 3 3 3 ( R o s t e n k o v s k i ) , S. 2238 ( B e n t s e n ) T e c h n i c a l C o r r e c t i o n s Act o f 1988. I n c l u d e s t e c h n i c a l c o r r e c t i o n s t o t h e T i t l e X p r o v i s i o n s o f COBRA r e l a t i n g t o ( 1 ) t h e d e f i n i t i o n o f " c o v e r e d e m p l o y e e s , " and ( 2 ) t h e t i m i n g of t h e payment of t h e premium a f t e r i n i t i a l e l e c t i o n of c o n t i n u a t i o n coverage. Also d e l e t e s t h e p r o v i s i o n a l l o w i n g c o n t i n u a t i o n c o v e r a g e t o be t e r m i n a t e d upon t h e c o v e r a g e o f t h e q u a l i f i e d b e n e f i c i a r y u n d e r a new e m p l o y e r ' s g r o u p h e a l t h p l a n . H.R. 4333 i n t r o d u c e d Mar. 31, 1988; r e f e r r e d t o C o m a i t t e e on Ways and Means. R e p o r t e d , amended (H.Rept. 100-795) J u l y 26. P a s s e d House, amended (380S. 2238 i n t r o d u c e d Mar. 3 1 , 1988; r e f e r r e d t o Committee on 2 5 ) , Aug. 4 , Finance. H.R. 4829 ( M o r e l l a ) Amends T i t l e 5 of t h e U.S. Code ( r e l a t i n g t o t h e F e d e r a l C i v i l S e r v i c e ) t o a l l o w f o r t e m p o r a r y c o n t i n u a t i o n of h e a l t h b e n e f i t s c o v e r a g e f o r s e p a r a t e d employee and c e r t a i n f a m i l y members. Introduced June 15, 1988; r e f e r r e d t o C o m n i t t e e on P o s t O f f i c e and C i v i l S e r v i c e . H.R. 4845 ( R o s t e n k o v s k i ) Makes t e c h n i c a l c o r r e c t i o n s i n p e n s i o n - r e l a t e d p r o v i s i o n s i n t h e I n t e r n a l Revenue Code o f 1986 and t h e Employee R e t i r e m e n t Income S e c u r i t y Act of 1974. I n c l u d e s t e c h n i c a l c h a n g e s t o T i t l e X of COBRA. I n t r o d u c e d J u n e 1 6 , 1988; r e f e r r e d t o Committees on Ways and Means, and on E d u c a t i o n and Labor. R e p o r t e d by C o m n i t t e e on Ways and Means (H.Rept. 100-801, P a r t I ) J u l y 27. O r d e r e d t o be r e p o r t e d by Committee on E d u c a t i o n and Labor Aug. 1 0 , 1988. H.R. 5080 ( R o s t e n k o v s k i ) Amends t h e P u b l i c H e a l t h S e r v i c e Act t o make t e c h n i c a l c o r r e c t i o n s i n t h e c o n t i n u a t i o n coverage requirements of group h e a l t h p l a n s . Introduced J u l y 1 4 , 1988; r e f e r r e d t o Committee on Energy and Commerce. H.R. 5102 (Aderaan) Amends p r o v i s i o n s o f T i t l e 5 , U.S. Code, r e l a t i n g b e n e f i t s p r o g r a m f o r F e d e r a l employees. Provides c o n t i n u a t i o n o f c o v e r a g e f o r s e p a r a t e d employees and members. I n t r o d u c e d J u l y 28, 1988; r e f e r r e d t o C o r m i t t e e a n d C i v i l S e r v i c e . O r d e r e d t o b e r e p o r t e d Aug. 1 0 , 1988. t o the health f o r temporary c e r t a i n family on P o s t O f f i c e S. 2401 (tiarkin) Amends the Internal Revenue Code, the Employee Retirement Income Security Act, and the Public Health Services Act to provide that a person's eligibility to receive continued health benefits (under Title X of COBRA) ceases a soon as that person becomes eligible for coverage under another group health plan. Introduced Hay 16, 1988; referred to Committee on Finance. ~RONOU)(;Y T i t l e X of COBRA 03120186 ----- 12/19/85 --- 12/05/85 --- 11/14/85 --- 10/31/85 --- H.R. 3128 passed House (245-174). 10124185 H.R. 3500, as amended, passed House (228-199). 10/03/85 ----- 10/02/85 --- 09/11/85 --- 07/31/85 --- 04/07/86 President signed H.R. 3128 into law as P.L. House agreed to Senate version of H.R. bill for the president's signature. 99-272 (COBRA). 3 128, clearing the Conference report for H.R. 3128 filed in House (H.Rept. 99-453). Senate agreed to conference report but House rejected it. H o u s e incorporated H.R. 3500 (containing Comnittee on E d u c a t i o n and Labor's h e a l t h i n s u r a n c e c o n t i n u a t i o n provisions) into H.R. 3128. House asked for a conference on H.R. 3128. Senate amended and passed H.R. 3128 (93-6) by substituting the text of S. 1730 for House-passed provisions. H.R. 3500 (Omnibus Budget Reconciliation Act) introduced in House, containing Comnittee on Education and Labor's health insurance continuation provision. S. 1730 (Consolidated Omnibus Budget Reconciliation Act) i n t r o d u c e d in S e n a t e containing a h e a l t h i n s u r a n c e continuation provision that was a modification of several bills: S. 1211, Health Equity and Fairness Act; S. 1615, Health Care Improved Access Act; and S. 1632. H.R. 3128 reported from House Committee on Education and Labor containing a heal th insurance continuation coverage provision. H.R. 3128, Deficit Reduction Amendments of 1985, introduced in House incorporating continuation provisions of H.R. 3210 and H.R. 21, Continued Access to Group Health Insurance Act. Reported by Committee on Ways and Means to the House. Amendments t o T i t l e X C o v e r a g e o f Retirees o f F i m s i n B a n k r u p t c y (H.R. 5300, OBRA o f 1986) 10/17/86 ----- 09/25/86 --- 09/24/86 --- 10/21/86 P r e s i d e n t s i g n e d H.R. 5300 i n t o law a s P.L. 99-1012). House a g r e e d t o c o n f e r e n c e r e p o r t (H.Rept. agreed t o conference report. 5300 w i t h S e n a t e amendments. S e n a t e p a s s e d H.R. s e n t t o conference. H.R. 99-509 (OBRA). H.R. Senate 5300 5300 p a s s e d i n House. Technical Corrections t o T i t l e X (H.R. 3838, Tax Reform Act of 1986) 10/22/86 --- P r e s i d e n t s i g n e d H.R. 09/27/86 --- S e n a t e a g r e e d t o c o n f e r e n c e r e p o r t f o r H.R. 09/25/86 --- House agreed to 3828 i n t o law a s P.L. conference report for 99-514. 3838. H.R. 3838 (H.Rept. 99-84 1 ) . 07/16/86 06/24/86 12/17/85 --- ----- H.R. 3838 s e n t t o c o n f e r e n c e . S e n a t e p a s s e d H.R. H.R. 3838 w i t h S e n a t e amendments. 3838 p a s s e d i n t h e House. Regulatory Actions 06/15/87 --- 06/26/86 --- Department 11/04/86 --- Department o f T r e a s u r y p u b l i s h e d proposed r u l e s i n t h e F e d e r a l R e g i s t e r f o r Continued P r i v a t e H e a l t h I n s u r a n c e Coverage a s p e r P.L. 99-272 and P.L. 99-514. o f Labor i s s u e d ERISA T e c h n i c a l R e l e a s e p r o v i d i n g g u i d a n c e on g r o u p h e a l t h i n s u r a n c e c o n t i n u a t i o n c o v e r a g e not i f i c a t ion provisions. Department of T r e a s u r y h e l d p u b l i c h e a r i n g s i n Washington, DC, f o r c o n t i n u e d p r i v a t e H e a l t h I n s u r a n c e Coverage. U.S. Congress. House. Providing f o r r e c o n c i l i a t i o n pursuant t o s e c t i o n 2 of t h e Concurrent R e s o l u t i o n on t h e Budget f o r F i s c a l Year 1987; Washington, U.S. Govt. c o n f e r e n c e r e p o r t t o accompany H.R. 5300. ( 9 9 t h Congress, 2d s e s s i o n . House. P r i n t . O f f . , Oct. 1 7 , 1986. R e p o r t no. 99-1012) U.S. Congress. House. Comnittee of Conference. C o n s o l i d a t e d Omnibus Budget R e c o n c i l i a t i o n Act of 1985. Washington, U.S. Govt. P r i n t . House. Report O f f . , Dec. 19, 1985. ( 9 9 t h Congress, 1st s e s s i o n . no. 99-453) U.S. Department of Labor. O f f i c e of Pension and Welfare B e n e f i t Programs. ERISA T e c h n i c a l R e l e a s e no. 86-2. Guidance on g r o u p h e a l t h c o n t i n u a t i o n coverage n o t i f i c a t i o n p r o v i s i o n s . Washington, J u n e 26, 1986. U.S. Department of t h e T r e a s u r y . I n t e r n a l Revenue S e r v i c e . 26 CFR P a r t 1. Income t a x ; c o n t i n u a t i o n coverage r e q u i r e m e n t s of group h e a l t h p l a n s ; n o t i c e of proposed rulemaking, F e d e r a l r e g i s t e r , June 1 5 , 1987: 22716-22732. FOR ADD1 TIONAL READING U.S. L i b r a r y of Congress, C o n g r e s s i o n a l Research S e r v i c e . Employees group h e a l t h i n s u r a n c e b e n e f i t s c o n t i n u a t i o n , by Vincent E. Treacy. [Washington] J u l y 11, 1986, updated Feb. 20, 1987. CRS Report 87-196 A ----- P r i v a t e h e a l t h i n s u r a n c e c o n t i n u a t i o n coverage: l e g i s l a t i v e h i s t o r y of T i t l e X of COBRA, by Beth C. Fuchs. [Washington] J u l y 15, 1987. CRS Report 87-613 EPW