2000
<PRE>[DOCID: f:h1078ih.txt]






107th CONGRESS
  1st Session
                                H. R. 1078

     To amend title XVIII of the Social Security Act, the Employee 
Retirement Income Security Act of 1974, the Public Health Service Act, 
 and the Internal Revenue Code of 1986 to provide for an election for 
  retirees 55-to-65 years of age who lose employer-based coverage to 
acquire health care coverage under the Medicare Program or under COBRA 
  continuation benefits, and to amend the Employee Retirement Income 
    Security Act of 1974 to provide for advance notice of material 
        reductions in covered services under group health plans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 15, 2001

 Mr. Kleczka introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committees on 
 Energy and Commerce, and Education and the Workforce, for a period to 
      be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
     To amend title XVIII of the Social Security Act, the Employee 
Retirement Income Security Act of 1974, the Public Health Service Act, 
 and the Internal Revenue Code of 1986 to provide for an election for 
  retirees 55-to-65 years of age who lose employer-based coverage to 
acquire health care coverage under the Medicare Program or under COBRA 
  continuation benefits, and to amend the Employee Retirement Income 
    Security Act of 1974 to provide for advance notice of material 
        reductions in covered services under group health plans.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Broken Promises Retiree Health 
Coverage Act of 2001''.

   TITLE I--ACCESS TO MEDICARE FOR INDIVIDUALS LOSING RETIREE HEALTH 
                                COVERAGE

SEC. 101. ACCESS TO MEDICARE FOR INDIVIDUALS LOSING RETIREE HEALTH 
              COVERAGE.

    (a) In General.--Title XVIII of the Social Security Act is amended 
by inserting after section 1818A the following new section:

 ``medicare benefits for certain individuals who are 55 to 65 years of 
                                  age

    ``Sec. 1818B. (a) Eligibility to Enroll.--
            ``(1) In general.--Subject to paragraph (2), an individual 
        who meets the following requirements with respect to a month is 
        eligible to enroll in the insurance program under this part 
        with respect to such month:
                    ``(A) Age.--As of the last day of the month, the 
                individual has attained 55 years of age, but has not 
                attained 65 years of age.
                    ``(B) Medicare eligibility (but for age).--The 
                individual would be eligible for benefits under this 
                part for the month if the individual were 65 years of 
                age.
                    ``(C) Not eligible for coverage under group health 
                plans or federal health insurance programs.--The 
                individual is not eligible for benefits or coverage 
                under a Federal health insurance program (as defined in 
                subsection (e)(2), other than under this section) or 
                under a group health plan (including such eligibility 
                merely through a Federal or State COBRA continuation 
                provision) as of the last day of the month involved.
                    ``(D) Loss of retiree health coverage.--The 
                individual was covered under a group health plan as a 
                qualified retiree, but a termination of such coverage 
                occurred not more than 90 days before the date the 
                individual seeks enrollment under this section.
                    ``(E) Not imprisoned.--As of the first day of such 
                month, the individual is not imprisoned under Federal, 
                State, or local authority.
            ``(2) Limitation on eligibility if terminated enrollment.--
        If an individual described in paragraph (1) enrolls under this 
        section and coverage of the individual is terminated under 
        subsection (d) (other than because of age), the individual is 
        not again eligible to enroll under this section unless the 
        following requirements are met:
                    ``(A) New coverage under group health plan or 
                federal health insurance program.--After the date of 
                termination of coverage under such paragraph, the 
                individual obtains coverage under a group health plan 
                or under a Federal health insurance program (other than 
                under this section).
                    ``(B) Subsequent loss of new coverage.--The 
                individual subsequently loses eligibility for the 
                coverage described in subparagraph (A) and exhausts any 
                eligibility the individual may subsequently have for 
                coverage under a Federal or State COBRA continuation 
                provision.
            ``(3) Change in health plan eligibility does not affect 
        coverage.--In the case of an individual who is eligible for and 
        enrolls under this section, the individual's continued 
        entitlement to benefits under this part shall not be affected 
        by the individual's subsequent eligibility for benefits or 
        coverage described in paragraph (1)(C), or entitlement to such 
        benefits or coverage.
    ``(b) Enrollment Process.--
            ``(1) In general.--An individual may enroll under this 
        section only in such manner and form as may be prescribed by 
        regulations, and only during an enrollment period prescribed by 
        the Secretary consistent with the provisions of this 
        subsection. Such regulations shall provide a process under 
        which individuals eligible to enroll as of a month are 
        permitted to pre-enroll during a prior month within an 
        enrollment period described in paragraph (2).
            ``(2) Enrollment periods.--
                    ``(A) In general.--
                            ``(i) Initial enrollment period.--If the 
                        individual is eligible to enroll under this 
                        section for October 1, 2001, the enrollment 
                        period shall begin on August 1, 2001, and shall 
                        end on December 31, 2001. Any such enrollment 
                        before October 1, 2001, is conditioned upon 
                        compliance with the conditions of eligibility 
                        for October 1, 2001.
                            ``(ii) Subsequent periods.--If the 
                        individual is eligible to enroll under such 
                        section for a month after October 2001, the 
                        enrollment period shall begin on the first day 
of the second month before the month in which the individual first is 
eligible to so enroll and shall end four months later. Any such 
enrollment before the first day of the third month of such enrollment 
period is conditioned upon compliance with the conditions of 
eligibility for such third month.
                    ``(B) Authority to correct for government errors.--
                The provisions of section 1837(h) apply with respect to 
                enrollment under this part in the same manner as they 
                apply to enrollment under part B.
    ``(c) Date Coverage Begins.--
            ``(1) In general.--The period during which an individual is 
        entitled to benefits pursuant to an enrollment under this 
        section sh
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all begin as follows, but in no case earlier than 
        October 1, 2001:
                    ``(A) In the case of an individual who enrolls 
                (including pre-enrolls) before the month in which the 
                individual satisfies eligibility for enrollment under 
                subsection (a), the first day of such month of 
                eligibility.
                    ``(B) In the case of an individual who enrolls 
                during or after the month in which the individual first 
                satisfies eligibility for enrollment under such 
                subsection, the first day of the following month.
            ``(2) Authority to provide for partial months of 
        coverage.--Under regulations, the Secretary may, in the 
        Secretary's discretion, provide for coverage periods that 
        include portions of a month in order to avoid lapses of 
        coverage.
            ``(3) Limitation on payments.--No payments may be made 
        under this title with respect to the expenses of an individual 
        enrolled under this section unless such expenses were incurred 
        by such individual during a period which, with respect to the 
        individual, is a coverage period under this subsection.
    ``(d) Termination of Coverage.--
            ``(1) In general.--An individual's coverage period under 
        this section shall continue until the individual's enrollment 
        has been terminated at the earliest of the following:
                    ``(A) General provisions.--
                            ``(i) Notice.--The individual files notice 
                        (in a form and manner prescribed by the 
                        Secretary) that the individual no longer wishes 
                        to participate in the insurance program under 
                        this part.
                            ``(ii) Nonpayment of premiums.--The 
                        individual fails to make payment of premiums 
                        required for enrollment under this part.
                            ``(iii) Medicare eligibility on other 
                        basis.--The individual becomes entitled to 
                        benefits under this part other than by reason 
                        of this section.
                    ``(B) Termination based on age.--The individual 
                attains 65 years of age.
            ``(2) Effective date of termination.--
                    ``(A) Notice.--The termination of a coverage period 
                under paragraph (1)(A)(i) shall take effect at the 
                close of the month following for which the notice is 
                filed.
                    ``(B) Nonpayment of premium.--The termination of a 
                coverage period under paragraph (1)(A)(ii) shall take 
                effect on a date determined under regulations, which 
                may be determined so as to provide a grace period in 
                which overdue premiums may be paid and coverage 
                continued. The grace period determined under the 
                preceding sentence shall not exceed 60 days; except 
                that it may be extended for an additional 30 days in 
                any case where the Secretary determines that there was 
                good cause for failure to pay the overdue premiums 
                within such 60-day period.
                    ``(C) Age or medicare eligibility.--The termination 
                of a coverage period under paragraph (1)(A)(iii) or 
                (1)(B) shall take effect as of the first day of the 
                month in which the individual attains 65 years of age 
                or becomes otherwise entitled to benefits under this 
                part.
    ``(e) Premiums.--
            ``(1) In general.--Premiums for enrollment under this 
        section shall be paid to the Secretary in an amount determined 
        under paragraph (2). Such premiums shall be paid at such times, 
        and in such manner, as the Secretary shall by regulations 
        prescribe, and shall be deposited in the Treasury to the credit 
        of the Federal Hospital Insurance Trust Fund established under 
        section 1817.
            ``(2) Amount of premium.--The amount of premium for a month 
        occurring during--
                    ``(A) fiscal year 2002, is equal to $400; and
                    ``(B) a succeeding fiscal year is the amount 
                specified under this paragraph for the previous fiscal 
                year increased by the percentage  increase in the 
consumer price index for all urban consumers (all items; United States 
city average) for the 12-month period ending with July preceding the 
beginning of the fiscal year.
            ``(3) Period of applicability of premiums.--Such premiums 
        shall be payable for the period commencing with the first month 
        of an individual's coverage period and ending with the month in 
        which the individual dies or, if earlier, in which the 
        individual's coverage period terminates under subsection (d).
    ``(f) Definitions.--For purposes of this section:
            ``(1) Qualified retiree.--The term `qualified retiree' 
        means an individual who, immediately before the occurrence of 
        the termination of coverage of such individual under a group 
        health plan--
                    ``(A) had attained 55 years of age; and
                    ``(B) was receiving such coverage by reason of the 
                retirement of the individual.
            ``(2) Federal or state cobra continuation provision.--The 
        term `Federal or State COBRA continuation provision' has the 
        meaning given the term `COBRA continuation provision' in 
        section 2791(d)(4) of the Public Health Service Act and 
includes a comparable State program, as determined by the Secretary.
            ``(3) Federal health insurance program defined.--The term 
        `Federal health insurance program' means any of the following:
                    ``(A) Medicare.--This title (other than by reason 
                of this section).
                    ``(B) Medicaid.--A State plan under title XIX.
                    ``(C) FEHBP.--The Federal employees health benefit 
                program under chapter 89 of title 5, United States 
                Code.
                    ``(D) TRICARE.--The TRICARE program (as defined in 
                section 1072(7) of title 10, United States Code).
                    ``(E) Active duty military.--Health benefits under 
                title 10, United States Code, to an individual as a 
                member of the uniformed services of the United States.
            ``(5) Group health plan.--The term `group health plan' has 
        the meaning given such term in section 2791(a)(1) of the Public 
        Health Service Act.''.
    (b) Conforming Amendments.--
            (1) Section 1905(p)(3)(A) of the Social Security Act (42 
        U.S.C. 1396d(p)(3)(A)) is amended by striking ``or 1818A'' and 
        inserting ``, 1818A, or 1818B''.
            (2)(A) Section 602(2)(D)(ii) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1162(2)) is amended by 
        inserting ``(not including an individual who is so entitled 
        pursuant to enrollment under section 1818B)'' after ``Social 
        Security Act''.
            (B) Section 2202(2)(D)(ii) of the Public Health Service Act 
        (42 U.S.C. 300bb-2(2)(D)(ii)) is amended by inserting ``(not 
        including an individual who is so entitled pursuant to 
        enrollment under section 1818B)'' after ``Social Security 
        Act''.
            (C) Section 4980B(f)(2)(B)(i)(V) of the Internal Revenue 
        Code of 1986 is amended by inserting ``(not including an 
        individual who is so entitled pursuant to enrollment under 
        section 1818B)'' after ``Social Security Act''.

SEC. 102. PROTECTIONS UNDER MEDIGAP FOR RETIRED WORKERS WHO LOSE 
              RETIREE HEALTH BENEFITS.

    (a) Providing 
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for Medigap Open Enrollment Period.--Section 
1882(s)(2)(A) of the Social Security Act (42 U.S.C. 1395ss(s)(2)(A)) is 
amended--
            (1) by inserting ``(i)'' before ``in the case of''; and
            (2) by inserting before the period at the end the 
        following: ``, or (ii) in the case of an individual who enrolls 
        in part B pursuant to a special enrollment period provided 
        under section 1837(i)(4), the 6-month period beginning with the 
        first month as of the first day of which the individual is 
        enrolled under part B pursuant to such enrollment''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act and apply to any 
involuntary termination of coverage under a group health plan.

             TITLE II--COBRA PROTECTION FOR EARLY RETIREES

 Subtitle A--Amendments to the Employee Retirement Income Security Act 
                                of 1974

SEC. 201. COBRA CONTINUATION BENEFITS FOR CERTAIN RETIRED WORKERS WHO 
              LOSE RETIREE HEALTH COVERAGE.

    (a) Establishment of New Qualifying Event.--
            (1) In general.--Section 603 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1163) is amended by 
        inserting after paragraph (6) the following new paragraph:
            ``(7) The termination of benefits of group health plan 
        coverage as a result of plan changes or termination in the case 
        of a covered employee who is a qualified retiree.''.
            (2) Qualified retiree; and qualified beneficiary defined.--
        Section 607 of such Act (29 U.S.C. 1167) is amended--
                    (A) in paragraph (3)--
                            (i) in subparagraph (A), by inserting 
                        ``except as otherwise provided in this 
                        paragraph,'' after ``means,''; and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(D) Special rule for qualifying retirees and 
                dependents.--In the case of a qualifying event 
                described in section 603(7), the term `qualified 
                beneficiary' means a qualified retiree and any other 
                individual who, on the day before such qualifying 
                event, is a beneficiary under the plan on the basis of 
                the individual's relationship to such qualified 
                retiree.''; and
                    (B) by adding at the end the following new 
                paragraphs:
            ``(6) Qualified retiree.--The term `qualified retiree' 
        means, with respect to a qualifying event described in section 
        603(7), a covered employee who, at the time of the event--
                    ``(A) has attained 55 years of age;
                    ``(B) was receiving group health coverage under the 
                plan by reason of the retirement of the covered 
                employee; and
                    ``(C) is not enrolled under section 1818B of the 
                Social Security Act (relating to Medicare benefits for 
                certain individuals who are 55 to 65 years of age)''.
    (b) Duration of Coverage Through Age 65.--Section 602(2)(A) of such 
Act (29 U.S.C. 1162(2)(A)) is amended--
            (1) in clause (ii), by inserting ``or 603(7)'' after 
        ``603(6)'';
            (2) in clause (iv), by striking ``or 603(6)'' and inserting 
        ``, 603(6), or 603(7)'';
            (3) by redesignating clause (iv) as clause (vi);
            (4) by redesignating clause (v) as clause (iv) and by 
        moving such clause to immediately follow clause (iii); and
            (5) by inserting after such clause (iv) the following new 
        clause:
                            ``(v) Special rule for certain dependents 
                        in case of termination of retiree health 
                        coverage.--In the case of a qualifying event 
                        described in section 603(7), in the case of a 
                        qualified beneficiary described in section 
                        607(3)(D) who is not the qualified retiree or 
                        spouse of such retiree, the later of--
                                    ``(I) the date that is 36 months 
                                after the earlier of the date the 
                                qualified retiree becomes entitled to 
                                benefits under title XVIII of the 
                                Social Security Act, or the date of the 
                                death of the qualified retiree; or
                                    ``(II) the date that is 36 months 
                                after the date of the qualifying 
                                event.''.
    (c) Type of Coverage in Case of Termination of Retiree Health 
Coverage.--Section 602(1) of such Act (29 U.S.C. 1162(1)) is amended--
            (1) by striking ``The coverage'' and inserting the 
        following:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the coverage''; and
            (2) by adding at the end the following:
                    ``(B) Certain retirees.--In the case of a 
                qualifying event described in section 603(7), in 
                applying the first sentence of subparagraph (A) and the 
                fourth sentence of paragraph (3), the coverage offered 
                that is the most prevalent coverage option (as 
                determined under regulations of the Secretary) 
                continued under the group health plan (or, if none, 
                under the most prevalent other plan offered by the same 
                plan sponsor) shall be treated as the coverage 
                described in such sentence, or (at the option of the 
                plan and qualified beneficiary) such other coverage 
                option as may be offered and elected by the qualified 
                beneficiary involved.''.
    (d) Increased Level of Premiums Permitted.--Section 602(3) of such 
Act (29 U.S.C. 1162(3)) is amended by adding at the end the following 
new sentence: ``In the case of an individual provided continuation 
coverage by reason of a qualifying event described in section 603(7), 
any reference in subparagraph (A) of this paragraph to `102 percent of 
the applicable premium' is deemed a reference to `110 percent of the 
applicable premium for employed individuals (and their dependents, if 
applicable) for the coverage option referred to in paragraph 
(1)(B)'.''.
    (e) Notice.--Section 606(a) of such Act (29 U.S.C. 1166) is 
amended--
            (1) in paragraph (4)(A), by striking ``or (6)'' and 
        inserting ``(6), or (7)''; and
            (2) by adding at the end the following:
``The notice under paragraph (4) in the case of a qualifying event 
described in section 603(7) shall be provided at least 90 days before 
the date of the qualifying event. Such notice shall include information 
with respect to eligibility for enrollment under section 1818B of the 
Social Security Act (relating to medicare benefits for certain 
individuals who are 55 to 65 years of age).''.
    (f) Election of Medicare Coverage in Lieu of Continuation 
Coverage.--Section 607(3) of such Act (29 U.S.C. 1167(3)) (as amended 
by subsection (a)(2)) is amended further by adding at the end the 
following new subparagraph:
                    ``(E) Exclusion for certain individuals electing 
                medicare enrollment.--Such term does not include an 
                individual who is enrolled under section 1818B of the 
                Social Security Act (relating to Medicare benefits for 
                certain individuals who are 55 to 65 years of age).''.
    (g) Effective Dates.--
            (1) In general.--The amendments made by this section (other 
        than subsection (e)(2)) shall apply to qualifying events 
        occurring during plan years ending after August 1, 1996. In the 
 
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       case of a qualifying event occurring on or after such date and 
        before the date of the enactment of this Act, such event shall 
        be deemed (for purposes of such amendments) to have occurred on 
        the date of the enactment of this Act.
            (2) Advance notice of terminations and reductions.--The 
        amendment made by subsection (e)(2) shall apply to qualifying 
        events occurring on or after February 10, 2001.

        Subtitle B--Amendments to the Public Health Service Act

SEC. 211. COBRA CONTINUATION BENEFITS FOR CERTAIN RETIRED WORKERS WHO 
              LOSE RETIREE HEALTH COVERAGE.

    (a) Establishment of New Qualifying Event.--
            (1) In general.--Section 2203 of the Public Health Service 
        Act (42 U.S.C. 300bb-3) is amended by inserting after paragraph 
        (5) the following new paragraph:
            ``(6) The termination of benefits of group health plan 
        coverage as a result of plan changes or termination in the case 
        of a covered employee who is a qualified retiree.''.
            (2) Qualified retiree; and qualified beneficiary; 
        defined.--Section 2208 of such Act (42 U.S.C. 300bb-8) is 
        amended--
                    (A) in paragraph (3)--
                            (i) in subparagraph (A), by inserting 
                        ``except as otherwise provided in this 
                        paragraph,'' after ``means,''; and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(C) Special rule for qualifying retirees and 
                dependents.--In the case of a qualifying event 
                described in section 2203(6), the term `qualified 
                beneficiary' means a qualified retiree and any other 
                individual who, on the day before such qualifying 
                event, is a beneficiary under the plan on the basis of 
                the individual's relationship to such qualified 
                retiree.''; and
                    (B) by adding at the end the following new 
                paragraphs:
            ``(5) Qualified retiree.--The term `qualified retiree' 
        means, with respect to a qualifying event described in section 
        2203(6), a covered employee who, at the time of the event--
                    ``(A) has attained 55 years of age;
                    ``(B) was receiving group health coverage under the 
                plan by reason of the retirement of the covered 
                employee; and
                    ``(C) is not enrolled under section 1818B of the 
                Social Security Act (relating to Medicare benefits for 
                certain individuals who are 55 to 65 years of age).''.
    (b) Duration of Coverage Through Age 65.--Section 2202(2)(A) of 
such Act (42 U.S.C. 300bb-2(2)(A)) is amended--
            (1) by redesignating clause (iii) as clause (iv); and
            (2) by inserting after clause (ii) the following new 
        clause:
                            ``(iii) Special rule for certain dependents 
                        in case of termination of retiree health 
                        coverage.--In the case of a qualifying event 
                        described in section 2203(6), in the case of a 
                        qualified beneficiary described in section 
                        2208(3)(C) who is not the qualified retiree or 
                        spouse of such retiree, the later of--
                                    ``(I) the date that is 36 months 
                                after the earlier of the date the 
                                qualified retiree becomes entitled to 
                                benefits under title XVIII of the 
                                Social Security Act, or the date of the 
                                death of the qualified retiree; or
                                    ``(II) the date that is 36 months 
                                after the date of the qualifying 
                                event.''.
    (c) Type of Coverage in Case of Termination of Retiree Health 
Coverage.--Section 2202(1) of such Act (42 U.S.C. 300bb-2(1)) is 
amended--
            (1) by striking ``The coverage'' and inserting the 
        following:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the coverage''; and
            (2) by adding at the end the following:
                    ``(B) Certain retirees.--In the case of a 
                qualifying event described in section 2203(6), in 
                applying the first sentence of subparagraph (A) and the 
                fourth sentence of paragraph (3), the coverage offered 
                that is the most prevalent coverage option (as 
                determined under regulations of the Secretary of Labor) 
                continued under the group health plan (or, if none, 
                under the most prevalent other plan offered by the same 
                plan sponsor) shall be treated as the coverage 
                described in such sentence, or (at the option of the 
                plan and qualified beneficiary) such other coverage 
                option as may be offered and elected by the qualified 
                beneficiary involved.''.
    (d) Increased Level of Premiums Permitted.--Section 2202(3) of such 
Act (42 U.S.C. 300bb-2(3)) is amended by adding at the end the 
following new sentence: ``In the case of an individual provided 
continuation coverage by reason of a qualifying event described in 
section 2203(6), any reference in subparagraph (A) of this paragraph to 
`102 percent of the applicable premium' is deemed a reference to `110 
percent of the applicable premium for employed individuals (and their 
dependents, if applicable) for the coverage option referred to in 
paragraph (1)(B)'.''.
    (e) Notice.--Section 2206(a) of such Act (42 U.S.C. 300bb-6(a)) is 
amended--
            (1) in paragraph (4)(A), by striking ``or (4)'' and 
        inserting ``(4), or (6)''; and
            (2) by adding at the end the following:
``The notice under paragraph (4) in the case of a qualifying event 
described in section 2203(6) shall be provided at least 90 days before 
the date of the qualifying event. Such notice shall include information 
with respect to eligibility for enrollment under section 1818B of the 
Social Security Act (relating to medicare benefits for certain 
individuals who are 55 to 65 years of age).''.
    (f) Election of Medicare Coverage in Lieu of Continuation 
Coverage.--Section 2208(3) of such Act (42 U.S.C. 300bb-8(3)) (as 
amended by subsection (a)(2)) is amended further by adding at the end 
the following new subparagraph:
                    ``(D) Exclusion for certain individuals electing 
                medicare enrollment.--Such term does not include an 
                individual who is enrolled under section 1818B of the 
                Social Security Act (relating to medicare benefits for 
                certain individuals who are 55 to 65 years of age).''.
    (g) Effective Dates.--
            (1) In general.--The amendments made by this section (other 
        than subsection (e)(2)) shall apply to qualifying events 
        occurring during plan years ending after August 1, 1996. In the 
        case of a qualifying event occurring on or after such date and 
        before the date of the enactment of this Act, such event shall 
        be deemed (for purposes of such amendments) to have occurred on 
        the date of the enactment of this Act.
            (2) Advance notice of terminations and reductions.--The 
        amendment made by subsection (e)(2) shall apply to qualifying 
        events occurring on or after February 10, 2001.

      Subtitle C--Amendments to the Internal Revenue Code of 1986

SEC. 221. COBRA CONTINUATION BENEFITS FOR CERTAIN RETIRED WORKERS WHO 
              LOSE RETIREE HEALTH COVERAGE.

    (a) Establishment of New Qualifying Event.--
            (1) In general.--Section 4980B(f)(3) 
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of the Internal 
        Revenue Code of 1986 is amended by inserting after subparagraph 
        (F) the following new subparagraph:
                    ``(G) The termination of benefits of group health 
                plan coverage as a result of plan changes or 
                termination in the case of a covered employee who is a 
                qualified retiree.''.
            (2) Qualified retiree; and qualified beneficiary; 
        defined.--Section 4980B(g) of such Code is amended--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by inserting 
                        ``except as otherwise provided in this 
                        paragraph,'' after ``means,''; and
                            (ii) by adding at the end the following new 
                        subparagraph:
                    ``(E) Special rule for qualifying retirees and 
                dependents.--In the case of a qualifying event 
                described in subsection (f)(3)(G), the term `qualified 
                beneficiary' means a qualified retiree and any other 
                individual who, on the day before such qualifying 
                event, is a beneficiary under the plan on the basis of 
                the individual's relationship to such qualified 
                retiree.''; and
                    (B) by adding at the end the following new 
                paragraphs:
            ``(5) Qualified retiree.--The term `qualified retiree' 
        means, with respect to a qualifying event described in 
        subsection (f)(3)(G), a covered employee who, at the time of 
        the event--
                    ``(A) has attained 55 years of age;
                    ``(B) was receiving group health coverage under the 
                plan by reason of the retirement of the covered 
                employee; and
                    ``(C) is not enrolled under section 1818B of the 
                Social Security Act (relating to Medicare benefits for 
                certain individuals who are 55 to 65 years of age).''.
    (b) Duration of Coverage Through Age 65.--Section 4980B(f)(2)(B)(i) 
of such Code is amended--
            (1) in subclause (II), by inserting ``or (3)(G)'' after 
        ``(3)(F)'';
            (2) in subclause (IV), by striking ``or (3)(F)'' and 
        inserting ``, (3)(F), or (3)(G)'';
            (3) by redesignating subclause (IV) as subclause (VI);
            (4) by redesignating subclause (V) as subclause (IV) and by 
        moving such clause to immediately follow subclause (III); and
            (5) by inserting after such subclause (IV) the following 
        new subclause:
                                    ``(V) Special rule for certain 
                                dependents in case of termination of 
                                retiree health coverage.--In the case 
                                of a qualifying event described in 
                                paragraph (3)(G), in the case of a 
                                qualified beneficiary described in 
                                subsection (g)(1)(E) who is not the 
                                qualified retiree or spouse of such 
                                retiree, the later of--
                                            ``(a) the date that is 36 
                                        months after the earlier of the 
                                        date the qualified retiree 
                                        becomes entitled to benefits 
                                        under title XVIII of the Social 
                                        Security Act, or the date of 
                                        the death of the qualified 
                                        retiree; or
                                            ``(b) the date that is 36 
                                        months after the date of the 
                                        qualifying event.''.
    (c) Type of Coverage in Case of Termination of Retiree Health 
Coverage.--Section 4980B(f)(2)(A) of such Code is amended--
            (1) by striking ``The coverage'' and inserting the 
        following:
                            ``(i) In general.--Except as provided in 
                        clause (ii), the coverage''; and
            (2) by adding at the end the following:
                            ``(ii) Certain retirees.--In the case of a 
                        qualifying event described in paragraph (3)(G), 
                        in applying the first sentence of clause (i) 
                        and the fourth sentence of subparagraph (C), 
                        the coverage offered that is the most prevalent 
                        coverage option (as determined under 
                        regulations of the Secretary of Labor) 
                        continued under the group health plan (or, if 
                        none, under the most prevalent other plan 
                        offered by the same plan sponsor) shall be 
                        treated as the coverage described in such 
                        sentence, or (at the option of the plan and 
                        qualified beneficiary) such other coverage 
                        option as may be offered and elected by the 
                        qualified beneficiary involved.''.
    (d) Increased Level of Premiums Permitted.--Section 4980B(f)(2)(C) 
of such Code is amended by adding at the end the following new 
sentence: ``In the case of an individual provided continuation coverage 
by reason of a qualifying event described in paragraph (3)(G), any 
reference in clause (i) of this subparagraph to `102 percent of the 
applicable premium' is deemed a reference to `110 percent of the 
applicable premium for employed individuals (and their dependents, if 
applicable) for the coverage option referred to in subparagraph 
(A)(ii)'.''.
    (e) Notice.--Section 4980B(f)(6) of such Code is amended--
            (1) in subparagraph (D)(i), by striking ``or (F)'' and 
        inserting ``(F), or (G)''; and
            (2) by adding at the end the following:
``The notice under subparagraph (D)(i) in the case of a qualifying 
event described in paragraph (3)(G) shall be provided at least 90 days 
before the date of the qualifying event. Such notice shall include 
information with respect to eligibility for enrollment under section 
1818B of the Social Security Act (relating to medicare benefits for 
certain individuals who are 55 to 65 years of age).''.
    (f) Election of Medicare Coverage in Lieu of Continuation 
Coverage.--Section 4980B(g)(1) of such Code (as amended by subsection 
(a)(2)) is amended further by adding at the end the following new 
subparagraph:
                    ``(F) Exclusion for certain individuals electing 
                medicare enrollment.--Such term does not include an 
                individual who is enrolled under section 1818B of the 
                Social Security Act (relating to Medicare benefits for 
                certain individuals who are 55 to 65 years of age).''.
    (g) Effective Dates.--
            (1) In general.--The amendments made by this section (other 
        than subsection (e)(2)) shall apply to qualifying events 
        occurring during plan years ending after August 1, 1996. In the 
        case of a qualifying event occurring on or after such date and 
        before the date of the enactment of this Act, such event shall 
        be deemed (for purposes of such amendments) to have occurred on 
        the date of the enactment of this Act.
            (2) Advance notice of terminations and reductions.--The 
        amendment made by subsection (e)(2) shall apply to qualifying 
        events occurring on or after February 10, 2001.

                     TITLE III--NOTICE REQUIREMENTS

SEC. 301. ADVANCE NOTICE OF MATERIAL REDUCTIONS IN COVERED SERVICES 
              UNDER GROUP HEALTH PLANS.

    (a) Advance Notice.--
            (1) In general.--Section 104(b)(1) of the Employee 
        Retirem
1633
ent Income Security Act of 1974 (29 U.S.C. 1024(b)(1)) 
        is amended--
                    (A) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively;
                    (B) by striking ``(1) The administrator'' and 
                inserting ``(1)(A) The administrator'';
                    (C) by striking ``The administrator'' the second 
                place it appears and inserting the following:
    ``(B) The administrator'';
                    (D) by striking ``If there is a modification'' and 
                inserting the following:
    ``(C) If there is a modification''; and
                    (E) by adding at the end the following new 
                subparagraph:
    ``(D) Notwithstanding subparagraph (C), a summary description of 
any material modification described in section 102(a)(1) that is a 
reduction in covered services or benefits provided in the case of a 
group health plan (as defined in section 733(a)(1)) relating to retiree 
health benefits shall be furnished to participants and beneficiaries 
not later than 180 days before the effective date of the modification. 
In any case in which an individual first becomes a participant under a 
group health plan during any such 180-day period with respect to such a 
modification or (in the case of any other beneficiary under the plan) 
first receives benefits under the plan during such 180-day period, the 
requirements of the preceding sentence may be met by providing the 
summary description of such modification not later than the date on 
which such individual first becomes a participant or such other 
beneficiary first receives benefits under the plan.''.
            (2) Determination by secretary.--Section 104 of such Act 
        (29 U.S.C. 1024) is further amended by redesignating subsection 
        (d) as subsection (e) and by inserting after subsection (c) the 
        following new subsection:
    ``(d) A material modification described in section 102(a)(1) that 
is a reduction in covered services or benefits provided in the case of 
a group health plan (as defined in section 733(a)(1))) relating to 
retiree health benefits that is subject to the requirements of 
subsection (b)(1)(D) may not take effect until after 6 months after the 
Secretary receives written notice of the modification from the 
administrator and after the Secretary determines that such modification 
does not violate the plan, including collective bargaining agreements. 
The determination of whether any such modification constitutes such a 
violation shall be made by the Secretary during such 6-month period, 
and any such modification shall be deemed not to be effective until the 
Secretary issues such determination. Any such determination shall be 
treated as a final order subject to review under section 502(k).''.
            (3) Advance notice to secretary.--Section 104(b)(1) of such 
        Act (29 U.S.C. 1024(b)(1)) is amended, in the fourth sentence 
        following subparagraph (B), by inserting before the period the 
        following: ``, or in the case of any such modification that is 
        a reduction in covered services or benefits provided in the 
        case of a group health plan relating to retiree health 
        benefits, not later than 180 days before the effective date of 
        such modification.''.
            (4) Civil penalty.--Section 502(c)(1) of such Act (29 
        U.S.C. 1132(c)(1)) is amended by striking ``or section 
        101(e)(1)'' and inserting ``, section 101(e)(1), or section 
        104(b)(1)(D)''.
    (b) Enforcement.--
            (1) Requirements.--Section 4980B of the Internal Revenue 
        Code of 1986 is amended by redesignating subsection (g) as 
        subsection (h) and by inserting after subsection (f) the 
        following new subsection:
    ``(g) Notice of Modification in Health Benefits.--
            ``(1) In general.--A group health plan meets the 
        requirements of this subsection, in the case of a material 
        modification described in section 102(a)(1) of the Employee 
        Retirement Income Security Act of 1974 that is a reduction in 
        covered services or benefits provided in the case of a group 
        health plan (as defined in section 733(a)(1) of such Act) 
        relating to retiree health benefits, if--
                    ``(A) the plan sponsor complies with section 
                104(b)(1)(D) of such Act; and
                    ``(B) such modification takes effect only after the 
                Secretary of Labor makes the determination required by 
                section 104(d) of such Act that such modification does 
                not violate the plan, including collective bargaining 
                agreements.
            ``(2) Noncompliance period.--For the purposes of subsection 
        (b), the noncompliance period with respect to this subsection 
        shall be determined without regard to paragraph (2)(B)(ii) of 
        subsection (b).''.
            (2) Conforming amendments.--
                    (A) Subsection (a) of section 4980B of such Code is 
                amended by striking ``subsection (f)'' and inserting 
                ``subsections (f) and (g)''.
                    (B) Clause (iv)(II) of section 4980B(f)(2)(B) of 
                such Code is amended by striking ``subsection 
                (g)(1)(D)'' and inserting ``subsection (h)(1)(D)''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to material modifications occurring on or after 
February 10, 2001.
                                 &lt;all&gt;

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