Partial Statement of Chairman Rostenkowski on Senate Floor Colloquies Regarding HR 3838. The Tax Reform Act of 1986.

With respect to the colloquy between the Senator Packwood and Senator Chafee on pages S13957 and S13959 of the Congressional Record dated September 27, 1986, relating to the tax treatment of Blue Cross and Blue Shield organization….it was not the intent of the conferees to prevent an existing Blue Cross and Blue Shield organization from making normal adjustments in their business practices, such as adjustments to reflect new trends in cost containment or adding new coverage. However, it is my understanding that any change in business practice that either eliminates coverage of high-risk individuals or small groups or that has the effect of eliminating such coverage is a material change in structure or operation. For example, a premium increase that reflects normal increases in medical costs is not itself treated as a material change. On the other hand, a premium increase that has the effect of making high-risk coverage unavailable because of the cost of such coverage is treated as a material change.