[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4410 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 4410

 To provide for universal affordable access to health care and health 
 insurance through tax and savings incentives, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 12, 1994

Mr. Jacobs (for himself and Mr. Inhofe) introduced the following bill; 
which was referred jointly to the Committees on Ways and Means, Energy 
                 and Commerce, and Education and Labor

_______________________________________________________________________

                                 A BILL


 
 To provide for universal affordable access to health care and health 
 insurance through tax and savings incentives, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Bipartisan Health 
Security Reform Act of 1994''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

          TITLE I--AMENDMENTS OF INTERNAL REVENUE CODE OF 1986

    Subtitle A--Tax Incentives for Purchase of Health Care Coverage

Sec. 101. Refundable credit for purchase of health care coverage.
               Subtitle B--Medical Care Savings Accounts

Sec. 111. Medical care savings accounts.
Sec. 112. Unused amounts in flexible spending accounts transferable to 
                            medical care savings accounts.
          Subtitle C--Expansion of COBRA Continuation Coverage

Sec. 121. Expansion of COBRA continuation coverage.
                       TITLE II--INSURANCE REFORM

               Subtitle A--Employer Insurance Protections

Sec. 201. Small group employer insurance protections.
Sec. 202. General portability requirement for employer-based health 
                            insurance.
Sec. 203. Exemption from certain State mandates.
Sec. 204. Enforcement.
Sec. 205. Definitions.
Sec. 206. Effective date.
     Subtitle B--Guaranteeing Portability of Health Insurance for 
                              Individuals

Sec. 211. Coverage of individual health benefit plans.
Sec. 212. Portability protections.
Sec. 213. Definitions.
Sec. 214. Effective date.
    Subtitle C--Assuring Health Insurance Coverage for Uninsurable 
                              Individuals

Sec. 221. Establishment of programs by States.
Sec. 222. Uninsurable individuals eligible for coverage.
Sec. 223. Qualified health insurance coverage under program.
Sec. 224. Funding of program.
Sec. 225. Administration.
                       TITLE III--MEDICAID REFORM

Sec. 301. Providing coverage for out-of-pocket expenses under private 
                            health plans.
                  TITLE IV--MEDICAL CHARGE DISCLOSURE

Sec. 401. Requiring providers of medical services to disclose maximum 
                            charges.

          TITLE I--AMENDMENTS OF INTERNAL REVENUE CODE OF 1986

    Subtitle A--Tax Incentives for Purchase of Health Care Coverage

SEC. 101. REFUNDABLE CREDIT FOR PURCHASE OF HEALTH CARE COVERAGE.

    (a) Allowance of Credit.--Subpart C of part IV of subchapter A of 
chapter 1 of the Internal Revenue Code of 1986 (relating to refundable 
credits) is amended by redesignating section 35 as section 36 and by 
inserting after section 34 the following new section:

``SEC. 35. PURCHASE OF HEALTH CARE COVERAGE.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to 30 percent of the sum of--
            ``(1) the amount paid by the taxpayer during the taxable 
        year for health care coverage for the taxpayer, the spouse of 
        the taxpayer, and any dependent (as defined in section 152) of 
        the taxpayer, and
            ``(2) if the individual is an eligible individual, the 
        amount contributed by the taxpayer for the taxable year to a 
        medical care savings account of such individual.
    ``(b) Limitation on Contributions to Medical Care Savings 
Accounts.--
            ``(1) In general.--The amount taken into account under 
        subsection (a)(2) for any taxable year for contributions to a 
        medical care savings account of an individual shall not exceed 
        the amount of patient cost-sharing required under the high 
        deductible health plan or the health maintenance organization 
        covering the individual. In the case of a husband and wife, the 
        excess described in the preceding sentence shall be divided 
        equally between such spouses.
            ``(2) Proration of limitation if part-year eligibility.--In 
        the case of an individual who is an eligible individual only 
        for a portion (but not all) of the calendar year ending with or 
        within the taxable year, the limitation under this subsection 
        for such taxable year shall be an amount which bears the same 
        ratio to such limitation (determined without regard to this 
        paragraph) as such portion bears to the entire calendar year.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible individual.--The term `eligible individual' 
        means any individual who is covered under a high deductible 
        health plan or by a health maintenance organization. Such term 
        shall not include an individual with respect to whom a 
        deduction under section 151 is allowable to another taxpayer 
        for a taxable year beginning in the calendar year in which the 
        individual's taxable year begins.
            ``(2) High deductible health plan.--The term `high 
        deductible health plan' means insurance which constitutes 
        medical care (as defined in section 213(d)), but only if such 
        insurance requires patient cost-sharing of at least $1,000 per 
        year but not more than $5,000 per year.
            ``(3) Health care coverage.--The term `health care 
        coverage' means--
                    ``(A) coverage under insurance which constitutes 
                medical care (as defined in section 213(d)),
                    ``(B) coverage under an accident or health plan, 
                and
                    ``(C) coverage by a health maintenance 
                organization.
        Such term does not include excluded coverage.
            ``(4) Excluded coverage.--The term `excluded coverage' 
        means--
                    ``(A) any coverage providing wages or payments in 
                lieu of wages for any period during which the employee 
                is absent from work on account of sickness or injury,
                    ``(B) any coverage providing for payments referred 
                to in section 105(c),
                    ``(C) any coverage provided to an employee or 
                former employee after such employee has attained age 
                65, unless such coverage is provided by reason of the 
                current employment of the individual (within the 
                meaning of section 1862(b)(1)(A)(i)(I) of the Social 
                Security Act) with the employer providing the coverage,
                    ``(D) any coverage provided under Federal law to 
                any individual (or spouse or dependent thereof) by 
                reason of such individual being--
                            ``(i) a member of the Armed Forces of the 
                        United States, or
                            ``(ii) a veteran, and
                    ``(E) any other coverage to the extent that the 
                Secretary determines that the continuation of an 
                exclusion for such coverage is not inconsistent with 
                the purposes of this section.''
    ``(d) Special Rules.--
            ``(1) Coordination with medical expense deduction.--Any 
        amount which is taken into account in determining the credit 
        under this section shall not be taken into account under 
        section 213.
            ``(2) Coordination with flexible spending accounts.--Any 
        amount paid from a flexible spending account shall be treated 
        as not paid by the taxpayer.''
    (b) Repeal of Deduction of Health Insurance Costs for Self-Employed 
Individuals.--Subsection (l) of section 162 is hereby repealed.
    (c) Technical Amendments.--
            (1) The table of sections for such subpart C is amended by 
        striking the last item and inserting the following new items:

                              ``Sec. 35. Purchase of health care 
                                        coverage.
                              ``Sec. 36. Overpayments of tax.''
            (2) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``or 
        from section 35 of such Code''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

               Subtitle B--Medical Care Savings Accounts

SEC. 111. MEDICAL CARE SAVINGS ACCOUNTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 408 the following new section:

``SEC. 408A. MEDICAL CARE SAVINGS ACCOUNTS.

    ``(a) General Rule.--For purposes of this title, the term `medical 
care savings account' (which may also be referred to as a `Medical 
IRA') means a trust created or organized in the United States for the 
exclusive benefit of an individual and the individual's spouse and 
dependents (as defined in section 152), but only if the written 
instrument creating the trust meets the following requirements:
            ``(1) Except in the case of a rollover contribution 
        described in subsection (c)(5), no contribution will be 
        accepted unless it is in cash and contributions will not be 
        accepted during any calendar year in excess of the limitation 
        applicable to the individual under section 35(b)(2).
            ``(2) The trustee is a bank (as defined in section 408(n)), 
        insurance company (as defined in section 816), or such other 
        person who demonstrates to the satisfaction of the Secretary 
        that the manner in which such other person will administer the 
        trust will be consistent with the requirements of this section.
            ``(3) No part of the trust funds will be invested in life 
        insurance contracts.
            ``(4) The interest of an individual in the balance of the 
        account is nonforfeitable.
            ``(5) The assets of the trust will not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(b) Tax Treatment of Accounts.--
            ``(1) Account taxed as grantor trust.--The account 
        beneficiary of a medical care savings account shall be treated 
        for purposes of this title as the owner thereof and shall be 
        subject to tax thereon in accordance with subpart E of part I 
        of subchapter J of this chapter (relating to grantors and 
        others treated as substantial owners).
            ``(2) Account terminates if individual engages in 
        prohibited transaction.--
                    ``(A) In general.--If, during any taxable year of 
                the account beneficiary, such beneficiary engages in 
                any transaction prohibited by section 4975 with respect 
                to the account, the account ceases to be a medical care 
                savings account as of the first day of that taxable 
                year.
                    ``(B) Account treated as distributing all its 
                assets.--In any case in which any account ceases to be 
                a medical care savings account by reason of 
                subparagraph (A) on the first day of any taxable year, 
                subsection (c) shall be applied as if--
                            ``(i) there were a distribution on such 
                        first day in an amount equal to the fair market 
                        value (on such first day) of all assets in the 
                        account (on such first day), and
                            ``(ii) no portion of such distribution were 
                        used to pay qualified expenses.
            ``(3) Effect of pledging account as security.--If, during 
        any taxable year, the account beneficiary uses the account or 
        any portion thereof as security for a loan, the portion so used 
        is treated as distributed and not used to pay qualified 
        expenses.
    ``(c) Tax Treatment of Distributions.--
            ``(1) In general.--Any amount paid or distributed out of a 
        medical care savings account shall be included in the gross 
        income of the account beneficiary unless such amount is used 
        exclusively to pay the qualified expenses of such beneficiary 
        or of the spouse and dependents (as defined in section 152) of 
        such beneficiary.
            ``(2) Excess contributions returned before due date of 
        return.--Paragraph (1) shall not apply to the distribution of 
        any contribution paid during a taxable year to a medical care 
        savings account to the extent that such contribution exceeds 
        the limitation applicable under section 35(b)(2) if--
                    ``(A) such distribution is received by the 
                individual on or before the last day prescribed by law 
                (including extensions of time) for filing such 
                individual's return for such taxable year, and
                    ``(B) such distribution is accompanied by the 
                amount of net income attributable to such excess 
                contribution.
        Any net income described in subparagraph (B) shall be included 
        in the gross income of the individual for the taxable year in 
        which it is received.
            ``(3) Penalty for distributions not used for qualified 
        expenses.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year in which there is a payment or 
                distribution from a medical care savings account which 
                is includible in gross income under paragraph (1) shall 
                be increased by 10 percent of the amount which is so 
                includible.
                    ``(B) Exception for distributions after age 59\1/
                2\.--Subparagraph (A) shall not apply to any 
                distribution or payment after the date on which the 
                account beneficiary attains age 59\1/2\.
                    ``(C) Disability or death cases.--Subparagraph (A) 
                shall not apply if the payment or distribution is made 
                after the account beneficiary becomes disabled within 
                the meaning of section 72(m)(7) or dies.
            ``(4) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets the 
        requirements of subparagraphs (A) and (B).
                    ``(A) In general.--Paragraph (1) does not apply to 
                any amount paid or distributed out of a medical care 
                savings account to the account beneficiary if the 
                entire amount received is paid into a medical care 
                savings account for the benefit of such beneficiary not 
                later than the 60th day after the day on which he 
                receives the payment or distribution.
                    ``(B) Limitation.--This paragraph does not apply to 
                any amount described in subparagraph (A) received by an 
                individual from a medical care savings account if at 
                any time during the one-year period ending on the day 
                of such receipt such individual received any other 
                amount described in subparagraph (A) from a medical 
                care savings account which was not includible in his 
                gross income because of the application of this 
                paragraph.
                    ``(C) Denial of rollover treatment for inherited 
                accounts, etc.--
                            ``(i) In general.--In the case of an 
                        inherited medical care savings account--
                                    ``(I) this paragraph shall not 
                                apply to any amount received by an 
                                individual from such an account (and no 
                                amount transferred from such account to 
                                another medical care savings account 
                                shall be excluded from gross income by 
                                reason of such transfer), and
                                    ``(II) such inherited account shall 
                                not be treated as a medical care 
                                savings account for purposes of 
                                determining whether any other amount is 
                                a rollover contribution.
                            ``(ii) Inherited medical care savings 
                        account.--A medical care savings account shall 
                        be treated as inherited if--
                                    ``(I) the account beneficiary 
                                acquired such account by reason of the 
                                death of another individual, and
                                    ``(II) the account beneficiary was 
                                not the surviving spouse of such other 
                                individual.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Qualified expenses.--The term `qualified expenses' 
        means any of the following expenses which are incurred for the 
        benefit of the account beneficiary or the spouse or dependents 
        (as defined in section 152) of such beneficiary:
                    ``(A) Expenses for medical care (as defined in 
                section 213(d)).
                    ``(B) Expenses for long-term care services (or 
                premiums for long-term care insurance).
                    ``(C) Expenses for work-related training, 
                education, and child care.
            ``(2) Account beneficiary.--The term `account beneficiary' 
        means the individual for whose benefit the medical care savings 
        account is established.
    ``(e) Custodial Accounts.--For purposes of this section, a 
custodial account shall be treated as a trust if--
            ``(1) the assets of such account are held by a bank (as 
        defined in section 408(n)), insurance company (as defined in 
        section 816), or another person who demonstrates to the 
        satisfaction of the Secretary that the manner in which he will 
        administer the account will be consistent with the requirements 
        of this section, and
            ``(2) the custodial account would, except for the fact that 
        it is not a trust, constitute a medical care savings account 
        described in subsection (a).
For purposes of this title, in the case of a custodial account treated 
as a trust by reason of the preceding sentence, the custodian of such 
account shall be treated as the trustee thereof.
    ``(f) Reports.--The trustee of a medical care savings account shall 
make such reports regarding such account to the Secretary and to the 
account beneficiary with respect to contributions, distributions, and 
such other matters as the Secretary may require under regulations. The 
reports required by this subsection shall be filed at such time and in 
such manner and furnished to such individuals at such time and in such 
manner as may be required by those regulations.''
    (b) Employer Payments Excluded From Employment Tax Base.--
            (1) Social security taxes.--
                    (A) Subsection (a) of section 3121 of such Code is 
                amended by striking ``or'' at the end of paragraph 
                (20), by striking the period at the end of paragraph 
                (21) and inserting ``; or'', and by inserting after 
                paragraph (21) the following new paragraph:
            ``(22) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106.''
                    (B) Subsection (a) of section 209 of the Social 
                Security Act is amended by striking ``or'' at the end 
                of paragraph (18), by striking the period at the end of 
                paragraph (19) and inserting ``; or'', and by inserting 
                after paragraph (19) the following new paragraph:
            ``(20) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106 of the Internal Revenue Code of 
        1986.''
            (2) Railroad retirement tax.--Subsection (e) of section 
        3231 of such Code is amended by adding at the end the following 
        new paragraph:
            ``(10) Medical care savings account contributions.--The 
        term `compensation' shall not include any payment made to or 
        for the benefit of an employee if at the time of such payment 
        it is reasonable to believe that the employee will be able to 
        exclude such payment from income under section 106.''
            (3) Unemployment tax.--Subsection (b) of section 3306 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (15), by striking the period at the end of paragraph (16) and 
        inserting ``; or'', and by inserting after paragraph (16) the 
        following new paragraph:
            ``(17) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106.''
            (4) Withholding tax.--Subsection (a) of section 3401 of 
        such Code is amended by striking ``or'' at the end of paragraph 
        (19), by striking the period at the end of paragraph (20) and 
        inserting ``; or'', and by inserting after paragraph (20) the 
        following new paragraph:
            ``(21) any payment made to or for the benefit of an 
        employee if at the time of such payment it is reasonable to 
        believe that the employee will be able to exclude such payment 
        from income under section 106.''
    (c) Tax on Excess Contributions.--Section 4973 of such Code 
(relating to tax on excess contributions to individual retirement 
accounts, certain section 403(b) contracts, and certain individual 
retirement annuities) is amended--
            (1) by inserting ``medical care savings accounts,'' after 
        ``accounts,'' in the heading of such section,
            (2) by redesignating paragraph (2) of subsection (a) as 
        paragraph (3) and by inserting after paragraph (1) the 
        following:
            ``(2) a medical care savings account (within the meaning of 
        section 408A),'',
            (3) by striking ``or'' at the end of paragraph (1) of 
        subsection (a), and
            (4) by adding at the end thereof the following new 
        subsection:
    ``(d) Excess Contributions to Medical Care Savings Accounts.--For 
purposes of this section, in the case of a medical care savings account 
(within the meaning of section 408A), the term `excess contributions' 
means the amount by which the amount contributed for the taxable year 
to the account exceeds the limitation applicable under section 35(b)(2) 
for such taxable year. For purposes of this subsection, any 
contribution which is distributed out of the medical care savings 
account in a distribution to which section 408A(c)(2) applies shall be 
treated as an amount not contributed.''
    (d) Tax on Prohibited Transactions.--Section 4975 of such Code 
(relating to prohibited transactions) is amended--
            (1) by adding at the end of subsection (c) the following 
        new paragraph:
            ``(4) Special rule for medical care savings accounts.--An 
        individual for whose benefit a medical care savings account 
        (within the meaning of section 408A) is established shall be 
        exempt from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if, with respect to such 
        transaction, the account ceases to be a medical care savings 
        account by reason of the application of section 408A(b)(2)(A) 
        to such account.'', and
            (2) by inserting ``or a medical care savings account 
        described in section 408A'' in subsection (e)(1) after 
        ``described in section 408(a)''.
    (e) Failure To Provide Reports on Medical Care Savings Accounts.--
Section 6693 of such Code (relating to failure to provide reports on 
individual retirement account or annuities) is amended--
            (1) by inserting ``or on medical care savings accounts'' 
        after ``annuities'' in the heading of such section, and
            (2) by adding at the end of subsection (a) the following: 
        ``The person required by section 408A(f) to file a report 
        regarding a medical care savings account at the time and in the 
        manner required by such section shall pay a penalty of $50 for 
        each failure unless it is shown that such failure is due to 
        reasonable cause.''
    (f) Clerical Amendments.--
            (1) The table of sections for subpart A of part I of 
        subchapter D of chapter 1 of such Code is amended by inserting 
        after the item relating to section 408 the following:

                              ``Sec. 408A. Medical care savings 
                                        accounts.''
            (2) The table of sections for chapter 43 of such Code is 
        amended by striking the item relating to section 4973 and 
        inserting the following:

                              ``Sec. 4973. Tax on excess contributions 
                                        to individual retirement 
                                        accounts, medical care savings 
                                        accounts, certain 403(b) 
                                        contracts, and certain 
                                        individual retirement 
                                        annuities.''
            (3) The table of sections for subchapter B of chapter 68 of 
        such Code is amended by inserting ``or on medical care savings 
        accounts'' after ``annuities'' in the item relating to section 
        6693.
    (g) Effective Date.--The amendments made by this section shall take 
effect on January 1, 1996.

SEC. 112. UNUSED AMOUNTS IN FLEXIBLE SPENDING ACCOUNTS TRANSFERABLE TO 
              MEDICAL CARE SAVINGS ACCOUNTS.

    (a) In General.--Subsection (d) of section 125 of the Internal 
Revenue Code of 1986 (relating to cafeteria plans) is amended by adding 
at the end thereof the following new paragraph:
            ``(3) Unused amounts transferable to medical care savings 
        accounts.--Subsection (a) shall not fail to apply to a 
        participant in a plan, and a plan shall not fail to be treated 
        as a cafeteria plan, solely because under the plan amounts not 
        paid out as reimbursements under a flexible spending 
        arrangement for medical care (as defined in section 213(d)) for 
        an individual or such individual's spouse and dependents) are 
        contributed on the last day of the plan year of the cafeteria 
        plan to a medical care savings account (as defined in section 
        408A) of such individual.''
    (b) Effective Date.--The amendment made by this section shall apply 
to cafeteria plan years ending after December 31, 1995.

          Subtitle C--Expansion of COBRA Continuation Coverage

SEC. 121. EXPANSION OF COBRA CONTINUATION COVERAGE.

    (a) Amendments to Internal Revenue Code.--
            (1) Smaller employers subject to requirements.--Paragraph 
        (1) of section 4980B(d) of the Internal Revenue Code of 1986 
        (relating to tax not to apply to certain plans) is amended by 
        striking ``20 employees'' and inserting ``4 employees''.
            (2) Period of coverage extended to 36 months.--
                    (A) In general.--Clause (i) of section 
                4980B(f)(2)(B) of such Code (relating to period of 
                coverage) is amended to read as follows:
                            ``(i) Maximum required period.--
                                    ``(I) In general.--The date which 
                                is 36 months after the date of the 
                                qualifying event.
                                    ``(II) Special rule for certain 
                                bankruptcy proceedings.--In the case of 
                                a qualifying event described in 
                                paragraph (3)(F) (relating to 
                                bankruptcy proceedings), the date of 
                                the death of the covered employee or 
                                qualified beneficiary (described in 
                                subsection (g)(1)(D)(iii)), or in the 
                                case of the surviving spouse or 
                                dependent children of the covered 
                                employee, 36 months after the date of 
                                the death of the covered employee.
                                    ``(III) Qualifying event involving 
                                medicare entitlement.--In the case of 
                                an event described in paragraph (3)(D) 
                                (without regard to whether such event 
                                is a qualifying event), the period of 
                                coverage for qualified beneficiaries 
                                other than the covered employee for 
                                such event or any subsequent qualifying 
                                event shall not terminate before the 
                                close of the 36-month period beginning 
                                on the date the covered employee 
                                becomes entitled to benefits under 
                                title XVIII of the Social Security 
                                Act.''
                    (B) Technical amendment.--The last sentence of 
                section 4980B(f)(2)(C) of such Code is amended to read 
                as follows: ``In the case of a qualified beneficiary 
                who is determined, under title II or XVI of the Social 
                Security Act, to have been disabled at the time of a 
                qualifying event described in paragraph (3)(B), any 
                reference in clause (i) to `102 percent' is deemed a 
                reference to `150 percent' for any month after the 36th 
                month of continuation coverage.''
    (b) Amendments to Employee Retirement Income Security Act of 
1974.--
            (1) Smaller employers subject to requirements.--Subsection 
        (b) of section 601 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1161) (relating to exception for certain 
        plans) is amended by striking ``20 employees'' and inserting 
        ``4 employees''.
            (2) Period of coverage extended to 36 months.--
                    (A) In general.--Subparagraph (A) of section 602(2) 
                of such Act (29 U.S.C. 1161(2)) (relating to period of 
                coverage) is amended to read as follows:
                    ``(A) Maximum required period.--
                            ``(i) In general.--The date which is 36 
                        months after the date of the qualifying event.
                            ``(ii) Special rule for certain bankruptcy 
                        proceedings.--In the case of a qualifying event 
                        described in section 603(6) (relating to 
                        bankruptcy proceedings), the date of the death 
                        of the covered employee or qualified 
                        beneficiary (described in section 
                        607(3)(C)(iii)), or in the case of the 
                        surviving spouse or dependent children of the 
                        covered employee, 36 months after the date of 
                        the death of the covered employee.
                            ``(iii) Qualifying event involving medicare 
                        entitlement.--In the case of an event described 
                        in section 603(4) (without regard to whether 
                        such event is a qualifying event), the period 
                        of coverage for qualified beneficiaries other 
                        than the covered employee for such event or any 
                        subsequent qualifying event shall not terminate 
                        before the close of the 36-month period 
                        beginning on the date the covered employee 
                        becomes entitled to benefits under title XVIII 
                        of the Social Security Act.''
                    (B) Technical amendment.--The last sentence of 
                section 602(3) of such Act is amended to read as 
                follows: ``In the case of an individual who is 
                determined, under title II or XVI of the Social 
                Security Act, to have been disabled at the time of a 
                qualifying event described in section 603(2), any 
                reference in subparagraph (A) to `102 percent' is 
                deemed a reference to `150 percent' for any month after 
                the 36th month of continuation coverage.''
    (c) Amendments to Public Health Service Act.--
            (1) Smaller employers subject to requirements.--Paragraph 
        (1) of section 2201(b) of the Public Health Service Act (42 
        U.S.C. 300bb-1(b)) (relating to exception for certain plans) is 
        amended by striking ``20 employees'' and inserting ``4 
        employees''.
            (2) Period of coverage extended to 36 months.--
                    (A) In general.--Subparagraph (A) of section 
                2202(2) of such Act (42 U.S.C. 300bb-2(2)) (relating to 
                period of coverage) is amended to read as follows:
                    ``(A) Maximum required period.--
                            ``(i) In general.--The date which is 36 
                        months after the date of the qualifying event.
                            ``(ii) Qualifying event involving medicare 
                        entitlement.--In the case of an event described 
                        in section 2203(4) (without regard to whether 
                        such event is a qualifying event), the period 
                        of coverage for qualified beneficiaries other 
                        than the covered employee for such event or any 
                        subsequent qualifying event shall not terminate 
                        before the close of the 36-month period 
                        beginning on the date the covered employee 
                        becomes entitled to benefits under title XVIII 
                        of the Social Security Act.''
                    (B) Technical amendment.--The last sentence of 
                section 2202(3) of such Act is amended to read as 
                follows: ``In the case of an individual who is 
                determined, under title II or XVI of the Social 
                Security Act, to have been disabled at the time of a 
                qualifying event described in section 2203(2), any 
                reference in subparagraph (A) to `102 percent' is 
                deemed a reference to `150 percent' for any month after 
                the 36th month of continuation coverage.''
    (d) Effective Date.--The amendments made by this section shall 
apply to--
            (1) qualifying events occurring after December 31, 1995, 
        and
            (2) qualifying events occurring on or before such date if 
        the period of continuation coverage required under section 
        4980B of the Internal Revenue Code of 1986 (determined without 
        regard to the amendments made by this section) has not expired 
        on or before such date.

                       TITLE II--INSURANCE REFORM

               Subtitle A--Employer Insurance Protections

SEC. 201. SMALL GROUP EMPLOYER INSURANCE PROTECTIONS.

    (a) Requirements for Insurers.--Any health benefit insurer that 
provides or offers a small group health benefit plan within a State (in 
this subtitle referred to as a ``covered insurer'') must meet the 
requirements specified in this section with respect to such a plan.
    (b) Small Employer Protection Against Termination or Non-Renewal or 
Industry Blacklisting.--
            (1) In general.--A covered insurer may not--
                    (A) cancel or nonrenew an individual small employer 
                group because of high claims costs or the health of the 
                group, or
                    (B) refuse to provide coverage to such a group 
                based solely on the nature of the employer's business 
                or industry.
            (2) Permissible termination.--A covered insurer may cancel 
        or nonrenew a small group health benefit plan for an individual 
        small employer group for any of the following:
                    (A) Failure to make premium payments.
                    (B) Failure to remain eligible for inclusion in the 
                class of business by which its coverage was provided.
                    (C) Failure to comply with the insurer's minimum 
                participation requirements.
                    (D) Fraud or misrepresentation by the employer.
            (3) Cancellation of Class of Business.--
                    (A) In general.--A covered insurer may cancel or 
                nonrenew an entire class of business with respect to a 
                small group health benefit plan.
                    (B) Limitation on market reentry.--In the case of 
                such a cancellation or nonrenewal, the insurer may not 
                write new business with the same or similar class of 
                small group employers for a period of 5 years beginning 
                on the date of termination of the last plan so 
                cancelled or not renewed.
    (c) Limits on Premium Rates.--The annual increase in the premium 
rate charged to a small employer group by a covered insurer may not 
exceed the sum of the following:
            (1) The percentage change in the premium rate for new 
        business for employers with similar case characteristics, as 
        measured between the first day of the year in which the new 
        rates take effect and the first day of the previous year.
            (2) A percentage (not to exceed 15 percent) based on claims 
        experience, health status, or duration of coverage.
            (3) Any adjustment due to changes in the coverage provided 
        or changes in the case characteristics of the small employer 
        group.
    (d) Limit on Variation in Premiums.--
            (1) Across classes of business.--The index rate for a 
        rating period for any class of business shall not exceed the 
        index rate for any other class of business by more than 20 
        percent.
            (2) Within a class of business.--For a class of business, 
        the premium rates charged during a rating period to small 
        employer groups with similar case characteristics for the same 
        or similar coverage (or rates that could be charged to such 
        employers under the rating system for that class of business) 
        shall not vary from the index rate for such class by more than 
        25 percent of the index rate.
            (3) Use of industry as a case characteristic.--
                    (A) In general.--Subject to subparagraph (B), a 
                covered insurer may utilize industry as a case 
                characteristic in establishing premium rates.
                    (B) Limitation on variation.--If a covered insurer 
                that utilizes industry as a case characteristic in 
                establishing premium rates, the highest rate factor 
                associated with an industry classification may not 
                exceed the lowest rate associated with any industry 
                classification by more than 15 percent.

SEC. 202. GENERAL PORTABILITY REQUIREMENT FOR EMPLOYER-BASED HEALTH 
              INSURANCE.

    (a) Limitations on Use of Preexisting Conditions.--
            (1) In general.--A group health benefit plan of an employer 
        shall not deny, exclude, or limit benefits for a covered 
        individual for losses incurred more than 12 months following 
        the effective date of the individual's coverage due to a 
        preexisting condition.
            (2) Restrictions on definition of preexisting condition.--
        For purposes of paragraph (1), such a plan shall not define a 
        preexisting condition more restrictively than the following:
                    (A) A condition that would have caused an 
                ordinarily prudent person to seek medical advice, 
                diagnosis, care, or treatment during the 6 months 
                immediately preceding the effective date of coverage.
                    (B) A condition for which medical advice, 
                diagnosis, care, or treatment was recommended or 
                received during the 6 months immediately preceding the 
                effective date of coverage.
                    (C) A pregnancy existing on the effective date of 
                coverage.
    (b) Limitation on Underwriting.--
            (1) In general.--In the case of a previously covered 
        individual who becomes an employee of an employer, the group 
        health plan of (or contributed to by) the employer shall accept 
        the individual for coverage upon the date of application for 
        coverage on the basis relating to the individual's health 
        status as of the date the individual applied for employment 
        with the previous employer.
            (2) Previously covered individual defined.--For purposes of 
        paragraph (1), the term ``previously covered individual'' 
        means, with respect to an employer, an individual who before 
        employment by the employer was an employee of another employer 
        and was provided coverage under a group health plan of (or 
        contributed to by) the previous employer.
    (c) Restrictions for Small Employer Health Plans.--
            (1) In general.--No insurer offering a health benefit plan 
        to a small employer shall refuse to accept under the plan any 
        individual who, on the date of the application for such 
        coverage, has been continuously covered (as defined in 
        paragraph (2)) and would be eligible for such coverage except 
        for underwriting considerations relating to the individual's 
        health status.
            (2) Continuous coverage.--
                    (A) In general.--For purposes of this subsection, 
                an individual is deemed to be continuously covered as 
                of a date if the individual is covered under any 
                employee health benefit plan or other health insurance 
                policy at the beginning and end of the 1-year period 
                ending with such date and has not had any lapse in such 
                coverage during such period totalling more than 31 
                days, not including as such a lapse any applicable 
                employment waiting or probationary period.
                    (B) Special rule.--For purposes of subparagraph 
                (A), there shall not be taken into account coverage 
                provided by or in connection with any State high risk 
                insurance pool.
    (d) Construction.--Nothing in this section shall be construed as 
requiring an insurer or health benefit plan to provide benefits greater 
than those provided to an individual insured as a standard risk had the 
previous coverage remained in force.
    (e) Definitions.--For purposes of this section:
            (1) Covered individual.--The term ``covered individual'' 
        means--
                    (A) an individual who is (or will be) provided 
                coverage under a group health plan by virtue of the 
                performance of services by the individual for 1 or more 
                persons maintaining the plan (including as an employee 
                defined in section 401(c)(1) of the Internal Revenue 
                Code of 1986), and
                    (B) the spouse or any dependent child of such 
                individual.
            (2) Group health plan.--The term ``group health plan'' has 
        the meaning given such term by section 5000(b)(1) of the 
        Internal Revenue Code of 1986.

SEC. 203. EXEMPTION FROM CERTAIN STATE MANDATES.

    An covered insurer that complies with the requirements of sections 
201 and 202 with respect to a small employer group is exempt from State 
law requirements concerning the providing of specified health insurance 
benefits or laws which prohibit the use of managed care networks.

SEC. 204. ENFORCEMENT.

    (a) In General.--Chapter 47 of the Internal Revenue Code of 1986 
(relating to taxes on group health plans) is amended by adding at the 
end thereof the following new section:

``SEC. 5000A. ENFORCEMENT OF REQUIREMENTS FOR EMPLOYER HEALTH BENEFIT 
              PLANS.

    ``(a) General Rule.--There is hereby imposed a tax on the failure 
of an insurer or group health plan to meet the applicable requirements 
of section 201 or 202 of the Bipartisan Health Security Reform Act of 
1994 with respect to any covered individual.
    ``(b) Amount of Tax.--
            ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to--
                    ``(A) a requirement in such section 201 shall be 
                $100 for each day in the noncompliance period with 
                respect to such failure; or
                    ``(B) a requirement in such section 202 with 
                respect to a covered individual shall be $100 for each 
                day in the noncompliance period with respect to such 
                failure.
            ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period--
                    ``(A) beginning on the date such failure first 
                occurs, and
                    ``(B) ending on the date such failure is corrected.
            ``(3) Correction.--A failure of a group health plan to meet 
        the requirements of section 202 of the Bipartisan Health 
        Security Reform Act of 1994 with respect to any covered 
        individual shall be treated as corrected if--
                    ``(A) such failure is retroactively undone to the 
                extent possible, and
                    ``(B) the covered individual is placed in a 
                financial position which is as good as such individual 
                would have been in had such failure not occurred.
        For purposes of applying subparagraph (B), the covered 
        individual shall be treated as if the individual had elected 
        the most favorable coverage in light of the expenses incurred 
        since the failure first occurred.
    ``(c) Limitations on Amount of Tax.--
            ``(1) Tax not to apply where failure not discovered 
        exercising reasonable diligence.--No tax shall be imposed by 
        subsection (a) on any failure during any period for which it is 
        established to the satisfaction of the Secretary that none of 
        the persons referred to in subsection (d) knew, or exercising 
        reasonable diligence would have known, that such failure 
        existed.
            ``(2) Tax not to apply to failures corrected within 30 
        days.--No tax shall be imposed by subsection (a) on any failure 
        if--
                    ``(A) such failure was due to reasonable cause and 
                not to willful neglect, and
                    ``(B) such failure is corrected during the 30-day 
                period beginning on the first date any of the persons 
                referred to in subsection (d) knew, or exercising 
                reasonable diligence would have known, that such 
                failure existed.
            ``(3) Waiver by secretary.--In the case of a failure which 
        is due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
    ``(d) Liability for Tax.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, the following shall be liable for the tax imposed 
        by subsection (a) on a failure:
                    ``(A) In the case of a group health plan other than 
                a self-insured group health plan, the issuer.
                    ``(B)(i) In the case of a self-insured group health 
                plan other than a multiemployer group health plan, the 
                employer.
                    ``(ii) In the case of a self-insured group health 
                multiemployer plan, the plan.
                    ``(C) Each person who is responsible (other than in 
                a capacity as an employee) for administering or 
                providing benefits under the group health plan, health 
                insurance plan, or other health benefit arrangement 
                (including a self-insured plan) and whose act or 
                failure to act caused (in whole or in part) the 
                failure.
            ``(2) Special rules for persons described in paragraph 
        (1)(c).--A person described in subparagraph (C) (and not in 
        subparagraphs (A) and (B)) of paragraph (1) shall be liable for 
        the tax imposed by subsection (a) on any failure only if such 
        person assumed (under a legally enforceable written agreement) 
        responsibility for the performance of the act to which the 
        failure relates.''.
    (b) Nondeductibility of Tax.--Paragraph (6) of section 275(a) of 
such Code (relating to nondeductibility of certain taxes) is amended by 
inserting ``47,'' after ``46,''.
    (c) Clerical Amendments.--The table of sections for such chapter 47 
is amended by adding at the end thereof the following new item:

                              ``Sec. 5000A. Enforcement of requirements 
                                        for employer health benefit 
                                        plans.''
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 205. DEFINITIONS.

    In this subtitle:
            (1) Case characteristics.--The term ``case 
        characteristics'' means demographic, geographic, and other 
        relevant characteristics as determined by the insurer that are 
        considered by the insurer in the determination of premium rates 
        for a small employer, but not including--
                    (A) claims experience,
                    (B) health status, and
                    (C) duration of coverage since date of issue.
            (2) Insurer.--The term ``insurer'' means an entity that 
        provides health insurance in a State.
            (3) Small employer.--The term ``small employer'' means a 
        business that, during the most recent calendar year, employed 
        at least 3, but not more than 25, employees who are eligible 
        for coverage under a health benefit plan on at least 50 percent 
        of that business' working days.
            (4) Health benefit plan.--The term ''health benefit plan'' 
        means any employee welfare benefit plan (as defined in the 
        Employee Retirement Income Security Act of 1974) that is 
        insured by an insurer that provides medical, surgical, or 
        hospital care or benefits to employees of a small employer and 
        their dependents and to which the employer contributes 50 
        percent or more of the single coverage cost at the time of 
        purchase. Such term does not include any individual major 
        medical policies and group insurance that are not designed or 
        administered as a health benefit plan to be provided by an 
        employer for its employees.
            (5) Index rate.--The term ``index rate'' means, for a class 
        of business as to a small employer's rating period with similar 
        case characteristics, the arithmetic average of the applicable 
        base premium rate and the corresponding highest premium rate.
            (6) Class of business.--The term ``class of business'' 
        means each separate class of business established by an insurer 
        to reflect substantial differences in expected claims 
        experience or administrative costs related only to one or more 
        of the following:
                    (A) The insurer's use of more than one type of 
                system for the marketing and sale of health benefit 
                plans to small employers.
                    (B) The insurer's acquisition of a class of 
                business from another insurer.
                    (C) The insurer providing coverage to one or more 
                association groups.

SEC. 206. EFFECTIVE DATE.

    This title shall take effect on January 1, 1996.

     Subtitle B--Guaranteeing Portability of Health Insurance for 
                              Individuals

SEC. 211. COVERAGE OF INDIVIDUAL HEALTH BENEFIT PLANS.

    (a) In General.--This subtitle applies only to health benefit plans 
delivered or issued for delivery to individuals in a State and does not 
apply to--
            (1) any employer-based health benefit plan, or
            (2) any eligible individual whose prior similar health 
        benefit plan was provided by--
                    (A) a State high risk pool (as defined by the 
                Secretary of Health and Human Services),
                    (B) under title XVIII or XIX of the Social Security 
                Act, or
                    (C) under another State or Federal program, unless 
                the eligible individual was previously covered as an 
                employee of the State or Federal Government.
    (b) Individual Health Benefit Plan.--In this subtitle, the term 
``individual health benefit plan'' means a health benefit plan 
described in subsection (a).

SEC. 212. PORTABILITY PROTECTIONS.

    (a) Consideration of Applications.--If an eligible individual or 
eligible family applies for an individual health benefit plan, the 
insurer offering the plan must either--
            (1) offer coverage to all eligible individuals applying on 
        the same application, or
            (2) deny coverage to all eligible individuals applying on 
        the application.
    (b) Preexisting Condition Period Limitation.--No policy provision 
of an individual health benefit plan shall exclude or limit coverage 
for a preexisting condition for a period beyond 12 months following the 
effective date of the individual's coverage.
    (c) Portability of Coverage.--The preexisting condition limitation 
period under any individual health benefit plan shall be reduced by one 
month for each month of continuous coverage the eligible individual had 
under a prior health benefit plan.
    (d) Limitation on Riders.--
            (1) In general.--Except as provided in paragraph (2), an 
        insurer issuing an individual health benefit plan may not 
        modify the plan with respect to an eligible individual.
            (2) Relation to preexisting condition exclusion period.--
                    (A) In general.--To the extent that a preexisting 
                condition limitation applies, an insurer may restrict 
                or exclude coverage or benefits for a specific 
                condition for a maximum period of 12 months from the 
                effective date of coverage of an eligible individual by 
                way of rider or endorsement.
                    (B) No addition riders.--No other rider or 
                endorsement may be placed on the health benefit plan to 
                restrict further coverage.
                    (C) Combination.--If both a rider and a preexisting 
                condition exclusion period are used, the combined 
                limitation period may not exceed 12 months.
    (e) No Disclosure of Condition Required.--A preexisting condition 
limitation period may be applied whether or not the specific condition 
has been disclosed on the application for coverage under the individual 
health benefit plan.

SEC. 213. DEFINITIONS.

    In this subtitle:
            (1) Eligible family.--The term ``eligible family'' means an 
        applicant, an applicant's spouse, and any eligible individual 
        who is a dependent child of the applicant.
            (2) Eligible individual.--The term ``eligible individual'' 
        means an individual who was insured under a prior similar 
        health benefit plan which was continuous to a date not more 
        than 30 days prior to the effective date of the new health 
        benefit plan for that individual.
            (3) Health benefit plan.--
                    (A) In general.--The term ``health benefit plan'' 
                means any hospital or medical expense insured policy or 
                certificate, hospital or medical service plan contract, 
                or health maintenance organization subscriber contract.
                    (B) Exclusion.--Such term does not include any of 
                the following:
                            (i) short-term limited duration insurance,
                            (ii) accident-only, credit-only, dental-
                        only, vision-only insurance,
                            (iii) medicare supplement insurance,
                            (iv) hospital indemnity insurance,
                            (v) long-term care or disability income 
                        insurance,
                            (vi) coverage issued as a supplement to 
                        liability insurance,
                            (vii) workmen's compensation or similar 
                        insurance, or
                            (viii) automobile medical-payment 
                        insurance.
            (4) Preexisting condition.--The term ``preexisting 
        condition'' means any injury or illness--
                    (A) for which the covered individual received 
                medical advice or treatment within 12 months 
                immediately preceding the applicable effective date the 
                covered individual became insured under the policy, or
                    (B) which in the opinion of a qualified doctor--
                            (i) probably began prior to the applicable 
                        effective date the covered individual became 
                        insured under the policy, and
                            (ii) manifested symptoms which would cause 
                        an ordinarily prudent individual to seek 
                        diagnosis or treatment within 12 months 
                        immediately preceding the applicable effective 
                        date the covered individual because insured 
                        under the policy.
            (5) Prior similar health benefit plan.--The term ``prior 
        similar health benefit plan'' means a health benefit plan under 
        which an eligible individual was previously covered and which 
        provides benefits who do not materially differ from the new 
        health benefit plan in any of the following respects:
                    (A) The type of medical benefits provided.
                    (B) The level of medical benefits available based 
                on deductibles, coinsurance, or copayments, or any 
                combination thereof.
                    (C) The maximum benefits available for specific 
                services.
                    (D) Cost containment provisions.

SEC. 214. EFFECTIVE DATE.

    This subtitle shall apply to each health benefit plan that is 
delivered or issued for delivery to an individual on or after January 
1, 1996.

    Subtitle C--Assuring Health Insurance Coverage for Uninsurable 
                              Individuals

SEC. 221. ESTABLISHMENT OF PROGRAMS BY STATES.

    (a) In General.--For years beginning with 1997, each State shall 
establish, administer, and fund a high risk health insurance pool (in 
this subtitle referred to as a ``State high risk program'') that 
assures, in accordance with this subtitle, the availability of 
qualified health insurance coverage to uninsurable individuals.
    (b) Deadline.--Each State shall comply with subsection (a) by not 
later than January 1, 1997.
    (c) Waiver.--Subsection (a) shall not apply in the case of a State 
that has established a comprehensive health insurance program that 
assures the availability of qualified health insurance coverage to all 
eligible individuals residing in the State.
    (d) Recommendation for Compliance Requirement.--Not later than 
January 1, 1996, the Secretary of Health and Human Services shall 
submit to Congress a recommendation on appropriate sanctions for States 
that fail to meet the requirement of subsection (a).

SEC. 222. UNINSURABLE INDIVIDUALS ELIGIBLE FOR COVERAGE.

    (a) Uninsurable and Eligible Individual Defined.--In this subtitle:
            (1) Uninsurable individual.--The term ``uninsurable 
        individual'' means, with respect to a State, an eligible 
        individual who presents proof of uninsurability by 2 private 
        insurers in accordance with subsection (b).
            (2) Eligible individual.--The term ``eligible individual'' 
        means, with respect to a State, a citizen or national of the 
        United States (or an alien lawfully admitted for permanent 
        residence) who is a resident of the State for at least 90 days.
    (b) Proof of Uninsurability.--
            (1) In general.--The proof of uninsurability for an 
        individual shall be in the form of--
                    (A) a notice of rejection or refusal to issue 
                substantially similar insurance for health reasons, or
                    (B) a notice of refusal to insure except at a rate 
                in excess of the plan rate,
                    (C) an offer to insure but only subject to a 
                reduction or an exclusion of coverage for a preexisting 
                condition for a period exceeding 6 months.
            (2) Exception.--A State may waive the requirement of proof 
        described in paragraph (1) in the case of an individual who 
        demonstrates a provable medical or health condition.

SEC. 223. QUALIFIED HEALTH INSURANCE COVERAGE UNDER PROGRAM.

    In this subtitle, the term ``qualified health insurance coverage'' 
means health insurance coverage that--
            (1) provides benefits typical of major medical insurance 
        available in the individual health insurance market, and
            (2) may include coinsurance (in a percentage not to exceed 
        20 percent) and a stop loss on out-of-pocket expenses of not to 
        exceed--
                    (A) for 1997, $5,000, or
                    (B) for a subsequent year, the dollar amount 
                specified in this paragraph for the previous year 
                increased by the percentage increase in the medical 
                care component of the consumer price index for all 
                urban consumers (United States city average, as 
                published by the Bureau of Labor Statistics) for the 
                12-month period ending with September of the preceding 
                calendar year.
        In applying subparagraph (B) for a year, if the dollar amount 
        computed under such subparagraph is not a multiple of $10, it 
        shall be rounded to the next highest multiple of $10.

SEC. 224. FUNDING OF PROGRAM.

    (a) Limitations on Premiums.--
            (1) In general.--The applicable premium established under a 
        State high-risk program may not exceed 135 percent of the 
        applicable standard risk rate, except as provided in paragraph 
        (2).
            (2) Surcharge for avoidable health risks.--A State high-
        risk program may impose a surcharge on premiums for individuals 
        with avoidable high risks, such as smoking.
    (b) Flexibility in Additional Funding.--A State high-risk program 
shall provide for additional funding through other means specified 
under State law. Such means may include--
            (1) an assessment on all insurers in the State through a 
        nonprofit association consisting of all health benefits 
        insurers doing business in the State on an equitable and pro 
        rata basis,
            (2) a designated tax source, or
            (3) general revenues of the State.

SEC. 225. ADMINISTRATION.

    A State high-risk program shall be administered through a contract 
with one or more insurers operating in the State.

                       TITLE III--MEDICAID REFORM

SEC. 301. PROVIDING COVERAGE FOR OUT-OF-POCKET EXPENSES UNDER PRIVATE 
              HEALTH PLANS.

    (a) State Option.--Section 1902(a) of the Social Security Act (42 
U.S.C. 1396a(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (61);
            (2) by striking the period at the end of paragraph (62) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(63) at the option of the State, provide that an 
        individual eligible for medical assistance under the State plan 
        has the option to receive medical assistance through enrollment 
        with a health plan under a program described in section 
        1931.''.
    (b) Program for Enrollment Described.--Title XIX of such Act (42 
U.S.C. 1396 et seq.) is amended by redesignating section 1931 as 
section 1932 and by inserting after section 1930 the following new 
section:

 ``optional state program to enroll individuals in private health plans

    ``Sec. 1931. (a) In General.--For purposes of section 1902(a)(63), 
a program under this section is a program under which the State makes 
payments to health plans that provide qualified health insurance 
coverage under section 223 of the Bipartisan Health Security Reform Act 
for enrolling individuals for coverage under such plans, including all 
necessary payments of premiums, copayments, and deductibles applicable 
under such a plan on behalf of such an individual.
    ``(b) Treatment of Payments as Medical Assistance.--Subject to 
paragraph (3), for purposes of determining the amount of Federal 
financial participation for a State under section 1903 in a quarter, 
any payments made by a State under the program under this section shall 
be treated as expenditures for medical assistance under the State plan 
for such quarter.
    ``(c) Optional Use of Contributions to Medical Savings Accounts or 
Vouchers to Obtain Coverage.--Under a program under this section, a 
State may provide for the enrollment of individuals in health plans--
            ``(1) by making contributions to an individual's medical 
        savings account established under section 220 of the Internal 
        Revenue Code of 1986; or
            ``(2) by providing the individual with a voucher that may 
        be used toward the payment of the costs of enrollment in a 
        health plan (as determined under an agreement between the State 
        and the plan).''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall apply to quarters beginning on or after January 1, 1996.

                  TITLE IV--MEDICAL CHARGE DISCLOSURE

SEC. 401. REQUIRING PROVIDERS OF MEDICAL SERVICES TO DISCLOSE MAXIMUM 
              CHARGES

    (a) Requirement Described.--Each individual or entity providing a 
medical procedure or diagnostic test shall post (at a place and in a 
manner that will be visible to the individuals receiving the procedures 
or tests)--
            (1) the maximum charge assessed for the procedure or test; 
        and
            (2) the costs to the individual or entity that are 
        associated with the procedure or test.
    (b) Prohibition Against Charging in Excess of Posted Maximum 
Charge.--An individual or entity may not charge an amount for a medical 
procedure or diagnostic test in excess of the maximum charge posted for 
the procedure or test pursuant to paragraph (1).
    (c) Recommendations for Enforcement.--Not later than April 1, 1995, 
the Secretary of Health and Human Services shall submit to Congress 
specific recommendations for sanctions that should be imposed on 
individuals and entities that fail to meet the requirements of this 
section.
    (d) Effective Date.--This section shall apply to medical procedures 
and diagnostic tests provided on or after January 1, 1996.

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